Tuesday, January 28, 2014

'Income Mutuality'

'Hey! I've got an idea for you
21st Century Americans!'
You are going to hear a lot tonight about 'income inequality' in President Obama's 5th State of the Union Address.

If you do the drinking games when you watch the SOTU, drink something every time you hear the words 'income inequality'; 'our policies are working' or 'we need to create more 'jobs'!' You'll sleep soundly tonight.

We don't dispute the fact that there are a lot of people who have made a whole heckuva lot of money not only during the Obama Administration but over the course of their lifetimes. Some people just know how to find and fund opportunities that yield tremendous wealth to them and their stockholders.

We also don't dispute the fact that millions of people are struggling today to make ends meet. Close to 20 million people have either dropped out of the workforce or are either under-employed or unemployed, a number that has not appreciably come down since the initial stages of the financial meltdown in 2009.

What we do take issue with, however, is how the issue of 'income inequality' has become the bloody flag of President Obama even though he has now had 5 straight years of his policies running this country which has led to much of this 'income inequality' in the first place!'

What we would welcome, and which would totally put us into shock, would be if the President said these words tonight:
'Let me be perfectly clear. My policies...have failed the American people. I am asking Congress to repeal all of the increased rules and regulations I have asked for and which were passed in 2009-2010. I also now recognize that Obamacare has almost completely distorted the American health market in ways I never could have envisioned or understood when we passed it in 2010 and needs to be replaced as well.'
We think the stock market would roar upward for the rest of this year and next. Businesses nationwide would throw caution to the wind and start hiring people left and right.  Businesspeople could finally be sure they could invest and move ahead without the federal government making life difficult for them and then taking a far greater share of their profits in taxes and side costs such as Obamacare.

What we think is important to think about, however, is not about just the 'income inequality' part of the equation in America today. Income inequality has been part of the capitalistic system since the ancient days.

You want to see 'real' income inequality'? Go to most any dictatorship in the world or communist system where the very elites get all the money and benefits of the system and leave hardly anything for the rest of the populations. Why, in many nations around the world, there is no middle-income class of people at all!

We think it is time to consider the importance of the free enterprise system to us all. We choose to call it 'Income Mutuality'.

We think this is a very important concept that is not being taught or recognized in America lately. There is a profound and deep symbiotic relationship between the entrepreneur; the investor and funder; the executive management team and the employee of any successful company or corporation.

A good look at our own American history would be a good place to start. Read this from Bill Bryson's book, 'Made in America':
In 1850, America's 23 million people had a cumulative wealth of $7.1 billion. Fifty years later, the population had tripled to 76 million, but the wealth has increased thirteenfold to $94.3 billion. In 1894, the United States displaced Britain as the world's leading manufacturer (after only a century of existence).
By 1914, it was the world's leading producer of coal, natural gas, oil, copper, iron ore, and silver and its factories were producing more goods than those of Britain, Germany and France together.
Within 30 years of President Garfield's death, one-fourth of the world's wealth was in American's hands.
For the average American, progress was not, in the words of Henry Steele Commager, 'a philosophical idea but a commonplace of experience....Nothing in all history had ever succeeded like America, and every American knew it.' 
How did they know it? Because they were working in jobs in exciting new industries that helped raise and support their families instead of working manual labor on farms from sun-up to sundown. For a few of them, they maybe even had some stock in such industries and and became more wealthy as brilliant innovators such as Thomas Alva Edison invented the light bulb and illuminated the entire nation and world.

These workers were dependent on the enterprise and creativity of the innovators and entrepreneurs such as Mr. Edison to come up with new products that have benefited not only us all but all of mankind. Entrepreneurs and innovators such as Mr. Edison were dependent on the work labor of his employees because he simply could not have made all of those light bulbs all by himself, now could he?

We think we should start talking about the 'Income Mutuality' of our nation and stop all of this class warfare in which President Obama takes glory and refuge.

The best way to address the 'inequality' any of us sees in America today is to support tried-and-true policies that free up the free enterprise system and activates the 'animal spirits' that Adam Smith talked about back into play in the nation's marketplace. Allowing the private sector to create 20 million full-time jobs would go a long way towards solving a multitude of problems we face in the United States, would you have to agree?

We don't think President Obama's policies have worked to accomplish that goal. Do you? Such to the degree that you are willing to wait another year or 2 years or 3 years until he leaves office in 2017 and 'give his policies just a little more time to work!'?

If you have been, or still are, among the 20 million people now not in full-time rewarding work, would you be willing to make that bet?  We don't think so.

'Income Mutuality'. We all have a stake in each other's success. Let's just hope your best friend, close neighbor or cherished family member has a great idea swirling around in his or her head that becomes wildly financially successful. And you have the guts to go to work with him or her on the ground floor of the next Microsoft.

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Thursday, January 23, 2014

What Has Really Happened To All Of Your Money You Have Paid Into Social Security and Medicare

Einstein's Brain
Albert Einstein had a vivid imagination.

He also had a massive amount of brainpower such that his heirs approved the removal of Einstein's brain after his death so researchers could figure out why he was so brilliant and creative whereas other mere mortals pale by comparison.

His most famous discovery, of course, was his theory of relativity with the equation E = mc2.  He was intrigued with quantum mechanics and theories of light and space, all of which are far beyond us here, except for a few rocket scientists and gearheads who read this blog on a regular basis.

One of his thought experiments might help us unlock the mysteries of the American Entitlement System, as odd as that may sound.  To the vast majority of people in America, the cash flows associated with such important programs as Social Security and Medicare are as foreign and confusing to comprehend as quantum mechanics and the theory of relativity anyway so why not use the theory of relativity to explain Social Security and Medicare?

It shouldn't be so confusing. Understanding the mechanics of where your payroll tax dollar goes each and every time it is taken out of your paycheck or when you pay your estimated taxes is important because without a clear understanding of that process, we may never get to a point where the political will in America will be enough to reform both Social Security and Medicare and, to our way of thinking, significantly improve both programs for future generations.

Einstein used to day-dream and try to imagine what it would have been like to ride on a beam of light. He once imagined how riding on a beam of light from a distant star beyond the sun would be affected by the gravitational pull of the sun, a theory which was not proven until an eclipse occurred 11 years after he published his theory.

Let's try to use that analogy to do the same with your payroll tax dollar paid every week, every other week, every month or every quarter:

Let's say you will be riding on part of the $100 taken out of your paycheck for your FICA (Federal Insurance Compensation Act) taxes for a certain pay period. That $100 will represent 7.65% of your gross compensation for the pay period which means you would be making about $1307 for that particular pay period.

(Self-employed will pay double the 7.65% FICA tax but let's keep it as simple as possible with this as an employed worker for now)

$78.43 of that $100 in FICA taxes will go into the Social Security Trust (sic) Fund in your name with your SS# on it. $21.57 of that $100 in FICA taxes will go into the Part A Medicare Trust (sic) Fund as well as your contribution to the system.

(Since the cash flows associated with Medicare Part A and subsequent additional accounts B and D are different than with Social Security, we will try to come back to them in this sort of thought exercise at a later time. Mainly because they are so complicated as to make even Einstein's brain get scrambled like so many eggs)

Are you with us so far?

Imagine that you are riding on the $78.43 that goes into the Social Security Trust (sic) Fund. Does that mean you will be flying along with those greenbacks into a dedicated bank account or IRA account like many of you have with registered 'real' trust funds or money managers?

If it was true, you would see that $78.43 invested in such things as mutual funds, stocks, T-bills, bonds and other financial instruments, even as safe as a savings account where those funds could sit for the next 45 years of your life starting at age 22 and accumulate interest, dividends and capital gains growth just for you and you alone.

If you stayed on that $78.43 for those 45 years, and watched all of the other $78.43 payments come in every single month for those ensuing 45 years, you would most likely see an appreciation of those assets become a pretty nice nest egg of $216,153 or so upon retirement.

$78.43 per month paid into your own private retirement account from the amount of money taken out of your own salary paycheck for 45 years would produce close to $216,153 for you upon retirement which you could use for your retirement and/or pass along to your heirs in the event of your unfortunate demise.

That amount of money would be available to any worker in America today who makes about $15,684/year, not even above the poverty level for a family of four.

Sounds pretty good, right?  You would be all snug and safe in that investment account sitting on top of a growing stash of funds for your retirement building up tax-free and all that for 45 years and life would look pretty good, wouldn't it?

Except that is not the case today. Not by a long shot.

The $78.43 you would be riding on today goes right out of your paycheck to the US Treasury in Washington where it is credited to the incoming revenue account of the US Government each and every month.

Let's see where it really goes.

You ride that $78.43 to the general bank account of the US Government where it is duly accounted for and noted on the monthly budget sheets kept by the IRS and tracked by other government agencies. A credit goes on the books in your name only at the Social Security Administration (SSA) which sends out annual notices to you saying you have received credit for that $78.43 for that pay period or, let's say, $941.16 per year.

However, since you are riding on that specific amount of money you paid to FICA, you will follow that $78.43 through the IRS bank account and be re-routed with lightning speed to the SSA where you will be spit out as soon as the SS checks are sent out at the end of the month to any one of the 44 million+ senior citizens now on Social Security.

In essence, you will be thrown overboard from this $78.43 as soon as it leaves the SSA and heads to some senior citizen to spend as he/she likes or needs to in their golden years.

That $78.43 could be sent anywhere in the country, or overseas if your money is mailed to some ultra-wealthy billionaire who has a home in the south of France or Barbados or somewhere exotic like that.

Yes, the older billionaires get a Social Security check just like the poor seniors do, as hard as that is to believe. In virtually all of their cases, it is a much higher monthly amount than it is for the poor senior simply because the rich seniors paid in the maximum amount each year to SS via the FICA tax and the poor senior did not pay in the maximum amount.

The maximum amount of Social Security anyone can receive today is $2642/month. The average monthly Social Security check received by seniors is just under $1300/month.

Compare those amounts with the $216,153 nest egg you could have been sitting on had we adopted a modified public national retirement plan even as recently as 34 years ago in President Reagan's first term in the White House when many of us first started working on transitioning to such a more advantageous system for everyone under the sun.

We are of the opinion, and have been for quite some time now, that you, the average American citizen and perhaps not-so-average citizen, are being seriously short-changed by the very government program that many people say is 'working so well to eradicate poverty among seniors in America', Social Security.

What could be more helpful to 'eradicate poverty' among any of our seniors and families in America than to have a program that builds real wealth that can be transferred from generation to generation where possible?

Do you realize that if you die at age 65, 11 months and 31 days, 59 minutes and 59 seconds before you turn age 66 which is the eligibility age for Social Security today, that you will get nothing from all those FICA payroll taxes you paid into the SS Retirement System? Regardless of whether you are white, African-American, Latino or just made a citizen after landing here from the planet Mars 7 years ago.

You don't make it over the goal-line at age 66 and poof! All those FICA contributions you made go to someone else. Obviously since: 1) you will not be here to receive the monthly checks going forward and 2) your heirs will not inherit the $216,153 that could have been in your individualized retirement account had we gone to another system 45 years ago.

You could have also retired at age 60 or 55 or whenever you want to under this new program whereas you are trapped into working yourself to death until you are age 66 to be eligible for dollar 1 under the current antiquated Social Security system.

Einstein's theory of relativity and quantum mechanics may be over your head and very difficult to understand.

Understanding the difference between having $216,153 in an individual retirement account versus receiving $1300/month in a Social Security check is very easy to understand. Assuming you have no other assets and your new account doesn't grow by one penny over the course of your retirement, you could pay yourself the equivalent of over 13 years of similar payments to what you can expect from Social Security under the old way of doing things.

And guess what? Your children could be doing the same for their retirement and not be burdened by the ever-escalating higher taxes they will have to pay to support you in your dotage under the current plan.

It would be an amazing sea-change development in the evolution of our national retirement savings plans. Social Security was passed in 1935 and has remained virtually unchanged in structure since then.

Don't you think it is about time to come into the 21st century with a new way of providing much better retirement benefits for everyone in America?

We do. The sooner, the better.

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Monday, January 20, 2014

'Blessed Are The Young... For They Shall Inherit The National Debt!'--Herbert Hoover

'Blessed are the young for they shall inherit
 the  national debt'
-Herbert Hoover
Sometimes the best way to make very complicated things, such as the US federal budget, more comprehensible is to try to compare it to something you might be more comfortable with such as 'spending per capita'.

Or more precisely: 'How much is being spent for every man, woman and child in America today?'

Note this is not spending on you in particular. In fact, you may never receive one dollar of any of this federal spending directly in a check sent to your mailbox until you qualify for Social Security...if you live to be eligible that is.

This is the average amount of money being spent as if every single person in America was responsible for paying the bills.  Which, in essence, you are since you keep electing the same people who go to Washington and keep spending more and more money every single year.

You hate to say it is 'your fault'. So let's just say it is the collective 'our fault' for allowing it to happen for too long on both sides of the ideological spectrum.

There are 310 million+ people now living in the United States. What these enterprising reporters from the New York Times did was to take the most recent budget deal just passed by Congress (maybe the only significant budget deal we will see under the entire Obama Presidency) and divide the final appropriated numbers of selected federal programs by 310 million people to get these per head numbers below.

Here's the article by Wilson Andrews and Alicia Parlapiano:  The Federal Budget Per Person

Remember this is just for the $1.1 trillion bill just passed by Congress, plus they added Social Security and Medicare for reference purposes. The entire federal budget is about $3.8 trillion annually now so a complete list of spending per capita by each federal program would make your eyes glaze over before they pop out of their sockets.

The one glaring omission from this list? Interest on the national debt. It currently is in the range of $223 billion per year or about $720 per person, more than what we spend on veterans retirement and veterans health care and food stamps...combined.

Think about that for a moment. The amount of money we spend each year purely on interest to satisfy past consumption of government services, dating back to perhaps at least 1984 (if there are still any 30-year bonds still left from back then), is greater than the entire amount of money we spend on all of the veterans who served their country bravely for their retirement and health costs plus the cost of all the food stamps we issue to people for food.

Interest on the national debt is an 'entitlement' mandatory function, make no mistake about it at all. We are forced to pay all of the interest on time every time it is due or else our credit rating will take a far greater hit than it has already been hit earlier in the Obama Administration when it was downgraded for the first time in recent history.

The fear we have is that all of the monetary policy stimulus undertaken by the Fed over the past 4 years is going to rear its ugly head in the form of rapid interest rates once the economy gets going again, if it does before the end of the Obama Presidency that is. When it does rear its ugly head, interest rates on the then existent debt could go back to 'normal' rates of 6%...in which case interest costs could at least triple or even perhaps reach $1 trillion annually.

That would be a very nasty outcome that benefits no one personally but it does benefit the government which can then pay its debt with devalued dollars over the next 30-50 years. Paying debt back with dollars that are worth 10 cents of what they are worth today is the time-honored way that every government has used to inflate their way out of debt crises in the past.

We will probably be no different, given that we have already done that several times in our history.

We wanted to make the point that even though many to most people, especially seniors today and soon-to-be senior Boomers, want to believe that somehow, some way the money being spent on Social Security and Medicare is 'their' money that has been locked up in a vault somewhere, sprinkled with fairy dust and allowed to grow in value in some mysterious way, it just simply is not true when you really look at it closely.

But we don't have the time tonight to go into that again so maybe at another time we will try to set the record straight on that score.

As we said, 'federal budgets and federal spending and federal taxes are confusing'. Maybe these comparisons below will help you educate your friends, neighbors and more importantly, people who have no idea of how much we are spending on anything in the federal government any more.


 $259 Food stamps ($82 billion MANDATORY SPENDING)
   $61 Child school lunch program ($19.5 billion MANDATORY SPENDING)
   $40 Loans and direct payments to farmers ($12.5 billion MANDATORY SPENDING)
   $30 Crop insurance ($9.5 billion MANDATORY SPENDING)
     $8 Food and Drug Administration ($2.5 billion)
     $3 Food and Safety Inspection Service ($1 billion)

$3 National Weather Service ($954 million)
$3 Census Bureau ($945 million)

$72 Pell grants ($23 billion)

$2,672  Social Security ($848 billion MANDATORY SPENDING)
(Social Security is financed through other legislation and was not addressed in this bill)

$1,591 Medicare ($505 billion MANDATORY SPENDING)
(This is the total cost of Medicare for 2014, but only a portion of it was provided through the bill).

$36    Internal Revenue Service ($11.5 billion)
$0.27 Supreme Court ($86 million)
$0.001 Compensation of the president ($450,000 MANDATORY SPENDING)

$94 National Institutes of Health ($30 billion)
$27 Head Start ($8.5 billion)
$22 Centers for Disease Control and Prevention ($7 billion)

$33 Customs and Border Protection ($10.5 billion)
$31 Federal Emergency Management Agency (FEMA) ($10 billion)
$31 Coast Guard ($10 billion)
$17 U.S. Immigration and Customs Enforcement ($5.5 billion)
$16 Transportation Security Administration (TSA) ($5 billion)
  $5 United States Secret Service ($1.5 billion)

$26 Environmental Protection Agency (EPA) ($8 billion)
  $8 National Park Service ($2.5 billion)
  $3 Smithsonian Institution ($805 million)

$26 Federal Bureau of Investigation ($8.5 billion)
$22 Federal prison system ($7 billion)
  $6 Drug Enforcement Administration ($2 billion)

$4 House of Representatives ($1 billion)
$3 Senate ($859.5 million)

$1,802 Total, including war spending ($572 billion)

$56 NASA ($17.5 billion)
$23 National Science Foundation ($7 billion)

$27 Global health programs ($8.5 billion)
$10 Military assistance to Israel ($3 billion)
  $5 Assistance to Egypt ($1.5 billion)
  $1 Peace Corps ($379 million)

$129 Federal Highway Administration ($41 billion)
(Through limits on obligations from the Highway Trust Fund and exempt contract authority)

$49 Federal Aviation Administration ($15.5 billion)
(Through appropriations and obligations from the Airport and Airway Trust Fund.

$4 Amtrak grants ($1.5 billion)

$267 Veterans compensation, pensions and benefits ($85 billion MANDATORY SPENDING)
$174 Veterans health care funding ($55 billion)

Most of the appropriation for fiscal 2014 was provided in the fiscal 2013 bill.

Sources: Congressional Quarterly; Congressional Budget Office; Office of Management and Budget; Source: The Committee for a Responsible Federal Budget; U.S. Census population clock

© 2014 The New York Times Company

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Thursday, January 16, 2014

'Heretics and Heroes'

John Hus burned at the stake for 'heresy'
Ever wonder how and why things 'change' in human history?

That is the question put forth by Thomas Cahill, author of the 'Hinges of History' series which just added the great 'Heretics and Heroes' edition as of late 2013.

The subtitle tells it all: 'How Renaissance Artists and Reformation Priests Created Our World'.

Let's just summarize this great book this way:
'The heretics in the past are the ones who saw some sort of injustice or wrong and did something about it. Then they became known as 'heroes'.
Take Martin Luther, for example.

He was perhaps eclipsed early in his career and life by a man named Erasmus. Never heard of Erasmus? Well, he was perhaps the first person in recorded human history to make his living solely off of his publications, not-so-coincidentally with the invention of the printing press by Mr. Gutenberg.

Erasmus also supposedly was the last human being on earth who could claim to have read all of the extant writings in terms of folios or bound books of some sort in the known world at the time. He did so in his native German, in Latin and in Greek as well.

But when it came to standing up to the All-Knowing and All-Powerful Catholic Church in Rome in 1517-18, Martin Luther did so and Erasmus did not.

That is why we have 'Lutheran' Churches still today and no 'Eramusian' Churches we have ever heard of at least.

Suffice it to say that very, very few people in history have had the guts to stand up to the existing authorities at the time and challenge the status quo which they believe to be unjust and just plain wrong.

It is a wonder that we don't read where Martin Luther was burned at the stake like John Hus and other Christian martyrs before and after him.

What has any of this 'heretic' talk got to do with anything today?

Plenty. As in the fact that our Founding Father/Brothers were 'heretics' in many ways in the way they dared to challenge the generally-accepted orthodoxy at the time that the King of England was great and he was fair and true to his word in terms of respecting the freedoms of the American colonists.

They fought the War of Revolution and won. Now they are considered heroes throughout the land and the constitutional freedoms for individuals they fought for and won have been exported and copied the world over.

What are some of the 'conventional' wisdoms generally held as sacrosanct today in American politics that are inherently 'unjust' and 'unfair' and need to be challenged by you and any other potential 'heretics'?
  1. The whole notion that there are enough self-sacrificing, self-effacing, wildly intelligent and honest political leaders who think they can go to Washington and make omnipotent decisions for the rest of us from Capitol Hill and the White House...and fix everything under the sun.
  2. The health and growth of our national economy is entirely dependent upon jump-starts and policy defibrillations from the federal government. It is not; never has been and never will be. The genius of the American innovator and worker is the fulcrum upon which all of our prosperity depends.
  3. 'We can't balance the budget'.
    Why the heck not? We either elect people who can count and add and subtract (hopefully more subtraction than addition) and then tell them to balance the budget or 'don't bother coming home again...cause we are going to vote you out of office next election!'
  4. 'Entitlements are sacrosanct! We can't touch them!'
    Again, why the heck not?  They are all programs that require money to be taken from taxpayers in the form of payroll and income taxes (Medicare is close to 85% subsidized by the general fund when you add in Parts A, B and D) or borrowed from abroad from the Chinese or whoever else is brave enough to loan us more money on top of the $17 trillion in federal debt we now have on the books.

    There are literally hundreds of billions of dollars that can be saved over the next decade just by making small, marginal changes in the copays, deductibles and Medicare Part B premium match, currently 25% enrollee/75% general fund. Going to a 28%/72% ratio would save billions per year.

    Raising the retirement age from 65 to 66 in Medicare would save billions as well. Social Security's retirement age is now age 66...why not at least make Medicare be equal to its own entitlement sister program standards?
For a more complete understanding of the myriad of budget options to reduce the size and scope of federal spending, you can go to these links: Choices for Deficit Reduction and Options for Reducing the Deficit 2014-2023.

The choices we now have to face are more difficult given that we have let close to 17 years now pass since the last time Congress did anything of any real magnitude in terms of reining in the rate of growth of federal spending in the Balanced Budget Act of 1997. Virtually everything we have done since 2001 has been to expand federal spending and regulation of the economy and borrow more money from overseas.

America has become like the Catholic Church of the post-Medieval days: archaic; bureaucratically top-heavy and spendthrift on things that don't directly benefit the general good of the population at large.

On a state level, the same thing has happened with programs such as Medicaid which was ostensibly set up to help the poor citizens of North Carolina have access to quality health care.

We went to a hearing yesterday where the Medicaid Reform Advisory Board took testimony from people who are mostly convinced that 'everything in the current Medicaid system is going pretty well...so don't change a thing!'

Nothing could be farther from the truth. The state legislature appropriated close to $600 million in emergency funds just last summer to pay the overruns of the current Medicaid program in North Carolina, all of which could have been allocated to, for example, paying teachers more in the public education system (which can stand a good dose of reform and rearranging itself, come to think about it)

There was a consultant from the state of Georgia who had worked with the Medicaid reform effort over the past several years who presented convincing testimony that Georgia's adoption of managed care for Medicaid patients had not only resulted in better measurable outcomes for the Medicaid recipients in Georgia over the past 5 years but had also produced close to $4.3 billion in savings as well.

At the same time during which the North Carolina Medicaid system cost an additional $4 billion or more probably over budget projections.

Putting it in a stark way:

'There was roughly an $8 billion difference in Medicaid spending between the states of Georgia and North Carolina over the past 5 years that could have been used to help pay teachers more; fix our state roads or return tax refunds to the taxpayer in some proportion or another.'

So who is the 'crazy person' when it comes to fixing what ails us in this country and state today: 'The Heretic' who wants to change things or the person who wants to maintain the status quo just as it has been for so many years now?

There are hundreds if not thousands of ways our elected leaders can reform the way they spend your tax money in Washington and the state capitols. You have to tell them what you want them to do, however. They won't do it on their own.

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Friday, January 10, 2014

The 'Ward and June Cleaver Economy' Under President Barack Obama

'Oh, Ward! 'Oh Wally!' 'OH, NO BEAVER!'
Back in the 1980's, Republicans led by President Ronald Reagan were accused of wanting women to 'stay at home'; 'cook and clean' and 'stay barefoot and pregnant'.

Keep the traditional single income-earning family intact and all that.

Essentially they were accused of being against 'women's rights' because they were against constitutional amendments such as the Equal Rights Amendment to the US Constitution, among other things.

Republicans were accused of wanting to roll back time to the Eisenhower days where men headed households as single wage-earners; went to work every day; brought home the bacon; and had a lovely wife such as June Cleaver at home polishing the furniture every day with Lemon Pledge while wearing pearl necklaces and lovely dresses while raising and tending the children, even mischievous ones such as The Beaver.

Well, one thing is almost for certain under President Barack Obama:

'America has darn near returned to the days of single income-earning families!'

Except this time around in the early 21st century, high numbers of male partners in the household are out-of-work and staying at home while the female partner keeps working to support the family. Regardless, many two income-earning families of the 90's and early 2000's are now reduced to a single income wage earner, if that.

January's jobs report could not have been more dismal or disappointing. Not only for the President, now in his 5th year in the White House but much more so for the millions of families who are still struggling to get out of the chronic under- or un-employed status they have been stuck in for the past 4 years.

Here's the January jobs report just out this morning: BLS January Jobs Report

Here are some of the 'highlights' (which in truth, are really 'lowlights', no matter how anyone tries to spin then):
  • 91.8 million Americans are not in the labor workforce
  • The labor force participation rate is down to 62.5%, the lowest percentage in 35 years.
  • The labor force participation rate hit its peak of over 67.3% in 1999-2000 at the peak of the internet boom while Bill Clinton was in his second term in the White House.
  • 535,000 more Americans dropped out of the workforce because they were frustrated not being able to find work

True, the 'official' unemployment rate dropped to 6.7%. But when that number is dropping primarily because more people are leaving the workforce instead of more jobs being added to it, that is not a cause for celebration but one for alarm.

Some will try to argue that the labor participation rate is dropping because of so many Boomers leaving the workforce and some of that might be at work here. However, when many IRAs and 401k plans have been decimated, it is hard to believe that many Boomers can even afford to retire at age 66 nowadays, the official Social Security retirement age today. Many are now forced to work beyond their official retirement age, simply because they can't afford to retire today.  Assuming they are not laid off or can't find work, that is.

No one is cheering this unemployment number today. You can see it on the news channels and on-line in various forums.

Virtually everyone is now acknowledging that this is the most anemic recovery in terms of job creation in modern American history. Typically, one can expect that after a severe economic downturn, such as the ones we experienced in 1980-81; 1987; 1992-93 or 2002-2003, job creation would return with a vengeance in the ensuing recovery. Housing used to lead us out of most of our recessions; it is slowly improving but nowhere near even the replacement rates necessary to keep up with population growth across the nation.

People can always be accused of playing politics with official jobs reports, one way or another. However, now that America has seen unrelenting stagnation in job creation and real economic growth, it is fair to ask yourself: 

'Has the economic policy under President Obama 'worked' or not?'

There is absolutely nothing wrong with asking that question, especially if you are out-of-work or significantly unemployed going into the 5th year after the economic collapse of 2008.

After all, you are entitled to evaluate your own self-interest and one of the most important things for everyone in America is whether they have the opportunity to work at a fulfilling job or not.

Creation of millions of new jobs would solve a myriad of problems we now face in America from expansion of Medicaid to the minimum wage to the extension of unemployment benefits.

Our Founding Fathers from Alexander Hamilton to Thomas Jefferson to James Madison all understood that the key to the future success of the United States would be establishing and maintaining the laws, rules and conditions where free enterprise could flourish so citizens could provide for their families.

Nothing wrong with demanding our elected leaders do something policy-wise at the federal and state level to allow these jobs to materialize. By the millions upon millions. 

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Saturday, January 4, 2014

Common Sense Lessons From History For The New Majority In America

As we have said before, we enjoy reading lots of history. Especially when it comes to the writings and musings of the people who framed our Constitution and, hence, our way of life in many ways under our constitutional democratic republican meritocracy.

One of the things we find is that there is really nothing new under the sun. In fact, the Founders left us with a plethora of underlying principles to follow that for the most part have worked for these past 234 years.

The only problem is that we have forgotten many of the good ideas that would have prevented us from getting into this current mess.

The great thing about 'ideas' and 'principles' is that they can be passed along and promoted solely by the power of the pen. Not the sword; not by coercion. These ideas and principles can be freely presented and freely accepted by citizens and when a majority of these citizens demand it, they happen.

Thomas Jefferson once said the power of the printed word through the press was the 'engine' of democratic government. Now that we have the internet, Facebook, Twitter, text and all sorts of other social media avenues to distribute and disseminate information, we can mostly bypass the traditional mainstream media which honestly does not do a good job at all of presenting all sides of the issues in a fair and honest way anyway.

So, let's do it.

Here are some very simple 'lost' principles from the Founding Days of the American Republic that, if recovered by either the current Democrat or Republican Party, can make a huge difference in how we govern ourselves into the future.

If neither party wants to adopt these basic principles as parts of their operating platform, then it will open the door to the burgeoning group of sentient registered Independents and Unaffiliated voters across the nation to band together and start supporting candidates who will not run as either Republican or Democrat but as mature adults.

Both major political parties today so closely resemble the antics of feuding kids in kindergarten that it is hard to take either of them very seriously any longer.  The history of American politics is that when the extremes on either end gain too much power, new factions break away such as the Whigs from 1830-1850 and then force the traditional parties to take stock of their situation and reform back to some center of sanity once again later.

  1. Find a means to extinguish all new debt within 30 years. (Alexander Hamilton)

    What does this mean exactly? What it means 'exactly' is that any time our elected officials want to enter into a new 'police action' or war overseas, or pass a new entitlement program, or expand any new domestic program that requires new debt, they first have to pass a new tax to pay for it so it can be 'extinguished' over a 30-year period.

    Consider this the 'Quicken Loans' approach to running our federal government. You don't have the specific revenue stream to pay the interest and retire the debt of the new initiative, you don't pass the bill authorizing it.

    Think of the spending discipline this will cast over all federal spending. A President wants to go to war in Iraq? He has to suggest and then introduce a new tax on gasoline, fast food, dividends, or capital gains that will pay for the $1 trillion in expected costs of prosecuting the war effort.

    It is one thing to just say: 'Let's go to war!' and then come to Congress every summer to ask for $250 million in new supplemental appropriations that are funded not with new taxes but with increased borrowing.  There is no restraint or governor on spending right now in place to prevent another excursion into Iraq or Afghanistan on a non-paid for basis.

    Same with new entitlements such as Obamacare or Medicare Part D passed under President Bush 43. Force our future elective officials in Congress to deal up front with the realities of the enormous open-ended costs of such high-minded ideas and offer specific tax streams to pay for the debt service and retirement.

    We believe this one simple concept, extinguishment of debt, if adopted by either current party or the soon-to-be majority of Independents, will do far more to arrest the growth of spending and accumulation of debt than anything Grover Norquist has ever done with his Tax Pledge.

    Because the Tax Pledge has been an absolute failure as a brake on federal spending and national debt build-up, hasn't it? Just look at where the level of federal spending and debt are today versus when the Tax Pledge was started in 1986!

                    Federal Spending                  Debt
    1986       $796 billion                             $1.7 trillion
    2013       $3.7 trillion                             $17 trillion+
  2. Place ALL federal programs in the discretionary or annual appropriations process. (There were no entitlements in the beginning)

    It is a total dodge by elective officials to throw up their hands in false alarm and say: 'We can't do anything about Social Security or Medicare or Medicaid because they are entitlement programs!'

    That is a complete and abject lie. It used to be when serious people were serving in Congress and the White House that almost every year, a budget reconciliation package was passed which included tax changes AND entitlement program changes.

    We know. We developed and presented close to $177 billion in Medicare and Medicaid reforms to the House Republican Budget Committee in the spring of 1993. Those were reforms that would have resulted in $177 billion in spending reductions and/or fee increases such as for Medicare Part B premiums or home health care copays and deductibles.

    No one came to take us to prison. No one came to take us to the insane asylum, although, truth be told, several members of the House Republican Budget Committee fairly blanched a sickly shade of white in their faces as these reforms were unveiled in a meeting one day.

    Newt Gingrich and Dick Armey, those two bastions of perceived conservatism, led the fight against the inclusion of these reforms in the House Republican Caucus. It was a pretty embarrassing and disheartening sight to behold.

    Removing the Iron Curtain from the entitlement programs we now have in place will allow a much-needed breath of fresh air to examine every program in the federal budget and make the changes necessary to bring them into line so we don't spend every single incoming tax dollar on just 4 programs soon in the future: Social Security; Medicare, Medicaid and Obamacare.

    Every. Single. Tax. Dollar. From every source: income, payroll, excise, corporate, capital gains, dividends and death taxes. It could happen as soon as 2020 but it certainly will happen in the next decade.
  3. 1 legislative year to pass legislation/1 year to evaluate/oversee programs

    This one is so simple and common-sense that we are surprised the Founders didn't think of it first.

    The year after the congressional elections, the odd-numbered years, will be the legislative years. Budgets will be passed; programs will be allocated money but they will be done for a biennial or 2 year period.

    In the even-numbered or congressional election years, congressional and senate committees will focus solely on administrative oversight of the programs they have authorized and appropriated in the odd-numbered years prior to then.

    Why do that?

    Have you looked at the results of many federal programs!? They never end, even if they are producing horrible or non-existent results! Ronald Reagan once said: 'The closest thing to eternal life on earth is a federal program!'

    Having a full legislative year for every congressional committee to take a look at every federal program under their jurisdiction and examine which ones to increase (cause they are working so well); which ones to cut back; and which ones to flat-out eliminate would be of enormous consequences to our fiscal health.

    (Only 1 federal program has been abolished in toto in modern memory, the Federal Helium Reserve Program...and there are efforts today to revive it because there isn't enough helium to fill balloons apparently)

    It would also restore some much-needed congressional prerogative over federal spending in a time when President Obama is usurping more and more power from the legislative branch and making some questionable constitutional separation of powers decisions regarding the implementation of Obamacare, just to cite one prime current example.
If either of the two major parties would adopt even 1 of these very simple concepts but preferably all three, they would help restore fiscal sanity to our federal government.

They would, in addition, be far more attractive to the tens of millions of people who are now fleeing for the exit gates and registering as Independents in droves, North Carolina being one of the most prominent and obvious exoduses in the nation.

And if neither party adopts them, the Independents and Unaffiliateds have the opportunity to form a new party around the nucleus of fiscal responsibility and maturity which is what most of them want first and foremost anyway.

'A little rebellion every now and then is not a bad thing' said Thomas Jefferson.

Here's the chance to do it in a peaceful way. With the power of the pen and the power of the purse.

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