FIX THE ECONOMY NOW, but don’t touch mine: Too late its already gone!

Shrinking Dollar

A Sorry State

We, America, are in a sorry state. This appears, on the surface, to be something with which most people agree. But the surface can be quite deceiving. Pierce the flesh of America’s electoral body and you start to see massive disagreement as to what is needed. Most importantly, and currently very concerning, is that everyone feels the solution involves steps to be taken by the other guys – you know, those who are not in OUR group! You know – The O T H E R guys; the non-white, non-black, non-Hispanic, non-immigrant, non-migrant, non-middle class, non-union, non-civil servant, non-farmer, non-medical professional, non-patient, non-majority, non-minority, non-lawyer, non-judiciary, non-legislative, non-administrative, non-professional, non-politician, non-unemployed, non-under-employed, non-employed, non-disabled, non-enabled, non-educated, non-uneducated, non-tolerant, non-intolerant, non-poor, non-rich, non-government, non-private sector… you know the Other Guys! – The ones whose fault all this is!!!

You know – everyone other than us! All those (whispered) other people, who have (caused the problem) (profited at our expense) (stolen our money) (spent too much) (worked too little) (think they are smarter than us) (are uneducated and lazy) (expect too much) (do too little) Circle the correct answer(s).

Also disturbing is that we are allowing our professional political class to drive, not only our debate, but out thinking as well. All you need to do is read the news and you will be fed the continuous supply of sound bite, talking points so you yourself can help frame what needs to be done to make the OTHER guys do their fair share. And of course, these talking points – these would be mantras for us to recite each day ad infinitum until they become ingrained in our psyche and we think nothing else – are not just in conflict with each other, they are diabolically and diametrically opposed. They are crafted to foment the most discontent and the most innate conflict. This is what our political process has become. Led my our professional political class; stirring up a minority to a feverish pitch so the bulk of the country will become afraid, or simply exhausted and in the end capitulate with what ever patch, or band-aid, the politicians decide to apply.

Community activists know that the way you get big gains for minority positions is to frighten or exhaust the bulk of the population. You see activists understand that most people don’t really care about much beyond their own day to day lives and basic existence. They know that when the average person feels threatened, or if the story gets annoying and tiresome – in the end they will just want their leaders to make it go away. They just don’t want to hear it anymore! This process is not about the right solution – it is about any solution that delivers me peacefully back to my mythical happy life. And you know what? It has worked every single time! It is all predicated on the right rhetoric -the right mantras.

The Current Mantras

  • We need to cut pensions costs We need better retirement benefits
  • We need higher wages We need lower manufacturing costs
  • We need more high paying jobs We need more labor jobs
  • We need universal health care We need low cost health care We need more free health care
  • We need to help people keep their homes We need to have the market sort itself out
  • We need to lower health insurance cost We need better insurance benefits
  • We need to stimulate the housing market We need the banks to lend more
  • We need to raise housing prices We need more affordable housing
  • We need more money We need less federal debt
  • We need more social assistance programs We need to lower government debt
  • We need a higher minimum wage We need competitive prices
  • We need to eliminate illegal immigration We need more cheap labor
  • We need to get the top 1% to pay more We need the top 1% to spend more
  • We need to lower government spending We need more government spending
  • We need more charitable giving we need to raise taxes and eliminate charitable deductions
  • The poor are getting poorer The rich are getting richer
  • The middle class is suffering We all need to sacrifice

Debunking the Myths

Most of the mantras in the list imply that fixing or making a change in one of these areas will repair what is wrong and remand us once again to the peaceful day-to-day happiness (even if it is just an illusion) that we all desire. While, depending on your personal political profile of course, all of these mantras appear reasonable, there is one underlying problem with each and every one of them. There is a set of fundamental myths that needs to be debunked. In debunking these myths, we give rise to the lies that are inherent in these supposed solutions.

To understand these fundamental myths we need to take a look at some assumptions.

Assumption 1

The poor are getting poorer! Who are the poor? We often use the term under-served, interchangeably with the term poor. Historically, we really have not wanted to clearly define the poor for a whole host of reasons. Defining a problem, or a segment of a problem, is not politically attractive. Well defined problems either yield impossible solutions, or easy solutions, and make it difficult for redefinition on the fly without political consequence. For a family to be described as poor and eligible for social programs the must fall within the Federal Poverty Level (FPL) or some multiple of the FPL.

The FPL for a family of four for the year 2011 ranges from $22,350 in the 48 contiguous states, to $25,710 in Hawaii and $27,940 in Alaska. Seems simple enough doesn’t it? well like most things governmental, its really not. So if the poor are those who earn less than, lets say $25,000 to keep it simple, than all aid for the poor would be for this group of people. About 18.79% of the U.S. population earned less than the FPL in 2010. This equates to about 58,332,000 people. But the provision of social programs is not targeted just at the poor. They are in fact often predicate on 200%, 300% even 350% of FPL for eligibility for some state and federal program eligibility. So most programs eligibility starts at $50,000.00 in income to as much as $85,000 in some cases. This in turn equates to almost 79.8% of the population according to the latest census data.

Now in reality, not all of the population draw programs support at 350% of the FPL. Only a smaller amount of programs offer eligibility at that level. The number today falls at about 50% of the population of the U.S. is eligible for federal and state program subsidies and currently takes advantage of these programs. Either alarming, or relieving, depending on your point of view, this 50% is getting slightly more than 1/2 of their annual income from programs and/or subsidies provided by the federal government. 84.1 million people (27.1% of the population) earned under $50,000 per year (200% of FPL). Together they earned in aggregate $1,591,640,000 of the U.S. total personal income economy of $4.915 trillion in 2009 – about 32%. So 32% of the money earned went to the lower 27% of the population and about 1/2 of their earnings came from money paid directly or indirectly by the federal government that came from taxes paid by the rest of the tax payers.

The biggest assumption of all with this segment of the population is that they are suffering more than they have in the past. While it is true the poor in America earn significantly less than much of the rest of the population, they also have the largest amount of eligibility for programs to offset what they don’t or won’t earn. In realty, while they earn less in real income, they have at least as much if not more in discretionary spending income because few if any of their needs go unmet. They receive a wide availability of care options, both Medicare, Medicaid and state based, as well as other federal and state programs for housing, mental health, addiction, job counseling and training, as well as numerous faith based and institutional charity programs as well as philanthropic programs. This is not to say it is pleasant to be poor. Simply to point out that the “poor” have a large array of services that are making up for what they actually do or do not earn. It is better to be poor in America than in much of the rest of the world.

Assumption 2

The Poor are the Under-served, is the core of assumption number 2. Anyone who has spent time working or volunteering in the areas of public health will quickly tell you that the under-served are not the poor we classically think of. The poor in America, as we discussed in the last assumption, are neither under-served, nor are they un-served. The bulk of the under-served are people earning between $50,000 and $110,000 per year. They have jobs, pay some taxes, send their kids to school, pay their rent sometimes late, or have a home, likely upside down in equity, and perhaps bordering on, or in default. Historically, they are two person family earners, and one of them has recently lost their job, increasingly one of their adult children is still living at home and has earnings insufficient to support independence, are still on their parents insurance, and one of the family members has a chronic illness.

The under-served are “working poor.” They don’t make enough to pay for all that they need and want. They make, or have made short term decisions regarding purchases, vacations, and or investments, that have come back to haunt them. If they have a chronic illness, they are making weekly, sometimes daily decisions between the proper treatment, or medication, and food, education, housing or clothing for their family. Often, health related costs are playing second priority, as a result their illness is getting worse, or in the worst case scenario, the untreated disease, bacteriological or virus infection is not becoming more resistant to the medication due to improper treatment levels – a potential public health hazard.

The under-served in America are squarely in the middle class. There is typically only one small incidental difference between basic prosperity and tragedy. A loss of one income, a chronic illness, a catastrophic accident, an unplanned pregnancy in inopportune bit of extravagance. Even without one of these incidental differences, the middle class are finding they have less and less discretionary income. More and more, even with raises, company healthcare, bonuses and perks, they just have not been getting ahead. They are earning more but are also more and more at risk.

The 29.6 million (about 9.55% of the population) under-served (a majority of the middle class) earned a total of $2.282 trillion (46.4%) of the personal income in the U.S. They earn on average $76,650.00 per year.

Assumption 2 is one of the main tell-tails to one of the major fundamental problems that if we do not come to grips with, will be the undoing of our economy, society, and ourselves.

Assumption 3

The rich are getting richer on the back of the middle class and the poor. Said another way the 1% are taking, through inappropriate or ill-gotten means, what is rightfully the 99%’s. Clearly the rich have taken in much more cash in the past 40 years. But when you look at the percentages they have gained it is not really a significant difference, as a percentage, than in previous years. But first let’s take a look at the top 1% and find out how they stack up against the rest of the population. The top 1% (about 3.9 million people) earn on average 275,000 per year. The total combined earnings for the top 1% equals $850 billion per year or about 16.5% of the combined total. Conversely the 99% earned a total of $4.103 trillion or about 83.5% of the combined earnings.

Clearly there is disparity, but I was surprised to see that the disparity was not quite as large as I expected it to be given the rhetoric. As Dianna Dooley, the Secretary of the Department of Health and Human Services for the State of California, said in one of her first public meetings after assuming office in 2011, “We all need to understand that disparity will exist.” Ms. Dooley was making the point that we cannot legislate away disparity. Disparity does not exist simply because of ill treatment or lack of opportunity. Sometimes disparity exists because people have made choices to not do certain things, not work, not get an education, not apply for available services. What percentage of the U.S. population does this characteristic apply to? It is had to say statistically because the census data does not measure motivations. We can use some numbers from a Thompson Reuters report in 2009 on the national health cares spend and we will find that about 20% of the monies spent go to people that have made such choices. I can’t say whether or not this is a valid measure for the economy as a whole. If I had to hazard a guess based on my life’s observations, I would think this is a reasonable estimate.

It does not seem to hold true that the rich are statistically getting richer, nor are the poor getting poorer. Both segments are getting more and more currency each year. The problem is not the amount of money they are receiving it is in the real value of the money they have. This is another clue as to the major fundamental problem, we will discuss shortly.

Assumption 4

We have had up until recently a vibrant economy, America has been very prosperous, and if not for the actions of this political party or their policy (depending on your political affiliations it is always the other party and their policies), all would be just fine. Said another way, when so-and-so was the President (again, depending on your political affiliations it is always the other party and their policies) everything was just fine!

In my last article Republicans & Democrats: Division destroys WE, I outlined a series of events since 1935 that have had major impacts on the current state of our economy. It was not meant to be all inclusive. In fact, I have heard from a number of readers who have suggested numerous other events, legislation, decisions, policies and actions that they also feel should be included. I prepared this article to point out that it was not one parties policies that have brought us to the precipice. It has been both parties. In effect it has been us, our decisions, our demands for more of this and that, and it has been our willingness to accept a gradual migration from the citizen politician, envisioned by or founding fathers to a professional political class whose rule we embrace today.

Those of us who learned American history after 1937 have been indoctrinated with the belief of “American Exceptional-ism.” As President Franklin Roosevelt prepared America to enter the war he needed to break the back of the isolationist tendencies we have developed after WWI. Part of the method to do this was building pride, patriotism and the belief that America was innately exceptional. As a result the history that was taught after 1937 was quite different from the history we would have learned before. I have advocated in earlier articles using Google Books, and searching for history tomes written before 1900. There as I was writing, “The History and Evolution of Health Care in America” I found a very different recollection of America than the one I carried in my head.

America has had a long history of economic trials and tribulations. Almost immediately upon the signing of the armistice at the end of the American revolution, the United States went from waging physical war to suffering under an economic war waged by England, France, Germany and other European nations and banking interests. By 1800 the American dollar had dropped to worth about 48 cents. It was the War of 1812 and our decisions to temporarily drop the international gold standard that allowed us at the end of the war to reset the dollars value when we went back on this standard. We dropped out of the gold standard a number of times based on the excuse of War all the way through World War I.

The first time we did not drop off the gold standard as a result of war was World War II when the Federal Reserve refused Presidents Roosevelt request to do so. FDR’s first request came at the beginning of the depression and also was refused. Some economists believe this single action is what caused the great depression, others simply believe it increased the severity. As a quick note, it was not the the Stock Market Crash of 1929 that caused the depression but the great dust bowl and drought. The stock market had recovered much of its losses within 4 months. Once again our history, post 1937 often seems to not reflect the realities of the past.

If we go back and take a good look at our real history, with the exception of the benefit we gained from the massive amount of gold reserves we accumulated during World War II, the real source of our prosperity into the mid 1960’s, America’s economy has not been as stellar a performer as we have been lead to believe.

The Dirty Truth

There is a fundamental problem with our economy. It is truly fundamental in every sense of the word. And although is not “Fun” you are guaranteed to feel both brain dead “Duh” and “Mental” if you try to understand it.

We believe that we have had a robust and growing economy though most of our lives. Even at the current limits of human life span most of Americans were born after 1928. Most of us have come of age after World War II. And almost all of us working today were born after 1950. We have for the most part lived through what we believe is the hay-day of America’s economic history. And our perception is false!

While we had significant prosperity after World War II, it was largely the result of the cash and carry policies that FDR put in place with western Europe for the sale of war materials by America. FDR enacted two major policies; lend-lease, and cash and carry. Under Cash and Carry, much of what we sold to the allies was paid for in gold. By the end of the war America held in Fort Knox a majority of the gold in the world. I have seen estimates of as high as 82% of the world’s gold. After the war and as we moved into the 1950s America was booming and we had a large amount of room to expand the amount of currency in circulation since we had most of the gold. But by the 1960s, our policy of allowing other countries to redeem U.S. Dollars in gold had seen our reserves significantly depleted as most of our Allies, England, France and Germany had systematically redeemed their dollars for our gold. By the mid 60s we again were having problems maintaining enough currency to support the perception of our growing economy.

By 1972 President Nixon had a cash problem. We did not have enough currency in circulation for the government to continue to pay its bills, including Social Security, Medicare and Medicaid, as well as pay for the war in Vietnam, and the ongoing cost of the cold war with the soviets. As a result, the Federal Reserve advised the President to remove the American Dollar from the gold standard. In doing so we gained the ability to create more currency to fund the cash needs of the government and the nation. But, there was still a problem.

While the elimination of the gold standard, did free the economy from the physical limits of the gold standard, it did not free the banks, where new currency, actually is created, from the limitations of the fractional reserve banking system. Banks under our form of banking can create ten dollars of currency for every dollar of assets (or debt) they have of record. While this was far better than the practical physical limit we had on the gold standard, the growth of debt by the government and obligations under federal programs, defense, logistics and entitlements were growing much faster than the asset base. Debt, the other method to grow the amount of currency became the main method.

Money Supply vs Trade Imbalance and Federal Spending

In 1972, America had, according to the St. Louis Federal Reserve Banks, about $500 billion of currency in circulation. Currency, prior to this period had grown on a fairly steady low growth rate from the $73.7 billion in circulation in 1940. While the rate of new money in circulation increased from 1940 to 1972 increased over the prior years the growth was still predicated on the tie back to the gold standard and as such most of the growth was real in relation to the bulk of the world currency and tied directly to the asset base of the U.S. In other words it was mostly real economic growth.

From right after 1972 to about 1986 the growth in currency supply was driven by increases in credit card debt and the ability of the Federal Reserve and banks to leverage that debt growth with new money at the rate of ten to one. You will also see from the above chart that we were steadily increasing both federal spending and accumulating losses due to the ongoing trade imbalance. The main restriction on the growth of new money was the fact that the bulk of the main debt in the U.S. (mortgage debt) was in the hands of S&Ls and other non-banks. You can see from the chart as the S&L’s failed as a result of the changes in rules for realizing asset values, like the mark to market rules, and the banks gained control of these mortgages – and the underlying ability to leverage them at ten to one, much more currency came into existence. Of course as the currency materializes the federal spending increases as well. By the time we get to 2010 we have increased the amount of currency from the meager $500 billion in circulation in 1927 to over $15 trillion in 2009, a thirty times increase. One simply needs to ask themselves did we really increase the values of all the assets of the U.S. thirty times since 1972? I don’t see how!

And of course by 2009 we have also accumulated a combined debt based on federal spending and the steadily accumulating trade deficit of over $11 trillion. Even harder to imagine a thirty-fold gain in relative net worth of America isn’t it?

So where did this new money go?

As I discussed in a previous article entitled, President Obama’s Speech: Critical Question Continued, this new money was disproportionately spent in the areas of federal program spending and housing costs. The effect this has had on our economy has been catastrophic. If you look at the chart in the prior section, the amount of spending has almost equaled the new money created. An interesting statistical note is if you look at a simple projection of what our economy would be today if we had stayed on the Gold Standard it would be about a $5 1/2 trillion economy instead of $15 trillion or more as we currently see it. This could just be a statistical coincidence, I will leave it to the professional economists to explain this – although when they do I seldom trust them.

So one of the fundamental problems is that our economy is simply not worth the paper we have printed to count it. We have significantly overvalued our economy, alnong with much of the rest of western Europe. If everyone in the world did this the same way it would be irrelevant. But China and Russia, among a few smaller others, have not banked this way. While we like to complain that China is “manipulating their currency” the truth is they simply are allowing their currency to stand at its value and are not increasing the amount of their currency and thereby artificially inflating salaries or benefits in the country. As a result, China, and many others cost significantly less to make stuff for the rest of the world.

You see what we have been lead to believe about our prosperity over the past 30 years has been an artifice, a mere contrivance. While we have all felt like we were getting richer, and our elected officials have been telling us to spend more, and borrow more on credit, and how we should all buy houses. The reality is what they were doing is getting us to go further and further into debt to provide fuel to the fire of our own economic destruction. So while our borrowing, spending and mortgage debt allowed them to increase the amount of money in circulation, the new money had no more value. It was all a facade.

This brings me to the current argument of the 99% against the 1%. The reality is, it is not the 1% who have done anything to take the value from the 99%. I think we effectively debunked most of that myth in the prior sections. The real issues effect the middle class the most. The poor and the rich have been effected exactly the same but they have not felt the effect the same as the middle class – the under-served.

The reason the middle-class have been so devastated is a result of the following two points. First, the rich have larger amounts of discretionary monies. These are monies that are not consumed by the cost of basic day to day living. The rich also have more savings and a larger portion of their earnings come from investment. Therefore when the purchasing power of their dollars falls they have a lot more drop to go before the true value falls below this basic day to day cost level, even at their higher costs as a result of more lavish life styles. In other words, they are not taking more they just don’t show the effects because they are not yet felt.

Second, the poor, as we discussed before, get at least half of their income from the federal government, so as the value of the dollar drops, the government is just printing more money and providing more benefits to the poor in America. The source for the spending is only in part taxes. So while it is clear that even if you took 100% of the earnings from the top 1% it would not even put a small dent in the economic issues we face, and taxing the rich politically sounds really good, in the end it is not solving the problem.

Taxes are neither the problem nor the solution. The problem is we have simply created at least twenty times more currency that we have real value in the economy. And as such the middle class, equaling 19.2% of the population, 59.8 million people, are feeling the crunch. Our professional political class, with the best of intentions at every singe step, have gotten them to take on debt they could not afford, buy homes they could not afford, hire employees companies could not afford, pay salaries we cant afford, provide free stuff, that we can afford, and purchase products and services that we can’t afford. They have built a national economic system that is predicated on federal subsidies – through the creation of more valueless dollars – to lull us into a false sense of security.

Americans today, cost too much, spend too much, borrow too much, expect too much and often work and produce too little per capita relative to the rest of the world economy. We speak of creating more jobs, but then we focus them in areas that do not bring our nations strategic value. Yes paying people to fix decaying infrastructure is necessary, but it is not the same creation of new value as when FDR created the WPA in the 1930s. Having an entire nation of college graduates makes us all warm and fuzzy and makes us feel really superior to countries like Mexico, and Singapore, but they have cheap labor and less per capita expense for laborers. As a result their goods cost less and we buy much more than we sell as a nation from these nations.

We make all our companies provide tremendous benefits for being an American employee but these also increase the cost of the development of goods and services and price our products out of the world economic market. We tout our abilities as the innovators of the world, yet the profits from innovation are dwarfed by the profits from the manufacturing of the products we have innovated. And now other countries are surpassing us as innovators. Their education systems are producing superior students because not everyone goes to college. Some are tracked for labor, some skilled labor, and only a few go to college – often American colleges. We have no labor pool to speak of and we have invested way too much in many of those that end up in labor related jobs because we sent them to college only to find there were no jobs for their level of education. Further, there is an argument that we have weakened the quality of an American college education because so much of our dollars are spread across so many.

Yes, overall we are in a very sad state. I am not an economist – just an individual who has asked some questions and tried to find my own answers. Are my answers the right ones? – the only ones? Perhaps not! But for me they have begun a path – so I can draw my own conclusions. I do know this! Until we address some of these fundamental questions, most particularly the big one of our highly inflated economic values, we will continue our decline, and likely will continue to seek solace by letting our professional political class print more money and lull us back to sleep.

It is time to wake up from our 40 year dream of profligate prosperity and face reality. The concept that the other guys need to sacrifice but not me is a false one. The sad part is we already have sacrificed. Our prosperity is already gone. The only thing left is the counting! Oh yea, and class warfare, revolution and destruction if that is what we really want?

What do you want?

Republicans & Democrats: Division destroys WE

This article is in response to a recent letter to the editor in my local paper.  In this letter entitled, ” GOP debt”, the writer makes his point that the U.S. debt is the Republican’s fault – that most of the debt incurred has happened under their watch, as a result of their programs.  He blames the current problems of America and its economy on thirty years of their dominance over Washington DC.  This article is not intended to challenge any of his assertions, or to attack the credibility of any of his arguments.  Fundamentally, it will not make any difference whether or not, he is correct as to who was actually controlling our government during the past 30 years.  The end point would have been the same.

Instead, I think it is time for all of us to take a hard look at a timeline for the past 76 years.  I have assembled a brief one here.  This is not meant to be inclusive of every single event, nor could it, as many would debate the events themselves.  I also have not intended this to try, by the volume or magnitude of events for either side, to lead anyone to the conclusion that one side is more at fault than the other – although I am sure some who read this will still complain of bias and that intent.

WE is us – We the People.  Not Republican, Not Democrat – neither liberal nor conservative.  It is simply WE.  Unless, or until, WE again congregate as one in purpose, we all will lose!

I have simply taken my own personal stroll through history and picked the particular events I felt were important, pivotal, in our long and involved – often entangled process – to arrive at the door of what may be America’s economic collapse.  We are at this doorway as a result of numerous decisions and actions.  We have made many many decisions in this period.  Most of the decisions were originally contemplated to fix contemporaneous problems of the day.  In this time we have developed a nasty habit of enacting short term programs with an intention to replace the programs with other solutions later, only to have the replacement step get lost along the way as we allowed the growth of a professional political class and the virtual elimination of the citizen politician on which the country was founded.

I don’t know if a professional politician is better for us in the long run than a citizen politician.  I can see advantages on either side.  History and the electorate soon will make that determination.  I do believe that at each step, for the most part, the politicians were attempting to fix the problem in a way they thought was best both for the country as a whole, their constituency, and their own re-electability.  While I can idealize a desire for so much more in the decisions of my representative, I must concede and accept the nature of humanity after all in this process.  It becomes my responsibility to elect the best person in support of the best solution. In effect to be a Mugwump.

In the end, it makes little difference.  Until we truly understand the mechanisms and fundamentals of our current situation – and correct them, we will continue to glide through the open door of disaster – slipping at some point into the empty maw of the economic abyss.

A Time-Line of Key Events

  • 1935: Social Security Act – Franklin Roosevelt (D)
  • 1965: Extension to Social Security Act (Medicare & Medicaid) – Lyndon Johnson (D)
  • 1972: Elimination of the Gold Standard – Richard Nixon (R)
  • 1974: Equal Credit Opportunity Act – Stimulates credit purchases – Gerald Ford (R)
  • 1977: Community Reinvestment Act – Jimmy Carter (D)
  • 1980: Depository Institutions Deregulation and Monetary Control Act – Jimmy Carter (D)
  • 1981: Initial Application of the Mark to Market Rule – Ronald Regan (R)
  • 1985: Home State Savings Bank begins to fail – Ronald Regan (R)
  • 1986: Tax Reform Act – Ronald Regan (R)
  • 1995: End of S&L Collapse – Assets sold to Banks – RTC cost $87.9 Billion – Bill Clinton (D)
  • 1995: National Homeownership Strategy Announced – Bill Clinton (D)
  • 1999: Fannie Mae eases the credit requirements to encourage banks to extend home mortgages to individuals whose credit is not good enough to qualify for conventional loans.
    The Gramm-Leach-Bliley Act repeals the Glass-Steagall Act of 1933 – Bill Clinton (D)
  • 2000: Lenders originating $160 billion worth of subprime, up from $40 billion in 1994. Fannie Mae buys $600 million of subprime mortgages, primarily on a flow basis. Freddie Mac, in that same year, purchases $18.6 billion worth of subprime loans, mostly Alt A and A- mortgages. Freddie Mac guarantees another $7.7 billion worth of subprime mortgages in structured transactions.
    Credit Suisse develops the first mortgage-backed Derivative (CDO).
    Commodity Futures Modernization Act of 2000 declares credit default swaps (and other derivatives) to be unregulated, banning the SEC, Fed, CTFC, state insurance companies, and others from meaningful oversight. – Bill Clinton (D)
  • 2003: Federal Reserve Chair Alan Greenspan lowers Federal Reserve’s key interest rate to 1%, the lowest in 45 years – George W. Bush (R)
  • 2008: Global Financial Crisis Begins – Feds Take over Fannie Mae Freddie Mac and guarantee $6trillion of mortgages, Fed Reserve Lends $85 Billion to AIG, $700 Billion TARP Program goes into effect, Fed lends $1.3 Trillion to companies outside financial sector – $900 Billion loans to banks and buys $540 billion in short term mutual find debt – Fed Loans 133 Billion to foreign banks, Fed pledges $800 Billion more to buy mortgage bonds from Fannie and Freddie – George W. Bush (R)
  • 2009: Fed increases support of AIG by $182.5 Billion, U.S. Government supports various Auto Manufacturers with $34 billion bailout package, Fed Injects approximately $2 trillion into the economy in new currency under term Quantitative Easing. – Barack Obama (D)
  • 2010: Federal Reserve continues injecting money into market under quantitative easing of $1.5 trillion, Banks begin to repay Govt. Loans, Patient Protection and Affordable Care Act is passed – Barack Obama (D)

Whats The Point

When I was contemplating writing this article, I had thought I would explain the relevance of each of the events I have listed.  In the end, I decided it is not up to me to tell you what to think.  It is your right, your privilege, and your obligation to find that out for yourself.  Should any of you wish to ask my opinion, or to tell me what you think, you may feel free to post in the comment section.  I will tell you my thoughts and conclusions and of course listen to your point of view.  Perhaps along with the others who read here we can continue to refine and get closer to a solution – get closer to WE.

The aforementioned timeline is by no means each and every issue that has drawn us into the potential collapse of our economy that we face today.  What is evident from even this brief review, is that the bad decisions were all short term fixes to solve contemporaneous imminent problems of the day – they span all parties and administrations.

My Conclusion

Our economic problems are neither Republican nor Democrat, they are only American.  We have done this to ourselves.  Only if we are united in this purpose, can truly fix them!

My Request of You

I ask each of you, who are kind enough to read my writings, to please circulate this to others if you feel it is valuable.  I believe we can all make a difference if we come together.  I know I can’t do it alone.  I ask you, my readers, to help at least get others to consider that there is something here bigger than ourselves and our politics.

Review of Article on Cloud Computing and Health Care from Healthcare Innovation Journal

In an article posted in Healthcare Innovation Journal titled, “Cloud Computing and Health Care” the Author, Vivek Raut makes some very good points about the potential of cloud computing in health care practice.  While I agree with many of his points; in a number of areas the ability to utilize the cloud in the manner he is suggesting are quite problematic.

Click to access original article

The use of the Cloud has tremendous potential to bring benefits in the areas that he cites like; reducing the complex and expensive infrastructure for providers, benefits of vertical integration and improvements of supply chain within a large provider, more appropriate infrastructure to improve collaboration, and more rapid and better access to vital care information among providers – it is the fundamentals of incorporating changes into the existing base system that doom such an approach to failure.  Without changes in the fundamental systems, other factors, naively considered in this article, prohibit or significantly impede the gains envisioned.

The problems of incorporating cloud based solutions under the current health care model come in three areas;

  1. The current legal requirements under the various privacy laws and HIPPA will not allow the kind of sharing and integration necessary to get the real benefits of such a system.
  2. The potential scalability and related benefits of economies of scale are lost due to the technical and legal requirements of the current transaction model.
  3. Simple movement to a Cloud based solution, either public or community, will not provide the improvements sought; as for each potential gain there is a corresponding offset in unintended consequences, infrastructure limitations, or cost of implementation.

This said, I do support the effort and agree there are significant savings to be had by the movement of health care systems to a Cloud based model.  With the proper redesign of the system itself into a comprehensive supply chain methodology, real gains from the cloud based approach can be realized.  Further, the most needed gain is the overall reduction in the cost of the provision of care through the elimination of duplication of services, fraud and abuse.  This can only be gained from the Cloud when the underlying methodologies for application of care and benefits is fully coordinated across all available sources.

Health care dollars in the U.S. are only woefully inadequate due to the percentage of loss due to fraud and abuse in our underlying system.  When only about thirty cents of the health care dollar spent makes it to the provision of care of a patient, it is clear that efficiencies need to be gained.  But the typical gains from solutions like the Cloud are focused in the areas of operational and administrative efficiencies.  In the health care continuum only ten to twelve percent of the dollars are lost due to administrative or operational inefficiencies.  The main loss of approximately fifty percents of the monies spent is in the area of duplicated/unnecessary services and fraud or abuse of benefits.

Clearly, the concepts inherent in the argument for Cloud computing apply here as well but only with a redesign of the current system and the underlying transactional model.  For instance; a community sharing of health data across a cloud to providers will still require written agreements under HIPPA between the providers and agreements with the cloud provider, all including the requisite business associate language.  The provider of cloud services would likely under the law be required to assure that each entity receiving any information had the proper legal documentation on file. The provider would also likely carry full liability for any breach by any agency under such a sharing arrangement.

Under the current health care transaction model, each agency stores and maintains full and multiple, sets of data on each patient in their system.  As patients see multiple providers their information is typically copied from provider to provider or supplied by the patient.  In a cloud based system there would be significant gains since the data could be shared a copied electronically and could also be regularly synched to provide accuracy and consistency.  The upside of this approach has major benefits to both the economy of the provision of care and to improved patient outcomes.  The down side is such a system, without a major change in the underlying transaction model, will overwhelm the current and foreseeable future of connected communication and likely yield significant cost increases for data storage and security.

Policy based controls over security in such a system under the current transactional model will yield little effect as the amount of data held in each location multiplies exponentially and the requirements of access to assure accurate and timely synchronization opens many additional corridors of access for hackers and data thieves.  The problem is not the Cloud itself.  In fact, the Cloud offers the opportunity to significantly improve security but to achieve these improvements a different transactional model needs to be adopted.  Even a singular public or community cloud warehouse point does little to provide the improvements in security due to the nature of putting all the information in one place.  No matter how secure we try to make it; one breach yields so much on so many it becomes a major problem.

To reiterate, I agree the Cloud will offer tremendous benefits.  In fact, I think the movement to the Cloud is already fait-accompli. It is not just the movement to the Cloud that is required.

There is an answer!  There are some very gifted people working right now on how to realize the gains that the author elucidates in his paper.  These changes are occurring and they will continue to occur despite our reservations and despite the inevitable short term unintended consequences that will show up along the way.  How can I be so sure of this?  Because this is not a revolutionary change that is occurring – it is evolutionary and the selection pressures forging these changes are both irresistible and irreversible.

I have always like this quote from Jim Morrison,

“The Future is uncertain and the end is always near!”

These words are a truism to the extent that they exist as a singularity.  Individually, we should all hold this advice very dear as we can be gone in an instant. But as a species, or in the abstract as a system, while we would have individually ceased to exist more than a millennium ago, it was adaptation cause by partially catastrophic events (selection pressures) that have led us to survival. Our evolution and decisions we have made along the way have both benefited us and caused unintended consequences.    Our discovery of the antibiotic properties of penicillin, for a brief period in our history significantly reduced death and disability from infections but along the way the organisms we were fighting have adapted and gotten more resistant.  We are now in the same position in our technologically based systems.  Health care is perhaps the one most evidently in need of change.  These changes are both inevitable and fundamental.  Without them the survival of the system itself is seriously in question.

If you would like to learn more about the efforts of those divining the answers on this subject, please contact me.

The First Oyster: Natures New Treat

Aside

I have often wondered, who ate the first oyster and the circumstances surrounding this amazing feat. Whoever it was either was exceedingly desperate or exceedingly brave! Perhaps, they were both!  I now know who it was!  It was you!

Chesapeake Bay Oysters: Natures Treat

A glint of light  – Sparks

Drawn Interest – Bottom Rocks

Water Races – Swift with this tide

Shimmering light – Bottom dances to syncopated rhythm

More moons than rocks – Some yawn

Rocks don’t yawn!

A smile – hints of motion

More than sun and surf – partners in deception

You bend, you stare.

More than meets the eyes – Natures transformers

Your hand under the surface,

 you touch – a click

Moonscapes craggy surface – oval – edged stone

Above the water – a rock again

Ready to skip across the slew – or fell a bird for supper

No! – More lies within!

A slight line, a fringe

The thin edge weeps

What would a god hide inside such a strong box?

Twisting and puling – no bonds do break

Stone knapps stone – searching for the point within

At last a crack – the gods tears weep out

Your blade finds purchase

Wedge and Pry to find the prize

Such a vault – Gods Food?

Taste it? – Eat it?

There must be a first

Sweet tear drenched morstle

Heavens Elixir – Hungers Reliever

Natures New Treat

As always, your comments are appreciated!

America Awakens: 1905 the beginning of the end for patent medicines.

America’s Great Awakening!

Any man’s death diminishes me, because I am involved in Mankind; and therefore never send to know for whom the bell tolls; it tolls for thee.
– John Donne

Adams vs. Cheney: The end of the patent medicine era

I find Donne’s quote very interesting – applicable to the work – the ultimate effect of which, Samuel Hopkins Adams had on the issue of quack medicine and the ill effects of patent medicine manufacturers and their nostrums. Prior to Adams revealing series, the Proprietary Association – the cartel of patent medicine manufacturers – was one of the most powerful cartels in America.  While today we think of the Sherman Act of 1890 as an anti-trust act targeting companies like Standard Oil, one of the primary objectives of this legislation was the Proprietary Association.  As a testament to their power, the first use of the Sherman Act did not occur for ten years after its passing and then it was in the Miles vs. Park case.  In this case, Miles, was Dr. Miles founder of what we now know as Miles Laboratories.  Even with this, and other legislation the power of the Proprietary Association was so great nothing changed.  Even the passing of the Pure Food and Drug Act of 1906, did little to diminish the sale of their noxious and often deadly elixirs.

The Proprietary Association controlled most of the newspapers of the day.  It was the rise of the periodical magazine that began to provide a voice free of the censorship of the Association to people like Adams that provided the vehicle of change.  And it took the courage of Adams, and others like him to report the truth that began to wake up the country, particularly the women of America, to the dangers of their medications.

What clearly spurred Adams on were his feelings of diminishment for the death of the people these nostrums had killed.  His investigations led to the discovery of various business practices, by and large unregulated at the time of inception, and the link between these various practices and their monopolistic power.  Adams exposed how the Proprietary Association was controlling its members, the resellers of the products, the distributors, state legislators, congressional legislation and ultimately the newspapers that the public was supposed to be relying on to keep commerce honest.  In the end, his series of seven articles was prophetic as they brought the public out of its stupor, both figuratively and literally.  In the words of Donne, Adams told the patent medicine men, “the bell tolls for thee!” and it surely did.

In October 7, 1905, Collier’s Weekly began printing a series of articles by Adams.  The series contained “A full explanation and exposure of patent medicine methods and the harm done to the public by this industry, founded mainly on fraud and poison. Results of the publicity given to these methods can be already seen in the steps recently taken by the National Government, some State Governments, and a few of the more reputable newspapers. The object of the series is to make the situation so familiar and thoroughly understood that there will be a speedy end to the worst aspects of the evil.” (Note: Read the reprinted version entitled The Great American Fraud available through Google Books.)

 The Red Clause

Cheney's Main Product

There were a significant number of revelations by Adams. He exposed the nature of what most of the formulations were made of.  He showed how they were based on the simple premise of addiction.  He illustrated the danger of these drugs and the hypocrisy of many who defended them.  He established clear connections between the various members of the cartel and showed how they conspired to maintain their control over the buying public.  Perhaps most importantly he disclosed the “legal” business practices that the cartel used to control the supposed “watchdogs” for the public good – the newspapers via the Red Clause.

Adams printed statements by Frank J. Cheney, the manufacturer of one of the most popular patent medicines of the day – Hall’s Catarrh Cure. Cheney was also one of the most powerful and successful of the nostrum purveyors.  Mr. Cheney, then president of the Proprietary Association, in addressing his fellow members as president at their annual meeting in 1899, made the following comment:

“We have had a good deal of difficulty in the last few years with the different legislatures of the different States…..I believe I have a plan whereby we will have no difficulty whatever with these people. I’ve used it in my business for two years and know it is a practical thing….I, inside of the last two years, have made contracts with between fifteen and sixteen thousand newspapers, and never had but one man refuse to sign the contract, and by saying to him that I could not sign a contract without this clause in it, he readily signed it….this is what I have had in every contract I make: ‘It is hereby agreed that should your State, or the United States Government, pass any law that would interfere with or restrict the sale of proprietary medicines, this contract shall become void….’ in the State of Illinois a few years ago they wanted to assess me $300.00. I thought I had a better plan than this, so I wrote to about forty papers and merely said: ‘Please look at your contract with me and take note that if this law passes you and I must stop doing business, and my contracts cease.’ The next week every one of them had an article….”

At the same meeting Dr. Frederick K. Humphries the maker of Pond’s Healing Cream (relabeled as Pond’s Cold Cream the product is still around today – but no longer healing) told the association that of “The twenty thousand newspapers of the United States make more money from advertising the proprietary medicines than do the proprietors of the medicines themselves….of their receipts (the manufacturers), one-third to one-half goes for advertising.”  Mr. Cheney further opined that the annual figure paid to newspapers in the U.S. exceeded twenty million dollars equating to more than one thousand dollars to each newspaper – a hefty sum in those days.  Cheney stated that he had contracts with over 14,000 newspapers at the time.  Finally, adding an almost sinister air, the record shows the Dr. Humphreys states,

“Will it not be now just as well to act on this, each and every one for himself instead of putting this on record?….I think the idea is a good one but really don’t think it had better go in our proceedings.”

Clearly intending they wanted to keep this secret.

Some revealing quotes and sections from Adams’ articles provide a very good idea how profound this series was.

The Following are some excerpted quotes from “The Great American Fraud”

Testimonial of a reader

The proprietor of a drug store in San Jose, Cal., writes to Collier’s as follows:

“I have a good customer, a married woman with five children, all under 10 years of age. When her last baby was born, about a year ago, the first thing she did was to order a bottle of Winslow’s Soothing Syrup, and every week another bottle was bought at first, until now a bottle is bought every third day. Why? Because the baby has become habituated to the drug. I am not well enough acquainted with the family to be able to say that the weaned children show any present abnormality of health due to the opium contained in the drug, but the after-effects of opium have been thus described.

Another instance, quite as startling, was that of a mother who gave large quantities of soothing syrup to two of her children in infancy; then, becoming convinced of its danger, abandoned its use. These children in middle life became neurotics, spirit and drug-takers. Three children born later and not given any drugs in early life grew up strong and healthy.

“I fear the children of the woman in question will all suffer for their mother’s ignorance, or worse, in later life, and have tried to do my duty by sending word to the mother of the harmful nature of the stuff, but without effect.

“P. S. How many neurotics, fiends and criminals may not ‘Mrs. Winslow’ be sponsor for?”

Adams comment on the
effect on the populace

Restrict the drug by the same safeguards when sold under a lying pretense as when it flies its true colors. Then, and then only, will our laws prevent the shameful trade that stupefies helpless babies and makes criminals of our voting men and harlots of our young women.

Adams quote on the responsibility
of the newspaper owners

Every intelligent newspaper publisher knows that the testimonials which he publishes are as deceptive as the advertising claims are false. Yet he salves his conscience with the fallacy that the moral responsibility is on the advertiser and the testimonial-giver. So it is, but the newspaper shares it. When an aroused public sentiment shall make our public men ashamed to lend themselves to this charlatanry, and shall enforce on the profession of journalism those standards of decency in the field of medical advertising which apply to other advertisers, the Proprietary Association of America will face a crisis more perilous than any threatened legislation. For printers’ ink is the very life-blood of the noxious trade.  Take from the nostrum vendors the means by which they influence the millions, and there will pass to the limbo of pricked bubbles a fraud whose flagrancy and impudence are of minor import compared to the cold-hearted greed with which it grinds out its profits from the sufferings of duped and eternally hopeful ignorance.

While Collier’s and Adams’ articles were not the first ones to raise the issue they were the ones that triggered the final effect.  The AMA had been distancing themselves from the Proprietary Association and patent medicines in the few previous years, yet their exposes and articles in the Journal of the American Medical Association (JAMA) did not have much effect since they were not widely read by the public. For a long time, JAMA was running ads for the very same patent medicines which made many physicians skeptical.

While the AMA had set up a committee to test the efficacy of the nostrums on the market, many physicians observed the medications that JAMA found as being ineffective were those from manufacturers that were not purchasing advertising space in JAMA.  Adams’ articles reached the broad public, and more importantly the women who were gaining power as a result of the Progressive Movement – Susan B. Anthony, and suffrage in particular – and it was this factor in conjunction with the legislative efforts that finally made the difference.  The bell had finally tolled – and loud enough so that the public had finally heard it.

Final Point

While Colliers and Adams had clearly rung the bell – the Proprietary Association also clearly still controlled the newspapers.  An article, written by Joel Blanc, appeared in 1905 written for the “Practical Druggist” periodical with the offensive title “The Niggers in the Wood Pile.” Like many others of the day, Mr. Blanc made a mighty attempt to play down the whole problem of the rising tide of concern about addiction and the problems with patent medicines.  They deemed it a big misunderstanding.  He further asserts the audacious stance of blaming the public’s concern against danger, injury and death as the responsibility of the true “fiends who are abusing these harmless medications.”  The title of the article was not simply an interesting pejorative of the day.  It was a part of an orchestrated campaign by the Proprietary Association to lay the problem caused by the “fiends” directly at the feet of freed slaves who he asserted were the true addicts.  While Mr. Blanc did not refer directly to the race excuse, other than in the title, he used this type of attack to attribute the problem to the lower class and disenfranchised.  The Proprietary Association and the targeting of minorities of any related issues had a long history in the patent medicine trade.  During this period, the blame not directed to simply the poor classes, it was now seen repeatedly in newspaper articles, often in the south, where it began to attribute the concern to rising violence and rape of “white” women by addicted “Negros” or in the West as an expected outcome due to the unscrupulous nature of “China-men.”  While society rejects this type of invective today, race based execration was all too common in this country’s sad history during this period which directly contributed to the distrust and disaffection between the races for many years.

Again I ask, if you enjoy this article, please comment!  A word or two makes it all worth while! – Tom

Pharmaceuticals in America: The Life and Death of a Patent Medicine King (1833 – 1960)

The Life and Death of a Patent Medicine King – Dr. Morse’s Indian Root Pills

There are those that believe the heyday of the Patent Medicine Men was over by 1930.  Still others believe that many of the leopards simply changed their spots. It is true that some of the original “cure-alls” live on today in various consumer products like Dr. Meyer’s

Original Brand of Pond's Cold Cream

Compound Extract of Tomato (now Catchup), Ponds Extracts (now Ponds Cold Cream,) Horehound Drops, Coca-Cola, Hires Root Beer, Dr. Pepper, 7-Up (originally called Lithiated Bib-Soda,) Listerine (at various times marketed as a floor cleaner, surgical antiseptic, cure for gonorrhea, and then successfully as cure for Halitosis(bad breath), and the Common Cold,) Halls Catarrh Cure (later Hall’s cough drops,) and many many others.  Further many of the companies, abandoned their “patent medicines” in favor of the new class of “ethical” pharmaceuticals that arose after the pure food and drug act of 1906. Even more damaging than the laws enacted by congress, were a series of articles in Colliers Weekly by Samuel Hopkins Adams that awoke America to the problems of these often deadly, always worthless concoctions that America was imbibing.

Many of the original members of the Proprietary Association, the rulers of the patent medicine kingdom, have disappeared from the pages of history.  That is not to say they do not still exist.  In fact, many of the major “Big Pharma” companies got their start in the heyday of Patent Medicines. If they did not produce patent medicines themselves – and few failed to capitalize on this lucrative trade from the mid 1800s through the 1930s – they provided raw materials to the purveyors of these noxious nostrums who made up a large portion of their incomes back in the day. It is no wonder that most of the major pharmaceutical manufacturers have purged their history of any mention of this era or these products.  The information is still there if you want to find it but it takes some serious digging.  Some great source for those so inclined, are the old periodicals available for free on Google Books.

Today, we fail to understand the lasting impact that this period and these manufacturers have had on our national psyche and our health care system today.  We have both many laws and numerous business practices that got their start either to help foster the sales of patent medicines or to curtail the influence of the Proprietary Association.  My book, “The History and Evolution of Health Care in America” among other things, explores in some detail the rise of this industry and its deleterious legacy on our current health care system.  Along the way I came upon an interesting story of the W.H. Comstock company, manufacturer of Dr. Morse’s Indian Root Pills.  In many ways this was the quintessential patent medicine manufacturer of the period.  The rest of this article will tell you a bit of the fascinating story of the W.H. Comstock company.

In northern New York there is the small, sleepy riverside town of Morristown.  Organized in 1871, few visitors even today to this picturesque location on the banks of the St. Lawrence River would suspect that it was home for over a century to one of the most famous and infamous purveyors of patent medicines of the late 19th and 20th centuries:  the W.H. Comstock factory, better known as the manufacturer of Dr. Morse’s Indian Root Pills.

Morristown was a quiet backwater before the Comstock brothers relocated their operations the 280 miles from New York City in 1867.  They moved, in part, to jettison some of their notoriety for a series of lawsuits between the family members in the business and many others in New York City.  Conversely, the village was a sleepy rural town whose main focus was dairy farming.  Lacking a powerful water flow at this part of the St. Lawrence it did not become a big haven for mills.  It did, however, at one point or another, develop a grist, carding and saw mill.  It was the arrival of the Comstock operation that spurred a significant period of growth in the town.

William. H Comstock (circa 1910)

What attracted the Comstock brothers was its isolation, its proximity to Canada, and similarly access to land immediately across the river.  It was also the perfect location for shipping. At the time of the relocation of the W.H. Comstock factory, the railroad was just beginning operations in the area, making travel back and forth to New York simple and convenient.  Comstock not only developed a factory in Morristown but developed a similar operation directly across the river in the Canadian town of Brockville.  It was this dual production and distribution system that helped the Comstock’s become one of the dominant players in the patent medicine game.

Like many in others in the same game, the Comstock’s were hard men in a hard business.  Founded by Edwin Comstock in 1833, along with numerous other brothers and sons their business evolved as a result of a number of questionable and contentious events in its early history.

The Comstock family came from a medical background and many of them were, or had worn the moniker of, physicians in their history.  More interestingly and likely very telling, is that the Comstock family home was in Connecticut only a few miles of the first American patent medicine, Lee’s “Bilious Pills.”  “Bilious Pills” both from Lee and many other imitators found such public and rapid success it certainly also had a profound impact on Edwin’s decision to venture forth in the same line of business.

Clearly, Edwin was not a novice when he established his business in 1833 in New York City.   As then early years progressed he would bring his brother Luscious into the business and also other brothers; Albert Lee, John Carlton, and George Wells.  He later introduced his son William Henry who ultimately succeeded him and who was the Comstock who brought the factory to Morristown.  Like many of the patent medicines of the day none of the Comstock’s products were patented but instead relied on the new trademark laws for protection.  Also like many others, they had numerous unscrupulous counterfeiters – the fakers were often members of their own family.

A great book for those who would like to learn more about the tortured history of the Comstock family along with the development of the patent medicine business might be obtained in the History of the Comstock Patent Medicine Business and Dr. Morse’s Indian Root Pills by Robert B. Shaw. (The book was published in 1916, and still available from Google Books.)

Comstock sold many more products other than the signature Root Pills. In 1854, Comstock & Company – then controlled by Lucius Comstock, listed nearly forty of its own preparations for sale, namely:

  1. Oldridge’s Balm of Columbia
  2. George’s Honduras Sarsaparilla
  3. East India Hair Dye, colors the hair and not the skin
  4. Acoustic Oil, for deafness
  5. Vermifuge
  6. Bartholomew’s Expectorant Syrup
  7. Carlton’s Specific Cure for Ringbone, Spavin and Wind-galls
  8. Dr. Sphon’s Head Ache Remedy
  9. Dr. Connol’s Gonorrhea Mixture
  10. Mother’s Relief
  11. Nipple Salve
  12. Roach and Bed Bug Bane
  13. Spread Plasters
  14. Judson’s Cherry and Lungwort
  15. Azor’s Turkish Balm, for the Toilet and Hair
  16. Carlton’s Condition Powder, for Horses and Cattle
  17. Connel’s Pain Extractor
  18. Western Indian Panaceas
  19. Hunter’s Pulmonary Balsam
  20. Linn’s Pills and Bitters
  21. Oil of Tannin, for Leather
  22. Nerve & Bone Liniment (Hewe’s)
  23. Nerve & Bone Liniment (Comstock’s)
  24. Indian Vegetable Elixir
  25. Hay’s Liniment for Piles
  26. Tooth Ache Drops
  27. Kline Tooth Drops
  28. Carlton’s Nerve and Bone Liniment, for Horses
  29. Condition Powders, for Horses
  30. Pain Killer
  31. Lin’s Spread Plasters
  32. Carlton’s Liniment for the Piles, warranted to cure
  33. Dr. Mc Nair’s Acoustic Oil, for Deafness
  34. Dr. Larzetti’s Acoustic Oil, for Deafness
  35. Salt Rheum Cure
  36. Azor’s Turkish Wine
  37. Dr. Larzetti’s Juno Cordial, or Procreative Elixir
  38. British Heave Powders

Because of its diverse inventory, Comstock became one of the major patent medicine companies during this period.  The manufacturer was also one of the pioneers of the Almanac as a sales tool. As Comstock began to develop its product line, the patent-medicine era was entering its golden years.  Robert Shaw states in his book, “Improved transportation, wider circulation of newspapers and periodicals, and cheaper and better bottles all enabled the manufacturers of the proprietary remedies to expand distribution—the enactment and enforcement of federal drug laws was still more than a generation in the future. So patent medicines flourished; in hundreds of cities and villages over the land enterprising self-proclaimed druggists devised a livelihood for themselves by mixing some powders into pills or bottling some secret elixir–normally containing a high alcoholic content or some other habit-forming element–created some kind of a legend about this concoction, and sold the nostrum as the infallible cure for a wide variety of human (and animal) ailments. And many conservative old ladies, each one of them a pillar of the church and an uncompromising foe of liquor, cherished their favorite remedies to provide comfort during the long winter evenings. But of these myriads of patent-medicine manufacturers, only a scant few achieved the size, the recognition, and wide distribution of Dr. Morse’s Indian Root Pills and the other leading Comstock remedies.”

Comstock took the lead as one of the main pioneers of the almanac -a sales brochure phenomenon of the day.  Almanacs were so popular and so mass produced that it was not uncommon for a person to walk into any drugstore and pick up three or four of them.  Some of these publications grew rapidly from just a few pages to over 64 pages by the mid 1800’s.

Stories published in the almanacs of the discovery of these nostrums, and also on the wrappers of the elixirs themselves, provided great reading and were the story-board commercial of their day.    Mr. Shaw relates in his book some examples of such inventive pitches,

Before 1900 the detailed story of the discovery of Dr. Morse’s pills was abridged to a brief summary, and during the 1920s this tale was abandoned altogether, until the end the principal ingredients were identified as natural herbs and roots used as a remedy by the Indians. In more recent years, the character and purpose of Dr. Morse’s pills also changed substantially. As recently as 1918, years after the passage of the Federal Food and Drug Act of 1906, they were still being recommended as a cure for:

  • Biliousness
  • Dyspepsia
  • Constipation
  • Sick Headache
  • Scrofula
  • Kidney Disease
  • Liver Complaint
  • Jaundice
  • Piles
  • Dysentery
  • Colds
  • Boils
  • Malarial Fever
  • Flatulency
  • Foul Breath
  • Eczema
  • Gravel
  • Worms
  • Female Complaints
  • Rheumatism
  • Neuralgia
  • La Grippe
  • Palpitation
  • Nervousness

Further, two entire pages in the almanac were devoted to explaining how, on the authority of “the celebrated Prof. La Roche of Paris,” appendicitis could be cured by the pills without a patient having to resort to the surgeon’s knife.

In another segment from the book, Mr. Shaw relays information mainly directed to the female health problems of the day.

THE GREAT FEMALE MEDICINE the almanac read:

The functional irregularities peculiar to the weaker sex, are invariably corrected without pain or inconvenience by the use of Judson’s Mountain Herb Pills. They are the safest and surest medicine for all the diseases incidental to females of all ages, and more especially so in this climate.

Ladies who wish to enjoy health should always have these Pills. No one who ever uses them once will ever allow herself to be without them. They remove all obstructions, purify the blood and give to the skin that beautiful, clear and healthful look so greatly admired in a beautiful and healthy woman. At certain periods these Pills are an indispensable companion. From one to four should be taken each day, until relief is obtained. A few doses occasionally, will keep the system healthy, and the blood so pure, that diseases cannot enter the body.

Watch any television show, listen to any radio broadcast or read any periodical or newspaper and one of the most prevalent areas of medicinal support will point to the area of sexual dysfunction.  Viagra and Cialis are boldly marketed for the treatment of men’s lack of “libido” or rigor in performance.   Only slightly more discreetly advertised are products for women related to dryness, libido enhancements or other more prurient pursuits.  While we think these issues are a modern connivance they are not. Again Mr. Shaw’s excellent history provides valuable insight to back up this assertion.  It reads:

Over on the Canadian side of the river, where another plant approximately the same size as the Morristown facilities was in operation, the Comstock Company had assimilated the Dr. Howard Medicine Co. Dr. Howard’s leading remedies were his Seven Spices for all Digestive Disorders and the Blood Builder for Brain and Body. The latter, in the form of pills, was prescribed as a positive cure for a wide array of ailments, but like many other patent medicines of the era, it was hinted that it had a particularly beneficial effect upon sexual vitality.

Over on the Canadian side of the river, where another plant approximately the same size as the Morristown facilities was in operation, the Comstock Company had assimilated the Dr. Howard Medicine Co. Dr. Howard’s leading remedies were his Seven Spices for all Digestive Disorders and the Blood Builder for Brain and Body. The latter, in the form of pills, was prescribed as a positive cure for a wide array of ailments, but like many other patent medicines of the era, it was hinted that it had a particularly beneficial effect upon sexual vitality.

They have an especial action (through the blood) upon the SEXUAL ORGANS of both Men and Women. It is a well-recognized fact that upon the healthy activity of the sexual apparatus depend the mental and physical well-being of every person come to adult years. It is that which gives the rosy blush to the cheek, and the soft light to the eye of the maiden. The elastic step, the ringing laugh, and the strong right arm of the youth, own the same mainspring. How soon do irregularities rob the face of color, the eye of brightness!

Everyone knows this. The blood becomes impoverished, the victim PALE. This pallor of the skin is often the outward mark of the trouble within. But to the sufferer there arise a host of symptoms, chiefest among which are loss of physical and nervous energy. Then Dr. Howard’s BLOOD BUILDER steps into the breach and holds the fort. The impoverished Blood is enriched. The shattered nervous forces are restored. Vigor returns. Youth is recalled. Decay routed. The bloom of health again mantles the faded cheek. Improvement follows a few days’ use of the pills; while permanent benefit and cure can only reasonably be expected when sufficient have been taken to enrich the Blood.

Before the Blood Builder pills were taken, all their users were advised to have their bowels thoroughly cleansed by a laxative medicine and, happily, the company also made an excellent preparation for this purpose–Dr. Howard’s Golden Grains. While the good doctor was modern enough–the circular quoted from was printed in the 1890s–to recognize the importance of the healthy activity of the sexual apparatus, such a suggestion should not be carried too far–so we find that the pills were also unrivaled for building up systems shattered by debauchery, excesses, self-abuse or disease. Along with the pills themselves was recommended a somewhat hardy regimen, including fresh air, adequate sleep, avoidance of lascivious thoughts, and bathing the private parts and buttocks twice daily in ice-cold water.

Certainly during the early days of the “Victorian” era these findings did not soften the ardor of the general populace who took to these remedies nor did the nature of these times force subtlety in the description of the cures available.  Today, the main findings we see pushed down our throats, very often literally, are cures for sexual dysfunction, “female problems,” constipation, the common cold or flu, mental stimulation, and my favorite compensating for loss of energy.  If one looks at the advertising for Comstock’s products one will see a historical mirror illustrating the sale of exactly the maladies and remedies for them, sometimes by the use of blunt and bold copy.  Most of the messages were communicated via the almanacs, product wrappers and newspapers. It would not be unlikely for all concerned about the evolution of health care to not wonder how much longer the patent medicine men would have held sway if radio and television had also been mediums to reach the gullible public. But then again, who is to say these purveyors of the quack and addictive have disappeared?

In a final section from the book, Mr. Shaw cites two other main points of interest during this period in which Comstock stands out as a solid illustrative member of the illustrious patent medicine industry; the use of testimonials in advertising its products and the lack of hard money in communities (important later relative to understanding the issues physicians faced in their practice in rural communities).  The use of testimonials was critical in the sale of these nostrums.  The experience of the everyday user was what rung most true to consumers, again just like today.  A great deal of newspaper ink was devoted to the publication of the merits of this nostrum or that elixir.  On rare occasions they showed up as advertisements.  More often than not, they also appeared as articles and letters to an editor.  Mr. Shaw summarizes these issues as follows.

Testimonials submitted voluntarily by happy users of the pills were always widely featured in the almanacs, newspaper adver-tisements, and handbills. Although the easy concoction of the stories about Dr. Morse and Dr. Cunard might suggest that there would have been no hesitation in fabricating these testimonials, it is probable that they were genuine; at least, many have survived in the letters scattered over the floor of the Indian Root Pill factory. In some cases one might feel that the testimonials were lacking in entire good faith, for many of them were submitted by dealers desiring lenient credit or other favors. Witness, for example, the enclosed letter from B. Mollohan of Mt. Pleasant, Webster County, West Va., on April 16, 1879.

Mollohan’s complaint about the shortage of money and the long delay in collecting many accounts reflected a condition that prevailed throughout the nineteenth century. Money was scarce, and the economy of many rural communities was still based largely on the barter system, so that it was very difficult for farmers to generate cash for store goods. Consequently, country storekeepers had to be generous in extending credit, and, in turn, manufacturers and jobbers had to be lenient in enforcing collection.

Contrary to popular perception, and in spite of many government regulations and actions taken by numerous associations to curtail the business of patent medicines, the W.H Comstock enterprise continued to thrive long after World War II.  The company reached its heyday shortly after World War I, but continued to sell many of its nostrums to retailers and distributors until March 31, 1960, when the last shipment of one-dozen boxes of pills was made to Gilman Brothers of Boston and two-dozen boxes to McKesson & Robbins of Mobile, Alabama on April 11 of that year. And with this final consignment – the factory closed its doors, concluding 93 years of continuous operation in the riverside village of Morristown.

In many ways W.H. Comstock is a true representative of the rise and decline of patent medicine manufacturers of the early 20th century.  I use the term decline as opposed to death.  It will be left up to the reader to determine if the patent medicine era has died or if the leopard has simply changed its spots. Later in this section, and in the others that follow, the reader will note that most of the companies are still with us, they have just changed their tactics or abandoned the “medicine” market for what is now referred to as “ethical pharmaceuticals” and/or the consumer product category.  Perhaps as a reader, you may come to the conclusion that “ethical” is a very flexible word when it comes to the acceptance and approval of pharmaceuticals.

After all, it took the FDA almost 100 years (1964) to finally get Warner – Lambert, the maker of Listerine – first formulated in 1879 – to finally stop improperly claiming in its advertizing that it was a cure for the common cold.

Please make a comment below if you like this brief history.  If so, I will be happy to include a few more in the next weeks as we prepare for the release of my new book!

Those who cannot remember the past are condemned to repeat it! Well do we remember?

Jorge Agustín Nicolás Ruiz de Santayana y Borrás 1863 - 1952

The title of this piece, a quote from George Santayana – a Spanish American philosopher, essayist, poet, and novelist, is a familiar refrain to all.  Most of us have heard this many times throughout our lives.  So much so, that I think many of us choose to ignore it as a tired and hackneyed phrase seemingly irrelevant in our modern and “enlightened” state of mind. Yet, this is one of those ‘old saws’ that continues to cut deeply into our collective bodies when we do fail to remember the lessons of the past. We need no more evidence than both our current economic condition and our political climate that we are in dire need of this lesson.

Yes, in fact we have all seen this before – many times – throughout our history.  Some of it we should know because we supposedly were taught it in school.  Some of it we don’t know because we were not taught it.  As we approached the mid-point of the last century we had a world conflagration and we had a good President that rightly knew he could not get our great nation united to fight yet another war unless we all recognized the exceptional nature of America and its people.  So with the best, temporary, intention we rewrote our history – American Exceptional-ism was born and our nation’s youth gained the will to enter World War II. Like most of FDR’s temporary government measures, this one too became permanent and we still experience both its consequence and benefit today.  One thing we should regret is an accurate view of our great history has been lost – along with the many lessons we should have learned.

If you would like to read some of the historical views of America’s history that were prevalent prior to 1935, Google Books has some reproduced on line.  They are a very interesting read with a significantly different and in come cases contemporaneous perspective as to who we believed our selves to be, what we were aspiring to become and where we honestly were at key points in our own evolution.  Here are some sources I recommend, with links on Google Books:

  1. The History of the United States of America by Henry William Elson: 1904
  2. The History of the United States of America by Henry Adams: 1889
  3. The History of the United States of America by Rev Charles Goodrich: 1823
  4. The History of the United States of America (an 8 volume set) by James Ford Rhodes completed in 1920

Having spent a lot of time reading this history as I was preparing to write, “The History and Evolution of Health Care in America,” I came quickly to realize that people back in the day really did know the key to prosperity and happiness! Although long under siege by both President Roosevelt – who initially stimulated the growth of Unions to foster job creation and later reconsidered his actions – and then President Truman in an attempt to reign in the Unions growing power, even the venerable Unions understood on which side their bread was buttered.

“When anybody preaches dis-unity – tries to pit one of us against the other through class warfare – race hatred or religious intolerance – you know that person seeks to rob us of our freedom and destroy our very lives!

And We Know What to do About Him!

The previous quote takes on a whole new relevance when you realize it was stated in a propaganda cartoon in 1948. Forwarded to me by Pam M., one of my oldest friends, the following cartoon is not only entertaining, it is quite prescient.  I hope you enjoy, “Make Mine Freedom”

Thanks Pam for this entertaining reminder of George Santayana’s very important life lesson!  I think it reinforces our collective need to be Mugwumps!

As always I look forward to your comments below.

“Pass My Job’s Bill NOW!”: Unions and Immigration – two sides of the same coin

Unions and Immigration dominate news along side of jobs

Reader Warning, this may be a long one! Please be patient.  No sound bites here!

The Argument

In his speech today, President Obama, once again called for congress to pass his jobs bill – NOW!.  The President stated that if they do not pass his jobs bill, which he views as perfect – without any flaw – and will, in his opinion, inevitably return us to prosperity, then the American people, who he states are overwhelmingly on his side, will harshly judge the republicans who are simply resisting for idealistic reasons.  He implied that the American people are tired of the republicans looking out for millionaires and billionaires.  He chose his words very carefully to imply that the Solyndra loan was the result of the prior administration’s programs – that he doesn’t own this one.  In doing so, once again he uses language to obscure this administration’s role in this specific loan. A loan that was denied by the prior administration and recommended by his own administration as not ready to be funded – but yet was funded anyway!

If one were to challenge the Presidents statement based on the inference inherent in the phrasing and timing of the language he used, his administration will seek the cover that was carefully crafted into this statement.  Jay Carney likely will respond, “that is not what he said…”  “What he said is that the “loan program” was begun under the prior administration…”  Continuing with the obfuscation, the President then presents “his” argument that this program is designed to make America competitive again.  As he makes this statement it is phrased so that he now owns this ideal of making America competitive. He would like us to believe that now “He” is making America competitive again. But is he?

He also repeated his mantra that, we need to make education more accessible and affordable and make sure every American goes to college.  His Education tzar, Arnie Duncan, in a recent radio interview, stated, that it is the U.S. governments responsibility to “provide a cradle to career assurance!” Is it?

In his speech he goes on to state that they are funding these loans to subsidize industries in order to get us “competitive” in a world where we no longer can compete.  He continues to state that we can’t compete against China who “subsidizes” their industries.  But if you talk to the manufacturers in China, as I have, – who the President claims the Chinese communist government is subsidizing – they will laugh at this assertion.  Again if you dig below the Presidents rhetoric, or if you challenge him on this statement, you find again that his words have been chosen most carefully.  The President’s administration will tell you that what he means is that China, through its Central Bank, is unfairly manipulating its currency.  Why, because they refuse to artificially inflate their currency, and overpay or over-benefit  their workers to become uncompetitive in the one world economy?

The Truth

In a whitepaper published by McKinsey & Company – September 14, 2011, written by Lowell Bryan, Sven Smit, and John Horn; They state that the current economic fundamentals remain unfixed.  Some of their main points include:

  1. Even if the developed governments, including the U.S. government, had been able to pass greater stimulus measures earlier – including isolating toxic assets – this would not have fixed the longer term fundamentals.
  2. The recent focus on debt ceilings in the U.S. and the sovereign debt crisis in southern Europe has also overwhelmed the public debate and shifted away from the failing economic fundamentals.
  3. In the U.S., the downward trend in labor participation has become pronounced.
  4. Structural economic fixes are needed such as;
    1. Stimulating private investment and savings
    2. Undertake an orderly de-leveraging of households (i.e. get Americans to stop borrowing and start saving – the exact opposite of what we are doing)
    3. Increase participation of labor (production level jobs) in the economy (as opposed to middle-level management and non-producing jobs)
    4. Reform long-term entitlement programs and tax policies to reduce the uncompetitive economic cost structure of American Businesses
    5. Reform education to produce more skilled labor
    6. Reform legislation to simplify and speed commercialization of innovation
    7. Rebuild failing infrastructure.

Like the Affordable Care Act, the President wants us to force congress to pass this legislation quickly before, as former speaker of the House, Nancy Pelosi, said we can read what is in it.  More importantly, it is not the reading – but the understanding of whether or not this will work.  The President is becoming very long on his implied -“trust me” plans.  He seems to either not recognize, or not care, that the majority of Americans no longer trust him or his advisers as their track record is putrid at this point.

While the focused effort at fomenting insurrection based on converting class envy into class warfare is getting quite a bit of play in the main stream media, it is not really playing in Peoria, or Winnemucca.  How will Americans feel if this concerted effort to stir up hate and discontent in the willingly disenfranchised boils over into a true insurrection?

The Presidents Jobs Bill, is being resisted, not because of republicans love for millionaires and billionaires or a reliance on them for campaign funding.  All of our professional political class (republicans AND democrats) loves, courts, and whores themselves to the so called millionaires and billionaires.  The bill is being resisted because most economists – outside of the presidents supporters – and good common sense find serious flaw with much of the underlying logic of his plan.  Further, history, including very recent history, shows that many of these approaches are not addressing the fundamentals and do not work.

The Kaiser Excuse

The Solyndra loan is one that this administration, the President, and the Vice President, own  lock-stock-and-barrel!  The prior administration had clearly and distinctly passed on this “so-called” investment.  Upon arrival in DC, and after some very in-judicious meetings with the lead investor – and big Obama bundler – George Kaiser; the administration decided not to simply revive this investment opportunity, but to expedite it and use it as a major public relations asset for both the Vice President and the President.

Now that this issue has blown up in the face of the President, his press secretary has characterized the meetings between George Kaiser and the President as discussions on his “non-profit ‘family foundation'” gifts program.  Once again they use carefully constructed phraseology to obscure the issue.  In this seemingly simple statement, most Americans will draw the connection to the Kaiser Family Foundation.  The Kaiser Family Foundation is a venerated non-profit known for its tremendous philanthropy and commitment to health care and the primary legacy of Henry J. Kaiser.

Houston we have a problem!  George Kaiser is no relation to Henry J. Kaiser nor is he connected in any way to the Kaiser Family Foundation.  He does have a family foundation, and he is a big contributor to charities including his Tulsa Community Foundation.  It is perhaps simply convenience that the administration chose this term to refer to his meetings and our own bad judgement to draw the conclusion that it was not “the” Kaiser Family Foundation – our bad!

All Jobs Are Not Created Equal in Fixing the Economy!

As the President is pushing his Jobs Bill he is really pushing Union jobs.  He is speaking about infrastructure, make work jobs.  Yes, it is true the infrastructure in America is in disrepair and needs to be rehabbed but this does not translate into making America competitive.

In his lecture to America this morning, he stressed the need to make us competitive again in the new world economy which he strongly supports.  We clearly need to become competitive again. And it is also very clear, that we are not competitive with China, Singapore, Taiwan, India, Hong Kong, Malaysia, Mexico, and many other nations around the world.  But will Union jobs and government subsidies really bring us back to being competitive?  The short answer is, no!  Looking at the U.S. Economy on the whole, taking tax money from the U.S., in any form, and passing some of that money back to companies to lower their specific costs or to provide incentives to people in America to buy their products does not make America any more competitive to the rest of the world.  It is just a zero sum game.

Think of this as your own piggy bank.  You have ten pennies in the bank.  If you pull 5 of them out of the bank to give to your friend to buy a stick of gum from you (that you paid three cents for) and you put them back in your piggy bank.  You still have only ten pennies in that bank.  Yet, you not only did not make a profit on the gum, you lost three cents overall.  This is the same shell game.  Lets take a look at some more realistic numbers.

The cost per man-hour to build a car varies widely in the world and even here in the U.S.  No matter whether you are building a luxury car or an inexpensive bare bones vehicle, the cost per man-hour is relatively the same.  It is the number of man-hours, and the price of the basic materials that changes the total cost of the car.  If you look to Detroit, the estimated costs for labor are approximately $85.00 per man-hour to make a car in this shining star of American manufacturing (at least according to the current administration).  If you look to Japan the per man-hour cost averages about $46.00.  If you look to Alabama, where some Japanese car manufacturers have moved their manufacturing the cost is about $28.00.  And some estimate the cost in India, at $18.00.  Is it any wonder that Detroit cars are not competitive in the world market?  And why the difference between Alabama factories and Detroit?  Can you say Unions?

Now I am not against unions – nor am I against union workers.  Unions have done some very good things historically for America’s labor pool – particularly related to dangerous employment conditions and mistreatment.  But Unions have also done some very bad things, perhaps knowingly, to America’s ability to compete in a one world market.

To coin a phrase, this is something we are “fundamentally” ignoring!  Our problem with being labor competitive comes in two basic areas:

  1. We have almost no natural labor pool left
  2. The labor pool we have costs way too much compared to the rest of the world.

There are other things that impact our competitive position in the world like, we no longer produce much in the way of raw materials, much of our business is based on middle-man transactions. And most of what we produce at the higher costs are sold at home doing little to reduce the steadily increasing trade deficit.  While these things are also very important, let us hold them for a later article.  The intent of this article is to focus on jobs and labor and the Presidents increasingly unfathomable position.

Why no labor pool?

Along with the focused drive, since 1972, by the banks and government to get us to stop saving and start spending, and the modification of the push to foster credit based purchasing, we have also been purposely closing trade schools and tech centers and redirecting those who would have gone into the skilled labor category to go to college. We are now a nation that does not value  the base laborer.  The person who creates valuable goods and services with their own hands has been left in the dust and become a second class citizen in a nation of college educated plumbers, welders, carpenters, cabinet makers, taxi drivers, and fast food managers.  I have repeatedly seen companies requiring a college degree for many professions like basic sales that should be more reliant on people skills simply to reduce the number of applications.  Most of the top sales people I have know in my career were without a college degree.  They learned their skills at the school of hard knocks.  I saw at least one such individual rise to one of the top sales positions in one of the top tech companies.  He almost single handedly took this company from a start up spin out to one of the premier producers in its class. In the end he was displaced by a policy decision that now required all executives to have a college degree.  It is no coincidence that within a few years they fell from favor in the market.  In some cases “book learnin'” does not compensate for real in the market experience.

While it is emotionally fulfilling to know these people have gone to college and perhaps studied the teachings of Confucius, or the writings of Chaucer; but has this made them better plumbers of has it just added to the expense of training them and increased their expectations and lifestyle and driven up their cost structures?  Is there value to them from this education?  Of course there is, but is there really value economically to America in their labor role?  No, it is in fact an unnecessary expense economically. Please remember I am not making a moral judgement here and I am not saying people who choose to, or end up forced to, practice a trade should not be allowed to go to college.  I am simply pointing out that this may not be the best economic solution for our world competitiveness problems.

While America has fostered the “everyone goes to college” mantra, closed its labor and trade schools and become dependent on immigration, legal and otherwise, to provide the required base level workers; places like Singapore still track a large percentage of their youth into labor and trade related programs.  Only a select few get stimulated to go to college.  Is this better morally?  Who knows, let the philosophers sort that out.  But economically, they are one of the countries kicking our asses, and we can’t blame that on the “subsidies of communism.”  By the way, kids that really want to go to college can choose to do that in Singapore, they are simply encouraged to go into trades and they venerate their trade workers and laborers.

So why is the President fostering class warfare, cradle to career assurance, union based infrastructure jobs and subsidizing industries to be competitive in the one world market?  Come to think of it why is the President such a supporter of this one world view?

The Reason

To start with,  who is this guy we elected?  Was he a prominent businessman?  No!  Was he a skilled civic executive?  No!  Was he a well  know economic theorist? No!  Was he a person who was well schooled in international relations?  No!  Was he an accomplished leader of any sort?  No! Well Maybe, if you consider he was elected as a state senator and then as a U.S. senator – in both capacities he quickly focused on the next step of his career but he had few accomplishments other than electability.

Look, I am not saying President Obama is incompetent!  I am pointing out that in the related experience he has little to qualify his views on this subject or to make some of the decisions that he appears to be making.  He is in fact relying on others to tell him what to do and these others, like most of our professional political class are corrupted by hidden agenda.

The President was trained as a community activist.  He apparently was very good at that.  What is the primary tool of a community activist?  It is to disrupt the status quo by using class envy as the pivot to foment unrest.  By convincing those that have less, that the ones that have more have attained it to their detriment.  In propagating this issue they gain the leverage, the power, to force changes.  These forced changes do not come about because they have been derived based on reason, due diligence and careful consideration.  They are forced into the stream based solely on the emotion of the moment.  Good community activists can get the minority so agitated that even the mere mention of due diligence or careful consideration becomes more evidence of the supposed evil intent of those who have more.

So why are we surprised to see this now?  And more importantly, why are we so blind to the real implications and the lack of focus on the economic fundamentals?  Could it be that another fundamental issue that is failing us is our education system?  McKinsey seems to think so, but I am not sure their reason coincides with mine or perhaps yours.

Additionally, our President has aspired, in fact worked hard, to become part of our professional political class.  He has in fact obtained the pinnacle of this class.  By doing so, he has assured that his future is taken care of by, and on the backs of, the same people that elected him to this office.  He is beholding to all that got him elected in the first place and is further constrained in his actions by those he will need to get himself reelected.  As I have said before in a prior article “Our Professional Political Class: An Island Cannot Rule a Continent!“, his currency is votes, and he appears willing to pay all of our collective equity in order to continue to gain these votes.

The Reality

I started this essay with the supposition that Unions and Immigration are two sides of the same coin.  While it has taken me much longer than normal to come back to this point, I feel in this case the preamble was both necessary and poignant.  Further, I think that the preamble is where we will find solutions – if we really want to solve this.

Since we have all but eliminated our labor class through the closure of trade schools, technical schools, and primary production industries (like farming, fishing, mining, oil and steel) and attrition through the aging of our population.  We have created a false expectation that everyone should go to college and our economy can not only absorb the expense but also have appropriate jobs available for these college graduates who all expect to be doctors, lawyers, Indian chiefs etc. – anything but “common laborers.”

We are left with no where to go but immigration to find those willing to work in the jobs we don’t want and at wages we can afford to pay, and still find you college educated plumbers willing to buy America’s goods and services.  We have unions who are, by their own claims – their own mantras, only looking out for the workers not American competitiveness.  But many of the workers they increasingly represent are not laborers but middle managers and low level executives.  The Unions, it appears, are dead set against immigration to solve the labor dilemma and they are dead set against relying on one world competitive wages as it would decimate the wages of the working class and the resulting stream of dues the leadership survive on.

Caught in the middle is the President. If our hypothetical coin is a quarter, then the President represents the low grade copper core.  On one side he has the silver representing the unions, the silver on the other side – immigration.  He can actually solve neither and have the solution be in the best interest of Americans.  He is left with obfuscation, and diversion.  He is in crisis mode as his pole numbers collapse.  And in crises he is falling back to the tried and true tool-set of community activists world wide – class warfare. We cannot count on this President, nor this congress, to solve this one.

In the end if we don’t solve it – we will all suffer!  At least he has acknowledged, that we are not competitive in the one world economy.  That is a step.  Not a step for the President, who can’t see or refuses to see the real implications of what he is advocating.  It is a step in that it take one more vague disingenuous argument off the table.  It takes the recently repeated ad nauseaum statement that “we are the most competitive nation in the world” – off the table.

We, now recognize that we need to become competitive again or we lose to those throughout the rest of the world who are willing to do the menial, tough, hard, exhausting jobs that we wont.  We also recognize that most of the rest of the world will do the jobs that we are actually willing to do for far less than we will! .  Until we begin to again rebuild primary production and manufacturing in America, and are able to staff the jobs with workers that are willing to not only do the job efficiently, but also at a pay rate that allows the American production to be cost competitive in the one world economy, we will fail.  No amount of robbing Peter to pay Paul, to build it, or buy it in America, will bring us back to successfully compete with those that will do what it takes for less.

America has an inordinately long row to hoe to get back to where we were.  We need to discontinue myth building, and begin to focus on the pragmatic.  We need to reject the community activist play book of class envy – come – class warfare and focus on resetting expectations.  We need to retrain many workers in production level jobs.  We need to review our educational policies and reopen trade schools.  We need to change the mind-set that everyone should go to college.  Not everyone should go to college.  Sending everyone to college lowers the standards of a college education and in the end lowers the value of education in general.  It is not necessary to get a good base education through the end of high school if everyone is also going to go to college. Also, after we send these kids to college they expect to be pad at rate commensurate with their education and its expense/investment. We need guidance counselors to again guide students into the most appropriate occupations.

Finally, we need to venerate the workers in America – the laborers in America.  We need to reduce the occupation of these required labor jobs by those expensive, excessively educated and overly trained persons with people appropriately costed and trained.  We need to once again elevate the community value of the individuals that convert the raw materials to valuable products, who convert their raw talent and effort to desired commodities. We need to have the unions and all groups, cartels, associations and members to recognize that unless we begin to put our nations ability to compete ahead of entitlements, grants, gifts, gimmes, and subsidies, we will become yet another backwater on the road of history.

I will leave you with this final thought.

It has been estimate that over 1/2 of all Americans receive at least 50% of their compensation directly or indirectly from the federal government or government sponsored programs.  By 2016, it is also estimated that this number will grow to a whopping 65% of the population receiving over 70%.  Our combined trade deficit since 1972 is almost $12 trillion.  In other words, we have purchased from the rest of the world $12 trillion more than we have sold to them.  How long can the business, that is the United States of America, continue to take in so much less than we sell.  This has been the case since prior to 1972, and in order to survive we simply increased the $500 billion in total currency then to over $16 trillion today.  But our piggy bank is empty, since most of this newly created currency has just gone to pay, by today’s numbers, 50% of the population 50% of their wages so they didn’t really notice there was a problem and the professional political class could continue to get their votes.

As Hot-Rod Swales said to me one day in 1965, “It do make you think – don’t it?”