Robbing Peter to pay Paul becomes robbing Peter and Paul to pay Peter and Paul

Rob Peter pay Paul

Does the practice of robbing Peter (taxing the top tier) to pay Paul (subsidizing the poor) have a theoretical limit?  If so where is the tipping point?  Like the luxury liner, Costa Concordia, are we already seeing the signs of capsize? Are our captain and crew already in the lifeboats, “coordinating” the rescue of the passengers?

I am starting to think that while the governmental practice of robbing Peter to pay Paul, has worked for quite a while, in the past few years we have reached some tipping point that has moved the paradigm into a new dynamic.  While I accept that the motivations for the practice are grounded in human decency and the desire to provide for the helpless and the downtrodden, at some point it has become part of our collective existence and not a real safety-net for the helpless.

It seems to me that at a point, perhaps when the Pauls become more than one-half of the population that the efficacy and sustainability of the process fall apart.  In fact, I would argue the tipping point is, at least mathematically, less than 50% because the system consumes resources to pay for the process itself.  Even if it is highly efficient, the cost to pay for the bureaucracy to provide the robbing and paying is at least 5%.  The basic grade-school  math says that one-half (50%) minus the 5% cost would yield the ability to only pay for 45% of the Pauls.  Today, the Peters are already paying a significant amount to about 48% of the Pauls.  Roughly, 48% of the people in America are getting almost half of their income from some form of federal subsidy, directly or indirectly.

The second observation is that we are no longer subsidizing just the poor in America.  In fact our continually expanding set of ideals is drastically changing.  In the 1930s it became obvious to many that something needed to be done to help the poor in America and the government took action.  In the 1950s the government took more actions, and in the 1960’s President Johnson declared the War on Poverty and took even more actions.  We have been waging this War on Poverty for many years and have spent huge amounts of money–it seems that no effective gains on helping the poor have been realized.  They are still poor and we are simply increasingly subsidizing the poverty.

The disturbing trend is that it was the rich and the middle-class Peters that felt it was their duty to help pay the poor Pauls.  But now the dialog has shifted.  The president wants to add the middle-class to the list of paid Pauls.  In fact, the middle-class started to become Pauls when the government began providing program eligibility at the 200% 300% and 400% of poverty level.

It appears to me that at some point, robbing Peter to pay Paul becomes robbing Peter and Paul to pay Peter and Paul.  I would submit we are either at this point or damn close to it already.  Not only are we now shifting our classification of who needs help in America to include the middle-class, but we already have numerous programs that indirectly are subsidizing even the highest echelons of the Peters because we provide incentives (subsidies) for many industries and business segments where we are not competitive on the world stage and we are proposing to add more subsidies. So almost all Americans, if not all Americans, are getting some or much of their ‘revenue’ from the federal government.  If you look at the unqualified increase in the amount of currency since 1974 it can be said that almost all of our money has come from nothing other that taking something from all of us in terms of devaluation of the currency and giving back a disproportionate share to selective groups–not all of them the poor.

Have we arrived at the point where we are just robbing ourselves to pay ourselves?  If so when do we really address this problem?  I think we clearly are at at least at the doorstep of this dilemma, and more likely our toes have already crossed the threshold.

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The State of Whose Union?

The President Reads the State of the Union Address

I have tried to resist responding to the State of the Union Address last night.  I really have tried!  But, you guessed it, I can’t.  I was so astounded by much of the rhetoric that passed through the President’s lips as unassailable facts I still can’t believe much of it.

As I am want to do, let’s review some real facts for a few minutes….

The President said the State of the Union was getting stronger

Well this really depends on what you choose as your measures and of course how hard you decide to spin them.  Here are some key statistics that were not highlighted in the speech.

Some of the pundits, immediately after the president’s speech, were very quick to remind everyone that President Obama inherited this bad situation.  That’s true, and so have every president since President Lyndon Johnson. in 1964.  The fact that they all have inherited it is not the relevant fact.  It is the fact that every one of them neither fixed it, nor improved it one iota.  In fact here is another little fact.  Everyone of them in some way or another actually contributed to making the situation worse-Republican and Democrat.  All they did was find ways to patch it, give more to those they thought deserved it (meaning would give votes to get it),  printed more money to pay for it, and hoped it didn’t all come apart before they got their golden parachute.  Well it has come apart now, hasn’t it.

“Fairness for all, Responsibility from all”
– President Obama 1/24/2012

Part of the problem I have with last night’s speech is the President stating he is going to make sure there is “fairness” for all.  It is not his wanting for people to have a fair shot that bothers me.  Everyone I know, if asked, would say they want fairness.  But fairness like many other things in life is a frangible and perspective driven concept.  It means different things to different people, and sometimes different things to the same people on different days depending on where they are and whether they are the beneficiary of the supposed fair treatment or not.

I just do not think anyone can give another fairness.  Often, the act of a group, or government, attempting to make something fair takes the form of redistribution or reallocation of something from one group or individual to another.  Look at the controversy surrounding Affirmative Action in Education and the implementation of quotas to make it fair. I am not challenging whether this was a good idea or not,  I am pointing out that in creating a quota to make it “fair” for one person or group, you simply are redirecting the opportunity from another person to this person.  If the person your took it from had nothing to do with the disparity in the first place then they now are being placed in disparity. Even in California, one of the strongholds of humanistic belief and liberal thought, some of our most liberal politicians have recently stated that we all need to get used to disparity.  That after 40 years of public life she now understands disparity must exist ; no mater the cost it cant be eliminated. It seldom works to try to make something fair by treating others unfairly—ask any six year old!

Frankly, if you look at other countries and other systems of government, America is just about as fair as anything could be given human nature in the first place.  I mean really, you think most of Africa is fair?  How about China?  Russia? Saudi Arabia?  Most other places are decidedly less fair than America.  So when people say we have some very deeply built-in unfairness, they usually are speaking in narrow terms.

Historically, if you look at our specific history in a vacuum, we’ve had periods where specific classes, specific races, and specific genders were treated unfairly.  This is very true and not something to be proud of in our newest age of enlightenment.  But once again, the facts are, that while we had these uncomfortable periods of our history, contemporaneously America was still head and shoulders above the rest of the world at the time.  We can always strive to do better , to be better people, to be better to each other, but no government can impose fairness nor can it replace the personal responsibility and character we should all instill in ourselves and our families.

Responsibilities from all

He used the term, “Responsibilities from all”.  The phraseology struck me oddly.  While I suppose it is grammatically correct to say that responsibility comes from somewhere or someone, I am not comfortable with this statement.  After thinking about it this morning, I realize this is because I believe responsibility should be innate in each of us.  That responsibility does not come “from” anywhere.  I feel that responsibility is part of our character and while it may flow from us it does not flow to us.  To try to illustrate this point, let me say that part of my responsibility, as I see it, is to help others.  In fact if I do help others I am being responsible.  I also feel that if I throw a baseball and it bounces and breaks your window, I should be responsible to fix the window. Fault in actions are in some way offset (not excused) by the exercise of responsibility for the fault by, or within, the individual.

I do not feel, however, that if you robbed a liquor store that it becomes my responsibility to pay for it. I assume most feel the same way.  But, I also feel that I am not responsible for any of the third party circumstances that you may have encountered in your life that led you to rob the liquor store.  I worry that the president believes that we are responsible for what others choose to do.  That somehow it is our responsibility to make sure they do not do something harmful or at least find themselves in circumstances that lead them to do something wrong.

In my life,  I have listened to many people justify their bad actions based on some set of circumstances that led them to do what they did.  I have heard things like; I was abused by my parents, my mother was an alcoholic, my tire blew out and because of my crack addiction I did not have enough money to get a cab so I could not get to work. Often, somewhere in each of these excuses became an attempt to transfer the responsibility to me or others because we somehow allowed the parental abuse, the mothers alcoholism, or the existence of crack cocaine– all of which if eliminated from this persons past would have somehow supposedly stopped the bad action in the first place so therefore–ipso facto– it is my fault, or your fault,  they did whatever they did.

I think these are some of the fundamental differences that divide us today.  I think the concept is attractive to take the position that everything that affects me is someone else’s fault or greed. Words like compassion and fair-share sound so good against the backdrop of greed, oppression, poverty and sacrifice.  But frankly, this is not what the fundamental issues we face are about.  It is now about our viability–national and economic.  We have destroyed our economy, and our viability, because we have systematically, over the past 100 years, made decisions for self gratification and personal appeasement of abstract goals that have affected our production, our cost effectiveness and our competitiveness in this new one-world economy.

We used to be the world leader in fisheries, agriculture, clothing, steel, oil, coal, automobiles, aircraft, raw production, basic manufacturing and many others.  But we have made decisions that have altered our ability to be in these industries at all or to be competitive in them.  Child labor laws killed the textile industry in New England, increasing labor costs and environmental laws killed coal, steel, oil and fisheries. Increasing labor costs, over production and now subsidies have effectively killed agriculture.  And overall for the rest the increasing costs in general, including labor costs, taxes, mandated benefits and shrinking labor pool (skilled and unskilled) have killed much of the rest.  Along the way, we have become a nation or middlemen, service providers, who purchase most of what we consume from other countries than we make ourselves.  Each year we bleed cash from our treasury to other nations workers.  Since 1972 this has exceeded $12 trillion.  That 12 trillion dollars more spent in buying stuff from other countries than we have sold to other countries.  This is one huge reason, but by no means the only reason, that we are circling the drain the way we are.

We have abandoned many industries because we felt there was just cause to do so.  Again, I am not saying any of these decisions were good or bad.  You need to make that call for yourself.  But, we have willingly walked away from most of the industries that led us to our short lived prosperity.  As we have embraced the “one-world economy,” we have killed our own production, rapidly and drastically increased our costs, and decided that we no longer can try to influence who goes to college (destined for middle management) and who works in the fields, the factories, and the plants.  In order to feel good, everyone has to go to college.  When we need labor, we relay with a wink, wink — nod-nod on immigration.  Since legal immigration is expensive and takes a long time we have a large illegal immigration problem–and we sit and wonder why!

As we have been indiscriminately printing money since 1974 we have lived in a fantasy land.  It is a wonderful place to be, don’t you see:

  • Everyone goes to college
  • Everyone can own a house
  • Everyone gets a car
  • Everything is fair
  • Everyone is a millionaire
  • Everyone has everything they want
  • No one needs to worry about getting sick
  • No one needs to save – in fact we need to borrow and spend more
  • Someone else will build it
  • Someone else will maintain it and clean it
  • Someone else will pay for it

In this fantasy land, the government will see to it that all the above just happens.  We don’t need to worry or pretty little heads just pay the taxes it will all be fair.

Shrinking Middle Class

The president has brought this up over and over recently.  Our president is a master at using language to infer that the middle class is suffering because of individual greed, because of Wall Street, because of corporations, because of millionaires and billionaires…. The truth of this is that the middle class are suffering because they have lost the value of what they earn disproportionately to everyone else–poor and rich. They are not poor enough to get in on the gravy train that is now the myriad government subsidies that over one-half of the population receive, nor are they rich enough to use investments to hedge the loss of value by playing the inflated earnings game that has been the finance,  investment, and real estate (FIRE) economy game for the past 40 years.  They have been screwed!  One reason the number of the middle class in the population is declining is we are raising the level of eligibility of programs for the poor. And along with that the cost of the additional program subsidies is coming from the middle-class and the rich in the form of taxes and higher costs, the rich just don;t feel it as much because they can invest enough of their money to offset the loss of value. Like the subsidies for industries and the poor, some portion of the new money ends up as liquidity in the stock market because the banks put it there! Can you say Quantitative Easing?

What was not mentioned by the president is equally telling

The Affordable Protection Act, his singularly biggest achievement — if you count it that way, was only mentioned in passing.  His own administration has had to admit that there are many things in the legislation that are either unfordable like CLASS, unworkable like the Medicare M.D. fix and the plan to have the IRS as the reporting agency, or potentially unconstitutional like the insurance mandate.

Medicaid, Medicare, and Social Security, like many other things are items that this president inherited.  Unlike most they are the biggest, and most insidious, causes of the loss of value to the middle-class and the destruction of our economy.  Once again, I am not making a value judgement on these programs or whether or not they should exist.  They simply have become what many feared at the time of their creation, much larger drains on our economy then was planned for.  Also, since most of the money that was created since 1974 has been needed to pay for these entitlements, along with the accumulating trade deficit, they are collectively the main reason that the money came into being and as such the main reason that the real value of the middle class has declined so drastically.

In the end, you have to ask yourself why the president spent so my time decrying the state of our economy, our industry and our people but then offered as a solution a panacea, of no pain, more money, more taxes, more subsidies, more for the poor, more from the rich, more subsidies for non-profitable industries no plan for increasing domestic primary production, and nothing about solutions for the real problems we face?  Well I guess it really is about re-elections not solutions.

In Closing

While the president may have appeared to be the brunt of my ire in this piece, it really is extended to all members of the full-time-professional-political class.  DNC or GOP the rhetoric and practice of opponent vilification and liberal application of what amounts to noting but wall paper paste needs to stop. Real solutions need to be proposed and vetted in this election process.  As a Mugwump, if a candidate does not start to tell me how they are going to fix the real issue and elucidate exactly what the pain points will be for everyone, then I am not voting for them regardless of the party.

If there ends up being no one; then I may not vote for anyone.  If that happens then it probably won’t matter because it will be too late.

The Two-Bit-Kid vs. The Come-Back-Kid: Which do you want for your candidate?

Entering the Florida primary-of-the-moment race  are ‘The Two-Bit-Kid‘ (Mitt Romney) versus the ‘Come-Back-Kid‘ (Newt Gingrich).  Clearly, Newt has earned the title the Come-Back-Kid, as he has been counted out at least three times in the recent months by many pundits on the left and right. I have called Mitt the Two-Bit-Kid for his inability to gain or stay above 25% in the polls for more than just short period. Often, he has risen above this apparent wall only when others implode, sometimes on their own, and then sometimes with a little help from his friends.

Is it just me, or if you’ re a Californian doesn’t Herman Cain remind you of Willy Brown? Or Marion Berry if you’ re from DC?

The Republican race thus far has not been an awe inspiring process has it?  If we were to take a path along the lines of creating the next “Steve Austin” we clearly could have combined the candidates into our own “One Billion Dollar Elephant Man.”  We could have taken Newt Gingrich’s brain and policy experience (Newt is consistently one of the smartest guys in the room–and he knows how to nail those that the people want nailed!), Hermancain’s simple 999 style(I say Hermancain because, I have never heard any other name for him.  I can’t even tell if this is his first or last namecan you?) Let’s add in some of Rick Perry’s reversion-airy ideas on converting our professional political class back to part-time citizen politicians (something that is definitely needed). How about some of John Huntsman’s ability to speak Chinese (he could tell Chinese Premier Wen Jiabao the inside dirty jokes or tell them where the best Chinese food is in Washington, DC–who would know?) Let’s take some of Ron Paul’s views on the Federal Reserve (and their big bank cohorts)  and their complicity and obfuscation in the current financial crisis (and perhaps his relationship with Arthur Dent, a hapless Englishman who travels the galaxy, could help if the aliens lose all common sense and decide to invade the planet–Come on, you think he doesn’t know him personally?) Now let’s put in a dash of

John Huntsman seems like a nice enough person but he reminded me of a bobble-head doll every-time he spoke!

Rick Santorum’s ability to keep talking to everyone while not  really enhancing the conversation one iota, but seemingly not pissing people off (other than convincing them he is really truly a conservative–and after-all to Rick, that is all that matters right?), Michelle Bachmann’s attractiveness to the Tea Party and her singular focus on repealing Obamacare (Do they still find her attractive?–I mean in a political sense of course), And Mitt Romney’s uncanny ability to continue to run for president after, what is it?–eight years–wining only one state and still not get more than about 25 percent of the electorate interested in him, but still he continues. (Don’t forget the hair–Mitt has great hair! The best that money can buy!)

Please, will someone tell Mitt Romney not to put jell on his implants? It makes them look like a well cultivated cornfield owned by some anally-retentive Iowa farmer.

Now, if we could pull that off we would have the One Billion Dollar Elephant Man (BDEM).  The Republicans are going to need this to go up against the One Billion Dollar Donkey Man(BDDM). (I thought about using the pejorative that I know many of you are thinking but, it would not be appropriate!) Oh yea, he already has one billion dollars doesn’t he!  I think we should put this fact in a bit of perspective.

Lee Majors vs Barack Obama

I did not realize, until I began to research this article, that the show The Six-Million Dollar Man began in 1974.  The same year that President Nixon took us off the gold standard!  Now, how about that for a coincidence!  Lets take a look at what it is going to cost to build a modern replica of Steve Austin and compare that to what either the BDEM or the BDDM is going to actually cost us all.

In 1974, when Steve Austin was being constructed to protect mom, apple pie, and the American way, He cost America $6 million to build and there was a total of $500 billion of currency in circulation (CinC.)at the time.  That was about 0.0012% of the total money in circulation.  Now, if we look at the Billion Dollar Donkey Man or the proposed Billion Dollar Elephant Man, using the benchmark of Mr. Austin, either of these candidates should only cost about $192 million based on having almost $16 trillion total Currency in Circulation today.  But, they will likely cost at least $1,000,000,000.00 each! That equates to 0.0625%–an increase of 520.83%. That is an inflation rate of 13.71% per year since 1974. What do we get for our money?

That’s a 520% Increase!

I guess we should not complain all that loudly, should we?  We only had a 520% increase in the cost of the $6 million dollar man but we increased the total amount of money circulating in our economy by 3,200% Yep, that’s correct! We increase the total amount of money in our economy 32 times what it was in 1972. And of course the value of all the assets of the U.S. increased 32 times as well didn’t they?

While our ideology, and its complete polarization, have made for great copy; no single person or party is responsible for this mess.  We all are!  As I read the paper this morning, I start to see the new push against Gingrich as angry, unpredictable and undisciplined.  I see the attacks on Romney as not in touch with the common man, driven more by greed, and not able to close the sale with voters.  Overall I saw so what!  In sales and marketing there is a thing called the “so what test!”  If after someone tells you something they think is a selling point you can say so what, then they have not made the sale!  I think we need to all say so what a bit more!

Conversely, now I hear, over and over, how the democrats are more afraid of Romney than Gingrich–that Gingrich has so much baggage they feel they can easily beat him. And as Yul Brenner said in The Kind and I, “Etcetera….  Etceteraaaa….  Etceteraaaaaaa!”  Deep inside, when I hear this I wonder if the words of the queen in Shakespeare’s Hamlet ring true?

_____________________________

Player Queen:
Both here and hence pursue me lasting strife,
If once I be a widow, ever I be a wife!
Player King:
‘Tis deeply sworn. Sweet, leave me here a while,
My spirits grow dull, and fain I would beguile
The tedious day with sleep.
Player Queen:
Sleep rock thy brain,
And never come mischance between us twain!
Hamlet:
Madam, how like you this play?
Queen:
The lady doth protest too much, methinks.
Hamlet Act 3, Scene 2

_____________________________

Logically thinking about this, I am not sure I agree with the conventional, or contrived wisdom, that the Democrats are more afraid of Romney.  He has more money at this point, he is more organized, and his background accomplishments key him up directly as the economic foil to illustrate the Presidents economic failures.  In the long run, if we get our collective heads out of our nether regions, I don’t think the rap against Romney on his fiscal achievements, and liabilities,–Bain Capital, taxes et. al.–amount to much in balance.  For everyone who begrudges him his success and fortune, others will want him to translate these skills to work on their behalf.

Likewise, Gingrich may have baggage, but it just different baggage.  Like the others, in many of the attacks on Gingrich the supposed weaknesses also become strengths.  Unpredictability, is well, unpredictable.  Unpredictability makes it difficult for others to prepare their game plan and stick to it.  Clearly, Newt is the strongest debater, and by almost every account the smartest man in almost any room.  Some have charged this leads him to be undisciplined and that his idea-a-minute brain makes it hard for others to find focus and achieve.  Clearly, this is not the case for some others.  Newt himself has had a disproportionate share of successes, accomplishments and achievements in his lifetime.  Recognized as a quintessential American, more along the lines of the early framers and founders.  He is and been a successful politician, author and consultant. He has been Times Man of the Year in 1995 for his role in leading the Republication Revolution and creating the Contract with America, Earned his PhD from Tulane University, has taught History and Geography,  founded Conservative Opportunity Society, American Solutions for Winning the Future, The Gingrich Group, and the Center for Health Transformation and co-authored over 27 books and documentary movies. Yes, his marital history and admitted infidelities are cause for some to find him inappropriate to hold the office. A number of our founding fathers had similar transgressions.  And for one I am really tired of this as a litmus test for an elected candidate.  I want someone who can lead the country, come up with good ideas and solutions and fight hard and passionately to bring them forward to conclusion.  I want someone who will call things as they are.  I am tired of the politically correct version of our history and our life.  Most importantly, I am tired of our desire to offend no one standing in the way of our ability to recognize the issues on either side and deal with them effectively, timely and efficiently.

Newt has baggage but he also has a long and diverse list of accomplishments!  While Romney resonates with women Newt does not.  While Newt creates the feeling that nothing is beyond his intellect and willingness to take a risk and to fight the full fight, Romney often appears to favor the safe path.  Overall, Newt presents to Americans the Passionate Risk Candidate, while Mitt presents the Safe Bet Candidate.  Who will eventually win may still be anyone’s guess.

Being a Mugwump, I will end up voting for the person that I believe will do the best job and accomplish the most.  There are things that are attractive to me about Newt as I feel what we need now is a fighter, someone who is willing to passionately address the issues we face both inside our nation and abroad.  I think now, I want someone who will not play it safe and who will take the risky path and fight for the best outcome.

I do not worry about Newts baggage, I am concerned that we have changed so much as a society that we no longer want citizen politicians with all their flaws–just read any of the recent biographies of Washington, Adams or Jefferson and you will see what I mean they were all flawed men.  I am worried that today we want political-celebrity-rock star-gods.  We seem to really want to have a Professional Political Class, telling us what to do.  We seem to be willing to accept anything they do as long as they do not become regular everyday people like us!

There are things about Romney I like as well.  I like his tenacity, his success, and his history in the private sector.  His religion and long term commitment with his wife neither sway me nor bother me.  I am not voting for a political-celebrity-rock star-god.  I will vote for the person I think can and will do the best job.  I am still forming this opinion, but I am now down to two candidates only.

What I am most concerned about is us!  I am concerned that the criteria we are using to select our next president is not based on the things we really should be evaluating.  We have said in years past, mostly in furtherance of political objectives, that it is about character.  I think in some cases character matters.  But like everything else, even a persons character has to moderated against the other factors and issues we face.  Genius lies in many people, many cultures, many demographics, many ethnicities, and many degrees of fidelity.  Overall, I want the best person to solve the problems that our country faces today.  The characteristics I have looked at in many ways become conflicting with each other and sometimes conflict with basic human nature.

What do I want?

  • I want plain talk, I want workable solutions, I want clear answers,
  • I want a dedication to America more than I want a dedication to my own self interests,
  • I want someone who knows how to get things done in Washington DC, I also want a citizen politician,
  • I want a strong leader, I want a leader to balance compassion with responsibility,
  • I want a person who can elevate the nation, and myself,  to a new level of greatness in the world,
  •  I want someone who believes enough in our capability to think big thoughts but deliver pragmatic solutions,
  • I want a leader who builds admiration and respect in our nations friends and abject fear along with respect in our nations enemies,
  • I want someone to lead us to a new era of tolerance and respect for each other as Americans,
  • I want someone who can move our full-time professional political class back to part-time citizen politicians,
  • I want a president who is selfless who will sacrifice the potential for “4-more-years” to do the correct thing for the country,
  • I want a president that can help re-engage our youth and re-invigorate our education system in teaching our next generations our real history–what it takes in terms of knowledge, commitment, dedication, hard work, respect and compassion to be successful and responsible national and family leaders,
  • I want a leader that will resolve the ongoing conflict between the powers at the federal level with those at the state level,
  • I want a leader that will inspire all of us to be bigger than ourselves, become more self reliant, and do better at helping each other as Americans.
  • I want a Washington, or a Lincoln, or an Adams, or a Jefferson, or a Jackson, or either Roosevelt
  • I want a pragmatic idealist
  • I want a person who believes that faith plays a role–which faith is not important
  • I want someone who can sees how the Federal government can provide the checks and balances to make sure we all do our best for the country and each other but not one who sees the Federal government provide for us all
  • I want a leader that knows the value of our history–all of it–not slanted to one political side or the other
  • I want a leader that will make the hard choices–the ones none of us want to make and does not soft peddle the solutions to preserve the livelihoods in DC

I could go on and on but this is long enough already .  I would hope that most of you do not find much, if anything, you disagree with–despite your political affiliation.  I also, hope you will notice what you do not see on this list: things like; marriage status, religious affiliation, sexual orientation, size, weight, personal predilections or anything else.  In the long run I am not even sure that in the end I want to ‘like’ the candidate. By this I mean they do not have to be someone I want to go have a beer with.  I really just want the best person, with the best ideas, singularly dedicated to fix the problems and make us a better country.

In the long run this alone would be a great start!  Wouldn’t it?

The Middle Class Myth: Let’s try this again

The Old -- New Middle-class

I have written a couple articles trying to explain the problem with the economy for the middle-class in America. If you listen to the current rhetoric, now apparently from both sides of the isle, you would come to believe that it is the fault of either the political right working to give the rich an unfair proportion of all the money, or it is the fault of the political left in America for running up the debt and increasing significantly the expenses of government.

Of course there are many other flavors of the arguments but, they all center on how someone else is causing the plight of the middle-class and only our side is looking out for you.  Oh yea, one more point…. they do it on purpose because they don’t like you and they want to hurt you, or they just don’t care about you! Have you heard this drivel recently?  Do you really believe that any leader in America is only looking out for one class of people?  If you believe this, I have to say. I feel sorry for both you, and America, as we have lost all reason, understanding, and any opportunity for compromise through tolerance.

I want to tell you that unequivocally I believe, all the crap you are hearing is simply not true!

Why is the Middle Class Suffering Then?

This is the key question isn’t it?  And, since we agree this is the “key” question being raised by both parties now, ad naseum, have you happened to notice the issue is not focused as much on the poor?  Hum???  Wonder why this is?

Being Poor in America

Well the poor in America have many programs already doing a great job of redistributing income back to them to help them survive. Before, you guys start to say that it is really bad to be poor — I agree it is not a good thing to be poor.  But if you are going to be poor, it is better to be poor in America at this time, than any other place, or time, in history.

The U.S. “givernment” and all our states have many, many, programs to help people classified as poor.  The definition of poor used to be people earning below the federal poverty level (FPL) which today is roughly less than $25,000 per year.  But, this is mostly a myth.  Many programs, if not all programs — I can’t verify that any programs work only at the federal poverty level — start their eligibility levels as 200 to 300 percent of FPL.  While you may not be legally designated as poor from the FPL definition, practically you are treated as poor if you earn $50,000 or in some cases $75,000 per year.  And due to the fact that these programs are not mandated to coordinate their care and benefits across any and all sources, somewhere between 20 and 40 percent of the money for services is paid to program participants more than once for the same need.  Meaning, in plain English, they double dip.  In some cases, this is nothing more than gaming the system — purposeful fraud.  In other cases, it is because they just don’t realize it — hard to believe, but true non-the-less.

Drug Rebates

A hidden redistribution program!

Few people know, and even fewer people understand, that the government, both state and federal, requires drug manufacturers to pay back to the government rebates on all drugs purchased through most state and federal programs. This is just one example of subversive hidden taxes that we get hit with every day. How can a rebate cost us money you ask? Well in this case it is because the price you are paying is where the rebate dollars come from in the first place. So what happens with drug pricing is this: There are various prices for any given drug, unlike most other industries which have Manufacturer Suggested Retail Prices (MSRPs), all the various drug prices are based on an arbitrary number like Average Wholesale Price (AWP) or Wholesale Acquisition Cost(WAC).
On top of this, there are rebates – rebates for distributors, rebates for pharmacies, rebates for others, and most importantly rebates to the state or federal government. It is the governmental mandated rebates that are the main problem. In other industries rebates paid in the retail path to the customer are checked by the MSRP and the customer’s willingness to buy. Government rebates simply inflate the price paid. And where does this money go? It goes back to the government, sometimes to the programs, and is reallocated to support the government costs or the programs that generate the fee in the first place. So you are paying more in prices that flow back to the government so it can distribute the money back to the people it wants to give it to. It is simply one of the many hidden taxes, perhaps more hidden than most. It also helps the government have flexibility in the disclosure of the real cost of the programs they offer.
These rebates are inflationary, they obscure transparency, and they are not, by any means, the only mechanisms that redirect your hard earned money to others that you just do not know about.

I have documented this in earlier posts, but as a reminder; we are now at a point that almost 50 percent of the population is getting almost one-half of their income from some form of federal subsidy — directly, or indirectly.  This is one half of the important facts we all need to consider as we try to move the country forward.

Being Rich in America

How about the other half? While it makes for great copy to vilify the rich as somehow taking the food out of the mouths of the poor in America it is just not true.  Sure, there have been people who have gained illegally and profited on the suffering of others.  But these despicable people do not represent the norm for rich in America.  The title Rich itself is a very frangible determinant.  If you are truly poor, meaning you earn at the FPL, then someone earning $75,000 per year could seem rich. But, this person you see as rich is often now just as eligible as you are for federal subsidies.  So are they rich?

Many try to classify the rich as millionaires and billionaires.  But this is a very problematic determination in itself.  There is a 1,000 fold difference between a millionaire and a billionaire. Further many millionaires do not earn a million dollars a year in income.  This represents what they have in equity, home, savings, investments etc.  Another problem with the designation is that, Millionaires and Billionaires make up a very small percentage of the population and our economy.  Less than 5% of the population.  They earn about 18% of the total income in the U.S.  Sure, this is a large number but, it is not as disproportionally large as many would have thought.  And, the “rich” pay over 40 percent of the taxes to the government.  Much of which goes to support the programs for the other 50 percent receiving some subsidy.

Romney’s 15% Tax Rate Shows they don’t pay their fair share!

As a very quick point, as I have been working on this article, the Mitt Romney 15% tax fiasco has come to the surface.  Once again the argument is false and stupid from both sides.  The 15 percent rate is not all the tax paid on these earnings.  For the most part, the 15 percent represents the tax paid on the earnings from the money he has invested. Where did he get the money?  Well some he likely earned as ordinary income and paid taxes on it at the time of earning of between 22 and 38 percent.  Some, he may have earned before as investment income and could have paid between the 15 percent and 22 percent based on when he earned it.  Lets say he inherited some of it.  Well he would have paid a significantly larger tax on that at the time he received it based on the estate tax (so called death tax) in effect at the time.

Because he chose to invest, or re-invest, these monies, he has paid taxes multiple times on the money.  If you want to be jealous of the fact that Mitt Romney has a lot of money, OK, I support your right to be jealous.  But, if that is your objection then the rest of your arguments are worthless.  This is America, what makes it great is anyone has the ability to get rich.  Yep, some will say this ability is not distributed equally.  That’s true! But, if you make it truly equal, then no one will have the opportunity to get rich!  As I  pointed out in the earlier section; rich vs poor is a relative state.  You see, if all are truly equal, then everyone has exactly the same — no rich and no poor.  Some argue this would be a good thing because they feel that everyone would have enough.  History challenges this assertion and it defies human nature. It is the opportunity for disparity, like it or not, that makes people work harder and innovation really happen.

So back to the question; why are the middle-class suffering disproportionately?

Two main points.  First, the middle-class is shrinking in number.  If you need to be poor to get subsidies from the government then part of the historic middle-class is being subsumed by the subsidies for the poor.  You could say that they are becoming poor because they are earning less and can afford less and that they need the programs to survive.  That is one way to look at it but, it is the symptom not the cause. In fact, the middle-class, like most of the rest of America, have seen their incomes grow drastically in dollars over the past 40 years. Second, The middle-class do not have the excess equity, cash or assets, to hedge their loss of buying power.

The middle-class are suffering a huge disproportionate loss of buying power in America because they are disproportionately shouldering the burden of the loss of value of the dollar —  you can call it inflation or deflation, the point is the same.  If you live in the middle-class, you are not eligible for subsidies and you do not have the excess assets, like the rich, to hedge your buying power against the loss of value in the dollar by investment, savings interest, and purchase of long term tangible assets.  As a result over the past 40 years, while you have been getting raises, like everyone else, and seeming to live a bit better like many, for you it has been a bigger falsehood than for most others.

In 1974, there was a total of $500 billion of currency (money) in circulation when President Nixon took us off the gold standard.  Today, by various estimates, there is over $16 trillion.  The real value of the combined worth of the U.S. has simply not increased 32 times in 40 years.  It is even harder to believe there was really any increase when you understand that during the same period we have accumulated a combined trade deficit — purchased more from other countries than we produced and sold — of over $12 trillion.

So, this means that all the things we own, all the money we made, all the stuff we buy, the wages, the prices, the stock market, etc,  have been inflated to levels that simply are not real.  If you are poor, the government has compensated for this by giving you more subsidies in one form or another.  If you were rich, you have been able to keep some form of pace with this devaluation problem because you could invest in housing, or businesses or the stock market.  And, if you were rich, the loss of buying power may have affected your discretionary purchases but  often not your day to day ability to live and pay your bills.

The middle-class, as I laid out before, do not have the assets to offset the increases in the amount of currency without an increase in real value of what they own, and they did not get subsidies either.  So the issues of taxes comes to the front now.  The rich have been paying much more in real taxes — revenue to the government —  during this whole period.

The middle-class have heard over and over how they were getting a tax cut!  How come you say the middle-class are bearing the burden? Well, the truth is, that there are Taxes and there are taxes….  Taxes are those things assessed by the government that we pay to support government programs directly through taxation.  “taxes” are those things we pay that indirectly are increasing the price of goods and services, increasing the prices in the economy to artificially inflate the amount or money we can claim is in circulation.  So you get paid more in wages, your company charges more for its goods and services and the economy appears to rise in value.  You get more benefits, you get more vacation days, etc, and each of these things translates in some way to an increase in prices or spending and therefore the economy supposedly was growing.  All that is necessary is for the government to be able to print more of that green-stuff to allow you to count it.

But, there is a fly in the ointment.  It is a zero sum game.  We are not making money as a country we are spending money as a country. So, as you thought that you had more money to buy new cars, new homes, take vacations, get more stuff, and the government has encouraged to do this– and on top of it borrow as much as you can to buy as much as you can — these new dollars were actually reducing in value.  The good news is that we are not alone.  Most of Europe has been doing the same thing in one form or another.  If you were a net exporter, like China, it was not a problem. If you convert natural resources to high margin goods like much of the Arabian peninsula — no problem either.   If not? Oh Well– bad for you!

As long as we were buying, most recently houses, and having the prices continue to go up, we could print more money, and no one was the wiser.  But, due to increasingly dumb decisions we finally made the mistake of over doing it and it all fell apart. The values we think we have are far different from the real values that we have.  Looking at median home prices from 1974 to today, with and without the gold standard, is is clear that we are still 20 to 30 percent too high in real values of homes.  If you look at the economy it is much worse.  We have $16 trillion in currency circulating in what is really a $5 trillion, maybe $6 trillion, economy.

Conclusion

The middle-class is, and has been getting hosed for a long time.  Those in the middle-class have suffered from not enough to be rich and protected, and too much to be poor and subsidized.  Further, as prices have risen, they have paid more with less real value and as such have indirectly, and disproportionately, paid for the programs for the poor.

And who is to blame for this?  All of us!  We have been asleep at the switch for too long.  We have allowed all of our administrations, and elected officials to do dumb things — things that defied our own common sense.  We allowed it because we all felt we were gaining. In the end, and once again, we will learn there is no free lunch!

Republicans, Democrats, Socialists, and Independents have all been elected to our government in the past 40 years and all have continued to perpetuate these myths and underlying problems.  Were they doing this consciously?  No more than any of the rest of us! It is not a Tax Problem alone, it is not a spending problem alone, it is a systemic problem.

We need to stop diversion to prurient, ad hominum, vilification of others ideas, and focus on a pragmatic solution founded in tolerance more than compromise.  In the end, we must all face the reality that, it will only be a broad based mutual solution that will solve the problems underlying the economic disaster we are now in.

  • We need to become competitive in the world from a total costs, benefits, and wages perspective
  • We need to get back to manufacturing in the U.S. products for the U.S. and others to consume
  • We need to stop subsidizing the existence of such a large portion of our population based solely on the desire to keep them thinking they are doing so much better and that  the products we make are competitive and  affordable.  (subsidizing production to make it affordable so we can pay inflated prices to support inflated costs and wages so we all feel good is not a good thing.)
  • We need to eliminate government redirection of monies to support hidden redistribution schemes.  (Example: mandated Drug rebate programs see sidebar)
  • We need to solve the problem with home equity, home mortgages and home prices in one holistic and complete fashion balancing the problem equally for all parts of society and the economy
  • We need to get back to primary production from our own natural resources.
  • We need to reduce what we purchase from other countries and buy more here —  but this cannot be subsidized to make it affordable or our economy remains false.

I believe it is fixable!  It is going to take a fundamental shift in what we all expect and, to some extent, how we view ourselves as Americans.  We needed to start this five years ago.  It may not be too late now, but it very likely will be in another four or five years.

Since the power of our government is derived from the people in this constitutional republic we call America: It is up to us!

Delusional Ravings of a Lunatic Mind receives good reviews!

Praise for the Delusional Ravings of a Lunatic Mind

“Outstanding reasoning. I was surprised to find out you weren’t a lawyer in the middle of the text. It is chock full of interesting insights and observations.”
–Kyle Becker, Author and Publisher of Rogue Government Blog

“Wow, You have too much common sense!.”
–James P. Finn, Author and Publisher of Thought Continue reading

The Global Leaders 2nd annual healthcare forum: January 10, 2012

Aside

Tom Loker will be facilitating the discussion at the Health Policy table at The Global Leaders 2nd Annual Healthcare Forum. January 10, 2011 at the historic Marines’ Memorial Club in San Francisco, California. To get more information about the conference go to http://tinyurl.com/6nppmu5 .  To Register Now go to http://tglhealthcaresymposium.eventbrite.com/.

The Global Leaders is proud to host its 2nd annual healthcare forum on Tuesday, January  10th in San Francisco at the historic Marines’ Memorial Club. The theme for the 2012 event is “Eliminating the Gap Between Innovation & Resources.” The conference will focus
on connecting CEOs and other senior executives with institutional investors and business development executives who can help bring the pieces together in a rapidly changing landscape.

  • Matching innovation with capital
  • How to mitigate risks; both financial and regulatory
  • The future of healthcare in a changing global market

WHO SHOULD ATTEND

• Biotech & Pharma
• Investors
• Business Development
• Research Analysts
• Key Opinion Leaders
• Journalists & Press
• Philanthropists
• Government Leaders

Be sure to check out Tom’s latest book, “Delusional Ravings of a Lunatic Mind.” available at Barnes & Nobel and Amazon.

Of you can find out more about Tom’s upcoming book, “The History and Evolution of Healthcare in America: The untold backstory of where we’ve been, where we are, and why healthcare needs more reform.

Ron Paul:The Republican’s Pall

Recent Pitts Article

Perhaps it is just me, and apologies to those Ron Paul supporters out there, but I do not understand the fascination with him as a candidate.  Yes, there are things he says that I agree with, but there are also many things he says that I find, quite frankly, astounding. Yes, he has a number of concrete plans, but his unbending ideology takes his positions to a ludicrous (I don’t mean the rapper–Ludicris) level.  Yes, he is a non-Romney candidate but given his positions in some areas you could say the same about Michael Moore. Because in some cases, I am not sure I can find much difference in the level of both extremes. I am not saying he and Michael Moore share the same views, just that often I see Mr. Paul taking his ideas to the same level of incredulity.

“A foolish consistency is the hobgoblin of little minds.” – Ralph Waldo Emerson

In a article by Leonard Pitts Jr., Ron Paul’s consistency doesn’t make him right, He sums up what it is about Ron Paul that has confounded me for so long.  I am fiscally conservative and often socially moderate and given the correct circumstances, sometimes socially liberal.  So I should be attracted by a committed Libertarian, but in this case I am not. To confound the problem, I don’t understand how he could have rated so high in Iowa. While there is an old joke that Iowa stands for “Idiots Out Walking Around,” I know many people in Iowa and I have traveled there many times over the years and conducted business in Iowa as well. I find the people of Iowa to be highly intelligent, dedicated, perhaps slightly more conservative, and very hard working. In short, I see nothing that would explain to me why so many have gravitated to someone who is often so far in the extreme.

I find myself in agreement with Mr. Pitts.  Something that is not a common occurrence.  This in itself gives me pause!  But Mr. Pitts summed up my exact sentiments about Ron Paul when he said, “Ralph Waldo Emerson, meet Ronald Ernest Paul. He is the very soul of a foolish consistency. Meaning that he is willing, often to a fault, to follow his ideology to its logical and most extreme conclusions.”

I also do not find some of the extremes of Ron Paul to be that conservative.  I know a few other very conservative people who refer to Ron Paul as really one of the most “liberal” people in the presidential race, some proclaim he is to the left of President Obama in many areas.  I am not sure that I would draw the same conclusions. I do, however, think his brand of extremism is more than confusing; it is at least very risky–perhaps even dangerous. It is in any event at least dangerous for the Republican party.

One pundit last night suggested that perhaps Iowans were sending a message to the Republican leadership. Well if so, it is to my way of thinking a very problematic message.  This election, more so than any others in recent history, will be decided by independents, and moderates in both parties.  Non-Republicans, and some Republican moderates, tend to worry about the extreme views of the Republican party and the potential extreme conservative segments of its platform, just as non-Democrats and Democratic moderates then tend to worry about the extreme liberal segments of the Democratic platform.

Sending such a message and ignoring Paul’s foolish consistency in the areas of civil rights, Iran and their nuclear ambition, and the recognition that there are some areas where the federal government must play a role to promote the general welfare, if in fact that is what is being done, is not going to go far toward endearing independents and moderates to the benefits of a Republican executive branch and congress.  Not since the period of the 1880s to the early 1900s have we seen such a divided ideological ocean between the parties.  With it has come a broad distrust of the professional political class and significant suspicion as to motivation and potential corruption in their platforms and agendas.

In the end, Ron Paul’s finish in the race last night in a virtual dead heat with Romney and Santorum worry’s me.  If the Republican party members in the U.S. now are willing to accept such a level of foolish consistency in their candidate in order to adhere to other desired ideals, we will run the risk of ignominious defeat in the presidential election.  Independents and moderates will likely see Republicans as a party driven so far by  ideology that these key voters will not be able to accept their perceived risk of this foolish consistency.

Perhaps the pundits are correct and Iowa is a Paul anomaly, and as we move through the remaining caucuses he will once again fade into history as did James G. Blaine in the election of 1884 or Alton B. Parker in 1904.  If not, I fear, in about one year, we will be recalling the Paul pall of 2012.