Replacing Rhetoric with Truth before you go to the polls.
October 26th, 2008

I often talk about tabloid journalism and the media’s propensity to generate controversy rather than report news. No better example of irresponsible journalism is the recent interview (I use that term loosely…more like an assault) of Joe Biden by Barbara West of WFTV, a Florida TV station (Fox, 2008). West called Barack Obama a ‘benefactor for” ACORN, recited Carl Marx’s famous “from the able, to the needy” quote as some kind of “Spread the Wealth” Obama economic doctrine; and Biden’s “Obama will be tested..” remark as some admission my him that Obama is not ready to be President and that America has lost it’s standing internationally.

I was actually more upset by Biden’s responses than this ignorant interviewer’s poorly prepared and abusive questioning. I think it’s time both political campaigns get off the cautious margins of political rhetoric and start telling it like it is.

First let’s be honest about what caused the current world wide economic crisis. The politicians are at fault. ALL OF THEM. And they are already perpetuating a massive “Spread the Wealth” doctrine that will be, in the end, in no ones interest.

What the Campaigns SHOULD be talking about:

Economy

Today’s problems started when the federal government chartered Fannie Mae in 1938 and Freddie Mac in 1970; these two mortgage lending institutions are at the center of the crisis (Miron, 2008; Paul, 2008). The government implicitly promised these institutions that it would make good on their debts, so Fannie and Freddie took on huge amounts of excessive risk.

Worse, beginning in 1977 and even more in the 1990s -2004, (notice the spanning of many administrations, both democrat & republican) Congress pushed mortgage lenders and Fannie/Freddie to expand subprime lending. The industry was happy to oblige, given the implicit promise of federal backing, and subprime lending soared. This subprime lending was more than a minor relaxation of existing credit guidelines. This lending was a wholesale abandonment of reasonable lending practices in which borrowers with poor credit characteristics got mortgages they were ill-equipped to handle.

The catalyst for the crash of 2008 was the Credit Default Swap (CDS, 2008) – a fancy name for “side bets” placed by anyone as insurance – or a hedge – on credit defaults; like mortgage defaults. You don’t have to have any interest in any credit transaction to place these bets. Action similar to CDS’ were made illegal in the US ever since a similar practice brought down the stock market in 1907 (Kroft, 2008). The US Congress removed regulation from these hedge bets just before Clinton left office in January of 2000 through the Commodity Futures Modernization Act. The final straw for investment firms and banks came when they had to pay the enormous CDS loss insurance on mortgage defaults (Tens of Billions of Dollars) – to investors that had no stake in the losses.

The bailout itself transferred enormous wealth from taxpayers to those who knowingly engaged in risky subprime lending and those who made pennies on the dollar side bets. The bailout CONTINUES to encourage companies to take excessive risks and count on getting bailed out by government (Miron, 2008). We may blame Wall Street, but this crisis sits squarely on the Washington Mall – and the bailout insures it will continue.

It’s solution – dissolve many of the federal programs that support federal intervention of, provide subsidies to, and insurance for the actions of, private industry. Repeal the Commodity Futures Modernization Act. Provide settlement for current holders of CDS to receive no more than par value (e.g. return only the insurance premium) on any payments due after Dec 1, 2008.

Energy

Congress and the presidency for 30+ years have abandoned effective energy policy in favor of the status quo. This has caused enormous amounts of U.S. taxpayer and U.S. corporate wealth to be transferred to other countries (Mufson, 2007; Pickins, 2008).

At every turn automakers and energy companies have thwarted attempts to provide zero emission electric vehicles to the U.S. market (NOW, 2006) and the Congress has supported the establishment of a Hydrogen economy – only because, once again, it supports the status quo.

Today’s oil based energy system employs millions of people – working in gas stations, on pipelines, trucking and delivery systems, refining and production. The current energy industry accounts for billions in jobs, gross national product and tax revenue. An electric vehicle revolution is an unacceptable alternative to Washington and the energy producing and consuming companies (See the 2006 documentary “Who Killed the Electric Car” by director Chris Paine, http://www.sonyclassics.com/whokilledtheelectriccar/ ].

In nature, everything that outlives its usefulness is allowed to die. In Washington it is given a subsidy. It is obvious that if government wanted to force the country to zero oil imports, it could do so in as little as 8 years. The technology to replace a fossil fuel transportation system with a total electric one is already fully developed. Replacing it with Hydrogen based systems will take at least 20 years… by the most liberal estimates. And the complexity and cost of a Hydrogen system is many orders of magnitude that of electric.

Solution: Pass national legislation that requires 50% of all new passenger vehicles sold in the US to be Zero Emission Vehicles (ZEV) within in 5 years.  All vehicles within 10 years. The world’s automakers have the technology. Five years is plenty of time to retool 50% of production to ZEV.

Social Security, Medicare, Medicaid,…

The epitome of “Spread the Wealth” doctrine, the Social Security, Health & Welfare systems in the US are anything but secure. This is another topic that both campaigns want to avoid. Because, once again, Congressional action & inaction have completely devastated what should have been a fine example for WFTV’s “from the able, to the needy” quote from Marx.

There are many democratic socialists that have shaped US policy and some of their creations are the most cherished “rights” to US voters. Among them: Social Security, Medicaid and Medicare. What Ms. West and those that authored her questions do not seem to realize, is that America was founded on the inalienable equality of the people and resistance to class inequities. I do not defend Marxism as practiced, but Marxism as written has many similarities to the scope and objectives of the US Constitution – much more than the conservatives would like to admit.

And Washington’s propensity to continue to abuse the needs of the people never ends. If Bush, McCain and many other conservative economists had their way, from 20% to 80% of your social security fund would be invested in Wall Street right now. Remember the Social Security Privatization movement? Want to consider that for a moment while you’re watching the DJIA today?

Taxes, Taxes, Taxes

It seems all any candidate can talk about is taxes. “Vote for me and I’ll lower taxes”. “The other guy with RAISE taxes”. “The sky will surely fall!”. “I am your only hope!”. Income taxes will be the least of our worries when we have no income.

It’s time to talk seriously about tax reform.  However, tax reform is a “throw away” campaign topic because people don’t CARE about the tax SYSTEM; only about their taxes and their jobs. Real reform is needed, but only the Congress can address the problem. Congress has shown how inept it is without a popular mandate.

There have been proponents of a flat tax, or graduated flat tax, for both individuals and companies for decades. Many east European countries that were ruled by communism for so many years, adopted a flat tax system (Flat Tax, 2008) to fund their democratic governments because the graduated tax that provided the communist/socialist foundation for wealth distribution (See quote from Communist Manifesto, Vance, 2008) actually created a super class differential and provided excessive power to the government.

The U.S. tax code is extremely complex. Tax breaks create jobs, promote investment, subsidize research,… but they also generate industries for shelters and promote complex and intentionally confusing financial reporting. Tax credits, deductions, deferments and hundreds of other complex tax loopholes hide billions in revenue from the government.  Thus, keeping individual tax rates artificially high.

The US banking system, international trade and the US tax code are intertwined to the point of chaotic distraction. So, a revamping of the tax system would be a daunting and formidable task. But continuing the way we are going today is a recipe for more market chaos. While an absolute flat tax may not be readily achievable, we can certainly flatten it out a lot more than it is today.

Conclusion

Jobs are created when we promote new industry (e.g. green energy, electric vehicles & public transportation systems) and jobs are KEPT when the economy and the underlying financial systems are stable.

Yes, I wish both campaigns would talk about the participation of BOTH parties in the current state of affairs. And yes, Ms. West, the international community DOES hold the US in very low regard right now. And so should you. The Commodity Futures Modernization Act of 2000 was passed unanimously – as in 100% – by the U.S. Senate.  The entire world is now paying for that mistake.

I say to McCain & Obama that if you want any last minute independents to take notice – start telling the truth. The problem is a lack of bold facts and honest truth about the how Washington has been on the side of perpetuating bad policies and poor industry decisions rather than allowing them to die a natural death and be replaced by new industry and better solutions.

The people and their welfare should come first. Marx be damned. We need lawmakers that worry more about our education system than their reelection. They need to pay more attention to our health and less to their contributor’s wealth. Jobs are important – but new jobs are more precious that old ones. New technology can be its own reward, if not held back by artificial stimulus to the wrong solutions.

Repeal the Commodity Futures Modernization Act; phase out Freddie & Fannie completely; flatten out the tax code; allow free enterprise to determine the best next energy solution.  Do what’s right.

JB

Sources:

CDS. (2008). Definition: Credit Default Swap. Wikipidia, retrieved October 25^th, 2008 from: http://en.wikipedia.org/wiki/Credit_default_swap

Corn, D. (2008) Article: Foreclosure Phil, Mother Jones Magazine, August 2008, retrieved October 25^th, 2008 from: http://www.motherjones.com/news/feature/2008/07/foreclosure-phil.html

Flat Tax. (2008). Countries that have flat tax systems; Wikipedia, retrieved October 25^th, 2008 from: http://en.wikipedia.org/wiki/Flat_tax

Fox. (2008). YOU DECIDE: Biden Interviewer fair or over the line?; FOX news, retrieved October 25^th, 2008 from: http://foxforum.blogs.foxnews.com/2008/10/25/you-decide-biden-interviewer/

Kroft, S. (2008). The bet that blew up wall street, CBS – 60 Minutes, retrieved October 27^th, 2008 from:http://www.cbsnews.com/stories/2008/10/26/60minutes/main4546199.shtml

Mufson, S. (2007). Article: Oil price rise causes global shift in wealth; The Washington Post, retrieved October 25^th, 2008 from: http://www.washingtonpost.com/wp-dyn/content/article/2007/11/09/AR2007110902573_pf.html

Miron, J. (2008). Commentary: Bankruptcy, not bailout, is the right answer; CNN, retrieved September 29, 2008 from: http://www.cnn.com/2008/POLITICS/09/29/miron.bailout/

Mufson, S. (2007). Article: Oil price rise causes global shift in wealth; The Washington Post, retrieved October 25^th, 2008 from: http://www.washingtonpost.com/wp-dyn/content/article/2007/11/09/AR2007110902573_pf.html

NOW. (2006). Transcript: Who killed the electric car?; Public Broadcasting Service (PBS); retrieved October 25^th, 2008 from: http://www.pbs.org/now/transcript/223.html

Paul. R. (2008). Article: monetary system is fraudulent; retrieved October 24^th, CNN, 2008 from: http://www.cnn.com/2008/POLITICS/10/24/ron.paul.economy/

Pickins, T. (2008). America is addicted to foreign oil; T. Boone Pickins; retrieved October 25^th, 2008 from: http://www.pickensplan.com/theplan/

Vance, L. (2008); The Flat Tax Is Not Flat, NewAmerican, retrieved October 25^th, 2008 from http://thenewamerican.com/economy/commentary-mainmenu-43/442

One doctor’s painful decision
October 12th, 2008

I received a letter from my Doctor about a week ago. His name is Dr. Gary Brewton and he is no longer accepting medical insurance (including Medicare) in his practice. He is not alone. Each year thousands of U.S. doctors are abandoning a broken medical insurance system; and Dr. Brewton tells us why.

An original copy of Dr. Brewton’s letter can be seen here.

While insurance companies constantly raise premiums to policyholders, they simultaneously reduce what they reimburse doctors, labs and care facilities. Health insurance companies are among the largest ‘institutional investors’ on Wall Street. They are using our premiums to make risky investments in Wall Street – not health care. Then our tax dollars are used to bail-out the companies and institutions that get into trouble.

But is it their fault? Not entirely, no. It’s the US Government that promotes credit and investment policies that cause these corporations to abandon sane business practices in an effort to increase shareholder value through ‘insured’ speculation – insured by US taxpayer dollars.

I say it is not entirely their fault because no Fortune 500 company will engage in credit polices that loan money on insufficient collateral or to those unable to pay. No Fortune 500 company will reduce customer satisfaction and lower product quality if their competition does not also do so. Only some kind of unseen force could make these large corporations make such risky and un-businesslike decisions. That ‘force’ is the dark side of government monetary and regulatory policy.

Education, health Insurance, mortgages and global trading policies are all influenced by US Government tax breaks, loopholes, pork, subsidies and insurance schemes. It is a not-so-well-hidden set of under-the-table hand-offs where money changes hands between the major political parties, special interest lobbies and major investors. This has overflowed into global markets and now threatens the stability of the US dollar – and the very security of the United States.

Only when these polices, strategies and tactics trickle down to the Dr. Brewton’s of this world do we see the far reaching affects on the victims – the U.S. Taxpayer and those that invest in the U.S. Treasury.

By then, it is often too late.

JB

How stupid are we anyway?
October 5th, 2008

I have been reading blogs and op-ed pieces for over a year now on various campaign events, tactics, personalities, and – on rare occasion – issues. The latest event – the Vice Presidential debates – of October 2, 2008, has once again lowered my expectations of the US electorate ever ‘getting it’ when it comes to these election contests.

Many political experts know that political campaigns are theatrical beauty pageants. They address little, if any, of the true job description a candidate is to fill. They are, by design, vote getting exercises. Strategy and tactics are refined to focus on ‘must win’ constituents and their values. The values and positions of the candidates are malleable and can change with any demographic.

A political campaign and a political office are complete opposites. In a campaign the candidate is vetted, questioned and studied. In office that same candidate vets, questions and studies others. In a campaign they are the ones being controlled by polls, press and the electorate. Once they get the office they seek, they are the ones controlling their staff and questioning and studying options and tactics. No wonder some look very good in the candidate role but fair less impressive as a lawmaker or administrator.

Candidates are told what to say, what to think, when to express views and how to address issues. Once in office the roles are reversed, with many campaign advisors and contributors getting administration or staff roles. The former candidate is now expected (by the electorate) to direct and control those that once directed and control them. Right.

Take for instance the current Republican vice presidential candidate, Governor Sarah Palin of Alaska. In a swirl of campaign theater and strategy, this woman has been swept from being a small town mayor & first mid-term Governor to a debating contender for “Presidential Backup” – in only five weeks. Wow. The fact that she tried to tackle this at all is testament to her will and self determination. It may be that, although she seems unpolished and uneducated in the heavy theater of national politics, she may be an excellent administrator simply because she brings so little political baggage and IOUs with her.

Now, I am an independent with a libertarian bent. I could go on a rant for hours on what has led me to this position over the last 50 years, but that is another story. What I can say is that I have never been a proponent of the “Bush Doctrine”. That wayward policy that tells others that seeking political change through violent means is wrong, while we engage in it with reckless abandon. And I fear that Mr. McCain will continue that policy. So I lean, at this juncture, for a peaceful overthrow of the Republican regime.

On other issues I have my doubts that either of the two parties can reverse the economic and social slide we find ourselves in. Mostly because they are the cause of it in the first place and any true corrective actions require admitting they were wrong. An infrequent occurrence.

The bottom line here is that the electorate and our media surrogates never ask a candidate such meaningful questions as who will be your chief of staff? Your Treasury Secretary? Your Secretary of State? What directives will you give cabinet and staff to reverse Bush Doctrine trends and economic crisis? And I want specifics here, not ideology.

You won’t hear this stuff from debate moderators or media interviewers. It may be because most of the electorate is not interested in how well one can govern; only how well we can identify with them as people. For political aspirants the axiom “All the world is a stage” is only too true. If you can fool most of the people most of the time, you are candidate material.

Solutions?

Solutions to removing theater and pageantry from politics is as easy as removing money from politics. Yea, easy. My solutions are not aimed at campaign reform as much as they are aimed at political reform in general.

First order of business is to change the job description of a lawmaker. Congressional members should be more like judges and less like lawyers.

For instance, in a court of law a judge is never to be approached by any representative of the defense or prosecution unless done so in a legal setting. Approach a judge out of court and try to influence his judgment, and you can quickly find yourself in prison. However, members of congress and special interest lobbyists communicate and socialize with reckless abandon. There is no law that requires special interests to present their case in a particular legal setting; to a particular congressional committee; or through a monitored and recorded file system.

There are no laws that say – if a company gives money to a campaign – they cannot work for, advise or consult the candidate after they win office. That one law alone would probably insure that no other campaign would surpass one billion dollars as we did in 2008. It would shorten the time of a campaign and insure less waste.

Lawmakers are representatives of the people. However, we cannot exclude constituent businesses and groups from promoting their interests with lawmakers any more than we can exclude individuals from promoting their interests. But access and influence must be proportional. It also must be recorded in some kind of accessible public record. And no company or special interest should be able to follow their political contribution into the inner circle of a congressional or presidential office.

Another key component of political reform would be the establishment of a line item veto for every administration. Every president wants it once they are in the White House; but never while in the congress. This may need to take the form of an amendment to the constitution to insure it is not easily overturned in future congressional action. The ability to attach unrelated ‘pork’ to any legislation results in some of the greatest abuses of taxpayer money ever uncovered.

Government based insurance (Medicare, Medicaid, FDIC, FICA, …) should protect only individuals not public corporations. While deregulation was blamed for the 2008 credit crisis, it was not deregulation that pressed the government to allocate $700 billion for a bailout. It was the government promotion of sub-prime and low-qualifying mortgages – with a promise to the mortgage industry that government sponsored “insurance” would back them up. Government officials thought that Freddy Mac and Fanny Mae would absorb any bad debt. When they failed the shock was global.

Lastly, we must get government out of business decisions. Business Tax loopholes, subsidies, federal insurance – all have no place in an ‘unregulated’ economy. You can believe me when I tell you that no Fortune 500 lender would have made a sub-prime or low-qualifying mortgage without some guarantee that their risk was covered. If it were not for government assurances no profitable lender would risk stockholder value in that way.

From the debacle of corn based Ethanol subsidies to the elimination of electric vehicle competition in 2001, and such risky legislation as the Commodity Futures Modernization Act of 2000; the US government’s meddling in business decisions has cost the US taxpayer Billions – and may eventually destroy what was once the worlds most stable economy.

JB