Friday, October 28, 2011

The Disastrous Decline In The American Standard Of Living



Wouldn't it be good to be in your shoes, even if it was for just one day?
Wouldn't it be good if we could wish ourselves away?
Wouldn't it be good to be on your side?
Grass is always greener over there.
Wouldn't it be good if we could live without a care?
—Nik Kershaw, Wouldn’t It Be Good?

Apparently, life for the average person in the U.S. really, really sucks.

At least, that’s the impression one is left with from any number of media reports over the last few weeks discussing census data revealing that the median U.S. income—presumably that income level at which 50% of the population is above it, and 50% is below it—has been relatively flat over the last decade.  USA Today ran a two-full-page piece last Thursday highlighting this data as a key underpinning of the “occupy” fad. 

To make this point—and to cast the “occupiers” as normal folks who just want their honest chunk of the American Dream—the article sifts through the inane “Tax the Rich” and “Arrest Tea Baggers” signs to focus on young Kate Wolfe, a very girl-next-door type who has $50,000 in student loans, and a $30,000 medical bill for which she has no insurance.  Ms. Wolfe says, “I’m not anti-capitalist . . . I just want some kind of hope for young people starting out, who think the deck is stacked against them.”  One suspects that Ms. Wolfe might find the deck a little more playable if she weren’t—as the USA Today article leads off informing us—spending her time trying to land parts as an actor in New York.  I don’t begrudge anyone chasing their dream, but don’t ignore the statistical and talent realities that say your chances of becoming Johnny Depp or Angelina Jolie are exceedingly slim and then claim the system is unfair.

Let’s note first that this income comparison is based on incomes indexed for inflation.  Unless you indulge in the fantasy that real incomes should normally be expected to show constant and substantial increases forever, it should come as no surprise that the buying power of the median household—particularly in the throes of the current ongoing recession—hasn’t changed that much over the last ten years.  Indeed, this is the basic hedge theory behind investing in gold.  In 1920, an ounce of gold as worth $20, an amount that would buy a fine men’s suit; that same ounce today is worth $1,600 (+/-), an amount that would buy . . . a fine men’s suit.

Interestingly, the USA Today piece goes on to cite Columbia economist Jeffrey Sachs, who traces the stagnant median income growth to 1973, and in researching the data on line I found that 1973 is a common cutoff point for analyzing relatively flat median income growth.  But even that 38 years is a relatively limited time sample in the grand scheme of things, and one suspects that over a broader time period median income would show better growth.  Indeed, a University of Arizona article shows that looking back at 1950 to present, median income (adjusted to 2008 dollars) has more than doubled.  Other online data shows average income—not quite the same thing as “median,” but it should be predictive of at least the direction of change in median income, if not the specifics—increasing fourfold (adjusted to 2004 dollars) from 1929 to 2004.  So to say that median income is flat would appear to be taking too limited a time frame to be meaningful.

As an interesting side note, the 1973 starting point for the flattening of the median income growth curve coincides almost exactly with the elimination of the gold standard in 1971 (thus allowing the Treasury to print money), and with the beginning of federal peacetime (yes, I know Vietnam dragged on into early 1975) spending routinely and significantly exceeding revenues as the true costs of Medicare and Medicaid kicked in. 

I’m not saying, I’m just saying.

The bigger question here is, even assuming that the median U.S. household income has been relatively flat on an inflation-adjusted basis, why anyone thinks this is necessarily a bad thing.  Consider the plight of that median household in the 21st Century.  According to statistics compiled in an article published by The Heritage Foundationalthough its real income hasn’t changed much, the median U.S. household as of 2005 had, among other amenities a PC, Internet access, a home printer, two color TVs, cable or satellite service, and a cell phone, none of which even existed in 1973.  UPDATE 11/1/11:  Yes, I know we had color TV.  Try to keep up with my point here.

Yep, life’s going downhill in a hurry.

Even the vast, vast majority of the “poor” in the U.S. have many of these same amenities, and the fact is that in our modern state of entitlement we don’t define poverty in terms of lacking the essentials for survival, but by the extent to which one has access to conveniences that are unknown to people in many parts of the world.  Over 99% of all U.S. households have a refrigerator and TV.  75% have air conditioning.  65% have cable or satellite service.  Over half have a cell phone.  Virtually none complain about not having enough to eat. 

Try finding those things in Zacatecas, Mexico.  Or Bangladesh.  Or Darfur.

To return to the median U.S. household, the USA Today piece wraps its thesis around the proposition that what it calls “two of the most common expectations of middle-class life, health insurance and college” are less affordable (query whether this affordability issue would be at least mitigated if the median household wasn’t choosing to spend its flat real income on the new amenities discussed above that it wasn’t spending on in 1973).  But leaving that aside, the roughly tripling of the cost of college since 1980 and doubling of health insurance premiums since 1999 cited in the article aren’t problems with the median income, but problems with the rising cost of those two products; it’s not that the median household doesn’t make enough income, it’s that the cost of these two specific items has grossly outpaced inflation.  Isn’t it interesting that for all the “Occupation” calls for free education as a basic human right, no one as far as I can tell is attacking the universities for raising tuition and fees?  And although it’s a subject for more detail another time, the increase in health insurance has as much to do with Americans generally being too fat, over-scanned, and over-medicated as it does anything else.

One wonders, if the standard of living at or below the median in the U.S. is so bad and plummeting off the cliff, why so many thousands a year risk life and limb and spend everything they have to try to get here.  By any sane measure, life in the median U.S. household, and even for the “poor” in the U.S., is better than it is for those in other parts of the world, better than it was in the U.S. in 1950, and exponentially better than it was in the U.S. in 1900.


For those of you on the Left who still believe things are so terrible, I’m happy for you to move to Europe where you can drown yourself silly in “free” government benefits, at least until the creditors come to collect.  Maybe Ms. Wolfe can land a part there.

Thursday, October 27, 2011

Free Money



Renault:         Oh, no.   Emile, please.  A bottle of your best champagne, and put it on my bill.
Emile:             Very well, Sir.
Lazlo:             Captain, please.
Renault:         Oh, please, Monsieur.  It is a little game we play.  They put it on the bill.  I tear up the bill.  It is very convenient.
—Claude Raines as Captain Louis Renault, Leo White as Emile, and Paul Henreid as Victor Lazlo in Casablanca

The President’s vote-buying tour continues.

I see now he is announcing a new executive initiative to re-write the paradigm for student loans.  This time, the deal is you borrow from the federal government (read: we taxpayers), and you pay the loan back at 10% of your income over $10,890, and at the end of 20 years whatever hasn’t been repaid is forgiven.

Where do I sign up?

This isn’t the first time this President has ventured into the lending business, which should really come as no surprise given his extensive background in business and finance.  But let’s review a bit of the history, shall we?

Rewind to the Spring and Summer of this year.  With unemployment stagnant at over 9% (really closer to 18% if you count the underemployed and those who have given up), and an economy showing effectively zero growth, Obama declares a budget emergency because the government reached its debt limit.  Having maxed out the credit card by accelerating the debt in just two years more than any administration in history, Obama spent much of June and July insisting that Congress had to raise the debt limit and allow him to borrow—and continue spending—even more.

Recall also the Solyndra debacle.  The Obama administration not only fast-tracked $500 million in federally guaranteed loans to a soon-to-be-bankrupt firm in an unproven startup industry without adequate financial review, it then doubled-down by restructuring the deal so that the taxpayers moved to the back of the creditor-priority queue.  Touted as a necessary “investment” in our green energy future, it is becoming increasingly clear that the $500 million bet on Solyndra was at best a na├»ve play on one of the Left’s most basic fetishes by an administration full of career academics, with neither the training nor the expertise to be dabbling in such high-risk business ventures.  At worst, it was just naked crony capitalism.

Or outright graft. 

Or how about earlier this week when the President unveiled an initiative to push banks to make high-risk, low-interest loans to people with iffy repayment ability, secured by mortgages on homes worth less than the amount being loaned.  As I discussed here, this is simply a reprise of the very federal mortgage program concepts that led to the banking industry meltdown and the current recession/malaise in the first place.

Over and over again we see this administration getting involved in so-called "loan" transactions where the concept of risk and the obligation of repayment seem not to exist.  I had a college buddy whose girlfriend couldn’t understand why her bank account was empty when she still had checks left.  It is clear that this President suffers from the same fundamental ignorance about money, and what loans and debt are.

Obama’s focus is solely on the borrower.  But when a student, or home purchaser, or business borrows money, that money doesn’t just fall from the sky.  The President forgets or does not understand that there are in fact two parties to a loan transaction.  Yes, there is the borrower who receives the money.  But there’s also the lender who supplies the money, and the key concept here is that the lender is only allowing the borrower temporary use of the lender’s money.  A loan is not a donation, and it’s not a gift.  The lender makes his money available to the borrower with the express expectation that at some agreed-upon time (or over an agreed-upon period of time), the borrower will pay that money back. 


It’s this latter part that Obama simply just doesn’t get, whether the context is borrowing to finance runaway government spending, compelling banks to make high-risk refinancing mortgage loans, or lending federal tax dollars to unproven green tech ventures or college students: 

Eventually the money has to be paid back.

If we ignore (or “forgive”) the repayment obligation, all we’re really doing is taking money from one person and giving it to the other.  That’s a great deal if you’re the borrower.  Not so much if you’re the lender.

Let’s put this into perspective in the student loan context.  There are some 36 million student debtors with an estimated total of $1 trillion in outstanding student loans.  By reworking the program to call for payments at only 10% of income above the poverty line and combining it with total debt forgiveness at 20 years, the President is inviting deliberate default—effectively taking $1 trillion from the taxpayers and giving it away to college students.  Yes, I know not every student will default, but the more unscrupulous will. 

And there’s the not-so-small problem of huge amounts of these loans being used to finance economically and socially useless degrees—some would say my political science and law degrees fall into this category, but I paid my student loans—where there simply is no job market for such graduates, and thus no real prospect that they’re going to have the economic wherewithal to pay the loan back once you have your loan-financed degree.  Quite like Solyndra, the making of these loans is not tied to any realistic assessment of the likelihood that the money will be repaid.  Chris Stirewalt at Foxnews.com put some flesh on the problem:

"If Suzy Creamcheese gets into George Washington University and borrows from the government the requisite $212,000 to obtain an undergraduate degree, her repayment schedule will be based on what she earns.  If Suzy opts to heed the president’s call for public service, and takes a job as a city social worker earning $25,000, her payments would be limited to $1,411 a year after the $10,890 of poverty-level income is subtracted from her total exposure.

Twenty years at that rate would have taxpayers recoup only $28,220 of their $212,000 loan to Suzy."

Some might say Stirewalt’s example is too extreme (actually, he’s understated the case, because he doesn’t include interest).  Let me take something a little more realistic, then.  According to the National Center for Education Statistics, the median income for those 25-34 with an undergraduate degree is $45,000.  At that income level, the student would only be paying $3,411 per year, or a total of $68,220 over the 20 year life of the loan.  To be sure, not everyone will take out the full $212,000 in Stirewalt’s hypothetical—the average is more like $27,000—but plenty will borrow between $50,000 and $100,000, and the median income figures suggest that a substantial number of them will never pay the full amount back under Obama’s reduced-payment-and-forgiveness plan.  UPDATE 10/27/11:  Not sure how I missed this, but AP reports (sorry, I can't find the link now) the White House is claiming that despite the obvious mathematical necessity that a substantial amount of these loans will never be repaid, somehow this program will not cost taxpayers anything.


When I graduated from Rice University, President George Rupp told us in his commencement address that “there is no free lunch.”  Eventually, someone has to pay the tab for all this.

Tuesday, October 25, 2011

Right Back Where We Started


Cohaagen:    Richter, you know why I’m such a happy person?
Richter:         No, sir.
Cohaagen:    Because I have one of the greatest jobs in the solar system.  As long as the turbinium keeps flowing, I can do anything I want.  Anything.  In fact, the only thing I worry about is, one day, if the rebels win, it all might end.
—Ronny Cox as Vilos Cohaagen and Michael Ironside as Richter in Total Recall


Am I the only one alarmed by these things?

Foxnews.com reports that this week the President will begin announcing a series of measures to try to jump start the economy, beginning with the Affordable Loan Refinance Program.  Apparently, not enough people with bad credit or other high risk factors are able to refinance mortgages that are under water; that is, people who are at high risk of default can’t get loans on houses that aren’t worth as much as what’s owed on them.  So to boost sagging demand in the housing market, Obama is by executive fiat going to order banks to make low-interest (read: low return relative to risk) loans to people who fail the normal underwriting rules designed to mitigate against the risk of foreclosure, and to do so on assets that by definition won’t cover the amount of the loan in the event the borrower defaults.

Wasn’t it Einstein who said the definition of insanity is doing the same thing over and over again and expecting different results?

As I’ve discussed previously, it is exactly this sort of government program that is at the root of our current economic mess.  The mortgage crisis and banking industry meltdown stemmed directly from the government effectively forcing banks to make high risk loans with little security.  Of course, why should we be at all concerned about repeating this mistake—after all, this time it’s Obama, and we know all about the Obama administration’s sterling track record when it comes to dabbling in high-risk lending.

Apparently, after 1000 days in office, the situation is now so urgent that we absolutely cannot wait any longer for Congress to act, so Obama-the-Savior has to assume the burden of rescuing us himself.

But I want to leave aside the sheer stupidity of repeating the forced lending mistake and focus on the real danger here, which is the process by which this is coming about.  This of course isn’t the first time we’ve seen this (as I’ve covered here and here and here), and there have been several examples of this use of executive fiat in recent weeks.  Barely 10 days ago, HHS Secretary Kathleen Sebelius informed Congress that because of long well-known problems with its long-term financial viability, the Administration would not be implementing the “CLASS Act,” the long term care program baked into the Obamacare bill, effectively exercising an after-the-fact line-item veto by administrative action. 

I guess they really did need to pass it so they’d know what was in it.

Last week, the President—again citing Congress’ failure to act—announced that his Department of Education would waive State compliance with basic elements of the No Child Left Behind law, effectively repealing the statute by executive decree.

Let’s assume for a second that Obama’s right (and, frankly, I don’t disagree that the CLASS Act and the No Child provisions the administration is avoiding were bad ideas—the mortgage thing is a different story, but my point here has nothing to do with the substance or merits of any of these statutes).  Let’s assume that he’s omniscient, endlessly benevolent, and really does need to take these measures for our own good.  Let’s assume that it’s really that urgent and we can’t wait any longer for Congress to enact legislation.  Let’s forget for a moment the colossally incompetent mess this President and his cabinet staff of career academics made the last time they got into the high risk loan/investment business, and assume that this time he’s got it right.

From where does the President derive the authority to do any of this?

Article II, Section 2 of the Constitution lays out the powers of the President:

The President shall be Commander in Chief of the Army and Navy of the United States, and of the Militia of the several States, when called into the actual Service of the United States; he may require the Opinion in writing, of the principal Officer in each of the executive Departments, upon any subject relating to the Duties of their respective Offices, and he shall have the Power to Grant Reprieves and Pardons for Offenses against the United States, except in Cases of Impeachment.

            He shall have Power, by and with the Advice and Consent of the Senate, to make Treaties, provided two-thirds of the Senators present concur; and he shall nominate, and by and with the Advice and Consent of the Senate, shall appoint Ambassadors, other public Ministers and Consuls, Judges of the supreme Court, and all other Officers of the United States, whose Appointments are not herein otherwise provided for, and which shall be established by Law: but the Congress may by Law vest the Appointment of such inferior Officers, as they think proper, in the President alone, in the Courts of Law, or in the Heads of Departments.

            The President shall have Power to fill up all Vacancies that may happen during the Recess of the Senate, by granting Commissions which shall expire at the End of their next Session.

Oh, yes, and Section 3 goes on to provide that the President “shall take Care that the Laws be faithfully executed[.]”

There is no “Congress fails to act” provision in the Constitution allowing the President to take unilateral action if Congress gets bogged down.  There is no line-item or after-the-fact veto allowing the President to—whether officially or de facto through deliberate inaction—write laws out of existence, even if those laws are stupid, fiscally unsustainable, or otherwise useless piles of steaming dung.  That is so, regardless of how urgent the need is.

I’ve harped on this before; the unilateral assumption of Presidential authority to rewrite or simply ignore acts of Congress that have been duly passed and signed into law is by far the single most dangerous threat to what’s left of this Republic.  Once the President has the power to do that, Congress becomes meaningless.  Presumably that same power to ignore actions of the Legislative branch would also permit the President to ignore actions of the Judicial branch.  At that point, we cease to be a nation of laws at all.  The President would have absolute power, because he would no longer be bound by anything Congress or the courts do.  That’s how it works in places like North Korea and Cuba. 

“The history of the present King of Great Britain is a history of repeated injuries and usurpations, all having in direct object the establishment of an absolute Tyranny over these States.”

We’re about two steps away from square one.

Monday, October 24, 2011

Greedy “Big Oil”


One way, or another,
I’m gonna find ya,
I’m gonna gitcha gitcha gitcha gitcha
—Blondie, One Way or Another


Here we are, some 60 days after the State Department issued its final report favoring approval of the Keystone XL Pipeline, and as predicted still no action from the White House.

You should pass it right away.

Meanwhile, the patently unconstitutional “super-committee” ostensibly charged with finding $1.5 billion in budget cuts continues to consider targeting “Big Oil” to achieve at least part of that goal.  So, at a time of chronic high unemployment/underemployment, a stagnant economy, and increasing dependence on imported petroleum, we’re going to punish the oil industry.  Bear in mind that this is an industry that employs literally hundreds of thousands of people, and has been begging the government to allow it to tap more of our vast reserves, which would not only increase employment but also increase domestic supply (thus reducing dependence on foreign imports and reducing costs to the consumer).  Never mind that the energy industry—and sorry, Greenies, but in 2011 that still means oil and gas—is the unquestioned driver of the economy both domestically and globally.

As the Guinness boys would say, “Brilliant!”

Big Oil makes for an easy target.  It’s a faceless, dehumanized collection of corporations—inherently evil in and of themselves, just ask any hippie-wannabe down on Wall Street.  With $3.50/gallon gasoline, the charges of “greed” gain ready traction with the media and public.  Witness USA Today last Friday running a story on how consumers are “unable to escape” the high cost of gasoline, and lamenting its impact on the middle class.  And, of course, anything associated with fossil fuels whips the Leftist base into a frenzy.

Driving this discussion is the idea that oil companies don’t pay sufficient taxes because of “subsidies” and “loopholes,” while at the same time they are making record profits by unfairly gouging consumers.  But let’s consider a few specifics.

First, those advocating targeting Big Oil like to make it sound as though oil companies don’t pay any taxes at all.  The truth is that oil companies pay more taxes than almost anyone.  Between 2005 and 2009, the U.S. producers paid over $98 billion in federal income taxes alone.  That’s nearly $86 million a day, more than virtually any other industry.  The effective global tax rate on the oil and gas industry is 40%, which is higher than both the federal rate of 35%, and the average rate for manufacturers of 26.5%.  And these companies are never going to receive Social Security benefits or food stamps.  All the while, these companies are also voluntarily giving back additional millions in charitable cash donations—as I reported here, the three largest domestic oil companies between them gave away over $412,000,000 in charitable donations in 2009 alone.

Second, the “subsidies” proponents of the get-the-oil-companies approach like to attack actually consist of tax deductions that are of a nature common to virtually all business taxes.  Corporations are taxed on profits, not revenue, which means they are taxed on income after deducting the costs of doing business.  The specific items at issue include things like the deduction of intangible drilling costs such as drillsite preparation and engineering (similar to the R&D costs deducted by pharmaceutical firms), and tax credits for foreign taxes that are designed to keep corporations with international operations from being double taxed (the same credit available to individuals). 

Further, plenty of other industries do receive actual federal subsidies.  A prime example is the ethanol industry—a sacred cow of the Green Energy Left and, regrettably, both Bush administrations—which for decades has actually been given a $0.40/gallon tax credit in order to make the product economically viable.  In the open market without that tax credit, ethanol is not economically competitive with other fuel additives  (of course, the irony is that “green” ethanol requires more energy to produce than it provides, is less efficient than other clean air additives, and its production consumes gigantic amounts of water and causes untold environmental impacts due to fertilizer runoff, etc., but that’s another discussion for another time).

Lost in the Leftist’s sleight-of-hand is the 100% certainty that if the tax treatment of oil companies is changed to eliminate deductions and credits—tax treatments that, as noted above, are identical or similar to those available to other businesses and individuals—that expense will be passed through to the final cost of a gallon of gasoline.  Proponents are telling a gullible public that they’re going to continue funding out-of-control government programs by increasing taxes on these evil oil companies, when in reality it’s the public itself that will ultimately bear that cost.

Also lost in the at least implicit suggestion that oil companies are profiting by unfairly gouging consumers at the pump is the fact that Big Oil doesn’t control the price of gasoline, or the price of crude (which is actually where the bulk of their profits are generated).  Nearly 70% of the price of a gallon of gasoline is the cost of crude oil, which is determined in the global commodities market, where emerging economies in China and India are skyrocketing demand.  Now, while those who want to demonize the oil companies like to talk about their size, the truth is the five companies that are commonly included within “Big Oil”—ExxonMobil, BP, Chevron, Shell, and ConocoPhillips—are relatively small players in the global market, which is actually dominated by the national oil companies in the Middle East and Venezuela.  To put it in perspective, according to Petrostrategies.org the world’s largest oil company, Saudi Arabian Oil Company, had 2007 reserves of over 303 BILLION barrels of oil equivalent.  Of the five companies making up “Big Oil,” only ExxonMobil at #17—with 2007 reserves of just over 13 billion barrels, just 10% or less of the reserves of each of the top five, and less than 5% of the reserves of the top two—even cracks the top 20 globally.  COMBINED the five “Big Oil” companies have about 45 billion barrels, barely good enough for 10th globally.  The simple fact is “Big Oil” has essentially no control over the cost of crude oil or gasoline.

The really sick part of this whole debate is the fact that the one profiting on the price of gasoline is really the very government that is now pointing the finger of blame at the oil companies.  On a $3.50 gallon of gas, the government gets, on average (depending on where you live), about $0.46, or approximately 13%.  The oil company gets between $0.02 and around $0.15, and that’s before corporate income tax on its profit.  So once again, we have government regulation creating or contributing to a problem—in this case, drilling restrictions limiting domestic supply, thus increasing the cost of crude—and government bloating itself on tax revenues, then blaming the consumer impact on the very industry being regulated and taxed.

Flogging the golden goose may make good short-term politics, but how long can we continue like this?

********
Bonus:

Childhood friend of mine posted the newspaper clipping below on Facebook.  I have no reason to believe it's a mockup.  Discuss.

Friday, October 14, 2011

The Politics Of Division


Brian:       Brothers!  Brothers!  We should be struggling together!
Francis:    We are!  Oh.
Brian:       We mustn’t fight each other!  We should be united against the common enemy!
Crowd:     The Judean People’s Front?!?
Brian:       No, no!  The Romans!
Crowd:     Oh, yeah.
—Graham Chapman as Brian, Michael Palin as Francis, and cast of Monty Python in Life of Brian


If you want to see one of the roots of why this country is so badly divided, you need look no further than this.

According to an article published October 11 at foxnews.com, there’s a fight brewing in Nevada over redistricting and its impact on Hispanic voters in that state.  In an odd reversal of the usual battle lines, this time it’s actually the Republicans supporting the creation of Hispanic majority districts, and the Democrats insisting that the districts be drawn to distribute the Hispanic vote throughout the state, rather than vice-versa.  We’ve had a similar fight-now-lawsuit here in Houston over Republican efforts to redraw the precinct lines in Harris County—lines that already bore a closer resemblance to a complex jigsaw puzzle than any natural geography.

The stated rationale for these redistricting fights is always the same: ensuring that the minority group at issue has “fair representation”—read: is able to elect one of its own.  In discussing the Nevada situation, Fox quoted “Hispanic Republican activist” Alex Garza:  “We should have the opportunity to elect the candidate of our choice.”  In a September 7 article on the lawsuit over Harris County redistricting, the Houston Chronicle reported that “[t]he plaintiffs argued that the maps prevented minority voters from gaining a sufficient number of new seats[.]”

Somewhere we developed this mentality that different ethnic groups are entitled to at least one of their own on every elected body, whether it’s the House, the State Legislature, the County Court, or what have you.  We’re just one step shy of simply dedicating seats; this is the Hispanic seat, this is the Black seat, etc. 

I’m searching and searching the Constitution, but I don’t see anything about every subgroup of Americans being entitled to elect one of their own.


More to the point, where does it stop?  Do we have to have at least one representative from every nationality-hyphen-American simply for the sake of having them?  What about gays—do we need a dedicated “gay” seat (don’t even bother with the joke, Beavis) in the statehouse?  And if there’s to be a gay seat, don’t we also need representatives from every other behavioral variation and fetish by which some group may define themselves?  Not only does this logic quickly devolve into the absurd, its only real solution is total democracy, because the only way to have every possible permutation of human individuality represented is to have each individual represent himself personally.

Further, the minute you begin attempting to create a district designed to permit, say, Hispanics to elect a Hispanic, you are—assuming your underlying premise that Hispanics will and should vote for Hispanics is valid—inherently devaluing the vote of non-Hispanics in the redrawn district.  The U.S. Seventh Circuit Court of Appeals put it nicely in Gonzalez v. City of Aurora:

“[N]either § 2 [of the Voting Rights Act] . . . nor any later decision of the Supreme Court speaks of maximizing the influence of any racial or ethnic group.  Section 2 requires an electoral process ‘equally open’ to all, not a process that favors one group over another.  One cannot maximize Latino influence without minimizing some other group’s influence.  A map drawn to advantage Latin candidates at the expense of black (or white ethnic) candidates violates § 2 as surely as a map drawn to maximize the influence of those groups at the expense of Latinos.”  (emphasis original, citations omitted)


The real problem, of course, is that both parties in this kind of debate are pandering to the lowest common denominator.  They are not genuinely interested in assuring that this group or that group is “adequately represented.”  They are interested in one thing, and one thing only, and that gaining or remaining in power, and in this vein they are acting on the inherently racist and elitist assumption that this group or that group is likely to support the party’s policies and will vote for a candidate solely based on the color of her skin.  So what they’re telling the Hispanic community (or blacks, or whoever) is we assume you can’t think your way through the issues so we’re going to color-code the ballot for you.  Possibly worse, this thinking also assumes that a Hispanic household cannot be adequately represented by their white next-door neighbor, or at least not as well as they could by a Hispanic who lives across town.

I vote for the candidate I believe is most likely to act in my best interest.  Yes, I have voted for white Anglo-Saxon males.  But I’ve also voted for women, blacks, Jews, Catholics, Hispanics, Vietnamese, and Indian candidates for various offices.  I’ve voted multiple times for Texas Attorney General Greg Abbott, who is a paraplegic, and unlike FDR, takes no measures to hide it.  I’ve probably somewhere along the way voted for at least one gay candidate—I don’t know, because I don’t ask and I don’t much care.  But I don’t just vote for the straight white guy because I’m a straight white guy.  If you do that—or if you vote for the black because you’re black, the Hispanic because you’re Hispanic, etc.—instead of voting substantively in your best interest, you are a racist and a fool.

Article I, Section 2 of the Constitution mandates that we redraw the maps after the Census in order to apportion seats in the House of Representatives.  But allowing these districts to be redrawn in any conceivable shape inevitably leads to the temptation to craft districts that technically include the requisite number of people, but are bizarrely laid out in order to maximize the drawing party’s political power (so-called “gerrymandering”).  The potential for mischief is almost endless, and it has been abused by both sides.  An easy fix, it seems to me, would be to mandate—probably by Constitutional Amendment—that all voting districts take the form of a polygon with, say, six sides, thus inherently limiting the degree to which it can be artificially manipulated. 

In advocating on behalf of the Republicans in Nevada, University of Texas at Dallas political science professor Thomas Brunell says that the artificial creation of “minority-majority” districts is necessary because “[w]e are not post-racial yet.”  Well, we’re never going to be post-racial if we can’t stop worrying about race and allow ourselves to be post-racial.

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Editor's Note:  I will be traveling on business next week, 10/17 - 10/21, so may be unable to post.

Wednesday, October 12, 2011

The Occupiers' Pure Democracy


You say you’ll change the Constitution.
Well, you know,
we all want to change your head.
You tell me it’s the institution.
Well, you know,
you better free your mind instead.
But if you go carrying pictures of Chairman Mao,
you ain’t gonna make it with anyone anyhow.
—The Beatles, Revolution


Following up on Monday's piece, it doesn’t take much to see the storm clouds gathering.

Over the weekend it appears that Representative John Lewis (D-GA) showed up at an “Occupy Atlanta” protest, and like most Congressmen, he expected to be given an opportunity to take the podium and address the crowd.  Presumably, he was going to follow what is becoming the DNC Party Line, express solidarity with them—never mind that with 24 years in the House, if anyone is the “government establishment” to which so much of the Occupiers’ anger is directed, it’s Lewis—tell them he and the Democrats are listening, etc. etc.

But a funny thing happened on the way to the Politburo.

Through direction/facilitation from a pseudo-leader relayed through the crowd by word of mouth, and communication and debate via a complex set of hand signals—one imagines Cameron Frye doing his Three Stooges-esque mocking of a third base coach giving signals at Wrigley—they took a vote and told Lewis no.

Predictably, the cries of racism that would have surely been leveled had this been a Tea Party event have been drowned out by the creaking of crickets.

What’s interesting here, though, is what’s revealed in the rationale behind refusing to let Lewis speak at the event: they couldn’t achieve a consensus of the masses to do so.  As reported at foxnews.com, according to one objector, the crowd was there to start “a democratic process in which no singular human being is inherently more valuable than any other human being.”  Another echoed that sentiment, “John Lewis is not better than anyone!  Democracy won!”  So, we can gather, Lewis should not be allowed to speak simply because he is a United States Congressman, or so sayeth the voice of the masses.

Now, most of us would agree with them about no single human being being more valuable than any other.  That’s the fundamental premise of our Declaration of Independence:  We hold these truths to be self evident: that all men are created equal[.]  But combine this idea in its practice as illustrated by the Lewis event with some of the other sentiments pervading the “occupation” movement.  Consistent talk about a “revolution.”  Complaints about the “greed” of the 1% being responsible for the lot of the other 99% (where they get their numbers is beyond me, never mind their logical train of effect back to perceived cause).  Advocacy of government-enforced lockstep salaries for all occupations.   For these people, the most articulable distillation of their issue is that the accumulation of private property in and of itself is inherently wrong.  What they want is pure democracy, where everyone gets a direct vote on everything and the majority rules, even on the distribution (or redistribution) of capital and wealth.

Haven’t we seen this movie before?

One course of action might be for those of us in the productive part of society—the so-called 1%—to take a page out of Atlas Shrugged and go on strike.  Take a month off all at once, and let the lazy and parasitic see what happens to them in our absence.

What do you mean, Starbucks is closed? I’ll die if I can’t get my Grande Double-Organic-Soy Iced Caffe Latte!!!

As these “occupation” forces become more and more feral, however, one suspects that a strike by the productive would likely be more provocative than educational.  We’ve already seen that in Greece, where having spent themselves into oblivion on social programs, they now face rioting when government austerity measures necessary to sustain Eurozone financial support  look to at least slow the draw on the public teat.  Ditto Italy, France, and Britain in recent months.  The addiction is powerful, and these people won’t be easily weaned.

When I was growing up, my Dad used to warn me about what happens when 51% of the population is able to vote themselves a living at the expense of the other 49%.  He wasn’t the first to see this danger, as James Madison warned of this very evil in Federalist No. 10, while explaining the Constitution’s choice of a republic over a pure democracy:

“From this view of the subject it may be concluded that a pure democracy, by which I mean a society consisting of a small number of citizens, who assemble and administer the government in person, can admit of no cure for the mischiefs of faction.  A common passion or interest will, in almost every case, be felt by a majority of the whole . . . and there is nothing to check the inducements to sacrifice the weaker party or an obnoxious individual.  Hence it is that such democracies have ever been spectacles of turbulence and contention; have ever been found incompatible with personal security or the rights of property; and have in general been as short in their lives as they have been violent in their deaths.  Theoretic politicians, who have patronized this species of government, have erroneously supposed that by reducing mankind to a perfect equality in their political rights, they would at the same time be perfectly equalized and assimilated in their possessions, their opinions, and their passions.”

Now, if these “occupiers” really do represent 99% of the population, they can have the pure democracy they seek; all they have to do is follow the Article V amendment process and abolish both houses of Congress (I must confess that, in my darker moments, I have a certain sympathy for that, although I don’t really advocate it in real life for obvious reasons) in favor of national popular rule.  My guess is the vast majority of them have never actually read the Constitution, so they don’t know Article V is there, nor do they much care at the end of the day.  Whether they know about it or not, they have no intention of using the methods provided in the Constitution for changing the system, because they don’t have the numbers or the patience for either.

The occupation movement appears to be raging against the very mechanism the Founders set up to protect the private property rights of the minority from the whims and plunder of the majority.  Make no mistake, these people aren’t looking to elect a dove and end a war.  They want your private property.  All of it.  They think they’re entitled to it, that the world owes it to them, and they’re becoming increasingly aggressive in their moves to take it. 

This isn’t 1969 Chicago. 

It’s 1917 St. Petersburg.

Monday, October 10, 2011

A Little Question For The “Occupying” Forces



Welcome to the jungle, it gets worse here every day
You learn to live like an animal in the jungle where we play
If you got a hunger for what you see, you’ll take it eventually
You can have anything you want, but you better not take it from me.
—Guns N’ Roses, Welcome to the Jungle


Look, it was fun for awhile.  But this isn’t 1967, the Grateful Dead is basically retired, and life in the free love Haight-Ashbury ultimately turned out to be a dirty, dangerous, bummer of a trip.  So to save us all some time and cut to the chase, I have a question for all you out there “occupying” Wall Street and other places: 

What is it that you want, and more to the point, who do you expect is going to pay for it?

Free college, you say?  As I reported a couple of weeks ago, according to a 2007 study by the Center on Philanthropy at Indiana University, over 70% of households earning $200,000 or more gave money to educational institutions in 2005.  Those households contributed approximately $42 billion that year, constituting over 90% of total household giving to educational purposes. That new science lab on campus—probably built with a donation from a rich person (that’s why they tend to have names like the Herman Munster Chemistry Hall). 


How much more, exactly, do you expect them to give you?

Free health care?  Over 70% of households earning $200,000 or more gave money to healthcare charities in 2005.  Those households contributed $17.8 billion that year, constituting approximately 80% of all household giving to healthcare institutions.  That hospital up the block—probably built with a donation from a rich person.  


How much more, exactly, do you expect them to give you?

You want an end to “corporate greed?”  According to a 2010 survey by The Chronicle of Philanthropy, the top 25 corporate charitable cash donors alone gave away $2.9 billion in 2009.  That list includes giant banks like Bank of America (#2— $209,000,000), Wells Fargo (#3— $202,000,000), J.P. Morgan Chase (#11— $104,000,000), and Citigroup (#12— $94,000,000).  It includes Wall Street securities firms such as Goldman Sachs (#19— $69,000,000) and Morgan Stanley (#22— $61,000,000).  It includes the three largest domestic oil companies, Exxon (#5— $187,000,000), Chevron (#7— $145,000,000), and ConocoPhillips (#13— $80,000,000).  The top 50 corporate cash donors gave away $3.8 billion.  This expanded group includes insurance companies like UnitedHealth Group (#31— $46,000,000), Prudential (#41— $28,000,000), Nationwide Mutual (#42— $28,000,000), Allstate (#44— $25,000,000), and State Farm (#50— $21,000,000).  These fourteen representatives from the industries you most love to hate—banking, stocks, oil & gas, and insurance—by themselves gave away over 1.3 billion dollars in 2009 alone.

How much more, exactly, do you expect them to give you?

But, you say, they make sooo much profit.  Well, yes, they make profits.  But recall that that’s what they’re there for.  A corporation’s sole reason for existence in the first place is to generate profits for its shareholders.  Without a profit incentive, no one would invest their money in a business, and the corporation wouldn’t exist.  And there’s that pesky thing about jobs.  Jobs, jobs, jobs. You and Obama say you want jobs.  Well, my friends, unless you work for the government, corporations are where the jobs are.  The same fourteen corporations discussed above employ over 1.6 million people between them.  Why?  Because they need those employees to produce the product or provide the service they sell—once again—for profit.  If there are no profits, the corporations won’t make the widget or perform the task, and thus have no need for employees.  No profits, no jobs.

People, not profits.

You want to help people?  Profit motive is what built this country.  Without profits and the corporations they spawn, your life would be unrecognizable.
  •  Like your iPad?  That would be made by Apple, which Steve Jobs would never have started without the possibility of making a profit.
  • Do you read at night?  Unless you have a permanent bonfire—careful about your carbon emissions with that—you’ll be needing electric light, which traces itself to Thomas Edison and General Electric, which, again, wouldn’t exist without the possibility of making a profit.
  • How are you getting together with your friends?  Well, if it’s by cell phone, I assume you’ll be thanking Alexander Graham Bell, who would never have pioneered telecommunications and created what became AT&T without the possibility of making a profit.
  • On the Pill?  That was developed by Searle & Co.  Do you or someone you love take Lipitor to help deal with high cholesterol?  It was invented by Pfizer.  How about Nexium for acid reflux?  Invented by AstraZeneca.  Maybe Allegra?  Invented by Sepracor and now sold by Sanofi-Aventis.  Or what about Maraviroc as part of a cocktail for HIV treatment?  Pfizer again.  None of these drugs would exist without these corporations created for the purpose of making a profit.
  • Are those Birkenstocks on your feet, and a Red Bull in your hand?  Is that a pack of Marlboros in your bag?

Puhleez.

Maybe you can get your weed from a non-profit organic collective—somehow I doubt it—but virtually everything else about your modern existence is made possible by corporations that do what they do for profit, and that wouldn’t exist otherwise.  And the truth is unless you live in a twig hut in a National Park and sew your clothes out of fabric you've woven from your own hair, you seem to be perfectly comfortable reaping the benefits of what corporate profiteering has wrought. 

One begins to suspect that your problem—to the extent you can articulate it at all (I guess now we know what it is “community organizers” actually do)—isn’t really with corporations, or profit.  It’s that you want it all, but you don’t want to pay for it.  You’ve spent your entire life with Mom & Dad providing for everything, and you can’t handle being an adult on your own.  Mostly, it’s that you see someone else has something you want, but you have no interest in applying yourself as they did and doing the work to earn it.

My advice to you:  get a haircut, take a shower, and put on a belt.

Friday, October 7, 2011

When Did We Declare War On Bank Of America?



Lucas:       Your mission is to proceed up the Nung River in a Navy patrol boat.  Pick up Colonel Kurtz’ path at Nu Mung Ba, follow it and learn what you can along the way.  When you find the Colonel, infiltrate his team by whatever means available and terminate the Colonel’s command.
Willard:    Terminate the Colonel?
Corman:   He’s out there operating without any decent restraint, totally beyond the pale of any acceptable human conduct.  And he is still in the field commanding troops.
Civilian:    Terminate . . . with extreme prejudice.
—Harrison Ford as Colonel Lucas, Martin Sheen as Captain Benjamin L. Willard, G.D. Spradlin as General Corman, and Jerry Ziesmer as the Civilian in Apocalypse Now           



I’m confused.

I thought we were in an economic crisis in which everyone’s highest priority was supposed to be getting 14.5 million unemployed Americans back to work.  In fact, I seem to recall someone in a position of authority constantly demanding that Congress put Obama’s $447 billion “jobs” bill—read: Son of Stimulus—up for a vote now (never mind, of course, that it’s Senate Majority Leader Harry Reid (D-NV) blocking a Republican proposal to do just that in the Senate).

You should pass it right away.

As if the point needs emphasizing, Senate Democrats have been in front of the cameras, repeatedly reminding us that it’s got to be all about jobs, jobs, jobs.  Senate Majority Whip Richard Durbin (D-IL) told CNBC September 22:

“We can’t just stand back and allow these jobs to continue to be lost in America.  We have to create jobs.  We have to create a climate for economic growth.” 

Senator Brad Miller (D-NC) told MSNBC less than a month ago:

“What Americans want is for jobs to be the top priority.” 

Oh, really.

Flashback to 2008, when I thought we were in an environment in the United States where certain institutions—like the larger banks—were deemed “too big to fail.”  So we had the TARP bailout program (for which Durbin, then-Representative Miller, and then-Senator Barack Obama all voted “Yea”) that included some $45 billion in assistance to Bank of America.

My, how things have changed.

Fast-forward to Tuesday, where we had Senator Durbin urging Americans to pull their money out and stop doing business with Bank of America altogether (I guess it’s a good thing BOA has already paid back the bailout money).  Somewhere along the way BOA went from “too big to fail” to having the #2 ranking member of the Senate advocating it be chloroformed.  I have no way to verify that this kind of an attack is unprecedented, but I certainly don’t recall a Senator ever taking to the floor of the Senate to actively pursue the extermination of an American business (in this case, it’s only a business that traces its history back to 1784).   

Covering Durbin’s flank was Senator Miller, introducing a bill to bar banks from charging exit fees on people taking Durbin up on his challenge and closing their accounts.  According to Miller:

“As megabanks flirt with menus of new fees, an increasing number of Americans will want to switch banks.  That is the way things work in a competitive free market, as unrepentant banks are still trying to rake in vulgar profits.”

Vulgar profits?

I know that Bank of America is only headquartered in Miller’s home state of North Carolina, but perhaps he’s missed out on recent news.  BOA reported a net loss in 2010 of $2.2 billion.  Its profits for the first quarter of this year missed projections and were off 36% from the first quarter of 2010.  It posted a net loss of $3.1 billion in the second quarter of this year, and its revenues dropped 54% versus the same period last year.  In August, BOA had to be propped up with a $5 billion cash infusion from Warren Buffett.  It is now in the process of laying off as many as 40,000 employees, a figure cited as a major contributing factor in last month showing the highest planned layoffs since April 2009.

I guess if you’re in better shape than Solyndra, that counts as “vulgar” profits in Miller’s world.

At issue is a Durbin-sponsored amendment to the Dodd-Frank bill capping the transaction charges (so-called “swipe fees”) banks and credit card companies charge retailers every time their card is used.  Despite the universal market acceptance of these fees, Durbin in his infinite wisdom decided they were too high and needed to be capped through force of federal regulation by the Federal Reserve.  As enacted by the Fed, the Durbin Amendment, which takes effect this month, caps those transaction fees at a maximum of 24 cents each.  It is estimated that the cap will reduce bank revenues by nearly $10 billion annually.

Predictably, banks like Bank of America have responded by shifting that cost to their customers through a $5 monthly usage fee.  This is exactly what they and everyone else told Durbin would happen when he was pushing his amendment.  But no matter, we must regulate, regulate, regulate, and damn the consequences.

The irony here is that BOA’s situation and the monthly fee that prompted Durbin to call for a nationwide boycott are the result of policies and regulations imposed by the Left, including Durbin himself.  As I’ve discussed here and here, the problems in the banking industry that led to the TARP bailout and ultimately the overreaching oversight of Dodd-Frank were caused by regulations compelling banks like BOA to make high-risk home loans to people who wouldn’t have qualified under normal risk-assessment protocols.  And with the Left having regulated banks onto fiscal thin ice, Durbin himself handed them an anvil by artificially capping the fees they can charge, rather than allowing the market to determine the economically efficient distribution of capital.

So what we have is a situation created by Leftist regulation in the first instance, made worse by additional regulation, and then we have one of the authors of the very regulation causing the immediate problem going on the attack when BOA tries to defend itself.

In this time of desperate need to focus on creating (or at least saving) jobs, the disconnect with the actions of people like Durbin and Miller is deafening.  BOA presently employs approximately 280,000 people.  Here we have a major employer of people struggling, and Durbin and Miller are basically holding a pillow over its face.

This is how we focus on creating jobs?

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Editor's Note:  I understand some of you have been having trouble posting comments.  Try changing your internet browser to Google Chrome (free download at Google's home page) and see if that solves it.

RDW