If Not Now, When?

I read an editorial recently about the incoming administration’s plans to raise gasoline taxes. The editorial contained a caveat that went something like, “of course, the middle of a recession is not the best time to do this…”. Hmm, interesting. Well if increasing the tax rate on an essential commodity is detrimental now (i.e. during tough economic times), when is it a good idea? In other words, what level of prosperity makes it okay to confiscate more of our money?

Forgive the digression, but similar comments have been made about Obama’s plan to cut middle class income taxes. People are asking if this campaign promise will be tabled as well. Why? Well you see, the middle class tax cuts come at a cost to the government (i.e. lower tax revenue – this could be argued, but that’s not the point). That cost would presumably be paid by increasing the tax burden on the rich. Speaking on behalf of Obama’s administration, David Axelrod addressed part 2 of the tax cut, increasing taxes on the rich. On Sunday December 28th’s Meet the Press, he said "the question is on the Bush tax cuts for the very wealthiest Americans and it's something that we plainly can't afford moving forward. And whether it expires or whether we repeal it a little bit early we'll determine later, but it's going to go. It has to go." In other words, they want to cut taxes for the middle class, but they’re not willing to increase taxes on the rich – at least not yet. Huh? Excuse me? Does anyone else see the admission here? Axelrod is implying (though reluctantly) that increasing taxes on the rich will hurt the economy. Duh! Of course it will. I’ve never worked for a poor person, thank you very much. Additionally, he’s implying that the Obama administration does not have a problem with increasing the federal deficit (like the Bush Administration). Anyway, my point was to illustrate the prevalence of this position - tax hikes don’t seem to be a good idea, at least not when you want to grow an economy!

Okay, so let’s get back to gasoline taxes. If in the next 100 days, the White House press secretary utters a single word about higher energy taxes “when things get better”, I’m going to throw up. A logical follow up question would be, “what GDP numbers would make this move palatable?” Of course, the White House press corps will not ask that question.

Mark my words; this will be a matter of discussion in the Obama White House. Recall that in the summer of 2008, Obama’s issue with high gas prices was not how high they were, but in how quickly the prices rose. There is a liberal left ideology which seeks to curb energy consumption and/or drive consumers to certain technologies through higher fuel prices. To what extent President Elect Obama will adopt this ideology is yet to be seen. The answer will have more to do with where the blame for higher prices can be assigned than anything else. Joe Biden will not have the guts to ask all Americans to “be patriotic” and pay higher gas taxes.

Let get down to simple logic folks: if one states that we wait to levy higher taxes because of a poor economy, one must be prepared to define an economic threshold (or set of circumstances) under which said taxes can or should be levied. This will not happen, folks. They will never define the threshold. Doing so would lead to a simpler question: if said tax increase prolong or exacerbate the malaise of a bad economy, wouldn’t it erode or slow a good economy?

So that’s my question, Mr. Axelrod. Please ask President Elect Obama for me when you get a chance… If not now, when?

How Bad Is the Economy?

It’s been the media’s number one topic - the US economy. Network anchors pronounce, "The economic crisis, the worst we’ve seen since The Great Depression". Really? Is it really that bad?

Now before I continue, let me state the politically correct disclaimer - I know people are suffering out there. There are millions of unemployed Americans. Some families are close to losing their homes. Others have already lost their homes. More go to bed hungry and don’t know where tomorrow’s bread and milk will come from. I know that this is a matter of fact because I know some of them. So... having said that, how pervasive is the misery? This is the question at hand.

This question presented itself to me recently, though in a slightly different format. In its first incarnation, 'To what degree are our spending habits influenced by media reports of the economic crisis?' I first considered this in October, 2008 when a colleague told me he is canceling a New Year's Eve trip to New York City, "...because of the bad economy... it makes sense to save since I don't know what's around the corner". The statement was interesting on many levels. First of all, isn't it a good idea to have rainy day money no matter what the economic condition? Second, I was talking to a gainfully employed young professional, not in eminent danger of losing his job, his home, his car, or even his weekend beer money - yet his behavior was apparently influenced by reports of doom and gloom. So we have the veritable chicken and the egg question: which came first, the apparent lull in consumer spending, or the reports of its inevitability?

I’m not an economist. I frankly know very little about macroeconomics and the principles that drive consumer spending and a nation’s overall productivity. But what I do know is that there are sources of meaningful and objective information out there. So I spent a few minutes and visited a few websites:

The US Department of Labor – Bureau of Labor Statistics

The US Department of Commerce – Bureau of Economic Analysis

Between these sites (and a few definitions on wikipedia), I was able to gather some statistics on a few economic indicators. Before I started, I told myself, “Whatever you get is what you get… no selective exclusion of data”. Here’s what I gathered.


The Unemployment Rate - not even close to the worst since The Great Depression. I counted at least 7 other peaks of around 7% or more. The highest rate was in 1980 shortly after Reagan got elected (Carter legacy I suppose :)

 

Consumer Price Index - this is a measure of, for example, how much a typical bag of groceries cost today versus a month ago. CPI was down in October, 2008. It was as low then as it was in May of 2008 (my guess is that gas prices influenced the summer highs in CPI). The CPI was virtually unchanged in September (as compared to August). If the unadjusted price of things we need is going down, what does that mean for Main Street? To me, it suggests the buying power of a dollar now is as strong as it was this summer. Granted, this is not a long term historical comparison, but I doubt that inflation adjusted numbers would suggest that milk is as expensive as it's ever been.

Gross Domestic Product (GDP) - the total value of what Americans produced over a given period of time. GDP is closely tied to terms like economic growth, recession, and depression. On December 1, 2008, I read an article on cnn.com that stated something like, “some people erroneously think that a recession is defined by 2 consecutive quarters of GDP decline…”. The article went on to state that a private research organization has deemed that "the U.S. is officially in a recession, and has been in one since December, 2007". What was missing to me was the definition of recession that these guys actually used. It occurs to me that if one defines growth or recession on one’s own terms, one can be in any economic condition desired!

Having said that, the U.S. quarterly GDP has been up 27 of the last 31 quarters going back to the beginning of 2001 (source – U.S. Bureau of Economic Analysis website). Over that period, it was down in Bush's 1st quarter in office, the 9/11 quarter, the 4th quarter 2007, and the 3rd quarter 2008 (by the way, all nonconsecutive quarters).

So here, I’ve presented a few statistics from some leading economic indicators. All of these data demonstrate (to me at least) that we are certainly not in the worst economy since the 1930’s. So is the media coverage of this crisis related to:

a) Ratings
b) An unpopular President in the White House
c) I’m way off – the sky is indeed falling
d) Something else I’ve missed

Finally, I noticed something while watching football on Thanksgiving… a sold out arena Detroit, Michigan, smack dab in the middle of a state hit very hard by the current crisis. Is a holiday football outing still considered discretionary income?

A Capital Idea

What happened to the idea that capital economies drive innovation? And that these economies are driven primarily by consumer choice?

In 2012, go to your local hardware store to buy a standard incandescent light bulb. You won’t find a single one. The rule of law (passed by congress and signed by Bush in 2007) will dictate you buy one of those new-fangled spiral fluorescents. What’s wrong with that, you ask? Among other things:

• Less consumer choice (my #1 beef)
• The light is poorer in quality - as an amateur photographer, I hate the tone they give to people
• They don’t work with dimmers
• They contain mercury, and they can break – I have a daughter. The less of that stuff in my home, the better

That’s just the tip of the iceberg…

The intention of this law is energy conservation. In my opinion, it will backfire. In the long run, the good capitalists that make our light bulbs will have less capital pressure to innovate. Allow me to explain.

Which of the following options do you think would benefit consumers, and for that matter, the planet?

• The government tells you that there is not a choice. You have to buy a more expensive, poorer quality product
• You and the rest of the market place decide which light bulb manufacturers produce

By the latter, I mean allowing consumers to vote with their wallets. The buying public is ecologically conscious - there is a pot of gold at the end of the rainbow for the company that creates a better product for less (not an inferior one that costs more). With government intervention, there is no incentive to create green value. In fact, the manufacturers now have another “green” reason NOT to innovate!

This kind of green governance generally serves to stifle innovation and progress. It’s done with the best of intentions, and it feels good. In the long run, we all suffer.

If you’re not buying (or following) my argument, consider the Compact disc. Introduced to the public in the early 1980’s, it did not supplant the analog cassette until the early 1990’s. Why? Because it was not a practical alternative. CDs were double the cost of cassettes, and CD players were prohibitively expensive. Now how long do you think it would have taken for the cost of manufacturing CDs and their players to come down if Reagan signed a law banning analog cassettes in say, 1985? More than a decade, that’s for sure!

The government is assuming you’re too stupid to drive green commerce. They think that they can do a better job. If not for the government, you’d be using “bad for the planet light bulbs” through 2050. Since you’re incapable of exerting capital pressure on the manufacturers to create a better product, they come to our rescue.

So tell your friends - capitalism and environmentalism are not necessarily antagonists. Remember that consumers drive consumption, and the capitalists will make what we tell them to make!

Green Consumption

A few weeks ago, I went to a local shopping mall to buy a few items. Now I’m not the shopping type – I like to get in and out of there as fast as possible. Accordingly, I was looking for a parking space as close to the entrance as possible. And then I saw them - next to the handicapped and expectant mother spaces. Hybrid Parking Only. My God! What’s this about?

Once I got beyond the irony of “green parking” at a shopping mall (a pantheon of capitalism and consumption), I wondered what it was about those dedicated spaces that that bothered me so much. It took me a while to figure it out.

It’s politically correct to go green. As individuals, it’s been en vogue for years. Today, your company better get on the bandwagon, or else. If you’re not eco-friendly, or at least appearing to be, you’re greedy. You’re mean. You’re wasteful. It does not matter what you’re actually doing, you just have to appear “green”. Eco-friendly parking is to a shopping mall, as a Toyota Prius is to an upper class tree hugger living in a 5000 square foot home.

One of these days I’ll get into an explanation of how environmentalism was hijacked by the left. For now, let’s just agree that environmentalism is very important to corporate America. I can’t get passed the irony of that statement.

A Community Service Requirement?

From President-Elect Obama's very own change.gov website:

"Obama will call on citizens of all ages to serve America, by developing a plan to require 50 hours of community service in middle school and high school and 100 hours of community service in college every year."

If a community service requirement is not what they meant, I'd really like to get an explanation. You see, we have something called the 13th amendment which prohibits this sort of thing:

"Neither slavery nor involuntary servitude, except as a punishment for crime whereof the party shall have been duly convicted, shall exist within the United States, or any place subject to their jurisdiction."

Does anyone else see a problem here?

If you know me, you'll know that I am not a fan of President, George W. Bush. But this is one area that he actually understood. I refer you to the following link: http://www.presidentialserviceawards.gov/tg/pvsainfo/dspAboutAwards.cfm. You see, "voluntary" is a key part of community service. Americans give more of their time in voluntary service than any other people on earth. Why all of a sudden is this type of service required?

Top Ten Predictions for Obama’s First Term

What a day! November 4, 2008. I’ll never forget where I was, and what I was doing when the networks made the call – “Barack Obama is President elect”! This one is firmly on the Mount Rushmore of great dates in American history – an African-American has been elected President of the United States.

So here we are, not quite sober from the high of the moment. As reality sets in, we begin to realize that on January 20, 2009, the real work begins. For me, this is where the milestone-induced euphoria ends, and where the concern over antipodal ideologies begins.

So to kick off this blog, I’d like to provide my Top Ten Predictions for Obama’s first term. It’ll be cool to look back at this in 4 years to see how accurate (or inaccurate) the list was. For some of the items on my list, I hope (for the sake of this country) that I am wrong.

10. The Hip House
The coolness factor of the White House will go way, way up! This will be good for young Americans… I hope that their ability to relate will mean more of them pay attention (Once you reach your late 30's, the term "young people" moves to third person plural :)

9. The dis-armed forces
This one’s a slam dunk. Less spending on defense and a smaller overall force is inevitable. ‘nough said.

8. Baby love
Government provided health care will be a reality - if not for all, at least for children. So get ready for the claims that “Republicans hate babies”, when they vote “No” to the first entry level socialized health care bill.

7. America! What a country!
Anyone that doesn't see this one coming is dreaming. Deserved or not, Bush 43 was an unpopular President, probably more so overseas than here at home. The election of Barack Obama to the highest office in the land will improve our international repute.

6. Roe v. Wade through 2040
If there’s one thing I will avoid discussing on this blog, it’s abortion. Some people on both sides are far too passionate to engage in logical dialogue. By the way, my position is irrelevant. One thing’s for sure – Obama will present Congress with Supreme Court candidates that agree with him. They will be young, and they will be liberal. It will take at least 8 presidential election cycles to get back to a 5/4 split in the top court.

5. Yo, bra’ Man! No More Excuses!
This is not as much a prediction as it is a directive. Brothers and sisters have a lot less room to blame “the man” for failure. After all, the man is your brother! The irony here is thick... Obama actually will seek to provide economic justice.

4. Same deal, different century
The New Deal mind set will make a strong comeback. Our collective ideological pendulum will violate Newton’s third law, and swing wildly to the left. Americans will come to expect more from Government, particularly the federal government. This one’s kind of hard to quantify, but let’s take an inventory of what “rights” people think we should have – now, and again in 2012.

3. Will work for food (stamps)
Man, do I hope I’m wrong on this one. Higher corporate taxes will stifle corporate investment. Businesses will adopt a “lights on” operations model to get through the long economic winter.

2. Kilo-what!
Your overall expenditure on energy will go up (e.g. your price per kilowatt-hour). It will go up for you, for me, and for the nation as a whole. Obama’s position on coal as an energy source will save the planet, but kick you square in your right butt cheek.

1. The check is in the mail
Our national debt will sky rocket. In Obama’s defense, McCain wouldn't have balanced the federal budget either. Having said that, if you think Bush 43 spent your money like a drunken sailor, you ain’t seen nothin’ yet!

I'll elaborate more on these items in the coming weeks. For now, take this in and hope right along with me that I'm way off target.

Congratulations, President Elect Obama!

Well, I lost a bet. I promised a friend that if McCain lost the 2008 election, I'd start a blog... a blog intended to carry the torch for small government, low taxes, free markets, a strong defense, etc. Well here it is!

Before I get this train rolling, let me say congratulations to my brother from the lake! Barack Obama! You're the 44th President of the United States of America! What an accomplishment. This is indeed a historic day!

Okay. That's it. My first post. More later!