September 30, 2010

The Rest of the Story

From the Last Embassy blog:

Does this sound familiar?

"But the problem that plagues the health care system is not just a problem for the uninsured. Those who do have insurance have never had less security and stability than they do today. More and more Americans worry that if you move, lose your job, or change your job, you'll lose your health insurance too. More and more Americans pay their premiums, only to discover that their insurance company has dropped their coverage when they get sick, or won't pay the full cost of care. It happens every day." -Barack Obama September 9, 2009 
Painting a picture

Lets paint that picture onto a canvass. John Q. Public has a health insurance plan through ABC insurance company. John has paid his premium for years. Suddenly John has a kidney stone. John enters treatment and about half way through treatment John is booted off his health insurance because he is "sick". Sounds rather sinister.

The practice of insurers dropping coverage is actually known as "rescissions". Recissions is an underwriting review process based on insurers sometimes reviewing an individual's initial application and cancelling the policy if the application is found inaccurate.

How widespread?
Exactly how widespread is this "rescissions" process? One hundred thousand rescissions per year? Half a million rescissions per year? If you no longer have to worry about losing your health insurance because you are sick, and this is a major talking point regardingObamaCare, then the phenomena has to be affecting a major portion of the population. Right?

Wrong. Sorry, its yet another ObamaCare riddle.

"According to a congressional report, there were actually fewer than 5,000 recissions per year, and at least some of those were actual cases of fraud....". 

Hence the talking point of "losing your health care when you are sick" is really the subject of less than 5,000 annual recissions based on inaccurate applications "and at least some of those were actual cases of fraud..".

If Paul Harvey was here, you know exactly what he would say.

September 29, 2010

How Free are our "Free Markets"?

Something to keep in mind:

Most Americans think of the U.S. as a free-trade country with open markets, and countries like China and Japan as protectionist countries with closed markets. And yet the U.S. is quite protectionist, when we consider that there are more than 12,000 tariffs (i.e. taxes) on imported products that are sometimes as high as 350% in the case of tobacco; 164% on peanuts; 100% on jam, chocolate and ham; and 48% on sneakers.

Sign of the Times

Where Our Money is Being Spent


September 24, 2010

What Happened to the American Socialist Party?

As you will see below, when you have the kind of success The Socialist Party of America has had in achieving its Platform since 1928, I guess there really isn't a need to exist anymore.
Socialist Party of America, Platform of 1928 
checkmark_red_yellow1. "Nationalization of our natural resources, beginning with the coal mines and water sites, particularly at Boulder Dam and Muscle Shoals."
checkmark_red_yellow2. "A publicly owned giant power system under which the federal government shall cooperate with the states and municipalities in the distribution of electrical energy to the people at cost."
checkmark_red_yellow3. "National ownership and democratic management of railroads and other means of transportation and communication."
checkmark_red_yellow4. "An adequate national program for flood control, flood relief, reforestation, irrigation, and reclamation."
checkmark_red_yellow5. "Immediate government relief of the unemployed by the extension of all public works and a program of long range planning of public works ... All persons thus employed to be engaged at hours and wages fixed by bona-fide labor unions."
checkmark_red_yellow6. "Loans to states and municipalities without interest for the purpose of carrying on public works and the taking of such other measures as will lessen widespread misery."
checkmark_red_yellow7. "A system of unemployment insurance."
checkmark_red_yellow8. "The nation-wide extension of public employment agencies in cooperation with city federations of labor."
checkmark_red_yellow9. "A system of health and accident insurance and of old age pensions as well as unemployment insurance."
checkmark_red_yellow10. "Shortening the workday" and "Securing to every worker a rest period of no less than two days in each week."
checkmark_red_yellow11. "Enacting of an adequate federal anti-child labor amendment."
checkmark_red_yellow12. "Abolition of the brutal exploitation of convicts under the contract system and substitution of a cooperative organization of industries in penitentiaries and workshops for the benefit of convicts and their dependents."
checkmark_red_yellow13. "Increase of taxation on high income levels, of corporation taxes and inheritance taxes, the proceeds to be used for old age pensions and other forms of social insurance."
checkmark_red_yellow_BLANK14. "Appropriation by taxation of the annual rental value of all land held for speculation."

September 23, 2010

Gotta Love Senator Coburn

From Senator Tom Coburn:

Did you know that nearly 100,000 civilian Federal employees owe back taxes totaling $962 million? 

Or that Congressional staff were delinquent on their taxes to the tune of $9.3 million last year? 

In other words, the two entities responsible for writing tax law, collecting your taxes, and spending it are failing to live by the same rules. 

This past week, I introduced two bills aimed at correcting this situation. 

S. 3790 will bar Federal employees who are seriously delinquent on their taxes from further Federal employment. Exceptions will be made for those who have agreed to payment plans or who are still pursuing their due process rights. 

S. 3791 will require members of Congress to disclose any unpaid taxes, face an ethics inquiry and garnishment of their wages. I believe that voters have a right to know if their federal legislators are failing to pay their fair share in taxes. 

No one should be above the law, especially those responsible for making and enforcing it on our behalf. Our leaders have an obligation to lead by example, and at a very minimum, they must be held to the same standards enforced on their fellow citizens. I am hopeful that S. 3790 and S. 3791 will get us one step closer to that goal. 

September 22, 2010

What I Have Learned from Sherlock Holmes

I am almost finished with the Complete Works of Sherlock Holmes, and I wanted to list the top ten things I have learned so far from the famous sleuth:

1) In the words of Mr. Holmes: "I never guess. It is a shocking habit — destructive to the logical faculty." Mr. Holmes also stated that "It is a capital mistake to theorize before one has data. Insensibly one begins to twist facts to suit theories, instead of theories to suit facts." Theorizing without appropriate and accurate data is not only useless but also potentially dangerous.

2) In the words of Mr. Holmes: .".....when you have eliminated the impossible, whatever remains, however improbable, must be the truth."

3) Genius does not come from being conventional. Don't be afraid to think and act outside of the confines of your comfort zone.

4) In the words of Mr. Holmes: "You know my method. It is founded upon the observation of trifles." Mr. Holmes also stated that "It is, of course, a trifle, but there is nothing so important as trifles." There are no such things as insignificant details. There are only less significant details. The more we train ourselves to be curious and observant, the more likely it is we will be successful in our endeavors.

5) In the words of Mr. Holmes: "In solving a problem of this sort, the grand thing is to be able to reason backward." This mirrors the concept Charlie Munger (Warren Buffett's business partner) so often mentions: Invert. Always Invert.

6) To the man with a hammer, every problem looks like a nail. Sherlock Holmes is a man of many talents and curiosities and uses many different disciplines (science, psychology, persuasion, physical strength, etc., etc.) to solve problems.

7) In the words of Mr. Holmes: "Education never ends Watson. It is a series of lessons with the greatest for the last." Never, ever, ever stop learning.

8) Distracting your mind is often the best way to solve a problem. Mr. Holme's greatest insights often came at moments when was doing a random science experiment, taking a walk, playing his violin, or smoking his pipe.

9) Develop odd friendships and learn to be comfortable in any setting. Mr. Holmes was as comfortable in the presence of royalty as he was in the boxing ring with someone trying to knock his block off. Don't be afraid to develop odd friendships with odd individuals.

10) Be just. Sherlock Holmes is not afraid to get his hands a little dirty every now and again, but he never loses sight of justice and righteousness.

When All Else Fails......Pull the Heart Strings

What do you do when the public catches on to the fact that your new Health Care Bill is going to do nothing but raise our health care costs and taxes and ultimately reduce the level of the care we receive? You tell tear-jerking stories like this (see below) and do everything you can to keep people focused on emotions and not facts.

I certainly believe we as citizens have a responsibility to care for those who cannot care for themselves. However, I believe we as "citizens", not we as the Federal Government, have a responsibility to care for those who cannot care for themselves.

I do not believe the Federal Government should overhaul and socialize our entire health care industry and possibly put this country into a completely unsustainable situation as far as entitlement spending is concerned so that we can have a few emotional stories to tell.

How much more powerful would the story below be if it read that a concerned group of citizens, church leaders, etc., etc. in the community of Keene, NH banded together to provide for Gail O'Brien's needs.

It is has been said that the bigger the government, the worse the citizen. I think we are seeing that play out every single day in this country:
The White House launched a new website with a link titled "50 States, 50 Stories.’’ He was hosting more than 30 state insurance officials at the White House (including Bay State insurance commissioner Joseph Murphy) and visiting a Virginia family to discuss the legislation.

The effort to show tangible benefits includes a White House-produced web video of a Keene, NH woman – Gail O’Brien – who has non-Hodgkins lymphoma. She lacked insurance when she was diagnosed and said she was denied coverage because she was already sick. But since the law’s passage she has been able to buy coverage through a new pre-existing condition insurance plan established under the law. Obama said she was the first NH resident to sign up for the pre-existing plan.

On the administration’s promotional video, O’Brien receives what the White House describes as a "surprise phone call’’ from the president, who is shown speaking to her from the Oval Office.

"If it wasn’t for you, I probably wouldn’t be here right now,’’ O’Brien tells the president, from the dining room of her bungalow. The president replies: "You’re the poster child for why this is so necessary and why we’re so proud of the reforms we initiated.’’


This entire piece from journalist Charlie Reese should be required reading for all Americans:

545 PEOPLE--By Charlie Reese

Politicians are the only people in the world who create problems and then campaign against them..

Have you ever wondered, if both the Democrats and the Republicans are against deficits, WHY do we have deficits?

Have you ever wondered, if all the politicians are against inflation and high taxes, WHY do we have inflation and high taxes?

You and I don't propose a federal budget. The president does.

You and I don't have the Constitutional authority to vote on appropriations. The House of Representatives does.

You and I don't write the tax code, Congress does.

You and I don't set fiscal policy, Congress does.

You and I don't control monetary policy, the Federal Reserve Bank does.

One hundred senators, 435 congressmen, one president, and nine Supreme Court justices equates to 545 human beings out of the 300 million are directly, legally, morally, and individually responsible for the domestic problems that plague this country.

I excluded the members of the Federal Reserve Board because that problem was created by the Congress. In 1913, Congress delegated its Constitutional duty to provide a sound currency to a federally chartered, but private, central bank.

I excluded all the special interests and lobbyists for a sound reason. They have no legal authority. They have no ability to coerce a senator, a congressman, or a president to do one cotton-picking thing. I don't care if they offer a politician $1 million dollars in cash. The politician has the power to accept or reject it. No matter what the lobbyist promises, it is the legislator's responsibility to determine how he votes.

Those 545 human beings spend much of their energy convincing you that what they did is not their fault. They cooperate in this common con regardless of party.

What separates a politician from a normal human being is an excessive amount of gall. No normal human being would have the gall of a Speaker, who stood up and criticized the President for creating deficits..... The president can only propose a budget. He cannot force the Congress to accept it.

The Constitution, which is the supreme law of the land, gives sole responsibility to the House of Representatives for originating and approving appropriations and taxes. Who is the speaker of the House? Nancy Pelosi. She is the leader of the majority party. She and fellow House members, not the president, can approve any budget they want. If the president vetoes it, they can pass it over his veto if they agree to.

It seems inconceivable to me that a nation of 300 million cannot replace 545 people who stand convicted -- by present facts -- of incompetence and irresponsibility. I can't think of a single domestic problem that is not traceable directly to those 545 people. When you fully grasp the plain truth that 545 people exercise the power of the federal government, then it must follow that what exists is what they want to exist.

If the tax code is unfair, it's because they want it unfair.

If the budget is in the red, it's because they want it in the red ..

If the Army & Marines are in IRAQ , it's because they want them in IRAQ

If they do not receive social security but are on an elite retirement plan not available to the people, it's because they want it that way.

There are no insoluble government problems.

Do not let these 545 people shift the blame to bureaucrats, whom they hire and whose jobs they can abolish; to lobbyists, whose gifts and advice they can reject; to regulators, to whom they give the power to regulate and from whom they can take this power. Above all, do not let them con you into the belief that there exists disembodied mystical forces like "the economy," "inflation," or "politics" that prevent them from doing what they take an oath to do.

Those 545 people, and they alone, are responsible.

They, and they alone, have the power..

They, and they alone, should be held accountable by the people who are their bosses.

Provided the voters have the gumption to manage their own employees...

We should vote all of them out of office and clean up their mess!

September 19, 2010

$111 Million for 55 Jobs

A recent audit has discovered that the City of Los Angeles has received $111,000,000 from the American Recovery and Reinvestment (aka our tax dollars) and created or retained 55 jobs.

It's always refreshing to see our tax dollars being used so efficiently.

Go West!

An extremely interesting chart on the mean center of the population in the United States from 1790 to 2000:

September 15, 2010

The Consequences of Really Bad Legislation

From Senator Tom Coburn:

Buried deep within the new health care law, you will find “Section 9006. EXPANSION OF INFORMATION REPORTING REQUIREMENTS.”

That innocent sounding language, easily lost in the details of the massive bill, represents a major and costly change for America’s small businesses. And it is a job killer. In short, it will require business to issue a 1099 form for any purchase of goods and services over $600 from any single individual or corporation during the year.

CNN gives this example:

“..under the new rules, if a freelance designer buys a new iMac from the Apple Store, they'll have to send Apple a 1099. A laundromat that buys soap each week from a local distributor will have to send the supplier a 1099 at the end of the year tallying up their purchases.”

This may be a boon for the IRS, but I can assure you it will be a nightmare for small businesses all across the nation. Unlike the largest corporations who will have the resources to handle the new requirements, costly as they may be, America’s small businesses will again be saddled with expensive, complex new guidelines that will kill new jobs and stifle innovation.

Congress had a chance to rethink its decision this week as it returned from a month’s long recess. Senator Mike Johanns offered an amendment on Tuesday that would have reversed the new mandate, freeing small businesses from the new reporting requirements.

Yet, by a vote of 52-46, Senators rejected the amendment.

This vote underscores the very worst habits of Washington. First, politicians with little or no real world experience are making decisions that will dramatically impact the ability of small businesses to survive. Second, Washington continues to operate as if it needs more of our money, rather than admitting it has a severe spending addiction.

September 14, 2010

An AH-HA Moment

After reading this article from Dinesh Disouza, you will have one of the biggest AH-HA moments regarding our current President.

Please, pretty please read the entire article. Here are the highlights:

Barack Obama is the most antibusiness president in a generation, perhaps in American history. Thanks to him the era of big government is back. Obama runs up taxpayer debt not in the billions but in the trillions. He has expanded the federal government's control over home mortgages, investment banking, health care, autos and energy. The Weekly Standard summarizes Obama's approach as omnipotence at home, impotence abroad.

.......The President continues to push for stimulus even though hundreds of billions of dollars in such funds seem to have done little. The unemployment rate when Obama took office in January 2009 was 7.7%; now it is 9.5%. Yet he wants to spend even more and is determined to foist the entire bill on Americans making $250,000 a year or more. The rich, Obama insists, aren't paying their "fair share." This by itself seems odd given that the top 1% of Americans pay 40% of all federal income taxes; the next 9% of income earners pay another 30%. So the top 10% pays 70% of the taxes; the bottom 40% pays close to nothing. This does indeed seem unfair--to the rich.

Obama's foreign policy is no less strange. He supports a $100 million mosque scheduled to be built near the site where terrorists in the name of Islam brought down the World Trade Center. Obama's rationale, that "our commitment to religious freedom must be unshakable," seems utterly irrelevant to the issue of why the proposed Cordoba House should be constructed at Ground Zero.

Recently the London Times reported that the Obama Administration supported the conditional release of Abdel Baset al-Megrahi, the Lockerbie bomber convicted in connection with the deaths of 270 people, mostly Americans. This was an eye-opener because when Scotland released Megrahi from prison and sent him home to Libya in August 2009, the Obama Administration publicly and appropriately complained. The Times, however, obtained a letter the Obama Administration sent to Scotland a week before the event in which it said that releasing Megrahi on "compassionate grounds" was acceptable as long as he was kept in Scotland and would be "far preferable" to sending him back to Libya. Scottish officials interpreted this to mean that U.S. objections to Megrahi's release were "half-hearted." They released him to his home country, where he lives today as a free man.

One more anomaly: A few months ago NASA Chief Charles Bolden announced that from now on the primary mission of America's space agency would be to improve relations with the Muslim world. Come again? Bolden said he got the word directly from the President. "He wanted me to find a way to reach out to the Muslim world and engage much more with dominantly Muslim nations to help them feel good about their historic contribution to science and math and engineering." Bolden added that the International Space Station was a model for nasa's future, since it was not just a U.S. operation but included the Russians and the Chinese. Obama's redirection of the agency caused consternation among former astronauts like Neil Armstrong and John Glenn, and even among the President's supporters: Most people think of nasa's job as one of landing on the moon and Mars and exploring other faraway destinations. Sure, we are for Islamic self-esteem, but what on earth was Obama up to here?

........Theories abound to explain the President's goals and actions. Critics in the business community--including some Obama voters who now have buyer's remorse--tend to focus on two main themes. The first is that Obama is clueless about business. The second is that Obama is a socialist--not an out-and-out Marxist, but something of a European-style socialist, with a penchant for leveling and government redistribution.

These theories aren't wrong so much as they are inadequate. Even if they could account for Obama's domestic policy, they cannot explain his foreign policy. The real problem with Obama is worse--much worse. But we have been blinded to his real agenda because, across the political spectrum, we all seek to fit him into some version of American history. In the process, we ignore Obama's own history. Here is a man who spent his formative years--the first 17 years of his life--off the American mainland, in Hawaii, Indonesia and Pakistan, with multiple subsequent journeys to Africa.

.......What then is Obama's dream? We don't have to speculate because the President tells us himself in his autobiography, Dreams from My Father. According to Obama, his dream is his father's dream. Notice that his title is not Dreams of My Father but rather Dreams from My Father. Obama isn't writing about his father's dreams; he is writing about the dreams he received from his father.

So who was Barack Obama Sr.? He was a Luo tribesman who grew up in Kenya and studied at Harvard. He was a polygamist who had, over the course of his lifetime, four wives and eight children. One of his sons, Mark Obama, has accused him of abuse and wife-beating. He was also a regular drunk driver who got into numerous accidents, killing a man in one and causing his own legs to be amputated due to injury in another. In 1982 he got drunk at a bar in Nairobi and drove into a tree, killing himself.

An odd choice, certainly, as an inspirational hero. But to his son, the elder Obama represented a great and noble cause, the cause of anticolonialism. Obama Sr. grew up during Africa's struggle to be free of European rule, and he was one of the early generation of Africans chosen to study in America and then to shape his country's future.

I know a great deal about anticolonialism, because I am a native of Mumbai, India. I am part of the first Indian generation to be born after my country's independence from the British. Anticolonialism was the rallying cry of Third World politics for much of the second half of the 20th century. To most Americans, however, anticolonialism is an unfamiliar idea, so let me explain it.

Anticolonialism is the doctrine that rich countries of the West got rich by invading, occupying and looting poor countries of Asia, Africa and South America. As one of Obama's acknowledged intellectual influences, Frantz Fanon, wrote in The Wretched of the Earth, "The well-being and progress of Europe have been built up with the sweat and the dead bodies of Negroes, Arabs, Indians and the yellow races."

.......Obama Sr. was an economist, and in 1965 he published an important article in the East Africa Journal called "Problems Facing Our Socialism." Obama Sr. wasn't a doctrinaire socialist; rather, he saw state appropriation of wealth as a necessary means to achieve the anticolonial objective of taking resources away from the foreign looters and restoring them to the people of Africa. For Obama Sr. this was an issue of national autonomy. "Is it the African who owns this country? If he does, then why should he not control the economic means of growth in this country?"

As he put it, "We need to eliminate power structures that have been built through excessive accumulation so that not only a few individuals shall control a vast magnitude of resources as is the case now." The senior Obama proposed that the state confiscate private land and raise taxes with no upper limit. In fact, he insisted that "theoretically there is nothing that can stop the government from taxing 100% of income so long as the people get benefits from the government commensurate with their income which is taxed."

.........It may seem incredible to suggest that the anticolonial ideology of Barack Obama Sr. is espoused by his son, the President of the United States. That is what I am saying. From a very young age and through his formative years, Obama learned to see America as a force for global domination and destruction. He came to view America's military as an instrument of neocolonial occupation. He adopted his father's position that capitalism and free markets are code words for economic plunder. Obama grew to perceive the rich as an oppressive class, a kind of neocolonial power within America. In his worldview, profits are a measure of how effectively you have ripped off the rest of society, and America's power in the world is a measure of how selfishly it consumes the globe's resources and how ruthlessly it bullies and dominates the rest of the planet.

For Obama, the solutions are simple. He must work to wring the neocolonialism out of America and the West. And here is where our anticolonial understanding of Obama really takes off, because it provides a vital key to explaining not only his major policy actions but also the little details that no other theory can adequately account for.

Why support oil drilling off the coast of Brazil but not in America? Obama believes that the West uses a disproportionate share of the world's energy resources, so he wants neocolonial America to have less and the former colonized countries to have more. More broadly, his proposal for carbon taxes has little to do with whether the planet is getting warmer or colder; it is simply a way to penalize, and therefore reduce, America's carbon consumption. Both as a U.S. Senator and in his speech, as President, to the United Nations, Obama has proposed that the West massively subsidize energy production in the developing world.

Rejecting the socialist formula, Obama has shown no intention to nationalize the investment banks or the health sector. Rather, he seeks to decolonize these institutions, and this means bringing them under the government's leash. That's why Obama retains the right to refuse bailout paybacks--so that he can maintain his control. For Obama, health insurance companies on their own are oppressive racketeers, but once they submitted to federal oversight he was happy to do business with them. He even promised them expanded business as a result of his law forcing every American to buy health insurance.

If Obama shares his father's anticolonial crusade, that would explain why he wants people who are already paying close to 50% of their income in overall taxes to pay even more. The anticolonialist believes that since the rich have prospered at the expense of others, their wealth doesn't really belong to them; therefore whatever can be extracted from them is automatically just. Recall what Obama Sr. said in his 1965 paper: There is no tax rate too high, and even a 100% rate is justified under certain circumstances.

Clearly the anticolonial ideology of Barack Obama Sr. goes a long way to explain the actions and policies of his son in the Oval Office. And we can be doubly sure about his father's influence because those who know Obama well testify to it. His "granny" Sarah Obama (not his real grandmother but one of his grandfather's other wives) told Newsweek, "I look at him and I see all the same things--he has taken everything from his father. The son is realizing everything the father wanted. The dreams of the father are still alive in the son."

In his own writings Obama stresses the centrality of his father not only to his beliefs and values but to his very identity. He calls his memoir "the record of a personal, interior journey--a boy's search for his father and through that search a workable meaning for his life as a black American." And again, "It was into my father's image, the black man, son of Africa, that I'd packed all the attributes I sought in myself." Even though his father was absent for virtually all his life, Obama writes, "My father's voice had nevertheless remained untainted, inspiring, rebuking, granting or withholding approval. You do not work hard enough, Barry. You must help in your people's struggle. Wake up, black man!"

The climax of Obama's narrative is when he goes to Kenya and weeps at his father's grave. It is riveting: "When my tears were finally spent," he writes, "I felt a calmness wash over me. I felt the circle finally close. I realized that who I was, what I cared about, was no longer just a matter of intellect or obligation, no longer a construct of words. I saw that my life in America--the black life, the white life, the sense of abandonment I'd felt as a boy, the frustration and hope I'd witnessed in Chicago--all of it was connected with this small piece of earth an ocean away, connected by more than the accident of a name or the color of my skin. The pain that I felt was my father's pain."

In an eerie conclusion, Obama writes that "I sat at my father's grave and spoke to him through Africa's red soil." In a sense, through the earth itself, he communes with his father and receives his father's spirit. Obama takes on his father's struggle, not by recovering his body but by embracing his cause. He decides that where Obama Sr. failed, he will succeed. Obama Sr.'s hatred of the colonial system becomes Obama Jr.'s hatred; his botched attempt to set the world right defines his son's objective. Through a kind of sacramental rite at the family tomb, the father's struggle becomes the son's birthright.

September 12, 2010

Cost of Government Growth

From John Mauldin's weekly E-Newsletter:

But It's More Than the Deficit

We talked earlier about how increasing government debt crowds out the necessary savings for private investment, which is the real factor in increasing productivity. But there is another part of that equation, and that is the percentage of government spending in relationship to the overall economy. Let's look at some recent analysis by Charles Gave of GaveKal Research.

It seems that bigger government leads to slower growth. The chart below is for France, but the general principle holds across countries. It shows the ratio of the private sector to the public sector and relates it to growth. The correlation is high. (In the book we will show the same graph for other countries.)


That is not to say that the best environment for growth is a 0% government. There is clearly a role for government, but government does cost and that takes money from the productive private sector.

Charles next shows us the ratio of the public sector to the private sector when compared to unemployment (again in France). While there are clearly some periods where there are clear divergences (and those would be even more clear in a US chart), there is a clear correlation over time.

And that makes sense, given our argument that it is the private sector that increases productivity. Government transfer payments do not. You need a vibrant private sector and dynamic small businesses to really see growth in jobs.

And at some point, government spending becomes an anchor on the economy. In an environment where assets (stocks and housing) have shrunk over the last decade and consumers in the US and elsewhere are increasing their savings and reducing debt as retirement looms for an aging Boomer generation, the current policies of stimulus make less and less sense. As Charles argues:

"This is the law of unintended consequences at work: if an individual receives US$100 from the government, and at the same time the value of his portfolio/house falls by US$500, what is the individual likely to do? Spend the US$100 or save it to compensate for the capital loss he has just had to endure and perhaps reduce his consumption even further?

"The only way that one can expect Keynesian policies to break the 'paradox of thrift' is to make the bet that people are foolish, and that they will disregard the deterioration in their balance sheets and simply look at the improvements in their income statements.

"This seems unlikely. Worse yet, even if individuals are foolish enough to disregard their balance sheets, banks surely won't; policies that push asset prices lower are bound to lead to further contractions in bank lending. This is why 'stimulating consumption' in the middle of a balance sheet recession (as Japan has tried to do for two decades) is worse than useless, it is detrimental to a recovery.

"With fragile balance sheets the main issue in most markets today, the last thing OECD governments should want to do is to boost income statements at the expense of balance sheets. This probably explains why, the more the US administration talks about a second stimulus bill, the weaker US retail sales, US housing and the US$ are likely to be. It probably also helps explain why US retail investor confidence today stands at a record low."

This is the fundamental mistake that so many analysts and economists make about today's economic landscape. They assume that the recent recession and aftermath are like all past recessions since WWII. A little Keynesian stimulus and the consumer and business sectors will get back on track. But this is a very different environment. It is the end of the Debt Supercycle. It is Mohammed El-Erian's New Normal.

September 9, 2010

Business Lessons from Boise

The passage below is specifically talking about how and why Boise State's offense is able to be so effective in so many different ways. Beyond football, there are many valuable lessons from Boise on how we can be more effective in our business and how we can attack our competition:


Boise State’s linebacker coach, Jeff Choate, once told me at coaching clinic two years back, “We run plays, we don’t have an offense. It makes it difficult to defend.” At that time he was working with the running backs. Before this project, I wondered how an offense can’t be a system. Coordinators pride themselves on establishing identities: “It’s what we do” is a common mantra among the coaching profession. Urban Meyer at Florida has his spread option, Chip Kelly at Oregon has his QB run game, Steve Sarkasian at Washington has his pro-style offense that he developed at USC. Well, apparently Boise was the Seinfeld of college football — their lack of identity is their identity. Although I may not have understood it then, the method behind this apparent lack of cohesion became much clearer to me after hours of study.

Boise specializes in getting defenses out of position to make plays by utilizing the three major essentials in offensive football: numbers, leverage and grass. “Numbers” means outnumbering the defense at the point of attack — i.e. more blockers than defenders on the edge, more receivers than zone defenders, etc. “Leverage” refers to out-flanking a defense at the point of attack — i.e. you may not have numbers but the angles are on your side. “Grass” harkens to Willie Keeler’s baseball adage, “hit ‘em where they ain’t.” Run the ball where there are the fewest defenders. As it turned out, Choate was right: Boise spends more time on distracting you then developing themselves. But don’t get confused: the point is that although the Broncos have the talent to be one of the best teams in the country and could simply overrun certain opponents, their modus operandi is to be patient and to take what the defense gives them — a true reflection of Petersen, their coach. The quintessential underdog philosophy, they wear you down by picking at four and five yard gains until they pop a big one. Watching them on film, it’s never surprising they score, but to a football junkie, the methodology of how they score is a work of art. Basically, Boise uses three distinct ways to score: (1) pre-snap leverage by the use of formation, (2) post-snap misdirection and (3) calling the unexpected — the dagger after lulling you to sleep

More to Make You Gag

Just in case the last post didn't make you sick, this from Senator Tom Coburn should push your gag reflex to the point of no return:

Do you realize that 1 in 20 Americans have now been officially qualified as “disabled” by the Social Security Administration, meaning they can longer work a full time job, and thus qualify for Federal disability benefits? If you’re at all skeptical that such a large number of Americans are truly eligible, you are right to question.

It is true that many Americans meet the test for these benefits, and receive much needed assistance. However, a recent investigation by the Government Accountability Office (GAO) and the Permanent Subcommittee on Investigations (PSI) paints a troubling picture of the $159 billion program.

Its findings include:
  • The program was responsible for at least $10.7 billion in overpayments from 2004-2008.
  • 600,000 Americans receiving disability benefits have been issued commercial drivers licenses (CDL).
  • A smaller sample of disability recipients also carrying CDL’s, estimated that 43 percent of these permit holders qualified for their license after the Social Security Administration determined they were eligible for full disability benefits. As a physician who has had to certify patients looking to qualify for a CDL, I can assure you that the two categories are mutually exclusive. One cannot qualify for a CDL and be classified as disabled.
  • By comparing federal workforce and disability program data, the GAO discovered that 1,500 Federal employees may be improperly receiving payments, at a cost of $1.7 million per month.
This type of fraud is widespread throughout many federal benefit programs, and costs taxpayers billions each year. It will not stop until Congress does its job.

The next time you hear a politician say that raising taxes is the only way to balance the budget, remind them of the $350 billion that federal agencies lose each year to pure waste, fraud, and duplication. Demand they do the necessary work to oversee bureaucracies, and demand they eliminate fraud and waste before they ever mention raising our taxes again.