Cliff Diving

We are just over 24 hours from officially going over the Fiscal Cliff.

Photo Credit: Boney Dias, www.trekearth.com
Waterfall and statutes inside the Dubai Mall

What a sad testament to the leadership of our President and the workings of our Congressional representatives.  We are not talking about something that snuck up on them.  This specific issue has been front and center for at least two years when the Bush tax cuts were first extended.  The issue even got messier when the can of necessary spending cuts got kicked down the road in the aftermath of the failure of the debt limit talks in August, 2011.

I know the Media is eager to blame the intransigent Republicans in the House but we also have not seen Senate Majority Leader Harry Reid and the Democrats in Senate do any better.  Of course, anyone who understands our system knows that this is really a total failure of leadership from our President.

Two Beltway insiders on different ends of the political spectrum, Evan Thomas, former Newsweek editor, and syndicated columnist Charles Krauthammer both point the finger of blame squarely at President Obama in The Daily Caller.

“This is not Congress’ fault,” Thomas said. “Congress is behaving like Congress. This is the president’s fault. The president needs to go to the country and explain why they need to get this done. He has never done that.” 

Thomas later reiterated his point by saying the aftermath of the election is a time for the president to spend his political capital not on gaining political advantage, but on solving a crisis.

“All political advances are with the president,” Thomas added. “What is he running for? He won, right? This is his time to actually take some political hits and tell the truth for a change instead of trying to get political advantage.”

Krauthammer adds,

“The president has never gone to the nation and made a serious speech about debt,” Krauthammer said. “He ignored it the first two years. He appoints a commission that he studiously ignores for the next two years. That’s why we’re at the cliff now. He’s not serious about the debt — none of his proposals. You raise the taxes on the rich, it’s eight cents on the dollar on the deficit. It reduces it a trivial amount of money and he’s never put any political capital in entitlement reform or tax reform. Oh, we’ll talk about it here and there — never invested any capital in it."

I have no doubt that John Boehner had the best of intentions in trying to work with the President on finding common ground.  However, Boehner was in  a "no-win" situation from the outset.  He was trying to find common ground with someone who clearly had little interest in finding common ground.  He never should have been negotiating in private with Obama.  This undermined his credibility with his own members.  He should have put all his efforts into putting together a package that would pass the House and could be sent to the Senate.

People are tired of back room deals that are driven by special interests.  The Republicans should start to build a new brand on three fundamental pillars-straight talk, no back room deals and shared sacrifice.

That would be a nice New Year's resolution to make when you are six feet underwater after going over the cliff.  I will some other ideas that build on this framework in my next post.

Where is our U.S. Grant?

I just finished reading Jean Edward Smith's biography of Ulysses S. Grant.  He was a remarkable man. There is little doubt that if it were not for Grant and Lincoln we most likely would not have saved the Union. Grant was also a very underrated President.

What struck me most in reading the book were the vast differences in life experiences when comparing Barack Obama to U.S. Grant before they were elected President of the United States.  Grant was actually one year younger (age 46) than Obama when he took office.  However, Grant seemed to have had three lifetimes of experiences before he ever set foot in the White House.

Born in Point Pleasant, Ohio in 1822, from an early age Grant had an enduring affinity for horses. He had an uncanny ability to train horses and his riding skills were unsurpassed.  When he was at West Point he was considered one of the greatest riders ever at the Academy. It was about the only area in which he excelled at the U.S Military Academy.  He finished 21st among 39 who graduated in 1843.  He ranked 28th in infantry tactics.

He saw combat in the Mexican-American War in which he was away from home (and his fiance, Julia) for almost three years. He married Julia in 1848 and stayed in the Army only to be ordered to California in 1852. Julia was 8 months pregnant with their second child and could not make the long trip to San Francisco which entailed a steamship voyage from New York to Panama, an overland trek across Panama and another steamer to San Francisco.

700 soldiers and their dependents embarked on the journey but only about half made it to San Francisco two months after they left New York.  A cholera epidemic ravaged the group as it transgressed Panama. All twenty children younger than three died on the journey. While most of the orderlies refused to care for the sick because of their fear of contracting the disease themselves, it was Grant who undertook the nursing of the ill himself.

Grant spent another two years in California without his wife and family. In his spare time he dabbled in numerous side business ventures attempting to make enough money to bring his young family to live with him. The California Gold Rush was in full swing and everyone seemed to be cashing in on the action in some way. Everyone but Grant. 

Grant lost money on almost every venture he attempted. His loneliness and bad luck eventually led him to rely too much on the bottle.  He resigned his officer's commission (many speculate he was forced to resign because he was drinking on duty) and headed home without enough money in his pocket to make the entire trip home to St. Louis which entailed retracing his previous path across Panama and by ship to New York.

He arrived in New York City with no money, and not even sure that his wife would want him to return to her parent's home in St. Louis.  He borrowed money from an old friend to pay his hotel bill in New York and waited to hear from Julia.  He eventually had to ask his father for the train fare home and a letter arrived from his wife welcoming him home with open arms.

Grant was 32 years of age when he left the Army. He spent the next four years working a 60 acre farm near St. Louis on land that his wife had received from her father as a wedding present. He never succeeded at farming.  Most of the money he made was selling cords of wood he would cart into St. Louis. He eventually had to look for work in St. Louis. He tried real estate and other jobs but he was not successful in any endeavor in the world of commerce.  He could not afford to have his family with him in the city and lived in a boarding house during the week. He walked twelve miles on Saturdays to see his wife and children and walked twelve miles back to St. Louis each Sunday. 

In 1860, at age 38, he eventually faced the inevitable, swallowed his pride, and asked his father for a job. His father had a leather business that had prospered over the years and he operated a half dozen retail outlets in the upper Mississippi River valley.  He gave Ulysses a job as a billing clerk and collection agent in his Galena, Illinois store.  Grant moved to Galena about one year before the start of the Civil War.

With this background you begin to see how incredible the story of Ulysses S. Grant is. Within four years of his move to Galena to take a job as a billing clerk, he was General of the Union Army. Within eight years he was President of the United States.

What made Grant successful?  First, he was not afraid to engage.  Except for Grant, most of the Union's field commanders were unwilling or unable to take the fight to the enemy. Grant knew that to win you had to be on the offensive.  Second, he led from the front and was cool under fire.  He took reversals in stride and often looked to take a disadvantage and turn it into an advantage.  Third, he was unassuming, honest and considerate.  Grant always put his country and men first.  He was as honest as they come and he always treated his enemies with the utmost of respect.

It is indeed sobering to read about the life and times of Grant and compare that life and experience to Barack Obama and other political leaders of today.  Men like Grant were tested in ways and manners so far removed than what we have in our leaders today that it is no wonder we find us where we are today.  We can't maneuver around a fiscal cliff?   What is that compared to the Battle of Shiloh or Vicksburg?

I found it particularly interesting how Grant responded to the Panic of 1873 in his second term as President.  By the way, when Grant was nominated by the Republicans for President in 1868 he gave but one speech-his acceptance of the nomination-of which he principally just focused on one theme, "Let us have peace".  He conducted no campaign as such.  Similarly, in his reelection bid in 1872 he also never campaigned.  How times have changed!

The Panic of 1873 was caused by "an insatiable desire for money that spawned a speculative boom that skyrocketed out of control.  Banks had lent money recklessly and brokerage houses had marketed securities that were often worthless", according to Smith in the Grant biography.  Does that sound familiar?

In 1873 Wall Street financial institutions started to fall like dominoes.  Grant soon came under pressure from Washington politicians to inflate the currency.  People were hurting as bankruptcies and unemployment soon followed as businesses, farms and factories were lost.  Congress felt that pumping more paper money into the system would solve the problems.  Again, does that sound familiar?

Grant was torn.  Having suffered in the Panic of 1857-that was the Christmas the president had pawned his gold watch to buy presents for his family-he sympathized with the nation's farmers and small businessmen.  Grant knew what it meant to be poor, to try to make a crop, to have a business fail, to be out of a job, and as a last resort to peddle firewood on a St. Louis street corner.  His heart was responsive to those who wanted to pump more money into the economy, yet as president he felt his responsibility was to the nation's future.  Cheap paper money might look like a panacea, but inflation was never a friend to stable government.  The United States would be driven from the world standard, the return to specie-backed currency would be set back, property values would be unsettled, and speculation rekindled.  If Congress could simply print unredeemable paper money to appease popular demand, the nation was in peril.

Congress passed a bill to greatly increase the nation's money supply (this was before the creation of the Federal Reserve). Grant then had to decide whether to sign the bill into law or use his veto power.  He initially decided to approve the measure bending to the political pressures but as he wrote down his rationale he determined that his reasoning was fallacious.  He vetoed the bill much to the shock and anger of his Cabinet and the Congress.  His veto was upheld and the nation soon moved solidly behind Grant's call for sound money and a stable currency.  The gold standard was resumed shortly thereafter that paved the way for the enormous growth of the U.S. economy in the last quarter of the 19th Century.  By 1900, the U.S. dollar had replaced all other currencies as the international symbol of financial stability. 

Where is our U.S. Grant today?

Cliff Dwellings

A few years ago I visited New Mexico and had the opportunity to see some of the historic cliff dwellings that the Pueblo Indians carved into the side of steep cliffs.  These cliff dwellings are not only beautiful but also speak volumes about the ingenuity of human beings to adapt to their surroundings.

Bandelier National Monument
National Park Service
Photo Credit: Richard Hasbrouck

Fast forward to the fiscal cliff that is fast approaching at the end of the year.  What we are seeing right now in Washington is certainly not beautiful.  We are also not seeing much ingenuity.  We certainly do not seem to have evolved in the slightest based on what we are seeing.

The Pueblo Indians eventually had to abandon their elaborate cliff dwellings in northern New Mexico as drought forced the indians to relocate to areas nearer to the Rio Grande valley.  The parallels of history are interesting as we are on the cliff today not because of prolonged drought but because of prolonged deficits.   The indians didn't have enough water to continue to sustain themselves.  Today we don't have enough money to sustain ourselves.  Our well is as dry as it was for the Pueblo Indians in the late 16th century.  They had to change, move and adapt.  We have little choice but to do the same.  We just can't seem to be able to do it.

I hate to keep dwelling on the cliff but I can't help myself.

• President Obama's leadership on this issue has been atrocious.  His public proposal is laughable.  He wants to raise taxes $1.6 trillion and he has offered the grand sum of $400 billion in spending cuts.  $4 in taxes for every $1 in spending cuts? This is balanced?   In my view, he has the ratio right he just has the numbers reversed. How about $4 in spending cuts for every $1 in taxes?

• Speaker Boehner is in an unenviable position from all accounts.  He is in a tough position to begin with but he has made it much worse with the way he has handled the cliff negotiations.  In light of the fact that he needs to deliver a couple hundred votes to whatever plan he agrees to with the President,  I think he has made an enormous mistake in not putting forth some clear principles and made it public.  For example, he should have said that for any revenue increase there needs to be $4 of spending cuts.  I think he should have also been putting plans up for votes by the House that his caucus would support and sent the legislation to the Senate.  Make it clear to the American people it is the Senate and President Obama who are not putting anything on the table.  

• If the best deal the Republicans can put together is the proposal they sent to the President that they are willing to accept $800 billion of tax increases for $600 billion of spending cuts, they might as well do nothing.  That is merely going to anger their base for nothing. I have long supported a tax increase (including a rate increase) as a bargaining chip. However, I would not agree to any tax increase without spending cuts of at least $3 for every $1 of revenue ( I would have started at 4:1).

• I think that John Boehner is going to have a hard time retaining his position as Speaker based on how this is playing out right now.  I know that John Boehner is a responsible person who is trying to do what is right.  However, at this point, the man has not been equal to the moment.  I hope he can strike a deal for the good of the country that is truly balanced and can result in meaningful spending restraints.

• I continue to believe that Barack Obama has the most to lose long term from any failure to get our fiscal house in order.  We are heading for a day of reckoning.  When that day comes people are not going to blame John Boehner or Mitch McConnell.  He is the quarterback.  Ask Mark Sanchez how that works.

• No one wants to lead on the fiscal cliff negotiations because no one (with the notable exception of Paul Ryan) has tried to tell the American people the truth.  As a result, you see these types of poll results.  It basically comes to this.  We need to do something about the deficit but don't tax or take any government goodies from me, take it from thee.  Tax the rich.  Tax large corporations.  Cut Medicare for the rich.  The one thing that people say they would accept is cutting government spending across the board.  In fact, that gets more support than taxing the rich.  

• This underscores the fundamental problem we have in this country today.  Everybody thinks someone else is taking advantage of the system to their detriment.   On taxes, people thinking the rich are using loopholes to avoid paying their "fair share".  On spending, people know that everybody is getting something from the federal government and they are worried someone else is getting more than them.   Total reform of the tax system to eliminate all deductions and preferences and across the board spending cuts are the only solutions.  I wrote about my tax reform plan last August. It's time to put the public interest ahead of special interests.  Why isn't this the Republican plan and their main talking point?  

I am heading back to my cave dwelling now.

Why Work?

There is a lot of debate and discussion about the fiscal cliff in Washington right now.  However, we never hear anything about the welfare cliff.

What is the welfare cliff?

It is the point in which it makes more sense to sit at home and do nothing and collect welfare benefits than do work.

Tyler Durden of Zero Hedge writes about the welfare cliff in "When Work Is Punished: The Tragedy Of America's Welfare State".  He cites a recent presentation by Gary Alexander, Secretary of Public Welfare, Commonwealth of Pennsylvania, in making his key points.

To illustrate the welfare cliff consider this fact about a single mother in Pennsylvania with two children.

The single mom is better off earning $29,000 with gross income of $57,327 in net income and benefits including welfare assistance than to earn gross income of $69,000 solely from working that nets out to income and benefits of $57,045.

The two charts below are from Alexander's presentation which is worth looking at to also see the massive growth in welfare and Medicaid over the years.

What is also sobering is what the welfare burden has become on working taxpayers.  For every 1 person receiving welfare assistance nationally, there are only 1.65 employed persons in the private sector.

For every, 1 person who is either receiving welfare or works for the government, there are only 1.25 persons working in the private sector.  After all, either way, taxes are needed from the private sector to support these payments.  Ouch!

One big factor in why the welfare recipient makes out so well is the tax-free nature of welfare benefits and the refundable tax credits that are built into the Internal Revenue Code. Tax loopholes are not just for the rich any more.

Providing housing assistance, food stamps (EBT), welfare, Medicaid, child care assistance and Obamaphones in after-tax dollars provides a significant income advantage to the welfare recipient compared to a middle-class worker.

Consider a cell phone.  If a private sector worker and taxpayer wants a $50 monthly cell phone plan, they need to earn about $65 to pay for the cell phone.  They need to pay income taxes (15%), FICA (7.65%) and state taxes before they have the money to spend on the cell phone.  People on welfare are just given the cell phone.

I am all for helping people who need a helping hand.  However, this is clearly not a sustainable path.

It also clearly shows that the incentives in the system are not properly aligned to get us the results we should be getting.  Our goal should be to get as many people in productive roles in our society as we can.  Our welfare programs are clearly not doing that.

We should also have policies that foster as much alignment between people in our country as possible. The disconnect between the people working and paying the bills and those receiving government benefits will do nothing but create greater discord in society if we don't fix this.

If we get past the fiscal cliff I certainly hope that we will soon start looking at the welfare cliff.

FISCAL Cliff Notes

A few short cliffs note summaries on how I see the Fiscal Cliff negotiations at this time.

Credit: InfoWars.com

• Congress undoubtedly will recess no later than December 21.  Any bill to be voted needs to be ready by at least three days before that (December 18).  That is exactly two weeks away.  There is very little time to get something done. 

• The Obama White House is not conducting a negotiation.  They appear to only be interested in playing a blame game.  The Republicans should have understood this from beginning and a big priority should have been in taking positions that would shift responsibility (and blame) to Obama.  Conceding the tax rates is the best way to put the onus on Obama.

• I agree wholeheartedly with the substance of attempting to reduce rates and broaden the tax base.  However, this is too complicated for the average person to understand.  The Republicans should concede the tax rates in return for substantial spending reductions or they will continue to get beat up.  Raising rates on the rich are the only thing that they have to use to get the spending cuts that are necessary.  That is the reality whether they like it or not.  It is a valuable bargaining chip and they should get something very big for it.

• I wrote previously that I thought they should have conceded the tax rates right after the election and asked for the repeal of Obamacare and spending cuts equal to at least $3 for every $1. There would probably be little chance that Obama would take this deal but what would Obama be talking about right now?  It would have changed the conversation dramatically as well as the blame.

• The Republicans have an inherent difficulty in these "negotiations" as there is no one person that can really speak for them.  The President has a lot of authority to take positions and lead.  John Boehner and Mitch McConnell cannot do that.  They have to make sure they have almost 300 other members of Congress with them to do anything.  That is an almost impossible task.  It also puts them at an enormous disadvantage in the fiscal cliff talks.

• The most outrageous demand that Obama has made in the negotiations is that he wants to have the  unilateral power to raise the debt ceiling.  This is not only audacious (The Audacity of Hope?) but also would completely usurp the Constitutional responsibility of Congress.  It is almost akin to Franklin Roosevelt's attempt to stack the Supreme Court in the 1930's.  For those who might have forgotten, the U.S. Constitution, Article 1, Section 8 says in part.

The Congress shall have the Power to lay and collect Taxes...to pay the Debts of the United States...To borrow Money on the credit of the United States.

           It does not mention the President at all.

           The Constitution in Article 1, Section 7 also states

All Bills for raising Revenue shall originate in the House of Representatives

• Due to this Constitutional power and the inherent difficulty the Republicans have in "negotiating", I believe that the only way forward for the House is to write legislation, pass it and send it to the Senate.  I would have 3 or 4 bills ready to go.  Pass the first and send it on.  If the Senate does not act, pass another option and send it on.  Do this between now and December 18.  If nothing is done by December 18 go home and the Democrats can decide which of the options (if any) they want to use to avoid the fiscal cliff (if they really want to avoid it).  
• I still believe the best alternative is to pair the tax rate increase on the rich with a repeal of Obamacare.  
• A back-up plan is to take a one-year increase in the rates on the rich for a one -year deferral of Obamacare.  This provides time for tax and entitlement reform.  Set goals on each and if they are not met the tax increase expires and Obamacare is repealed at the end of 2013.
• There are probably other good ideas.  The idea in each is to give Obama and the Democrats what they profess they want (tax rate increases on the rich) but extract a very, very large concession for it.  

• Many ask me what I think will happen.  I have no idea.  I know John Boehner to be an extremely responsible person.  He will do everything he can to produce a deal.  However, I am not sure that Obama wants a deal.  If I had to bet, I think we will go over the cliff because I think Obama does not really want a deal.  He wants more revenue, he wants big defense cuts and he wants to blame it on Republicans.  He gets all of this by going over the cliff the way things stand now. That is why I think the Republicans are making a mistake by not agreeing to the tax rate increase on the rich in some form or manner as I suggest above.  Forget the negotiations.  Win the blame game and let Obama live with whatever comes.

Data, Drop-Outs and Dreams

I came across an interesting data set published by the U.S. Department of Education on elementary and secondary education over the weekend.

A few of the highlights.  All data is for the 2010-2011 school year.

• There are 50 million students enrolled in primary and secondary schools in the U.S.
• 48% are considered "low income" and qualify for either free or reduced-price lunches.

• Only 52% of students are white.  24% are Hispanics, 16% Black and 5% are Asian.
• In Texas, 50% of all students are now Hispanic.  Only 31% of Texas students are white.  
• In California, 51% of all students are now Hispanic.  Only 26% of California students are white.

• There are 92,699 schools but only 47,832 (51.6%) are considered to be making Adequate Yearly Progress (AYP) by meeting all of their performance goals.

• Only 77% of students nationally who begin the 9th grade graduate four years later. 
• Iowa has the best record of graduating students with 88% receiving their diploma.  In the District of Columbia a mere 59% graduate.  I thought it was interesting that Texas tied for third with a 86% graduation rate.  Other states of interest-California (76%), Massachusetts (83%), New York (77%).  Low tax Texas has a much better graduation rate than these high tax states.

• On reading achievement, only 32% of all students nationally in the 8th grade were considered proficient.  The breakdown by demographics-whites (41%), blacks (14%), hispanics (18%), low income (18%).
• Math achievement is slightly better overall with 34% of 8th graders considered proficient.  The breakdown by demographics-whites (43%), blacks (13%), hispanics (20%), low income (19%).

How much are we paying for all of this?  Another data set from the National Center for Education Statistics provides those answers.  This data is from the 2008-2009 school year.

• School districts had total expenditures of $610 billion.  $519 billion of this was for current expenditures for public elementary and secondary education.  Of the remaining expenditures, the bulk of it ($74 million) was for capital outlays and interest on debt.
• To put this in perspective, total costs for Social Security and Medicare were $1.1 trillion in 2009.  Therefore, we are spending roughly twice as much on these programs for seniors as we do for public elementary and secondary education for the young.

• Current expenditures for public elementary and secondary education amounted to $10,591 per pupil.  In constant 2010 dollars, this is equivalent to $10,694.
• Since 1971, spending on education has increased almost 1,200%.  In constant dollars, spending has increased 133%.

Current expenditures per pupil in fall enrollment in public elementary and secondary schools: Selected years, 1961-62 through 2008-09
School year	Current expenditures in unadjusted dollars	Current expenditures in constant 2009-10 dollars1
1961-62	$393	$2,835
1970-71	842	4,596
1980-81	2,307	5,773
1986-87	3,682	7,174
1990-91	4,902	7,933
1995-96	5,689	7,981
1996-97	5,923	8,079
1997-98	6,189	8,293
1998-99	6,508	8,572
1999-2000	6,912	8,849
2000-01	7,380	9,135
2001-02	7,727	9,399
2002-03	8,044	9,574
2003-04	8,310	9,679
2004-05	8,711	9,849
2005-06	9,145	9,960
2006-07	9,679	10,276
2007-082	10,298	10,543
2008-09	10,591	10,694

                                Source:  National Center for Education Statistics

One of the data points that I found interesting was the excellent performance of Texas in graduating its students.  The liberal mantra is that a state like Texas is shortchanging its education system with its low tax philosophy compared to other states.  Let's look at spending compared to results in D.C., California and Texas.  All of these states have large minority populations. However, D.C and California have high tax, liberal philosophies and Texas has a more conservative, low tax outlook.  What type of results are they getting in the classroom?

• The District of Columbia spent $19,698 per pupil ( 89% higher than the national average)  despite the fact that only 59% of its students graduate from high school.  California spent $9,503 per pupil and graduated 71%. Texas spent $8,562 per pupil (19% below the national average) and graduated 86% of its students.  

• The District of Columbia had a pupil/teacher ratio of 12.03 compared to 14.73 in Texas.  California had the worst pupil/teacher ratio in the country at 24.12.  The second worst is Utah at 22.80.  

• Only 10.5% (average of reading and math scores) of low income students in the 8th grade (this seems to be a more objective standard of measuring school performance as it cuts across race elements in the data) in D.C. were proficient in reading and math achievement.  In California,  the comparable score is 13.5%.  In Texas, 22% of low income students are proficient.

What does all of this data tell us?  Despite what we often hear, spending more on education does not necessarily correlate into better academic performance. If money alone was the answer then the District of Columbia would be leading the nation in Advanced Placement test results.

30 years ago I did extensive analysis on what factors had the biggest influence on academic performance in primary and secondary schools.  After looking at a lot of data I came to the conclusion that children living in two parent households seemed to have the highest correlation with academic performance in the classroom.  It appears that this fundamental fact still holds true.  There is a limited ability to affect the educational outcome of a student in the classroom if a good foundation is lacking in the home.

In Washington, D.C. only 36% of children live in two-parent households.  By comparison, 79% of children in Utah live in two-parent households. Therefore, even though D.C spends nearly $20,000 per  pupil and has only a 12/1 pupil/teacher ratio, its student performance is abysmal.  Utah spends only 6,612 per student (1/3 of D.C.) and has a 22.8/1 pupil/ student ratio (almost double that of D.C.).  Utah does have the advantage of having far fewer low income students than D.C, however, 20% of its low income students are performing at a proficient level of achievement compared to 10.5% in D.C.

Last year, 41% of all births in the United States were to unmarried women.  For blacks, 72% of all births are to unwed mothers.  53% of Hispanic births are to unwed mothers.  This compares to 29% for whites and only 17% for Asians.  In 1960, before the War on Poverty, blacks had a lower percentage of illegitimate births (22%) than whites. What has happened and why is it important?

The Brookings Institution sponsored a study in 2009 that found that if an individual does just one of two things--graduates from high school or marries before they have children--the chances that they will end up in poverty are only 1 in 4.  However, if they do neither, the chances that they will end up in poverty is 3 out of 4.  If an individual graduates from high school, marries before they have children and gets a full-time job, the chances they will end in poverty is only 1 in 50!  More importantly, if an individual adheres to all three of these social norms, the chances they will end up in the middle class or above is 3 in 4.

I have long thought that we have been way too lenient when it comes to high school drop-outs.  We spend billions of dollars to provide a free education in our public schools.  In doing so we are also providing real opportunity to everyone.  If someone chooses not to take advantage of this opportunity, we know from the data cited above that the individual will most likely end up in poverty.  This means that society will most likely need to continue supporting that individual for most of their lifetime. And there is a good chance that the cycle will continue into the next generation. Is this right?  Does this make sense?  Are the incentives in our system aligned properly to get the right results?

What if it was our policy to provide notice to every 9th grader entering high school with something like this?

The taxpayers are providing you with a free public school education.  In the world today, a high school diploma is essential to your future economic well-being.  It is the bare minimum if you are to become a productive citizen in our country.  We are delighted to be able to provide you this opportunity.   

Please be advised that should you not avail yourself of this opportunity and choose to not graduate from high school, you will be permanently prohibited from access to any government benefits in the future.  This is not something we want to do, but if you are unwilling to assume the responsibility for preparing yourself for the future, the taxpayers are not willing to support you if you cannot support yourself.  

As a society we stand ready to assist anyone who is willing to take responsibility for themselves.  However, we will not provide public assistance to anyone in the future who does not take advantage of this most basic educational opportunity that is being provided to you.   

Good luck on your next four years!  You are on the right path to soon assume your place as one of the taxpayers who can return this favor to the next generation of Americans as it has been provided to you.  

It would be interesting to see what the high school drop out would be if this policy was in place.  This would be my own version of what I call the American Dream Act!  I can still dream, right?

Costco's Costly Contradiction

I love to shop at Costco despite the fact that the company's two principal founders, Jeffrey Brotman and Jim Sinegal, and I would probably agree on very little when it comes to politics.  I guess you would call me a little more sensible and reasonable than the nasty liberal politicians who tried to demonize Chick-fil-A because Dan Cathy, CFA's President, espoused his personal view that he was not in favor of gay marriage.

Brotman and Sinegal are staunch Democrats both of whom hosted $35,800 per couple fundraisers for Barack Obama during the recent campaign.  Sinegal also got a prime time spot to give a speech at the Democratic National Convention in support of Obama.

All of this is interesting in light of the news this week that Costco has declared a $7 per share special one-time dividend to its shareholders before the end of the year.  That's about $3 billion that the company will distribute to shareholders at the current 15% tax rate.  Of course, for shareholders like Brotman and Sinegal, the tax rate on dividends is scheduled to increase to 39.6% in 2013 if Barack Obama has his way.  On top of that, wealthly individuals like Brotman and Sinegal will also pay an additional 3.8% Obamacare tax on dividends received beginning January 1.

To put this in perspective, the regular quarterly dividend for Costco is currently set at 27.5 cents per share.  That's $1.10 per year.  Therefore, this special dividend is paying out what normally would be paid out over the next six years or so.  In effect, Costco is pulling dividends from future years to the current year.  You will see how they are doing that below.

It is difficult to understand that if people like Brotman and Sinegal think it is such great public policy to increase taxes in order to spread the wealth around why don't they think it is a great idea when it comes to their money? 

Why are they going to all of the extra trouble to declare this special dividend to avoid a little tax that could do so much good in the hands of the federal government?

It almost sounds as if they are greedy and unpatriotic. It seems that I have heard those terms thrown around once or twice before from Barack Obama's supporters.

By the way, Jim Sinegal is Costco's largest single individual shareholder with 2 million shares.  What is particularly interesting is that Costco is using the proceeds of a $3.5 billion debt offering to pay the special dividend.  That's right, Costco is going into debt to raise the cash to pay the dividend.  In effect, they are borrowing today against the future.  Now I understand why Brotman and Sinegal like Obama and the Democrats so much.  They have a similar view.  Borrow as much as you can now so you can  enjoy yourself today and pay for it later.  Costco should also send a nice thank you note to Ben Bernanke and the Federal Reserve for the low interest rates that also make that borrowing so attractive.

What is the benefit to Sinegal cost to the federal government of this planning scheme?  Mr. Sinegal The Treasury will save will lose about $4 million in taxes that would otherwise be owed by Sinegal.  In addition, since Costco has loaded itself up with $3.5 billion in debt, it will pay substantially lower corporate taxes in future years than it othewise would have because of the deduction of interest expense on that debt. This will further reduce future revenues to the U.S. Treasury.  Isn't this all working out just great?

Costco is not the only company declaring special dividends prior to year-end.  The Wall Street Journal had a recent op-ed that calls this "The Great 2012 Cashout".  The WSJ reports that as of November 28, 173 companies had already announced special dividends.  I would expect to see many more before year-end. It literally is unprecented in a couple of ways according to the Journal.

"I find no precedent like this (special dividends) at all going all the way back to the 1950's", Howard Silverblatt of S&P Dow Jones Indices told the Journal.  Then again, there is no precedent for the Obama Presidency.

I realized a long time ago that people usually will behave according to their self-interest.  Therefore, your best chance of altering behavior is by altering incentives so that they align with self-interest. 

Capitalism works because it recognizes that human beings are motivated primarily by self-interest.  In a capitalist system the incentives are aligned so that talented people are willing to be inspired and perspire for their own success and self-interest.   A critical element in this alignment is for government to respect and protect the right to aquire and possess private property so that self-interest and ambition (yes, even greed at times) can counter-balance other strong natural human traits such as laziness and a desire to get something for nothing.  History has shown that the results from capitalism provide the greatest benefits for the society as a whole.

Collectivism and socialism are great economic and political theories in a textbook.  However, the idealism of all for one and one for all breaks down when the theory meets the realities of human behavior.  The self-interest that controls in a socialist society is getting the largest share of the collective effort as possible with the least amount of individual effort.  Why put forth significant effort if everyone gets the same result?  It almost becomes a race for the bottom rather than a race for the top.  This inevitably leads to contempt and conflict and a dearth of overall benefits for the society as a whole. 

Costco and its owners are merely doing what is in their self-interest in paying this special dividend.  I get it.  What I don't get is how Jeff Brotman and Jim Sinegal cannot see how they expect the economy and country to prosper by supporting the liberal, progressive (and anti-capitalist) views of Barack Obama and the Democrats when their own actions say exactly the opposite.

Of course this is not new.  It is pretty common for liberals to say one thing and do another.  Peter Schweizer wrote an excellent book a few years ago "Do As I Say (Not As I Do): Profiles in Liberal Hypocrisy, that takes you through example after example of how liberal luminaries such as Michael Moore, Nancy Pelosi, Al Franken and Barbra Streisand want you to do one thing while they do another.  It all leads to a simple question that Schweizer poses in the book-"if these liberals ideas don't work for the very individuals who promote them, how can they work for the rest of us?"

Jeff Brotman, Jim Sinegal and the Costco dividend are just another example of why it does not work.

I will continue to shop at Costco. Why?  Self-interest.  I like their stuff and their prices.  What other reason is there?

Gambling On Our Future

All of the excitement about the $500+ million Powerball lottery pot this week got me thinking.

What if the federal government launched a gigantic lottery game of $1 billion weekly to help close our federal deficit?  If we can get this much interest in people buying lottery tickets for $500 million I wonder how much a $1 billion prize would do?

We could create a billionaire every week (maybe not a full-fledged billionaire because of the tax rates on the rich but certainly wealthier than Mitt Romney) and help pay our bills at the same time.  Talk about a plan that would advance the American Dream!

It would also be entirely voluntary.  No one would be forced to play or pay. This ought to appeal to the Republicans and the Libertarians.  On the other hand, it would raise revenues which the Democrats always like.

It is also a nifty redistribution scheme.  Instead of taking a lot of money from one rich person to pay the bills of a bunch of other people, you take a little amount of money from a bunch of people to make one person rich.

I think this might be the way to solve our debt problems.   Let's do the math.

Winners in lotteries typically get 50% of the amount of tickets purchased. Around 10% goes for payments for retailers and other administrative costs and 40% is left for the state government sponsoring the lottery.   Therefore, a $1 billion prize would require $2 billion in sales of which $800 million would inure to the federal government.

$800 million x 52 weeks would provide about $42 billion for the federal government in direct lottery proceeds annually.  At the 35% top federal tax rate and the 3.8% rate on the new Obamacare tax, there would be an additional income tax cost on the winners of $39 billion that the federal government would collect.  Of course, all of this tax revenue would not come upfront as the typical lottery pay-out is 30 years unless a discounted payment is taken upfront.  Let's ignore that complicating factor.

Therefore, a $1 billion lottery jackpot every week for a year in the United States would raise approximately $80 billion per year.

Our federal deficit is over $1 trillion per year.  A $1 billion lottery jackpot per week would generate less than 8% of what is needed to close our budget deficit.  This is about the same amount that President Obama's tax on the rich would raise annually.

You begin to see how miniscule any type of revenue increase is to solving the real budget problem we have when you view it from this perspective.  We are simply spending ourselves to death and spending the amount of time the President is on that side of the budget equation is doing little to solve the real problem in the fiscal cliff negotiations.

Given the choice between taxing the rich and the lottery, it might make more sense to go the lottery route. The Treasury raises $80 billion per year either way.  However, with the lottery, I create 52 Americans that will have more money than Mitt Romney in one year's time.  If I tax the rich, I will likely end up with fewer rich people in the course of the year.  And that is also likely to lead to job losses as the effects of those tax increases cascade through the economy.  That's basic economics. Take heart, for those who lose their jobs over the next year due to Obama's tax increases or Obamacare, you can always play the lottery!

I don't have any problem with Barack Obama gambling with his future or his money.  However, in everything that he does as President he is gambling with our money and our future.  And the future of our children and grandchildren.

The only sure thing about our budget problems is that we are spending way beyond our means.  The only sure way to solve this problem is to scale back what we are spending.  As I have written before, we can balance the budget in 10 years if we limit overall spending increases to about 2% per year.  If you have not seen the math behind my 2.22.22 budget plan, check it out.  (Please note that 22 is right in the middle of the numbers below!)

Considering the fact that many household budgets have had to actually cut back over the last few years, asking someone if they could live on a 2% yearly increase would seem relatively easy.  Why does Barack Obama think it is so difficult that he wants to risk our country's future with his high stakes gambling?

Winning numbers in the 11/28/12 $580 million Powerball Lottery Drawing

The Greatest Salesman of All Time

I saw this headline in USA Today this morning.

Obama sells budget plan to middle class, biz leaders

I consider myself to be a pretty well-informed individual but I didn't remember seeing that President Obama had proposed a "budget plan" to deal with the looming fiscal cliff.  Since we are just over 30 days from going over the cliff I thought there was big news in the article.

Perhaps I missed the major announcement yesterday of the "balanced plan" that he talked about during the campaign.   The article mentioned that the President was going to meet with selected members of the middle class and leaders of the business community today to discuss his "balanced approach to reduce our deficit."  On Friday, the President will be in full campaign mode when he travels to a Pennsylvania toy factory near Philadelphia to "sell his budget plan" according to the article.

I kept reading article to find the plan.  Nothing was mentioned except he wants to eliminate the Bush tax cuts for the rich.  We all know about that.  Nothing new there.  I was looking for the other side of the "balanced plan".  What was he proposing in spending cuts?  What was he proposing on entitlement reform?  There was no mention of anything except increasing taxes.

What kind of sales job is needed to convince people that somebody else ought to have their taxes increased?  What type of selling is that?

We elect a President to be a leader.  We are one month away from the largest tax increase in the country's history.  We are one month away from massive cuts to the Defense budget and other discretionary programs.  We are one month away from the Alternative Minimum Tax being extended to entrap over 28 million taxpayers for the 2012 tax year (that's right, this year!).  We are one month away from the expiration of $112 billion in payroll tax cuts.  We are one month away from the expiration of extended unemployment benefits.  We learned this week that we are also expected to hit the debt limit ceiling by the end of the year.

All of this is coming down on us in a month and the President of the United States is spending time selling a tax on the rich that would only solve less than 1/10 of our deficit spending problem?

It is utterly incomprehensible that we have utterly incompetent Presidential leadership at this point in our history.

What is also utterly incredible is that Barack Obama has been re-elected and he has the most political capital he will ever have right now.  At the same time he should not be constrained by any political considerations as he will never run for any office again.  If there was ever a time and place for a President to lead it is now.

A real President would have already proposed a complete balanced plan to do what is needed to avoid the fiscal cliff and be selling the sacrifices that are going to have to be made by Democrats, Republicans and all of the American people to solve the problem.

There seems to be no indication that this President is ever going to lead on this issue when he is more interested in doing campaign trips to Pennsylvania and photo ops in the Oval Office.

Therefore, I must conclude that this President has no real interest in avoiding the fiscal cliff.  He seems to be only interested in playing a blame game.

My view is that the Republicans are wasting their time trying to negotiate anything with Obama and position themselves to win the blame game.

They need to state that they agree to the tax increase on the rich (approx. $1 trillion over 10 years) based on a balanced plan of $3 in cuts for every $1 in taxes.  This is the ratio of spending cuts to tax increases used by the President's Simpson-Bowles Commission. The first item in the cuts must be the repeal of Obamacare which would be the least disruptive thing that can be done to save money as it largely has not taken effect.  It also would have the most positive effect on the economy in the near term.  We see this every day as companies start to respond to the impending mandates.

The Republicans should then sit back and say they compromised and gave the President what he asked for and wait for the President and the Democrats to propose all of the spending cuts.  The President can then "sell" those cuts to the American people.  We then will really see what kind of salesman he is.

What are the advantages to this approach?  First, it might actually get Obama to do something in the few days left.  Second, even if it does not, it will shift the blame for going over the cliff to Obama and the Democrats.  Third, it reinforces Republican opposition to Obamacare.  Obama and the Democrats would undoubtedly never agree to this condition but the majority of voters still oppose Obamacare.

I see dark clouds on the horizon ahead for supporters of Obamacare as it takes full effect over the next year.  The implementation of the exchanges look very risky to me and could very well turn into a disaster for the Administration and the politicians tied to the state exchanges later this year. The Wall Street Journal does a good job of explaining the risks.

Barack Obama-The Greatest Salesman of All Time?  We will find out soon enough.

Three Charts to Start Your Week

I love data.  I especially love data when it is presented in graphic chart form.  A picture really is worth a thousand words and a well done graphic chart brings data to life.  A good chart can tell a story with the data.  In my view the best data and charts deliver information that puts an issue into proper context.  Data does not mean anything unless it is put in context.

I came across three charts this weekend that I think are worth sharing because they pass all the tests above.

The first chart shows the control of state capitals since 1938.  The red represents the number of states where both houses of the state legislature and the governor were controlled by the Republicans.  The blue represents where the same is true for the Democrats.  Gray indicates where there is some type of shared control in the state.

Source: National Conference of State Legislatures as reported in The New York Times

Notice that it has been 50 years since the Republicans controlled so many states.  There has also never been a period since 1938 when the Republicans made more gains in state government than in the years since Barack Obama became President.  This does not look like a political party that is having difficulties in connecting its message with a changing demographic.

The second chart I came across involves the disastrous state of the public pension costs facing the state of Illinois.  Illinois is a state that has been controlled exclusively by Democrats in its state house since 1982 except for one two-year Republicans majority in the mid-1990's.  Democrats have controlled both houses of the legislature and the governorship since 2003.  This shows what happens when a political party is owned by the public sector unions.

The share of total revenue the state collects that must be used for annual pension costs has risen from 3.6% in 1996 to 22.0% in 2013.  It is headed for nearly $3 dollars for every $10 in revenue by the end of this decade.

Source: Institute for Illinois' Fiscal Sustainability

As an indication of how bad it is in Illinois, the pension plan for its state legislators (the General Assembly Retirement System) has less than 12% of the assets it should have to meet its future pension obligations under new accounting rules.  Between now and 2045 this pension fund is estimated to be on the hook for $895 million in pension payments and it has just $53 million in current assets.  The pension plan for teachers in the state is only 18% funded according to the same accounting rules.  Pension debt grew by nearly $12 billion in the last year alone in Illinois.

There is no question in my mind that Illinois is headed for bankruptcy.  They seem to have gone beyond the point of no return.  Remember, this is a state that increased individual income tax rates across the board by 66% (from 3% to 5%) and corporate tax rates by 45% last year.  How high do taxes need to go to fill this hole?  There will be few taxpayers left who will want to pay that bill.

The third chart deals with CO2 emissions.  Remember the Kyoto Protocol in 1997 that the liberals argued was absolutely critical for the United States to adopt to save the planet?  Of course, 70% of the world (including China and India) were exempt from the treaty.  The U.S. Senate voted against Kyoto 95-0 in 1997.  However, this is another issue that many on the Left still like to blame on George W. Bush as he refused to endorse adoption of Kyoto in his Administration.  Of course, the Senate during the Clinton-Gore administration made it clear that the United States would not sign Kyoto if it excluded China, India and other countries.  The Bush position was identical to the Senate position in 1997 but why let a little fact like that get in the way?  How has carbon emissions growth worked out since that time?

Notice that China's emissions have almost tripled since 1997.  India's have doubled.  Carbon emissions in the United States are lower today than they were in 1997.  China is now emitting about 50% more carbon emissions than the United States.

I found it interesting in researching this subject that last December Canada pulled out of the Kyoto Protocol that it had agreed to in 1997.  It did so to save an estimated $14 billion in penalties.  In making the announcement the Environment Minister of Canada blamed an "incompetent Liberal government who signed the accord but took little action to make the necessary greenhouse emissions cuts".

Who was right on Kyoto?  What exactly has it accomplished compared to what it was supposed to accomplish?  It looks to be nothing if the goal was to reduce worldwide carbon emissions.   Of course, that was not the real goal anyway.  The real goal was to attempt to soak the rich (the United States) with enormous financial penalties which is a favorite past time of the far left.  Why are facts like these so often swept under the rug by the liberal media?

Credit:  Watt's Up With That

I'm Thankful

I have so many things to be thankful for.  Family. Friends. Faith. Country. Employer. Co-Workers. It is a long list and it is worth spending some time today reflecting on what Thanksgiving is really about beyond the turkey and football.

It is easy to get discouraged today when we look around us.  High unemployment.  Trillion dollar deficits.  People without a clue.  Politicians with no spines.  However, this is really the day when the glass on the table really should be viewed as half full rather than half empty.

A few things that I am thankful for beyond what I mentioned above.

• I am thankful I was not the guy from Faith Baptist Bible College who guarded Jack Taylor of Grinnell College in Tuesday's basketball game when he scored an NCAA record 138 points.

• I am thankful I am not Taylor's shooting arm (he took 108 shots, 71 from beyond the 3-point arc).  That is one shot every 20 seconds he was in the game.  He only played 38 minutes.

• I am thankful that I am not the coach of Faith Bible College which scored 104 points in the game but still lost by 75 points (179-104).  

• I am thankful I am not the ex-CEO (Leo Apotheker) or on the Board of Directors of Hewlett Packard who bought a UK software company for $9.7 billion a little over one year ago and wrote off $8.8 billion on that investment this week.

• I am thankful that I am not former General and CIA Director David Petraeus this Thanksgiving when he has to sit down to dinner with his family.

• I am thankful I am not a turkey living in Minnesota. Interesting trivia fact that I learned this week- Minnesota is the nation's leading turkey producing state with 46.5 million gobblers raised there each year.  Yes, I am also thankful that I am not Senator Al Franken from Minnesota.

• I am thankful I don't live in Greece.

• I am thankful that I do not like Hostess Twinkies or Ho-Ho's.  Hostess Brands announced they would liquidate the company and 18,000 workers will lost their jobs in the wake of a strike by one its unions.

• I am thankful that I am not a nudist in San Francisco.  San Francisco's Board of Supervisors voted 6-5 in favor of a public safety ordinance that prohibits nudity in most public places, including streets, sidewalks and public transit.  What is the world coming to if San Francisco will not allow public nudity?

• I am thankful that I am not President Obama or Speaker Boehner as we head for the fiscal cliff.  We are at the point that there are no good options.  A lot of people are going to be unhappy with whatever comes out of this.  It is easy to govern when you are giving stuff away.  It is not so easy when you are taking things away.

• I am thankful for all BeeLine readers and especially those of you who have recommended this blog to others.  Although the month is not over, BeeLine has already broken its monthly readership record with almost 3,000 views. 

Red States Rising

President Obama's re-election has left some Republicans dispirited and others arguing that the the party needs to change its basic principles.  However, if you look a little deeper at the result of the 2012 election results you see that Democrats appear to be increasingly out of touch with the electorate in state and local races.

This is readily apparent when you look at this graphic of the United States that shows the state legislatures that are controlled by Republicans or Democrats such that they have veto-proof majorities.  Note that in 2009 that only 13 states had veto-proof majorities (note: the chart heading below states that 13 states had supermajorities but 14 states are shown in the chart.  I do not think that Illinois had a Democrat supermajority in 2009.) 9 were controlled by Democrats and only 4 by Republicans.  As we look to 2013, 9 are now controlled by Democrats but Republicans now have veto-proof majorities in 16 states (the chart below shows only 15 but I believe North Carolina also now has a supermajority in both legislative branches).

In four short years Republicans have gone from have supermajorities in only four states to having a substantial power bloc of votes in sixteen states.  This is pretty amazing especially when you consider that Alabama and Arkansas went from supermajority status for the Democrats in 2009 to supermajority status for the Republicans in 2013 according to the graphic ( in light of the errors I have noted above I do not have confidence that this is 100% accurate).

This could lead to some very divergent policy trends between the red and blue states according to this AP story by David A Lieb which is the source for the graphic above.

If the parties make full use of their enlarged majorities, residents of similar-sized cities in different parts of the country could soon experience a virtual continental divide in their way of life.

In one state, businesses could pay little to no taxes, the result of policies intended to spur hiring. Public schools might function at a basics-only level, with parents free to use public money to send their children to private schools. Only the poorest of the poor adults could expect medical care from the government.

In another state, residents would pay higher taxes, and the government would inject billions of dollars into public education with the goal of creating a highly skilled workforce to attract businesses. A social safety net would exist for the poor, including working adults not even considered to be in poverty.

States already have different approaches to taxes, the economy and care for the poor, but they have been tempered by compromise. Now the middle ground may begin to disappear in favor of stark extremes.

Supermajorities can allow lawmakers to override governors' vetoes, change tax rates, put constitutional amendments on the ballot, rewrite legislative rules and establish a quorum for business — all without any participation by the opposing party

In one state, businesses could pay little to no taxes, the result of policies intended to spur hiring. Public schools might function at a basics-only level, with parents free to use public money to send their children to private schools. Only the poorest of the poor adults could expect medical care from the government.

In another state, residents would pay higher taxes, and the government would inject billions of dollars into public education with the goal of creating a highly skilled workforce to attract businesses. A social safety net would exist for the poor, including working adults not even considered to be in poverty.

States already have different approaches to taxes, the economy and care for the poor, but they have been tempered by compromise. Now the middle ground may begin to disappear in favor of stark extremes.

Supermajorities can allow lawmakers to override governors' vetoes, change tax rates, put constitutional amendments on the ballot, rewrite legislative rules and establish a quorum for business — all without any participation by the opposing party.

It will be particularly interesting to see what happens in the states of California and Illinois since the Democrats now completely "own it" when it comes to the horrendous fiscal condition they are both in.  Where do they go from here?  How much will they tax?  Will they cut any spending at all?  It should prove interesting.

Michael Barone adds it all up and finds that the Democrats had 53% of state senators and 56% of state representatives nationally in 2009.  They now have only 46% of state senators and 48% of state lower house seats.  Barack Obama has been disastorous for the Democrat party at the grass roots state levels.

Although the Republicans lost a net two U.S Senate seats and a few U.S. House seats between 2010 and 2012, the change from 2009 to 2013 is also pretty dramatic. Republicans have picked up 54 seats in the House and 3 seats in the Senate since Obama took office.  Barone provides some interesting details on the changes in the composition of the House between the 2008 and 2012 elections.

Democrats have won or are currently leading in 201 seats in the House. (All these numbers could change slightly in final counts).

Between 2008 and 2012, they gained seats in only three states: Delaware, where a popular Republican ran for the Senate in 2010; Maryland, thanks to Democratic redistricting; and California, where a supposedly nonpartisan redistricting commission was dominated by Democrats.

The reapportionment process following the 2010 census cost Democrats some seats because their strong states had relatively little population growth. They have five fewer seats in New York, for example.

The reapportionment effect was strengthened because the 2010 backlash against Democrats gave Republicans control of redistricting in Michigan, Ohio and Pennsylvania, all of which lost seats, and North Carolina, which stayed the same.

As a result, in the 113th Congress, as compared with the 111th, there will be three fewer Democrats from Michigan, six fewer from Ohio, seven fewer from Pennsylvania and four fewer from North Carolina.

Democratic losses were greatest in the South, which gained seven seats from reapportionment. There will be 22 fewer Southern Democrats and 29 more Southern Republicans in the House next year than there were in 2009.

Another way to look at it: 123 of 201 House Democrats will be from the Northeast, the West Coast, Hawaii and Illinois. Only 23 are from the Midwest outside Illinois, and only 42 are from the South.

In light of all this, how can it be that Barack Obama could be re-elected?  As I wrote previously, Barack Obama is more symbolism than substance.  Take his policies and his record over the last four years and put them on another candidate and the Democrats would not have won the Presidency in 2012.

The politics don't mean much now.  It is time to find out how Barack Obama will really lead.  We are 6 weeks away from the fiscal cliff.  We still don't know anything about what happened in Benghazi.  Israel and Hamas are almost in a full fledged war.  Where is Barack Obama?  He's in Burma.  Does that sound like what he was elected to be doing right now?

Count me as "not impressed" to this start on the next four years.

 McKayla Maroney & President Obama are "not impressed"
Olympic gymnast Maroney made this "not impressed" look famous at the London Games

The Food Stamp President

President Obama popular vote total in the 2012 election (as of today) is 62.6 million votes.

There are currently 47.1 million people in the United States receiving food stamps.  That is equal to 75.2% of the total votes he received for President.

Mitt Romney garnered 59.1 million votes for President.

There were 45.4 million tax returns filed for individuals with adjusted gross incomes of $50,000 and higher in 2010 according to the IRS.

We have reached a point where we have more people on food stamps than the number of tax returns being filed that are paying taxes to support the country.

You might question this and ask why am I including only those tax returns for those making more than $50,000?  There are 38.1 million tax returns filed by those under $50,000 of AGI who are actually paying some income taxes.

There are another 59.1 million tax filers who pay nothing in federal income taxes.

However, the 38.1 million tax returns filed by individuals with adjusted gross income of less than $50,000 in 2010 are barely covering the food stamp cost in the federal budget  These individuals paid $77.2 million in income taxes. By contrast, the food stamp program cost $71.8 million in fiscal 2011.

Therefore, almost the entire load for the 310 million people in the United States is being carried by the taxes paid with 45.4 million tax returns.

You begin to see the challenge that Mitt Romney had in the election when you match up 47.1 million people on food stamps vs. 45.4 million tax returns.

You also can better understand why Newt Gingrich referred to Barack Obama as "The Food Stamp President" in the Republican primaries.

Here are a few charts that put the growth of the food stamp program in perspective prepared by Matt Trivisonno.

There are 47.1 million individuals currently receiving food stamps.

That represents 14.9% of the U.S. population.

The cost of the food stamp program has more than doubled since 2008.

19 million additional individuals (and voters?) were added to the food stamp rolls over the last four years.  Note that only 11 million additional food stamp recipients were added to the rolls during eight years of Bush 43 and food stamp beneficiaries actually dropped by 8 million during the eight years ( and six Republican Congress years) in the Clinton Administration.

What is particularly interesting is the United States has more individuals on food stamps (47 million) than the entire population of Canada (35 million)! And yet Canada is producing oil and gas and President Obama is blocking almost all efforts to take advantage of our resources.  For example, three days after the election the Interior Department closed 1.6 million acres of federal land for oil shale development that had been set aside for that purpose by the Bush Administration.

When you have as many mouths to feed as we do, we better either get these people a job (for which affordable energy is critical) or look to create more wealth by taking advantage of our oil and gas resources to generate more revenues to the federal government (as Canada has done over the last decade.)

A number of states now allow food stamps to be used to purchase fast food meals.  How this is consistent with Michelle Obama's healthy eating initiative is beyond me.  I guess it has something to do with votes.  By the way, they are not called food stamps any more, they are EBT's since the program has been transitioned to an electronic benefit transfer card.

If you have any doubts how far we are gone, feast your eyes on this profane, perverted music video that  is entitled "It's Free, Swipe Your EBT".   This is the United States of America in 2012?  Did Mitt Romney have any chance at all?  Remember, he is the guy who was out of touch with America.  That does sound right if this is what America has become.