Looking In All The Wrong Places

President Obama seems to think that all of our problems would be solved if we could get the rich, business owners and others in the private sector to pay more in taxes.  After all, "they didn't build that" anyway.

It seems to me that President Obama's focus should be much closer to his current home in Washington, D.C.

For example, the metro Washington, D.C. area has the highest percentage of millionaires in the United States (as a percentage of households).  

This little factoid is in the latest issue of Money magazine (August, 2012 issue, page 65).  San Francisco, Honolulu, Boston and Hartford-New Haven are the next four highest metro areas for percentage of millionaires.  Money also points out that 40% of the world's millionaires live in the United States.

This data is consistent with the recent Bureau of Economic news release on State Personal Income for 2011.  You can see the full report here.

Per capita personal income in the District of Columbia in 2011 was $73,105. For the United States as a whole it is $41,663. Washington, DC is 75% higher than the nation as a whole.

The highest state is Connecticut at $56,889.

This means that the average income in DC is almost $30,000 higher than the nation at large and over $16,000 higher than the highest state.

Since 2000, per capita income in DC has increased at more than twice the rate of the country as a whole. An 81% increase in D.C.- from $40,462 to $73,105- compared to a 37% increase in U.S. per capita income which only saw per capita income increase from $30,319 to $41,663.

Washington, DC has no manufacturing base. It does not grow crops. It has no oil wells or coal mines. It does not produce computer chips or other high tech items. It produces almost nothing that creates value in a traditional economy. Yet, its residents have the highest per capita income in the country! What more is needed to know that something is seriously amiss in our country?

I am not just talking about the pay for government workers. After all, there are plenty of lawyers, lobbyists and lunch places along with everything else in DC. However, almost all of those jobs and wealth would not exist without the massive amount of money that gets shipped to D.C. by the people who are working the factory jobs, tending the crops and mining the coal. People who work hard every day for a fraction of what the people in Washington, DC are making. However, they must pay taxes on that fraction and send it to Washington to support incomes that are almost double what people in my home state of Ohio are earning ($37,791).

In looking at this data I wondered if the urban nature of D.C. could be skewing the data compared to the state data which would combine both rural and urban data. To this end, I did look at some selected Census Department data to compare Washington DC to other large urban cities such as New York City, Los Angeles and Chicago. Census Department data seems to focus on "money income" rather than personal income. Money income excludes capital gains, sales of properties, tax refunds, food stamps, public housing subsidies etc. This data only includes 2006-2010 using 2010 dollars. However, even using this data, Washington, DC's per capita money income far exceeds these other large cities.

Per capita money income in Washington, DC in the Census data was 38% higher than NYC, 55% higher than Chicago and 52% higher than LA.

How has it gotten this way? Big money and special interests. The federal government will spend about $3.8 trillion this year. A very small amount of this is for national defense and the general welfare. 2/3 of it is direct payments to individuals. In 1945, payments to individuals made up less than 3% of federal spending. Washington is largely a gigantic redistribution machine today. Money comes in one end from one group of people and it goes out the other end to another group of people. Money and wealth have been created in Washington because of the bureaucracy to run that machine and all of the lobbyists, lawyers and special interest groups working to get "their share" of money coming out of the other end.

Credit:Ramberg Media Images/Flickr

President Obama seems to be looking in all the wrong places with his plans to "fix" our country. He only seems to be interested in getting more money in rather than looking at the outgo. Instead of trying to take more money from harding working people in places like Albuquerque, Cincinnati, Des Moines, Erie, Grand Junction, Kalamazoo, New Bern, Ocala, Roanoke, Springfield and Wausau he should be focusing first on the voracious spending that emanates from Washington, D.C.

Compare the per capita income amounts for the states for each of these cities with Washington, D.C.

District of Columbia $73,105

New Mexico $34,575
Ohio $37,791
Iowa $40,470
Pennsylvania $42,478
Colorado $44,088
Michigan $36,533
North Carolina $36,164
Florida $39,563
Virginia $45,920
Missouri $38,248
Wisconsin $40,073

These swing states will determine the 2012 Presidential election. It should be clear by now that President Obama has no interest in fixing Washington, D.C. In fact, his solution will most likely feed the beast even more and further expand the income divide between Washington and the rest of the country. Do people in these states and around the country realize how far out of balance it has gotten between Washington and the rest of us?

The place to begin fixing our nation's problem is by begin looking at what we have created in Washington, D.C. There are many things that our federal government can and should be do including national defense, establishing and protecting our system of currency and protecting individual rights. However, its role should not be picking winners and losers. It should be more concerned with serving the general welfare than specials interests.

If you doubt any of this, take a look again at the per capita income levels in Washington, D.C. and the percentage of millionaire households in the metro D.C. area compared to the rest of the country and explain to me how any of this makes sense.

It is ironic that we continually hear about the income and wealth divide between the rich and the poor in our country. However, it is the income and wealth divide between DC and the rest of us that should be getting the attention.

Upside Down? You Decide.

Is it just me or does the world around us seem upside down?

Credit: TheMetaPicture.com

Three stories in the last week seem to indicate that something is amiss.

First, the CEO of Chick-fil-A, Dan Cathy, answers a question that he believes in the Bible and therefore is not in favor of gay marriage.  Never mind that his views are entirely consistent with federal law (the Defense of Marriage Act), almost every state in the union ( a majority of which have it in their constitution that marriage is defined as one man and one woman) and that there has never been a vote of the people in this country in any state where gay marriage has been approved of (including California!).

His view was also entirely consistent with that of the President of the United States, Barack Obama, until three months ago when he "evolved".

Cathy's views were villified by many liberals including the Mayors of Chicago and Boston.  Both said they wanted to ban Chick-fil-A from doing business in their cities.  They seem to have forgotten that the Constitution of the United States contains a Bill of Rights that protects both the freedom of speech and the freedom of religion.

The same week that Mayor Rahm Emanuel was stating that Chick-fil-A was not welcome in Chicago because they didn't have "Chicago values" he was also welcoming Nation of Islam leader Louis Farrakhan with open arms.  Here are just a few of Farrakhan's quotes over the years.

“Murder and lying comes easy for white people.”

“The Jews don’t like Farrakhan, so they call me Hitler. Well, that’s a good name. Hitler was a very great man.”

“These false Jews promote the filth of Hollywood. It’s the wicked Jews, the false Jews that are promoting lesbianism, homosexuality, [and] Zionists have manipulated Bush and the American government [on the war in Iraq]."

By contrast, this is Chick-fil-A's corporate purpose statement.

To glorify God by being a faithful steward of all that is entrusted to us. To have a positive influence on all who come in contact with Chick-fil-A.


By the way, I have been eating at Chick-fil-A's around the country faithfully for 40 years.  I have never seen a hint of discrimination in who they hire or who they serve.  In fact, they probably contribute more to local charities in their communities than any other restaurant chain that I am familiar with.  And they do it with "pleasure".

Upside down? You decide.

If you think this is upside down you can show your support for Chick-fil-A by supporting a buy-cott on Wednesday, August 1.  This is in response to liberal and gay groups who urged a boycott of Chick-fil-A after Cathy's statement.

Gay activists are also urging a same sex kiss-in at Chick-fil-A's on Friday, August 3.  Is this an example of the civility that the Left is always talking about?  What a great example for our children.  I say keep your PDA out of CFA!  What you do in private is your business.  When you take it in to a family friendly, faith-based business there is little doubt you are upside down.

I will be eating at Chick-fil-A on August 1 as I have also done the last two days.  I could see no evidence that any boycott was affecting their business in either of my visits.  It was hopping inside and at two drive thru-lanes on both days.

This cartoon, compliments of the Media Research Center, pretty simply states the case.  Supporting traditional marriage is not bigotry, it's biology.

The second story that caught my eye came out of San Francisco.  Is there any place more beautiful on the outside but you have to wonder what is happening on the inside?

A new bill would ban tobacco at all outdoor events like street fairs and concerts on city property.  However, the use of medical marijuana would still be allowed.  Medical marijuana has been shown to be little more than a disguised legalization of pot.   Roger Parloff described what is happening in California in an article in Fortune magazine in 2009.

In most of California's coastal metropolitan areas, marijuana is effectively legal today. Any resident older than 18 who gets a note from a doctor can lawfully buy the stuff, and doctors seemingly eager to write such notes, typically in exchange for a $200 consultation fee, advertise in newspapers and on websites.

There are an estimated 300,000 to 400,000 medical marijuana patients in the state now, and the figure is rapidly growing.

The proliferation of medical marijuana shops in Los Angeles have become so bad that last week the Los Angeles city council voted 14 to 0 to ban all the city's marijuana dispensaries.  There are actually more pot dispensaries (almost 1,000) than Starbucks in Los Angeles according to LA City Councilman Paul Krekorian.


If it has come to this in liberal LA what does that say about what San Francisco is doing?

If someone has to use medical marijuana why do they have to do it in public, anyway?  I guess it is for the same reason that gays want to have a kiss-in at Chick-fil-A.


Upside down?  You decide?

Finally, we have Brian Ross of ABC News trying to associate the Aurora, Colorado Batman mass murderer with the Tea Party.  Of course, remember when all of the mainstream media outlets like ABC News consistently tried to avoid reporting that U.S. officer Nidal Malik Hasan, who killed 13 at Fort Hood. Texas in 2009, was an Islamic radical and had even shouted "Allah Akbar" before he commenced the shootings.

The media is quick to try to tie patriotic, peaceful Americans to a mass murder but they won't report real facts about a hate-filled Islamic radical's actions in killing patriotic servicemen and women.

Upside down?  You decide.

Atlas Shrugged Again

I have finally shrugged and decided to actually read Atlas Shrugged.  I have written about the book and the movie previously but I could never commit to starting the 1,168 page tome.  The eerie nature of how closely President Obama's remarks on "you didn't build that" parallels a book written over 50 years ago as a cautionary tale on the dangers of socialism and collectivism pushed me over the edge.  I plan to begin reading it this week.

If you somehow missed Barack Obama's view of entrepreurship and success here it is again...

"If you’ve got a business -- you didn’t build that.  Somebody else made that happen."

Compare that to this dialogue in Atlas Shrugged written by Ayn Rand in 1957 that makes the same argument as to why the government is justified in heavily taxing and regulating a successful entrepreneur named Rearden...

“He didn’t invent iron ore and blast furnaces, did he?”

“Who?”

“Rearden. He didn’t invent smelting and chemistry and air compression. He couldn’t have invented his Metal but for thousands and thousands of other people. His Metal! Why does he think it’s his? Why does he think it’s his invention? Everybody uses the work of everybody else. Nobody ever invents anything.”

She said, puzzled, “But the iron ore and all those other things were there all the time. Why didn’t anybody else make that Metal, but Mr. Rearden did?

Is this life imitating art or art predicting life when we forget the principles that made America what it is?

By the way, Atlas Shrugged: The Movie-Part 2 is scheduled for an October 12, 2012 release.

I went to Part 1 when it was released in May, 2011.  Apparently not many others went to see it as it only grossed $4.6 million per IMDb.

I enjoyed the film but was concerned when I saw the box office results that Parts 2 and 3 of the trilogy would never make it to theaters.  Thank you to whoever has backed this project financially!  Putting this movie together in liberal Hollywood is not an easy task.

It appears that a different cast will play the main characters in Part 2 than we saw in Part 1.  You can find out more at the Atlas Shrugged Part II web site.

I can only imagine what Ayn Rand is thinking as she looks down on us.  I don't think she is shrugging.

You Didn't Build That-Part II

Most of the attention about President Obama's "You Didn't Build That" speech in Roanoke, Virginia on Friday, July 13th (perhaps Obama should be superstitious) has been on this remark.

"If you’ve got a business -- you didn’t build that.  Somebody else made that happen." 

However, he also said this shortly before he made the above statement.

"Look, if you’ve been successful, you didn’t get there on your own.  You didn’t get there on your own.  I’m always struck by people who think, well, it must be because I was just so smart.  There are a lot of smart people out there.  It must be because I worked harder than everybody else.  Let me tell you something -- there are a whole bunch of hardworking people out there."

I think in many respects that this remark was the more interesting and enlightening of the two.  Why?  I couldn't help but notice how much it downplayed personal accountability and achievement compared to   luck in the success of an individual.  I think these few sentences tell us a lot about the way Barack Obama and many other liberals see the world.  It also provides insight as why we see such a philosophical divide between the two parties today.

There is no doubt that good fortune, luck or blessings plays a role in everyone's life.  Everyone that is born in the United States has that going for them.  In terms of the birth lottery, if you were born in the United States rather than North Korea, Cuba or Afghanistan, you won big!  If you were born to parents who cared about you, nurtured you and supported you, you won again.

Nassim Nicholas Taleb wrote an excellent book a few years ago entitled "Fooled By Randomness".  As you might guess from the title, the book is about luck.  More precisely, how we perceive luck in our personal and professional experiences.  However, the real focus of Taleb in the book is on the forum where luck is most often mistaken for skill-Wall Street.  If you want to read a book that will provide you with some interesting insights that challenge the bona fides of many in the investment profession this is the book for you.

For example, one of those insights is comparing the skills of a trained dentist with that of trained investment manager.  Taleb observes that practicing dentistry requires real skill.  A tooth needs to be fixed a certain way and the results can be measured accurately afterwards on whether the dentist was skilled or not.  Luck does not play a role.  However, can the same be said of a commodity trader or hedge fund manager?  Pure chance can explain why someone could even have a string of years of success in the markets.  The same can be said for Wall Street analysts.  Did skill really explain their calls or was it mere chance?  Markets move and can anyone really be said to have the skill to call those movements accurately?  Were they just lucky?  Were they really smarter than the average bear?  It is hard to tell if it is skill or luck.

Another area where it is hard to discern skill from luck is success in the entertainment business.  Sure, we see the big stars on the screen and on stage and they are talented.  However, I have seen great acting in college playhouses and heard fantastic voices in church equal of anything in Hollywood.  Why do some make it and others not?  Is it really the talent that is the differentiator or did someone just get a break that another did not.  One actor makes millions and the other actor is still waiting tables.  One wins American Idol and the other did not get by the producers in the try-outs in Dallas because the screener had a headache at the time.

Compare these areas with a small business owner.  Sure, luck can play a role in the success or failure of a business.  However, I would argue it is a much smaller factor compared to the personal initiative and hard work required to make that business a success.  I am not demeaning the hard work and long hours put in by entertainers or those on Wall Street.  They clearly deserve everything they get from their efforts.  However, there is a different dynamic in what ultimately makes one successful.

I heard an interesting comment about Democrats from a prominent Republican Senator recently that adds additional insights to President Obama's comments.  He stated that most Democrats simply never come in close contact with business people from Main Street.  They simply have no appreciation for the risks, hard work and commitment these people make.  They just are not in the circle of people they come in contact with which generally just includes Wall Street hedge fund managers, union bosses, Hollywood celebrities and trial lawyers-the people who fund their campaigns.

To many liberal Democrats the fact that someone has money and is successful is seen more as  good fortune than hard work.  This is their life experience.  In fact, my personal opinion of why so many Hollywood types are liberals is the fact that in their heart they know it was principally luck that put them where they are.  Sure, they worked hard to earn success. However, there are a whole lot of other hardworking actors and singers that never got "the break." As they worked their way into the business they knew many other talented people that did not make it while they did.  They have to know better than anyone that they could have just as easily been the one still waiting tables.  That has to affect you and how you look at the world.  It is perfectly logical that they support Democrats the way they do from a political perspective considering their life experience.

On the other hand, I think there are far fewer entrepreneurs thinking the same thing.  They acknowledge the blessings they got along the way but they also know that without taking that individual risk, without the long hours, and without the hard work, they would not have succeeded.  It is also perfectly understandable why a lot of entrepreneurs support Republicans based on their life experience.

What is most troubling to me about President Obama's statement is that it seems to be another way of attempting to foment class warfare.  In effect, he is saying that it is not your fault if you have not succeeded.  You are as smart and hardworking as anyone.  These rich people were just lucky and now they don't want to share the wealth with you.  Forget the American Dream.  All we want now is for the American Green to be spread around more evenly and it will solve all our problems.  After all, it is only fair!

If you have any question as to why President Obama holds the views he does I recommend you look at this short 6 minute video by Bill Whittle entitled "It's A Miracle".

There is little doubt that the President has considerable ability and has achieved a lot during his life.  However, he has also been one of the luckiest, most fortunate people that I have ever seen.  I have no doubt that he really does realize this in his heart of hearts.  He just needs to use his mind to see that many others did it the hard way and these are the people who create most of the jobs and taxes that makes this country work.

You Didn't Build That-Part I

When the history of the 2012 Presidential election is written, historians may cite the statement that President Obama made in Roanoke, Virginia on July 13, 2012 as the seminal moment that defined the campaign.

This is the statement that I am taking about.

"If you’ve got a business -- you didn’t build that.  Somebody else made that happen. " 

However, he also said this shortly before he made that statement.

"Look, if you’ve been successful, you didn’t get there on your own.  You didn’t get there on your own.  I’m always struck by people who think, well, it must be because I was just so smart.  There are a lot of smart people out there.  It must be because I worked harder than everybody else.  Let me tell you something -- there are a whole bunch of hardworking people out there."

There are very few times in a Presidential campaign when you see the very essence of what a candidate truly believes. What is in his mind and in his heart. So much is orchestrated and on teleprompters that we rarely get that true glimpse.

However, at this speech in Roanoke the President was not using the ubiquitous teleprompters that we have come to expect with an Obama speech. According to The Hill, President Obama is trying to wean himself off of the teleprompter in order to be more spontaneous and better connect with voters on the campaign trail.

The two statements above clearly appeared to be off-script remarks.

One of the best comments I have seen in reaction to Obama's remarks was by Pat Sajak, the "Wheel of Fortune host, who is also a rare Hollywood conservative. This is how he described it in a commentary on Ricochet where he harkens back to other famous defining moments for (in order) Michael Dukakis, John Kerry, Dan Quayle and Gerald Ford.

It's as if President Obama climbed into a tank, put on his helmet, talked about how his foray into Cambodia was seared in his memory, looked at his watch, misspelled "potato" and pardoned Richard Nixon all in the same day....

Sajak sees this as a similar moment.

 These defining moments take hold most devastatingly when they confirm what a large portion of the electorate already believes. Taken alone, it seems unfair that a single moment, an unguarded remark or a slip of the tongue can carry such weight. They're often dismissed as "gotcha" moments, but when voters are able to nod and say, "I knew it," these moments stick and do terrible damage. We have witnessed such a moment. 

I won't go that far because it remains to be seen how this will all play out.  In the other examples, the real damage was done with consistent repetition in the media of the original faux pax. This made it stick with the public.  It is unlikely the mainstream media is going to do that to Barack Obama.  The heavy lifting on that will have to come from the Romney campaign.

What I did find very interesting in the Obama statement is how closely it resembles dialogue that is in Ayn Rand's book, Atlas Shrugged, that I have written about before.   Ayn Rand's 1957 novel is about the collapse of society as the most productive citizens go on strike, led by the mysterious John Galt, rather than continue to be exploited by a controlling government.  Rand grew up in Russia and saw the flaws of communism, socialism, statism and the welfare state first hand in the aftermath of the Russian Revolution of 1917.

Remember that this is a book written in 1957 that is set in a future USA whose economy is collapsing as the most productive people in society slowly check out rather than deal with increased taxation, regulation and the general overreach of government.    


Rearden (in the dialogue below) is the owner of a steel company who has invented and produced a wondrous new metal alloy for rail lines that is making high speed rail travel a reality (remember this is written in 1957).  What has government done in response?  A raft of new laws have been passed directed at Rearden and his success.  He must limit his output of the new metal.  Another law requires him to sell "a fair share" to everyone who requests it, regardless of output.  There is no way that his company can survive long term if they have to follow the new rules.


Consider this dialogue which is in Part I, Chapter 9 of Atlas Shrugged as it is argued why government is fair in taxing and regulating Rearden the way that they are. (Credit to Chris who made this comment to an Ann Althouse blog who pointed this out)

“He didn’t invent iron ore and blast furnaces, did he?”

“Who?”

“Rearden. He didn’t invent smelting and chemistry and air compression. He couldn’t have invented his Metal but for thousands and thousands of other people. His Metal! Why does he think it’s his? Why does he think it’s his invention? Everybody uses the work of everybody else. Nobody ever invents anything.”

She said, puzzled, “But the iron ore and all those other things were there all the time. Why didn’t anybody else make that Metal, but Mr. Rearden did?”

It is almost eerie how closely President Obama remarks parallel a book written over 50 years ago as a cautionary tale on the dangers of socialism and collectivism.

This election, perhaps more than any other since the election of 1860, is about a choice of two very different paths for the future of our country. President Obama for the most part cleverly disguised his true intentions and agenda four years ago. His speech in Roanoke should make it clear that he wants to take the country in a direction that is far removed from the principles that made us the greatest country in the history of mankind.

The only question left is whether a majority of the voters in this country still believe in personal initiative, freedom, accountability, creativity, rational self-interest and individual incentive as the foundations of success-both for individuals and for societies.

President Obama does not seem to believe that these principles have been that important in creating what made the United States great. He seems to think it has been luck. More on that in Part II of "You Didn't Build That".

Look Out Below

I like two things about politics in particular.  I am a policy wonk and I like to think deeply about policies that will do the most to advance our country and our citizens.  I also love data, especially when you can dig into the numbers and get to a point of where they can provide context and meaning to the bigger political picture.

A little over a month ago I took my first in depth look at this year's Presidential election in my blog post, 150 Days and Counting.   There are still over 100 days until the election which is an eternity in a political campaign.  Political races have dynamics that make predictions this far out a risky proposition. However, in that post I looked at the math and stated that I saw three potential outcomes.  A squeaker for Obama, a squeaker for Romney or a comfortable win for Romney.

It is generally conceded that President Obama can not run on his record on win.  He also is not going to be able to use his "hope and change" theme of four years ago.  The Rasmussen Presidential Approval Index has shown that around 40% of likely voters strongly disapprove of the way President Obama is performing as President.  This has been the case pretty consistently for the last three years.

These types of numbers would normally spell doom for an incumbent.  However, Obama has stayed even, or even leads, in many polls.  How can this be?  A big reason is that many people still do not know Mitt Romney.  People are slow to turn out an incumbent,  Human beings feel more secure with the familiar.  It is always a risk to venture away from what you know.

The other factor that has been helping President Obama has been a relatively high favorability rating.  People might not approve of the job he has done as President but he has generally been considered a likeable individual.  Someone that you would like to have a beer with or have as a guest in your home.

Despite the fact that over most of the last three years more than 40% strongly disapproved of his job performance, he has pretty consistently had more than 50% of voters saying that they have a favorable opinion of the President.  You can see all the favorability polling data going back over the last few years via Real Clear Politics.  Therefore, this seems to be the key factor underlying President Obama's position in the polls despite his record in office and the poor economy.

With this as background, I was very interested to see the CBS News/NY Times poll of July 11-16 that was released recently.  The headline of the poll showed a 47-46 Romney lead.  However, the internal data in the poll got my attention.

It showed Obama at a -12 in favorability with only 36% viewing him favorably and 48% viewing him unfavorably.  This is also a poll that oversampled Democrats (33%) over Republicans (27%) with 41% stating they were Independents.

In April the same poll showed Obama with a -3 in favorability with 42% favorable and 45% not favorable.  That is a pretty significant erosion of support.

Governor Romney also has a net negative favorability rating of -4 in the same poll.  32% view him favorably and 36% have an unfavorable opinion of him.  However, while 87% have a firm opinion of Obama only 68% of voters have an opinion about Romney.  There still is a significant opportunity to shape this opinion, pro or con, in the coming weeks and months of the campaign.

The interesting thing about these results is that this poll was taken in the same time frame that the Obama campaign stepped up their personal attacks on Romney and Bain Capital.  They even suggested that he might be a "felon".  Could this indicate that Obama is in a box?  He can't run on his record but he also can't attack vigorously attack Romney either or he risks eroding his "favorable" rating that is keeping him above water?  Have these attacks on Romney actually hurt Obama more than they hurt Romney?

I saw another interesting data point in this article by Mike Flynn at Breitbart's Big Government.com.  Flynn writes about the significance of "undervotes" in uncontested primaries.  He provides an analysis of the undervotes in Pennsylvania's Democrat primary when President Obama was uncontested on the ballot as an indicator that he may be in serious trouble in Pennsylvania.

One of my first jobs in politics--decades ago--was to analyze the "undervote" in uncontested primaries. An undervote happens when a voter fails to register a vote in a particular primary contest when there is only one candidate on the ballot. In essence, the voter simply skips over the race. It happens either because the voter hasn't heard of that candidate or they have some basic opposition to that candidate. Our general rule of thumb was that a candidate who had more than 10% undervote was in serious trouble. In many counties in the recent Pennsylvania primary, Obama's undervote was 30% or higher. 

If you recall, President Obama's problems in the Democrat primary were not confined to just a state like Pennsylvania.  An inmate in a Texas prison won 41% or the vote against Obama in the West Virginia primary, a little known Tennessee attorney got 42% against him in Arkansas and 42% of Democratic voters checked off "uncommitted" in Kentucky's primary.  

This map of Pennsylvania shows the "undervote"by county.  You can see that the undervote was very small in the heavily Democratic Philadelphia urban counties.  However, in Western and Central Pennsylvania the undervotes are huge.  These are areas where working class people "cling to guns or religion" as Obama described them in 2008.

I talk to many people every day that don't think that President Obama can be beaten.  However, the data shows that 2012 is not 2008.  The data seems to indicate he is hanging by a thread. Unemployment is 8.2% and does not appear to be improving.  Economic growth is lagging. Consumer confidence is falling.  His favorability is falling.  He has fundamental problems with the Democratic base in a number of states.

Governor Romney needs to close the deal.  He needs to better connect with the voters, let them see his heart and mind and better articulate a path forward.  If he can do it, President Obama will be a one-term President.  It is not written in the stars but the data show the weak foundation on which this President is going to be running this campaign on.  His upside appears to be very limited due the high levels of disapproval that have persisted for over three years.  However, the downside looms much larger for Obama.  Charm can only take you so far.

My advice to President Obama right now?   Look out below.  Whatever he has built (did he really build it?) has a very weak foundation.

Grin and Bear It

I have commented before about the immense power of the world wide web.

It literally puts any information in the world at your fingertips.  It connects you with great minds, great thoughts and great ideas as never before.  It is as if you have millions of people at hand to call on for another perspective or to solve a problem.  It provides a platform to extend ourselves while the technology continues to extend itself.

It also provides easy access to the amazing wit, humor and creativity of the human race like never before.

President Obama has become a pretty easy target of the witmeisters (did I just invent a word?-NO-see right below) with his comments of last week where he said,

" If you’ve got a business, you didn’t build that.  Somebody else made that happen. " 

Here are just a few examples of the humor and creativity out there on the internet reacting to that statement.

Nice computer.  Who is that interloper with it?

Thomas Edison should never have left Milan,Ohio to build that bulb in New Jersey.  Somebody else made it happen, anyway.  What was the point of all that effort?

We might as well teach these lessons early.  All the good ideas have already been thought of already.  Besides, why would we want anyone to think they need to work hard to move up the economic ladder?

Of course, to be fair, there are some things in this world where it really can be said that you did not earn it and somebody else did made it happen.

Moving to another subject, this ought to sum up a lot of people's feelings on the Obamacare penalty tax.

"They actually believed me when I said it wasn't a tax"!

Finally, sometimes you find someone that has found a way to convey a message that is simple, straightforward, and a little too scary for the good of our Republic about our choice in November.

It never hurts to laugh a little along the way.  There are plenty of reasons to grin and bear it right now.

Play Chess Rather Than Checkers

President Obama has called for a one year extension of the Bush tax cuts for the "middle class" which he defines as couples making less than $250,000 per year.

Under current law, all of the Bush tax cuts expire for all taxpayers on January 1, 2013.

He argues that there is agreement between both Democrats and Republicans on this point so that Congress should go ahead and extend the cuts for the "middle class". Of course, by doing this those making over $250,000 will see a significant tax increase next year.

(Note-these tax increases are in addition to the new 3.8% flat Medicare tax on the same taxpayers that is  a part of Obamacare on all investment income that is effective 1/1/13.  The same taxpayers must also pay an additional .9% Medicare flat tax (beyond what they are already paying right now) on their salaries and wages effective in 2013 that is also a part of Obamacare).

President Obama argues that the Republicans need to compromise on their position that the Bush tax cuts should be extended for all (including the rich) so as to not hold middle class taxpayers hostage.

He has also stated that he is interested in bringing down the federal deficit. Remember how he stated in the 2008 campaign that he was going to cut the deficit in half?  Never mind that the deficit was $458 billion in fiscal 2008 and has not been below $1 trillion in any year of his Presidency.

The Republicans also very much agree on the need for deficit reduction.  Another point of agreement with President Obama.

I have my own idea about a compromise that the Republicans should offer to President Obama.

1. Agree to extend the Bush tax cuts permanently for everyone right now.
2. Agree to increase taxes on those making more than $250,000 at the beginning of the first calendar year after the end of the first future fiscal year (ending September 30) in which federal government spending is less than 20% of GDP.

This provides the middle class tax cut everyone wants.  This proposal also provides a deficit reduction target that everyone states they want but which no one does anything about.  It provides the tax increase on the rich that President Obama wants.  However, it also assures the Republicans that the tax increase will only be used to facilitate deficit reduction and not fund greater federal spending.

President Obama states that he merely wants to return the tax rates on the rich to the same as they were in the Clinton Administration.  The Republicans should counter that they merely want to return federal spending to the level of spending during the Clinton years (20% or below).  This compromise proposal would allow both parties to reach their stated goals.

The chart below shows federal spending by President from Carter to Obama.  We are currently spending over 24% of GDP.  During the Bush 43 years we were spending about 20% of GDP.  In the last four years of the Clinton administration, we were actually below that level of spending each year.  That is why a 20% of GDP target seems imminently reasonable as a target.

This chart also should put to rest President Obama's claims that he is a misunderstood fiscal conservative who has been restraining government spending.

Source:  US News &  World Report

I have no doubt that many Republicans will gnash their teeth and howl about this proposal.   They are adamantly opposed to any tax increases.   I understand and respect their view because every time tax increases and spending reductions are paired together in a so-called "balanced" package the tax increases go into effect immediately and the spending reductions never seem to get implemented.  That is why the spending cuts must come first or there will be no tax increases.

Spending under this proposal would have to be reduced by about 4.3% of GDP before any tax increase could occur on the rich.  That is equal to about $700 billion in annual spending.  The tax increase on the rich is projected to bring in about $85 billion per year.  That means that we would get about $8 of spending reductions for every $1 of tax increases out of this proposal.  And the spending reductions would have to come first.  There would also be no tax increases now when the economy can ill afford any on the job creators in the economy.

A very smart man I worked for used to tell me to play chess rather than checkers when negotiating.  In other words, know where the end game is and think three steps ahead of the other guy.  The President thinks he is being very clever with his class warfare tax policy.  He thinks he can use this simple stratagem to jump ahead in the polls.

It is time for the Republicans to start playing chess.   Give the President what he says he wants.

He said he want to compromise with Republicans in Congress.  He's got it.

He said he wants a middle class tax cut.   He's got it.

He said he wants he wants a plan for serious deficit reduction.  He's got it.

He said he wants a tax increase on the rich.  He's got it.

Pass the bill and send it to him for his signature.

He has two choices.

He signs and gives the Republicans what they want ( an extension of the tax cut for all taxpayers) and  spending reduction targets as well.  The tax increase on the rich would not take effect until spending was substantially reduced.  This might be years in the future the way Washington operates.

Or

He vetoes the bill and has to explain why he got everything he says he wanted but would not sign the bill.  Who is the real obstructionist in Washington?   

Checkmate.

Ten Internet Trends Worth Knowing

Ten internet trends worth knowing.

• There are 513 million internet users in China.  215 million of them were added since 2008.  Total population penetration is 38%.  By contrast, the United States has 245 million users but only 15 million were added since 2008.  Penetration is 79% of the population.
• There are 121 million internet users in India.  Over half have been added since 2008.  However, only 10% of the population is using the internet.  There is a lot of potential in India.
• There are 208 million 3G mobile phone subscibers in the United States equal to 64% of the population.  Japan has the next highest total at 122 million subscribers but that is a 95% penetration rate.  South Korea is at 85% penetration, Portugal at 78%, Australia at 76% and Sweden at 73%.  On the other hand, China is at 6%, India at 4% and Russia at 8%.
• Almost 70 million iPads were sold in the first 2 years after launch.  By comparison, only 20 million iPhones and about 1 million iPods were sold in their first 8 quarters on the market.
• Android phones have outsold iPhones globally by a factor of 4x in their first 13 quarters after launch.
• There are 953 million smartphones in use in the world compared to 6.1 billion mobile phones.  Smartphones still have a huge upside in the world, particularly in China and India.  The higher cost of the equipment is the biggest obstacle for growth in these countries.
• 29% of U.S. adults own a tablet or eReader, up from 2% 3 years ago.
• 10% of internet traffic is now over mobile devices.  Only 1% of internet traffic was on mobile devices as recently as December, 2009.
• 7% of people's media time is spent on print but 25% of current ad dollars go to print.  Conversely, 10% of people's media time is spent on mobile but only 1% of ad spend is directed at mobile.  This is huge opportunity.
• In 1994 there were about 800 million landline telephone lines in the world and less than 100,000 mobile phones.  In 2009, there were 4.7 billion mobile subscribers globally and about 1.2 billion landlines.  Landlines peaked at 1.3 billion in 2006.

All of these factoids are included in an excellent presentation prepared by Mary Meeker of Kleiner Perkins Caufield Byers, the Silicon Valley venture capital firm.

The world is changing at an accelerating pace.  Meeker documents it as well as anyone can.  The entire presentation is 110 slides but is well worth your time.  You should definitely look at her slides on how the internet is resulting in the re-imagination of almost everything. (Slides 33-84).

Photo Shop or Not?

I was browsing through the June, 2012 issue of Vanity Fair a couple of weeks ago and came across this picture of Barack Obama and his girlfriend, Genevieve Cook, when he lived in New York City shortly after graduating from Columbia.  The photo accompanied an excerpt from David Marannis' book, Barack Obama: The Story, that was recently published.

Source:Vanity Fair

Am I hallucinating or is this photo obviously photo-shopped?  Obama's head seems to be completely out of proportion to the rest of the body.  If you look closely at the original in the magazine it also appears that there is a wedding band on the left hand of "Obama".

I was curious as to the source of this photo.   There was no credit given in Vanity Fair other than the reference to the Marannis book.  Therefore, I drove over to the local Barnes and Noble to view the photo in the book and see who Marannis credited the photo to. Tellingly, there was no photo credit given even though almost every other photo in the book had a photo credit.

I am not a conspiracy theorist or birther.  I just look at facts, logic and ask questions when things don't seem to add up.

Is the image photo-shopped?   Any expert opinions out there?

If it is, why would someone go to all of the trouble to do this?

Where did Marannis get the photo?  Why didn't he give any photo credit for it in the book?

Why does it seem that there are always more questions than answers when looking at the background of Barack Obama?  They just never seem to go away.  The Marannis book continues the trend by seeming to show that a good part of Obama's memoir, Dreams From My Father, "is contradicted by the people and events in his life".

What is especially interesting when you consider all of this is the statement Obama advisor David Axlerod made last week in which he stated that "Mitt Romney is the most secretive candidate since Richard Nixon".

Is he really serious?  We know infinitely more about Mitt Romney's background than Barack Obama and Romney has not been the President of the United States for almost four years.

John Hinderaker of Powerline clearly does not think so in his post Who's Secretive?

Was Nixon a secretive candidate? Not that I recall. It was John Kennedy, not Nixon, who kept secret a serious medical condition (Addison’s disease) that almost certainly would have cost him the election had it become known. And, of course, it was Kennedy, not Nixon, who carried out endless secret dalliances both on the campaign trail and while in office. But let’s compare Nixon with Obama: Nixon didn’t publish a fictional memoir in his thirties to create an essentially false identity for himself. How secretive is that?

The litany of Obama’s non-disclosures is familiar. Unlike other recent presidential candidates, to cite just one example, Obama has kept his college and law school records under wraps. But that is relatively trivial. It seems to me that another instance of Obama’s secretiveness is much more significant: his refusal to release his medical records. Almost all major party nominees in modern election cycles have made their medical records public. (Bill Clinton is the notable exception.) Mitt Romney has said that he will release his. Yet in 2008, Obama did not make public any medical records at all; instead, he produced a one-page letter from a doctor to the effect that he is in good health.

In the end, all of this is just a trivial side show.

We may not know everything there is to know about what shaped Barack Obama into the man he is today. However, in his time in office, we have gotten to know his views, his attitude and his abilities very well.  We don't need to know too much more to know that he has not produced the kind of leadership and results the country needs from its President right now.

Photos can be photo-shopped.  Barack Obama's record and results as President of the United States cannot.

It Doesn't Have To Be This Way

Another month and another anemic jobs report.  

Unemployment is at 8.2% overall.

Unemployment for African Americans is 14.4%.

Unemployment for Hispanics is 11.0%.

Unemployment for teenagers is 23.7%.

Unemployment is 14.9% if you include "all persons marginally attached to the labor force, plus total employed part time for economic reasons."

The most interesting statistic in the jobs report is the fact that in June more people went on the disability  rolls with Social Security (85,000) than the number of new jobs created in the month (80,000).

This actually continues a trend that started three years ago where the disability ranks have consistently outpaced job growth throughout the so-called Obama recovery.  Recall that an $800 billion stimulus package was passed in February, 2009 that was supposed to reduce unemployment to 5.6% by this time.

This chart shows that since June, 2009, 3.1 million workers have signed up for disability benefits while only 2.6 million new jobs have been created in the U.S. economy.  Of course, none of these 3.1 million former workers are now considered unemployed and are not in the unemployment statistics.

Source: Investor's Business Daily

Why is this important?  As I have written before, the unemployment rate is a flawed number the way it is calculated today.  It only considers those persons who are actually seeking work.  It does not include those that are too discouraged to continue looking for work.  It does not include those who become discouraged and go back to school or seek retraining for a new occupation.  It does not include those who become discouraged and file for disability.

However, every American is a mouth to feed, clothe and shelter.  If there are fewer people pulling the wagon and more people in the wagon, we have a fundamental problem.  The money gets spread around in thinner and thinner increments.  That is just basic economics.

You can see the issue when you look at the employment-population ratio.  This compares those employed to the entire population 16 years and over.  It currently stands at 58.6%.  In 2000 it was close to 65% and it was about 63% before the recession began.

Source:  James Pethokoukis, American Enterprise Institute

A 4% change since 2008 may not seem huge.  However, the civilian noninstitutional population is 243 million.  4% of this number equates to almost 10 million more people not working compared to four years ago.

Let's be conservative and calculate that each of these people need at least $1,000 per month for food, shelter and clothing.  That is $120 billion per year that has to come from somewhere if they have no income from a job.  If they were working and each made $40,000 per year and were paying taxes (income, social security, sales, gas etc) at 25% overall, that would be an additional $100 billion of government revenue.   You have a swing of almost one-quarter trillion dollars.  

What is most amazing to me is that the polls continue to show that the Presidential race is a toss-up.  

Governor Romney said it well in his response to the jobs data on Friday.

"It doesn't have to be this way."

There are too many people who seem to believe that nothing can be done about our current situation.  They do not think that it matters who is elected.  How else do you explain the fact that African Americans, Hispanics and Young Americans were large voting blocs for Obama in 2008 and apparently most are going to continue to support President Obama reelection based on recent polling data.  

These groups are suffering the most under President Obama's economic policies.

Don't they realize that it doesn't have to be this way?

A Candle In The Kitchen

I was reviewing my investment statements for the second quarter and noticed my investment return for the year on a money market fund I own.

I have almost $14,000 in this Treasury money market fund.

My total return for 6 months----66 cents!  This is an annualized return of .01%.  That is 1/100 of 1%.  At that interest rate it will only take me about 7,000 years to double my money.

The policies of Ben Bernanke and the Federal Reserve are killing savers.  I have written previously about this subject here and here.

These policies are also accelerating the demise of Social Security as we know it.  They are also preventing our politicians from facing the tough decisions that need to be made.  As a result, the can is being kicked further down the road.

Social Security has a so-called "Trust Fund" which is owed about $2.75 trillion from the federal government.  These special treasury securities carry an interest rate that is set by a formula that averages market based bond yields over a rolling three-year period.  This formula was established in 1960 to  insulate the Trust from transitory changes in interest rates in order to provide stability to the Trust Fund.

This formula has worked to the benefit of the Trust Fund over the last few years as interest rates plunged.  However, we are now over three years into the low-rate Fed policy and the interest income outlook going forward will no longer work to the benefit of the Trust Fund.  For example, last month $135 billion of securities earning an average yield of 5.64% were replaced with bonds yielding only 1.375%.

Bruce Krasting writes an excellent blog on the financial issues of the day that I read regularly.  His most recent post is on the impact of the Fed low interest rate policy (Krasting calls it ZIRP-the Zero Interest Rate Policy) on the Social Security Trust Fund (SSTF) which highlights all of the above and much more.  Here is how Krasting sees it looking forward.

As a result of the Fed’s extended ZIRP policy, and the SSA's interest rate setting formula, it is now a certainty that interest income at SSA is going to substantially drop over the coming decade. The problem is that SSA has provided projections for its interest income over this time period that don’t jive with this reality. From the 2012 SSA report to Congress:

The SSTF believes it will earn an average of 4% over this period. That is not possible any longer. I calculate that the most SSA could earn is an average of 2.3% (it could be significantly lower). The drop in yield translates to a reduction in income of $535B over the forecast period. That’s a lot of dollars.  

Consider again the base case provided by SSA in April. The following compares the size of the trust fund based on SSA’s estimates and my adjustments for what interest income will be (everything else is constant).

Based on a realistic assessment of interest income at SSA, the trust fund tops out in 2015, its peak value will be ~$2.823B. The SSTF has reported that the TF will top out at $3,061B, and that milestone will not be reached until 2021. Essentially, the train wreck will happen six years earlier then assumed, and the TF will be $250B short. It gets worse.

The other key ingredients in the SS "pie" are tax receipts from workers and the amount of monthly benefit payments (the assumptions used is that GDP growth will average 4%, and unemployment falls to 5.5% -  no recessions over the ten-year horizon). These are not realistic assumptions. This means that once the SSTF hits its peak in 2015, the run off in assets will happen very quickly. 
The SSTF has stated that the date in which the TF falls to zero will be 2033. The actual termination date of the TF is much closer than that. It could come as early as 2023.

I referred to it as a "so-called Trust Fund" above.  That is because there is nothing about it that anyone should have any trust in.  There are no assets in the Trust Fund beyond a promise from the Treasury to make good on a future payment.  The promise is only as good as the government's ability to raise future tax revenues (or borrow even more money) to transfer to Social Security.  Therefore, the promises will only be met if the next generation is willing to absorb significantly higher Social Security taxes than are being paid today.

Of course, in order to maintain all of the federal spending we have today on things other than Social Security, that also means significantly higher Medicare taxes and income taxes as well.  We also have to figure in the new taxes to help pay for Obamacare and its increase in government spending.  Something has to give.  Spending levels must be reduced or taxes will need to be sky high in the future.  Oh, to be young and have all of this to look forward to!

One could argue that since the Trust Fund is nothing but an illusion, it does not really matter what the interest crediting rate is on the bonds owed to Social Security.  However, the illusion that everything is fine with Social Security because it has $2.75 trillion in its "Trust Fund" masks the danger ahead.  It also allows politicians like Harry Reid to say there are no problems with Social Security.  Rest assured everyone, Senator Reid states that he is willing to look at fixing Social Security in two decades!

The same can be said for Bernanke's low interest rate policy which is permitting the federal government to finance its massive debt at unrealistically low rates.  It is another illusion that is permitting our elected representatives to avoid doing what has to be done.   For example, with nearly $16 trillion in federal debt, if interest rates were 3% higher across the board (close to historical averages) the annual federal deficit would be almost $500 billion higher.  This year's estimated $1.1 trillion deficit would balloon to $1.6 trillion from higher interest rates alone.

In effect, we have a house that is fully engulfed in flames but the illusions of the Trust Fund and the Fed's ZIRP make it seem that the only thing burning is a candle in the kitchen.  At least that is how our elected officials are acting.

Of course, all of this can be solved if voters lit a fire under the collective rear ends of our elected representatives.  We truly get the representation we deserve.  We soon will get other things that we deserve.  There are going to be a lot of promises that will not be kept.  Or there are going to be a lot of new taxes.  Start preparing or start voting to change what is happening in Washington.

Improper and Wicked Projects Redux

I wrote previously about The Original Argument which is an updated writing of the Federalist Papers.  I have moved around the book reading different Papers as I have time.  It really is unfortunate that more people are not familiar with the Federalist Papers for in this contemporaneous writing we have the theories, rationale and reasoning underlying our Constitution. What is truly amazing in reading the Federalist Papers is how well our Founders understood human nature.  Power, politics, greed, fallibilities, bias, conflicting interests, oppression. There is nothing going on today that they did not anticipate.

Due to the intelligence and insights of our Founding Fathers they wrote a document that considered all of the above and more in writing the U.S. Constitution.  They knew that instability, injustice and confusion within the institution of government had caused many to fail.  They were determined to build a governmental structure that could endure for the ages.

Federalist Paper #10 was written to describe "How the Union Will Act as a Safeguard Against Domestic Division and Rebellion". They understood that opposing political factions were the greatest potential threat to any government and that in many governments the only redress was violence. They wanted to insure that factions could not wield power that would be dangerous to either the rights of other citizens or the common good.  What did they see as the most common and tangible source of potential division? The conflict between rich and poor. Here are the exact words from #10.

The most common and durable source of factions has been the various and unequal distribution of property. Those who hold and those who are without property have ever formed distinct interests in society. 

Where did they see the most danger for a majority to trample on the rights of a minority?  Taxation.

The apportionment of taxes on the various descriptions of property is an act which seems to require the most exact impartiality; yet there is, perhaps, no legislative act in which greater opportunity and temptation are given to a predominant party to trample on the rules of justice. Every shilling with which they overburden the inferior number, is a shilling saved to their own pockets. 

The inferior minority they are talking about?  Have you heard about the so-called 1% that is castigated continually by so many?

The Founders understood that those that governed us had to be a cut above to balance and mediate these conflicting interests and put the public interest above any special interests.  However, they also knew that this was naive. The Original Argument modern translation puts it this way.

Enlightened statesmen will not always be in power, and even if such mediation could happen, it would rarely take place with long-term interests in mind, since the immediate "here and now" interests of the party in power would most likely win the day at the expense of the rights of the other party, or the good of the whole.

Our Founding Fathers were one smart group.

They also knew that there was little they could do to prevent factions from occurring.  That could only be done by either limiting liberties or insuring every citizen has the same opinions, feelings and the same interests. Neither was acceptable to the Founders.  They had no interest in preventing the causes, which is what Communist and Totalitarian governments do.  They focused on controlling the effects of factions.  Thus, they constructed a republican governmental framework with an ultimate goal of securing both the public good and private rights against the dangers of an oppressive majority faction.  Everything in the Constitution was built on this foundational principle.

They built a government which derived all of its power directly or indirectly from the People, administered by representatives who hold their offices at the pleasure of the People, for a limited period of time, or during good behavior.  Using different time periods for holding office, including the separation of powers between the three branches of the federal government and limiting the power of the federal government relative to the states were all important foundational principles to achieve their overarching goal of facilitating majority rule but protecting minority rights.

Perhaps most applicable to today is what Federalist #10 says in the second to last paragraph.  It explains why they set up the republican form of govenrment we have and not a democracy or parliamentarian system. It literally stopped me in my tracks when I read it.  I re-read it several times in The Original Argument and then went to the actual Federalist Papers to read it exactly as it was written.  There could not be a better example to show how far we have deviated from the path the Founders established and why they set up safeguards in the Constitution to protect the People.  It reads as follows with the bold emphasis being mine:

The influence of factious leaders may kindle a flame within their particular States, but will be unable to spread a general conflagration through the other States. A religious sect may degenerate into a political faction in a part of the Confederacy; but the variety of sects dispersed over the entire face of it must secure the national councils against any danger from that source. A rage for paper money, for an abolition of debts, for an equal division of property, or for any other improper or wicked project, will be less apt to pervade the whole body of the Union than a particular member of it; in the same proportion as such a malady is more likely to taint a particular county or district, than an entire State.

How much more relevant can you be to what we have seen in recent years in this country, most particularly in the Obama Administration?  The Founders found all of these to be "improper or wicked projects"by dangerous factions.  These were the types of government abuses they were trying to prevent.  However, we see calls for each of these "projects" almost everyday from those in power in Washington.

• a rage of paper money (what is the Federal Reserve doing?)

• an abolition of debt (what was done to the secured creditors in the GM and Chrysler bankruptcies, with the bailout of Wall Street?  What do we hear should be done about mortgage and student loan debt by many liberals?)

• for an equal division of property (Redistribution of income and wealth through a focus on taxing the rich, in particular the very small 1% minority)

Isn't it interesting that each of these "improper or wicked projects" is also at the core of what motivated the Tea Party?  Terrorists?  I think not.  These are the sons and daughters of the Founding Fathers united against the very factious leaders our forefathers warned us about.

It seems that if we are looking for guidance on how to solve are many problems we should return to some of our key foundation principles.  It is right there in the Federalist Papers for all to see.