Friday, November 30, 2012

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?

Thursday, November 29, 2012

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

Wednesday, November 28, 2012

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.

Sunday, November 25, 2012

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

Thursday, November 22, 2012

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. 

Monday, November 19, 2012

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

Thursday, November 15, 2012

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.

Wednesday, November 14, 2012

Democrat Deficit Reduction Rip-Off

It looks like President Obama wants to do another typical Democrat Deficit Reduction Rip-Off of the taxpayers.

Here is what he said at today's press conference according to the Associated Press.
At the news conference, he laid out a two-step process for an overall compromise — immediate extension of all the expiring tax cuts except the top rate, followed by a comprehensive agreement in 2013 to overhaul the tax code and the government's big benefits programs, which include Medicare, Medicaid and Social Security.
Notice that he expects the Republicans to agree to the tax increase now.  However, any overhaul of the tax code and entitlement spending reforms would wait until 2013.  President Obama has to be kidding.  If the Republicans agree to that deal they ought to just hand over the keys to Washington to Obama and the Democrats and go home.

The CBO estimated in August, 2012 that ending the Bush tax cuts on those making over $250,000 would result in increased revenues of $823 billion over the next ten years.  Combined with interest savings of $127 billion, this is projected to reduce the budget deficit by a total of $950 billion.  However, President Obama is now saying he wants $1.6 trillion in new taxes.   Is this a bait and switch or what?

White House press secretary Jay Carney said the president would bring to the table a proposal for $1.6 trillion in new taxes on business and the wealthy when he begins discussions with congressional Republicans, a figure that Obama outlined in his most recent budget plan. The targeted revenue is twice the amount Obama discussed with Republican leaders during debt talks during the summer of 2011.
Carney said the figure, combined with $1.1 trillion in spending cuts already signed into law, would reduce deficits by $4 trillion.

That is double the amount of tax increases he campaigned on.  Who is going to get stuck with that bill?
Bruce Krasting thinks that Obama is planning to expand the Alternative Minimum Tax.  The AMT is already in play for the 2012 tax year because the tax patch that limits its applicability ended at the end of 2011.  A one-year exemption was granted for 2012 but the exemption is not effective if it is not "re-patched" before year-end.  This was part of the debt ceiling deal.

Right now the AMT only applies to about 4 million taxpayers.  I am one of the lucky ones that get to pay it each year.  That number could go to 33 million if the patch is not fixed.  That tax bill would also be due for the 2012 tax year.  This is not a 2013 issue.

In addition, the President said he was interested in a balanced approach.  Simpson-Bowles and others defined that as involving at least $3 of spending cuts for every $1 in tax revenues.  History has shown that a ratio of at least 4:1 or 5:1 has had the most success in getting a country back on track that is in the fiscal shape we are in. 

It appears to me that with interest expense savings the revenue side of his equation is going to be about $2 trillion.  They are claiming they have already "saved" $1.1 trillion. (where is it?).  Does that mean that all the President is going to propose is another $1 trillion of cuts?  President Obama has to really be kidding.

I have stated countless times over the last two years that I am not opposed to revenue increases as part of a balanced approach to solving our budget problems.  However, if this is going to be done, it must be accompanied with real, substantive spending cuts and budget reforms.  These cuts also have to be real and they have to done unfront.  No more back end spending reduction deals.wwUnder no circumstances should any tax increase be traded for a future spending cut.  No way.  No how.

There clearly is a practical problem right now in that there is no time to put together any comprehensive tax or entitlement reform before year-end.  However, there is no reason that the Republicans should accept a tax increase for a promise. That is why I wrote previously that they should insist on the repeal of Obamacare in trade for any tax increase before year-end.  If the President wants the most important concession from the Republicans then he must be prepared to give his most important concession.

If the President is unwilling to make this concession and wants the tax deal before year-end, then Obamcare should be deferred for one year and the tax increase on the rich is only effective for one year conditioned on the tax and entitlement reform taking place.  If it occurs, Obamacare comes back on line.  If the reforms do not happen, it is permanently repealed as is the tax increase.

I am a reasonable man.  I have long been willing to accept some revenue increases to get to a fair and balanced budget plan..  However, I am not willing to accept a tax increase on a promise to do something on spending, tax reform or entitlement reform next year.  That is not reasonable.  If spending and reform issues have to wait, the tax increase can wait.  It is that simple.

It looks like we are on the road to another Democrat Deficit Reduction Rip-Off.  The Republicans better not let it happen.  They also better start making their position crystal clear to the American people.

Monday, November 12, 2012

Horse Trading at the Not So OK Corral

What are House Speaker John Boehner and Senate Minority Leader Mitch McConnell doing to prepare for negotiations with President Obama on the looming fiscal cliff?  Not much of anything that makes sense if you ask me.  It is horse trading time at the Not So OK Corral and they better understand their horses.

Successful negotiations require give and take.  A successful negotiator has to be realistic as well as understanding the strengths and weaknesses of both their position and the other party.  Win-win negotiations are optimal but they are not always possible.

I have done a lot of negotiating over the years and was fortunate to attend an excellent course on negotiating early in my legal career.  One of the first exercises in that course involved each of us being given facts about a legal case we were asked to settle with another party.  We were split into pairs with one lawyer acting as plaintiff's counsel and the other as defendant's counsel.  There were about 24 attendees so there were about 12 different negotiations going on.  Each plaintiff's counsel was given the same facts.  The same was true for the defendants.  We were given an hour to reach a settlement.

After the hour we came back and reported on the settlement in each negotiation that invovled a suit for personal injury. The range of settlements were astounding even though the facts were the same in each case. As I recall, the plaintiff's got anywhere from $1,000 to $1,000,000.  It was quite a lesson in the art of negotiations.

That exercise really showed that successful negotiations are not so much about the facts but how you use the facts.  They are also about understanding yourself and your adversary in the negotiation.  Most particularly, knowing your adversary and putting yourself in their head.  Most people worry too much about their position. Winning a negotiation usually involves knowing the true motivations and vulnerabilities of the other side and playing against them.

I also learned that there are two predominant negotiating styles that most people use.  There are those that look at a negotiation as a win-lose proposition.  They understand that there will be give and take so they give very little up front.  They know you have to meet in the middle but they want that middle to be closer to them when it is reached.  Every inch they give is painful to them but they have a lot of room to negotiate.

The second style people use involves those that look for the win-win.  They try to look at all sides of the issue and have a sense of where the middle is when they begin the negotiation.  Their first offer is likely to be close to the middle because they want to be fair from the outset and look for the middle ground with the other party.  They typically do not have as much room to negotiate because of where they start.

It is important to know what negotiating style you feel most comfortable with.  However, it is even more important to figure out what style your adversary is using.  Negotiations involving individuals with similar negotiating style usually work out well.  However, negotiations where one person is using win-lose and the other is deploying win-win can turn out badly.  That is particularly true for the win-win person negotiating with the win-lose.  There is a real danger in getting taken to the cleaners.  Therefore, a win-win negotiator must change their style if it is a win-lose negotiation or they will be the one to lose big.

That brings us back to Speaker Boehner and Senator McConnell.

Boehner immediately stated after the election that he would accept raising tax revenue in a broad deal.  He also seemed to take Obamacare off of the table by saying "Obamacare is the law of the land".  That seems an awfully soft negotiating position considering the facts.

McConnell has been more direct and blunt.  He has stated that Republicans "won't agree to any tax increases that will hurt the economy".  He then adds that "we Republicans in the House and Senate think we have a voter mandate not to raise taxes".  That seems an awfully hard nosed and unrealistic position considering Republicans lost seats in the Senate and the Presidency.

Of course, we also have Obama insisting that he has a mandate to raise taxes on the rich because of his re-election.  He also likes to always state that this is necessary to achieve a balanced approach with spending cuts to cut the deficit.

What are the facts?

Both sides need a deal or we are heading for real fiscal and economic crisis.

If it comes to this who will be blamed?  Nobody wants this to occur.  However, it is important to not be the party that is blamed if a deal is not reached.  The House Republicans have the most to lose right now because they all have to run for re-election in two years.  Obama never has to face the voters again.

63% of voters in the Presidential election stated that taxes should not be raised to help cut the budget deficit. This included 37% of Obama's voters and 61% of Romney's.

On the other hand, when asked in the same poll if income tax rates should be raised, 13% responded they should be increased for all, 35% not increased for anyone and 47% wanted to increase them only on the rich (that is a real shock!).

Asked about Obamacare, 49% stated that it should be repealed in whole or part with 83% of those voting for Romney.  44% of all voters want to leave Obamacare alone with 87% of Obama voters saying they wanted it retained.

How would I approach the negotiation?

No one is a stronger fiscal conservative than I am.  No one is a stronger opponent of tax increases. However, I am a more concerned about the budget deficit than higher taxes on the rich. I am not opposed to paying more if it will really help.  I just don't want more tax money thrown down a government rat hole.   I think most voters who voted for Romney would agree.  They are willing to contribute to solve the problem but want 100% assurance it will not continue to feed the government monster.

Therefore, agreeing to a tax increase on the rich is a huge bargaining chip for the Republicans. However, if they put that on the table they better get something very, very, very big in return. The only thing big enough is Obamacare.  This is big, but more important, it is symbolic.  A close second would be a Balanced Budget Amendment with a hard cap on tax and spending at no more than 18%-20% of GDP ( I am always willing to negotiate!).

If I was negotiating with President Obama I would hold a press conference and state the following.

President Obama has long stated his desire to increase taxes on the rich. As Republicans we do not agree that raising taxes on any American is prudent or smart with the economy this weak .  We strongly believe that keeping tax rates low for everyone is the best economic policy that we can have to insure a strong economy that will create investment and jobs.
However, we face a looming fiscal cliff in a little over a month.  We must work together to see that this does not occur.  President Obama has stated that he favors a balanced approach to solving the budget.  We take him at his word that he is willing to follow through on that pledge.  He has stated that he is willing to cut spending for $3 for every $1 of revenue.  We think that is too low and would like to see it higher but that is what negotiations are about.   
To show our good faith in reaching an agreement, we will agree to President Obama's proposal to increase taxes on those making more than $250,000.  This is estimated to result in revenue of $823 billion in revenue over the next 10 years according to the Congressional Budget Office. In return, we want President Obama to agree to repeal Obamacare.  The country and our economy cannot afford this program that will add over $1 trillion in added costs over the next ten years as well as add an additional tax burden on Americans of over $800 billion over the next ten years.   
In addition, we want President Obama to propose an additional $3 billion in spending reductions to replace the sequester on defense and discretionary spending that is scheduled to take effect on January 1.  The combination of the repeal of Obamacare and the $3 billion in spending cuts will give us a balanced approach to avoid the fiscal cliff.  We will also avoid the draconian cuts to Defense that we both agree are totally unacceptable.
Mr. President, we know you don't want to compromise on Obamacare.  We just as resolutely do not want to increase taxes.  It is the core issue for our Party.  However, it is time to put our differences aside for the good of the country.  There is not a lot of time left to avoid the cliff.  We are making the most meaningful concession we can upfront to demonstrate our good faith.  For the future of America, it is now your turn to show that you are willing to do the same.  The American people have again put their faith in you to provide the leadership we need at this critical time.  We have done our part to show our willingness to meet you more than halfway.  It is your turn to lead.
Why do I suggest this approach?

  • It puts the Republicans on the high ground in the negotiation.  By immediately conceding President Obama's biggest demand he is put on the defensive.  He is placed in the position of having to respond and the spending cuts have to come from him.

  • It makes it clear that the Republicans must get something very, very big in return for their concession on taxes. Many in the Republican party will not like the tax increase but if it leads to the repeal of Obamacare in the deal it will feel like the Republicans won.

  • As it stands now the Republicans have taken all of the criticism for being nothing but obstructionists. This offer puts that onus on President Obama and the Democrats.  If a deal cannot be reached the blame will be on them.  The Republicans merely need to keep repeating that they gave Obama and the Democrats what they wanted on taxes.  They need to show they are really serious about deficit reduction and our country's future.

  • The majority of Americans still want Obamacare repealed.  For Republicans, over 80% want it repealed.  This strategy would be welcomed by the Republican base.  However, would Democrats risk increasing taxes on all Americans just to save Obamacare?  I doubt it.  Even though Obama does not have to seek re-election every other Democrat does.  I don't think Obamacare will look very attractive to Democrats when every middle class family would have to pay for it if the Bush tax cuts were to expire on everyone.  That would be the practical effect if a deal was not reached.  That is not a very good record to run on.

  • Those inside the Washington Beltway and the political class would undoubtedly be aghast at this offer. They think Obamacare would be a non-starter with the White House.  However, I think most Americans would think it is imminently reasonable.  It is horse trading at its very essence.  You can't get something big without giving up something big.

  • A fallback position might be to agree to a one year tax on the rich in return for a deferral of the implementation of Obamacare.  This would be conditioned on reaching agreement on a broad tax and entitlement reform package in 2013.  If the conditions were met, a trigger would reinstate Obamacare with all provisions being pushed back one year.  If not, we are back where we are today a year from now.

There is an interesting sidenote to all of this when it comes to taxing the rich that a BeeLine reader sent me. If you look at the ten wealthiest counties in the United States, eight of those counties voted for President Obama.  In all eight of those counties Obama's margin was larger than the 50%-48% margin he had nationally.

If these rich liberals want to pay higher taxes why should the Republicans deny them the opportunity, especially if that concession provides real leverage to really accomplish something of substance.  Perhaps the Republicans should focus more on repealing Obamacare to help entrepreneurs and small businesses and getting the deficit down now so that taxes will not need to be increased in the future for everyone.

Boehner and McConnell are riding into the Not So OK Corral on two pretty good horses.  However, they need to learn to horse trade like the Democrats who like to give you a horse in the trade that you find can't run (spending cuts that never materialize) or a horse that they promise will be great in a few years (spending cuts that only take effect in years 6-10 in the budget cycle).  Of course, the tax increases always take effect from day one and never go away.  The Republicans have quit trading because of that past experience.  That is not an option anymore.  They have to horse trade.  I like the President's favorite horse.  If he wants mine, he should be willing to give it up.

Friday, November 9, 2012

Why Did Romney Lose?

Why did Mitt Romney lose?  That is the question that a lot of people are asking right now.  I have spent a lot of time analyzing exit poll data and putting it into a broader context to help me answer that question.  A few of my thoughts follow.

First, I am not going to blame Mitt Romney or his campaign.  All in all, I thought he was a great candidate because he would have been a great President.  I do not believe that any other candidate in the Republican primary field would have done any better.  No one would have been able to raise the amount of money that Mitt did.  No one would have been able to go through the entire campaign with only one major gaffe (the 47%).  No one would have been classier.

It is always easy to be a Monday (Wednesday?) morning quarterback.  It is even easier when you have 20/20 hindsight.  I have the benefit of both right now.  It is easy to be smart after the fact.  I have the utmost respect for Mitt Romney and his team.  They got in the ring when others did not.  They worked their tails off in a tough primary and a tougher election.  They deserve thanks for putting it all on the line for America.

So,why did Mitt lose?  The simple answer is that Romney was not able to convince enough Obama voters from 2008 to switch to him in 2012 and the Democrats got more of their people to turnout for the election.

I wrote in the days before the election that for Romney to win he needed Turnover + Turnout.  He needed to turn 2008 Obama voters into 2012 Romney voters for turnover.  He also needed to turnout more Republicans leaning voters compared to what McCain did in 2008 when the Democrats had a +7% margin at the polls.  I created a chart to make this point graphically.

My basic premise leading into this campaign was that there were millions of Obama voters who had buyer's remorse.  I did not believe that there was one major demographic group that could not be counted to provide more support for Romney in 2012 than they did for McCain in 2008.  Exit polls bear this out in almost every group. Romney took a higher percentage of the vote from men (+4%), women (+2%) (both married and single), 18-29 year olds (+5%) , blacks (+2%), Catholics (+3%), Jews (+9%), liberals (+1%), moderates (+2%), conservatives (+4%) etc.  The only two demographics that he did poorer with were Hispanics (-4%) and Asians (-9%).

There wasn't any question in the exit polls this year that asked the voters who they voted for in 2008.  This was a question that was asked in the Obama/McCain race.  17% of Obama voters in 2008 had voted for Bush in 2004.  On the other hand, 9% of McCain voters had voted for Kerry in 2004.  That was a net turnover of 9% to Obama. A poll a couple weeks before the 2012 election  had about 11% turning against Obama and 5% turning toward him for a net 6% turnover to Romney.  I think the final turnover number was probably in the 4%-5% range.

Let's assume that it was 4%, looking at the chart above showed that Romney would have to improve Republican turnout by at least 5 percentage points compared to 2008.  In other words, take the 7% disadvantage and make it only a 2% disadvantage.  The exit polls tell us that the Romney campaign was only able to shrink the disadvantage by 1%-from the 7% Democrat margin in 2008 to 6% in 2012.

Plug 4% turnover and 1% turnout into the chart above and look at the result.  Romney loses by 2.3% according to my projection.  What was the actual result?  Obama beat Romney by 2.4%.

It is simple to now look at the numbers and state that Romney lost because he could not turnover and turnout enough voters.  The more difficult question is why???

A number of commentators are flooding the airwaves with opinions that the Republican Party must fundamentally overhaul their positions on the issues to be successful in the future.  They argue that there has been a fundamental seismic shift in the voting demographics that is younger, less White and more liberal.  There is no question that was true in the 2012 election.  However, where was that voting demographic in the 2010 election?  Where was it in the Wisconsin recall election earlier this year?  The demographics of the country have not changed that dramatically in the last two years.

When I look at the data I see a country that has been center-left in the 2008 and 2012 elections but center-right in 2012 and the Walker recall.  How could this be?  I think it involves voter engagement.

Minorities and the young were very engaged in the 2008 and 2012 elections.  They seemed to have turned out principally because of Barack Obama.  His success seems to be driven more by symbolism than substance.  These groups turned out to vote for him in 2008 because his message was inspirational and aspirational to them.  They turned out to vote for him in 2012 because they did not want to admit that they might have been wrong in 2012. They turned out to defend him and defend their own judgment. The symbolism trumped the substance of the last four years.

If you think I am wrong look at the polling.  When asked who is more to blame for the current economic problems, 53% of all voters blamed Bush.  Only 38% placed more of the blame on Obama.  Of those that blamed Bush, 85% voted for Obama.  The Obama campaign effectively used this narrative for the last four years and it was successful for Obama.  Of those that held Obama accountable, 94% voted for Romney!

However, those same voters who turned out to support Obama in 2008 and 2012 did not show up to support the substance of his policies in the 2010 mid-term elections where Obamacare was the focus. They also made no difference in the Wisconsin recall vote earlier this year where public sector unions were the issue.  In both cases, the Republicans won in landslides. 

Let's look at a comparison of the demographics of the voters in 2008, 2010 and 2012 by race.

Minority voters as a percent of the electorate declined from 26% when Obama was on the ticket to 22% when Obamacare was on the ticket to 28% when Obama was on the ticket again.  This shows a lot of enthusiasm for Obama the symbol.  Not so much for the substance behind Obama.

These percentage changes amount to millions of voters.  Overall, minority voters increased by 82% between 2010 and 2012.  However, it was essentially unchanged from 2008 to 2012.  On the other hand, white voters only increased by 27% from 2010 to 2012.  There were also 9% fewer white voters in overall numbers compared to 2008.

Consider the age breakdown of the electorate.  Voters age 45 and over made up 53% of the total in 2008 and 54% in 2012.  However, in 2010, motivated by the Obamacare issue, they made up 67% of all voters!

It is even more interesting looking at the total number of young voters (ages 18-29) compared to older voters (age 60+) for the last three elections.  30 million older voters showed up consistently at the polls in each of those three elections.  However, 24 million young voters came out in 2008 to help elect Obama, only 10 million showed up in 2010, and 23 million reappeared in 2012 to save Obama.

There clearly was a solid group of voters who would vote for Barack Obama.  That was proven in 2008 and 2012.  It is just not clear to me that this voting bloc is sustainable or repeatable.  Obama is not going to be on the ballot again.  The symbol will be gone and all that will be left is the substance of the Democrat positions that are not exactly wildly popular.  Republicans should take heart and not be too quick to alter their core positions.  This comes through in the exit polling for 2012 even considering the demographic advantage that the Democrats had in voters this year.

Look at these polls questions and responses.

What should happen to the 2010 health care law?

Repeal some of it or all of it.   49%
Expand it or leave it as is.       44%

Should Government do more or less to solve problems?

Do less                                   51%
Do more                                 43%

Should taxes be raised to help cut the deficit?

Yes                                         33%
No                                          63%

Is the country on the right track?

Yes                                         46%
No                                          54%

This certainly should put to rest the argument that the Republicans need to change most of their message.  In the exit polls the only real issues that Republicans have that were really troublesome with voters were abortion and immigration.  59% of 2012 voters thought that abortion should be legal if it was framed as a yes or no answer.  In fact, only 13% thought it should be illegal in all cases.  Todd Akin and Richard Mourdock undoubtedly helped skew that number to the left with their total inability to articulate a sensible defense of their position.

On immigration, asked to choose between offering illegal immigrants a chance to apply for legal status versus being deported, by 65% to 28%, voters said let them have a chance to stay.

I believe the Republicans are going to lose these issues every time if they allow it to be phrased as  a yes/no question.  People like simple answers even when the questions are complex.  Both abortion and illegal immigration are incredibly complex issues on two sides.  It is also human nature to choose who you know versus who you don't know.  A woman is known.  An unborn baby is unknown.  An illegal immigrant in the United States is known.  A person waiting in Guatemala to come to the United States legally is unknown.

For example, 99.99% of people would say it was murder to kill a new born baby.  Why is it not murder the day before the child is born?  Where do you draw the line?  When do an unborn child's rights supersede the mother's rights?  At what point on the timeline between conception and birth does that occur? The Roe vs. Wade decision essentially came down for the mother's rights in the first trimester and the child's rights in the third trimester and left the second trimester up for grabs.  Is this still correct?  We know a lot more medically today than we did 40 years ago. Women generally have a much greater ability to know they are pregnant earlier.  Should this factor into the thinking about a "woman's right to choose" and "an innocent child's right to live"?  Republicans need to expand the discussion beyond yes or no and challenge people to think more critically about what is a complex issue.

The same goes for immigration.  On a yes/no question it is hard to say you want to deport an immigrant who is here illegally.  They have established homes.  They have children.  After all, they are here and many of us see these people working hard every day around us.  However, what about the other person in India or Poland or Venezuela that is waiting patiently in line and obeying our laws who can't get here.  The person we don't see.  Who is looking out for that person?  Is it fair to favor someone who broke the laws to come here over someone who is honoring our borders?  Whose rights should be favored in this situation?

How come Democrats have come to be able to take the high road on these issues when if it was put in yes or no terms they are the ones who would be the ones to allow the abortion to take place the day before birth and they would provide amnesty to someone here illegally.  How come Republicans are on the wrong side of that yes/no issue when they are defending the rights of those that really don't have a voice.  I thought that is what Democrats say they do.

All of this just goes to show that trying to deal with complex issues in political terms is incredibly difficult, if not possible. That brings me to the final point on why I believe that Mitt Romney lost. 

From the data above we clearly can see that Romney did not get the turnout he needed.  A large part of this is directly related to Barack Obama and his specific appeal to young and minority voters.  I believe that Mitt Romney would not have lost the turnout battle with a Hillary Clinton, John Kerry or Al Gore if they had the same record as Obama over four years.

However, why wasn't Mitt Romney able to turnout and turnover more white voters who voted for Obama in 2012?  When the final numbers are in Obama will have probably gotten 7 million fewer votes than he tallied in 2008.  Mitt Romney will probably fall short of McCain's total vote by some 2 million.  That totals about 9 million voters who voted in 2008 who did not vote in 2012.  Why didn't they vote?

My guess is that there were a lot of voters who were uncertain about Obama and were in play for Romney even near the end. Most voted for Obama the last time.  They did have buyer's remorse.  A large portion of the people who stayed home simply appear to me to have decided they could no longer support Obama but also decided that Romney was not any better.  As they would say it, "I didn't want to vote for the lesser of two evils." Many others who did vote seemed to be of the same mindset.  9% of all voters said they made their decision in the last few days. That was about 11 million voters. By 55%-45% they broke for Obama at the end.

When people are uncertain, they almost always go with the status quo.  Why wasn't Mitt Romney able to make the sale in the end?  I don't think he asked voters the right question at the end of the campaign when he needed to close the sale.

My view of elections is that most are decided by asking the voters to answer just one simple question.  As I discussed above, most people are not able to answer complex questions.  They want simple questions that are easy to answer.  Think about other successful campaigns and the basic question they asked of voters.

1980 Ronald Reagan       "Are you better off now than you were four years ago"?

1992 Bill Clinton             "Who can feel your pain better"?    

2004 George Bush          "Has George Bush kept you safe since September 11, 2001?"

2008 Barack Obama       "Are you tired of George Bush?"

2010 Mid-Term               "Do you want to repeal Obamacare?"

There were a number of issues in each of those campaigns but a lot of voters made their decision by answering that one question.  In each case the question was effective because it related to what people felt in their gut more than their brain.

So what was Mitt Romney's question?  He talked a lot about jobs, the economy and much more but he never seemed to simplify it to that one simple question.  I think the question he should have asked was this...

Do you want a President or a Politician?

If he would have kept repeating this theme I think he would have closed the deal.  Romney could have made it even more effective by plainly stating that he was not the politician that Barack Obama was.  He was not as articulate or cool.  However, when it came to hard work, focus and putting the country before politics, he had it over Barack Obama every day of the week.

I think this would have gone to the gut of those persuadable voters that were up for grabs.  Establish the narrative by consistently drawing the contrast between what a Politician does compared to a President.  

Obama's results never came close to matching his rhetoric.

There was more golf than job council meetings.

There were more fundraisers than national security briefings.

There were more appearances on The View and David Letterman than press conferences.

When the attack occurred in Benghazi he was off the next morning to Las Vegas to campaign rather trying to learn what happened.

If he had established this overarching theme throughout the campaign President Obama's hurricane response would also not have provided the benefit it appeared to at the end.  It would have looked like one more political move.  Instead, 15% of the people who voted for Obama cited this as the most important reason they supported him.

By contrast, everything that the Obama campaign did seemed to focus on this question.

Do you trust a rich, white guy like Mitt Romney to look out for you?

The Obama campaign made their campaign about that simple question.  The Romney campaign never got it down to a simple question.  We know the end result.  The politician won.  The rich guy lost.  America lost even more.

Wednesday, November 7, 2012

The Night After Christmas

Random thoughts about yesterday's election results...

  • My election prediction was "If I Am Wrong, I Am Wrong About America."  I was wrong about America.  And it hurts.  The only way I can describe it is that it is like finding someone you love deeply ( and I love America deeply) has done something that hurts you to the core.

  • I have heard some say today that the results did not really change anything.  They woke up yesterday and they woke up today. The world did not change.  We are going to have the same President and essentially the same mix in Congress.  Everything is the same.  That is crazy.  That is like saying that nothing has changed the day after you learned you have a life-threatening illness because you look exactly the same to your neighbor.  We took the test and we know the results. Nothing is the same today as it was yesterday.  We now know for certain there is a disease deep within the body politic.  We did not know that yesterday.

  • I heard some political analysts stating that the Republicans could not win unless 74% of the electorate was white.  What are they talking about?  The three states with the largest white populations in the United States are Vermont (96.6%), Maine (96.3%) and New Hampshire (95.7%).  They all voted for Obama.  By the way, other than Hawaii, the state with the lowest white percentage is Mississippi.  It voted for Romney. This seems to be the same old talk we get from people who want to keep dividing us.  Romney did not lose because there were not enough white voters.  Romney lost because there clearly aren't enough voters that are thinking right.  A case in point-11% of voters in the exit polls said they made their decision to vote for Obama primarily because of his response to Hurricane Sandy.  They ignored a four year record and based their decision on a four hour trip to New Jersey in a helicopter to tour storm damage? Is that thinking right?

  • Barack Obama received almost 10 million fewer votes than he got in 2008.  However, Mitt Romney tallied almost 3 million fewer votes than John McCain! I know there still are some provisional and absentee votes that have not been counted but that total turnout is almost 10% below 2008. 

  • 9% of the voters said in exit polls that they made their decision for whom to vote in the presidential election on the last few days before or on election day.  That is about 11 million votes.  They split about 50%-45% for Obama.   What does this tell me?  When you combine it with the 11% of voters who made their decision for Obama on Hurricane Sandy and the 13 million fewer votes that were cast in total, it tells me that this election really turned on a knife's edge.  There were a lot of voters who were uncertain about Obama and were in play even near the end.  A large portion of the people who stayed home simply appear to have decided they could no longer support Obama but also decided that Romney was not any better.  As they would say it, "I didn't want to vote for the lesser of two evils." The ones who did vote seem to be of the same mindset but they had to decide one way or the other.  When people are uncertain, they almost always go with the status quo.  Even if it means pointing to a hurricane response as the reason.

  • I think the Republicans have to stop being "nice".  They need to stop allowing the Democrats to stack the deck to their advantage in elections.  A good example is early voting rules.  In Ohio the only place that you can physically vote is at the county seat.  In Hamilton County this is in downtown Cincinnati.  It is convenient and easy for city dwellers which so happen to be largely Democrats. For those in the suburbs it is anything but.  You have to leave your work or home, drive to downtown, find a place to park etc. If you are going to have early voting it needs to be fair.  In a large county like Hamilton County they should have a number of voting places spread around the county for easy accessibility for all.  I know that would add considerable expense.  If this cannot be done because of cost then it should not be done at all.  Make it a level playing field.  On voter access and voter id.  The Democrats are laughing with every vote. 

  • I thought Rush Limbaugh pretty well summed up what happened last night in the colorful way he describes things---he said " In a nation of children, Santa Claus wins."  This is part of the transcript where he talked about that on today's show.
One of the greatest misunderstandings in this country, if you boil all this down, is what creates prosperity. The Romney campaign was essentially about that, and the Romney campaign was devoted to the traditional American view and history -- vision, as well -- of what creates prosperity. The old capitalism, the old arguments of hard work, stick-to-itiveness, self-reliance, charity, helping out in the community.
All of these things that define the traditional institutions that made this country great, that's what the Romney campaign was about. It was rejected. That way, or that route to prosperity was sneered at. That route to prosperity was rejected. The people who voted for Obama don't believe in it. They don't think it's possible. They think the game's rigged. They think the deck is stacked against them.
They think that the only way they're gonna have a chance for anything is if somebody comes along and takes from somebody else and gives it to them. Santa Claus! And it's hard to beat Santa Claus. Especially it's hard to beat Santa Claus when the alternative is, "You be your own Santa Claus." "Oh, no! I'm not doing that. What do you mean, I have to be my own Santa Claus? No, no. No, no, no. I want to get up every day and go to the tree. You're the elves," meaning us.


  • In the grown-up world, Santa Claus does not pay the bills. He just hands out the gifts. And the bills start coming in shortly after Christmas. It is no different for our country. We soon will have to pay.

Choices Have Consequences

The results of yesterday's election clearly show that we are in The Fourth Turning.  History is not made by events but by the reaction of human beings to events.  We saw clear evidence of that yesterday.  We are hurtling down the road for a rendezvous with history of our own making.  Two clearly marked paths were there for choosing.  The American people made their choice.   We all will have to deal with where it leads.

I have many new readers over the last two weeks as interest in the election approached.  Many of you probably did not see my post, "How Can There Be Hope When There Is No Change?".  This still accurately captures my biggest concerns about where we are going from here. Like it or not, this is where we are.  We have no choice but to move FORWARD.  That is what President Obama promised.  We will now see where he is leading us.

In many ways I think we exhibit the traits of an addict.  Our drug of choice is government spending and dependency.  Unfortunately, like most addicts, we may have to totally hit bottom before we come to our senses and begin recovery.  As we know, the sad truth is that as the addict spirals downward they also hurt many innocent people around them on that path.

It did not have to be this way.  It still doesn't have to be this way.  However, this seems to be the path we have chosen right now.  We have turned our backs on the warnings.  We have failed to listen, somehow thinking that our addiction will not lead to our ultimate downfall.  Choices have consequences.  We will learn what they are together.  For better or worse.  Our only hope now is that the President we elected yesterday is not the same leader we had for the last four years.


" Can There Be Any Hope If There Is No Change"-originally published October 2, 2012

Can there be any hope if there is no change in November?  This is a question that I have been pondering because I have serious concerns for our country and our economy should President Obama be re-elected.


I am a natural optimist.  I like to look for the positives in any situation. However, I am very, very troubled about where the country ends up if there is an Obama victory on November 6.

I believe a substantial part of the entrepreneurial sector in this country is hanging together almost entirely on the basis of hope right now.  Hope that there will be change in a couple of months and the country can get back on the right track.   We all know how important hope is to keep you going, especially if the end is in sight. However, hopelessness sets in easily if you cannot see light at the end of the tunnel.

There are many people, especially the most productive jobs producers and owners of capital in the country, who are looking for that change with a lot of hope right now.  I am talking about the people that make the economy go.  These are the people that are the engine of the ecoomy.  In my opinion, a Romney victory would have a tremendous positive psychological effect on this group which would provide an immediate boost for our economy. On the other hand, an Obama victory has the potential to  have a very negative impact on the psyche of these group. Any little hope that exists now could be extinguished quickly with very negative impacts for the economy.

An Obama victory will send a very ominous signal to many in this group that we have reached a critical tipping point.  It will appear that we have more people concerned about themselves than they do about the country.  It will look as if a majority of people have really given up on themselves and are only looking for government to solve their problems.   It will feel as if we have willingly driven our country off the cliff even when there were miles and miles of warning sides all along the road.

I have been deeply involved in previous Presidential campaigns where my guy did not win.  However, in the immediate aftermath of those elections I have always taken heart and had a lot of hope that the new President would pull the country together and move the country forward.

I have no such hope or expectation this time.  The record over the last four years could not be any clearer with President Obama.  There is absolutely nothing to suggest that the next four years will be any different than what we have already seen.  And if this is my view, I would expect that there are millions and millions of others that feel the same way.  I believe that we face a dynamic unlike anything we have ever seen in the aftermath of a Presidential election in my lifetime if President Obama is reelected.  Rather than the optimism that normally follows a Presidential election, I think we could experience real pessimism following this election.  

This country has made mistakes before, but it has never made a mistake when the chips were down and our backs were up against the wall.  In those times the American people have always made the right decision. This is such a time.  Will America get it wrong for the first time when it really counted?  I am not sure many fully understand the ramifications that could result if we don't get it right this time.

I still have to believe that there are a majority of people in this country who realize how much trouble we are in and how much we need change.  That is what makes the stakes so big.  That is also why the risk is so large for the psyche of the country if change is not made when it is so obviously needed.  If the choice is that clear and the majority choose to give Obama another four years, there will be far less hope left for a whole lot of people.

In light of where we are, if I was a Democrat, I would be very concerned about the re-election of Obama. As many of you know, I have written previously about the book, The Fourth Turning, by Neil Howe and William Strauss.  Howe and Strauss predicted in 1997 that we were heading for a Crisis period beginning in the 2005-2010 period that would test the country in a manner similar to the Revolutionary War, Civil War and Great Depression/World War II periods.

I don't think that there is any doubt we have entered The Fourth Turning but the really rough waters still lie ahead according to the predictions of The Fourth Turning.   By the same token, we are at a point where the warnings are well known to the general public now. This was not the case in 2008.  Obama came in with no blemishes and could easily avoid blame for what he "inherited".  He is not in the same position in 2012 if he is reelected.  He will be very vulnerable over the next four years and he will also put the entire Democratic party at significant risk if the waters get really rough and he can not guide the ship of state to calmer waters. No one will be able to say later that they were not warned.

Consider this perspective from Howe and Strauss on what history teaches us when it does hit the fan.
History warns that when a Crisis catalyzes, a previously dominant political party (or regime) can find itself directly blamed for perceived "mistakes" that led to the national emergency.  Whoever holds power when the Fourth Turning arrives could join the unlucky roster of the circa 1470 Lancastrians, circa 1570 Catholics, circa 1680 Stuarts, circa 1770 Tories, circa 1860 Democrats, and circa 1929 Republicans.  That party could find itself out of power for a generation.  Key persons associated with it could find themselves defamed, stigmatized, harassed, economically ruined, personally punished-or worse. (emphasis added)
Are any Democrats listening?  Barack Obama? Harry Reid? Nancy Pelosi?

It does not have to be this way.  There is still hope but only if we make a change.

Mitt Romney and the Republicans are also at risk should they carry the election.  We are now at the point that governing in Washington is a little bit like playing musical chairs.  The best place to be be over the next four years might be to be as far away from Washington as you can when the music stops.

Credit: Ian Evans

However, I think the Republicans would get far more latitude from the voters if they take charge after November 6 than the Democrats will.  I also think that Mitt Romney and the Republicans actually provides us the chance to turn things around.  Hope and change will not work going forward.  That should be clear to everyone after the last four years. Change and hard work is all that will work this time.  Mitt Romney is the only one that can deliver on that.