Thursday, January 31, 2013

Will History Be Kind To Millennials?

When the history of the Obama era is written, I think one of the ironies that historians will focus on will be the level of support that younger voters provided for Obama that will clearly be seen as having been against their self-interest when viewed in the fullness of time.

Voters do not typically vote against their self-interests.  That is why the unions and government workers who believe in big government and big spending typically vote for Democrats.  It is also the reason that small business owners and investors who are concerned about high taxes and government regulations vote for Republicans.  It is why young voters in the Vietnam era voted for Eugene McCarthy and George McGovern and why generations of African-Americans voted for Republicans after the Civil War.

Obama carried two-thirds of voters aged 18-29 in 2008.  He carried this demographic with about 60 percent of the vote in 2012.  When you consider the following it is hard to understand why.

We know the obvious.  Over $4 trillion in national debt has been added in the Obama years.  The President's budgets over the next four years looks to be more of the same.  When Obama leaves office it looks as if these young voters will be inheriting at least $20 trillion in federal debt that they will have to pay for from future taxes.

The overall unemployment rate for 18-29 year olds in December, 2012 was 11.5%.  This is far worse than the 7.8% national rate.  The African-American unemployment rate was 22.1%.  12.2% of young Hispanics were unemployed. These are all worse than four years ago when President Obama took office.

One of the more troubling graphs I have seen in a long time is this beauty that I found on dshort.com.  This chart shows the growth in federal loans to students from 1995 to 3Q, 2012.  Since President Obama has taken office these loans have increased by over 4-fold in four short years.

Please note that this is not the total of all student loans.  These are only the loans that the federal government has made.  Another $600 billion of loans are owed to private financial institutions.  Of course, a big reason that the federal loans to students have grown so rapidly is that in 2010 the federal government took over the guaranteed college loan program.



What I found even more incredible is that student loans are now the largest financial asset on the federal government's balance sheet as this chart from the Federal Reserve's "Flow of Funds" balance sheet shows.



Of course, the federal government does not have much in financial assets--only about $1.4 trillion--compared to its massive $16 trillion in direct balance sheet liabilities as measured by the current debt limit ceiling.

How good are these "assets" that the federal government is holding?  Take a look at these charts via Zero Hedge that show the percentage of 90+Day Delinquent Loans and the New Delinquent Student Loans from 2003 to 3Q2012.  Delinquencies are climbing even faster than the number of loans.




This is understandable considering the unemployment rate for younger people as well as the fact that so many college graduates (with large student loans) are underemployed.  In fact, a recent study by the Center for College Affordability and Productivity, says that out of 41.7 million working college graduates, 48% of them-more than 20 million people, held jobs in 2010 that required less than a bachelor's degree.  37% of the college graduates were actually performing jobs that required no more than a high school diploma!

What kind of jobs are we talking about?

15% of taxi drivers were college graduates.  In 1970, only 1% of cab drivers were college grads.

25% of retail clerks were college graduates,  Less than 5% of clerks were in 1970.

5% of janitors have college degrees as do 18% of firemen.

You begin to see how those student loans can be difficult to repay with large numbers of young people unemployed and underemployed.

At the same time, President Obama seems to think that the answer to every economic problem we have centers solely around education.  Don't get me wrong, education is critically important.  However, education is an investment.  For that investment to produce a return it has to result in a good paying job.  An underperforming economy will quickly overwhelm a good education.  The last few years have proven that.

President Obama has always seemed to be challenged by economics.  He has spent a lot of time talking about increasing the supply of college students and providing more and more student loans.  However, he has done little in improving our economy and the supply of jobs.  The result is an over supply of college graduates when there is little demand for many of their skills.  This overbalance depresses wages for those that get jobs but it also means that college graduates ultimately take jobs from less-educated workers who then end up on the unemployment line. It is an ugly cycle of underemployment and unemployment.

I don't envy the future of our young people.  They are on the hook for $16 trillion and counting in federal debt.  They are the hook for many more trillions in public sector pension costs for state and local  workers.  They are on the hook for over $1 trillion in student loans that are not dischargeable in bankruptcy.

More than 1 in 10 of them is unemployed and 1 in 2 is underemployed.  The poor economy and low interest rates are keeping millions of Baby Boomers in the workforce and blocking their career advancement.  They almost certainly will pay much more into Social Security and Medicare than they will ever get out of it or they will end up caring for Mom and Dad somewhere down the line.

However, almost 2 out of every 3 of them has no one to blame but themselves.  They had a choice to make for their future but were more enthralled with "cool" than with "competent".

It is something I don't understand.  It is something that I don't think history will understand.  For the sake of their own future, I hope the so-called Millennial Generation will soon understand what is happening to them and demand real change.  It is their only real hope to create their own history. If not, they will just pay for ours.

Wednesday, January 30, 2013

We Need More We Than Me

I have come across a number of mind blowing factoids since I started writing BeeLine.  I don't think any was more significant than discovering that almost $2 out of every $3 spent in our federal budget is comprised of "payments for individuals".

We tend to think of the role of government as furthering the public and common good.  Providing for the national defense, building and maintaining roads and bridges, public safety, public transportation  public schools, public libraries and public parks.  Expenditures that all of us can benefit from in some form or fashion.

For the vast majority of our 200+ years of existence the federal government was focused on these issues.  In 1953, only 14% of the federal budget was comprised of "payments for individuals".  The rest went for defense, roads, prisons, parks and the like. In 2013, by contrast, these payments are estimated to account for 65.4% of all federal outlays.  All of the data in this post is from The Budget of the Federal Government, Fiscal Year 2103 prepared by the Office of Management and Budget.

What are "payments for individuals"? These are federal government spending programs designed to transfer income (in cash or in kind) to individuals or families.  This includes Social Security, Medicare, Medicaid, Veteran's Benefits, Welfare, Food Stamps and Student Loans.  It does not include salaries to government workers or the military as these are considered to be payments in return for services provided.   Therefore, "payments for individuals" effectively represent what amounts to the redistribution of income from one person to another with the federal government serving as the middle man.

These are not outlays for the common defense, common good, public works or public safety.  These are government payments that are intended to benefit select individuals based on their age, their income, their health or any one of a number of other distinctions.

In total, "payments for individuals" in the 2013 federal budget are estimated at $2.5 trillion out of total projected outlays of $3.8 trillion.  In other words, we are spending twice as much on these "special interest" payments as we do on defense, justice, roads, research, national parks and everything else Washington spends money on-combined!

Where is this money being spent?  Here are some of the major categories of outlays.

Social Security                        $827 billion
Medicare                                 $621 billion
Medicaid                                 $283 billion
Public Assistance                    $170 billion
Food Assistance                      $112 billion
Civil Service Retirement         $  83 billion
Unemployment                       $  75 billion
Student Assistance                  $  60 billion
Military Retirement                 $  55 billion
Housing Assistance                $  49 billion

I am not suggesting that all of these programs are ill-considered or bad.  After all, Social Security and Medicare are there for everyone.  Workers pay into these programs and deserve a return of their investment without someone drastically changing the rules on them just as they near retirement.

However, we all need to look in the mirror and ask ourselves how we have allowed what began as well-meaning social safety net programs to reach the point that they now account for 2/3 of federal spending?

Even worse, the Obama administration in its budget proposal for 2013 estimated that individual income taxes and payroll taxes would only amount to $2.3 trillion in the current year.  This means that the $2.5 trillion in "payments for individuals" in the federal budget are not even being covered by the $2.3 trillion in "payments from individuals" in taxes.   In effect, we are really borrowing every dime we need to fund what our Founders would have considered the basic fundamental functions of government.  It is really hard to fathom.

I have said it before and I will keep saying it again and again...we are on a road to disaster that we are paving with trillions of dollars in debt.   At some point the pavement is going to be gone and the road is going to get rocky and rough.  We need to change our course before it is too late.

My suggestion is that our national priorities need to be focused more on "WE" than "ME" if we are to get back on the right path.

Credit: Jahn Henne

Monday, January 28, 2013

Combat Correctness?

Has political correctness led us to combat correctness?

That is the question on my mind as I consider the announcement by outgoing Secretary of Defense Leon Panetta to allow women to assume combat roles in the U.S military.

I fully understand the desire to open up more opportunities for women in the military.  It is a fact that serving in combat roles in the military is often necessary in order to advance to the highest ranks.  Therefore, opening up combat roles for women would be very beneficial for the women seeking those promotions.

Credit: Clay Bennett, TimesFreePress.com


However, is it the right decision looking at the military and our country at large? Are we putting the advantages for a few over effects on the many? Let's consider this question from several perspectives.

From a physical perspective, there are women that are stronger, faster and more athletic than many men.       I don't think many men would want to challenge Brittney Griner to a game of one-on-one basketball, Serena William to a game of tennis or Allyson Felix to a 100-meter dash.  There are overlapping bell curves with respect to the physical abilities of men and women.  Some women will always have better physical abilities than some men. However, most men will enjoy physical advantages over most women.

Physical differences between men and women have been extensively tested by the U.S. military as reported by Joshua Goldstein in his book, War and Gender:  How Gender Shapes the War System and Vice Versa.. A 1982 report of 18-year olds found that men had 72% more upper-body strength, 33% more lean body mass and 28% more aerobic capacity.  Perhaps women might score better today with greater participation in high school sports but men, on average, clearly have superior physical abilities for performance in combat.

The Air Force has tested lifting capacity using 110 pounds for both men and women recruits as this was considered a critical threshold where strength might be required to assist a fallen comrade off the battlefield. 68% of men passed this test compared to only 1% of women.

If there were not significant physcial differences between men and women why are there men's and women's events at the Olympics?  Why is there a WNBA?  Why is there a LPGA in golf?  It is because there is a difference.  What if it is your son who was left on the battlefield because his female comrade could not drag him to safety? Are we going to just ignore these facts in order to push some type of "equal rights" agenda?

There is also a mental perspective.  I think it goes without saying that women are generally constitutionally stronger than men in many respects.  Women live longer, are more resilient and are much more mature in their late teens and early 20's than men, which are the prime ages for military service.  We also have the whole issue of child bearing.  It is not called labor by accident.

As I have written before, women now make up 60% of all recent college graduates.  They have the smarts and discipline to do anything.  They have the courage and dedication to back it up. However, if it was your wife or daughter, how would their mental state deal with the following example posed by Ryan Smith in an op-ed in The Wall Street Journal.  Smith was a Marine infantryman in Iraq.

I served in the 2003 invasion of Iraq as a Marine infantry squad leader. We rode into war crammed in the back of amphibious assault vehicles. They are designed to hold roughly 15 Marines snugly; due to maintenance issues, by the end of the invasion we had as many as 25 men stuffed into the back. Marines were forced to sit, in full gear, on each other's laps and in contorted positions for hours on end. That was the least of our problems.

The invasion was a blitzkrieg. The goal was to move as fast to Baghdad as possible. The column would not stop for a lance corporal, sergeant, lieutenant, or even a company commander to go to the restroom. Sometimes we spent over 48 hours on the move without exiting the vehicles. We were forced to urinate in empty water bottles inches from our comrades.

Many Marines developed dysentery from the complete lack of sanitary conditions. When an uncontrollable urge hit a Marine, he would be forced to stand, as best he could, hold an MRE bag up to his rear, and defecate inches from his seated comrade's face.

During the invasion, we wore chemical protective suits because of the fear of chemical or biological weapon attack. These are equivalent to a ski jumpsuit and hold in the heat. We also had to wear black rubber boots over our desert boots. On the occasions the column did stop, we would quickly peel off our rubber boots, desert boots and socks to let our feet air out.

Due to the heat and sweat, layers of our skin would peel off our feet. However, we rarely had time to remove our suits or perform even the most basic hygiene. We quickly developed sores on our bodies.
When we did reach Baghdad, we were in shambles. We had not showered in well over a month and our chemical protective suits were covered in a mixture of filth and dried blood. We were told to strip and place our suits in pits to be burned immediately. My unit stood there in a walled-in compound in Baghdad, naked, sores dotted all over our bodies, feet peeling, watching our suits burn. Later, they lined us up naked and washed us off with pressure washers.
Yes, a woman is as capable as a man of pulling a trigger. But the goal of our nation's military is to fight and win wars. Before taking the drastic step of allowing women to serve in combat units, has the government considered whether introducing women into the above-described situation would have made my unit more or less combat effective?

Finally, there is the emotional perspective.  We have a culture that has traditionally given women and children special status in our society.  Sure, we can pretend it doesn't exist and ignore thousands of years of history and tradition.  We could even start now and train our soldiers to ignore how they were raised.  Tell them that is doesn't matter whether Jessica or Jeff is captured.  They are both soldiers.  Forget everything you learned growing up.  Jessica will be able to handle herself with her male captors just as well as Jeff.  Forget those old stories of soldiers raping and pillaging. Oh, maybe there are other things that we need to worry about with Jessica that we don't have to with Jeff?

There is also the basic biology involved between young men and women.  It is already a huge problem in the military but one that you don't hear a lot about.  When you put men and women together stuff happens.  And it already is happening a lot in the military as it is. For example, just over ten percent of women in the military said in 2008 that they'd had an unintended pregnancy in the last year according to this Reuters story..  That number is significantly higher than in the general public.

The U.S. Navy seems to have had an ongoing problem with pregnancies in maintaining their force readiness.  As much as 34% of the billets of shore commands are "manned" by pregnant sailors who are not available for sea duty.  This causes problems both at sea and on the shore as the Navy must adjust assignments and staffing to deal with pregnancies of which almost 3/4 are unplanned.

Finally, where does all of this lead us if at some point the draft is reinstituted?  It is easy to look at all of this in the context of the all-volunteer military today and say that if a woman wants to volunteer, and is qualified for combat duty, why should she be denied that opportunity?

However, are we comfortable with drafting women for these roles?  I don't know when or why but we will undoubtedly come to a point at some time in the future that a military service draft will become necessary. What then?  If anyone is arguing that women are fit for combat they better be prepared to subject them to the draft as well.  Decisions like this need to be thought through to their logical conclusion.  Are we prepared for this?  If we are not, we have no business even considering women in combat roles.

I can already see the lawsuits in our future when the young man is drafted for combat duty but the young woman is not.  I can also see a lot of pregnancies to avoid the draft or service.  Think not?  I saw it all during the Vietnam War.  There were marriage deferments.  Then there were student deferments.  Finally, when they could not raise the forces that were needed, we had a lottery and the deferments ended.  That led to a lot of young men volunteering for the Reserves in order to stay stateside.

I know I have posed more questions than answers.  They are tough questions that require even tougher answers.

What I do know is that this type of policy change should not be instituted by the President of the United States, the Department of Defense or the Joint Chiefs of Staff by fiat.  If we are going to change the rules on women in combat we need a real conversation in the country on this subject and that debate needs to extend to our duly elected representatives who should vote on this policy.  

It is one thing to say that women can do these roles effectively.  It is another question altogether whether we as a country want this for our wives, daughters and girlfriends. 

A Gallup survey last week found that 74% of adults stated that they would "vote for a law allowing women to serve in combat".  It is probably not surprising that the number is that high when almost anyone's first reaction should be for equality of opportunity in this country.  However, let's put all of the questions I have posed out there and have a national conversation and debate before we decide.

If you need further perspective, I suggest that you read these commentaries from women who have served on or near the frontlines in Iraq and Afghanistan here and here.  They have been there and done that and do not think it is the right thing to do.

As for me, count me in the 26% for now.  I am open-minded but I am going to have to be convinced that this change is not being driven by political or combat correctness, but is in the best interests of the United States of America.  This cannot be about individuals, this needs to be about the common defense and common good.  Will women in combat roles upgrade our overall capabilities and culture or will it degrade it?  Let the debate inform us all.

Thursday, January 24, 2013

Unions Are Laboring

The Bureau of Labor Statistics (BLS) released the latest data on union membership yesterday. 

What caught my eye is the fact that public sector union membership exceeds union membership in the private sector.

There are 7.3 million public sector union members compared to only 7.0 million union members in the private sector.

This chart from The Wall Street Journal shows the numbers of union workers (both private and public sector) from 1973-2012.



11.3% of all American workers are union members.  In 1983, union membership was 20.1% overall.

Today only 6.6% of workers in the private sector are members of a union compared to 35.9% of public sector workers.

Other factoids about union membership that I found interesting in reviewing the BLS data.

  • Local government workers have the highest union membership of any of the public sector employees-41.7%.  29.9% of federal government workers are unionized and 31.3% of state employees.
  • Education, training and library occupations have the highest union membership-35.4% of any occupation categoy.  Compare that to union membership in manufacturing (9.6%) or mining (7.2%) that traditionally were considered heavily unionized industries.  You begin to see the significance of the teacher's unions today when you consider this data.
  • Transportation and utilities  (20.6%) and construction (13.2%) are the private sector industries with the highest unionization rates. Agriculture (1.4%) has the lowest.
  • Since 2008, union membership has decreased by 11% overall.  This compares to an total loss of employment of 1.4% workers for the U.S. at large.  Therefore, unions are losing members at a faster rate than jobs have been lost.  I thought one of the purposes of unions was to protect the employment of their members?  I guess when you have a poor economy that does not apply.
  • This effect is even more dramatic in the private sector.  Union members are down 15% compared to a decrease in private sector workers of 1%.  Public sector union membership has held up better but it is still down 4% since 2008.  However, this is largely a factor of a 6.4% decrease in public sector workers.  It is probably no surprise that the public sector unions have fared better in this regard as they are not subject to the same competitive pressures the private sector is under.
  • New York has the highest percentage of union workers (23.2%). North Carolina has the lowest percentage (2.9%).
  • About half of the 14.4 million union members in the U.S. live in just seven states (California, New York, Illinois, Pennsylvania, Michigan, New Jersey and Ohio.  Is it any surprise that all of these states were carried by Barack Obama?

What do I conclude from all of this?

Unions are laboring.  The union movement has lost momentum and is weakening.  What is interesting is that unions have taken their biggest hits since President Obama took office.  

Private sector union membership has been declining over the last 30 years but it has accelerated since 2008 when the economy turned sour.  

Public sector union membership generally saw a steady increase since 1980 but has now declined for four consecutive years.

Union influence has waned.  Who would have thought a few years ago that Wisconsin would severely limit the power of public sector unions and that Indiana and Michigan would become right-to-work states?  Ohio may be the next significant state in which right to work becomes an issue.  The actions of Indiana and Michigan may put pressure on Ohio to act for competitive reasons. 

Underlying all of this is the simple fact that a bad economy is bad for everyone-including unions.  If you do not have a growing economy and the need for more workers, the President can't do much for you and your union.  The same goes for public sector union members.  If a growing economy is not producing growing tax revenues, it is only a matter of time before there are lower union dues as well.

Too often the unions have tended to look at everything as a zero sum game.  They think everything is "win-lose".   They need to start looking for "win-win" solutions as does everybody else in the country.

President Kennedy said it best 50 years ago,

"A rising tide lifts all boats."

Of course, Warren Buffett provided a converse view that is worth considering, 

"Only when the tide goes out do you discover who has been swimming naked."

It seems to me that too many unions have been swimming naked over the last 30 years.  Much of their focus and money has been spent on political influence rather than the individual welfare of their members.  That welfare begins with insuring that their employers and their industries can grow and prosper.  In most cases union members are not getting a fair return on their union dues because a large portion of dues either go to pay the salaries of the union bosses or end up in the coffers of the Democratic party.  

Let's face it, there are very few people who want to come out of the water bare naked.  Especially when  its daylight.  It is daylight and the sun does not appear to be setting anytime.  The unions better make sure that their swimming trunks are firmly in place as the tide continues to go out.  Or they need to start putting more effort in assisting in getting that rising tide to help everyone.

Tuesday, January 22, 2013

$andy In$anity

If you need further proof about the out of control spending and lack of fiscal sanity in Washington, DC look no further than the recent legislation that was passed for Hurricane Sandy relief.

This legislation received a lot of attention in the press and Speaker John Boehner received a great deal of criticism for supposedly "blocking" the emergency Sandy relief legislation from being voted on in the House after it passed the Senate.




What are the facts?

The U.S. Senate passed a bill late last year that was advertised as a $60 billion emergency relief package for Sandy victims and sent it to the House.

How reasonable a number is that?  Consider the fact that the estimated insured losses from the storm are currently estimated at $25 billion.  The entire insured losses from all disasters nationally in 2012 are estimated at $58 billion.  Bear in mind that this is nearly double the average of annual insured losses from 2000 to 2011.

This should immediately tell you that something else is going on beyond "emergency relief".  That becomes very evident when you look at what was in that Senate bill.

The fact is that only about $10 billion of the $60 billion had anything to do with emergency aid for the victims of Sandy.  In fact, only $9 billion of the total amount in the bill was even slated to be spent in 2013.  The rest is what some might call pure political pork.  What else do you call it when a Hurricane Relief bill includes $150 million for Alaskan fisheries, $100 million for the federal Head Start program for poor pre-schoolers, $188 million for new Amtrak lines (not repair of lines caused by the storm, all new additional lines), $11 billion for public transportation projects, and $1 million for a performance arts festival in New York?

Harry Reid passed the bill through the Democrat controlled Senate and then sent everyone home.  Since it was done with only days left in the session it was essentially a "take it or leave" deal for the House as there was no time to reconcile differing bills with the Senate. What ended up in Speaker Boehner's lap was fatter than any hog in his Southwestern Ohio Congressional District.  He tabled the bill and it died with the end of the session on January 3.

Of course, anyone who wanted to slow down the process and trim the pork ends up being calling an unfeeling heel.  It is not easy being Speaker John Boehner these days or anyone else who has any sense of fiscal sanity left.

The new House passed a $9.7 billion Sandy relief bill on January 4 that would have taken care of the immediate spending needs for the national flood insurance program.  It easily passed 354 to 67 with bipartisan support. However, this amount was a far cry from the $60 billion bill the Senate passed and the howls on the political left and the country's Northeast continued unabated.

Boehner came back last week and put forth two bills before the The House of Representatives that added up to $50.7 billion.  The first vote concerned $17 billion and included funds for relief and transportation projects. The second vote set aside $33 billion for future longer-term projects.  Any attempts by the Republicans to scale the bills back were beaten back by almost all Democrats and a handful of Republicans (mostly from the Northeast).   Attempts to offset the increased spending with budget cuts elsewhere were also defeated. In the end, 49 Republicans and 192 Democrats voted for the entire package.  Only 1 Democrat voted No and he was jointed by 179 Republicans.  That was Rep. Jim Cooper of Tennessee.

Therefore, a $60 billion "emergency relief" package that is pretty close to the bill passed the Senate in the last session now will be reconsidered again in the newly formed Senate.

It is probably a foregone conclusion that the entire $60 billion bill will pass again in the Senate and go to President Obama for his signature.  Bear in mind that $60 billion is also about the annual amount that will be raised from the recent income tax increase.  It literally is as if the money is coming in on one hand and going out on the other.  If you thought that additional tax revenue was to help reduce the deficit, think again.  At least for this year.

This is just another example of the spending insanity that seems to permeate Washington. I am all for helping New York and New Jersey recover from this storm.  That is what it means to be an American.  However, it is time to stop taking advantage of real emergency spending situations with pork and politics.

It is also time to start budgeting for these contingencies ( I know that is a completely ridiculous proposition for the Senate who has not even produced a budget in almost 4 years) as we know there will be rainy, windy and other bad, bad days in our country from time to time.

It is a little late to do that on this one but how about a common sense idea like cutting our foreign aid budget this year to partially offset this added cost? This is a suggestion that Senator Rand Paul has made.  For example, why are we shipping foreign aid money to Egypt this year when we have a need for domestic aid to New York and New Jersey?

When is the insanity going to stop?  It looks to me that it will not stop by any action in Washington.  That means that when it does stop, it is going to be a very hard stop.

If that happens we are going to quickly find ourselves in a very different world.  That is a world when people may look at Rand Paul much differently than they do today.  It could mean that someone on the far, far left may also look like they have the right answers.  If our debt train goes off the tracks, I think it provides an opening for those on the fringes of either party to propose solutions that could go mainstream that today would elicit barely a snicker.  

It is a long way to 2016.  Fasten your seatbelt and stay away from the straight jacket.  We need some people to maintain their senses and understand the nonsense in Washington.

 

Sunday, January 20, 2013

The Fleecing of Old and Young

What would the media coverage be like if every person on Social Security saw their monthly income benefit cut by 80%?

What would the media coverage be like if scores and scores of senior citizens had to return to the workforce because their retirement income just wasn't there anymore because of the policies of our federal government?  In fact, this resulted in seniors actually taking jobs at the expense of younger workers.

If we saw this you would think we would see both senior and younger workers in full outrage about those government policies.  Seniors, who worked and saved their whole life, having the rug pulled out from under them just as they were looking to enjoy the promise of retirement security.  Younger Americans, who are looking forward to the future,  seeing the promise of a better life put in serious jeopardy by those policies.

In fact, all of this is occurring and yet we hear almost nothing about it on the news.  We see nothing changing insofar as our government policies.  And we see next to nothing from both young and old alike demanding change.

What am I talking about?

If you are a retiree and have any amount of savings, you know.  For others, let's look at what has happened over the last few years.

In 2007, a retiree (or any saver for that matter) could earn a decent yield on invested cash in money market, certificate of deposits or bonds.  Dennis Miller who writes a column called "Miller's Money Forever" explains how things have changed for that retiree.

Finding cash alternatives is one of the most important issues affecting us as investors. To help this make sense, let me begin at the beginning… the good old days of 2007, when most of us kept our cash in brokerage "sweeps" accounts.

Sweeps accounts automatically "swept" a portion of our brokerage account into an interest-bearing account so that our idle cash would provide some income. At that time, my Schwab sweeps account was paying 4% interest. To keep the math simple, imagine a person with a $150,000 portfolio who wanted to earn 10% overall – that's $15,000. If one-third of that portfolio ($50,000) were in cash, earning 4% interest, that's $2,000. That means that the other two-thirds of the portfolio has to earn $13,000, or 13%, on the remaining $100,000. That wasn't so outrageous in 2007.

Many conservative portfolios would take a portion of that remaining $100,000 and invest it in fixed-income instruments paying 6% or more. Even then, the remaining balance could be invested wisely to make for a 10% overall return with only a portion of the capital at any real risk.

Now fast forward to 2012. Today my sweeps account pays exactly 1/100th of 1%. That same $50,000 only earns $5.00 in interest annually. That means that the other two-thirds of the portfolio has to earn close to 15% to reach the same target of 10% overall… in a down economy. That's a tall order.

I want to really emphasize this point for all of our readers. In 2007, it took $50,000 to earn $2,000 in interest in our normal cash account. To earn the same $2,000 today, we would need $20 million in our sweeps account. (emphasis added)

In addition, back in the "good old days" part of the remaining two-thirds of a conservative portfolio would have been invested in CDs or top-quality bonds. What's happened to that portion? The best rate I can currently find for a five-year CD is 1.2%. Not only has the one-third cash allocation taken a huge hit, so has the portion that would have been safely invested in CDs and high-quality bonds.

Let's see how all of this has worked out for a retiree with a retirement investment portfolio of $500,000 that came from a lifetime of savings in their 401(k) plan.  Miller again does the math.

In 2007, before the government decided to clamp down on interest rates, you could invest that money in 6% CDs and earn $30,000 in interest. For decades almost all financial planning tools used 6% as a retirement benchmark.
Now, the best rate for a 5-year CD is 1.2% interest. The same CDs would earn $6,000 in interest. 
The interest does not even cover the government-reported 2% inflation. Add that $6,000 to your Social Security check and that is what you have to live on

If you are keeping score, that retiree's investment income has gone from $30,000 per year to $6,000 per year.  That is a loss of income of $24,000 per year-or a 80% reduction.  For an investor to earn the same safe income today would require an investment portfolio of $2,500,000!

Why has this happened?  Quite simply, the Federal Reserve has been on a mission since 2008 to bail out Wall Street and the bankers that made bad loans and the politicians in Washington and elsewhere who can't balance a budget (or in the case of the U.S. Senate, even pass a budget).

Retirees and savers have paid a horrible price.  And yet you hear almost nothing about what is close to theft by way of the low interest rate policy supported by the Federal Reserve and our Washington policy makers.

So what are those over age 55 and over doing about it?  Those at age 55 and older who are already working are not giving up their job.  They can see that their 401(k) balances will not earn very much in retirement.  For those who have already retired, many are going back to work.

Younger workers are paying the price.

Look at his chart of Job Additions Since July 2009 (the "End of the Recession") by Age Group that was put together by Zero Hedge back in November.  It shows that of the 3.3 million jobs that were "created", 3.8 million jobs went to workers age 55 and over.  All other age groups lost 500,000 jobs in total.  Workers in the youngest (ages 16-19) and prime (ages 25-54) cohorts lost 1.3 million jobs.



Workers aged 20-24 have gained jobs over the last three years but at only a fraction of those aged 55 and over.

This chart from Zero Hedge shows the job additions by age group in October, 2012.  This is  representative of what has been occurring over the course of 2012.


Bear in mind that the two charts above were as of October, 2012.  That was right be before the election.

Despite this, we know who the voters sent to Washington.  This is despite this clear evidence that both the old and young are being fleeced by the policies of the last four years.

Is the media completely asleep?

Are the people nothing but sheep?

Are all of our elected representative creeps?

When are we going to understand that our problems run very, very deep?

If we don't soon, there will be many more who will weep.

Thursday, January 17, 2013

Are We Looking At The Right Target?

We barely avoided going over the fiscal cliff.

We are now heading straight for a collision with a mountain of federal debt.

However, all we hear the President talking about right now are guns, guns and guns.

Are we looking at the right target in all of this?  What should we really be focusing on?


Credit: AccurateShooter.com


There is little doubt that gun violence is a big problem and an important issue. However, is it the biggest problem we have right now?  After all, we are less than a month from hitting that debt limit ceiling.  We continue to spend $1.00 for every .60 in revenues.  We are still looking at $1 trillion annual deficits.  We still have a U.S. Senate that has not passed a budget in almost four years.

What will all of the talk, proposals and executive orders on guns actually accomplish?

First of all, I am not a gun nut.  I have used firearms and at one time had obtained the NRA Sharpshooter classification.  I respect guns and what they can do.  More importantly, I respect the U.S. Constitution.  I believe the 2nd Amendment is pretty clear.
A well regulated Militia, being necessary to the security of a free State, the right of the people to keep and bear Arms, shall not be infringed.
There is no doubt that the people have the right to keep and bear arms and that right is not to be infringed.  At the same type, it seems understood that some type of regulation is permitted with regard to that right.  The difficult question is at what point is the right to keep and bear arms infringed by regulations?

For example, does an individual have the right to keep and bear arms such as a nuclear weapon, surface to air missile or bazooka?  I have not heard anyone with the NRA or anyone else make that argument.  Machine guns and other military types of automatic weapons are already illegal and have been since the 1930's.  In fact, the use of these weapons by gangsters such as Machine Gun Kelly, Baby Face Nelson and John Dillinger led to the passage of the National Firearms Act in 1934 that made them illegal in the U.S.

If anything is going to be done that might infringe on that right in the Constitution it would seem that it should be clearly demonstrated to be a reasonable regulation.  To meet that standard government should have to show that vast numbers of the public are being killled (or could be killed) to outweigh the individual constitutional right.  This is clear with an atomic weapon, machine gun or SAM.  In other words, the public's interest to safety outweighs the individual rights to keep and bear arms.

Let's look at some surprising statistics that I found in researching this blog.   The following information on gun violence comes from the Brady Campaign to Prevent Gun Violence.  The other data is from research I did to put these deaths in context.

On average, over the three years 2008-2010, 31,537 people in America have died from gun violence.  This is a shocking number.  However, over the same time period, an average of 34,651 people died in auto accidents.  25,000 people die annually in accidental falls.  There are 39,000 deaths each year by poisoning, most due to abusing drugs.  There were also almost 800,000 abortions  in the U.S. in 2009 according to the CDC.  120,000 abortions were done in New York alone.

What I found interesting in looking at the gun violence deaths is how they were caused.

Only 11,583 of the total were homicides.  That is only 37%.

18,783 of the total deaths by gun violence were the result of suicides!  That is 60% of total deaths.

Only 334 of all gun deaths were caused by police intervention and 584 were the result of people being killed accidentally by guns.

When you consider that 60% of gun violence deaths are caused by people committing suicide you begin to get an idea of how ridiculous all of this gun talk is.  How many people kill themselves using an assault rifle or with a magazine with over 10 rounds?  Will any of this do anything substantial on curbing gun violence deaths that would justify infringing on the rights of law abiding citizens.  I think not.

Further to this point, John Hinderaker cites another interesting statistic in PowerLine that adds additional context to all of this.  In 2010, there were only 358 homicides that involved rifles (all rifles, not just "assault weapons") in the U.S.  That means that only 1% of all deaths by gun violence involved rifles of any type.  Again, are we looking at the right target?

Handguns are clearly the cause of almost all gun violence in this country. However, standard handguns are not even being discussed.  That is because the U.S. Supreme Court in D.C v. Heller ruled in 2008 that banning personal firearms possession is unconstitutional. The District of Columbia had banned the possession of all firearms by anyone but law enforcement officers beginning in 1976.  Of course, there are legitimate questions about how useful the ban on handguns in D.C was anyway as Jeffrey Scott Shapiro points out in this Wall Street Journal op-ed.  Murders in D.C. have actually declined by more than 50% in the four years since the handgun ban was repealed.

When I look at the statistics the obvious answer is that the primary target on gun violence needs to be focused first and foremost on the people firing the weapon.  It seems to me we need to be focusing more on the mental health side than on the gun side.  You start with the fact that suicides are the cause of 60% of gun deaths.  The recent mass shootings in Aurora, CO and Newtown, CT clearly seem to point to serious mental health issues being the primary reason for the killings.  The same was true with Jared Loughner in the Gabby Giffords shootings in Arizona last year.

Much more of this debate and discussion should be looking at the issue of mental health than the size of the magazines in firearms.  That debate should also include what effects (if any) video games and other entertainment might have on the mental state of mass killers like we saw in Aurora (Batman) and Newtown ("Call of Duty" video game).  It may be coincidental or circumstantial but it bears looking into in some depth.  We have introduced a lot of external factors and influences into our environment that were not present 20, 30, 50 or 200 years ago.

It should not be easy to infringe on individual constitutional rights.  Should any of this be done by Executive Orders?  I know that is easy for the President. However, what happened to the idea of passing bills in the legislative branch first and having the President sign them into law?

As for the issue of gun violence, let's start where the numbers tell us the real underlying problem is.  Mental health is being talked about but not with the same vigor and rigor that guns are being talked about. As a result, it seems that most of the focus in this debate is on the wrong target.  And we are also spending a lot of time talking about an issue that, while important, is far less critical than the looming debt and budget crisis that should be #1 on every person's mind in Washington right now.

We are not going to solve any part of the gun issue in this country in the next 60 days.  We have to solve some part of our debt and budget crisis in the next two months.  Time is wasting and the President is fiddling.  I just don't want all of us getting burned in the process.

Monday, January 14, 2013

Degree Dearth=Date Dearth

One of the big trends in American society over the last forty years have been the increasing number of female college graduates compared to males.

In 1970, about 60% of all college graduates were men and 40% were women.  Today, those numbers are reversed.  I wrote about this and other interesting facts about the state of higher education in this country in my blog a little over a year ago.

The higher college graduation rates of females is also evident when you look at the female proportion of the college-educated workforce.  59% of the college-educated work force between the ages of 20-24 is female.  It is 54% for the ages of 25-34.

Source: National Association of Colleges and Employers

55% of all college accounting majors today are female as are 49% of business administration majors.  However, women still lag in the STEM disciplines (Science, Technology, Engineering and Math). Women make up only 17.8% of Computer Science majors and 18% of Engineering majors according to NACE.  We need to do a better job of encouraging women to choose these courses of studies.  Our economy can only absorb so many Mass Communications or English Literature majors.  Future demand is going to be driven by people who can make it, fix it, figure it out, test it or code it.  Too many women are not taking this path and we need their talents in these fields to stay competitive in the world economy.

Another factor in the changing educational backgrounds of men and women is the effects it is having on personal relationships.  The enormous shortage of college educated men is creating a significant imbalance in the dating pools in a number of large cities where college graduates tend to migrate to after college.

Consider this graph from The Atlantic which shows the percentage by which women under the age of 35 with at least a bachelor's degree outnumber male college graduates under age 35 in various U.S. cities.  Oh, to be a young, single guy with a college degree in Detroit!


Here is a second graph based on 2009 data that looks at the metro areas rather than just the city dwellers.  Most of the single guys in Detroit must be living in the burbs.


What does all this mean?  I am not sure we know at this point.  Women have historically tended to date and marry men of at least equal educational attainment.  That is becoming an increasingly difficult goal.  There is also research to suggest that in societies with male-female imbalances you see results related to the supply-demand imbalance.  In female-heavy populations, men are more promiscuous and are less prone to make commitments.  In male-heavy populations, there is more marriage, less divorce and fewer illegitimate children.   All of this seems to be connected in some way to the significant increase in the age of first marriages in both men and women over the last 50 years.

Median Age at First Marriage (US Census Bureau)

This ultimately also impacts the birthrate because biology will necessarily limit the potential number of children (at least in wedlock) out of these unions.

Of course, if all of this has not made the single dating scene daunting enough if you are a female, then you should read this blog post by Penelope Trunk on "How to pick a husband if you want to have kids".  I don't know if the choices are as stark as she lays them out but I think there is food for thought here.  For me, this would turn daunting into depressing if I were a single woman.

I would hope there is more to life and love than all of this.

 Here is how Penelope sees it.
You cannot pick a husband to have kids with until you know if you want to work full-time while you are raising them. Some women will say they know for sure that they do want to work full-time. Most women will say that they don’t know for sure. But there are actually only two choices: be a breadwinner or marry a breadwinner. Then, within those two choices, there are a few strategies you could use.
I will boil down the strategies that Penelope suggests for you. If you are going to be the breadwinner, you better really love your job and be capable of making a ton of money. It also helps to marry a guy who would not mind staying home with the kids. If you are marrying a breadwinner, make sure he is going to be able to earn a ton.

If you are a single female and are up to reading the full article, you need to know your Myers Briggs Personality Type as well as anyone you might consider to be marriage material. You can go here to find out your personality type.

I think all of this shows that we live in a very complex time with a lot of complicating factors that also lead to a lot of consequences-both intended and unintended.  Who would think that all of this might be the result of more women simply getting a better education?  The better question to ask might be-How do we get the men step up?

Friday, January 11, 2013

Who Is Picking Your Pocket?

When you see a headline like that on BeeLine you have to thing you are in for another story on the fleecing of the American taxpayer.

Not this day.

I am writing about a real life pickpocket.  Perhaps the best pickpocket in the world.  His name is Apollo Robbins and he was recently profiled in an article in The New Yorker written by Adam Green.  It is a must read.  A few short excerpts.

A few years ago, at a Las Vegas convention for magicians, Penn Jillette, of the act Penn and Teller, was introduced to a soft-spoken young man named Apollo Robbins, who has a reputation as a pickpocket of almost supernatural ability. Jillette, who ranks pickpockets, he says, “a few notches below hypnotists on the show-biz totem pole,” was holding court at a table of colleagues, and he asked Robbins for a demonstration, ready to be unimpressed. Robbins demurred, claiming that he felt uncomfortable working in front of other magicians. He pointed out that, since Jillette was wearing only shorts and a sports shirt, he wouldn’t have much to work with.

“Come on,” Jillette said. “Steal something from me.”

Again, Robbins begged off, but he offered to do a trick instead. He instructed Jillette to place a ring that he was wearing on a piece of paper and trace its outline with a pen. By now, a small crowd had gathered. Jillette removed his ring, put it down on the paper, unclipped a pen from his shirt, and leaned forward, preparing to draw. After a moment, he froze and looked up. His face was pale.

“F***. You,” he said, and slumped into a chair.

Robbins held up a thin, cylindrical object: the cartridge from Jillette’s pen.


In more than a decade as a full-time entertainer, Robbins has taken (and returned) a lot of stuff, including items from well-known figures in the worlds of entertainment (Jennifer Garner, actress: engagement ring); sports (Charles Barkley, former N.B.A. star: wad of cash); and business (Ace Greenberg, former chairman of Bear Stearns: Patek Philippe watch).

He is probably best known for an encounter with Jimmy Carter’s Secret Service detail in 2001. While Carter was at dinner, Robbins struck up a conversation with several of his Secret Service men. Within a few minutes, he had emptied the agents’ pockets of pretty much everything but their guns. Robbins brandished a copy of Carter’s itinerary, and when an agent snatched it back he said, “You don’t have the authorization to see that!” When the agent felt for his badge, Robbins produced it and handed it back. Then he turned to the head of the detail and handed him his watch, his badge, and the keys to the Carter motorcade.


In the book, Outliers, Malcolm Gladwell states that for anyone to be a phenom or an extrordinary talent it normally takes at least 10,000 hours of concentrated training and practice to get to that level of expertise.  It also helps if it is done at a young age. It doesn't matter what the skill is.  It could be golf (Tiger Woods), hockey (Wayne Gretzky), chess (Bobby Fischer) or the piano (Van Cliburn).  However, research indicates that it is going to take at least 10,000 hours of concentrated effort to be an elite world-class talent at anything.

How did Robbins hone his pickpocket skills?  More importantly, how did he do it without spending 10,000 hours in prison?

At age 22, Robbins was a struggling magician in Las Vegas.  He had married young, had a son and his marriage was already unraveling.  He was living off the sale of his collection of magic books that he began collecting when he was age 15.

One day, Robbins got a call from the head of entertainment at Caesar’s Magical Empire, a now defunct Roman-themed dinner-theatre extravaganza at Caesar’s Palace, offering him a two-week job filling in for a magician. On his first night at work, a woman in the crowd, from whom he hadn’t stolen anything, shouted, “My rings! I had a diamond and a sapphire—where are they?” The woman and her husband accosted Robbins and threatened to call hotel security.

“Don’t walk away,” Robbins said calmly. “Let’s go together, because if I had your rings I could just get rid of them while you were gone. So let’s have them search me in front of you.” He continued in a soothing tone, “I understand how you feel. Once we eliminate the possibility that I stole your rings, then you’ll be able to think more clearly and figure out what happened to them.”

“I was using an old sales technique called ‘Feel, Felt, Found,’ where you empathize with the customer,” Robbins told me. “Also, the improv technique of never using a negative—agree and add on instead.”

While Robbins was being searched, the woman went to check her room and discovered that she had left her jewelry there. Robbins was offered his first permanent gig.

Robbins describes his years at Caesar’s Magical Empire, where he worked from 1998 until it closed, in 2002, as his “college and graduate-school education” in picking pockets. His job was to dress as a wizard and provide seven minutes of entertainment for tourists waiting to be led to dinner by a toga-clad hostess. “I decided I wouldn’t do any magic tricks—just stealing,” Robbins said. “That way, I had to work without a net.” He estimates that he met twenty-four people during every show, and that he stole something from three of them. At six shows an hour, five hours a day, five days a week, forty weeks a year, that works out to at least eighty-one thousand pockets picked. “It was a hyper-learning experience,” he said.


How much pickpocket practice was that? That's close to 4,000 hours of picking pockets right there and Robbins has almost exclusively been a pickpocket entertainer since that time. 10,000 hours of picking pockets has long since passed for Apollo.

What does this all mean and why should be care about a pickpocket in Las Vegas?

It is another example of the incredible abilities of human beings. There is almost nothing that can't be done by someone who puts their mind to a task, practices and works at it with total focus.

It might be picking pockets, spinning plates or walking on a cable across Niagara Falls. It might be transplanting a human heart, inventing the iPhone or landing a man on the moon.  It might even be a child born with no arms who can do everything with their feet as well as anyone else does with their hands.

So, how come it is so hard to balance the federal budget?

See a video of Apollo Robbins picking the pockets of New Yorker writer Adam Green.

Here is another video of Apollo on the Las Vegas Strip with a little sleight of hand.

Here is final video on Robbins from Scientific American "Neuroscience meets magic".

What could you accomplish with 10,000 hours?

Thursday, January 10, 2013

Four Charts For Foresight

If you are a regular reader of BeeLine you know I love charts.

Here are four charts that I came across in the last week I think everyone should see.  They give you some perspective based on hindsight but they also might help provide a little foresight on what has to happen to get things on the right track in this country.

Stephen Covey once said,

"The main thing is to keep the main thing the main thing."

If we have one main thing we have to do in the United States it is to grow the economy.  We need more people making and less people taking.  If we can do that it will take a lot of pressure off of our other problems, most particularly, our budget deficit.

The first chart from Calculated Risk shows how steep a climb we still have to make to do this.  This chart shows the percent of job losses in each Post WW II recession compared to the peak employment month.  As you can see, at almost 5 years into the recession that began in 2007, we still have 3% fewer jobs than we had then.

The other interesting thing to note is that in each recession since 1981 it has been taking longer to recover the jobs lost from the prior peak. My guess that technology is a big reason the recovery in jobs is taking longer. In 1981, it took about 27 months to recover the jobs.  In 1990, it took 32 months.  2001's recession set us back almost 48 months.  As jobs are cut in the recession, employers find other ways to get the job done when the recovery starts.  Increased productivity through improved technology is often used.  Recovering the jobs in this recession looks to be years away based on where we are right now.


The other three charts are from an article in Forbes titled "2012-The Year in Healthcare Charts" by Dan Munro.

If we have another main thing it is to reduce the cost of health care as a percentage of our economy.  The cost trends are simply unsustainable in the same way our federal government deficit is.

The first of these charts shows the % increases in Health Insurance Premiums compared to workers contributions, workers earnings and inflation.  You will notice that both premiums and workers contributions have vastly outstripped workers earnings and inflation since 2000.  Please note that since 2009 (when Obamacare was passed) the amount that workers pay for their coverage has outstripped premium growth.  Employers have had to increasingly place more of the burden for health care on their workers as costs have increased.  Obamacare does next to nothing to control health care costs and this will become more evident over time.  In fact, the mandates actually increase costs in many cases.

Credit:  Kaiser Family Foundation

I do not make annual predictions in BeeLine.  I have learned over the years to leave the future to the Lord.  I also have learned that I am much smarter using hindsight than foresight.  However, if I were to make one prognostication about 2013, I would suggest that the first open enrollment period with Obamacare's health care exchanges is going to be very chaotic.  As a result, I do not think I would want to be the HHS Secretary in October or November.  I do not see how the systems for the open enrollment period can be ready to handle what has to be done.

The second chart on health care compares per capital health care costs and life expectancy across 34 OECD countries using 2009 data.  This chart is from Mary Meeker's USA, Inc. financial report.  This chart really shows what an "outlier" is.  How do we remain competitive in a world economy with these higher health care costs compared to the rest of the world?


Finally, this chart that was originally developed by Carnegie Mellon University professor Paul Fishbeck,  compares our per capita health care costs by age olto Germany, UK, Sweden and Spain.  From this data you see that almost all of our excess health care costs are related to ages 60 and over.  Our costs at other age cohorts is similar to other countries.  Therefore, this would suggest that Medicare reform is absolutely critical if we are to effectively deal with our health care cost problems.

We should also be very concerned that turning more of the health care system over to the federal government (via Obamacare) may also be a path to further worsening our health care cost situation, not improving it.



Tuesday, January 8, 2013

The $1 Trillion Coin Con

We continue to find ourselves in The Twilight Zone.

The most recent example is the proposal that is circulating in some liberal Democrat circles that the Treasury Department should mint a $1 trillion platinum coin and put it in on deposit with The Federal Reserve.  It is argued that this would allow the Obama Administration to ignore the debt ceiling limit as it would have an additional $1 trillion "on deposit" to allow it to keep on spending without having to answer to those pesky Republicans in the House.

With the coin "on deposit" with the Fed the Treasury could then draw upon the account to pay its bills without worrying about the debt ceiling.  What happens when that $1 trillion is gone?  Simple.  Just mint another coin.  While we are it, why don't we just mint a $16 trillion platinum coin and wipe out all our debt at one time?  Why not start the new year with a fresh start?

The whole idea for the magical coin stems from what is an obscure provision in the law that permits the Secretary of Treasury to mint and issue platinum bullion coins for commemorative purposes.

It is incredible how creative people can get to avoid facing facts, making difficult decisions or having to step up to do the hard work necessary to fix our fiscal situation.  Where is this creativity when it comes to actually solving the problem that is right in front of us?

Of course, there is no intention that the actual coin contain any but a trace amount of platinum.  Perhaps just a small surface varnish to make it shine very brightly in the sun.

That got me wondering how large a true $1 trillion platinum coin would have to be if it was pure platinum?

Fortunately, Zero Hedge already did the calculation and provided a few facts to put it all in perspective.

So you want a trillion dollar platinum coin? Ok: here are some facts:
  • Platinum has traditionally been the most valuable precious metal for one simple reason: it is rare.
  • It is so rare, that all the platinum ever mined could fit into a 25 cubic foot box.
  • The weight of that box comes out to just over 16 tons: this is how much platinum has been mined since the start of time.
  • A coin valued at $1 trillion and made out of platinum would, at today's price of $1557/ounce, weigh in at 642.3 million ounces.
  • 642.3 million ounces is also roughly 18 thousand tonsor about 1100 times more than all the platinum mined.
In other words, putting a coin that is worth $1 trillion in perspective to all the platinum ever mined, would look something like this:






I don't know about you but it appears to me that Lady Liberty is crying when I look at her image on that platinum coin.

Monday, January 7, 2013

The Twilight Zone

At times I think we are living in The Twilight Zone.



For those a little younger than I am, The Twilight Zone was a television series that originally aired from 1959-1964 that combined science fiction, suspense, horror or fantasy which often concluded with a macabre or unexpected twist.

The show started with a voiceover like this which was narrated by the show's creator, Rod Serling.

"This highway leads to the shadowy tip of reality: you're on a through route to the land of the different, the bizarre, the unexplainable...Go as far as you like on this road. Its limits are only those of mind itself. Ladies and Gentlemen, you're entering the wondrous dimension of imagination. Next stop....The Twilight Zone."


If you don't think we have crossed over the line to The Twilight Zone consider this AP story about Gerard Depardieu, the French actor, who recently renounced his birth citizenship because of his anger over the proposal by French President Francois Hollande to raise the income tax on earned income to 75% from the current rate of 41%. In his letter renouncing his citizenship Depadieu stated that he was leaving France because of his belief that success and talent are being punished by the current French government.

Gerard Depardieu


Where is Depardieu going to take up citizenship? Switzerland? Belgium? Austria? UK? USA?

No. This is where we enter The Twilight Zone.

Depardieu is on his way to becoming a Russian citizen as President Vladimir Putin has approved Depardieu's application for citizenship in expedited fashion.

Why would Depardieu be interested in becoming a Russian citizen?

Russia has a flat 13% tax rate. That's right, 13%! France is at 41% and wants to go to 75%. The USA has just increased the income tax rate on rich people like Depardieu to over 40% (including the Obamacare taxes) and communist Russia is at a flat 13%!

This highway has indeed led us to the shadowy tip of reality. We have found we are also on a route to the land of the different, the bizarre, and the unexplainable when a communist country has a flat tax of 13% and what have always been considered free market, capitalistic countries are close to confiscating incomes and property rather than taxing it.

I have to think that if Serling had submitted a Twilight Zone script to CBS in 1962 with a story line that Russia had a flat tax and was luring people of individual talent and achievement away from Western countries it would have been rejected as too far fetched.  Not only has Atlas Shrugged but Ayn Rand could return to her homeland and feel good about it.

Please change the channel! All of this is getting a little too scary to watch. Let's watch Leave It To Beaver instead.

Thursday, January 3, 2013

The Phone It In President

Article 1, Section 7 of the United States Constitution states,

All bills for raising revenue shall originate in the House of Representatives; but the Senate may propose or concur with amendments as on other Bills.

Every bill which shall have passed the House of Representatives and the Senate, shall, before it become a law, be presented to the President of the United States; if he approve he shall sign it... (emphasis added)

So how did our President of the United States sign the momentous piece of legislation averting the so-called Fiscal Cliff?  By autopen!  It seems that President Obama was already annoyed that he was missing time on the golf course and the beach in Hawaii because of the Fiscal Cliff negotiations and he could not hang around for another day to perform the constitutional duties of his office after it was settled.  Of course, it was Joe Biden who had to be called in to actually get the deal done the President found elusive for the last two months. The story on the autopen signing from ABC News.com.

President Obama has signed the “fiscal cliff” legislation into law via autopen from Hawaii, where he is vacationing with his family.

The bill to avert the “fiscal cliff” arrived at the White House late this afternoon and it was immediately processed, according to a senior White House official. A copy was delivered to the president in Hawaii for review. He then directed the bill to be signed by autopen back in Washington, D.C.

The Bush administration deemed in 2005 that the use of the autopen is constitutional, although President George W. Bush never used the mechanical device to replicate his signature on a bill.

The office of legal counsel found at the time that Article 1, Section 7 of the Constitution allows the president to use the autopen to sign legislation, stating “the President need not personally perform the physical act of affixing his signature to a bill to sign it.”
Our New President of the United States


Notice the reference to the Bush Administration reference supporting the legality of the autopen signature.  If you are the mainstream media it is always helpful to seek cover by citing the Bush Administration, isn't it?   The fact is that, despite this opinion, neither President Bush or any other President in the history of the United States has signed a bill into law by autopen.  This is the second time that President Obama has done so.  The first related to an extension of the Patriot Act when he was in Europe in 2011 attending the G8 Summit.  The legal opinion can be read in its entirely here.

However, bear in mind that this is just a legal opinion on how the attorneys in the Bush Administration thought the issue would be decided in a court of law.  It is just an opinion.  Nothing more.  In fact, consider the portion of the legal opinion cited below where the attorneys cite legal memorandums of the Supreme Court that suggest that a personal signature is required.  In addition, as recently as 1999, when fax technology and emails were also available, a contrary opinion came out of the Office of Legal Counsel of the Clinton Administration.  As a result, bills were flown halfway around the world so that the President could personally sign necessary legislation.  The Clinton Administration did not want to attempt trifling with the plain words of the U.S Constitution.

In reaching our conclusion, we recognize that from the Founding to the present day, the President has always signed bills by personally affixing his signature to them. Moreover, in recent years some unpublished opinions of this Office (though not our most recent opinion, see Whelan Memorandum) have suggested a constitutional basis for this practice. See Rehnquist Letter at 2 (concluding that "with the exception of signing bills passed by Congress, there is no legal impediment to the delegation of the act of signing and that the question of which documents the President should personally sign is largely one of propriety rather than of law") (emphasis added); Scalia Memorandum at 1 (citing Rehnquist Memorandum and stating that "[t]he signing of bills passed by the Congress is one exception which may require the President’s personal signature") (emphasis added); Memorandum to Files from Ralph W. Tarr, Deputy Assistant Attorney General, Office of Legal Counsel, Re: Presidential Signing of Bankruptcy Extension Act at 9-10 (June 13, 1984) ("Tarr Memorandum") ("We therefore concluded that it was necessary for the President physically to sign the bill in order for it to become a law."); cf. Wilkey Memorandum at 10 ("a bill would seem to present an a fortiori case in which under the Constitutional provision the signification of the President’s approval requires an exercise of personal discretion and therefore cannot be delegated"); Rehnquist Memorandum at 2 ("the requirement for the President’s signature as well as his decision approving a bill would appear to be non-delegable"). Indeed, on at least two occasions, a bill was flown halfway around the world, on the advice of this Office, so that the President could personally affix his signature to it. See Tarr Memorandum at 9 (China); see also Memorandum to File from Jeffrey P. Singdahlsen, Attorney-Adviser, Office of Legal Counsel, Re: Preliminary Advice and Consideration Regarding Proposal to Fax Continuing Resolution to the President While He Was Abroad at 1 (Dec. 22, 1999) (Turkey).

Why is all of this important? Consider the facts and tell me what you would have done if you were President.

HR 8, the American Taxpayer Relief Act of 2012 is undoubtedly one of the most consequential pieces of tax legislation in our country's history. It permanently establishes tax rates and credits for over 98% of America's taxpayers. It amounts to $4 trillion in total tax savings for those taxpayers compared to what would have resulted with the expiration of the Bush tax cuts on December 31, 2012.

The bill, which was passed at around 11pm on January 1, had to be signed into law by the President before the recess of the old Congress by 11:59 am on January 3 or the legislation would have been null and void with the swearing in of the new Congress.

The bill made its way to The White House by the afternoon of January 2.  However, Obama left Washington to return to Hawaii around midnight that day-or about 15 or 16 hours before the bill was ready for signature.  Therefore, in order to get a few hours more vacation time this President resorted to "signing" one of the most significant pieces of legislation of his Administration by autopen?  It truly is unbelievable.  In fact, it seems to be a clear dereliction of his duties as President.

Let's consider the downside risk here.

Assume that someone challenges the constitutionality of the law on the basis that it was not signed by the President.  The lawsuit goes through the courts and ends up in the Supreme Court in a couple years.  The Supreme Court rules that, in fact, the law is invalid because it was not personally signed by the President.  As a result, all of the tax cuts are to be ignored and back taxes are owed by everyone in the country for the last three years.  Everyone in the country (except for the evil rich people who make more than $400,000) have underpaid their taxes for the last few years.  The Internal Revenue Service is soon instructed to collect delinquent taxes (and interest) from all the taxpayers who did not pay their lawful amounts due.  Showing great sensitivities to the awkward circumstances, the IRS graciously waives penalties on the underpayments.

The total bill for three years would be well in excess of $1 trillion. 

Now, the fact that the law might be invalidated by the Court may only be a 1%, 2% or a .1% chance.  However, if I am the President of the United States why do I ignore that risk merely to get an additional 15 hours of vacation time?  Is his Wednesday golf game that important?  In addition, if I am a Judge or Justice looking at the facts of this case where do I find the exigent circumstances to permit something that no other President found necessary to do over the course of 200 years?

Does anyone think that Mitt Romney or George W. Bush would have done this?  Does anyone think that if they did the mainstream media would have let them get away with this without lambasting them?

Do we need to know any more about this President of the United States?



The Phone It In President
Photo Credit: Steve Senne, AP

Phone It In (third-person singular simple present phones it in, present participle phoning it in, simple past and past participle phoned it in)
  1. to choose to deliver a message by telephone when etiquette demands the effort and respect conveyed by in person communication
  2. (idiomatic) To fulfill a responsibility with a minimum effort rather than the appropriate level of effort.
                                                                                    -Wiktionary.org