When compromise and experts are dangerous

With a title like, "Are Economists Really That Smart" I had to read Bill Flax's piece in this month's issue of Forbes magazine, especially after digesting his first sentence, "Remember when Joe Biden admonished us to keep spending or else we'd go bankrupt?"  Mr. Biden's statement reminded me of something Nancy Pelosi uttered before enactment of the unpopular Obamacare legislation affecting 1/6th of our national economy.  Of course, Joe Biden and Nancy Pelosi are not trained economists, nor am I, but these people are running the country.  This clip is only two seconds...

My timing to read the aforementioned Forbes piece was good since I'd just finished fighting my way through Nassim Taleb's best selling book, The Black Swan.  (I say "fighting" because several technical aspects are beyond me).

In their own ways, Messrs. Flax and Taleb fillet and roast the cadre of economists, public policy-makers and financial journalists who gather at the Keynesian alter.  Living within one's means and free market principles are concepts ignored, even ridiculed, by economic intelligentsia as they advocate for trillions in "stimulus".  

Their voices clamor for more government spending.  The reason QE2 failed, according to these experts, is that the sum wasn't large enough and all the fresh liquidity wasn't given enough time to work.  On the other hand, economists like Nassim Taleb see the economic calamities we now face through a different lens.  Back to the Forbes, piece...  

Mr. Flax says of economics and its modern day application to fiscal policy, 

"The principal failing of macroeconomics is the intrusion it invites and the certainty it instills in politicians...no planner, no matter how wise, could possibly appreciate all the subjective nuances lurking behind these numbers.  Such schemes are doomed to folly."

There also exists today, a notion that Pols sparring over fiscal policy must "compromise" as if the key to solving our economic morass falls in the middle of some ideological bell curve. 

Icon by Creatype at freepik

Compromise might catalyze new legislation, but it won't cure a deficit spending addiction.  Consider Nassim Taleb's eighth principle for a Black-Swan-Robust Society,

"Do not give an addict drugs if he has withdrawal pains.  Using leverage to cure the problems of too much leverage is not homeopathy, it's denial.  We need rehab."

1900 advertisement treatment for morphine addiction - Wikipedia

The same metaphor I used in January of 2009 (and used elsewhere by others) of a drug addict who needs to take the pain, was also used by Dr. Taleb.  

The point is one cannot compromise with a drug addict, they only come back for more, which is why we must lower federal spending.  Tax increases and money printing are analogous to a government's morphine fix -- it feels good for a while, but only makes the problem worse before the inexorable crash.  We must take the pain.  

Conflicting voices about the debt crisis

The official position of this blog remains that the United States does not have a revenue problem, it has a spending problem. 

I spoke with Rep. Jim Sensenbrenner at a local Town Hall Meeting last April about an idea advanced by Tim Pawlenty to avoid default, without raising the debt limit.  The U.S. Treasury has the power to sequence (i.e. prioritize) payments when bills come due.  So debt holders can indeed be paid first to avert default and buy time while a budget patch is passed.  The idea has been roundly ignored or dismissed as impractical.  Of course, the U.S. government also has over a trillion dollars worth of other assets much of which could be liquidated to pay bills, but that's another post.

Guy tilling soil in front of Financial Temple - Wikipedia

The debt markets have not been as restive as the equity markets.  Bond markets know that the administration would not pull the financial temple down on our heads and allow a default, because it is not in the politicians' interest to do so.  The Obama administration would have little choice but to play the payment sequencing card to avert financial Armageddon. 

Treasury Secretary Tim Geithner does not believe the Treasury possesses this ability.  A blog called FairlyConservative.com points out the bluff by citing some July 25th reporting done by Charlie Gasparino.  

What happened two days ago?  Bloomberg News and others reported that "...the Treasury Department will disclose its list of spending priorities in the event the debt limit isn't raised before August 2nd."  Apparently, the rating agencies warn against doing this (the same folks that did such a fine job assigning risk before the housing market cratered).  It really wouldn't matter much according to David Wessel, and others. 

Few observers want a credit downgrade to occur like Neil Cavuto and I understand the potential impact of a downgrade on borrowing costs, but it might be more of a political risk than an economic risk. That  view is expressed in this blurb from Politico.

I'm listening to Bloomberg Radio and an interview with Mohamed El-Erian.  Dr. El-Erian suggests that the bond markets are a more reliable indicator of danger than political sideshows reaping so much media attention.

The Truth About Wisconsin's Collective Bargaining 'Rights'

American Thinker logo

Published in American Thinker - 4.3.2011

By Tim Peterson, Robert J. Simandl, and John J. Maddente

Right: noun: a just claim or title, whether legal, prescriptive, or moral. 

That's the definition of the word used in connection with Wisconsin's government union employees and their demands to retain collective bargaining privileges.  This issue more than any part of the Budget Repair Bill, has captured the nation's attention.

For weeks, we've heard demonstrators beating drums in Madison and equally vocal sympathizers in the media admonish anyone listening about "rights" of government union employees and the turmoil visited upon "the middle class" due to the Governor's Budget Repair bill.  We've also seen polls suggesting public support for some of their views. 

We do not believe that: 1) government employee collective bargaining constitutes a "right" by any reasonable measure, or 2) poll data spewed out by parts of the media has been properly framed, or useful to gauge public opinion. 

According to Encyclopedia Britannica, collective bargaining is

"A process of negotiation between representatives of workers (usually labor union officials) and management to determine the conditions of employment. The agreement reached may cover not only wages but hiring practices, layoffs, promotions, working conditions and hours, and benefit programs."

Further into the root of the issue, according to West's Encyclopedia of American Law, edition 2, in Constitutional Law rights are classified as natural, civil, and political. Natural rights are those that are believed to grow out of the nature of the individual human being such as rights to life, liberty, privacy, and the pursuit of happiness. Civil Rights belong to every citizen of the state, and are not connected with the organization or administration of government.

Political rights entail the power to participate directly or indirectly in the establishment or administration of government, such as the right of citizenship, the right to vote, and the right to hold public office.  Nothing in Wisconsin's Declaration of Rights (found in the State Constitution) guarantees a right to collective bargaining for any citizen, yet the reaction coming from government unions sounds as though the 1857 Dred Scott decision was dropped on them to enshrine slavery. 

One point appears lost in this discussion of "rights" (even coming from some commentators who supported the bill's passage).  Neither the U.S. Constitution nor Wisconsin's Constitution identifies collective bargaining as a right.  One can argue for an amendment at the state level -- and some advocates have recently done so -- but you can't credibly maintain that the legal equivalent presently exists. 

Therefore since collective bargaining is neither a natural, civil, nor political right, at best it is a right only in the colloquial sense of the term and merely a privilege in a purely constitutional sense.  It is a privilege in our view that has been badly abused in Wisconsin to the detriment of state taxpayers.  Collective bargaining actually denies the individual employee -- who might otherwise choose to decline a contract, or even decline the requirement to bargain collectively -- an ability to act independently, yet many continue to refer to this bargaining mechanism as a right.

While the recently enacted bill has caused much consternation, what it actually will do is replace collective bargaining with distributed bargaining and push down negotiations to the local school district levels -- where, in our view, they belonged in the first place.  We are bothered by the oft-used phrase of an "assault on the middle class" believing as we do, that it is not an assault on government employees who possess Cadillac health care benefits and retirement plans the rest of us only dream of.  Further, at 15% of the workforce (and even less of the populace), they hardly constitute the sweeping characterization we often hear as -- "Wisconsin's Middle Class."

The fact is, at the local level in many rural Wisconsin communities, public employment has become a fiefdom of privilege where, owing to binding interest arbitration based upon comparability, the never-ending spiral of wage and benefit improvements often results in local government compensation exceeding community "middle class" standards. The need to bargain virtually every operational issue makes implementing policy decisions and providing services a protracted struggle, often ending in grievance arbitration.

Perhaps this is why President Franklin D. Roosevelt, the patron saint of the American labor movement warned:

"All Government employees should realize that the process of collective bargaining, as usually understood, cannot be transplanted into the public service. It has its distinct and insurmountable limitations...The very nature and purposes of Government make it impossible for...officials...to bind the employer...The employer is the whole people, who speak by means of laws enacted by their representatives."

We believe by limiting Collective Bargaining, the legislature has enriched individual workers ability to work where they want and associate and negotiate with whom they choose and taken steps to reign in runaway costs.

We also take issue with the way poll takers have tried to report public opinion, and trumpet results.  Consider the USA Today/Gallup poll asking respondents, "Would you favor or oppose a law in your state taking away some collective bargaining rights of most public unions, including the state teachers union?"  Their poll data revealed that 61% of respondents said "oppose" and so the Feb. 22^rd article title in USA Today blared, "Poll: Americans favor union bargaining rights"

We say -- not so fast.  In the first place, a more reasonably framed question would have been,

Would you favor or oppose a law in your state that substituted some collective bargaining privileges, including those of the state teachers union, with a move toward local bargaining?* 

The aforementioned USA/Gallup poll also indicated that 71% of us do not favor any tax increases as a means to reduce state budget deficits.  The problem with the USA/Gallup poll and those who like to seize only on responses to the first question mentioned above, is that they fail to ask respondents to choose between tax increases or spending cuts, as an either or proposition. Assuming we want present government employee staffing levels, we must choose between reducing costs, and levying tax increases for taxpayers.

A few commentators maintain that the $3.6B structural deficit Governor Walker inherited, does not actually mean our state is broke.  Of course the state can simply borrow more, raise taxes and user fees, engage in more accounting gimmickry (e.g. raiding segregated funds to close budget gaps), or some combination thereof.  That's what we have been doing for decades by kicking the proverbial can down the road. 

Change is never easy, but meaningful reform has come from duly-elected officials in Madison, Wisconsin.  We applaud our Governor and the Republicans for their leadership in standing for fiscal restraint and we remind our fellow taxpayers this boils down to a debate over controlling costs. Too much deficit requires lower and sustained limits on government employee benefits -- just like in real life where private businesses and taxpayers dwell. 

*Question shortened from published version.

Tim Peterson is a Milwaukee businessman and former Libertarian Party Candidate for US Senate, Robert Simandl is a Wisconsin attorney practicing employee benefit, labor and employment law and John Maddente is a Milwaukee businessman and former community columnist.

Letter to USA Today and Gallup published at Examiner.com 3.31.2011

Dear Madam or Sir,

I take issue with the way Dennis Cauchon (and others in the media) have reported upon public opinion in Wisconsin, and summarized results.  Consider your USA Today/Gallup poll asking, “Would you favor or oppose a law in your state taking away some collective bargaining rights of most public unions, including the state teachers union?” 

Apparently, 61% of your respondents answered “oppose” and so Mr. Cauchon’s February 23rd piece blared, “Poll: Americans favor union bargaining rights”

Not so fast.  In the first place, “right” is an emotionally-laden word and also an inaccurate one when used to reference collective bargaining, since no such right is enumerated in either the U.S. Constitution or Wisconsin’s Constitution (or any other state constitution that I have yet to discover) . 

A more accurate and reasonably framed question would have been, “Would you favor or oppose a law in your state that substituted some collective bargaining privileges, including those of the state teachers union, with local bargaining at the district level?”

Your poll also indicated that 71% of us do not favor any tax increases as a means to reduce state deficits.  Another problem with the USA/Gallup poll and those who like to seize only on the flawed question mentioned above, is that they fail to ask respondents to choose between tax increases or spending cuts.  Assuming that Wisconsinites want present government employee staffing levels, it is an either or proposition. 

Our governor and Republican lawmakers have taken commendable steps to help taxpayers permanently reign in outlandish benefits costs.  They have chosen and they were chosen - at the polls which mattered – last November’s elections.

Regards,

John J. Maddente

By examiner.com, Fair use, https://en.wikipedia.org/w/index.php?curid=50668796

Setting it straight on 'rights' (published 3/15/2011)

Image by Freepik

By Tim Peterson, Robert J. Simandl And John J. Maddente 
Published in the Milwaukee Journal Sentinel 3.15.2011

Right, noun: A just claim or title, whether legal, prescriptive or moral.

That's the definition of a word used by Wisconsin's public-sector unions demanding to retain all collective bargaining privileges.

For weeks, we've heard demonstrators beating drums in Madison alongside equally vocal sympathizers in the media talking about "rights" of public-sector union employees and "attacks" on "the middle class." We respectfully disagree with them.

According to Encyclopedia Britannica, collective bargaining is "A process of negotiation between representatives of workers (usually labor union officials) and management to determine the conditions of employment. The agreement reached may cover not only wages but hiring practices, layoffs, promotions, working conditions, hours and benefit programs."

West's Encyclopedia of American Law, edition 2, in Constitutional Law, says rights are classified as natural, civil and political. Natural rights are believed to grow out of the nature of the individual human being such as rights to life, liberty, privacy and pursuit of happiness. Civil rights belong to every citizen and are not connected with the organization or administration of government. They include rights of property, marriage, protection by law, freedom to contract, trial by jury and the like.

Political rights entail power to participate in the establishment or administration of government, such as the right of citizenship, the right to vote and the right to hold public office.

Therefore since collective bargaining is neither a natural, civil nor political right, at best, it is a "right" only in the colloquial sense of the term and merely a privilege in a purely constitutional sense.

Further, nothing in Wisconsin's Declaration of Rights (found in the state constitution) guarantees a right to collective bargaining for any citizen.

While the bill has caused controversy, it enables distributed bargaining and pushes down negotiations to local levels - where, in our view, they belonged in the first place. We are bothered by the oft-used phrase of an "assault on the middle class" pertaining to public-sector union employees who possess Cadillac health care benefits and retirement plans the rest of us only dream of. And, as 15% of the workforce, public-sector unions hardly constitute the sweeping characterization of "Wisconsin's middle class."

The fact is, at the local level in many rural Wisconsin communities, public employment has become a fiefdom of privilege where, owing to binding interest arbitration based upon comparability, the never-ending spiral of wage and benefit improvements often results in local government compensation exceeding community "middle class" standards. The need to bargain virtually every operational issue makes implementing policy decisions and providing services a protracted struggle, often ending in arbitration.

Perhaps this is why President Franklin D. Roosevelt, the patron saint of the American labor movement warned: "All Government employees should realize that the process of collective bargaining, as usually understood, cannot be transplanted into the public service. It has its distinct and insurmountable limitations . . . The very nature and purposes of Government make it impossible for . . . officials . . . to bind the employer . . . The employer is the whole people, who speak by means of laws enacted by their representatives."

We believe that by limiting collective bargaining, the Legislature bolstered workers' ability to associate and negotiate with whom they choose, while reining in runaway costs.

Finally, we note that a few commentators believe a $3.7 billion structural deficit does not mean our state is broke. They know Wisconsin can borrow, raise taxes and user fees, engage in accounting gimmickry (e.g. raiding "segregated" funds to close budget gaps), or some combination thereof. That's what we have been doing for decades - until now.

Change is never easy, but reform has come from duly-elected officials. We applaud our governor and the Republicans for their leadership in standing for fiscal restraint, and we remind taxpayers that this all boils down to numbers. Too much deficit requires sustainable limits on public-employee benefits - just like in real life, where businesses and taxpayers dwell.

Tim Peterson is a local businessman and former Libertarian Party candidate for the U.S. Senate. Robert Simandl is a Wisconsin attorney practicing employee benefit, labor and employment law. John Maddente is a Republican, blogger and local businessman.
 ___________________________________________________________________________________

What I saw on Feb. 11 in Madison, Wisconsin

John Maddente photo

It was a clear day at the Capitol.

What wasn't reported quite as clearly, was the composition of the Pro-Walker forces, which were outnumbered I'm guessing, by about 20 to 1 thanks in part to throngs of out-of-state demonstrators.  One problem with the media characterization, was that they consistently reported the Pro-Walker group as a "Tea Party" rally.  

Obviously, Tea Party members were out in force but the group contained a broader cross-section of voters including mainstream GOP members and even a few Blue Dog Dems including one courageous soul holding a sign labeled, "I'm A Teacher For Walker"  I believe that teacher has more company than most people realize, particularly among private school teachers that are non-unionized and paid less than their public school counterparts.  

Back to the afternoon event.  It was non-violent, but press accounts labeling it as "peaceful" stretch the adjective.  The government union faithful were deployed in a circle, perhaps a dozen members wide, that encircled the entire capitol building so that Pro-Walker supporters had to walk through them, and their insults, in order to get to the muddy basin of the capitol steps where Walker supporters gathered.  Three times protesters tried to engage me in dialogue which I ignored to avoid a fruitless, heated debate -- or worse.  Remember, I said nothing before or afterward to these people.  That sort of provocation occurred repeatedly -- but you probably didn't read about it.  

Another unreported, or at least under-reported development, occurred near the lectern of the pro-Walker gathering.  Suddenly, the speaker's booming voice went silent.  Turning to a friend, I said, "That was no accident."  Seconds later, an opposition mole was ushered away by Sheriffs and the sound system began to work after someone plugged it in again. Yes, just like it happened in the film Forrest Gump, but here the saboteurs were on the Left.

Union members marching around the capitol circle chanted, beat drums and hoisted signs -- most of which contained civil inscriptions -- but others had words or images that are unrepeatable on this site.  Again, I saw no press coverage of these signs, though they were hard to miss. I hoped that the owners of those particular signs are not teaching children.  I'm not sure they should be near children.  

To be fair, I saw a couple objectionable signs in the pro-Walker camp but they were less numerous than vile ones paraded by the other side. 

In yesterday's Wall Street Journal, columnist John Fund distills all this clamor into one question.  Mr. Fund asks, "Who's in charge of our political system -- voters or government unions?"  For decades, of course, the answer in the Badger State has been government unions. That could change. The objective is not to bust them, it's about requiring unions to pay a reasonable share of their lucrative benefit packages and allocating more control to voters.

John Maddente photo

Fortunately, legislators do not need the fourteen absent Dems to vote on the collective bargaining provision of the bill. 

Collective bargaining is a mechanism many want scaled back because such "bargaining" over the decades is what led to the out sized, budget-busting wage and benefit packages for many government employees. Pushing decisions down to the local levels makes sense.  Instead of allowing the Left to spin this fight as destruction of "rights" -- it's more accurate and less emotional -- to characterize the legislation as a move toward distributed bargaining.  

If you're a public teacher, try looking at the issue in the following terms.  Most of us cannot "bargain" for higher pay or benefits.  Instead we receive a market-based pay package and a defined benefit plan, not a guarantee of retirement income and virtually free health care plans.  If we feel that our benefits or pay packages are unacceptable -- we find work elsewhere. We do not have, nor do we seek, any collective means to hold employers (or taxpayers) hostage. 

Another notion advanced by some on the Left, is that this legislation is a surprise hijacking that nobody talked about before the election.  Senator Lindsey Graham (R-SC)  speaking this morning on Meet The Press explained how measures in the bill causing such a stir, are a well documented facet of candidate Walker's campaign before he took office.  Informed voters knew as much when they elected him.  Arguably, it is a one reason that they did elect him.  

What is unprecedented, of course, are the fourteen fugitive Democrat state senators.  It's a disgraceful signal to young people or anyone considering a career in public service.  When things get tough, flee the state -- just take your ball and leave. That way, no one can play.  

I hope that this stalemate doesn't turn violent. We can all disagree without throwing punches, but what I saw yesterday worried me. 

 

(Image above taken in Madison, WI 2/19/2011.  John Maddente photo)

A writer's words to live by

The following passage was shared with me recently.  It was written by a German writer, Rainer Maria Rilke.  Mr. Rilke died in 1926 at the age of 51. This piece is taken from his "Letters To A Young Poet".  I find his words timeless, profound and moving.   

Please consider sharing the passage with someone.
_______________________________________________________________________________

Be patient toward all that is unsolved in your heart

and try to love the questions themselves.

Do not now seek the answers, which cannot be 

given you because you would not be able to live them. 

And the point is to live everything.

Live the questions now. 

Perhaps you will then gradually, without noticing it, live along some distant day into the answers.

Image by freepik

AEI scholars' research: taxes vs. spending cuts

OMB Chart

Excerpts published at Examiner.com

An editorial grabbed my attention recently.  Titled, "The Right Way to Balance the Budget" the piece was published on page A13 of the Wall Street Journal on December 29th. 

Three scholars from the American Enterprise Institute (AEI) collaborated on the aforementioned article.  They examined the likelihood of success coming from three choices we have to address our deficits and the national debt.

The choices of course are: tax increases, spending cuts, or a combination of both.

AEI website: Andrew Biggs

AEI website: Kevin Hassett

Two PhD economists, Andrew Biggs (London School of Economics) and Kevin Hassett (University of Pennsylvania) and economic research analyst Matt Jensen, argue their case by building on the prior work of two Harvard economists: Albert Alesina and Silvia Ardagna.

Messrs. Biggs, Hassett and Jensen conclude the primary way to fix our fiscal predicament is singular in nature -- cut government spending.  Period.  (Although they'd hasten to add that the type of spending cuts implemented does matter).  According to their thesis, the notion of raising taxes, or even using a combination of tax raises and spending cuts -- will not work. 

The case for cutting federal (and state) government spending has been simple -- increasing revenues for the government without statutory spending restraints, will only result in continued spending because historically, government reverts to its spendthrift ways when it is not legally shackled to do otherwise.

Remember, we had a balanced federal budget as recently as 1998 and ran surpluses for a few years but Congress and the Executive branch of government failed to continue a fiscally responsible path, so here we are in 2010 facing a 14 Trillion dollar monster.

No wonder many Americans believe that neither Congress, or any President can be trusted to remain fiscally responsible.  What about other industrialized, debt-laden countries?  Here's the verdict from the AEI authors who analyzed the history of debt consolidations attempted in 21 nations over the course of 37 years...

The authors assert, "...the typical unsuccessful consolidation relied on 53% tax increases and 47% spending cuts."  

Some observers predict that this is precisely the sort of compromise (i.e. arriving at a closely weighted mix of tax increases and spending cuts) which will be hatched by pols in Washington trying to tackle our own debt problem (or appear as though they are).

Biggs-Hassett-Jensen conclude that nations achieve fiscal balance only after applying austerity measures which include a minimum 85% reduction in spending cuts.  In other words, no more than 15% of the total solution, comes from tax increases.  They also hold that nations achieve these cuts primarily by responsible reduction of social transfer payments.

Surprised?  We have to significantly reduce spending now to avoid much more devastating pain later. Nations don't tax their way to solvency.

Public Notice - the bankrupting of America

Public Notice is "an independent non-profit dedicated to providing facts and insight on the economy and how government policy affects Americans’ financial well-being."  

Here's a slide from them (with holiday flair) called "The 12 Days of Government Spending"

Shutterstock image

A post-election reply to Mortimer and Stanley

Wikipedia

Here are excerpts from a reply to two friends - disguised with fake names - called Mortimer and Stanley.   

These guys fall at opposite ends of the political spectrum, but their exchanges are respectful.  The three of us have been "sparring" since our teens. 

Some text changed, but it is close to the original version when I responded to their post-election e-mail dual of 11/3/2010...

"Dear Mortimer and Stanley,

Thanks for your sentiments about today's political landscape and all that ails us.  I agree with both of you - to an extent. Ah, the advantage of going last...

I'll start with Stanley and his Mortimer rebuke - "Greed and avarice are as old as the Bible, Morty. And the Democrats are experts on that."  

Stanley, I assume you mean Dems are experts on greed, not the Bible. What's missing in your criticism, is the role of of the players who make policies, appropriations, budgets and tax incentives that perpetuate our fiscal hell. 

Take, the housing bubble, which was enabled by government policies (sorry Morty, mainly Dems and the Fed in my view) when millions of Americans "bought" houses that they could not afford.  That experience is the perfect example of why we are broke as a nation and as a people. We ate too much, drank too much, bought too much, saved too little and then the bill came due. 

Yes, we have a consumer-based economy Morty and it's a giant Petri dish of self indulgence.  An economy so dependent upon domestic consumption strikes me as doomed as ancient Rome. Our sense of liberty gave way to gluttony and we confuse the two nouns. 

These election outcomes?  Yes the people have spoken Stanley, but will a new majority in power practice sound fiscal principles by telling voters what many of them don't want to hear?  Will tax cuts be matched by corresponding spending cuts?  We'll see what the new Congress tries in January, but I don't believe we can tax our way out of the hole, or depend upon government to be a good steward of the peoples'' wealth.  Nor can the Fed save us by printing cash. What's the pain remedy?  First we must take some pain.  

Live within our means, keep the dollar strong and responsibly scale back entitlement programs.  Social Security, Medicare, a bevy of state and other federal programs, public sector defined benefit retirement plans, as well as Cadillac health plans are all part of the same problem.  Some austerity measures can kick in now, not in 2025.

As for Mortimer's remorse regarding Mr. Feingold's election fate, my view on how Russ Feingold devolved as a public servant would take too much space, but here's an example...

You called him a Maverick, Morty.  Sometimes yes, but not always when it mattered.  His lonevote against the Patriot Act was pointless grandstanding.  He acted as though he had a monopoly on wisdom and constitutional purity that somehow eluded 98% of the United States Senate (one senator didn't vote on the measure).

Libertarians later rebelled against this Maverick after he voted for his party's stimulus package and Obamacare.  All this and years of inactive legislative performance sunk his boat, Morty.  He fell in love with being a Senator and made an ill-timed dart to the entitlement-embracing, Left. It was too late for him to retreat to the Center. 

Your devoted friend,

John

A fiscal adult -- David M. Walker

Consider the national debt which as a percentage of gross domestic product is at its highest levels since World War Two.  Click here for a real-time depiction of our debt and consider the faith that the rest of the industrialized world has in the United States as a beacon of financial stability. 

What happens when that changes?  Why are some observers more worried about climate change than global economic calamity that is looming in our midst?  

We need more leaders like Mr. David M. Walker.  This post is dedicated to his mission.  What we need in Congress and the White House now are accountants more than crusaders. Mr. Walker, by the way, was an Arthur Andersen partner years ago. 

We need people who can balance a budget and say "no" and be proud to say no because it is right and just.  The only anecdote for a nation addicted to debt are politicians with the fortitude to say, "You'll be getting less now and you'll wait longer to receive it and here's why...."

Mr. Walker is willing to accept more tax increases to offset spending cuts than some of us would like -- as opposed to demanding proportionally-larger spending cuts.  Yet, I still admire his zeal to reclaim a fiscally-sane America. I invite you to learn more about him by clicking on this Wiki...

David Walker: Wikipedia

Mr. Barrett's omission

Yesterday morning I listened to a radio program that sounded like a Town Hall celebration of Tom Barrett's Gubernatorial bid.  It was broadcast live from the University of Wisconsin - Milwaukee. 

The thirty minute portion I heard included Mr. Barrett's diatribe against Wisconsin's $2.7B structural deficit and his plan to end it which includes tax increases on "the wealthy."  Here's what bothers me...

Not once in the first thirty minutes of Mr. Barrett's monologue did I hear a single reference to a spending cut. If I missed such a bombshell in the remaining minutes of the program, please let me know.

Kapenga for Wisconsin's 33rd Assembly District

I'm supporting Chris Kapenga for this seat because we need a hard-nosed fiscal conservative now more than ever.  If only we had more accountants in the state legislature. Here's something I found on Mr. Kapenga's website written by William J. H. Boetcker

•You cannot bring about prosperity by discouraging thrift.

•You cannot strengthen the weak by weakening the strong.

•You cannot help little men by tearing down the big men.

•You cannot lift the wage earner by pulling down the wage payer.

•You cannot help the poor by destroying the rich.

•You cannot establish sound security on borrowed money.

•You cannot further the brotherhood of man by inciting class hatred.

•You cannot keep out of trouble by spending more than you earn.

•You cannot build character and courage by destroying men's initiative and independence.

•And you cannot help men by doing for them what they can and should do for themselves.

Mark Stoiber R.I.P.

One week ago today, I was shocked and saddened to read the obituary of Mark Stoiber.  Mark Stoiber's cause of death was a Pulmonary Embolism. 

Mr. Stoiber was Co-Founder and President of The Sleep Wellness Institute, a successful Milwaukee-area operation that helps people with sleep apnea.  He was also a proud husband, father of three children and a man of quiet confidence, patience and intelligence. Moreover, Mark Stoiber cared about others. 

It might be the most cruel paradox in life--someone like Mark Stoiber is taken ten days before his 48th birthday, while countless bastards live peaceably into their nineties.  

Class struggles, debt and happiness

Credit-related causes of the Great Recession included: lax underwriting standards (abetted by government programs and the GSEs), overuse of ARMs (because the borrower couldn't qualify for a fixed rate note), too much cash-out financing and artificially low interest rates.  Yet, the Wall Street factor (i.e. securitization of those obligations and excessive risk-taking) always seems to dominate the debate even though:

1) the Wall Street factor already gets most of the attention in the press,
2) regulatory reform for banks is a foregone conclusion,
3) Wall Street's culpability came during and after credit issuance to subpar borrowers, not beforehand. 

It's the third point that is lost on some who look only at the Wall Street role in this disaster.  The destruction could only have been possible with easy credit extended to in-over-their-heads borrowers, like our federal government that operates the same way -- in the red. 

Even today, many journalists treat sympathetically those homeowners who walk away from their mortgages when the principal amount owed, exceeds the current market value of a property. That's disturbing.  (Experts say, that between 20 and 25 percent of all outstanding mortgages in this country are under water.)

Author User: Brendel at en.wikipedia.org

Excessive consumer debt and government debt affect the rest of us who keep our promises and pay our obligations.  Yet some debtors and their advocates continue to ply us with excuses.  I have given you examples, but here's another one, which I'll call the Jon Stewart excuse:  You can't fault them because they were just "optimistic" about the future.  (If you're an optimistic borrower with bad credit and thus in need of an empathetic co-signer; please seek out Mr. Stewart.)  I'm genuinely sympathetic to people who suffered tremendous misfortune that led their financial problems.  Examples may include catastrophic medical issues, sudden job loss or sudden death of a primary wage maker.  Their pain was not self-induced.  My belief, is that people in those unfortunate circumstances constitute a smaller percentage of the people defaulting on their obligations, than what's portrayed by media figures. 

A new book by Arthur C. Brooks called, The Battle: How the Fight Between Free Enterprise and Big Government will Shape America's Future may add some perspective.  The book is reviewed by Matthew Continetti in the June 21 issue of National Review.  Mr. Continetti, an associate editor at The Weekly Standard in his article titled, "The Happiness of Pursuit" notes that Dr. Brooks thinks 30% of the American public believes "...free enterprise is unfair and the government ought to do more to ensure equal outcomes" and that wealth redistribution is a justifiable anecdote.  

Continetti notes that conservatives believe "redistribution is inefficient, or unfair to those from whom the money is taken, or a recipe for unlimited government".  He notes that Arthur Brooks has additional reasoning why redistribution fails in practice.  Based upon what Continetti calls an "abundance of empirical data" Brooks believes feelings of low self-worth, not inequality, actually make people unhappy and giving a man a fish not only won't help him fish, it won't help him feel good about himself either.  Brooks believes that earned success which he defines as, "the ability to create value honestly" is a proven prescription for happiness.

According to Brooks, 30% of Americans believe that wealth redistribution is justified.  That figure stuns me.  Apparently 30% of us do not realize (or care) that continuing down this slope could have apocalyptic repercussions for our current way of life -- a way of life that enabled America to flourish in the first place.  Perhaps despair and envy are the birth parents of Socialist states.

Blessed again!

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Another Progressive I've known since childhood read my last post - I'll call him "Cameron" and he takes issue with my claim, "Wealth re-distribution is the Excalibur sword of most Progressives."  Cameron feels redistribution is only reconciliation for 30 to 40 years of growing disparity between the wealthy and the less fortunate. Cameron summed it up thus: 

"So John, I have a question for everyone out there that talks about this so called wealth redistribution. Based upon the facts I have cited, why was it okay for that wealth redistribution to go on during the 80's, 90's and into the 2000's, but now it's not when it goes the other way around?"

"Cameron,

Thanks for taking the time to read my last post and share your views.  I appreciate it.

Regarding CEO pay at the S&P 500; I don't feel it's a useful benchmark for a public policy discussion, because by definition, you are citing 500 companies to represent a national employment landscape that comprises over six million private employer companies.  That's hardly a reasonable sample, but let's talk about it anyway. 

(On a side note, I hear large public company CEO criticism often and find it interesting that few care about celebrity compensation like that paid to Oprah Winfrey or Alex Rodriguez - even though their pay dwarfs the average CEO paycheck and they don't create many jobs). 

Vastly undeserved executive compensation occurs, but it's really a matter for shareholders to deal with, isn't it?  After all, they own the company.  They can sell their shares, vote out the board, start a proxy fight, file lawsuits and do any number of things - and many do. 

Similar to any employee that just can't stand his/her Boss; vote with your feet, sue the bastard, etc. but let's not make policy for 300+ million people based upon a handful of public company executives, lax boards, or apathetic stockholders.

Two other items affecting prosperity are: housing and taxes.

More of our discretionary dollar goes to housing than anywhere else.  We were not raised in wealthy homesteads, Cam.  Our parents worked hard, but lived modestly by today's standards.  Perhaps a 1500 square foot bungalow on a postage stamp-sized lot, with two bedrooms, maybe three.  Can we agree on this description?  How do we live today?  More importantly, what has happened to American home sizes over this period you are pointing to? 

Researcher Moya Mason notes in a recent paper that while family sizes have decreased almost 25% over the last 30 years, the size of new houses actually increased over 50%.  This is consistent with my view of Americans in general.  Few of us are able to consume too little and the living standard has improved among all groups, since our childhood.

America has grown primarily through free markets, hard work and innovation - not government intervention.  I recognize this is traditional conservative orthodoxy, but it goes to the core of our disagreement.  You sound as though lower and middle third America have actually been exploited by the "top third."  How so, Cameron?  Think about income taxes (we can talk about taxes on property and consumption another day).

A column in the Wall Street Journal (April 14, 2010, `Spreading The Wealth Isn't Fair') by Arthur C. Brooks of the American Enterprise Institute alerts readers that last year, 38% of all Americans were expected to have zero tax liability.  They paid nothing in federal income taxes.  Under Mr. Obama's budget and other expected tax changes, this group of Americans that pay zip to federal coffers, is expected to grow to 46% in 2011 while the federal government continues to expand. 

Dr. Brooks also notes that according to the nonpartisan Tax Foundation, a full 60% of all Americans "consume more in government services than they pay in taxes."  And what about that top 5% of Americans earning more than the other 95%? These are the folks everyone loves to hate.  Well, they pay over half of all federal income taxes paid.  Yes, 5% of the tax paying public, pays over 50% of all federal income tax collected.

I understand the worry over a concentration of assets, but whether we advocate for the top third, bottom third, or middle third of America - we cannot tax our way to prosperity, or make transfer payments to reverse perceived inequities, unless we want to unwind the very system that facilitated America's rise. 

I'm going to close with part of that Arthur Brooks column:

"...our system is the envy of the world and should be a source of pride.  Generation after generation, it has rewarded hard work and good values, education and street smarts.  It has offered the world's most disadvantaged not government redistribution but a chance to earn their success."   

I can't improve on that statement, so I'll leave it there. 

Cam, I know we haven't resolved our debate, but I am excited about your visit this summer after not having seen you for years.  Please let me know your expected day(s) in town, so we can block the time and I can make the sauce.

Best,

John"

Blessed with friends on the other side

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This post contains excerpts from an April 10 e-mail response to a dear friend of mine (edited for emphasis and anonymity). 

“Mortimer,

I’ll say hello to the guys for you and I’ll be thinking about you this evening.

As for politics, yes, we tend to gravitate toward sources that share our views.  However, I also read the New York Times Op-ed pages and on occasion watch MSNBC.  I suppose you watch Fox on occasion and I know you read the WSJ – so good for both of us.  We try.  The state-sponsored education you cite that we both benefited from, came largely from our parents' sweat equity – translated into tax dollars – that funded the University of Wisconsin system. True, my friend. But, I'm not arguing for zero taxation, or zero government involvement, in our lives just less of each. 

When Progressives argue in favor of entitlement programs, they'll sometimes cite Social Security (under-funded as it is) to bolster their case. They'll ask, “Well do you think Social Security is a Socialist program too?”  

The bone of contention, gets down to whom you trust with your money.  Progressives wish to give more of it to government because they believe it helps society. Others say....

"I don’t trust you because of your history.  Not only do you choke economic growth with your tax and spending policies, but your programs fail and are fraught with waste, fraud and abuse."

Of the millions of foreclosures we've seen during The Great Recession, I believe the majority were assumed by reckless borrowers or cheats who had no business assuming those loans.  They lost “their” homes, tanked the market and made the climate more difficult for honest Americans who now - despite their best intentions - remain shut out of the market, perhaps for years.

A primary cause of our trouble was state-sanctioned, predatory borrowing that the Left now calls predatory lending, because their munificent homeownership scheme blew up. 

Wealth redistribution is the Excalibur sword of most Progressives, Mortimer.  Howard Dean admitted as much recently.  Their vision is not what made this country great and what’s more, all the anger you see out there coming from good people – will not fade away.

I deplore violence and lawlessness and I will not partake in it, but I fear that with the warmer weather and a relentless Progressive in the White House, you’ll see things boil over this summer.  I hope I am wrong, but things are going to get uglier because many see their way of life at stake - and a revolution of sorts, is already underway.  How many Americans can take another 2+ years of “hope and change?”   Is there not palpable anger and frustration is among the Right and the Center?  It's not just the GOP or John Kerry critics -- it's a cross section of Americana.  One last item Morty…

I believe most Progressives have a heart as warm as mine and I include you among them. I simply view most Progressives as honestly misguided on these matters - and you see me the same way - I get it.  It's a draw. 

We also agree there are Wing Nuts on both sides.  However, if life comes down to helping your fellow man, consider that Conservatives believe government is simply not the way to salvation and its very nature is to give what it does not have, in order to stay in power.  Fannie, Freddie, free Fed money, and the like, were all government conceived, packaged and delivered.  They just needed help from a few reckless Wall Street titans to package and insure the mess, in order to bring down the whole temple. 

But back to helping the less fortunate.  Consider that as a percentage of income, many observers believe Republicans give a larger percentage of their incomes to charity than Democrats.  If you doubt the assertion, check out this link…  I have not studied the question, but I think the generousity debate is another draw, Mort.

Either way, too many Dems pretend that they belong to the party of compassion and that the GOP doesn't care.  That stifles productive debate, so thanks for not playing that nauseating card!

Gotta run...

Your devoted friend,

John“

Mark Neumann's time for a new goal

By WisPolitics.com - Mark Neumann 

Here's to Mark Neumann, a fiscal conservative and effective legislator with the best interests of the people in mind.  He's the kind of candidate we need to help take back our state from what Ayn Rand called, "the looters." The problem is that the Governor's job won't be his. Mr. Neumann's could instead challenge Russ Feingold for a Senate seat (that could have become his in 1998) and abandon his Gubernatorial ambitions because....

• The Walker forces are too strong, better funded and possesses support of the party leadership and the GOP rank and file.
• Mr. Walker has a very real chance of beating Mr. Barrett - you could cast more momentum his way, by throwing your support to the Walker campaign.
• Neumann is the only credible candidate with Washington experience and a chance to beat Feingold.  
• He lost to Mr. Feingold by a slim margin last time. Feingold and other stalwarts in his party, are more vulnerable today.  

So, Mr. Neumann, please be a pragmatist.  You will not win the September primary anyway. There is still time to displace Mr. Feingold, but you must change horses....soon.

Kanjorski & Armey - a worthy dual.

This morning, while watching CNBC's Squawk Box, I was struck by a welcome reminder that civility and reasoned political discourse still exist.

Democratic Congressman Paul Kanjorski and former Republican House Majority Leader Dick Armey debated.  The issues and the exchanges mattered less to me than the tone and outcome of the segment. 

Neither man gave much ground, but neither fell prey to stupid sniping or demagogic interruptions while the other man spoke.  Honest officials can put forth opposing views without acting like vicious morons.

I don't know if it is because Mr. Armey and Mr. Kanjorski were reared in an earlier era, or if actual maturity comes to one later in life.  Joe Wilson rants and Keith Olbermann types do us no good.  

Torinus & Geanakoplos

Today, I came upon a message I sent August 16, 2009 to Milwaukee columnist and entrepreneur, John Torinus.  Mr. Torinus has some terrific ideas about creating fiscal health and opportunity here in the Badger state.  However, I was piqued by something in his column last summer and I wrote to him:

"John,

While I agree with 95% of the column, the notion – apparently advanced by John Geanakoplos -- that the government ought to force “a write-down of principal on sub-prime home loans that are under water” is wrong. 

I recall hearing one of your presentations on healthcare and the insurance plans of yesteryear which offered no incentive to control costs (as opposed to high deductible plans many of us now have). You likened the situation to a 10 cent Martini night that you observed as a young Marine. Such arrangements, you reminded the audience, just might lead one to be “over-served.”

Well that’s precisely, the story of most sub-prime borrowers – they were over-served and just as no one forced you to drain too many martinis, no lender could force someone to buy more home than they could afford.

Of course, the rest of us who behave responsibly with our health and wealth, pay the price for those who don’t, but that’s fodder for another column.

To keep sub-prime borrowers in "their" homes - the ones with jobs anyway who may just need a little time - there are better options like converting them to renter status, interest only payment extensions, etc. But write down the principle? No. Doing so abets irresponsible behavior instead of suppressing it.

Tougher mortgage underwriting standards have already taken hold because far too many people, left to their own devices, will drink from the trough until they burst."