Something jumped out at me as I watched the President's State of the Union address last week. It was the line where President Obama said that the reason that the healthcare bill had hit roadblocks is because it is very complicated legislation and he hadn't explained it well enough. While I admit that healthcare reform can be complicated, the president gave over 40 speeches on the subject last year. So the reality is that the American people didn't like what was being explained, not that it wasn't explained well enough. Polls show that only 38% of Americans supported the specific plan that was being debated even though a majority of Americans want some kind of healthcare reform to bring down costs and help those who are falling though cracks in our imperfect system.
Then the president said that he wants to nationalize student loans because he doesn't like banks making profits of educational lending. Furthermore he said that the government would then forgive any outstanding student loan debts after 10 years if you went to work in the public sector and after 20 years for those who work in the private sector.
There are so many things backward about this kind of thinking that I almost don't know where to begin. First of all, profits are a good thing. Profits are what drives our economy, business growth, jobs, competition, supply and demand and innovation. Wherever there is a profit to be made there will be people stiving to make that product or service better for consumers and therefore capture larger marketshare and more profit.
Secondly, we want to give people a financial incentive to work for the government instead of the private sector? Because what we need in this country is more beaurocracy? It has always been the private sector that brings innovation, new products and technologies and that revitalizes the economy. Not so in this "recovery". This adminstration is pumping money into the public sector like never before. According to USA Today "Federal workers are enjoying an extraordinary boom time in pay and hiring during a recession that has cost 7.3 million jobs in the private sector. And to add public-sector insult to private-sector injury, data from the Office of Personnel Management show the average federal salary is now roughly $71,000 - about 76 percent higher than the average private salary."
[http://www.usatoday.com/news/washington/2009-12-10-federal-pay-salaries_N.htm]
So what progressives like our president do not understand is that Americans don't want the government to run everything nor do we think that the federal government can run anything (except the military) better than the private sector. That is the fundamental roadblock that this administration's agenda is running up against. And I do not think that the president or his advisors or Senator Reid or Congresswoman Pelosi understand that distinction.
This country was founded as a "grand experiment" on the principles of a very limited federal government. It was an experiment that has succeeded for over 200 years in a way that no other government philosophy has. One has only to look to the words of our founding fathers to see how they felt about a large or powerful federal government:
"A wise and frugal government, which shall leave men free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor the bread it has earned - this is the sum of good government." - Thomas Jefferson
Jefferson trusted the people to take care of their own lives. Progressives think that we need government to take care of us. But as Ronald Reagan pointed out, "as government expands, liberty contracts."
So maybe we can't all just get along when fundamental differences exist in the view of the role of government in America. Maybe one philosophy has to win the day. My vote is for liberty.
Sunday, January 31, 2010
Friday, January 22, 2010
Handicapping the Economy
Everyone is frustrated with how little progress (if any) we have seen in the US economy in the past year. I have to wonder if the current White House and Congress has any common sense in regards to economic policy. I am not an economist, but even I can see that the kind of "stimulus" that we are currently attempting at the cost of hundreds of billions in taxpayer dollars is doomed to fail.
Here's the math:
The Obama Administration claims that the stimulus program has saved or created 640,329 jobs since it was enacted back in February through the end of October. This number is updated and posted on the Administration’s recovery.gov web site. That amounts to $246,436 per job based on the $157.8 billion that has been awarded so far. Total compensation earned by the average payroll employee during October, on an annualized basis, was $59,867. If the government had simply used the funds awarded so far to pay for a year’s worth of labor, that would have paid for 2.6 million jobs.
Don't get me wrong, I am not suggesting that the government start funding payroll. They are already doing that anyway. According to a USA Today article from September 2009, the stimulus program was responsible for 25,000 new federal jobs year-to-date.
[http://www.usatoday.com/news/washington/2009-09-23-stimfed_N.htm]And that's just federal jobs, that doesn't include state and local tax payer-funded jobs. So really the main thing that the federal government is stimulating is the size of the federal government.
Here is the basic reason why this type of distribution of tax payer dollars to stimulate the economy has not worked and will not work: it is not the job of the government to create (or save) jobs... and they stink at it. The government is not a good manager nor spender of money because it is not their money. I like to tell the story of my first job working for a PR firm where we had mostly corporate clients but also the state agency of Cal Trans as a client. Or corporate clients pushed us to give them the best return on their investment for public relations services. Cal Trans meanwhile paid our public relations firm $80 - $100 per hour to pass out fliers in neighborhoods announcing upcoming construction projects. Government agencies have a "spend it or lose it" mentality that would never fly in the private sector. I see it all of the time in my current job responding to government bids that have to be awarded by a certain date so that the funds will be allocated again the next year, and the next year, and the next year....
Besides the gross mismanagement of funds, the Government also hurts the economy by artificially handicapping the market. The government picks winners and losers in industries, sectors and among competitors that have no basis in economic Darwinism or supply and demand.
Examples:
1. Cash for Clunkers succeeded in getting some people to buy a car a few months or a year sooner, but they were going to buy a car eventually, so we get growth in the auto industry one month followed by a slump the following months. And maybe that car buyer was incentivized by Cash For Clunkers to buy a new car that month instead of a new washer and dryer, thus taking the money away from the washer and dryer company and the stores that sell washers and dryers. And since when is destroying good working cars and all of their parts a good idea? Gas guzzling cars are incrementally being replaced by more fuel efficeint cars because of demand and fuel savings. When the government tries to artifically speed up that process, the unintended consequences outweigh the positive effects.
2. Demand, not government intervention, creates lasting growth in an industry. If the government wants to grow "green jobs" they may prop up a product that is simply not in demand yet due to the cost / benefit ratio. Consumers have proven with hybrid cars, compact flourescent light bulbs and programable thermostats that when the cost of a product or technology produces relative benefits, we will adopt that green technology. As soon as solar panels on houses becomes affordable, the technology will be adopted in mass. But if the government subsidizes that technology to artificially boost the sector they will slow down the timeline for that to happen.
3. Government economic gerrymandering leads to cronyism. Case in point: there was only one energy-efficient window company in the US to get stimulus dollar tax breaks. What do you know, the window company’s policy director is married to Cathy Zoi, Asst. Secretary for Energy Efficiency and Renewable Energy in the White House. Zoi is the administrations “weatherization boss.”
[http://www.businessandmedia.org/articles/2010/20100115161050.aspx]
What effect does the money and promotion given to the hand-picked Serious Materials window company have on its competitors that might make as good or better windows? This is not capitalism.
I fear that this administration and congress will continue to play these stimulus games in lieu of doing what is proven to stimulate the economy. Give across the board tax breaks to the small and medium businesses that create jobs in this country and remove any burdensome regulation that hampers business growth. Then let the private sector do the rest. In essence: get out of the way.
One more thing: let companies that make bad decisions go out of business. Better companies will take their place. artificially propping up bad companies just leads to more bad companies. I don't want to own a car company, and if I did, it wouldn't be one destined to fail because labor unions have driven legacy costs to unsustainable levels. But that's a blog for another time.
Here's the math:
The Obama Administration claims that the stimulus program has saved or created 640,329 jobs since it was enacted back in February through the end of October. This number is updated and posted on the Administration’s recovery.gov web site. That amounts to $246,436 per job based on the $157.8 billion that has been awarded so far. Total compensation earned by the average payroll employee during October, on an annualized basis, was $59,867. If the government had simply used the funds awarded so far to pay for a year’s worth of labor, that would have paid for 2.6 million jobs.
Don't get me wrong, I am not suggesting that the government start funding payroll. They are already doing that anyway. According to a USA Today article from September 2009, the stimulus program was responsible for 25,000 new federal jobs year-to-date.
[http://www.usatoday.com/news/washington/2009-09-23-stimfed_N.htm]And that's just federal jobs, that doesn't include state and local tax payer-funded jobs. So really the main thing that the federal government is stimulating is the size of the federal government.
Here is the basic reason why this type of distribution of tax payer dollars to stimulate the economy has not worked and will not work: it is not the job of the government to create (or save) jobs... and they stink at it. The government is not a good manager nor spender of money because it is not their money. I like to tell the story of my first job working for a PR firm where we had mostly corporate clients but also the state agency of Cal Trans as a client. Or corporate clients pushed us to give them the best return on their investment for public relations services. Cal Trans meanwhile paid our public relations firm $80 - $100 per hour to pass out fliers in neighborhoods announcing upcoming construction projects. Government agencies have a "spend it or lose it" mentality that would never fly in the private sector. I see it all of the time in my current job responding to government bids that have to be awarded by a certain date so that the funds will be allocated again the next year, and the next year, and the next year....
Besides the gross mismanagement of funds, the Government also hurts the economy by artificially handicapping the market. The government picks winners and losers in industries, sectors and among competitors that have no basis in economic Darwinism or supply and demand.
Examples:
1. Cash for Clunkers succeeded in getting some people to buy a car a few months or a year sooner, but they were going to buy a car eventually, so we get growth in the auto industry one month followed by a slump the following months. And maybe that car buyer was incentivized by Cash For Clunkers to buy a new car that month instead of a new washer and dryer, thus taking the money away from the washer and dryer company and the stores that sell washers and dryers. And since when is destroying good working cars and all of their parts a good idea? Gas guzzling cars are incrementally being replaced by more fuel efficeint cars because of demand and fuel savings. When the government tries to artifically speed up that process, the unintended consequences outweigh the positive effects.
2. Demand, not government intervention, creates lasting growth in an industry. If the government wants to grow "green jobs" they may prop up a product that is simply not in demand yet due to the cost / benefit ratio. Consumers have proven with hybrid cars, compact flourescent light bulbs and programable thermostats that when the cost of a product or technology produces relative benefits, we will adopt that green technology. As soon as solar panels on houses becomes affordable, the technology will be adopted in mass. But if the government subsidizes that technology to artificially boost the sector they will slow down the timeline for that to happen.
3. Government economic gerrymandering leads to cronyism. Case in point: there was only one energy-efficient window company in the US to get stimulus dollar tax breaks. What do you know, the window company’s policy director is married to Cathy Zoi, Asst. Secretary for Energy Efficiency and Renewable Energy in the White House. Zoi is the administrations “weatherization boss.”
[http://www.businessandmedia.org/articles/2010/20100115161050.aspx]
What effect does the money and promotion given to the hand-picked Serious Materials window company have on its competitors that might make as good or better windows? This is not capitalism.
I fear that this administration and congress will continue to play these stimulus games in lieu of doing what is proven to stimulate the economy. Give across the board tax breaks to the small and medium businesses that create jobs in this country and remove any burdensome regulation that hampers business growth. Then let the private sector do the rest. In essence: get out of the way.
One more thing: let companies that make bad decisions go out of business. Better companies will take their place. artificially propping up bad companies just leads to more bad companies. I don't want to own a car company, and if I did, it wouldn't be one destined to fail because labor unions have driven legacy costs to unsustainable levels. But that's a blog for another time.
Friday, January 15, 2010
The Awakening
I spent awhile this morning talking to a business contact about the state of our Union. He was less optimistic that I am that the corruption and back room deals that have ruled Washington for decades can be changed back into what our founding fathers envisioned: a republic ran by the people and for the people.
I read yesterday that the White House made a deal with labor unions to exempt them from the health care taxes proposed in the current legislation. And I thought, why aren't more people outraged by this? Are we accepting the premise now that if you contribute money and help get a candidate elected then you will be cut sweetheart deals down the road? How is that "for the people and by the people"?
Then today I read that Scott Brown is statistically tied with Martha Coakley for the MA Senatorial race. Scott Brown has campaigned on being the 41st vote necessary to stop this travesty of a health care reform bill. The bill is so bad that even Democrats with a filibuster-proof majority have to cut deals with Democratic Senators and Representatives just to get it passed. Add to that the fact that Democrats outnumber Republicans 3 to 1 in Massachusetts and it is really remarkable how well Scott Brown is polling.
So yeah, I am optimistic that there is an awakening in this country. People see 14 plus trillion dollars in debt and realize that we are indebting our children's children with liabilities that can't be paid. People see that it is no longer the will of the people, but rather the agenda of the large pocket book special interests and big business that are shaping policy. It is interesting to note that Scott brown has raised nearly 1 million dollars a day from small online donations from individuals across the country. Martha Coakley held fund raisers this week with lobbyists from health insurance companies and big pharmaceutical companies.
But the people are catching on. We saw government getting too big to succeed under the last couple presidents and it seems to only be accelerating. We don't want cradle-to-grave entitlement programs that keep people dependent on the government for everything from food to jobs to health care. This country was founded on individual freedoms, responsibility and opportunity. That is who the United States of America is. Good morning America. Rise and shine. We have a country to take back; not from Democrats or Republicans or from a particular politician. Once removed, those powers will sneak back in. We must remove the culture of Washington that has been perverted over the decades into something George Washington would not recognize. We must replace it with people who share the values that we hold dear as Americans. As a fan of Superman, I like to call it "Truth, Justice and the American Way".
I read yesterday that the White House made a deal with labor unions to exempt them from the health care taxes proposed in the current legislation. And I thought, why aren't more people outraged by this? Are we accepting the premise now that if you contribute money and help get a candidate elected then you will be cut sweetheart deals down the road? How is that "for the people and by the people"?
Then today I read that Scott Brown is statistically tied with Martha Coakley for the MA Senatorial race. Scott Brown has campaigned on being the 41st vote necessary to stop this travesty of a health care reform bill. The bill is so bad that even Democrats with a filibuster-proof majority have to cut deals with Democratic Senators and Representatives just to get it passed. Add to that the fact that Democrats outnumber Republicans 3 to 1 in Massachusetts and it is really remarkable how well Scott Brown is polling.
So yeah, I am optimistic that there is an awakening in this country. People see 14 plus trillion dollars in debt and realize that we are indebting our children's children with liabilities that can't be paid. People see that it is no longer the will of the people, but rather the agenda of the large pocket book special interests and big business that are shaping policy. It is interesting to note that Scott brown has raised nearly 1 million dollars a day from small online donations from individuals across the country. Martha Coakley held fund raisers this week with lobbyists from health insurance companies and big pharmaceutical companies.
But the people are catching on. We saw government getting too big to succeed under the last couple presidents and it seems to only be accelerating. We don't want cradle-to-grave entitlement programs that keep people dependent on the government for everything from food to jobs to health care. This country was founded on individual freedoms, responsibility and opportunity. That is who the United States of America is. Good morning America. Rise and shine. We have a country to take back; not from Democrats or Republicans or from a particular politician. Once removed, those powers will sneak back in. We must remove the culture of Washington that has been perverted over the decades into something George Washington would not recognize. We must replace it with people who share the values that we hold dear as Americans. As a fan of Superman, I like to call it "Truth, Justice and the American Way".
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