Thursday, October 27, 2011

2.5% Growth! Really?

Back during the housing bubble, counterintuitive momentum was artificially driven by a key piece of misleading information; "Triple A" ratings from government sanctioned rating agencies on mortgage securities.  We all know how that worked out.

Today the stock market is skyrocketing on, among other things, the latest GDP growth estimates that have the economy up 2.5% in the third quarter; far from a new recession.  But is this "real"?  Consider:  all government growth estimates are based on inflation adjusted dollars and the under-reporting of inflation is about...2.5%!  This figure comes from John Williams at Shadow Government Statistics who looks into these things with a particularly astute eye.  He's not alone, but you needn't listen to anyone.  Instead, look at the overall dollar-price-of-gold since 2005, the base year for these government numbers.

Also, ask yourself, is it possible government appointees might have an incentive to under-report inflation?  Or unemployment?  Jus' askin'.      

Wednesday, October 26, 2011

Memo to Occupy Wall Street

Memo to Occupy Wall Street:  If you are wondering what happens when the 99% succeed in stopping the 1%, there's a really good book about that.  It's called "Atlas Shrugged" by Ayn Rand and with each passing day it becomes more and more relevant.  Be careful what you wish for.

Related Post: Obama's Mob

Tuesday, October 25, 2011

Gaddafi Bounce

Let me ask you a question:  What if a person lied, cheated, and stole a billion dollars but then used the money to help catch and kill a murderer; would that be a net contribution to society?  This is the question we face after the killing of Muammar Gaddafi.  Recall:  UN-1973, which was the basis for US and NATO intervention was a humanitarian effort to maintain a no-fly zone over Libya and protect civilians.  That was a lie.  UN-1973 was regime change.  We were also promised it was a mission of days not 8 months costing a billion dollars.  Regardless of what UN-1973 was or was not, no attempt was made to include congress or even congressional leaders in the decision.  Inexcusable.

Every day in American courts, police who capture criminals are punished for doing so if they employ extra-legal methods.  So too should Barack Obama be punished in the polls for doing a good thing the wrong way.  

Wednesday, October 19, 2011

Nein! - Nein! - Nein!

I must say I was disheartened by the idiotic attacks on Herman Cain’s 9-9-9 tax plan last night in Las Vegas.  It’s one thing to find legitimate issues with Cain’s plan, (and they're there) but it’s another to invent fantasy issues in a lame attempt to ding a front-runner.
As for Herman Cain’s sales skills in defending his plan:  his responses showed he is no Mitt Romney!

I like 9-9-9.  It may be just a tax plan, but it’s a darn good one and it’s not what the naysayers made it out to be last night.  It’s bad enough Herman Cain’s got Barack Obama spewing misinformation about his plan, the last thing he needs is a GOP circular firing squad aiming at him.  

Once again:
9-9-9 is not a VAT.  A retail sales tax is not a VAT.  Many states have retail sales taxes but none has a VAT.  Herman Cain needs to be able to nail this charge in as many words and then stop talking.  This is what a VAT looks like.  See update below.

9-9-9 will not give New Hampshire a state sales tax.  This is just stupid.  Herman’s “apples and oranges” explanation was adequate but he needs to slay this ridiculous charge with a sniper bullet to the forehead:  Texas has no income tax and the federal income tax doesn’t change that.  The same logic applies to sales taxes in NH or any other state.  Period. 

9-9-9 will not increase tax rates on the poor.  Cain really needs to be able to nail this and I’ve heard him almost do it.  He knows pizza, right?  All he needs to say is this: 

“I know pizza.   A $10.00 pizza has about $1.00 of embedded stealth corporate taxes built-in.  The guy who grows the wheat pays a 35% corporate income tax, as does the tomato grower, all the processors, the delivery companies, and the restaurant.  75% of that goes away with a 9% flat business tax and in it’s place is a transparent 9% retail sales tax on a now $9.25 pizza.  Total price:  still about $10.00.”    

Cain calls the stealth taxes issue “sneak-a-tax” and I like that.  In fact, I think stealth taxes are at the root of all tax evils today.

The 9-9-9 sales tax will never result in an ever increasing rate.  Why?  Because it is not a stealth tax.  Only stealth taxes go up inexorably and quietly.  Transparent taxes that hit everyone cannot go up indefinitely lest voters fall asleep.  This one is a slam dunk.  

There are legit reasons to refute Cain’s plan and I think Newt Gingrich nailed it when Anderson Cooper asked him why it was such a hard sell:  “You just watched it” said Newt after watching the Republican field throw clueless flak in Cain’s face.  Revolutions are tricky to sell.  Even good ones take time, and time is in short supply. 

There is a huge industry built around our current tax code and it includes every elected officeholder in Washington.  Cain touched on this last night and it will make changing the tax code next-to impossible.  In today’s Wall Street Journal, Art Laffer, perhaps the most respected voice on tax policy today, writes a full-throated endorsement of Cain’s 9-9-9 plan and disputes the notion that it would be next-to impossible to pass.  As proof he cites Reagan’s success in getting Kemp-Roth passed in the senate with a 97-3 vote.  What he omits is the fact that Reagan had just been shot!  I seriously doubt that vote would have looked anything like that without the “Win One for the Gipper” vibe.  

There are great reasons to like Cain’s 9-9-9 plan:  It eliminates stealth taxes and puts everything right in front of voters for them to see.  The low marginal rates of 9-9-9 will generate huge growth in revenue as per the Laffer-Curve.  The 9% sales tax will finally tax the underground economy at the federal level.   It is exponentially simpler than what we have.  (Unfortunately, when discussing it relative to today’s monstrosity, the complexity of the current system makes comparisons…complex.  A frustrating Catch-22.)

The only thing 9-9-9 needs is a master salesman and 65 votes in the senate (for insurance!).  Short of that, some miracle boost like Kemp-Roth got.  That’s not too much to ask for, is it? 

Update:  Apparently, some are claiming the 9% business tax is akin to a VAT, not the sales tax part.  (see WSJ Letters 10/25/11) That is because it applies not just to profits but to payroll as well.  This is a good point and one I missed, however it still is not a VAT but rather a combined payroll tax and business income tax.   By the logic of those claiming it is a VAT, we already have a VAT in the payroll taxes for Medicare and Social Security that total over thirteen percent of payroll currently!  This is nonsense.  

A business earning ten percent profits with a payroll running twenty percent will pay about  three percent under Cain's plan verses six percent under current tax law as a percent of gross receipts.  That is a fifty percent improvement versus current law!  Still a stealth tax, but a smaller one by half and certainly not a Value-Added-Tax.  I'd rather see all stealth taxes gone and every cent paid by voters, but no politician is currently recommending that.   

Wednesday, October 12, 2011

Mitt Romney - Birth of a Salesman

I watched the GOP debate in New Hampshire last night and thought something new happened:  Mitt Romney showed how talented he is as a salesman. Now, when I say “salesman” I don’t mean it in the pop-culture sense like “huckster” or “con-man”. No, I mean it as a huge mega-compliment.

I have the utmost regard for quality salespeople; the people of integrity who bring new products, services, and ideas to a reflexively skeptical audience. (Think Steve Jobs.) And boy are we skeptical when it comes to politicians!

The skills necessary to excel in sales are often misunderstood outside business circles. A good salesman does not trick you into buying something you don’t want. A good salesman does not convince you to act against your interests. No, a good salesman has the skills to understand what is important to you and then explain his product intelligently in those terms. Moreover, a good salesman must have a solid product, be knowledgeable, trustworthy, and likeable.

Selling is just a piece of making a good President, but selling is really important. What if a President had a truly decent product (agenda) but lacked the skills to implement it? Would that person make a good President? What if a President had a really bad product and managed to cynically convince us to buy it against our interests? Would that person make a good President?

Last night Mitt Romney passed the sales test for me in a way he hadn't before, but that doesn’t make him perfect. (No one’s perfect, except of course my wife!)

My problems with Mitt Romney are a bit different than the usual. You see, I’m actually OK with Romneycare. In fact, I’m OK with the individual mandate at the state level. The reason for this, as Mitt has explained, is that we’ve always had a mandate in health care, except it was one-sided. That mandate was always on the providers and it forced them to treat anyone who walked into an emergency room. That forced a reciprocal mandate on responsible, insured folks to cover the costs of those who refuse to pay. (Remember, those who are indigent are covered by Medicaid!)

The debate over Obamacare has been hijacked by the mandate controversy because the issue of constitutionality is seen by opponents as a way to kill it in the courts. That may or may not work, but I think it’s been a distraction. The real evil of Obamacare is that it nationalizes the remaining 50% of the health care market and that will kill innovation, access, quality, and life. I think Mitt Romney gets this and the Massachusetts plan was not a similar takeover.

I’m also OK with being pro-choice and pro-life, even though my views may differ from Romney’s at any given time. I’m OK with choice early in a pregnancy, but I define late-term abortion as taking a life. ‘Nuff said.

No, my problem with Mitt Romney is that he does not seem to understand Obama’s role in the financial meltdown. I’ve heard him say things like: “Obama did not cause this mess. He’s a nice enough guy. But he made it worse!” I find this a fundamental misreading of the biggest issue of the day. As much as any one man, Barack Obama did cause the meltdown in 2008 and has lied about it and blamed others ever since. He was known as the “Senator from Fannie Mae” for Pete’s sake! He worked with ACORN to force banks to make bad loans in the ‘90s. He voted for TARP. His fingerprints are all over this from the get-go. And yes, he did make it worse.

I realize the polls don’t agree with this assessment and Acade-Media-Wood have done a great job of covering Obama’s tracks, but I expect the Republican nominee to at least understand this. And once they understand it, I’d hope they can sell it in a general election.  Based on last night, Mitt Romney is half way there.

(I realize there were others at that debate and I thought Michelle Bachman was the other winner, but this post is limited in scope.) 

Wednesday, October 5, 2011

Obama's Mob

Just in case you think this Occupy Wall Street protest is unique and spontaneous: Barack Obama has been involved in protesting banks since his early days as a community organizer.

 From Investors Business Daily:
Obama, who once represented ACORN in a lawsuit against the state of Illinois, was hired by the group to train its community organizers and staff in the methods and tactics of the late Saul Alinsky. ACORN would stage in-your-face protests in bank lobbies, drive-through lanes and even at bank managers’ homes to get them to issue risky loans in the inner city or face charges of racism.

In the early 1990s, reports Stanley Kurtz, senior fellow at the Ethics and Policy Center, Obama was personally recruited by Chicago’s ACORN to run training sessions in “direct action.” That’s the euphemism for the techniques used under the cover of the federal Community Reinvestment Act to intimidate financial institutions into giving what have been called “Ninja” loans — no income, no job, no assets — to people who couldn’t afford them.

CRA was designed to increase minority homeownership. Whenever a bank wanted to grow or expand, ACORN would file complaints that it was not sufficiently sensitive to the needs of minorities in providing home loans. Agitators would then be unleashed.

Chicago’s ACORN used Alinsky’s tactics against institutions such as Bell Federal Savings and Loan and Avondale Federal Savings. In September 1992, the Chicago Tribune described the group’s agenda as “affirmative action lending.”
How do you think we ended-up writing billions in sub-prime mortgages? Do you think bankers suddenly lost their collective minds in the mid-90s after thousands of years of prudent lending? Who could forget the sub-prime crisis of 1850? Or the sub-prime crisis of 1921? How about the sub-prime crisis of 1952? Of course, there was no such thing as a sub-prime mortgage ever in the history of banking until community organizers like Barack Obama and ACORN began protesting outside banks and accusing them of discriminatory lending. It was a bold attempt to redistribute money and credit to unqualified borrowers and it worked fabulously well. In stepped Bill Clinton in the mid 90’s and through regulation, arm-twisting, and executive orders, out popped a decade of run-away sub-prime, no-doc, and liar-loans, all underwritten by US taxpayers through Fannie Mae and Freddie Mac.

Now Obama and his community organizer friends are at it again protesting banks and twisting arms in the name of more redistribution. As a few have pointed out, the timing of these protests coincides exactly with a marked shift in Wall Street’s political donations. Whereas 70% of Wall Street money had been flowing into Democrat coffers and specifically Barack Obama’s war chest, that trend has reversed lately:

From YourBlackWorld.Com:
Wall Street Donors Stop Giving Money to President Obama   August 24, 2011
The soft economy, overbearing regulation, and class-warfare has finally out-bid the crony capitalism and bailout billions which attracted Wall Street to Obama in the first place. This Occupy Wall Street mob is actually Obama’s Useful Idiot Corps throwing a temper tantrum in an unwitting attempt to restart the Wall Street money pump for him. Don’t believe me? Watch the donations. How much you wanna bet, the protests end the moment Wall Street caves and sends a $10,000,000 check to Obama’s campaign? And if the check doesn’t materialize, watch for the protests to get violent.

This is Obama’s play-book and we’ve seen it all before. It never works out for anyone but him. Expect the same this time.