Archive for October, 2012

Life in the hereafter

Sunday, October 28th, 2012

Time for relief from the political tsunami. For this edition it’s my wife Jane’s turn. She has been laid up the last few weeks with an arthritic knee. Last week she overrode the pain to pen this poem.

Life in the Hereafter

There’s a reserved section called

“Wicked Only”

There you and I shall meet

Except for Sunday mornings

When I am excused for my little talks with Jesus

And Tuesday mornings

When you are excused for a round of golf

With the guys

Bill Stonebarger, Owner/President Hawkhill

P.S. You are excused to vote next Tuesday.

Lefties

Sunday, October 21st, 2012

Oct. 22, 2012

An impressive majority of intellectuals, academics, artists, writers, scientists and journalists are lefty democrats if not socialists. Why?

They might argue it’s obvious—democrats and socialists are smarter, more compassionate and more aware of what’s really happening in the world.

Maybe. Or, like most things, it might be plain old self-interest—you scratch my back, I’ll scratch yours.

Many of the above profit directly from a command economy. Government pays good salaries and benefits to professors, teachers, and other workers in the public sector. They would like to see the government expand. Makes sense.

Significant portions of many artists’ and scientists’ incomes come from government grants. For artists this means PBS, NPR or grants from local, state and federal agencies. For scientists there are many very lucrative grants for research today, especially in health care, energy and climate change. Democrats want to give more grants so again, it makes sense to support them.

It’s tough to make a living in the overcrowded fields of writers, journalists, actors, musicians, moviemakers and television personalities. A few do fine. Most—like 99% or more—live close to poverty level. They apply for grants but more often than not get turned down. They tend to be outsiders, critical of bourgeois life styles and especially scornful of sales and business. When they think of Republicans they think establishment and business. Most vote Democrat.

A few of the more radical OWS types preach class war and revolution, agreeing with Chairman Mao, “A revolution is not a dinner party, or writing an essay, or painting a picture…A revolution is an insurrection, an act of violence by which one class overthrows another.”

The people at the top of the entertainment world live a rarefied life with the huge incomes that come with fame. Barbara Streisand, Bruce Springsteen, Oprah Winfrey and other Hollywood and New York celebrities don’t benefit from grants. They know the public is fickle though and they might have to share a future bed with fellow artists now denied the big bucks. These celebrity millionaires are major sources of campaign funds for the Democratic Party.

Independently wealthy lefties are another story. Their fathers or grandfathers were successful (greedy?) businessmen. The heirs are happy to accept the profits granddaddy left and they want to use them now for doing good. To lefties this means working in a non-profit, preferably for an artistic, scientific or social welfare cause. Rather than create more, they want to distribute the wealth.

Many independently wealthy are democrats. The Roosevelt’s and the Kennedy’s come to mind. Today there is former House Speaker Nancy Pelosi and multi-millionaire Democratic Senators Kerry, Warner, Rockefeller, Lautenberg, McCaskill, Hagan, Nelson, Harkin, Feinstein and Kohl. Then there are living heirs of Cornelius Vanderbilt, Andrew Carnegie and J. P. Morgan (and the foundations they set up); heirs of General Motors, Ford and Microsoft founders (and the foundations they set up); etc., etc. These heirs and foundations tend to support left leaning Democratic agendas.  (To be fair, there are also foundations, wealthy heirs and Republican Senators that support Conservative or Libertarian agendas, but not as many and not as rich.)

Anti-business, anti-profit bias is especially common in Hollywood where, ironically, a passion for profit is probably more intense than in any American business.

One of the most popular (and no doubt profitable) movies of all time was It’s a Wonderful Life. Jimmy Stewart played the role of an honest small town banker up against a greedy Wall-Street-type played by Lionel Barrymore. It’s a brilliant anti-business movie that never fails to get a tear (even from me) when it is replayed on millions of TV screens every Christmas season.

Another example is the 1969 classic The Graduate where a businessman at Benjamin’s (Dustin Hoffman) graduation party gives him dead-serious one-word advice for his future that always gets a laugh—“plastics.”

More recently directors like Michael Moore and Oliver Stone (“greed is good”) have made millions mocking business and profit-making ventures.

On a different level we have the view of Albert Einstein, “One of the strongest motives that lead men to art and science is escape from everyday life with its painful crudity and hopeless dreariness, from the fetters of one’s own ever-shifting desires. A finely tempered nature longs to escape from the personal life into the world of objective perception and thought.”

It takes one to know one. I fit into many of the above lefty categories for most of my adult life. It took me longer than most to accept the wisdom of the quip attributed to French Premier Georges Clemenceau, “Not to be a socialist at twenty is proof of want of heart; to be one at thirty is proof of want of head.”

What does all this add up to this political month?

Republican Mitt Romney has been unable to escape ridicule and outrage over an off-the-cuff remark he made at a fund-raiser a few years ago. He told a group of wealthy donors that 47% of the American public is dependent on the government and would never vote for a Republican.

Romney has since apologized. Maybe he shouldn’t have. If anything the 47% figure is a lowball estimate.

The Democrats can count on getting most of the votes of middle class government workers; of those on unemployment, food stamps or disability checks; of those getting government benefits from Medicare, Medicaid and Social Security; of African-Americans, Hispanics and other minorities who profit from affirmative action and anti-poverty programs.

The democrats can also count on votes from the intellectuals, writers, journalists, scientists, artists and independently wealthy folk who think that a government of compassionate intentions is superior to one wanting to grow the economy by favoring the profit-making transactions of private businesses.

They may not get 100% of these groups, but paraphrasing Abe Lincoln, “You can get the votes of some of the people all of the time, and all of the people some of the time, and that’s enough to win most elections.”

I shouldn’t scoff since I was a lefty once myself. In defense lefties in the past have been progressive. In the 19th century they led a movement to abolish slavery along with Abraham Lincoln and the new Republican Party. In the 1960s lefties led a movement that passed Civil Rights laws to abolish Jim Crow and guarantee equal rights for all, along with a Democratic President and many left-liberals from both parties (bitterly opposed though by Southern Democrats).

The present Democratic Party is tipping more to the reactionary side than the progressive one. The vision of many Democratic leaders today is to return us to an imaginary past where enlightened and compassionate lords and nobles took care of the ignorant and dependent peasants, serfs or slaves who worked their land. It’s not sold that way of course. With a powerful assist from the environmental wing, modern democratic elites sell this vision today as a benevolent locally-based organic community where everyone does his or her fair share to give us a sustainable economy for an all-new all-green future.

The only hitch is that some crude and dreary souls will have to do the painful everyday life work to make the profits needed to sustain this romantic vision. We could continue to borrow as we are doing now but just as families can’t make out for long by taking in each other’s wash, so countries can’t make out for long by borrowing each other’s cash. China, for one, may get weary of lending. We could borrow from our grandchildren, but that’s not fair. We can’t all be dependents. Somebody has to make the money before it can be distributed.

The only somebodies who can do that are profitable private enterprises that thrive not on government handouts, but on energy, opportunity and independence. More regulations on profit makers and more dependency of citizens, whether it is 47% or whatever, won’t cut it.

Bill Stonebarger, Owner/President Hawkhill

P.S. For a fresh look at the role of capitalism, religion and science in a growing democratic economy see the DVDs:  Capitalism and Democracy, Religion and Democracy, and Science and Democracy. You can read and copy the scripts at no cost on the web at www.hawkhill.com.

Vouchers

Sunday, October 14th, 2012

Oct. 15, 2012

Let’s get specific. Last week I listed two suggestions to grow the economy…

(1) Reform entitlement spending so that it does not lead to bankruptcy.

(2) Promote private sector growth so we will have the profits to finance a compassionate and vibrant culture.

Last week Vice President Joe Biden sneered at Paul Ryan’s voucher plans. Biden was wrong. We could advance both of the above suggestions by relying more on direct payments (vouchers) to citizens and less on social welfare programs that pay the service providers. For instance…

In last week’s Wisconsin State Journal columnist Chris Rickert described a way to help the poor. “Madison is a big-hearted, social conscious city that’s keen on righting wrongs and helping those who’ve gotten a raw deal in life.” He describes a new program the city hopes will break the cycle of poverty. Social workers will make multiple home visits to poor families to help them “with everything from maintaining stable housing to helping parents get jobs to modeling parenting skills.” Rickert pointed out it will be expensive—“$10,000 to $20,000 per family.”

It’s a good example of command-economy democratic strategy.

What would an alternative be from a free-market libertarian point of view?

Abolish minimum wage laws and support for unwed mothers and their dependent children. Instead give $10,000 to $20,000 a year to poor parents who are married and have, or want to have, children. This would cut out the social workers, but would help poor parents get jobs even if those jobs pay less than minimum wage (their direct voucher payments would not be reduced by any wages the couples earn).

It would give a strong hand-up to people struggling to get “jobs, decent housing and parenting skills.” It would give children the benefits of two parents and a better chance to succeed in school. It would give the local economy a boost by decreasing unemployment, multiplying win-win profits as the couples spend the money, and keep zero-sum transfers from accelerating us into bankruptcy.

Social workers and women who have children without a partner would be losers. The social workers have other opportunities. Unwed mothers are unfortunately so common today that out of compassion we would phase in the change over a few years. Eventually women and men who chose the unwed parent life style would have to depend on churches and charity for help which would make it less attractive and less common. The community would win with a decrease in the crime that comes with irresponsible semen donors and their single-parent children. Children, parents and the American dream would be winners.

All that said I realize it is unrealistic to propose this on a local basis. Back in the 1960s I was in favor of a program that tried to remedy disparities in opportunity on a national level with a War on Poverty. Unfortunately poverty won. I think now the major reason that war failed was the belief that government experts know best.

To open up more opportunities for all consider instead the virtues of direct cash payments (vouchers). Vouchers put faith in the choices of millions of individual citizens. Government expert programs put faith in the choices of government bureaucrats. Government bureaucrats may be smart (and rich with government money), but they can’t know what’s best for 311 million people.

Examples…

Medicare, Medicaid and Obamacare are the biggies when it comes to wealth transfers. Suppose we fund them all at roughly the same level we do now, but give the money directly to people instead of to service providers. Individuals and families could make the choices about their own health care. It would be like a single-payer system. The money would come from taxes. But it would be administered by millions of us rather than by experts in the Department of Health, Education and Welfare (HEW).

The vouchers would be enough for people of modest means (most of us) to purchase full-service gold-plated insurance policies if we so chose. Or we could buy cheaper high-deductible health insurance keeping the extra voucher money for our own purposes. With the latter choice we would have to pay most medical and dental expenses out-of-pocket (the way we all did for all of our health care before Medicare and Medicaid began in the 1960s) but we would be fully covered for high-cost diseases or emergencies.

It would still be a zero-sum wealth transfer. But with appropriate laws to keep insurance companies from limiting their liability or imposing pre-conditions—as well as laws (even more important) to control the predations of trial lawyers—the high deductible insurance would bring with it increased efficiency, decreased fraud, lower costs and more win-win transactions to multiply profits for private companies and increase tax revenues. In short a vibrant growing economy. Individuals and families would benefit from increased freedom, responsibility and opportunity.

Social security is not as severe a problem as health care. It could remain as originally envisioned, a government-run pension program. To keep it solvent we will need to gradually change the retirement age and raise withholding taxes substantially on workers to pay for the increasing number and longer life spans of retirees.

A better option might be to let people invest some or all of their withheld money in private pension funds that will almost always in the long run yield a greater return than the government offers. Yes, it would be (slightly) riskier but that is what most teachers in colleges, universities and elite private schools do today with the private pension giant TIAA-CREF.

Which brings me to education, that vast desert where innovation and progress have languished for centuries.

Public schools (and teacher unions) have a near-monopoly on K-12 education today. Colleges and universities are rich with money from student loans much of which will never be paid back. At all levels costs keep soaring but results don’t.

Let’s change this with a national voucher program like the GI Bill of Rights after WW2.

Last year we (local, state and federal governments) spent over a trillion dollars on education. For the 77 million students from nursery school through college that comes to roughly $13,000 apiece.  Let’s give that money in grants, not loans, to each of the 77 million students (or their parents), nursery school through graduate school. Let them decide which schools, if any, they want to go to. It would not only be great deal for the students it would be a shot in the arm for creative teachers, professors and administrators. The unions would lose, but teachers could now compete for innovative excellence and better compensation when they succeed.

Following the same principles we could go whole-hog and scrap all social welfare, pension, health care and education programs, replacing them with a flat income grant for life to every U.S. citizen—man, woman and child. Say $12,000 a year. That would mean a family of four would have a yearly income of $48,000 dollars without working. (Income from work or privately funded pensions would add to the federal government guarantee. It would also add to government tax revenues.)

Impossible? Politically it might be difficult. But believe it or not, the math is okay. $12,000 a year multiplied by 311 million men, women and children comes to about the same amount that we are spending now for all the social welfare, pensions, health care and education benefits that we get from local, state and federal governments—3.7 trillion dollars! Check it out.

Change the way we distribute that largess and at long last we might actually win the war on poverty and go a long way toward reducing inequality of wealth in this fair country.

Bill Stonebarger, Owner/President Hawkhill

P.S. For a fresh look at the role of capitalism, religion and science in a growing democratic economy see the DVDs:  Capitalism and Democracy, Religion and Democracy, and Science and Democracy. You can read and copy the scripts at no cost on the web at www.hawkhill.com.

P.P.S. Charles Murray’s 2006 book, In Our Hands: A Plan to Replace the Welfare State, explains the details and the pros and cons of voucher plans like the above.

Who built what?

Sunday, October 7th, 2012

Oct. 8, 2012

Elizabeth Warren, running for the Senate in Massachusetts, said of entrepreneurs “you didn’t build that business.” President Obama agreed.

Ms. Warren and President Obama remind us that government has an important role in building a business. Henry Ford, Steve Jobs or Bill Gates would have been hard put to found their companies in Afghanistan, Mali or Vietnam. Warren and Obama are wrong though to imply that the entrepreneur who “built the business” does not deserve major credit for its success. Ford Motor Company without Henry Ford, Apple without Steve Jobs, Microsoft without Bill Gates would all have been poor bets.

The question is not who gets the most credit but how the process works, what creates wealth, and what to do with it. Our 30th president, Calvin Coolidge, put it well.

“The chief business of the American people is business. They are profoundly concerned with producing, buying, selling, investing and prospering in the world. I am strongly of the opinion that the great majority of people will always find these are moving impulses of our life…Wealth is the product of industry, ambition, character and untiring effort. In all experience, the accumulation of wealth means the multiplication of schools, the increase of knowledge, the dissemination of intelligence, the encouragement of science, the broadening of outlook, the expansion of liberties, the widening of culture. Of course, the accumulation of wealth cannot be justified as the chief end of existence. But we are compelled to recognize it as a means to well nigh every desirable achievement. So long as wealth is made the means and not the end, we need not greatly fear it.” (Italics mine. A trickle-down capitalist win-win approach.)

Our 32nd president, Franklin Roosevelt, had a different view, “The day of the great promoter or the financial Titan, to whom we granted anything if only he would build, or develop, is over. Our task now is not discovery or exploitation of natural resources, or necessarily producing more goods. It is the soberer, less dramatic business of administering resources and plants already in hand…of meeting the problem of underconsumption, of adjusting production to consumption, of distributing wealth and products more equitably.” (Italics mine. A trickle-down government zero-sum approach.)

The contrast between these two points of view is close to the heart of the current political campaigns.

Mitt Romney and Paul Ryan are on the Coolidge side. President Obama and Joe Biden are on the FDR side. Romney and Ryan want to grow the economy by encouraging private sector businesses and getting more win-win opportunity for citizens. Obama and Biden want to distribute the wealth more fairly by having rich citizens pay “their fair share” in a sustainable (zero-sum) economy.

Businesses specialize in win-win transactions. Governments have to use both zero-sum and win-win transactions. The trick is to find a balance that creates enough new wealth to finance the increases in social welfare spending most of us demand and want for our aging and diverse citizenry.

The biggest zero-sum transactions are the entitlements that transfer wealth from one person to another. A civilized society is a compassionate society that helps the elderly, the disabled, the poor, and above all the children. Entitlements use national wealth for good purposes, but they are zero-sum and don’t increase the national wealth.

Social security and Medicare are examples. Oldsters like Jane and me paid payroll taxes during our working days but now we are getting far more money out than we (and our employers) paid in. Millions of other retirees are doing the same. Where is that extra money coming from?

It’s coming from young workers (and their employers) who presently get no benefit. True, these young workers are promised benefits when they retire. The cruel fact is this is very close to a Ponzi scheme. Early retirees like Jane and me are getting great benefits. The much larger group of people paying the bills now will be the much larger group hoping to get paid back years from now. Unless we can reform the programs and increase our national wealth by a good measure, this much larger group will find there are promises but not much cash when it comes their turn.

Medicaid and the new Obamacare (or some substitute if Romney wins) are compassionate and needed but are also zero-sum transactions. Both depend on increasing taxes—taking money from some (working adults) to benefit others (the biggest beneficiaries are old people like Jane and me). You could argue that healthier children and improving the health of working adults make these programs win-win in the long run. But most of the money for both Medicaid and Obamacare is going to be spent for old people like Jane and me in their final years. Compassionate and needed, yes. But transfers like this don’t help grow the economy or increase national wealth.

If federal entitlement benefits are driving the federal government toward bankruptcy, state and local budgets are moving in the same direction and faster. State and local costs for education, health, welfare, pensions and other government services have skyrocketed more than federal ones over the past four decades. Most states and cities have promised over-generous health and retirement benefits to government employees, including early retirement options. The only way they can honor these promises is by having their local economies grow dramatically. Raising taxes on the rich, even to a confiscatory level, won’t help. They already pay the great bulk of taxes, local, state, and federal. Past experience at all levels shows that large tax increases on the rich may result in revenue decline for governments. It may also shrink economies instead of growing them.

If you doubt these judgments consider what is happening now in Greece, Italy, Portugal and Spain and is well nigh certain to happen soon in France, the UK and other European social welfare democracies. All have promised more than they can deliver and the bills are coming due sooner rather than later.

Other zero-sum transactions like food stamps, housing subsidies, unemployment insurance, aids to disabled, etc. may also be compassionate and needed but also don’t help grow the economy.

Crony capitalism, subsidies to favored industries, could and should be reduced or eliminated. Romney mentioned one egregious example in his first debate with Obama. Over the past three and a half years we have spent 90 billion dollars subsidizing green energy. This money could have paid for quite a few new teachers, fire fighters or police officers.

What government actions do contribute to a growing economy?

Some zero-sum ones are essential like the military, police and fire protection, a justice system, laws to protect private property and promote free trade, laws and regulations to protect the environment, laws to prevent discrimination and foster equal rights. Some other costs of government are zero-sum in the short run but win-win in the long run. Examples are education, roads and infrastructure, subsidies for basic research in science, investments in artistic and cultural programs. All of these grow the economy in the long run. All could help even more with reforms to increase efficiency.

Summing up, the formula for growth in the economy comes down to two major principles:

(1) Reform entitlement spending so that it does not lead to bankruptcy. One promising idea is to make more entitlement spending in cash (or vouchers). This would enable the recipients to make the win-win choices that could increase efficiency and help produce the growth and profits that pay for the zero-sum benefits.

(2) Vigorously promote private sector growth so we will have enough revenue to finance the “multiplication of schools, the increase of knowledge, the dissemination of intelligence, the encouragement of science, the broadening of outlook, the expansion of liberties, the widening of culture.”

I will propose some radical ways to implement these two principles next week.

Bill Stonebarger, Owner/President Hawkhill

P.S. For a fresh look at the role of capitalism, religion and science in a growing democratic economy see the DVDs:  Capitalism and Democracy, Religion and Democracy, and Science and Democracy. You can read and copy the scripts at no cost on the web at www.hawkhill.com.