Right-Wing Terrorism

The news over the past few days has demonstrated that elements of the Tea Party and others on the far right have resorted to blatant bigotry and threats of violence in the run up to and in the aftermath of Sunday's House vote on the landmark heath care reform bill. As some Democratic lawmakers were making their way up to Capital Hill on Sunday, Tea Party protesters hurled racial and other epithets, like ni***r and fa***t to a few black congressman and one gay congressman. One black congressman was even spat upon.

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Response Written Concerning The Current Healthcare Legislation

A couple points of response:


If any company takes taxpayer dollars, then by right of being a shareholder, taxpayers should have some say in how the company operates. I completely agree with you regarding the government's lack of industry expertise, but at the same time if the banking industry is going to benefit from my investment, as a stockholder, I have a right to their profits.


Same with the insurance companies. Medicaid and Medicare pay billions to insurance companies to regulate healthcare. What do we get in return? Larger premiums and poor coverage while the share holders rake in the profits. With government being the largest customer of private insurance companies, they have a right to demand better service, lower premiums, and higher quality of care. If an insurance company does not want to deal with the government's request, capitalism steps in. The insurance company needs to drop the government as a customer and the market will pick up the slack. However, insurance companies understand current legislation has been written in their favor. The government has legislated high barriers to entry and strict state to state competition laws. You and I have limited choices in what insurance companies we can purchase from, stifling competition. To make matters worse insurance companies are protected by anti-trust legislation making it harder to pin responsibility on price fixing and collusion.


Similar condition with with drug companies. Drug companies (with the help of Republicans) wrote price fixing laws into the 2003 Medicare bill making it illegal for the government to directly negotiate pricing. As a result the largest buyer of drugs pays the highest price. Capitalism or intervention? Drugs are cheaper in Mexico and Canada for the sheer reason of market forces. Now I wish the best for the pharma industry. I hope they make billions in profits. They should be rewarded for their innovation.  However it’s a double edged sword to play the victim of legislation that encourages the use of free market concepts to drive down profits. The drug companies have been sucking the tax dollars from our wallets with no repercussions of the price gauging they have regulated.


Now, "Obamacare" fixes several of these issues. It protects consumers from being dropped when their health takes a turn for the worse. It reinstates the government’s power to negotiate drug prices. It creates an insurance exchange to allow small businesses to band together and negotiate like massive corporations. Several of these concepts are free market principles. Now, I am not sure how I feel about mandating every citizen to buy healthcare. Obviously cutting down on emergency room care through scale would be a huge cost saver, and one of the driving principles of this legislation. I am also not sure if regulating small businesses to provide healthcare is a wise market principle either. However, economics will teach you that there are vast economies of scale as competition increases and demand rises. This is exactly why we can cover more people, using market principles, at a lower cost per individual. Is the healthcare bill perfect? No. But it is definitely better then the legislation we currently have in place. The CBO, a non-partisan organization, has projected the bill will be covered by forecasted costs already in the system (I guess we should thank the Republicans for that – the Medicare 2003 bill was quite an expensive entitlement program!) and increasing payroll taxes on individuals making over $250,000.


The Conservatives' Waterloo

David Frum, President George W. Bush's former speechwriter and a conservative political pundit posted the following on his website yesterday. I highly recommend the entire article, but here are some key points:

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Just to clear it up once and for all...

In 1998, Elder Marlin K. Jensen of the First Quorum of the Seventy gave a lengthy interview with the Salt Lake Tribune, in which he explained why the First Presidency of the Church issued a letter to all LDS congregations encouraging members to participate in the functions of government in their communities. Part of the concern that prompted the statement from the First Presidency was that it is not in the Church's "best interest to be known as a one-party church." Furthermore, he stated:

I think I could safely say that one of the things that prompted this discussion in the first place was the regret that’s felt about the decline of the Democratic Party [in Utah] and the notion that may prevail in some areas that you can’t be a good Mormon and a good Democrat at the same time. There have been some awfully good men and women who have, I think, been both and are both today. So I think it would be a very healthy thing for the church—particularly the Utah church—if that notion could be obliterated.


"Beware of Those Who Stir Us Up to Anger"

To start the blog, I would like to link one of my favorite LDS General Conference talks from the past few years given by Elder Robert S. Wood of the First Quorum of the Seventy. In observing the political climate in 2006, Elder Wood noted:

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Atlas Shrugged Response

(Response challenging my views being opposite the lessons of Atlas Shrugged)


I don't see it that way. I am a pretty pure capitalist. I support Milton Friedman's ideas about school vouchers to maximize privatized education. I never supported Obama’s plan to control CEO pay. In my MBA classes I was one of the few students to oppose CEO pay regulation, as compensation is a market function. I even work for one of the largest corporations in the world which provides a lesson everyday about supply and demand. I think government subsidies for corporations are anti-capitalistic. I thought that the American car companies should fail. I think unions have outlived their purpose and are the major cause of the auto company’s demise (and airlines). I think minimum wage laws are useless and unnecessary and I disagree when Democrats push regulatory legislation. I think the Federal Reserve is what allowed banks to undertake excessive risk with minimal consequence. If the Philadelphia bank in the 70’s, the Savings and Loan bank in the 80’s, and other large banks in the 90’s were allowed to fail, it would have sent a clearer message to manage risk this past decade, instead of embrace it. I don’t think it’s possible for a company to make too much money. This includes drug companies, as profit drives innovation.


However, there are times when I see conflicts between capitalism and the best interests of society. Healthcare is one example. The interest of shareholders does not align with the interests of the people. I see insurance companies as one of the most wasteful corporate entities, being fed by taxpayer dollars, and supported by legislation to stifle competition, creating a high barrier to entry. Tell me how this plays into a free market belief? I also find it absurd that the largest buyer of drugs pays the highest price driven by legislation making negotiation illegal. Tell me how that is capitalistic? (By the way, I have enormous respect for your brother who bucked party lines to vote against the Republican monstrosity healthcare bill. The Medicare 2003 bill is perhaps one of the most detrimental pieces of legislation to ever come out of Congress. A one trillion dollar entitlement program over ten years?! And the right calls Obama a socialist!)


Remember that Ayn Rand was a Russian immigrant seeing firsthand the problems with communism. It was the Russian Government that taught her how destructive anti-capitalistic models are, and drove her motivation to push ideas on capitalism. I don’t think anyone would question Greenspan’s dedication to free markets, but even he saw a flaw with the current capitalistic model stating that he had made a "mistake in believing that banks, operating in their own self-interest, would do what was necessary to protect their shareholders and institutions." Greenspan called that “a flaw in the model that defines how the world works.” This contradicts Adam Smith. This also demonstrates to me that Ayn Rand needs some revision.


Education - Capitalist Style

Written in response to a challenge for privatized education and protection:


Public schools would be replaced by private institutions driven by profit. In order to meet the demands of capitalism, the only admitted students would be those who can pay. Obviously the quality of education would be directly tied to the amount one could pay, as the most expensive schools could afford to recruit and pay the very best teachers. Currently, the average costs for K-12 grade is roughly $8500 spent per student per year. Let’s assume that through capitalism greater efficiencies are realized and the cost drops by 30% (this is very generous). This would equal about $5900 per student. Let’s say since education is now privatized we now spend half on property taxes (savings of $800 on a $300,000 home in AZ). This would equal a net cost of $4900 for one student, $10,800 for two students, and $16,700 for three students.


Obviously households would have to be in the upper middle income bracket to afford the average education premiums, and for the best education, they would need to be an upper income household bracket. With half of the American households making less than $50k a year, paying little to no taxes, this incremental cost would solicit very tough choices. You could send you child to a below average school, at a lower cost, with poor quality teachers, shorter hours, and little to no resources. Or you could elect to forgo substantial costs like healthcare for your family which will then be reflected in emergency room costs skyrocketing (not to mention a poorer quality of life). You could also choose to educate from home, if there is a non-working parent willing to make the sacrifice. In any of these scenarios there is a guaranteed certainty that crime will spike given the lack of education and time spend in a productive environment.


Ultimately privatized education will drive increases in poverty, widening social class divides, and the absorption of the middle class. Even more unfortunate you will not see children from broken homes in Arkansas, become Rhode Scholars, and Presidents of the US. There is a reason that every advanced industrialized nation offers education in a socialized, not capitalistic, manner. Even for-profit institutions like The University of Phoenix rely almost exclusively on government subsidized student loans to generate 80% of their revenue (think about that for a second, your tax dollars are going right to the pockets of UOP shareholders).


Now, there is also the subject of vouchers which mixes government capital with private institutions. However, based on our current conversations about governmental spending, I am guessing government funded vouchers are not the ideal scenario.


There would be similar consequences for privatized protection. Imagine getting charged $200 every time you called 911. If you couldn’t afford the premium then calling 911 for help wouldn’t even be an option. Police wouldn’t even respond if you did not have a payment form on file, and those in danger would weigh whether or not the calling risk is worth the cost. Sounds like potential anarchy to me.


Wake Up Middle Class!

With Obama’s plan to let the Bush Tax cuts expire in 2010, there has been an onslaught of media attention concerning his budgetary decisions. Phrases like “socialism”, “re-distribution of wealth”, and “tax hikes” are being associated with President Obama’s fiscal policies to discredit his approach. Obama has been open and direct concerning who his tax policies are targeting. The interesting part of the situation? There has never been such an uproar from the middle class fighting for the benefits of the wealthy.


Now to be clear I have little issue with the wealthy, or their personal incomes. Athletes, actors, stock brokers, and executives are all paid based on market conditions. I do believe that the wealthy are the largest benefactors of governmental regulation. We live in a mixed market economy, not a free market. The government regulates trade, blocks monopolies, and protects intellectual property. Almost all of the bailout money went to save the shareholders of large corporations and free up credit markets which have the largest impact on the wealthy.


The richest Americans have been the largest recipients of tax cuts over the past 30 years. Starting with Jimmy Carter’s administration, the highest tax rates have been cut in half to present day levels (70% to 35%). The wealthy have also seen the largest jump in income. From 1992 to 2004 upper class income rose from 111,000 to 154,000 (+39%). Over the same time period median wages only increased from 39,000 to 43,000 (+10%). So, over the past 30 years the wealthy have seen their taxes decrease by 50%, and their incomes increase by 39%. (Inflation adjusted for all above examples)


What many Americans do not realize is the vast redistribution of wealth over this period. Whenever tax rates are cut disproportionately, tax burden shifts among classes. Regarding the 2002 and 2003 tax cuts, families making $60,000 saw their tax payments drop by $1,000. In contrast, the wealthiest 1% saw their annual tax bill drop by $58,000. This resulted in a dramatic swing in tax burden to the middle and lower classes and redistributed wealth to the upper class.


President Obama’s plan is to close the gap on the federal deficit by allowing the Bush tax cuts of 2002 and 2003 to expire. This would increase the tax bracket of the wealthiest (single taxpayer making more then $357,000) from 35% currently, to 39%.*** This would return some of the tax burden back to the wealthy, and redistribute the wealth back to the middle class. Before the middle class rejects Obama's policies, they should remember upper class Americans never asked for the Bush tax cuts, and certainly didn't need them.


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***Now, before you drop your jaw regarding these figures remember this is a bracket, and tax brackets can be misleading. A family of four with household income of $365,000 claiming $100,000 in deductions actually pays about 17% in income tax. In comparison, an average family of four with income of 150,000 and deductions of $30,000 falls into a 25% bracket, but only pays about 12% in tax. An average family of four with income of 70,000 and no deductions falls into a 15% bracket, but only pays about 5% in tax.


What Do Republicans Believe?

In the break room at work we have a TV that runs news programs throughout the entire day.Since the office is primarily Republican, I get an earful from Fox News every second away from my desk. Fox News retains 25% of the population’s attention, and appears to have a clear understanding on whom to market their outrage to. Listening to their undertones and self promotion demonstrates one firm conclusion; the Republicans are starving for an identity.


What exactly do Republicans stand for? Under the Eisenhower era military prudence was tied directly to Republicans. In the Regan era conservatism was embraced. Under the Clinton era Newt Gingrich led the Republican New Deal urging smaller government. Over the past several decades, all of these ideals have been forgotten. George W. and his Republican dominated leadership increased the size and scope of government to record levels. The federal budget under his watch jumped 38% as President Bush did very little to control this rise in spending. Yet when I watch Fox news, I am led to believe that the Conservative ideals are alive and well.


To agree with Frank Rich, Fox News and the Republican Party are screaming into an echo chamber. The louder they scream, the more they believe themselves. Take for instance the stimulus bill that just passed congress. To the Republican right an absolute disaster; to 51% of Americans, a step in the right direction. Or how about Obama’s cluster of tax cheats nominated to cabinet positions? To Rush Limbaugh, a strong demonstration of Obama’s inept decision making ability. To 68% of Americans a forgivable offense in which they still offer support for the president.


Besides identity fallout, what hurts the Republican platform is the negligent insistence on tax cuts to solve all economic problems. We tried that in 2002 and 2003. How did we fare? Many on the right will incorrectly point to the tax cuts as the key driver of the four year boom from 2002-2006. The truth is that falling interest rates and leveraged equity were the real contributors. The tax cuts in 02-03 put money back into the pockets of the super wealthy, who then proceeded to watch it disappear in the securities fallout. Many still cling to the supply side theories of Reagan’s policies to bolster their tax cut claims. Two problems with this belief: Jimmy Carter had already started lowering tax rates on the upper class with little success, and two, Reagan was the recipient of Paul Volkner’s rate-slashing Federal Reserve. What has been forgotten by Republicans is that conservatism at its root does not drive tax cuts. Conservatism preaches smaller government, in which tax cuts are a byproduct.


The GOP’s lack of identity and shrinking base impacted the elections of 2006, 2008, and most likely 2010. The extreme big government policies of the last eight years, coupled with an unfavorable war, pushed moderates to the left. However, the biggest problem for the Republicans going forward is their shrinking base, which is wedging out the younger demographic. Fox News and the Republican leadership had a field day teeing off on Howard Dean in the 2004 primaries. But it was Dean who inspired many of the college age kids who turned out in droves in 2006 and 2008 to vote Democrat. The GOP has kept a single eye on big business and the religious right, and has failed to court their future base.


Republicans need to regroup and tell America what they stand for. The American people are ready for extended dialogue and genuine conversation from both sides of the aisle. If the GOP can’t embrace a persuasive identity, and continue to use tax cuts as a substitute for thinking, change will continue.Unfortunately, it’s probably not the change the Republicans desire.


The Republican Philosophy – One Giant Credit Card

Tax and Spend Liberals. If I had a nickel for every time I heard this phrase, I would be writing this post from an exotic hut with glass bottom floors somewhere in the French Polynesia. This negative connotation has been associated with the Democratic Party for several decades, and will be an effective talking point for elections to come. The irony: I would much rather be a tax and spend liberal, then a free charging conservative.


Recently I had a conversation with a friend whose number one disagreement with the current Democratic candidate was his commitment to let the Bush Tax Cuts expire (one might ask, why were the Bush tax cuts passed with an expiration date?). This, in essence, would be raising taxes.I followed up with a question regarding the consequences of deficit spending; their response, “government needs to be cut.”


There is not one current presidential candidate who shares this conservative ideology. Although Obama’s proposals are beyond McCain’s in cost, McCain’s proposals will increase deficit spending much faster that of Obama ($5.7 trillion to the national debt over the next decade -- source: CBO). Why?McCain is proposing vast tax cuts including voiding the AMT, doubling child credits, and lowering the corporate bill. This would be like cutting my salary by 20%, and not changing my spending habits. Needless to say I would rack up vast amounts of debt forcing me to leverage every asset I could to support my current lifestyle.


Think of the national debt as one giant Black American Express. Where does this limitless credit card come from? This is the scariest question of them all.We are currently expanding our money supply by borrowing from foreign countries. We are allowing Saudi Arabia, Japan, and China to become our shareholders. So, during this Olympic season when you are complaining about China’s human rights violations, just remember they are making our mortgage payments.


Looking at the last four presidents, government spending increased 36% under Reagan, 17.2 % under Bush I (only 4 years – 34% for 8 years), 21.2% under Clinton, and 32.4% under Bush II. What is most interesting from this comparison is that the economy was expanding at the fastest rate under the Clinton administration, providing them with the strongest justification to increase spending (higher tax revenues). Yet it was the tax and spend liberal who balanced the budget and kept the National Debt basically stagnant his final year in office.


Two major consequences of a rapidly expanding money supply (national debt) are declining currency value and inflation. When your two dollar milk now cost three, or the gas prices skyrocket at the pump, thank deficit spending and a weakening dollar. This is exactly why economists call inflation “the hidden tax”. However, we should take comfort that the current administration has passed sizeable tax cuts to off-set these cost to households making more then 250,000 a year.


In the upcoming election when sizing up candidates, don’t be so quick to dismiss the tax and spend liberal. Just remember over the last 30 years it has been the tax and spend liberals who have made the most progress on limiting governmental spending, keeping the national debt in check, and maintaining responsibility with America’s money.




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