Income, Expenses and Rationality

I promised myself that I wouldn’t write anything else about politics for my next post, but then today’s newspaper landed on the front porch. The headline proclaimed “Romney won’t pay city.” Turns out that when both candidates for the top of the Republican ticket, Mitt Romney and Congressman Ryan, visited our little city right before the election significant costs were incurred to provide for their safety. An invoice was prepared and sent out to the campaign for reimbursement. It was returned with the message that the U.S. Secret Service had requested these services. They should be billed for the cost. Of course the campaign already knew that USSS never reimburses cities for these expenses. They don’t have enough money in their budget to cover such things. Our little city has struggled economically because the Hoover Company had provided a large portion of city tax revenues. It was the city’s major employer and operated the factory in the center of town until they closed up and moved all of its jobs to Mexico and China. Now the city is stuck with this bill.

This situation points out a few major issues that should be discussed as our nation is herded by our elected officials like lemmings toward the “fiscal cliff.”  The first thing we need to deal with is campaign financing reform. Billions of dollars were spent for advertising here in Ohio and across the nation. Television ads played non-stop. Several flyers arrived in our mailbox from both candidates on a daily basis. If campaigns have enough money to fund these things, they should also be required to fund extra security measures deemed necessary for personal appearances. This goes for incumbents as well as challengers. These guys raise enough money to cover it, and if it means that one less ad won’t air on TV, well that’s really a good thing as far as I’m concerned.

Our mayor tried to put a positive spin on this mini-fiscal crisis. The guy was so happy that his party’s top dog was going to bless this little burg with a personal appearance that he couldn’t wait to show off our fair city’s resources. He answered the critics of his reckless spending by saying that the visit provided an economic boost to the city. People came to town and ate in our restaurants. They saw what a fine little city we had, and maybe stored that away for future development potential. I believe the proper term for this is “bullshit.”

I posted about this visit in detail (see “High School Football and Political Rallies” from 10/27/12) and witnessed the marvelous “economic boost” firsthand. The folks who came to town were mostly from wealthy little enclaves to the north, like Hudson and Medina, where the well off have been hiding from urban problems for decades. Do you think they were impressed by North Canton, and considered investment potential while here? Probably not. They rolled into town in their Cadillacs, Mercedes-Benzes, and Lexus cars or SUVs and parked wherever they could find a spot. Many chose to take a free parking space in the parking lot of the store where I work. We sold a few disposable rain ponchos and provided free restroom facilities to folks still clutching their huge Starbucks coffee containers (by the way, we don’t have a Starbucks in North Canton, so they didn’t buy it here) before strolling off to the rally down the street. Our regular customers couldn’t come in to shop. We experienced no financial boost. North Main Street was so choked by traffic that I would bet that none of the local merchants had a positive economic boost that evening. But it’s nice to pretend it happened, isn’t it Mr. Mayor? Nice spin control, which’s what politics are all about these days. Hope your party noticed, because you’ll be facing re-election soon and you might just need a new job. But perhaps he has no need to worry, because no group has demonstrated a penchant for clinging to unworkable policies or unqualified leaders more than the Republican party.

The second thing that this brings to mind is the reason that rich people (Mitt Romney is certainly worthy of this distinction) stay wealthy: they like to make money for themselves, and spend other people’s money whenever possible. Romney canceled his campaign workers’ credit cards on the night of the election. If workers were far away from home, they had to pay their own way back, because the campaign was no longer going to pay for anything. He might have kept the cards active if he had won, but he didn’t, so in the typical reaction of every “self-made” rich dude it was every man for himself.

Perhaps the reason that he lost his bid for President is that enough people have finally figured out that the nonsense that his party spews about the need to maintain low tax rates for rich people so that they can create jobs is bullshit. The Congressional Research Service reported this fact to Congress, but had to pull the report due to Republican bitching about wording in the report (see “Never Stop Learning” posted 11/2/12). This tax policy simply doesn’t work, yet remains a cornerstone of the party’s platform.

Warren Buffett, a well-respected billionaire and perennial member of Forbes Magazine’s list of the 400 wealthiest Americans (currently #2) appeared on a TV show the other night. He expressed his opinion that wealthy Americans should actually pay more taxes than they are now required to pay. His idea is that if you make over $1 million per year, you should pay a flat 30% tax on that amount over $1 million. If you are blessed enough to make more than $10 million per year, you should pay 35% in taxes, no matter what the source of your income (salary, dividends, capital gains, etc.). He pointed out that the aggregate income of the Forbes 400 twenty years ago was $300 billion which has now increased to more than five times that amount, or more than $1.5 trillion. For the most recent period, one forth of those people paid less than 15% in taxes, and six of them paid no taxes at all. During the same period, the productivity of the American worker has doubled, while their incomes have remained static. It’s pretty easy to see where all the money went, and it wasn’t to the struggling American middle class.

Yet the House Majority Leader announced that his party is completely unwilling to raise taxes on the wealthiest Americans in order to prevent the “fiscal cliff” at the start of next year. His reason is that we must protect the “job creators” by which he means our richest citizens. On his TV appearance the other night, Buffett asked the host what how he would respond if Buffett were to call the host and say he had a great idea to make money. Buffett was going to invest all of his money in the idea, certain that the reward would mean lots of return on the investment. He then asked the host if he would hesitate to join him based on the amount of taxes that he would have to pay. They chuckled about it, obvious that the answer would be no.  Buffett also pointed out that he had been selling stocks since he was twenty years old (he is now 82) and that over that time period he had witnessed significant increases in our nation’s Gross Domestic Product. This even included times when the marginal tax rate was in excess of 90%. So even when rich people got to keep only a dime out of every dollar they earned, they had been willing to invest in America.

Isn’t it time to refute this idiotic argument once and for all, and stand up for rationality and reality? Certainly we could stand a bit more fiscal responsibility in our government spending. We also need to face some hard realities when it comes to taxation. Chief among these is that those who can best afford to pay more taxes should do so. How about a compromise on who should pay more taxes? The suggested limit of an income of $250,000 per year may be outmoded. A quarter of a million per year isn’t what it used to be, and despite how attractive it may look to you or me, those at that level of income may actually feel a pinch. So let us compromise. Raise the top rate to those who make more than a million per year, and do as Mr. Buffett suggested. Tax all income at the higher rate. It really does make sense. The rich have been getting richer for years, while the middle class struggles. All we need is some rationality in the thought process.      

Warren Buffett

The End of Twinkies? Don't Count On It

There were a host of things that sparked my interest today: Unfaithful Generals (who could have saved themselves embarrassment by staying monogamous) and an outspoken Senator (who should have been somewhere else learning the information he claimed was denied to him). Greedy retailers who have twisted a national day of peaceful reflection and giving thanks into another day of hyperactive consumerism were also on my radar. All of these things caught my attention, and I’ll probably get back to them soon. But as I ate my bowl of fresh strawberries, blueberries, pineapple, and kiwi fruit this morning, the news reporter on TV shouted out that they were going to quit making Twinkies. Oh no!

Now everyone here knows what Twinkies are, but I have readers across the globe (not many, but some). If you are unfamiliar with the confection, it’s a cream filled sponge cake, full of fats and sugars, with enough preservatives to keep it on the shelves for months, and edible for years, if not decades. Not really healthy stuff to eat. In fact, health experts may be saying good riddance, but that’s probably premature. I’m betting we will see the return of Twinkies in the near future. As a nation, we just can’t let something so deliciously unhealthy disappear forever. They will probably be back in time for state fair season next summer, where they are a favorite of those insane carnival workers that like to deep-fry them. Yum!

The TV reporter blamed the demise of the company, makers of Wonder Bread and other goodies (that also really aren’t good for you) on "America’s healthier eating habits" and a “labor dispute”. What nonsense they try to feed us, along with their unhealthy foods. To place the blame on people eating healthier, combined with greedy workers, is like trying to blame the attack on Pearl Harbor on the Hawaiian Islands, for moving underneath the falling bombs at an inopportune moment.

Today’s corporate news-rag (our local paper), featured a little story concerning a report issued by the CDC (America’s well-respected Center for Disease Control and Prevention). It was a very small story, confined to a sidebar, and should have been given more depth and more importance. The report stated that diabetes rates are skyrocketing in the US. The biggest jump was in Oklahoma, with similar problems across the South, where the rate of diabetes since 1995 has more than tripled. But it’s not a regional problem. Here in Ohio, almost one in ten are now diabetic, a rate that has more than doubled during the past 15 years. The nation’s growing weight problem is behind the increase, according to Linda Geiss, the report’s lead author. So much for “America’s healthier eating habits”.

As for Twinkies’ “labor dispute”, I’ve been following this situation for years, with first hand information provided by some of those fine people who have now lost their jobs, health care benefits, and the pensions that they have worked a lifetime to obtain. The parent company had been taken over in a leveraged buy-out by a group of  “investors” and taken private. It’s an old story by now, repeated across the country to the detriment of our nation’s economy and for the benefit of a handful of greedy people who have learned to expertly game the system.

Shortly after the firm was acquired in a LBO, it declared bankruptcy. One of the first payments authorized by the bankruptcy judge was to provide millions of dollars in “retention bonuses” to the corporate officers in order to keep them from leaving the company. These were the guys that forced the company into bankruptcy just so they could rape it. Meanwhile, workers at the company were informed that they would need to take pay cuts and reduced benefits in order for the company to survive. Oh, the pension that they had counted on for their retirement was also cut in half. This happened when the old-timer who delivered Wonder Bread to the grocery store that I worked at was preparing to retire. He didn’t, because he couldn’t afford to, once the cuts were made. Needless to say he was a little bitter about it, but he tried to remain the same nice, loyal, company man that he had always been. The saga continued with more pay cuts, fewer benefits, lower pensions, and increased worker dissatisfaction. Another bankruptcy occurred earlier this year, and the company’s death spiral quickened. Do you really think that the greed of the workers caused this company to fail? They gave back until there was no more to give, while the new owners took until they had it all.

I have written before about the perils of Leveraged Buy-Outs and the havoc that they wreak on our nation’s economy. I really don’t understand why on earth we allow this kind of thing to continue when some simple changes to our tax laws could put an end to them and the destruction that they reap. Oh yeah, I almost forgot. We are subject to the modern ‘golden rule’ in this country. The people with the gold make the rules. The rest of us are screwed. Personally, I am writing to my recently re-elected senator and asking him to put an end to leveraged buy-outs. Why don’t you do the same? It won’t take long. Next week it might be your job that needs saved.

Advertising Ourselves to Death

The elections are over, and apparently not much has changed. Once again America has opted for a status quo of inaction followed by crisis. We’ll probably never learn, but maybe that’s because of who we let teach us.

The bright spot in our after-election picture is that we are no longer inundated by the political attack ads that ran endlessly here in swing state hell, Ohio. Not to worry though, the non-stop Christmas advertisements have stepped smartly up to fill the void. Thank goodness for the DVR and its ability to skim past the commercials. On election night I heard one of the talking heads on TV saying that $3 or $4 billion were spent on political ads this year. He speculated how far along we would be on curing whatever disease we would have chosen to spend that money on instead. Noble thought, but man’s lust for power has always overshadowed his benevolence, and likely always will.

On my way out the door yesterday, I caught a few minutes of the Dr. Oz show on TV. He was talking about cancer, and offered some insight on the cause of deadly pancreatic cancer. Now I don’t know the sources of this guy’s research, but I understand that he is a fairly brilliant cardiothoracic surgeon. So you might be right to maintain a healthy skepticism with regard to his advice in the area of oncology, since cancer isn’t his specialty. However, Dr. Oz has always struck me as a well-meaning person, as well as someone who does his homework, so I listened.

Oz said that as little as two 12-ounce cans of soda pop a week leads to an excess of insulin production, which is a major factor leading to cancer of the pancreas. Drinking two cans of pop doubles your chance of getting pancreatic cancer. That’s twenty-four ounces of soda. I know lots of people that drink that much in a day, if not more. Now if you’re feeling pretty smug because the soda that you gulp daily is diet soda, you probably shouldn’t be feeling so swell either. I read something recently that said diet soda (as well as lots of other products containing artificial sweeteners) leads to excess belly fat and a host of other health problems. Seems that it triggers a desire for more food and more sugar in our bodies, and the processed foods that we rely on in our diets are full of sugars.

Now I’ve been a skeptic most of my life, and I don’t always fall for statistics that sound meaningful, but really aren’t that important. But when you combine all of the “expert research” that we’re subjected to with the observations available from the life (and death) that surrounds us, much of this stuff makes sense. The other day, I ran into an old friend from high school days that I hadn’t seen for years. At one point in our conversation, she ran down a list of people from our class who have already died (we’re still almost two decades shy of our average life expectancy). It was quite a list. Personally, both of my brothers are already dead, although both of my parents are still alive. My oldest brother was killed in a traffic accident when he was a teenager, so I certainly can't put that down to his diet, but my other brother succumbed to cancer.

For our parents’ generation (here I’m speaking of people born in the late-1920’s through early-1940’s), soda pop was a rare treat. Coke came in 6 ½ ounce bottles, and most other soda pops weren’t much larger. Pepsi made a big impact when it introduced a 12-ounce bottle in 1936. Most of the food consumed was made from scratch, not prepackaged and over-processed. Maybe that’s why my generation is dying-off while my parents’ generation lingers on.

Michael Bloomberg, the Mayor of New York City, has proposed a ban in the city for selling soda pop in sizes larger than 16-ounces. It’s probably a good idea for the health of the citizens, but most people think it’s a little crazy. It probably won’t even help much. I’m sure there’s one group of New Yorkers that aren’t pleased: the folks on Madison Avenue that dominate our advertising industry. I know that advertising has spread far beyond the confines of a single street in New York, but “Madison Avenue” still invokes the advertising industry, and is still instantly recognizable (think of TV’s “MadMen” a show about advertising in the late-50’s and early-60’s). These people have been influencing our decisions all of my life.

There lies our greatest problem. Our “education” is based on information provided by people who just want us to buy something. Once you buy it, they want you to buy more of it. If you don’t, they go out of business. Think about who it is that advertises most in this country. They’re the people who have the most to gain: makers of simple, low-cost products with high profit margins. Soft drink makers sell sugar-flavored carbonated water (either cane sugar-now rare, high-fructose corn syrup-the vast majority, or artificially sweetened) which is pretty cheap to make. The packaging and advertising cost more than the product itself. So we have to have more. Originally, Coca-Cola contained a pretty significant amount of cocaine, but now it uses “spent” coca leaves for its flavoring, as well as caffeine from the kola nut, also an addictive substance. One of the “benefits” of drinking Coke brought out in its early advertisements was its ability to “cure” morphine addiction. I’ll bet it’s pretty easy to “cure” alcohol or nicotine addiction with a switch to heroin, too. Probably not a good health choice though.

We succumb to advertising claims on a daily basis and not always to our benefit. Phosphate in our detergents made our washing machines more effective in removing stains from our clothes. But then we found out that it stayed in our wastewater and did severe damage to our lakes and streams. They had to change the formula (President Nixon signed the bill into law that banned phosphates, and launched the EPA), but they still need advertising to tell you that there is a major difference between different formulations of soap and water, and get you to favor their brand above all others.

In recent years we have seen a significant rise in advertising for prescription medicine. We see and hear claims for products that will cure a wide range of problems, including those that we didn’t even know were problems, like “restless leg syndrome”. The list of potential side effects is usually frightening, but they speed through those in a hushed voice at the end of the commercial, so how important can they be?  Pharmaceuticals have extensive costs associated with their development, but once you have the formula, they’re usually pretty cheap to make. The companies also have to reap the benefits while they are protected under patent laws, because when that expires, a flood of generic brands usually takes over the market. It’s easier for doctors to acquiesce to their patients’ desire for a particular medicine in order to “cure” the symptoms that the TV ad told them they had, than it is to try to get the patients to make healthier choices to begin with. It’s much, much easier if the doctor also has an investment portfolio that includes big blocks of stock in large pharmaceutical companies.

The biggest problem is that our nation continues a slide into lazy stupidity. How many issues were on the ballot in your area that would have increased tax funding for schools? How many of them were successful? The majority in my area failed. People don’t want to pay more taxes, and who can blame them? That’s fine with the folks in power (and I don’t mean our political leaders exclusively). The people that really call the shots in this country (and other countries as well) have very good educations, usually at exclusive private schools. If we enhanced public education, the entire population might become a bit more skeptical and less inclined to believe those authoritative voices on TV ads (we’re much too busy to read these days so we must get information from simpler sources). Those voices of authority tell us that buying more of their product will enhance our lives. Instead, we might be more inclined to follow the advice of those thoughtful people who only make money giving advice, instead of selling some mass-produced consumer good (yes, I know, consumer ads keep TV shows like Dr. Oz on the air).

If you are tired, try taking a nap instead of a stimulant, or just get more sleep at night. If you are thirsty, have some water (don’t worry, Coke and Pepsi bottle that stuff, too. They won’t go out of business) instead of soda pop. Try steaming broccoli, or making macaroni and cheese from real ingredients instead of a box. Seriously, learn a few simple recipes because you are killing your children with processed foods. It is much easier for parents to give-in to whining children screaming for candy at the store, but try another approach. I’ve witnessed the results first hand: harried mothers quickly buckling to the demands of their out-of-control kids to have some candy. The kids looked wired and unhealthy. I’ve seen other mothers remain firm and deny such requests, going as far to tell the kids “no” (Gasp! Can it be true? Doesn’t that lead to tormented psyche?). They then inform their child that they can have an apple or plum or nectarine or some grapes when they get home. It may not come as a surprise to you how much better such children look physically, and how much better they behave in public.

There has been a good deal of speculation about the failure of the massive amount political ads in the election, especially here in Ohio. Karl Rove simply couldn’t believe that the voters of Ohio were not swayed to vote for the Republican candidate. He had an on-air meltdown on Fox. It was really pretty sad. He did persuade almost half the Ohio electorate to vote his way. Thankfully it was just under half. But he, like many other political king-makers (and avid advertisers), failed to allow for the all-important “Law of Unintended Consequences.” What they mostly did was make us distrust all politicians. They made us so sick of commercials and other political ads that in an effort to maintain our sanity we simply tuned them out. Our state’s famous tiny fraction of undecided voters (really, you couldn’t decide even a few days before the election?) that swung the state to the incumbent must have simply flipped a coin in the end, and the fickle odds of chance made the decision for them. Or maybe they finally tuned out the bullshit, and searched their soul for reason. I think it was probably the coin, because if you didn’t understand the issues well enough, you probably lack the necessary mental acuity to find reason within yourself. Blame under-funded public schools. I do.

For the most part, however, advertising is effective. We are an easily swayed life form, and that is a shame. As a species, humans have a great deal of promise, but we’re blowing it. We are allowing ourselves to be advertised to death. All too often we fail to take the long view. Our health will improve if we make healthy choices. Our economy will improve if we produce more things here instead of buying cheaper foreign-made goods. Our people would be better off if we spent more money educating them to make good decisions, but these things don’t benefit us immediately, so it’s out of the question that we would do something to help our future generations at our own immediate expense. Yet, when you ask a parent what it is that they hope for most, the most likely reply is that they desire for their children to be healthy, and live in a better world than today’s mess. Most people don’t even stop to think about it. Their answer is routine. Probably something they heard on TV.    

“Children must be taught how to think, not what to think.” 

― Margaret Mead

Never Stop Learning

“Never stop learning.” Those were the words of advice that the Commander-in-Chief gave a US Marine as the two men drank ale on a porch off of the White House West Wing on the eve of an awards ceremony. It is a short sentence with great meaning, and we would be wise to always remember it, and take it to heart. The next day, President Obama presented Sergeant Dakota Meyer with the Congressional Medal of Honor, our nation’s highest military award. Meyer was the first living Marine recipient of the CMH in 38 years, only the third since the Vietnam War, and was given the award in recognition for his extraordinary courage under fire.

Yesterday, I finished reading Into the Fire: A Firsthand Account of the Most Extraordinary Battle in the Afghan War, written by Dakota Meyer and Bing West. It chronicles Meyer’s life and military service, and includes a description of the Battle of Ganjgal in Afghanistan conveyed with such intensity that it left me vibrating and reaching for a cigarette. I have the utmost respect and admiration for those who serve our country’s military, and this book only served to reinforce that feeling. Meyer was given top-notch training and top-notch equipment. Then they sent him into a no-win situation that would drive the sanest man crazy. The book points out the problems and ultimate futility of trying to wage a limited war in a country that has been fought over, but never fully subdued, for all of recorded history. Read the book for yourself and draw your own conclusions. It won’t take very long, and it’s worth the additional knowledge that it provides. Never stop learning: it’s very good advice.

I read something else last night, although it turns out that some people in a position of power would have liked it best if no one read it. A report was prepared by the Congressional Research Service and released to members of Congress in September. Usually, such reports are not released to the general public, and after reading this one it is clear that most people wouldn’t even try to slog through the details. The CRS does that sort of thing all of time. It’s one of three agencies that also includes the Congressional Budget Office (CBO) and the Government Accountability Office (GAO) which provide our legislative branch with non-partisan, accurate, and objective information, so that they can hopefully make better decisions. The CRS serves as a “think tank” for our government, and their reports and research are generally highly regarded.

The report in question is titled “Taxes and the Economy: An Economic Analysis of the Top Tax Rates Since 1945” and for the most part it lived up to the non-excitement promised by its title. It’s full of things like multivariate linear regression analysis that used to make me yawn in business school, and still do now. It is important to remember that this report was prepared objectively, on a non-partisan basis. The CRS exists only to provide a service; it has no ideological ax to grind. One of the main conclusions of the report is that there is no relationship between reducing top income tax rates for the wealthy and new job creation. No evidence supports a link between allowing the wealthiest Americans to keep a bit of extra money after taxes so that they can supposedly use those extra funds to invest in new jobs for everyone else. There is however evidence that indicates lowering the top marginal tax rate increases the gap between rich and poor, by allowing more funds to accrue to top earners. The rich get richer and the poor get poorer.

The reason that I almost didn’t get to read it was that Mitch McConnell, the leading Senate Republican, and his Senate followers, objected to wording and conclusions in the report and forced the CRS to withdraw it pending further study. Seems they had issues with phrases such as “Bush Tax Cuts” that referenced reductions to the top marginal tax rate made during Bush’s administration, but not directly by Bush himself. The report also references House Budget Committee Chairman (and current Republican VP nominee) Paul Ryan’s the Path to Prosperity by name and disagrees with Ryan’s solutions. One could easily draw the conclusion (most already have) that what really irked those forty or so Republican Senators (who seem to wield way too much power these days), was that the report refutes the central premise of their party’s economic theory. Supply-side economics don’t work. Lowering taxes for rich people does not create jobs. It is time that we all learn to deal with that reality, but as our election approaches, Republicans continue to say that we need to lower taxes for wealthy people in order to create more jobs.

Sen. Chuck Schumer (D-N.Y.), referencing the CRS report, told the New York Times, "This has hues of a banana republic. They didn't like a report, and instead of rebutting it, they had them take it down." Yes, this is strong-arm politics at its worst.

In the war in Afghanistan, policies in place to prevent potential harm to the civilian population prevented Dakota Meyer’s team from receiving the artillery support that might have saved their lives. Among the many allied casualties that day were four Marine advisors from Meyer’s four-man training team (Dakota had been replaced that day, because he was trained as a sniper, and they were going in just to talk with village leaders). Command decisions were made (or in this case, avoided) at a rear echelon command base, instead of in the field where they would have been more effective, and where most military scholars, including Gen. Colin Powell, believe they should reside. During the battle, the civilian population of Ganjgal had either fled the area, witnessed by Meyer and others from their rear echelon position before the battle, or joined in with the Taliban to fight the joint US-Afghan forces who had come to town for a talk with village elders. Such is the ebb and flow of political allegiance in Afghanistan, and one of the reasons that makes finding the bad guys so difficult in that country. They change sides daily.

On the other hand, in the war for the hearts and minds of the American voter, we are faced with information controlled by a handful of self-interested senators, instead of being able to read and digest the information for ourselves. The evidence really points to a small group of people more interested in consolidating wealth and power into the hands of a selected group of followers, instead of providing a workable solution to the problems faced by the vast majority of Americans. But if you believe that these people have your best interests at heart, then give them your vote. Just think about renaming the country “The Banana Republic of America” because the country we will live in will not the one envisioned by the framers of our constitution. They proudly named us “The United States of America” and it remains the country that I love, and maintain a hope for its future.

Never stop learning. These are words of advice to live by. Use your brain, don’t let it rot, or be influenced by thirty-second bursts of misinformation, half-truths, and outright lies. Seek out unbiased information if you can, and try to discern the real reasons behind the information that you are being provided. Most importantly, make your voice heard. Make your vote count. Protect yourself. Above all, never stop learning.

“There is not conclusive evidence, however, to substantiate a clear relationship between the 65-year steady reduction in the top tax rates and economic growth. Analysis of such data suggests the reduction in the top tax rates have had little association with saving, investment, or productivity growth. However, the top tax rate reductions appear to be associated with the increasing concentration of income at the top of the income distribution.”
 -From “Taxes and the Economy: An Economic Analysis of the Top Tax Rates Since 1945” published by the Congressional Research Service

      

(Congressional) Medal of Honor

Navy Version

Worst Socialists Ever

Well, the US General Election is barreling toward us like a hurricane. It will be over soon, one way or another, and I won’t be missing those political ads at all. They’ve reduced one poor little girl to tears: in her viral video, she said she hates both candidates for president. Here in Ohio, we’ve been spared from the worst of Hurricane Sandy’s wrath, but my thoughts go out those who have suffered the most. A friend used to always say that “we hang by a silver thread,” meaning that something life-changing can happen at any moment, and that was surely on display on our east coast this week.

Last week, before the storms grabbed all of the headlines, my local paper’s business section had several stories (which I mentioned in an earlier post) that seemed to bode well for our economy. The unemployment rate continued to fall in our area. A headline proclaimed that the United States could become the world’s top oil producer, explaining that there is currently a boom in oil and other liquid hydrocarbon production in our country. In our local economy, a new retail store and a new hotel that caters to long-term business travelers are planned for the county. It was such a flood of good economic news, that I was startled by the headline of an article at the bottom of the page.

“Stocks sink as DuPont, Xerox, 3M scare investors” the headline of The Associated Press release announced. It seems that despite three years of growing profit for these and other “Blue Chip” companies, revenues (money received from operations, such as sales) are down. Part of the problem lies elsewhere in the world: these are truly global companies after all, and demand has fallen off worldwide. In addition, investors are worried that corporate cost-cutting has reached its limit. I don’t think that’s really the case. There is one area with enormous cost saving potential that is never discussed: executive compensation.

In 2011, the CEO of Xerox was paid $12,902,607 (all figures include salary/bonus, benefits and stock options) representing an amount 379 times what was paid to the average worker. The Chief Executive of DuPont received $15,926,631, or 468 times what the average employee earned, and 3M’s CEO was compensated $25,391,738 which was 746 times the pay for one of the company’s average employees. Those CEOs are way behind the leader. The CEO of Apple, Timothy Cook, was paid $377,996,537, or 11,100 times the average employee compensation. To be fair to Cook, most of his compensation was in the form of stock options, which could decrease in value by the time he exercises them, but still, that’s a whole lot of executive compensation.

Of course you know by now that I love history, especially the insight that it can offer to our current situation. So let’s look back a few years. In 1980, the average CEO compensation for all of the companies included in the Standard & Poor 500 was 42 times the average worker’s pay. In 2011, the average CEO in the S&P 500 received 380 times more than the average worker. I don’t know about you, but I find that number staggering. It boggles my mind, and it raises a few questions, including the main one: why so much more now than just over thirty years ago?

It also answers the question that I thought of when I first saw the headline, which was why would a company come out at the end of October and warn its investors that problems are on the way for the companies’ profitability? Well, I think the simple answer is that these executives would like everyone to think that our current President isn’t up to the task of doing what is best for American businesses. Furthermore, we would be much better off if we would elect a Republican who has more than demonstrated his own support for big business, as well as support for the concept of rule by the wealthy. Personally, I don’t think it really matters, since history has shown (there’s that old “historical perspective” thing again) that the stock market has actually performed better under Democrat presidents than it has under Republicans. Both parties are in the pockets of the corporations, and there is little evidence that any significant changes are forthcoming. However, those people at the top, the top 1% of income earners, want to make sure that they stay where they are: at the top. Also, in order for that to happen, that everyone else stays at the bottom.

The new flood of unrestrained PAC-money sponsored political ads really has me freaked out. Does anyone really believe this nonsense? Is anyone really this uninformed? Of course they are. We’ve been taught from an early age to respect authority, and what’s more informative than the deep, reassuring voice of authority from TV news, which is mimicked in the political ads? Serious television journalists such as Edward R. Murrow and Walter Cronkite set a standard for unbiased reporting in the middle of the 20th century, and many of us assume that this integrity continues in all newsrooms today. It really doesn't. Our media is owned by large corporate entities that mostly dispense the news that they want us to hear. The political ads twist facts so badly in an effort to frighten us into giving them our vote that it should be a criminal act. It won’t be unless we speak up as an overwhelming group, and that won’t happen.

The latest political ad that has made me nauseous is from an Eastern European guy who talks about growing up under Socialism. He speaks in the background about the failure of the Socialist system while pictures from post-World War II Europe flash across the screen. He concludes with the statement that he plans to vote Republican this election, because Socialism doesn’t work. The implication is that Democrats favor Socialism. They don’t. Never did. Not once.

I reiterate the following fact: our economy has fared better in recent history under Democratic administrations than it has under Republican administrations. That is information supported by evidence. The commercial cited above is the worst kind of fear-mongering propaganda. The people who fill your head with such nonsense do not deserve your vote. I was once a pro-business Republican. I’m not sure if I’m now a Democrat, but I still love my country, and want what is best for her people, as well as what is best for all of the world’s people. I’m fairly certain that capitalism is the best way for people to succeed in this world, but I have seen the problems associated with unrestrained capitalism. Human greed needs to be kept in check. We need rules and regulations to help the little guy, because the success of our nation rests on the success of our rapidly vanishing middle class. History has demonstrated this time and again. Capitalism works, but unrestrained capitalism only works for the ones with the most money and most power.

So what should you do? Cast your vote for the people who are going to benefit you the most. If you are a member of the middle class, or even poor, you would be wise to vote for the Democrats. If you’re a multi-millionaire, that means you probably think you should vote for the Republicans. Guess what? History has shown us that your stock portfolio will probably improve more under a Democrat’s administration (check out the following graph). As far as Socialism goes, history has already demonstrated that the last two Democrats to hold the office of President of the United States of America would be considered two of the worst Socialists ever. More like Capitalists, really good Capitalists.

“Self-interest makes some people blind, and others sharp-sighted.”

-Francois de La Rochefoucauld