Consequences

As soon as we are old enough, we are taught to discern the difference between “right” and “wrong”. Since humans are in reality only sophisticated mammals, it is necessary to establish boundaries of decent behavior in order for society to function smoothly. Otherwise we might revert to our basest animal instincts, and then all hell would break loose.

There are various methods used to establish what behaviors are acceptable in our culture, and what is taboo. As small children, it was once enough for us to know that bad behavior would be promptly punished, usually with a quick whack, so our primary point of reference was whatever our parents or other adult authority figures told us constituted good or bad. The primary lesson was that doing something that was unacceptable resulted in swift and sure punishment. As our society has become more enlightened (although many might argue that it does not really represent progress), this has changed to the concept of rewarding good behavior, and discouraging bad behavior. We have been introduced to the concept that our actions have consequences, and should behave accordingly.

We also painfully learn that not all consequences in our young lives are enforced through adult authority. Jumping off of the garage roof can swiftly and painfully lead to a broken arm or leg. Riding a bicycle too fast down a steep hill can result in scrapes, bruises, a destroyed bicycle, or worse. Thus we learn that we must pay careful attention to the physical laws of nature as well as the metaphysical laws imposed by our parents. An additional layer is imposed in the metaphysical realm as well. Philosophy, generally in the form of religion, is usually added to the mix.

Right and wrong, and the consequences of improper behavior, attain a whole new level of punishment under the laws imposed by religion. A bad Christian will suffer the damnation of hell’s fire. A bad Buddhist could be reincarnated as a bug. Morality is imposed in the most theoretical of universes, but apparently is not enough. At the same time that we are taught the moral aspects of society, we are made aware of legal limits to our actions: the laws imposed by the state. Punishment for violation of the laws of man range from monetary fines, through involuntary incarceration, to the ultimate forfeiture, loss of life.

At some point in our maturation process, many of us open our eyes to see the world as it really exists. It is not a pretty picture for the most part. Some of us choose to remain ethical human beings, content to do what is right and behave with civility toward our fellow beings. Some perceive, perhaps correctly, that society actually rewards those who do injury to others.

When we think of Eli Whitney, the inventor of the cotton gin, we think of a man whose advancement of technology freed people from a difficult and time-consuming task. The actual result of this laborsaving device was to make upland short cotton into a profitable
crop, which strengthened the economic foundation of slavery in the United States. The mass production of the automobile put many wagon manufacturers out of business, however, many companies simply joined the transformation to the new technology and displaced workers found ready employment in the new industries. The innovators were rewarded and society overlooked the short-term consequences for the greater good. In this case, the rewards for innovation were justified. Modern innovators have also been rewarded by society. The advances in computer technology have increased productivity in the business world and the innovators have been correctly rewarded despite a dislocation of some workers. Progress appears to be the most important god in our culture.

Recent history has provided new examples of behaviors that are rewarded despite adverse economic consequences. The masters of the leveraged buyout gain great personal financial rewards while leaving economic misery in their wake in the form of displaced workers and ruined companies. I’m not talking about corset makers or buggy whip manufacturers, but viable firms whose only problem was being at the right place at the wrong time. The wizards of Wall Street finagle laws and capital markets, skirting regulation or having it eliminated entirely through political lobbying (what used to be referred to simply as bribery). In the process they may reduce the value of the life savings entrusted to them by gullible investors, but their own rewards are enormous.

Thus it is that we learn the morality of the rich. Anything that increases their personal wealth is good. Too bad if others get hurt in the process. I may not be considered a good Christian or an ethical Buddhist by my society, but I try to remain a morally civilized human being, and such behavior by the rich bothers me greatly. I have been personally wronged by a wealthy individual who has suffered no adverse financial setbacks while I have suffered greatly. There may be other, less tangible consequences to his behavior but superficial observation of his current status reveals that he has been richly rewarded for taking advantage of others and myself.

Obviously, morality and religion have failed to protect us from the all-powerful human desire for more. The laws that we have implemented to protect our personal interests are no longer effective or enforceable. The wealthy scream that if we would only unshackle them from ruinous regulations they would be able to grow our economy more efficiently, providing new employment opportunities for the little guy, the working poor and our rapidly vanishing middle class. I think their position is utter nonsense and ask if you, kind reader, believe that they really have the best interests of their country, or humankind as a whole, in mind when they make these statements?

While we may not need more regulations, we certainly do not need less. We need to adjust the consequences of violation so that they are no longer taken lightly. Corporations are known to regularly violate environmental and financial regulations. If they are caught, they typically face a fine. Such fines, sometimes representing only a minor fraction of their net income, are regarded simply as a cost of doing business. Just as the legal prohibition against suicide rarely has any meaningful consequence to the successful violator, monetary fines levied against the corporation have no impact on those who decided to violate regulations. Like the child of old that faced a whipping if caught stealing, we need to put some teeth into the consequences of violating economic regulations. Fines should have a significant impact on the personal fortunes of the decision-makers. Tear aside the veil of protection offered by the corporation and punish the individuals responsible. Let us devise new laws that prevent the looting of companies for personal gain, eliminating the adverse consequences of the leveraged buyout.

All great societies in history have reached a zenith and then declined. If that is your vision for the future of our country then elect to office those who would maintain the status quo and increase the advantages that the immoral usurpers currently enjoy. Personally, I have a grander vision of the type of country we should have. We need to tell our elected officials what is expected of them when we vote them into office, and what the consequences will be if they fail. Remember that failure on their part may only cost them an elected position, but the cost to our nation will be too terrible to contemplate.

“It has always seemed strange to me... the things we admire in men, kindness and generosity, openness, honesty, understanding and feeling, are the concomitants of failure in our system. And those traits we detest, sharpness, greed, acquisitiveness, meanness, egotism and self-interest, are the traits of success. And while men admire the quality of the first they love the produce of the second.”

 -John Steinbeck

“Anyway, no drug, not even alcohol, causes the fundamental ills of society. If we're looking for the source of our troubles, we shouldn't test people for drugs, we should test them for stupidity, ignorance, greed and love of power.” 

 -P.J. O’Rourke

Censorship and Man's Best Friend

A friend of mine asked me to sign a petition to remove a page called “I Hate Dogs” from Facebook. Now the person that made the request is someone that I have known for decades, although we don’t really socialize much anymore. In fact, I haven’t seen her for years, although if she were to call to ask a favor that was in my power to grant, I would most likely do it. I’m a firm believer in the Golden Rule, and also in old friends. I also like dogs, although I don’t have one right now, and don’t really understand how anyone could possibly hate a dog. They mostly just want to please us.

But I just couldn't bring myself to sign the petition. For one thing, I doubt if it would work. Considering the plunge in the value of Facebook’s stock, I don’t think they can afford to get rid of anyone at this point, even if the group in question espouses an asinine philosophy involving hatred of a species that is commonly known as “Man’s Best Friend”. In the spirit of fair play, I went to the page in question. I didn't spend too much time there; most posts included a variety of misspellings, bad grammar, and basic mental vomitus. But the sad truth is this: you have the right to be an idiot in this country (indeed, viewing the slate of people vying for political office in our fair land, it may even be a prerequisite). Furthermore, I support your right to idiocy wholeheartedly.

Not that I wish it weren't so. Imagine what a fabulous world this would be if all of its inhabitants shared my views of fair play, equality, justice and pursuit of the truth! However, I know for a fact that there are people who do not share my views (heretics and fools to be sure, but they do exist and their numbers are large). If their aim is to remove me, or remove my voice from the general conversation, rest assured that I would fight them to my last breath. But they have the same right to their opinion as I have to mine. The one thing that I cannot support is censorship.

Ay, there’s the rub, as The Bard of Avon would say. There’s a whole lot of people that I wish would just shut-the-f**k-up. Take my district’s current U.S. Congressman for example. I just watched his ad on TV where he speaks of being a cancer survivor, and how it’s personal for him to see that all Americans with cancer are treated. Yet he has also said that he wants to repeal the Affordable Care Act, which might just be the only way that millions of Americans have a ghost of a chance to receive needed treatment. I’ll tell you what’s personal, dude. My brother, who worked for years as a self-employed paint contractor and couldn't afford health insurance, died from cancer a little over four years ago. That’s personal you moron! Not that I’m bitter about it or anything. But my Congressman (who has much better health insurance than almost everyone else) has the right to spew nonsense across the airwaves, just as I have the right to do my best to make sure that he is no longer my Congressman next year.

In fact, politicians have more opportunity than ever to spew whatever they think (or at least what they think will get them elected) thanks to the Supreme Court ruling in the Citizens United v. FEC case that says anonymous money is free speech. I tend to think that free speech is one thing and well-funded propaganda is something else entirely. But where is the line drawn? Who should be able to make the call? The Supreme Court has clearly demonstrated that it is no longer an impartial body of jurists, but has been undermined by political philosophy. In reality it has always been swayed by the underlying beliefs of the nine justices since they must, by necessity, interpret the Constitution, deciding how new laws and situations fit into that cherished document’s guidelines. It is clear to me that one of our President’s most important jobs is making appointments to the Supreme Court. Therefore it is extremely important to choose the person that will make the best choices possible, since it is typical for Supreme Court justices to far outlast the President that appointed them.

Our system of government is becoming an increasingly polarized institution that appears to have forgotten that they are elected to serve the people of our country. Unfortunately, our citizens include groups of illiterate dog-haters as well as billionaires that favor tax cuts for the extremely wealthy, even if it shatters the economy in the process. Our citizenry also includes millions of kind, thoughtful people, but we don’t hear much from them. That’s too bad, because it’s this group that needs to express itself more forcefully.

Maybe we should start a new political party. Call it the Dog Party, designed to serve the needs of those whose hearts are big enough to provide care and comfort for our canine companions. But we’d probably need another name for it, since these folks should be kind enough to see the need to include cat owners as well. Of course we can’t forget tropical fish…and ferrets…hamsters…ah hell, it’s tough to please everyone.

“The better I get to know men, the more I find myself loving dogs.” 

―Charles de Gaulle

Paying Our Best and Brightest

E. Gordon Gee, the energetic, 68-year old, bow-tie-wearing president of The Ohio State University was the subject of a news article in today’s paper. The story seemed to be critical of Gee’s lavish spending for travel and entertaining over the past five years, and made comments about “his” 9,600 square foot mansion. I’ve been critical in the past regarding excessive compensation for America’s Chief Executive Officers, and being president of a major university is very similar to running a large corporation. Since I’m an OSU graduate, the article caught my attention and caused a wince of shame. We think of academics being more like the impoverished Mr. Chips than the wealthy Daddy Warbucks.

However, my finance degrees from OSU gave me a strong foundation in analyzing the underlying numbers, which I did. The paper reported that Gee’s compensation was $8.6 million, but buried the fact that it was over a five-year period, so he earned an average of $1.72 million per year in salary and benefits. He had travel and entertaining expenses of $7.7 million over the same period, so $1.54 million per year. During a 38-month period approximately $895,000 was spent entertaining guests at the residence, which numbered about 16,000 over a five-year period. As close as I can figure, that’s a little over $88 per guest. Gee’s 9,600 square foot residence is not really “his”, it belongs to The Ohio State University Foundation, and was donated by a local resident. The foundation is not funded by taxpayers, but with private donations.

During the five-year period, the popular university president presided over an increase in the university’s endowment of $2.6 billion dollars. In other words, for every dollar spent by Gee, he brought in almost $160. Too bad my stock portfolio never achieved that kind of gain. It doesn’t really seem like Gee has been terribly over-compensated.

Compare that with the performance of the CEO of Home Depot in 2006. Over a five year term he had been paid $123.7 million, excluding stock options, or almost $25 million per year. During that period, Home Depot’s stock price decreased by 10%. When he was finally ousted, he left with a wonderful "golden parachute" whereas the company was left with a financial mess. Last year, the Bureau of Labor Statistics reported that median CEO pay had increased 27%, while median worker’s overall pay increased only 2.1%. The rich are truly getting richer, while the rest of us are getting screwed.

A story produced by ABC News last year showed 26 CEOs received more in compensation than the company paid in income taxes, and added that tax breaks that contribute to excessive executive pay cost taxpayers $14.4 billion annually.

How can we change this? There is already a limit of $1,000,000 on executive pay that can be deducted for tax purposes. Companies have already circumvented this problem by compensating executives with stock options, allowing them to purchase stock in the future at below market prices. Even if they mess-up the company, they can still profit.

Famous management consultant/economist/professor Peter Drucker said that CEO pay should be no more than 20 times the rate of worker’s compensation. Higher CEO pay tends to erode worker morale and productivity. The CEO of the company that I work for made well over 350 times what I’ll make this year, and there’s lots of people in the company that earn less than I do. Incidentally, the morale at our company really sucks.

Again I ask, how do we remedy this situation? It is argued that CEOs must have large compensation packages in order to bring in the “best and brightest”, executive compensation is a market-based figure, and “the market” always knows best. Obviously, companies like Home Depot in the situation described above were not correctly gauging the market. I’ve always wondered what the effect on such things would be if corporate income taxes were eliminated entirely.

The argument is that corporate income taxes are simply another cost passed along to consumers. One way or another, we end up paying the tax. The ability of corporate accountants to play the system and allow CEOs to be paid more than the company pays in taxes is already documented. If all business decisions were made based on the immediate impact on the bottom-line profits, instead of being based on an after-tax basis, would the decisions change? I don’t know, but I think they might. There are a whole lot of other effects to consider, and major changes to individual income tax laws would have to be made in order to compensate for the loss of corporate taxes. Corporate income taxes remain popular with the government simply because they’re easier to collect than personal income taxes. But large companies are playing games with accounting to escape paying significant taxes anyway.

I would love to hear your take on the matter. Leave a comment. The issue is complex, but any idea could have merit. Should we continue to allow our country to morph into an oligarchy, where the richest rule over all, or should we implement laws to return power to the electorate? It is no longer an issue of the merits of capitalism over collectivism; I’m still a firm believer in capitalism. It’s really a matter of civilization over…I don’t even want to imagine the eventual alternative.

“ When a man tells you he got rich through hard work, ask him: Whose? ”

— Don Marquis

   

E. Gordon Gee

President, The Ohio State University

Civilization and Government Housing

United States Congressman Paul Ryan spoke out today in defense of his running mate’s earlier comments, which had not been well received by…well, apparently no one liked them, not even the guy that said them. Romney, upon reviewing his remarks, didn’t really like what he had said, primarily because he angered almost half of American voters. No doubt one of his strategists told him that he would need to get more than 50% of the votes in order to win. Pity that you can’t simply buy this one, isn’t it?

Ryan stated that “…what we’re trying to achieve is getting people off of government dependency and back to a job that pays well and gets them onto a path of prosperity.” Then he added “We have too many people becoming too dependent upon government because of the poor economic policies of the Obama administration.” Perhaps the young man needs to glance at his own resume. Too many people are dependent on government? Like…um…a certain U.S. Congressman who would like to get promoted to Vice-President? Dude, it’s a government job. Taxpayers pay your salary, provide you with the best health care insurance available, much better than most plans available to the millions of Americans that you would like to have vote for you (so that you can spearhead the drive to deny an inferior level of health care coverage to them), and offers a host of other perquisites. If you get elected to the job of Vice-President, it includes some pretty swanky government housing as well.

What was totally ignored in Ryan’s remarks is that our current President has been trying to put more Americans back to work in the private sector (through his proposed jobs bill), and has been trying to do so for some time now. The problem is that the opposition party has been blocking his initiative in the U.S. Senate, in order to make him look weak. What nonsense, what hypocrisy, what lies are these idiots willing to spew in order to attract the votes of other fools? If you guys want real change, use real facts to support your position because the BS ain’t flyin’.

Ryan went on to say “President Obama said that he believes in redistribution, Mitt Romney and I are not running to redistribute the wealth, Mitt Romney and I are running to help Americans create wealth.”

Well, first things first, as my old Economics professor used to say. The redistribution of wealth through the use of a progressive income tax has been considered a very sound and equitable arrangement for many years. By the way, it is called a "progressive income tax" not because it is favored by liberals, but because the percentage of tax paid increases slightly as one earns a higher income. Personally, I’ve never been opposed to paying a little more than someone else that couldn’t afford it as well as I could at the time. Call it a basic tenant of Judaism, Christianity or Islamic tradition, or call it good Karma, or just call it being civilized. It has always seemed to me to be the right thing to do. I’ve also had the great good fortune to have friends do the same for me in my time of need. A progressive income tax has been considered reasonable for many, many years. It isn’t socialism---it’s called civilization.

What kind of wealth are Romney and Ryan seeking to create? If history is any judge, they seek to enrich the few at the expense of normal, hard working Americans. Romney’s wealth is the result of money made through leveraged buy-outs (I was going to say earned, but he really didn’t earn it through hard work, or even spectacular insight, did he?) He figured out how to scam the system by borrowing heavily, and bankrupting frequently, that all too often left the company they acquired no longer productive.

We need an economically strong middle class and a healthy, functional economic climate. We don’t need people to screw-up functional enterprises. True, not every company deserves to survive. The first ones we need to get rid of are the ones that prey off of the misery of others. One such company is named Bain Capital and it was started by a guy who wants to be our next President. These guys already don’t pay as much tax (as a percentage of income) as a good secretary or a store manager, and yet they whine that they have to pay too much. Boo-freakin’-hoo. America’s top marginal tax rate is lower than it has been for many decades. That means that the very wealthy in this country pay lower taxes than their parents or grandparents ever did. I never heard my grandfather bitch about taxes.

Our country provides opportunity at unequal levels, and likely always will do so. The children of wealthy parents are far more likely to succeed at whatever they try than the offspring of poor parents, or at least have an easier time if they fail. Our system of taxing people who can afford to pay more has been considered fair for a long time. Why is there such a sudden need to change that? A civilized society considers it greedy to desire more than one really needs, especially if you have to hurt someone else to get it.


“Thus did a handful of rapacious citizens come to control all that was worth controlling in America. Thus was the savage and stupid and entirely inappropriate and unnecessary and humorless American class system created. Honest, industrious, peaceful citizens were classed as bloodsuckers, if they asked to be paid a living wage. And they saw that praise was reserved henceforth for those who devised means of getting paid enormously for committing crimes against which no laws had been passed. Thus the American dream turned belly up, turned green, bobbed to the scummy surface of cupidity unlimited, filled with gas, went bang in the noonday sun.” 
           –Kurt Vonnegut, Jr., God Bless You Mr. Rosewater: A Novel

One Observatory Circle

Official Residence of the U.S. Vice President

Poor Fishing

This Wednesday the U.S. Census Bureau released a report saying that the poverty rate in 2011 was at 15% of American households, representing roughly 46.2 million of our fellow citizens. It called the change in the rate from last year’s 15.1% “statistically insignificant” and further stated that median household incomes fell to $50,054, representing a 1.5% decrease from 2010 levels, the second straight annual decline. Additionally, the report indicated a slight easing of the unemployment rate between 2010 and 2011. During the same period the gap between rich and poor increased and there was a small decline in the number of people without health insurance. In a blog post, the White House said the data showed that government policies can help the poor, middle class and uninsured, while more work needs to be done. No shit Dick Tracy.

Speaking from a fundraising event in Florida (does he ever just talk to people, or must he also constantly get money from them?), W. Mitt Romney said that Obama “is the candidate that’s pushed the middle class into poverty.” Um, apparently Mitt was on vacation somewhere (probably somewhere nice and expensive) when George W. Bush and his Republican pals pushed the economy into the abyss during the Financial Meltdown of 2008. It must be a wonderful feeling to be able to awake each morning and invent a sparklingly bright new reality out of whole cloth. True reality bites the big one.

Willard went on to say that his party was not “…the party of the rich. We’re the party of the people who want to get rich.” Um, again…no shit famous-comic-strip-detective-named-Dick. It doesn’t take a genius to figure out that a party cannot survive on the 1% of rich Americans for support. It depends on support from a gullible electorate that believes their own ship of prosperity is about to dock any minute, courtesy of a party that really wants to keep them dumb and wanting.

I used to love to go fishing as often as possible, and it was pretty easy to do so when I once lived 60 feet from the shore of a lovely lake in east central Ohio. I fish for relaxation, not for food (I find it difficult to refer to it as “sport” since the lake was stocked with fish annually). Although I lack conclusive evidence (I don’t bother with DNA testing while engaging in catch and release fishing), I’m almost positive that I caught the same bass twice in one day, in fact the second catch was within a half hour of the first one. He (or she, like I said, I don’t do tests) must have been really hungry, or the artificial lure that I was using must have been exceptionally alluring that day.

But today I had a new insight about fishing, and it was from the fish’s side of the water. We as voters tend to swim along under the surface. We are hungry, not for mere illusory bait, but for actual substance. As we seek our elusive prey, we are given the opportunity of biting on false substitutes time and again. Like the hungry bass, eventually we take the bait and we’re hooked. What a terrible shock it must be to be hooked by the lip and forcefully pulled from our natural environment. Probably like going to bed as a comfortable middle-class American and waking to discover that your investments have evaporated and your family has slipped below the poverty line.

As I prowl along underwater (millions of homeowners know another meaning of that term these days), I see two twinkles just beneath surface in the distance. Warily approaching the first, I see a highly polished spoon bait, and know immediately that I would find no sustenance were I to bite. Above the surface I spy the fisherman. His fishing tackle is of the highest quality and his clothing is tailor-made. Behind him are a small group of supporters, laughing and sipping champagne. Occasionally, they hand him new rods and reels of the finest quality, or slip him a pocketful of gold so that he might purchase more of his own. Farther behind him is another group, sipping tea and shouting slogans of divisiveness sprung from minds unschooled in rationality or facts. I am hungry, yet wary, so I swim on.

The next bait that I encounter is so lifelike that I must check my hunger before I swallow it whole in an instant. Above the surface I spot another angler, not quite so well tailored but certainly no slouch. His fishing tackle is of good quality, certainly equal to the task at hand but yet a bit below that of his opponent. A small group stands close behind him as well, urging him on and supplying occasional gifts of silver. Farther back on the shore is a highly diverse group of people. It’s immediately clear that although they stand in support of the fisherman, they do not always stand in agreement with each other. Perhaps if they didn't shout at each other and point blame their fisherman would have an easier task. I remain wary and continue on.

Down the shore are a line of children with cane poles and unbaited hooks dangling in the water without hope. I cannot waste my time there. My hunger grows, yet there are no other offerings to consider. I circle back and eye the baits again as instinct tells me that I must choose one or the other. I want more, but what? It would be nice if I could find a fisherman using live bait. At least I’d have a chance to fill my belly before I am caught again.

"Many men go fishing all of their lives without knowing that it is not fish they are after."

 -Henry David Thoreau

Robber Barons-Old and New

I just finished reading an interesting article and I think you owe it to yourself to read it too. It’s titled: “Greed and Debt: The True Story of Mitt Romney and Bain Capital” by Matt Taibbai, and appears in the latest issue of Rolling Stone Magazine. Here’s the link if you would like to read it online:
 http://www.rollingstone.com/politics/news/greed-and-debt-the-true-story-of-mitt-romney-and-bain-capital-20120829#ixzz26Go2IfOK

I’ve often mentioned my love for our cultural history, as well as the importance of understanding the past so that we may improve upon the results for our collective benefit in the future. One period of American history that has always fascinated me was the time in the mid to late-19th and early-20th century known as “The Gilded Age.” It was a time when industrialization took over the nation’s economy. Railroads, factories, and businesses flourished during this time and a new ruling class emerged: we named them “Robber Barons.” Like royalty of old, these men accumulated huge personal fortunes and built palatial mansions for themselves. Many of their homes are now tourist destinations, owned by historic trust organizations, because for years after the end of the Gilded Age, no one could afford to maintain such homes on their own. My own community has such as place, known as Stan Hywet Hall and located in Akron, Ohio. Built late in the age (1916), it was for years the home of the Seiberling Family, founders of Goodyear Tire & Rubber Company as well as the Seiberling Rubber Company. A member of the family still lived in the gatehouse on the property when I first visited the property on a school field trip in the 1960’s. Originally built on about 3,000 acres, the 65 room main Manor House was quite impressive, and much more than one family really needed.

Of course the Robber Barons got a much earlier start. In the mid-1800’s, Cornelius Vanderbilt started out in the new field of steamships and eventually moved into railroads to amass what was at the time the world’s greatest private fortune. Men like Jay Gould and James Fisk made money in railroads and stock speculation, John Rockefeller cornered the market in oil, Andrew Carnegie built the world’s largest steel works. These men were both revered and reviled in our history. The accumulation of such wealth usually does bring out detractors, since it usually requires some ruthless acts on the part of the mogul in order to become tops in a chosen endeavor. In the case of the Gilded Age Robber Barons workers were exploited, worked to destruction or death and cast aside without aid. Financial markets were manipulated, often crushing smaller investors along the way. In the end, facing the cold eye of history, guilt caused many of these men to establish philanthropical foundations to give away their tainted money to the less fortunate of the world.

It has been said that we are in the midst of a New Gilded Age with a new class of Robber Barons, and it’s probably true. However, one thing can be said for the Robber Barons of old that isn’t true of the modern version: for the most part, those guys actually built something. We have infrastructure like roads and railroads, oil refineries and factories, enterprises that actually employed people and added to the general wealth of all, even if it enriched the founder more than anyone. Now I am not opposed in theory to the rich reaping the rewards of their efforts. People like Steve Jobs and Bill Gates built massive companies based on their ideas and efforts, and leave behind useful items that make the world a more productive and enjoyable place. Such people are entitled to the fruits of their labors. However, many of today’s wealthy have taken a different route.

If you don’t understand the basic mechanics of the process known as a “leveraged buyout” there are many excellent reference sources on the subject, including the article mentioned above and videos on YouTube.com. In essence, an investor group buys a company using a little bit of its own money and lots of borrowed money. Then, several things can happen, like the investor group can actually make improvements to company’s management and operations, making it a more profitable enterprise then sell it based on the value added. Most such companies, like Mitt Romney’s Bain Capital, would like you to believe that’s what always happens. Truth is, that scenario is the exception rather than the rule, but it has happened.

Typically, after buying control of a company with largely borrowed funds, saddling the firm with a huge amount of excess debt, the LBO firm guts the company. Key employees are fired, assets are sold-off, and new, unwarranted management fees are charged to the company for the advice that will eventually destroy the company. Most of these firms are bankrupted, but not before the LBO company has recouped all of its investment plus a huge profit through the use of management fees. One such recent example that I witnessed up-close and personal is what happened to the company known as Hostess Brands.

Hostess Brands is the company that makes Wonder Bread and Hostess Twinkies, among many other products. It has gone bankrupt twice in recent history. How could a company that makes such ubiquitously popular products as white bread and cream-filled goodies possibly go bankrupt in our increasing obese American society you may ask? Give yourself an “A” if you answered Leveraged Buy Out. I listened to the tales of woe told by drivers that delivered these products to grocery stores over the past few years. Stories were told of benefits stripped from or denied to longtime, loyal employees. Mismanagement of pension funds took place. However, the top managers of the firm were handsomely rewarded all along for allowing the company to fail. Something is very wrong here. Shouldn’t this be a crime? Let’s make it one.

Our current tax laws allow LBOs to write-off interest on debt payments as a normal course of doing business, just as the interest on your home mortgage is tax-deductible. Unlike you, who own a home where you and your family can live when your mortgage is finally paid, the new Robber Barons of the LBOs are long gone. They’ve bankrupted and liquidated the company, destroying lives in the process, and weakening our economy too.

When I was studying real estate in college during the mid-70's, we used to judge any proposed project on both a before and after-tax basis. The analysis included the effects of the marginal tax rate of around 70% on proposed real estate investments. Because mortgage interest was tax deductible, and non-cash expenses like depreciation also lowered the income tax burden (real estate typically increased in value, although you were allowed to assume for tax purposes that it decreased in value-which the buildings do, but the land doesn't-really confusing if you haven't studied it.). Anyway, the result was that many projects that weren't feasible on a before tax basis became must do projects when income taxes were included in the equation. What resulted were some famous cases like the "see-through" office buildings in Texas and other places. They got their name because the buildings had no tenants, and therefore no interior office walls-you could see right through them. In one memorable case, the developer/owner of an empty skyscraper in Texas moved his home to the top floor of his empty high-rise office building, and then declared bankruptcy. Under Texas bankruptcy law, he was allowed to keep his personal residence (without paying his creditors), which in this case was a giant office building! Real estate tax laws changed significantly in 1986. I remember being very busy at the end of the year in '86 as a commercial appraiser. Tax laws for real estate were changed at that time for the benefit of the economy. We need to do the same thing with regard to Leveraged Buy Outs. They wreck the economy and shouldn't be allowed to happen.

Romney and his ilk like to talk about how they understand business, and their economic model will work for America. Do you really think so? While screaming about the evils of our nation’s increasing debt, they have used debt to enrich themselves. I believe the proper term is “hypocrisy.” There are those who argue for necessity of unharnessing American capitalism from the yolk of excessive regulations for the good of the country. History has shown us the results during the first Gilded Age, but I doubt if it can survive the results from the second one.

Most likely we need a Constitutional Amendment to stop this practice, and those are hard to get. Simple changes to the tax laws are possible, but unlikely in the current corporate controlled legislative bodies of our country. Actually, nothing is likely to happen unless we stop living in a dream world where everything will be OK if we just work hard and persevere as best we can, like our parents told us to do. They wouldn’t recognize the new business model as having anything to do with making the world a better place to live. You shouldn’t either. People who commit such acts of brutality should be labeled as financial terrorists and incarcerated for the overall good of society and our economy. Sure as hell they shouldn’t be asking us for our vote to allow one of them to become the leader of the free world.

“The seemingly religious flavor of Bain's culture smacks of the generally cultish ethos on Wall Street, in which all sorts of ethically questionable behaviors are justified as being necessary in service of the church of making money. Romney belongs to a true-believer subset within that cult, with a revolutionary's faith in the wisdom of the pure free market, in which destroying companies and sucking the value out of them for personal gain is part of the greater good, and governments should 'stand aside and allow the creative destruction inherent in the free economy.' "
 - Matt Taibbai, from “Greed and Debt: The True Story of Mitt Romney and Bain Capital”

Cornelius Vanderbilt

Low Information Voters and Other Birds

I've had the opportunity to get to know a wide range of people over the course of my life, from the homeless to CEOs of Fortune 500 companies, and everyone in between. Despite a vast difference in socio-economic conditions, there is a trait that many people share. They don’t pay enough attention to what is happening in their various government bodies. I’d like to tell you a story that represents the kind of person I’m talking about: the Low Information Voter.

Let me introduce you to Sid (it’s not his real name), one of the guys I met while working in a grocery store. Sid delivered soda pop for one of the major beverage companies. He is a naturally gregarious sort, usually with a fresh joke to recite, and always wanting to talk about whatever was the major topic of the day. In November, a little less than two years ago, right after the elections, he came into the store with his delivery and asked me if I had picked the winners with my vote.

“Not really,” I told him, “most of the guys I wanted to win lost.”

“Not me,” he replied, “most of the guys I voted for won. I used a system. If they were in office, I voted ‘em out. Time to give the new guys a chance.”

I was a little stunned by his choices, especially since our new Governor-elect and new Congressman were both strongly anti-union. Sid held some elected office in his own local union, and had once favored me with a lecture about how minimum wage laws and medical benefits all came about in the workplace because of unions. I told him about the anti-union rhetoric that his candidates had been spouting before the election.

“Didn’t know that,” he said. “But the Governor’s TV ads made him sound a lot better than the other guy.” I was stunned, but I shouldn’t have been. He voted based on TV ads, and the winner had a bigger war chest. His ads played twice as often as his opponent’s ads.

Several months later, I was talking to him out back of the store, as he unloaded his truck. He said that he respected my opinion, and had a question that he wanted to ask. How could I refuse? “Do you think Obama is a socialist?” he asked.

I laughed. Of course I had heard our President called a socialist by the Tea Party extremists and other right wing rabble-rousers, but I couldn’t imagine that anyone took them seriously. I explained that I felt the President was a fairly pragmatic centrist, and then gave him a similar example. “President Obama is politically pretty similar to Richard Nixon,” (well, minus the rampant paranoia) “and I don’t think anyone ever called Nixon a socialist." Sure, Obama wants the really rich people to pay more taxes than the [struggling and disappearing] middle class do now, but the top marginal tax rate under Nixon was a lot higher than what Obama proposed.” I explained that a system with progressive tax rates does redistribute wealth to a certain extent, but doesn’t really qualify as socialism. We’ve had progressive income tax rates for a long time.

Then he asked, “What is a socialist?” It wasn’t the kind of information you get from TV ads, but it is a term brandished on some of the less informative infotainment shows for the purpose of causing unwarranted damage. Apparently because some jerk on TV had said the president was a socialist, it must be true. Obviously he didn’t understand the way that modern American media works.

Recently, I encountered an older man who spoke proudly of his union; he told me that everything he had in life was derived from his involvement with the union at the steel mill where he’d spent his life. He then told me that the company he’d worked for went bankrupt shortly before his planned retirement and was purchased by another company that had been freed of the previous firm’s pension obligations. I joked with him that we now have a candidate for president with lots of experience doing the same thing. When he told me he supported Romney for president, I was more than a bit confused. As a businessman, Mitt had never been a friend to unions.

Then the old man informed me with a single word of his deep-seated bigotry, told me of his fear of a coming uprising of blacks in this country, and how he was convinced that Obama intended to get us into a war with Iran and Russia. I had already quit listening. Racism, paranoia, and most likely large doses of watching Fox News tainted his logic. Sadly, bigotry in his generation was largely the result of institutionalized “education” at an early age, and won’t really disappear until the generation passes away. This guy wasn’t really a Low Information Voter; he was a Misinformation Voter.

Some older voters are rooted in the past, where President Eisenhower was typical of the Republican Party, standing for smaller government when possible while allowing it to provide for the people when necessary. Protecting the rights of citizens as best he could, while warning us of the dangers of a sprawling military-industrial complex that remains a threat to us all. They think that men like LBJ still exist, who could cajole, sweet-talk, and arm-twist the Senate into actually taking action, instead of hiding behind the wall of a threatened filibuster in order to make the opposition look weak. They may half-listen to talk radio and TV pundits, but real information rarely finds its way into their thought process. Sadly, they have become the Old Information Voters.

Then I had an encounter that simultaneously blew my mind and broke my heart. A few days ago, I gave a fellow employee a ride home from work. Ken is a thirty-something year old black man. He lives with his mother and other family members, and takes the bus to work (apparently he doesn’t own a car or drive), although his mother picks him up after work because our city buses don’t run that late. Having just listened to Bill Clinton’s speech at the Democratic National Convention, and appreciating his message and delivery, I asked Ken if he followed politics as we headed toward his home. “Let’s see,” he said, “I know Romney, and Bush-Cheney, and Obama too. Oh yeah, and John McCain and what’s-her-name…Palin.”

I told him Bush and Cheney hadn’t been around for a while, and that McCain-Palin had lost the last election, and weren’t currently running, although McCain was still a senator. He told me that he had seen a video on TV about McCain during the last election that he had liked. The video told McCain’s history, including his time as a POW in Vietnam. Ken told me that he thought it was pretty cool that the North Vietnamese had offered John McCain an early release because “He had some relative in the military,” but he had refused. I explained that John’s father was a Navy four-star admiral at the time, and had been given command over all U.S. troops in Vietnam.

“Yeah,” he agreed, without comprehension. “I thought that was pretty cool. I was going to vote for him, but…ya know, I didn’t.” As it turned out, Ken didn’t bother voting for anyone. I was amazed that as a young black man, living on the brink of poverty, working a part-time job without benefits, would consider voting for the guy running against the first serious black presidential candidate in history. The candidate that offered the most hope for people like him. It didn’t make sense to me. I had encountered my first No-Information Non-Voter. It made me want to scream. In the end, I said nothing. What could I say that would change anything? Here was a guy who just went through life taking whatever was offered, and giving nothing in return. He had no real sense of the issues. McCain’s video had been sufficiently persuasive to influence his decision, because he thought of the Senator as an American hero, and that was enough. Apparently he was doing something else when the Democrats met, and played Obama’s biographical video. Maybe Ken would have been inspired enough to register and actually cast a vote. I doubt that it would have really made a difference.

As I think about it, I begin to wonder if Ken was representative of a significant amount of Americans who just don’t bother to vote at all. Does it really make a difference? I’d like to think that it does. I’d like to think that eventually someone would stand up to the moneyed interests and fight for the vision of America that we were taught to believe in as children. It doesn’t seem to be happening, does it? After all, I voted for change in the last election, and things really haven’t changed that much. The President did manage to get health care reform legislation passed, but it faces repeal after the next election. The Supreme Court has allowed unrestrained money to flow into the election process under the guise of free speech, even if it means that everyone is free to lie.

I had thought that Ken was the ultimate mind-blower. That was until I met a customer that came into the store today. Wearing a dirty and ripped M*A*S*H T-shirt and buying lots of canned goods, she told me that the interest on the $16 billion that America owed (maybe she meant trillions) was coming due and we couldn’t afford to pay it. She said that the elections this year might be canceled. I told her that there had been reports before the last presidential election of the same thing, but it didn’t happen. She said that the drought was going to make it impossible to find food, then added that Social Security was stockpiling ammo, but later (she came back in for more canned goods) she said that maybe it was really Homeland Security that was buying bullets. She said that it was important that I had enough ammo. I assured her that I did have enough ammunition. What I didn’t tell her was that if the shit really hit the fan and anarchy was the rule, the first victim that I would seek was a crazy lady with lots of canned goods. Perhaps it’s better that such people don’t understand the real truth. It would be even better if they would log-off the Internet, shut-off Fox News, and maybe go outside and tend their garden, or maybe try to educate themselves on what is transpiring in the world where real people live. I don’t know if she bothered to vote or not. I don’t even want to come up with a term to describe a voter like her. The only thing that came to mind when she finally left was “Cockoo-Cockoo-Cockoo.”

So what kind of voter are you? Do you even bother to vote? Do TV ads influence you, or do you tune them out completely, focusing on what a candidate's past actions tell you about him or her? Is there anyone running for office that really deserves your vote? Maybe that's the big question.  

“If you are bored and disgusted by politics and don't bother to vote, you are in effect voting for the entrenched Establishments of the two major parties, who please rest assured are not dumb, and who are keenly aware that it is in their interests to keep you disgusted and bored and cynical and to give you every possible reason to stay at home doing one-hitters and watching MTV on primary day. By all means stay home if you want, but don't bullshit yourself that you're not voting. In reality, there is no such thing as not voting: you either vote by voting, or you vote by staying home and tacitly doubling the value of some Diehard's vote.”
                                                                          -David Foster Wallace