cosmoscon

Obama gave us another example of his leadership yesterday by calling US companies “lazy.”  This happened at a speech to a business forum during the Economic Summit with many Asian countries attending where topics such as trade and currency policy were discussed.  I’m sure the Asian leaders enjoyed hearing how lazy American companies are and they’ll be sure and take that message back with them.

This isn’t the first “tough love” Obama gave us.  Remember in late September of this year Obama called Americans “soft.”

I’m all for shooting straight and if there is one person I want to give me the facts without sugar coating them, it is the POTUS.  I’m a big boy and can take the brutal facts and am comfortable confronting them and I truly appreciate those who have the courage to bring them to my attention. 

So is this what we have here?  Has Obama mined a key fact that is hindering American growth?  Have Americans lost their fierce competitive edge?

American Companies Aren’t Lazy

American companies are working harder and more efficiently than ever and this is noted in the productivity numbers from the Bureau of Labor Statistics.   We’ve dropped off a little in the past couple of years and I’m sure the great recession had something to do with that but you can’t say we are on a downward trend. 

And drilling into the last 20 years, you can see we are on an upward trend and our productivity numbers are better than the ‘good ole days’ of the 1990’s.

So I must disagree with Obama that American businesses are lazy.  Instead, I have another reason for jobs going overseas and American companies not expanding.  It’s from over regulation and I’ve written about it here.  The EPA, FDA, DoJ and SEC are killing American business and if the President can’t see this, we have a big problem.

Who Should We Call Lazy?

Would Obama call Unions lazy?  They continually hold out for better benefits while holding US companies hostage so they can get paid more for working less.  This is a key reason why their membership has decreased as manufacturing has moved to other countries.  Go to Flint Michigan and ask those residents how Unions have benefited their community. 

Would Obama call people who have been on Unemployment Insurance benefits for over 2 years lazy?  They make more money staying on the government entitlement payroll than accepting a job and entering the workforce.   The Heritage Foundation has been shown here that extending these benefits actually hurts the economy.

Would Obama call people who never try to get off Welfare lazy?  There is a clear link to poverty rate and Welfare spending and this is obvious to those who work for a living. 

Would Obama call the idiots at Occupy Wall Street lazy?  Judging from their list of demands, it appears they want more money for doing less work.  Free college education, guaranteed living wage regardless of employment status, free healthcare, debt forgiveness and $2 trillion government spending (debt) on environmental and infrastructure projects are just a few of their demands.  It must be stated that all these demands come from people who don’t pay taxes.

The President is Lazy 

I am continually appalled at the hubris of this President when he attacks American businesses which are the backbone and economic engine of America (and the main source of tax dollars).  Get out of the way and let American companies and the Free Market do what they do best and if we still don’t have growth and the productivity numbers drop, then you can call us lazy.  Until then, spare us your sanctimony.    

I will never abide a politician calling US companies lazy and especially not from a man who went golfing 60 times from January 2009 to March 2011 which works out to over 2 times per month.  I’m a golf fanatic but my job (at a US company) doesn’t allow me that amount of leisure activity.  I’d like to think that the leader of the Free World would have a little more on his plate than I do and would find a better use of his spare time. 

20-JAN-2013 can’t come soon enough.

There is a great post from Alveda King (Niece of Dr. Martin Luther King, Jr.) that explains why Liberals are terrified of Herman Cain.  The money quote from this post is pasted below:

“For many years, the Democrats have had a 90% stranglehold on the black vote. This is because many blacks feel that Republicans are racist and only care about the rich, while Democrats love them, give Blacks welfare, etc. When a strong, charismatic, BLACK conservative goes head to head with Obama, many blacks who have not yet done so will actually listen to both sides of the political argument.”

This got me thinking about a narrative from Frederick Douglass during the Civil War (September 1861) where he implored The Union to use African American soldiers to help fight against the South and he called this piece “Fighting Rebels With Only One Hand”.  Mr. Douglass stated that the South used African Americans to support their army (what he calls the ‘bad cause’) so he wondered why a ‘good cause’ shouldn’t do the same.  His sound logic stated that not utilizing African Americans in the Union Army was equivalent to fighting with one hand tied behind your back.  The pertinent quotes from Mr. Douglass are pasted below:   

“Why does the Government reject the Negro? Is he not a man? Can he not wield a sword, fire a gun, march and countermarch, and obey orders like any other? Is there the least reason to believe that a regiment of well-drilled Negroes would deport themselves less soldier-like on the battlefield than the raw troops gathered up generally from the towns and cities of the State of New York? We do believe that such soldiers, if allowed to take up arms in defense of the Government, and made to feel that they are hereafter to be recognized as persons having rights, would set the highest example of order and general good behavior to their fellow soldiers, and in every way add to the national power.”

“If a bad cause can do this, why should a good cause be less wisely conducted? We insist upon it, that one black regiment in such a war as this is, without being any more brave and orderly, would be worth to the Government more than two of any other; and that, while the Government continues to refuse the aid of colored men, thus alienating them from the national cause, and giving the rebels the advantage of them, it will not deserve better fortunes than it has thus far experienced.–Men in earnest don’t fight with one hand, when they might fight with two, and a man drowning would not refuse to be saved even by a colored hand. “

This is great wisdom and something that Conservatives should consider.  For far too long the Liberals have dominated the conversations with African Americans and indeed 96% voted for Barrack Obama in 2008.  As Mrs. King’s post explains, they have been brainwashed to believe that Conservatives are racists and Liberals will take care of them but the truth is that Liberal policies only increase poverty and this has been shown in an earlier post of mine.

Even if Mr. Cain is not the eventual Republican nominee in 2012, the exposure he has received and the positive Conservative message he has presented should help sway some in the African American community to open their minds to the Conservative principles and realize they are empowering and the best path to economic freedom. 

UPDATE: I found a great post from Black and Right that shows the great Liberal lies from the past with regard to Democrats fighting for Civil Rights.

If you were like me, I felt sorry for Perry last night when he couldn’t remember the third government agency he’d shut down and as you’d expect, that gaff has been all over the blogosphere today.  But I spent most of my free time today pondering another odd moment in the debate where Newt was questioned about his involvement with Freddie Mac.

The key exchange is pasted below from the transcript of the debate.

HARWOOD: Since — since you mentioned Fannie and Freddie, Speaker Gingrich, 30 seconds to you, your firm was paid $300,000 by Freddie Mac in 2006. What did you do for that money?

GINGRICH: Were you asking me?

HARWOOD: Yes.

GINGRICH: I offer them advice on precisely what they didn’t do.

(LAUGHTER)

Look — look, this is not — this is not…

HARWOOD: Were you not trying to help Freddie Mac fend off the effort by the Bush administration…

(CROSSTALK)

GINGRICH: No. No, I do — I have never…

HARWOOD: … and the — to curb Freddie Mac.

GINGRICH: I have — I assume I get a second question. I have never done any lobbying. Every contract was written during the period when I was out of the office, specifically said I would do no lobbying, and I offered advice.

And my advice as a historian, when they walked in and said to me, “We are now making loans to people who have no credit history and have no record of paying back anything, but that’s what the government wants us to do,” as I said to them at the time, this is a bubble. This is insane. This is impossible.

GINGRICH: It turned out, unfortunately, I was right and the people who were doing exactly what Congresswoman Bachmann talked about were wrong. And I think it’s a good case for breaking up Fannie Mae and Freddie Mac and getting much smaller institutions back into the private sector to be competitive and to be responsible for their behavior.

 I could tell Gingrich wasn’t comfortable with that question and his involvement with Freddie Mac (who, along with Fannie Mae, helped precipitate the housing bubble that burst in 2008) was unknown to me until last night. 

A quick Google search revealed an article from CNSNews in 2008 that clearly linked Gingrich with Freddie Mac.  From the article (emphasis mine):

“Internal Freddie Mac budget records show $11.7 million was paid to 52 outside lobbyists and consultants in 2006. Power brokers such as former House Speaker Newt Gingrich were recruited with six-figure contracts.”

“Gingrich talked and wrote about what he saw as the benefits of the Freddie Mac business model.”

It didn’t sound like Gingrich was pointing out Freddie Mac’s flaws and I doubt they’d pay someone over $100,000 just to hear how wrong their business model was.

This relationship with Freddie Mac was not good news for Newt’s presidential hopes and he must have realized that too since he has already issued a clarifying post on his campaign website.

This is not the first time Gingrich had to walk back a past mistake – we all remember this big one that he is still paying for.

I love listening to Gingrich in a debate format and I’d bet my life savings he’d destroy Obama in a national debate but his past continues to haunt him and more of this will come to light as he rises in the polls.  As Perry falters, the lion’s share of those supporters will go to Gingrich or Cain but as Gingrich gets closer to front runner status, more of those skeletons will come out of his RINO closet.

Maybe Newt has changed and these are just mistakes he made in the past and he has now seen the “Conservative Light”.  I think he is 1,000 times better than the Socialist we have in the White House right now so if it came down to Gingrich or Obama I think he could win in a national vote.  But is he the best choice for the Republican nomination?  Are there more skeletons to come out?  Will Conservatives embrace him with his RINO past?  We’ll know in a couple of months.

Did you hear the story about the Occupy Wall Street (OWS) protester who decided he had enough of the corruptions and quit the movement?  Don’t worry if you missed it, there’ll be plenty more in the coming weeks and months.

The following NPR story peeks into the inner workings of Occupy Wall Street leadership and indirectly gives hints as to how it will end. 

Pete Dutro has a powerful leadership position at the OWS in NYC because he is the guy who controls the money.  OWS has amassed over $500,000 from donations which is deposited in at least 2 banks (yes banks!) and Mr. Dutro is the guy who has authority to withdraw that money and pay bills to benefit the OWS cult.  So OWS, who is against the supposed 1% controlling the fate of the 99%, has all their money under the control of one person.  Oh the irony!  Here is a good quote from the story:

One of the most sought out protesters at Zuccotti Park is Pete Dutro, a 36-year-old former tattoo artist. On any given day, you’ll find demonstrators like Zuni Tikka trying to meet with him because Dutro’s the guy with the money.

According to the story, Mr. Dutro is getting a degree in finance so by default he has the highest level of education about business, economics and finance among the dolts at these protests.  He approves money for things like laundry, cookie dough and sleeping bags so he’s busy keeping the loafers fed and warm as the temperatures drop.  You can glimpse the frustration he must be feeling from the following quote from Brendan Burke who is on the OWS Security team:

They have a feeling that if they stick their hand out – hey, I need another sleeping bag, I don’t know what happened to the other one. Well, it’s up to you to keep track of it.  Are we going to start babysitting people that can’t take care of themselves or, at some point, is this going to not be a protest or a demonstration, but a large outdoor soup kitchen?

The report also states that OWS wired $20,000 to Occupy Oakland and you remember these anarchists, they rioted in the city, caused property damage and shutdown the port.  Don’t tell me these acts of violence are from the ‘fringe’ when the main Occupy headquarters is wiring money to support the offending group. 

So OWS is taking in large sums of money and entrusting the spending of that money to a select few.  Others are getting frustrated that the money is not being used wisely or worse, that it is being used for the benefit of the few in top leadership positions.  The low level protesters have no private property and must depend on the handouts from the ruling leaders and because of this, they do not treat the property they have been given with respect.  If this sounds familiar to you it is because we’ve seen this same scenario play out time and time again throughout history.  This is how all Socialistic countries are destroyed. 

The old saying about giving someone enough rope so they can hang themself seems incredibly appropriate at this time.  We get to watch this train wreck play out in the coming weeks and months and remember that Obama supports OWS so he ‘owns’ their eventually outcome.  And given Obama’s track record, it is now a good omen to have him support your cause.    

UPDATE [25-OCT-11 21:00 EDT]: I have updated this post as more details of the Perry plan have been revealed.

Rick Perry announced tonight that he has come up with a new Tax Plan that he calls “Cut, Balance and Grow.”  The details have yet to be revealed but the high level plan looks like this:

·         Dropping Corporate Tax Rates to 20%

·         Allowing citizens to choose between their current tax rate and a new 20% Flat Income Tax

I analyzed the Cain 9-9-9 Tax plan in posts here and here so now I’d like to compare the Perry plan with the Cain plan to see how they stack up. 

There are two tools that I’ll use to evaluate the effectiveness of these tax plans.  The first is a static analysis to determine if it is revenue neutral – which means the new tax plan will bring in the same tax revenue as the current system ($2.163 trillion in 2010) without changing any of the assumptions.  With lower corporate and individual tax rates, we’d expect to see the economy improve and more people would be working which would generate more tax revenue and increase business profits but for the sake of comparison a static analysis will be performed.  For the second tool , we must look at what the effective tax rates would be for each income demographic group and compare that with the current plan and if the new tax rate is lower than the current tax rate then the new plan is a positive for the citizens in that group since they have more money to spend.

The Perry plan is easy to compare to the 9-9-9 plan in two areas – Corporate taxes and National Sales taxes – because I just need to change 9% to 20% for the corporate tax rates and 9% to 0% for the National Sales Tax (Perry does not create a national sales tax).  But the Individual Income tax comparison is a little more difficult.  Perry states that we’ll have a choice to use the existing tax code or the new flat tax and it can be assumed that people will choose the tax method that will enable them to pay the lower tax amount.  So using the 2009 IRS tax data, I’ll look at the income group that pays an effective tax rate over 20% and I’ll assume that they’ll choose the flat tax and those making less money than this income group will choose the current system. 

From the IRS data, the effective tax rate for those making between $100,000 and $200,000 had a 16.3% average effective tax rate on taxable income (which means their total gross income minus standard or itemized deductions).  Those making between $200,000 and $500,000 had a 24.6% average effective tax rate on taxable income.  To find the 20% point, we have to interpolate but without details it’ll be hard to find the exact point.  For the sake of argument I’ll choose $150,000 and this will make Perry’s plan generate even more tax income because I know that income in this range has average effective tax rates around 18%.   

Now we need to find out what percent of total income is represented by those making over $150,000.  Again, using the IRS data, those making $200,000 or more make up 25.8% of all income and those making over $100,000 make up 49.4% of all income.  The amount of income represented by those making over $150,000 should split the difference and for sake of high level analysis I took the midpoint between 25% and 50% which is 37.5%.  That means those making less than $150,000 per year make up 62.5% of the total revenue.

But there is still another cut I need to make because Perry’s plan will increase the standard deduction to the point where those making $50,000 per year and less will pay no taxes.  Using the 2009 IRS data, the total percent of income represented by the <$50,000 per year income demographic makes up 25% so we have to deduct 25% from the 62.5% which means 37.5% of the total revenue will be taxed at their current rate and 25% will have no taxes. 

I now need to find out what the average effective tax rate for those making less than $150,000.  For those making less than $100,000 the average effective tax rate is 11.3% and for those making less than $200,000 the average effective tax rate is 13.3% so if I split the difference I get an average effective tax rate of 12% for those making less than $150,000 per year.

Now that the assumptions are taken care of, here is the analysis.

Revenue Neutral

The table below shows the comparisons of each new tax plan and it should be noted that the numbers for the total US income, total business profits and total consumer consumption were obtained from the same sources as outlined in my Cain 999 analysis post.

From this analysis, the Perry plan will bring in a little over $200 billion more annually versus the 9-9-9 plan and this make sense because the Perry plan has much higher corporate and individual flat tax rates.  You’ll notice a difference in the above spreadsheet on the Perry plan – there is a row added called Minus Deductions.  The Cain plan eliminates almost all deductions (dependents, house mortgages, etc.) except for charitable contributions but the Perry plan retains all of these deductions.  I used the Bureau of Business and Economic Research (BBER) data found in this link to obtain yearly personal income data ($12.357 trillion estimated for 2012) and to complete the analysis of the Perry plan I’ll need to subtract the deductions before calculating the income tax revenue.  So now I need to find what percentage of total personal income is actually taxable and I did that by comparing total taxable income from the IRS 2009 data ($7.626 trillion) and dividing that by the total income from the BBER for 2009 ($11.917 trillion).  Doing that math sets the ratio of taxable income to total income to roughly 65% so I multiplied the total estimated personal income for 2012 by 0.65 to get $8.032 trillion and used that value to calculate the tax revenue from the Perry plan.   Suffice it to say that the Perry plan generates more tax revenue than the 9-9-9 Plan and is more revenue neutral on a static analysis. 

As a side note, there was a recent editorial in the Wall Street Journal which stated that Perry’s finance team performed this revenue analysis and estimated that his tax plan would generate $2.781 trillion in revenue in 2014 and that is very close to my $2.291 trillion in 2012 so I think I’m in the ball park here!       

Tax Rate Comparisons

Now let’s compare graphs of tax rates for various income demographic groups.  On this analysis, Perry’s plan is more favorable to the lower income groups and this was a major flaw I pointed out in the 9-9-9 plan.  Cain has since modified this planto account for this disparity but I have not shown that in the graphs below.  It should also be noted that people making over $150,000 a year will pay a higher tax rate under Perry’s plan when compared to the 9-9-9 Plan so that is a negative for Perry’s plan.

So it appears that the Perry plan is better on the revenue neutral analysis and is not hurting the lower income groups which makes this plan superior to the 9-9-9 Plan. 

I enthusiastically support both tax plans as compared to our current tax code and I would gladly vote for either Perry or Cain over Obama (or the other Republican candidates for that matter).  It should also be stated that the 9-9-9 Plan is a transition plan to an eventual Flat Tax plan and I have yet to debate the wisdom of going immediately to the Flat Tax plan versus transitioning to the Flat Tax plan.  Those who are more versed in Economic models than I should also do more than this static analysis.  It could be case that the boom to business and personal income from lower tax rates in the 9-9-9 plan will greatly offset the static analysis benefits from the Perry plan.  And the theory that lower tax rates increase tax revenue has been proven during the Reagan years as the previously cited WSJ editorial states:

After the Reagan reform of 1986 that reduced tax rates to 28% from 50%, tax revenues rose by 36% from 1986 to 1990.

Either way, the Perry Plan and the 9-9-9 Plan from Cain are orders of magnitudes better than our current system.  Entitlement spending cuts along with major tax system reform, like these plans offer, are exactly what America needs to move forward.      

Full Disclosure – Here is the Excel spreadsheet I used for this analysis.  999 and perry calcs

In the wake of Alabama’s strong Illegal Immigration Law , which passed over three weeks ago, the state is now facing a labor crisis that has farmers struggling to plant and harvest their crops. 

I was in favor of the Alabama law which really just gives Police the authority to enforce the laws on the books (imagine that) and it appears the law had its intended effect – Illegal immigrants fled the state.  Now that the illegal workforce is gone, US citizens and legal residents in Alabama who are unemployed can now fill those jobs and get Americans back to work, paying taxes and increasing consumer purchasing power.  Well, that was the way it was supposed to work.

According to one Farmer, Guiseppe Peturis, the unemployed people of Alabama are lazy and don’t want to do hard farm work.  Mr. Peturis has tried to go through the state employment office to fill his labor needs but here is how he describes those results to NPR:

“Two of them left in 30 minutes; didn’t even tell us they [were] going to leave,” Peturis says. “One worked an hour and says it was too hard on his back.”

So one conclusion we can draw from the current Alabama situation is that the unemployed are lazy and would rather sit at home, collecting unemployment benefits instead of working a job.  While there is an economic paper that proves just that – extending Unemployment benefits keeps the Unemployment Rate high – I think there might be something else contributing to this labor shortage.

It is entirely possible that the farmers have become addicted to the cheap labor that illegal immigrants provide and now the low labor rate is priced into the farmer’s business models.  This low labor rate is so low that Americans have no incentive to engage in the hard farm work when they can either earn more money at an ‘easier’ job or sit at home and collect unemployment benefits.  As shown in the following report, the average hourly wage for a farm laborer in 2006 was around $9.00/hour.  Making assumptions for inflation and rounding up for easier math – A labor rate of $10/hour in Alabama would provide a farm laborer just over $20,000 per year (neglecting overtime). There is another report of farm laborers making as high as $18/hour in neighboring Georgia, which equates to over $37,000 per year but further analysis in that report showed that $18/hour labor rates are not the average but the extreme of the labor rate distribution.  $20,000 per year is not going to draw people away from Retail, Hospitality or even Manufacturing industries so it’s not hard to see why there is a labor shortage right now.  

But when faced with losing their farm or raising labor rates, each farmer will have to do what is in the best interest of his business.  This is a classical Economics problem and the Market will find a rate for labor that will allow the farmer to make a profit and entice workers to fill the labor supply void.  Of course this could mean higher prices at the supermarket so this economic situation affects people who don’t depend on farming for their business (i.e. Me) but adjustments to labor wage rates and food prices are what the Markets do.  We might see labor rates of $18/hour becoming the norm instead of the exception with regard to farm labor wages in Alabama and then the farmers should see more people incentivized to fill those higher paying jobs. 

If the Federal Government will not address Illegal Immigration then the States have no choice but to enforce the laws on the books and pass legislation copying what Alabama just did.  Unfortunately for Alabama, they are suffering for blazing the trail but eventually all states will have to go through this and we should not be surprised when we encounter a correction period while the Market sorts things out.  The Market will fix this short term disruption and it will do all of this without the need of a “Farming Czar”!  The Invisible Hand will work through this situation so don’t be surprised at this temporary disruption – Economics predicts this will happen. 

The honeymoon is over for Occupy Wall Street.  The kids are getting restless and now that whole Socialism thing isn’t sounding so good.  Sharing all your stuff with everyone isn’t as appealing as it once was and they are even fighting over sleeping bags – I wonder if colder temperatures have anything to do with that.  There is a great piece written by Alex Klein that chronicles the unrest in the OWS commune and you should go read it here. 

And the unrest isn’t confined to the East Coast.  At Occupy LA,  Big Government posted  the following video which shows lively debate about concensus, property rights and grass roots politics.  There were many heated conversations which shows that tempers are flaring and it’s obvious that the communal concensus method (up twinkles, down twinkles) isn’t working to everyone’s satisfactions.  It’s a great video so take a look at it and then share it with others.    

This is why Socialism only works in a Utopia where you have miraculously discovered a way to suppress the DNA in humans that cause us to do things such as excel, strive and possess objects.  When everything belongs to the State, then you don’t have Rights to anything and the State can take it away from you and give it to someone else.  All the sleeping bags, food, water, shelters and other necessities of life have been provided to the OWS movement and therefore it belongs to the entire commune.  That was great when the movement first started but now the weed has run out, they haven’t played their video games in several weeks, cell phones bills are coming due and things are starting to get testy. 

Welcome to the real world kids.  This is why Socialism doesn’t work and why Capitalism is the best economic system in the World and why the US has the #1 economy in the World.  Greed is good, Profit is Good, Innovation is good, Competition is good, Jobs are good and having a purpose in life is good.  Go read about it.      

Recently, Herman Cain has been mentioned as a front runner in the bid for the Republican presidential nominee and the white hot political spotlight has been focused on him.  This was not unexpected and if the front runner can’t withstand the scrutiny in a primary then he doesn’t deserve the nomination.  With so much riding on the 2012 Presidential election, the Republican voters require a thorough vetting process for each and every legitimate candidate – which is why I enjoy a large number of debates.   The increased spotlight has levied three main attacks on Cain over the past week and I’ll detail those in this post and offer an explanation as to why Cain has stumbled.      

The first attack was regarding his 999 Plan and this was not only predictable but needed.  The 999 Plan, while simply stated, requires a great deal of conversation and mathematics to determine the validity of the plan.  Reducing corporate taxes and Income taxes with an offset of an additional National Sales tax can’t be embraced with a quick bullet point scan of its contents.  Many Americans have dug into these details and after doing so they have embraced it and Cain vaulted to the lead in many polls.  His opponents had to attack him on this and sure enough, they hammered him in the first 20 minutes of the Las Vegas debate.  I happen to like the 999 Plan (which is really a transition plan to an eventual Flat Tax approach) and I performed my own analysis of this plan here and here.  This analysis, Cain’s performance in the Las Vegas debate and the fact the Rick Perry recently decided to reveal his own Flat Tax plan confirms to me that this plan is still valid and is what we need in America.

The second attack also occurred at the Las Vegas debate but started in an interview with Wolf Blitzer before the debate where Cain stated that he’d be open to a similar trade of terrorist prisoners for an American soldier hostage.  You can watch the video for yourself but it does appear to me that Cain was open to the idea of negotiating with terrorists for hostage transfers.  Negotiating with terrorists is a bad policy which is very unpopular with most of America and while Cain appeared to walk that back in response to questions during the debate, I was not convinced. 

The third attack occurred during an interview with Piers Morgan when he was asked about his position on Abortion.  Again, Cain seemed to talk around the topic and take both sides of the issue (being 100% pro-life but not willing to allow the US government to get involved in preventing the murder of unborn children).  After watching that interview I was confused on his position and I’m sure most of America was as well.

Cain’s problems with answering ‘gotcha’ questions on hypothetical scenarios seems to be systemic  for him and he needs to fix it quickly if he wants to stay in contention for the Republican nominee because the Media now smells blood in the water and they will continue to pepper him with these foreign policy and social issues questions.  It seems odd that someone who gives straight answers in an eloquent manner about his vision for American and his 999 plan would seem to stammer on the ‘gotcha’ questions.  I think I know why Cain stumbles in this area and let me explain below.

Cain is not a politician and has spent his professional life as a business leader.  A CEO is a type of leader who is not used to responding within seconds to problems without first consulting his leadership team in order to get all sides of the issue before making a decision.  CEO’s know that all problems are unique and cookie cutter solutions are rarely used in a complicated business environment.  Cain attempted to state that fact in the Blitzer interview by saying he was not privy to all the details that led to the Israeli hostage swap decision and while this was a wise response, people are not accustomed to hearing politicians speak in this manner.  It is true that we don’t know what led Benjamin Netanyahu to agree to release over 1,000 Palestinian prisoners in exchange for the release of Israeli soldier Gilad Shalit and a CEO-type leader would not be quick to condemn Netanyahu before learning of the details of the problem.  Still, negotiating with terrorists is bad and Cain should have had his response crisper so that his true position was communicated. 

On the abortion question, Cain released a clarifying statement and I’ve pasted that below for your review so you can draw your own conclusions.  I happen to take the viewpoint I think was espoused by Cain – while I believe that human life starts at conception and aborting a fetus is equivalent to murder, I have an issue with the government telling someone what to do with that baby in the instance of rape or when the life of the mother is at stake.  Those scenarios represent a very small portion of the population of Abortions that are performed in America and while that can be characterized as a Straw Man argument, a person running for President needs to have his message clear and in a package that can be communicated in less than 60 seconds.   Abortion is a tough subject and there is a reason that America still struggles with this issue but that is no excuse for a Presidential candidate to not have a clear stance that he can communicate.

I would prefer a President to act like a CEO when attacking an issue and get as much data he can from his advisors and experts in the field before making a decision.  That is how the person should perform while occupying the job of President but while the person is campaigning for that job, he needs to act differently.  Politicians are used to being grilled in press conferences and they have their story tight and stick to talking points because interviews are not the place for long, thoughtful discourse.  Cain needs to sharpen up his policy positions and be prepared for the next ‘gotcha’ question or he’ll fade in the polls and be left holding out for a VP offer from the eventual nominee.   

Regarding Piers Morgan and the Abortion Question

Dear Friends,

The abortion issue is very serious. I believe strongly that this is true, and I believe that you do too.

Because the news media loves to make mountains out of mole hills, I want to be very clear about where I stand on abortion:

I am 100% pro-life, period.

Let me explain. In an interview yesterday with Piers Morgan on CNN, I was asked questions about abortion policy and the role of the President.

If you listen to the line of questioning, it is clear that Mr. Morgan was asking if I, as president, would simply “order” people to not seek an abortion.

My answer was focused on the role of the President. The President has no constitutional authority to order any such action by anyone. That was the point I was trying to convey.

As to my political view on abortion…again, I am pro-life. End of story.

As President, I will appoint judges who understand the original intent of the Constitution. Judges who are committed to the rule of law know that the Constitution contains no right to take the life of unborn children.

I will oppose government funding of abortion. I will veto any legislation that contains funds for Planned Parenthood. I will do everything that a President can do, consistent with his constitutional role, to advance the culture of life.

Friends, please know that I appreciate all of your support. Together, we will put America back on the right track.

Sincerely,

Herman Cain

I hope the Occupy Wall Street (OWS) protests continue for a long time.  The very existence of the OWS movement is a direct result of Liberal policies over the past 20 years and  America needs to see this.  We are at a crossroads in America and over the coming years we’ll have to decide whether we continue this failed Liberal experiment or move back to Conservative and Capitalistic policies.  The OWS could not have come at a better time for people who are on the Conservative side but before I get to this main thesis, let’s take a look at what has made the news from the OWS protests.

The Daily Mail took this photo of an occupier who defecated on a police car.  My latest favorite is of this Columbia graduate student (with a trust fund) who goes on a rant about saving the country.  Later, the same person sits down and tries to have an adult conversation but fails.  The idiotic way they pass ‘laws’ prevents even the most trivial tasks from taking place such as taking 10 minutes to decide NOT to let a congressman speak .  Then there is the example of the women who mistook the OWS protests for a Poison concert and bared their breasts in hopes of getting an invitation back stage with Brett Michaels.  (Warning: The video is NSFW so click at your own risk….).  Michelle Malkin does a very thorough job of outlining the costs to American taxpayers due to these temper tantrums going on across our country (increased overtime for Police and Cleanup workers) but I think that most of the OWS protesters aren’t there for an urban version of Woodstock and in many respects I feel sorry for them. 

Where is the outpouring of support from the Democrats for the OWS movement?  When the Tea Party rose to power, the demands consisted of a clear, coherent Fiscally Conservative message and those in Congress who resonated with that message loudly voiced their support.  Even RINOs tried to garner Tea Party support but their true colors were already known and they were shouted down.  In the next paragraph I’ll attempt to enumerate the OWS demands and once you read them it is obvious that Liberal Democrats resonate with these policies and they should rally behind them.  Why are they absent?  Could it be that they realize OWS is the results of their failed policies and they are ashamed?  Do they now realize the chaos they created and in response to that epiphany they hide their heads in the sand?

Unlike the Tea Party, the OWS protestors aren’t clear in their purpose and it appears that there are numerous demands and grievances that they have – Replace Capitalism with Socialism, punish rich CEO’s, eliminate evil banks, dissolve evil corporations, prosecute evil politicians, redistribute the Wealth, high unemployment, forgive student loans, eliminate fossil fuels, increase union membership, institute a single payer health care system, open our borders, give free college tuition and many others.  It wasn’t until I read this Daily Beast article that I started to group all of these demands under one umbrella.  The article talks about the ‘Clueless Generation’ which the author calls Baby Boomers and the key paragraph of the article is shown below (bold emphasis mine).

What the Clueless Generation finds difficult to comprehend is that literally millions of highly educated and hardworking young Americans—people who followed all the rules and did everything we told them to do – are either severely underemployed or have no jobs of any kind. Meanwhile, they struggle with the massive educational debts they incurred after the baby boomers decided that access to the bargain-priced higher education from which we benefitted wasn’t so important after all.

The Baby Boomers and to some extent the Generation X-ers (of which I am a member) have failed our youth.  Now that we have allowed Liberal policies to take hold, our American Youth (Generation Y) have now reached adulthood and they have discovered that these policies didn’t deliver on their promises.  We told our kids that competition was bad and there really are no losers.  If you try your best, that is all that matters and don’t worry what others think. We stopped keeping score in little league baseball games and U6 soccer games.  We changed the grading systems in school to allow more to reach ‘passing’ grades.  Due to the successes of the Baby Boomers (who thrived because of Capitalism), Generation Y kids experienced  very little hardships – they had video game consoles, cell phones, Satellite TV, iPods and every other luxury known to modern civilization.  Don’t get me wrong, it is great that our nation was so wealthy that we could provide our children with these luxuries but when we provide these luxuries without describing the sacrifice required to not only produce these products but also to afford them then we do the children a disservice.  We failed to teach them that profit is good and that motivates companies to innovate and consumers to purchase.

When you get right down to it, the majority of OWS crowd are upset because things aren’t working out the way they thought.  The parents of the OWS protestors told their kids that everything would be great no matter what decisions they made as long as they trusted their instincts and followed their heart.  That is sound advice but unless it is tempered with real world economics, we poisoned this generation and failed to teach them the harsh truths of Capitalism.  It’s great to get a degree in Anthropology but you must realize that starting salaries and demand for this profession are very low.  If you really want to pursue this career then your expectations out of college need to be lowered. 

We’ve also seen an increase in Government entitlement policies and we’ve taught our kids that risky decisions don’t come with harsh consequences because the Government will take care of you.  Can’t find a job?  No problem, the Government will give you Unemployment Insurance until you find something that is perfect for you and awards you a six figure salary.  You have a bad credit rating?  Don’t worry, the Government will force banks to offer you low interest loans on a new house that is way outside your income level.  Having trouble making ends meet while in college?  No problem, you can get a credit card and use it to pay for your living expenses and pay it off later when you make big bucks from that English degree.  Can’t afford tuition to an Ivy League school?  Just take out a huge student loan and you can pay it off when you get the big bucks that comes with that Marketing degree. 

We have raised a whole generation of wimps and we are all responsible.  Liberals are directly responsible for creating an entitlement state and subverting the innovation and wealth generation that Capitalism brings to the table.  Conservatives are indirectly responsible because we were too afraid to speak against these policies for fear of being labeled ‘unfair’ or ‘closed minded’.  We have failed to educate a whole generation of Americans on the benefits of Capitalism and now we have OWS demanding we abandon it.  Little do the protestors know that the charmed childhood they enjoyed was a direct result of Capitalism and the problems they are now encountering are a direct result of Liberal policies designed to subvert Capitalism. 

I stated in my previous post on Herman Cain’s 999 Plan analysis that one of the main arguments against the 999 plan was that it was not revenue neutral.  That premise states that the tax collected from the 999 Plan would not be equivalent to the current tax collected with the convoluted tax code.  I have done more research and have performed a calculation that will show this argument is not valid.

Remember that the 999 Plan will levy a 9% tax rate on each of the following: personal income (minus savings and charitable contributions), corporate profits and consumer purchases (through a national sales tax).  For the rebuttal to the revenue neutral argument let me provide the supporting data to my analysis.  The total tax revenues in 2010 were $2.163 trillion according to this link so that is the amount the 999 Plan must meet to be characterized as revenue neutral.  The total personal income estimate came from here and is equivalent to $12.375 trillion.  I estimated total annual corporate profits by taking the 3^rd quarter of 2010 corporate profits ($1.659 trillion) and multiplying that by 4 to get an estimate of yearly profits by business ($6.636 trillion) (SEE UPDATE AT END OF POST FOR CLARIFICATION OF THIS ESTIMATE).  Note: This corporate profit estimate should be conservative since corporate profits should increase as the economy recovers in 2013 (as Obama leaves and Federal regulations diminish which will allow the Free Market to flourish).  The total consumer purchases come from the 2009 Census data on Annual Retail Trade Survey and amounts to $4.091 trillion.

The high level analysis is shown in the table below.  Using these conservative numbers, the 999 Plan misses the 2010 tax revenue totals by only 3.95%.  This analysis is a static analysis and neglects economic improvements from consumers having more disposable income (consumer purchases increase) and corporations paying lower taxes (corporate profits increase).  Once you take these net positive economic impacts into consideration, overcoming this delta should be trivial.  Of course spending must be reduced since $2.163 trillion in tax revenue doesn’t cover the $3.456 trillion in Federal spending but having a Fiscally Conservative in the White House and a Fiscally Conservative leadership in both the House of Representatives and Senate will take care of that.

UPDATE – Herman Cain posted 9 rebuttals to common argumenst against the 999 Plan and you can find it here.

UPDATE – Arthur Laffer, famed economist, has also provided his supportive analysis of the 999 Plan here.

UPDATE 28-OCT-11 – Based on an error that was pointed out by a commenter (which I replied to here) I underestimated corporate profits.  The real estimate for corporate profits should have been $1.659 trillion and not the higher $6.636 trillion I originally used.  But I am going to keep my original value for corporate profits because, as I stated in the comments, Mr. Laffer used $9.5 trillion for corporate profit estimates from Cain’s team.  I think the discrepancy comes in the fact that Cain’s plan would change the formula for calculating corporate profits that are taxed.  Currently Cost of Goods Sold is subtracted from gross income and that includes labor and operating costs.  In the brief description on Cain’s website corporations will only deduct purchases and capital equipment and that sounds like it excludes operating costs and labor.  It could be that this will be taxed and therefore the higher figure is probably what we should use.  It is my opinion that Cain’s staff needs to release the details on the Revenue Neutral analysis to clear up some of this confusion.

There have been three main arguments against Herman Cain’s 999 Plan – 1) The national sales tax gives the Government another tool to use for higher tax collection, 2) the plan is not revenue neutral and 3) the plan penalizes lower income groups. 

The first argument shouldn’t be too hard to debunk.  Currently, there is nothing preventing Congress from raising current income taxes or initiating new income taxes right now so adding a different tax (national sales tax) won’t increase the odds of Congress raising rates on the that new tax collection vehicle.  That is why elections are important and we must elect those who would rather focus on reducing our Spending than raising our Taxes.  Raising the National Sales Tax would require legislation and Congress would be on the record (and the hook) for voting in favor of tax increases.  So this first 999 Plan argument is dumb and shows people aren’t thinking logically.

The second argument is more complicated and I’ll address this in a future post when I have better data.  There is one link here, where someone has taken a look at the revenue neutral argument from a high level.  If we perform a static analysis (meaning the economy won’t change after the 999 Plan), then the plan is not revenue neutral and we’ll fall short by about $400 billion in the first year.  But even modest economic models will show economic growth from the 999 Plan.  When you give people more disposable income they’ll buy products which will stimulate the economy, grow business and add jobs (which inturn generates more revenue from Corporate and Income taxes).  Dropping the Corporate tax rate will give companies more money to hire workers, build new facilities and develop new markets/products which will also grow the economy.  The economy is holding back due to excessive regulation and the 999 Plan should open the gates and allow our economy to experience annual growth rates that will rival the best in our history.  When taking 9% growth rates into account, the 999 Plan is revenue neutral.  Again, I’d like to get more data and perform this analysis on my own to verify. 

Now on to the third argument and I believe this one has some validity.  I developed a spreadsheet that allows me to perform a simple calculation and comparison of the current tax system and the 999 Plan for various Income demographic groups.  For this analysis, I used the latest IRS data from 2009to get the average tax rate on taxable income for each group.  I also assume each group saves 10% of their annual income and donates 2.5% of their annual income to charity.  The current plan includes the average effective income tax rates (from teh 2009 IRS data), Social Security Tax (4.2%) and Medicare Tax (1.4%) and those taxes are levied against the net income after deducting savings and charitable contributions.  The 999 Plan has a 9% tax on the net Income and also a 9% sales tax on the net income (I assume that you are spending the rest of your money after savings and charitable contributions).  You can see from the graph below that the lower incomes will see their effective income tax rates increase while the middle and upper income groups will see their effective tax rates drastically decrease.  The difference is less than $1,000 per year but that is a lot of money for those making less than $50,000 per year.  This increased tax burden on the lower income demographics needs to be addressed and maybe the plan clarified that those making less that $50,000 per year will be exempt from teh 9% Income tax (they’ll still pay their fair share through the 9% National Sales Tax). 

Footnotes – You’ll also see that assuming the same savings and charitable contributions across all groups, the effective tax rates in the 999 Plan are the same (makes sense because we’ll all be taxed at the same 9% for income and 9% for purchases).   In case you are interested, there is a tax simulator that allows you to see the comparisons between the current tax system and the 999 Plan.  The actual Excel Spreadsheet I used for this analysis can be found here ->  999 clacs.

UPDATE – Herman Cain posted 9 rebuttals to common argumenst against the 999 Plan and you can find it here.

UPDATE – Arthur Laffer, famed economist, has also provided his supportive analysis of the 999 Plan here.

Senior Obama campaign strategist David Axelrod made some comments to reporters today and in doing so, tipped the Obama camp’s hand on how they’ll battle Mitt Romney in the general election.  It appears the Obama camp sees Romney as the front runner and eventual Republican presidential nominee and they have already started to sketch the framework of their attack narratives.

Their strategy is to paint Romney as a flip-flop artist who presented himself as a moderate to the people of Massachusetts when he was running for governor and now presents himself as a strong Conservative now that he is running for President and seeks the votes of the Tea Party.  You can see the gist of their attack plan in the following quote,

“It is a pattern time and time and time again and you heard it again last night,” Axelrod said. “It’s consistent with a guy who ran for the governorship of Massachusetts and for the Senate in Massachusetts as a pro-choice moderate who supported civil unions and supported environmental protections … to the guy you see today who is hard after the tea party vote and thrown all of his positions over.”

Why is that an issue?  Don’t all politicians lie to get votes?  Well, yes to some extent but Axelrod presents the case that America needs someone in the White House that can be trusted and they don’t need another politician who changes his social views depending on the audience that he is seeking.  I have to agree with Axelrod on that point and if he really believed those words I don’t understand how he can still work for Obama in good conscience but that is another matter.  Axelrod lays out the argument here,

“The question of trust is important particularly for the middle class,” Axelrod said. “They want to know that where the president was yesterday is where he’ll be today and where he’ll be tomorrow,” Axelrod said. “It’s hardly the case when you’re all over the lot as Gov. Romney was last night, has been throughout this campaign, has in fact been throughout his career.”

So that is their plan, to pigeonhole Romney as someone who has no moral compass but instead changes his views to match the voting demographic he is going after.  I happen to believe that Romney has more Character and Integrity in his little finger than Obama has in his whole body but I’m a strong conservative and even if the Republican presidential nominee is a hollow log, I’ll vote against Obama.  I feel it is critical for the fate of our country to remove Obama from the White House in 2013. But Obama’s attack strategy might take root with the independent and undecided voters (where all elections are won).   The Community-Organizer-in-Chief is skilled in Alinsky tactics and can, in the words of Alinsky, “Pick a target, freeze it, personalize it and polarize it.”

Romney has still not given a good response to the fact that he pushed for and got a Massachusetts state-run health care reform bill that was used as the model for Obamacare.  Obamacare is the number one target that all the presidential nominees, except Romney, can hammer the President on.   When Romney stumbles in a debate on this topic, Obama is sure to bring up the shifting social views of Romney mentioned above and paint him as someone who can’t be trusted.

Republicans take note of this tactic as you choose your candidate and look closely at Romney to see if he is smart enough to get in front of this attack and defend it now.  If he can’t defend this now while debating fellow Republicans, he’ll be eaten alive in the general election by a masterful campaigner like Obama.

As was expected, the President’s American Jobs Act (AJA) was rejected in the Senate on a vote of 51-48 with two Democrats joining all Senate Republicans in blocking debate on the Bill.  There is absolutely no chance the AJA will be brought to a debate/vote in the House so the President’s only hope is to bust the AJA up into its pieces and vote on them one at a time.  As predictable as the descent of vultures after a fresh road kill, President Obama came out and attempted to progress his Do-Nothing-Republican meme by saying

“We will now work with Senator Reid to make sure that the individual proposals in this jobs bill get a vote as soon as possible.  With each vote, Members of Congress can either explain to their constituents why they’re against common-sense, bipartisan proposals to create jobs, or they can listen to the overwhelming majority of American people who are crying out for action.”   

So let’s break up these 199 pages of fiction and see what major pieces should never be debated and explain why they are failures.  I’ve categorized each section using the headings in the AJA so you can search the actual text of the bill to verify my conclusions.

PART III – GENERAL PROVISIONS

This is the sections of the AJA that is basically a smaller version of the 2009 Stimulus that didn’t work.  Obama proposes various projects in airports, bridges, high speed rail and other transportation projects.  I’m all for improving our Infrastructure but can’t we do this with the existing $3.8 trillion our government spends?  Of course we can but that would mean cutting some of the $2.1 trillion from entitlement programs (Social Security, Welfare and Medicaid) that would anger the Liberal base of voters who demand those handouts as payment for their votes.

As if this extra spending, which has proven will not stimulate the economy, isn’t enough, the AJA also creates a new bureaucracy called the American Infrastructure Financing Authority (AIFA).  To quote the AJA,

“The AIFA shall provide direct loans and loan guarantees to facilitate infrastructure projects that are both economically viable and of regional or national significance, and shall have such other authority, as provided in this Act.” 

In other words, a new group will be created to do the political bidding of Liberals and provide loans to failing companies like Solyndra.   And as a final insult, section 259 of the AJA the bill provides $25 billion to $50 billion for administration of this new bureaucracy.   

SUBTITLE H – NATIONAL WIRELESS INITIATIVE

Obama wants to use the $18 billion to attack a phony spectrum scarcity problem.  Telecom companies are sitting on Billions of dollars of unused spectrum now so why should the government spend billions more to give them more spectrum to sit on?  And why use tax payers’ money to make it easier for Telecommunication companies to increase their profits?  What is next?  Will the government build retail stores for Target and Wal-Mart?  Will the government build automotive manufacturing facilities for General Motors?  Adding Telecommunication bandwidth is the job of Telecoms because they would be the ones to see profits from the expanded supply.  If there is an untapped wireless market then the Telecoms will build the infrastructure to reap those profits – that is how the Free Market works. 

And like the Infrastructure portion of the AJA, Section 284 also establishes another bureaucracy called the Public Safety Broadband Corporation (PSBC) and the role of this entity is unclear but Section 289 gives the National Telecommunications and Information Agency $50 billion dollars for administrative purposes to set up the PSBC.  

TITLE III – ASSISTANCE FOR THE UNEMPLOYED AND PATHWAYS BACK TO WORK

This portion of the AJA will extend unemployment benefits set to expire in January 2012 to January 2013. How convenient that this extends the handouts through the Presidential election in November of 2012.  It has been shown here that extending these benefits only hurts the economy by keeping unemployment high, providing no economic boost and only moderately increasing consumption.  Even President Obama’s new lead economic advisor, Alan Krueger, showed the fallacies of extending unemployment benefits in this paper.   A quote from the abstract of the paper states

“The empirical work on unemployment insurance (UI) and workers’ compensation (WC) insurance finds that the programs tend to increase the length of time employees spend out of work.”

TITLE IV – OFFSET

Now we get to how we’ll fund the AJA.  Those who fit into the following categories will have their deductions limited.

The taxpayer’s adjusted gross income is above—

(A) $250,000 in the case of a joint return within the meaning of section 6013,

(B) $225,000 in the case of a head of household return,

(C) $125,000 in the case of a married filing separately return. or

(D) $200,000 in all other cases

The AJA states that deductions for charitable contributions will be reduced from $0.35 for every dollar to $0.28 for every dollar.  This will reduce donations to charities and I can’t see how this would be good for the economy or the general welfare of our nation.  The AJA plans to soak the ‘rich’ which is really those individuals making over $200,000 per year.  I have shown here that this income demographic group accounts for 25.8% of all American Income but pays 50.2% of all income taxes.  They already pay twice their share so there is no further need to penalize them.

So let Harry Reid and Obama break up the AJA and try and pass it piecemeal.  The Republicans have more than enough ammunition to show why each and every part of the AJA is not what America needs right now.  We need to provide America with confidence that we are heading in the right direction and tax increases, new bureaucracy and Stimulus part II aren’t going to help that.