On November 6, 2012 America decided to vote for no change, keeping the balance of power between the House, Senate, and Executive branch. The election seems to have turned on President Obama's appeal to single women worried about birth control, Hispanics worried about immigration, students worried about coolness, and stay at home conservatives. It perhaps also turned on revenge against the 1%. The Media abetted the story line with shallow commentary, hyping for an election "To Close to Call" just in time to push $100M in media buys.
Whatever the reason for America's decision, the reality is that taxes and government will continue to consume disproportionate resources to pay off our past excesses and future entitlements. 43% of those that voted, a large fraction of those voting for President Obama, think government should do more. Since government ultimately gets money from taxpayers (through the IRS or Fed QE 1, 2, 3 or X), that means 43% of the voters want things from the other 57% of voters. Politicians call this 57% the 1%. If you are part of the 57% you might consider the following steps to protect your finances. Actually, since the Government won't be able to offer more goodies for the 43%, they may also want to pay attention for when the music stops.
Please do not get sanctimonious about how we need to help the poor. We help the poor in this country in incredible ways. We could probably do a better job yet if those who are not poor did not put themselves in the handout category. While the poor represent 15% or less of our country, almost 34% of households receive some form of “Means Tested” benefits from the government. Programs like social security, aimed a destitute widows, is now a means to take investment income and redirect it to middle class retirees with more than enough retirement income and resources. Programs like SNAP, designed to feed the poor, have gone from 17M to 40M people in the last few years. Under federal guidelines, a family of four with an household income of $50K qualifies.
If you believe that government needs to do more to help those in trouble, take some responsibility to understand what you are talking about. Take some responsibility to be sure these programs are targeting the people that really need help. Hold these programs accountable for transitioning people out of bad situations. Take some responsibility to be sure that others, who have enough of their own means, do not game the system. Ultimately the failure to assure the welfare system is focused on the most needy puts a tax on growth and opportunity, the very same opportunity that will transition people out of the welfare state. It is unlikely that the vocal among the “43%” will realize the system is unstable and cut their own throat. The best way to transform the system at this point is to accelerate the breaking point. The way to accelerate the breaking point is to save money and highlight hypocrisy. Some ideas include:Entertainment
While it may seem destructive to others to curtail personal spending, it is important for voters to see the connection between economic activity and prosperity. Somewhere in our discourse, 43% of voters think that there is an endless supply of money from the 1% (really the 57%) that can underwrite the needs of everyone else in the United States. Frankly everyone in Washington knows the 1% can not possibly carry the bulk of costs or even a small amount of the costs. Its a deception by both sides of government. Some voters think redistribution will improve their lives more than productivity and prosperity. They are wrong (see Atlas Shrugged). For those the believe we are all better if government focuses on its core responsibilities, the example of our own success outweighs a politician's promise.
While the administration, the unions and GM complement themselves for the revival of GM, a deeper analysis by Bloomberg and others, shows GM faces its most intense competitive landscape perhaps in its history. GM is trading below its IPO price. Taxpayers are likely to lose up to $30B in their investment. This loss fails to include "Opportunity cost" - for example, how would other more productive companies perform if they did not have to compete with the subsidized lower performing GM? As reported in Bloomberg:
That’s not all the exposure that taxpayers will have going forward. The GM bailout has distorted the playing field so badly that its competitors are demanding their own handouts to even things out.
If you are a student of quality systems, you know employee suggestion systems help. If you are improving quality, detecting problems on a production line, fixing customer service, etc., getting feedback from customers and employees with direct insight makes a great deal sense.
It seems the President of the United States thinks that the way to fix the economy is to have the equivalent of a suggestion box. He first tried something called Idea storm to have people propose and rank new ideas for his administration. He keeps going to town halls (cover for campaign stops) to "Listen to the people" but spends most of the time talking. His newest tool is "We the People", to have citizens develop petitions for government action.
Suggestion systems are fine if you want to improve service or quality. Open Innovation and ideation are ok tools if you actually have a team that can implement successfully in your market. Open Innovation, often associated with ideation, is not really about "Ideas" but about working with partners in novel ways to resolve problems in the market place. Open Innovation is not a random process of gathering suggestions. The President's team should read books by Henry Chesbrough and Clay Christensen. Or maybe go take some classes at MIT.
Ideas are a dime a dozens. Solutions are the result of leadership and vision. The President is mistaken to think that leadership comes from a suggestion box. Success in leadership and innovation comes from setting an objective, advocating a position, convincing people that your ideas are valuable, and securing their support. The best leaders do with even with their opposition.
It really does not matter if the President does or does not get along with Congress. If he wants to practice "Open Innovation" he needs to engage business and investors. He should not listen to GE. GE knows how to run a multi billion dollar established entity. GE innovates buy buying companies, not creating new markets. Young firms find new markets, create new value propositions, and drive economic growth. Economic growth creates jobs. The President should engage with these innovators, Congress, regulators, et. al. in the following way:
I call this process NOT (A vs. B) BUT C. The notion is that its easier for opposing parties to agree on a common but different solution. In which version C contains that which can be resolved from option A and B.
That aside, the best idea is to just decrease the size of government so that entrepreneurs don't have to come up with ideas to help the government make our lives more difficult. After all we are a country based on the concept of personal liberty, not central control.
In a show of support for American workers, Hilda Solis the US labor Secretary, traded in her black limousine for a Chevy Equinox. Its not clear why the Secretary of Labor even has a Limousine, but that is a separate issue. Shortly after talking up her new purchase, it was discovered the Chevy Equinox is assembled in Canada. It did not take long for her staff to track down that some portion of the parts in a Chevy are actually made in the United States, which is a miraculous save of here diligent staff (who likely have GM on speed dial given how the administration basically controls GM).
So, with new information in hand, Solis spokesperson Carl Fillichio changed the story (politicians call this a Pivot) to explain how great it is that our dynamic economy builds such a great vehicle using the best talents of an open market.
“Modern automobile manufacturing is a global industry and General Motors is a company whose reach extends far beyond the boundaries of the United States. Cars assembled here in the U.S. are made from globally sourced parts, just as cars assembled in other countries utilize parts made in America. Not only is the Equinox the second fastest selling SUV in America—a good sign for the overall health of the U.S. auto industry—66 percent of its parts were made in America. That’s up from about 50 percent just a few years ago.”
The problem is "Buy American". The $787B in the stimulus finding had a clause that said all the projects funded had to use parts certified as American sourced. In the grand scheme of things, who cares how this applies to Mrs. Solis's Chevy Equinox. What is important is that a large fraction of the $787B "Must have" stimulus was held up as contractors went through extensive verification that the parts they were using in infrastructure, weatherizing, clean tech, etc all came from American manufactures, American plants and American labor.
Stimulus was a bad idea. It took on $787B in debt for projects that only temporary funded a screwed up economy, making things worse. The further hypocrisy of "Buy American" makes it worse. The President and Congress insisted that the "Must spend" dollars had to be injected in the economy right away, but only if American parts are used. Contractors spent time and money to keep the left's political base on board. The left needs to decided whether stimulus spending was critical or not, but putting your foot on the gas (stimulus) while pressing the brakes (buy American) does no one any good.
Every President and Politician needs time off to decompress, see their family, and connect with real people. Though, if you run a small business in this economy you are probably not on vacation. If you don't have a job you are sort of on vacation, but probably not enjoying it in Martha's Vineyard.
The President has said he will announce a brand new "Sure to Work" job strategy in September after he gets back from his vacation. He sees no need to call Congress back early to deal with our economic challenges. If Congress does not accept his proposals, he will just fight it out in the election (i.e. he has no plan on compromising with Tea Party terrorists).
I have no doubt the President has the perfect plan to fix the economy. I am not sure why he has waited this long after the other "Sure to Work" plans (TARP, ARRA, etc). His budget busting budget in April, which was rejected 98-0 in the Senate was also a sneaky way to hide his true intentions of releases the perfect plan. That said, I would remind the President that we spend $12.8B or so a month on unemployment benefits. So his little 1 month delay for vacation is costing us $12.8B. That is a very expensive vacation.
PS: I know he also wants to get the evil Corporate Jet owners by removing the tax benefit of accelerated depreciation on jets. That would increase revenue by $3B over 10 years. So, I guess 3B over 10 years is more important to the President that 12.8B in a month. Hmmm......
In a all but expected twisting of the facts, the President and his team claim in one way or the other that the S&P downgrade is:
After using the downgrade as justification for government action and reason to question Republican actions, he then goes on to say that actually S&P got it wrong and the US is really AAA rated.
I am not sure if the President's "Re-scoring" is some form of economic affirmative action or if the President also has expertise in rating sovereign debt. Giving him the benefit of doubt, if our rating is really AAA does it me that DC gridlock is dangerous and we need to spend more money or not? I did not go to law school, but I don't think you can use a false predicate to prove a point.
PS: Isn't S&P being investigated for biasing their analysis for their client? I wonder if the President has some reason to bias his analysis of our debt?
From the first time I heard that President Obama was going to run for president, I thought he was a bad choice. His lack of experience and political philosophy is beneath the presidency. But, he won the presidency. His party won control of the senate and house. As a result of the democratic process, a incredibile number of bad policies have been implemented (Stimulus, health care, etc). All of these policies have damaged the economy. For more than 20 years we have been electing politicians focused on expanding the size of government, entitlements, and favors for a select few.
I would like nothing less than the complete reversal of all Obama policies as quickly as possible. But..... Holding up the debt ceiling is not mechanism for the reversal. After great debate, the congress and numerous presidents have put in place the expenditures that put us in to deficit. The Debt Limit is a weak form of leadership, sort of like a drunk locking the liquor cabinet. If congress authorized something, let it run its course and not use legal tricks to stop it. Because when the game changes in 2 years, the other side will use some other version of the same tracks to block republican policies. To get government working, we need to be friends after the fight not scheming how to destroy each other before the next battle.
To reverse the scope of budget authorizations with the blunt force of a debt limit cap creates a level of chaos that government is incapable of resolving. The president has tremendous discretion on what things he can limit. The president will chose favorites to achieve maximum political power. Capping government will further polarize the political parties and frustrate independents. Frustrated independents will vote for normalcy, and depending on how the define normalcy that could be re-electing President Obama in 2012.
The President is a petulant brat who only sees things the way he wants. He is even willing to throw his liberal base to the wolfs to get his way. He believes he is morally superior to all others. When pushed in a corner, he has shown he will storm out of the room like a child. The Tea Party is right to drive the need to constrain the budget and get sanity, but the prize is 2012. A dramatic reduction in budget now likely leads to "Scrambled Eggs" which may emotionally empower the smaller government movement, but just as likely will create uncertainties that further damage the economy.
Speaker Boehner is well positioned to be the adult in the room. As a past business man he understands that negotiation is about a productive answer that both sides can live with. Cantor, Pelosi, Reid, Obama, etc are partisan in nature, they are just as happy with no settlement.
At some level, Obama believes his rhetoric that more spending will improve his chances of re-election. It won't. So Boehner should propose in the negotiating room and in public:
The President is trying to create a divide between the Republicans and the Tea Party so that 3rd party candidates emerge in the next election. If we let that happen, Obama will win re-election. So, the Tea Party and the Republicans need to determine (with 2012 in mind) how to put the President in a corner which gets worse over time. That means the Tea Party will need to endorse Boehner's plan (what ever it is) so that the President can not leverage them off each other.
We need to start winning political fights on their merit. The democrats hold the senate and the presidency. Filibusters and Debt limits are legal means for minority power, but we should have leaders who can persuade through thoughtful argument. Lets hire them in 2012 and get rid of this crowd.
GE lobbied for more expensive LED light bulbs, then used banning of incandescents to justify closing last US light bulb plant, moving operations to China. Of course, this was done while GE CEO Immelt was advising President Obama on how ot help the US economy. Seems like GE was smart enough to dodge the whole labor board thing better than Boeing, who got in trouble for trying to make planes in a right to work state. Maybe Boeing should have just had Congress outlaw airplanes, then they could move all operations to China and print money.