Monthly Archives: February 2011
In Memory of Donna Kane
It seems that each week we start by saying, “Wow, what a week,” and this week is no exception. The world still spins on its axis but it does feel as if it is wobbling.
Geo-politics and Geo-economics are clashing with an intensity that I cannot recall in recent history. All across the Arab world and into the heartland of America itself anger ferments. For the first time, the term regime change seems to apply equally to despotic governments in the Middle East as it does to our own State governments in Wisconsin and Virginia. It is Facebook versus dictator; union versus governor.
On Monday Colonel Gaddafi fled Tripoli and is desperately hoping to hold on to the eastern part of his country and wage a war with his own people to hang onto the power he has had for 42 years. Hundreds of Libyans have been killed by his own troops with no end in sight. Foreign nationals are evacuated by civil and military air and naval forces while our American citizens wait patiently for a ferry to dock. And President Obama dances to Motown in the White House; a far different response than that of President Reagan and the Gulf of Sidra incident in 1981.
Tuesday saw oil increase 8 ½ percent in one day on the fear of oil interruption through Libya. And in Wisconsin, Tea Party and Union forces went chin to chin at the Statehouse while Democratic Party lawmakers remained outside of the State in order to avoid voting on limiting the collective bargaining power of public sector unions.
Four American Christian missionaries were killed by Somali pirates while negotiations for their release were being conducted on a nearby naval vessel.
U.S. Rep. David Wu (D-OR) apologized to his staff for his erratic behavior while wearing a tiger costume and taking prescription drugs given to him from a campaign contributor. Wu said on ABC’s “Good Morning America” that it was “unprofessional and inappropriate” for him to send pictures of himself wearing a tiger costume to staff members. I finally agree with a Democrat.
Oil hit $100 on Wednesday as speculators feared the worst in the Middle East, and why not? And our own Congressman Michael Capuano let loose with a remarkably insensitive and politically incorrect statement that the unions ought to get into the street and get bloody. This comment made just weeks after his own colleague Gabby Gifford was shot by a maniac in Tucson.
Citigroup economists reported on Friday that the US economy would fall behind China by the end of the decade and behind India by 2050. They identified Global Growth Indicators to watch for and noted countries such as Bangladesh, Egypt and Iraq as economies to watch. The United States was not among them.
And Newt Gingrich cautioned the President that even Barack Obama cannot suspend the Constitution and become a one-man Supreme Count as he decided not to challenge the Defense of Marriage Act, signed into law by President Clinton in 1996. He simply will ignore it. No, Mr. President, we have a procedure for that. It’s called the Judicial System, the third branch of government.
The world is on fire and the President dances to Motown. I heard that through the grapevine.
There is no doubt about the fact that the economy is the number one issue facing the nation at this moment and what drives our economic condition today is the fate of the Federal Budget.
The numbers are staggering. So staggering, in fact, that I believe the average person can’t even comprehend their magnitude. So, I am not going to talk in terms of annual expenditures, but monthly expenditures: annual numbers divided by 12.
And I will even be generous. The annual President’s Budget is $3.8 trillion dollars. Divided by 12, that is roughly $300 billion dollars per month. By the way, that is 10 billion dollars per day. You may argue whether we spend all of that wisely. For the record, we do not. We borrow a lot of money, too. Every month, it amounts to $120 billion. That’s almost a half a billion dollars per day.
Is it still too much to comprehend? Say you get paid, as I do every 2 weeks. Let’s say you spend $3000 each pay period. That’s a nice $78 grand per year. Here’s where it gets funky. Following the Federal model, you would only be earning about $47 grand per year. You would be borrowing the difference, some $2400 each month. That’s about $80 per day. Every day. And every month it keeps rolling.
But you make some assumptions that make you feel better. You’ll work harder. Your boss will recognize you. You’ll get a big fat raise of $10 per hour (up from about $6). You’ll inherit something big. You’ll hit the lottery. It’s no use.
As the saying goes, you can’t dig yourself out of a hole. You have to stop digging. You have to start changing behaviors.
As recently as 2008, our Federal budget was $2.9 trillion per year. Sorry, about $242 million per month. That’s 24% less than today’s budget. Now, ask yourself, “Am I earning 24% more today than three years ago?” In the words of John Boehner, “Hell no.” So why are we spending so much?
We continue to spend because we cannot say, “no.” Seemingly innocuous programs grow in size over time. No programs are sunsetted; none are eliminated. Our government pensions are defined benefits instead of defined contributions. Our fiscal house is in desperate shape and no one wants to give back anything. That goes for corporations to unions and homeowners and welfare recipients. But something has got to give.
With the sound turned down on my hotel TV this week, I watched unruly crowds gathering. I thought it was Egypt or Libya or Bahrain. Instead, it was Madison, Wisconsin! Schools closed, public buildings crowded with protesters, legislators on the run. And over what calamitous act were they demonstrating? Establishing contributions to their healthcare and pensions. The private sector averages a 20% healthcare contribution and about an 8% retirement contribution. The Wisconsin government unions contribute zero towards either.
No one is looking to balance the budget on the backs of public unions but it must start somewhere. We are not immune in Massachusetts. To fully fund our pension liability would require almost 3 annual budgets. That’s 100% of three annual budgets. That’s the hole we have dug for ourselves on Beacon Hill. It is worse for many other States and our appetite at the Federal level is just as voracious.
We are fortunate that the conservative movement has taken control of the House of Representatives. The power of the purse resides there. We have seen some tentative steps emanating from the House on fiscal leadership. We need to see more and we need to support them in their efforts.
I used to say that this is about our children’s future and that is still true. What is becoming very clear now is that our immediate future is at stake. Time is short for all of us.
Cairo, Tripoli, Manama. Now Madison. Protest is coming soon to a city near you.
The gravy train has left the station. Press on.
It has been a very busy week in Washington and around the world. Events in Egypt have unfolded daily. At stake is not only regional political stability but, indeed, global economic stability. Who will lead the Egyptian government and for how long is paramount to determining the outcome of continued peace in the Middle East. Unfettered access to Egyptian oil pipelines fed from the producing regions of the Middle East and the flow of international commerce through the Suez Canal is critical to the slow but steady worldwide economic recovery. Oil price spikes will not aid in the recovery and will do much to disrupt daily life- especially in the West.
Still, the events in Egypt are secondary to the key issue facing the United States today: rebuilding the economy and restoring jobs. The recovery has been jobless so far. New entrants into the workforce require 120,000 new jobs every month just to keep pace with population growth. On top of that we need to reabsorb 6 to 8 million unemployed back into the fold. Depending upon what divisor you choose, that makes a full employment recovery, the type of recovery that we need to restore American economic preeminence, a very long way off. Our best month of recovery in recent history is 240,000 in May 2010. That optimistic prospect still places recovery in the 2016 timeframe. The Obama administration is talking more like 2018.
What is a country to do?
There are no silver bullets in the chamber, no magic arrows in the quiver. What has served this economy well over our history is capitalizing upon the robust nature of business itself. Our economy has been weighted down with regulations and taxes that promote agendas other than full employment. We are in crisis right now and should expect to be so for several more years. And when in crisis, we should review the rules of the game. Job growth in many companies, however meager, is often oriented towards expanding compliance with government regulation rather than innovation and growth. The effects of these regulations will be to make all US industry as responsive as a public utility. I can’t imagine the electric company or the water company driving innovation.
The President has called, via Executive Order, for a review of regulations to ensure that they are not stifling economic growth. The EPA said that they routinely conduct such a review and that everything is just fine. That will not advance the ball. The only way that remains for the government to drive increased revenue is through economic growth and increasing employment. And that revenue growth must go towards reducing our deficit. No other issue, short of national security, can diminish our focus on fixing the economy.
The ingredients of this recipe are in our cupboard.
• Make corporate income taxes competitive with the OECD countries with which we compete; this will preserve jobs and possibly result in repatriation of jobs to the US.
• Allow US companies to repatriate foreign earnings into the US at this new reduced rate with the express intent of direct investment in capital projects or technology R&D
• Declare a moratorium on new regulations on business, especially from the EPA and FDA, if they are counter to innovation and productivity
• And, finally, let’s commit to end our dependence upon foreign energy. Let’s tackle the energy deficit slice by slice: nuclear, domestic oil, clean coal, solar and wind. No one solution will solve the problem but, taken collectively, we can begin to insulate ourselves from the tyrants who hold us hostage and influence our behavior due to energy dependence.
As with any recipe, the cook makes a big difference in the outcome. We hired some new Representatives and Senators to take the reins in DC this past November. We sent them there to drive change. To innovate the way we govern ourselves. They must be bold enough to drive the change we deserve for our country and demand for our children.
This is where you come in. Never underestimate the power of the people to affect change. One need look no further than the streets of Cairo to realize that an oppressed and repressed people can change the world.
Now, that is an interesting reminder.
This is Tom Wesley. Press on.