Our system of governance in the U.S. is highly dependent on the willingness and ability of citizens to elect leaders who will solve the problems and challenges of the current environment, and who will promote institutional adaptations in the long-term public interest.

Most of us will identify with the basic attributes scholars often point to as the foundation for effective public leaders: (1) Honesty; (2) Basic and Common roots; and (3) A reputation of high integrity and personal principles.

As I searched for the “secret sauce” of public sector leadership, I found a few terrific recipes.

My favorite might be, “If leadership has a secret sauce, it may well be humility. A humble boss understands that there are things he doesn’t know.”

Some contenders include,

“Good leaders motivate and encourage others.” Continued emphasis on controlling and/or reducing costs in the public sector puts extreme pressure on public sector employees.  Good leaders create supportive atmospheres and encourage initiative. They invest in their people and foster skill growth. And when employees are satisfied in a healthy environment, great results likely will follow.

“Good leaders communicate clearly and listen attentively.” When good leaders sincerely listen to the needs and challenges of their constituents, they can respond effectively and bring about the greatest positive change.

“Good leaders are trustworthy.” Trustworthiness is built upon integrity and character. When people trust leaders and value their integrity, they tend to be more open to new ideas and exude a willingness to try.

“Good leaders think critically and act collaboratively.” Effective decision makers employ careful consideration and analysis of the evidence before formulating a decision. Public sector decisions can have multi-generational impact, so using a team approach incorporating strong analytical, problem solving and critical thinking skills is essential to the job.

“Good leaders are resilient.” In the world of public policy and governance, the only constant is change. Uncontrollable external variables will create unexpected challenges. Good leaders remain positive; they develop alternative solutions; and they encourage confidence in their employees to help ensure they will remain effective at the most crucial times.

My greatest hope is that other fellow citizens of the U.S. will take a few minutes to step back and think about the strategic implications of leadership.

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The headline comes directly from Steven Mnuchin, our U.S. Treasury Secretary, who recently penned an op-ed piece which appeared in print in the Tampa Bay Times (July 3, 2018).  https://www.whitehouse.gov/articles/trump-tax-cuts-strengthened-u-s-economy/

Mnuchin’s opinion piece seems to consist primarily of fluffed-up puffery related to the Tax Cuts and Jobs Act (TCJA) of 2017.

Mr. Mnuchin omitted several critical issues which most economists agree must be included in any analysis of the U.S. economy.

First is the ‘business (economic) cycle’.  The National Bureau of Economic Research (NBER) has been tracking the U.S. economy for 160+ years.  NBER defines one business cycle as: A period of economic expansion; followed by a contraction (recession); ending at the next point of recovery.

NBER’s 160+ years of records reflect that (over that time) the U.S. economy experienced 66 business cycles. Since 1945, we have experienced 11 business cycles with an average length of expansions of 5 years, followed by an average length of recessions of 1 year.

We can’t forget that the U.S. economy almost collapsed in early 2008 following a period of ebullience and expansion apparently accompanied by loose regulatory oversight of the financial sector.

Quick intervention in 2008 by our federal government saved the U.S. economy from the deepest and longest downturn since the Great Depression.  NBER data reflects the point of recovery (beginning of expansion) of the U.S. economy occurred in June 2009, and has now entered its 10th year (109th month) of growth.

Our current economic expansion is now the second-longest expansion on record, exceeded only by the expansion from March 1991 to March 2001, which lasted a full 10 years.

History tells us we are very close to the point of contraction (recession) of the U.S. economy.

Second is the ‘Skills Gap’.  When Mr. Mnuchin tells us that “…there are enough job openings in America for every unemployed person in the country” he fails to explain that the majority of open jobs require skills which the majority of unemployed people lack. In other cases, the unfilled jobs are located hundreds – maybe thousands – of miles away from the location of potential job seekers.

One solution to filling the open jobs is to encourage migration – or immigration — of skilled workers.

Another solution is to recruit, educate and train currently underemployed or unemployed U.S. residents who live in near proximity to the open jobs.

Third involves a dangerous combination of tax cuts and deficit spending to finance those tax cuts.

Mr. Mnuchin touts benefits to U.S. workers as a result of repatriation of hundreds of billions of dollars from off-shore corporate subsidiaries to the U.S.  In fact, companies thus far have paid out dividends and other withdrawals of $305.6 billion from foreign receipts which far outstripped the amount of this cash which was reinvested domestically.  By some estimates, corporations have spent 72 times as much on share buybacks as they have spent on one-time worker bonuses and raises.

The U.S. ‘current account deficit’, which measures the flow of goods, services and investments into and out of the country, widened by $8.0 billion to $124.1 billion, or 2.5 percent of national economic output in the first 3 months of 2018, virtually all of which seems to be attributable to the repatriation tax holiday.

To make up for the loss of tax revenue, the Trump administration is relying on a combination of debt financing and mystical economic growth which they expect to occur at the end of an extended business cycle.

Mnuchin tells us that U.S. economic growth is on steroids.

Some observers have noted that the appearance of economic growth is highly influenced by the infusion of repatriated cash – somewhat similar to feeding 2nd graders sugar before sending them out onto the playground.

The energy is intense, but it won’t last very long, and it is just not sustainable.

A recent report (6/21/2108) from the U.S. Office of Government Accountability (GAO) warns that responsible action is needed on the nation’s growing federal deficit, which grew to $666 Billion in FY 2017 (10/01/16 to 9/30/17) and is projected to surpass $1 Trillion by 2020.

According to the GAO’s 2017 financial report, the federal deficit in FY 2017 increased by 13.5% from $587 Billion in FY 2016 and $439 Billion in FY 2015. Federal receipts in FY 2017 increased by $48 billion, but that was outweighed by a $127 billion increase in spending.  (Note that Deficit is an annual measure; National Debt is aggregate, an accumulation of annual shortfalls.)

The aggregate (gross) amount that the U.S. Treasury can borrow is limited by the U.S. debt ceiling. As of April 30, 2018, our National Debt was $21 Trillion, about 78% of GDP.

Since its passage in December 2017, the non-partisan Congressional Budget Office has warned that TCJA will add $1.84 Trillion to the federal deficit over the next 10 years, which they estimate will push the National Debt to an unprecedented 152 percent of GDP by 2028, significantly increasing the odds of a new financial crisis.

Interest rates are rising, and National Debt is increasing, thus interest on National Debt will consume an ever-increasing amount of future federal budgets.

And, of great concern is the flattening of the ‘yield curve’.  Traditionally, interest rates on short-term debt are lower than rates paid on long-term obligations.

The spread between the yields of the 2-year Treasury note (2.55 percent) and 10-year Treasury note (2.89 percent) was 34 basis points on June 23. That’s less than half of what it was in early February and the narrowest it’s been since August 2007.

An inversion of the yield curve — when long-term rates fall below short-term rates — traditionally predicts a looming recession.

—————————————————————————-

It’s not clear why Mr. Mnuchin – a seasoned financial services sector professional with a clear expertise in fixed income securities – would omit such important information in his assessment of the U.S. economy.

I am drawn to conclude Mr. Mnuchin is using his position as a high-ranking federal official to ‘butter his own toast’, likely through complex – and undisclosed — derivative positions.

We’ll have to see if the Walrus is correct…..

It seems wherever we look, Donald Trump’s appalling behavior sets a new and very low standard upon which to measure the 21st Century version of The Ugly American.

His most recent tweets about Canadian PM Trudeau which followed Trump’s rude early departure from the G-7 meeting are deplorable.

Then, he sent his thugs Kudlow and Navarro off to reinforce the message in harsh, scorched-earth fashion.

Said Navarro on Sunday, June 10, 2018: “All Justin Trudeau had to do was take the win. President Trump did the courtesy to Justin Trudeau to travel up to Quebec for that summit. He had other things, bigger things on his plate in Singapore.  And what did Trudeau do? As soon as the plane took off from Canadian airspace, Trudeau stuck our president in the back. That will not stand.”

Trump did a courtesy? Hello? Red meat to the Trump base; An insult to everyone else who lives on Planet Earth.

Donald Trump said what Canada has “done to our dairy farm workers is a disgrace. It’s a disgrace. And our farmers in Wisconsin and New York State are being put out of business, our dairy farmers.”

Trump has gone on to tell us that “Canada charges the U.S. a 270% tariff on Dairy Products! They didn’t tell you that, did they? Not fair to our farmers!”

No, they didn’t because it’s just not true.  There is one specific dairy product which has ignited this Tempest in a Teapot, a product which exists in surplus due to overcapacity in the U.S. dairy industry.

The product at the center of the dispute is ultra-filtered milk, which is used to make cheese and yogurt.

It is not governed by any tariffs under NAFTA, because it essentially did not exist when NAFTA was originally negotiated. The U.S. dairy industry has been selling surplus ultra-filtered milk — duty-free — to Canadian processors. And that is part of the root problem for Canadian dairy farmers.

Never heard of ultra-filtered milk?  Neither had I.

Ultra-filtered milk (sometimes called diafiltered milk) is generally a byproduct of butter production after the milk fat has been removed to provide the basic ingredient for butter.

It is a sub-classification of milk protein concentrate which is created by passing the remaining low- or no-fat milk under pressure through a thin, porous membrane to separate the components of milk according to their size. Ultra-filtration allows the smaller lactose, water, mineral, and vitamin molecules to pass through the membrane, while the larger protein molecules are retained and concentrated. The removal of water and lactose reduces the volume of milk, significantly lowering storage and transportation costs.

In 2016, the U.S. dairy industry sold about $133 Million of ultra-filtered milk to dairy product producers in Canada, a rounding error on the total trade transactions between the U.S. and Canada.

The federal U.S. Trade Representative reported a U.S. $12.5 Billion trade surplus for goods and services with Canada in 2016, exporting $320.1 Billion and importing $307.6 Billion. (The reported U.S. surplus was $8.4 Billion in 2017).

Meanwhile, the man who affirmed that he would faithfully execute the office of President of the United States, and would — to the best of his ability — preserve, protect and defend the Constitution of the United States has given us clear and irrefutable evidence that his abilities are deficient, inadequate, unacceptable, inferior and dreadful.  Or, perhaps he is an untruthful traitor.

Either way, he has put our entire world in danger of a real world war.

Martha Stewart served prison time for a conviction on insider trading.

There is a cadre of Trump Insiders who are privy to Mr. Trump’s rants which roil the financial markets, some of whom are getting rich off of their advance information of what he will say or do.

Donald Trump’s frequently irrational, generally unpredictable — and often arbitrary and capricious — tweets, pronouncements and actions have proven to significantly move financial markets, often creating a whipsaw effect.

Today – May 31, 2018 – Mr. Trump allowed tariffs to be enacted on steel and aluminum imports from Canada, Mexico and the E.U. on the grounds that such materials are being imported into the United States “in such quantities and under such circumstances as to threaten to impair the national security of the United States.”

There is no credible evidence that steel and/or aluminum imported into the U.S. from Canada, Mexico and/or the E.U. pose any threat to the national security of the U.S.  In fact, there is no credible evidence that such imports pose any threat to the U.S. domestic economy.

Meanwhile, Mr. Trump’s action today to impose tariffs on imports from our closest allies was apparently not expected in the financial markets, leading to a 1% drop in the Dow Jones Industrial Average.

We now have several data points relating to financial market response to irrational actions by President Trump which clearly represent huge arbitrage opportunities for Trump insiders.

The ‘out-of-right-field’ announcement in early March 2018 by Mr. Trump that the U.S. would impose tariffs on steel and aluminum imports precipitated an almost immediate 500 point drop in the DJI.

 

It’s bad enough that Trump’s actions pose a tremendous risk to the entire U.S. society and our economy.

The Securities and Exchange Commission (SEC) needs to reign in this illegal behavior by Mr. Trump, and to charge those insiders who are illegally profiting in the financial markets from advance knowledge of what sort of disruptive, arbitrary and capricious pronouncements President Trump will make in the near term.

America’s Teachers

April 12, 2018

America’s teachers have notoriously been underpaid relative to their peer group. The excuses include, (a) Flexibility; (b) Summers off; (c) a profession dominated by women (and we all know that women earn about 80% of what men earn for comparable experience in similar jobs).

If I were a young person approaching college graduation, I might look at starting salary, and projections for advancement over the course of my career.

If I did that, teaching would not likely be on my list of job choices.

According to a study published by US News and World Report looking at the best jobs for 2018 college graduates, there are dozens of opportunities which absolutely blow away starting salaries for teachers, which seem to be in the $38k range.

One random example is an entry level Financial Analyst in the area of investment banking, private banking and the securities industry. The highest paid in the financial analyst profession work in the metropolitan areas of San Francisco, New York City, and San Luis Obispo, California. The Stamford /Bridgeport, CT area also pays well, as does the city of Salem, Oregon.

San Francisco      $141,840
New York City     $133,130
San Luis Obispo, CA  $120,750
Bridgeport (Stamford), CT   $120,520
Salem, Oregon            $120,150

These are median starting salaries for newly minted graduates.  What’s most egregious about this?

On a really good day, financial analysts provide zero economic value-added to our overall economy and society; on a bad day, they can cause catastrophic damage. Financial analysts produce no tangible outputs; they endeavor to discover and exploit financial opportunities to benefit their firm and its clients at the expense of other individuals.

Teachers bring value every day, yet they are generally under-respected and certainly, under-compensated. Teachers are the mechanism by which we build future intellectual capital to benefit future generations in and across the U.S.

Some may argue that this example attempts to pit Capitalism against Socialism:  Nice try on that one!

Pure capitalism relies on the premise that private capital, invested strategically, adds value to the overall economy and society, while providing a fair and reasonable profit to the capitalist(s).

Pure socialism requires a government controlled population of workers to both plan and operate the system; true socialism requires government control of all economic as well as political and public affairs.

By levying fair and reasonable income taxes on excess or suspicious profits, a nation is able to re-invest those taxes into strategic and forward-focused programs and initiatives, such things as: bridges; tunnels; airports; rail rapid transit; healthcare research and innovations; and public education – including teacher quality and teacher compensation.

Teachers need to re-focus their compensation and resource allocation argument toward pure economics.

It strikes me that the message needs to be:  “High quality, well-compensated teachers who are provided with appropriate and needed classroom resources help to shape and create the next generation of high-performance, highly motivated and productive citizens our nation will need to ensure future economic and political success.
There is no substitute for a ready and reliable supply of intellectual capital waiting in the wings to take charge in the coming decades.”

Dear Governor Rick Scott

February 21, 2018

I’ve been calling Florida my second home for 40 years, and I was finally able to move here permanently in January 2017. Florida has some fabulous positive attributes. Firearm regulations are not on that list. It is my belief that Florida currently has some very weak controls over gun acquisition, gun possession, gun ownership and the sale of ammunition and accessories.

Florida’s gun control regulations absolutely made sense in 1960 when the total population was about 5 Million, and the state was highly rural and agrarian.

Today, we have some 21 Million residents, highly concentrated in high density urban MSAs, with an economy highly dependent on tourism.

A number of academic studies have forecast a very high correlation between tourism and perceived public safety risks.  Areas with a reputation for a high risk of crime or violence against residents and visitors are shunned by visitors.

I’m a dues paying member of the NRA and a gun owner; I think the 2nd Amendment is a good thing, and I’ve read it dozens of times. I’m not sure exactly what the folks who wrote it were trying to say, and they are all now deceased so we can’t ask them in person.

Florida has been the location of several recent massacres involving young people wielding AR-15 weapons.

A massacre in Orlando in June 2016 involving a demented 29 year-old man wielding an AR-15 resulted in the death of 50 people (including the shooter) and physical and mental wounding of many others.

Nothing was done at the state or federal level following that atrocity because, as some said, “the Second Amendment didn’t kill anybody.”

On February 14, 2018 a young man named “Cruz” stormed a high school in Parkland, FL with an AR-15 rifle. He killed 17 and wounded many more.

In an interview with CNN’s Wolf Blitzer following the Parkland massacre, you said, “Everything’s on the table, all right? I’m going to look at every way that we can make sure our kids are safe.”

Some political operatives have focused their diversions on mental health issues, yet Federal law already bars people who have been adjudicated mentally ill or committed to institutions from buying firearms.

Until the State of Florida takes action to update our gun control regulations to recognize we are no longer a rural and agrarian state, and that we are now economically focused on tourism – both domestically and internationally – we as residents are at physical risk from demented individuals wielding assault weapons, and we as taxpayers are at economic risk for dramatic revenue losses from tourists who make decisions to avoid Florida due to perceived public safety risks.

It is incumbent on you and the elected members of the Florida legislature to enact legislation which will make sure that powerful assault weapons, high capacity magazines, bump stocks, suppressors, armor piercing bullets and other military grade accessories can’t be sold, owned or used by any civilians – including teenagers – who wish to live in our 21st Century Florida civil society.

There seems to be little argument that one primary outcome from the Citizens United decision was the opening of our campaign finance system to a deluge of anonymous money.

It’s been reported that special interest groups spent more than $1 Billion in elections across the country in the last election cycle, and there is virtually no transparency or accountability.

The very essence of “one man, one vote” is on the chopping block.

Throughout recorded history, we can see multiple examples of societies which inadvertently allowed a very small group of people to slowly and carefully seize extraordinary power from the masses.

Looking back to late 19th century America, we can observe the activities of a very elite group of industrialist-capitalists known commonly as the “Robber Barons.”

Some of the 19th century names include: Andrew Carnegie; Jay Gould; Andrew Mellon; J.P. Morgan; John Rockefeller; and a dozen more.

None of these folks were ever indicted or found guilty of illegal activities, and history tells us that they produced some positive outcomes over the long term. They built steel mills; they built and operated railroads; they made oil and gasoline widely available.

Yet, our elected representatives at the time were so concerned about the potential for future abuse should large sectors of our economy get consolidated into monopolies or oligarchies, Congress passed the Sherman Antitrust Act almost unanimously in 1890, and it remains the core of U.S. antitrust policy.

The Act makes it illegal to try to restrain trade or to form a monopoly. It takes its name from Senator John Sherman who said, “If we will not endure a king as a political power we should not endure a king over the production, transportation, and sale of any of the necessaries of life”.

We can learn from history and halt the ability of a very small group of people to seize political and economic power from the American people, and we need to start right now.

Many of us who watch this issue (myself included) focus in on the Koch Brothers and their well-documented, ultra-conservative positions – including the activities of their Super PAC, Americans for Prosperity.

We should continue to carefully watch what AFP is up to – they have very deep pockets and a singular agenda which seems to be very self-serving.

Super PACs and anonymous money strategically use private economic power to create ‘reasonable doubt’ across a group of voters regarding an issue or a candidate.

In the past 5 years, we’ve witnessed a number of successful multi-media campaigns fueled by anonymous deep-pocket donors which were based on dubious ‘facts’ and which may not be in the best, long-term interests of the majority of our citizens.

One recent example which reflects the incredible power of anonymous money is that of Ted Cruz, a relatively unknown lawyer from Houston, Texas who leaped into the national spotlight after winning a landslide upset election to U.S. Senate in the 2012 election cycle. Cruz and his campaign committee spent some $14 Million, raised in a relatively short time, making it one of the top-performing Senate campaign committees for candidates running for open seats.

In contrast, Paul Sadler who opposed Cruz on the Democratic line raised about $700 K, just 5% of the Cruz total.

However, that $14 Million was just direct spending by the Cruz campaign.

The extra power of unlimited Super PAC spending on behalf of political position advertising favoring Ted Cruz (and/or opposing his opponent) enables behind the scene power brokers the opportunity to influence with impunity.

Does the Citizens United decision violate our U.S. Antitrust regulations?

Not in fact, because the framers of antitrust regulations had no way to imagine the potential abusive power of a Super PAC on our free enterprise system.

I argue that the Citizens United decision infringes on the intent of several prior Supreme Court decisions supporting the “one man, one vote” doctrine, and further is in violation of the intent of our Constitution and of our antitrust regulations.

It is incumbent upon our elected officials to reform existing U.S. antitrust policy and regulations to encompass political activities in such a way that clearly and unequivocally prohibit unlimited and/or anonymous donations to enable spending on political and/or ideological positions.

I hope others will join me in helping us return to a ‘one man, one vote republic’, in fact and in practice.

Walrus Feeling Guilty

October 4, 2013

With all of the attention on the shenanigans in Washington and the in-depth moment by moment reporting, I thought the Walrus might sit this one out, but various forces have caused guilt.

Congress certainly has the authority to challenge the Affordable Care Act. Why don’t they just challenge the ACA in Court? Why are they messing with the greatest economy in the World?

Oh, wait. They did challenge it in court. In the Supreme Court. The highest court in the land. On June 28, 2012, the United States Supreme Court issued an opinion upholding the constitutionality of the “Patient Protection and Affordable Care Act” finding that the federal government can require people to purchase affordable health care insurance coverage or face an income tax penalty.

So, we have a law which was approved by the House of Representatives, approved by the U.S. Senate, approved by the President of the U.S. and affirmed by the Supreme Court.

But, wait! We also have a splinter group of dubiously elected officials (i.e. the Ayatollah John Boehner, Cruz Control, Private Ryan, Eric “T.P.” Cantor – and others who shall remain anonymous for now).

These creatures have determined (in September 2013) that the only appropriate way for the Congress to arrive at a Continuing Budget Resolution which would keep our federal government running is to open a debate on a law which was enacted in 2010?

Now, don’t get me wrong. There are many times I wish that I could just put all of the clocks and calendars around the world on pause. Just give me a few days to catch up on all of the loose ends, and then I would restart the clocks and calendars as though those few days I had to myself were invisible and inconsequential. Sort of like a short “working vacation” in the Twilight Zone.

Boehner and his Band of Merry Men apparently have gone beyond the Twilight Zone and have jumped all the way down the rabbit hole, desperately trying to drag the rest of the country with them.

I have to wonder – how does the Supreme Court feel about this behavior?

A Letter to Hon. John Boehner

December 28, 2012

Hon. John Boehner
Office of the Speaker
H-232 The Capitol
Washington, DC 20515

Dear Mr. Boehner:

I’ve been following the saga of ‘the fiscal cliff’ since the end of summer 2012.

It was made very clear to us outside the Beltway (commonly known as citizens, voters and taxpayers) that our elected officials in Congress would take no action until after the November elections.

As disappointing as that news was, it seemed reasonable and appropriate to many of us on the outside to expect that our elected officials would do some talking behind the scenes in preparation for a call to action after the election at which time our elected officials would work together in the best interest of the overall U.S. economy — business, commerce, education and the citizens of the United States.

Now – several months later and just a few days from the ‘tipping point’ a.k.a the ‘fiscal cliff’– we seem to have a continuation of the petty, partisan and puerile drama that has come to categorize our Congress following the national elections of 2010.

November 2010 marked the point in time when a number of conservative tea party candidates were elected to the House of Representatives. The infusion of passionate but neophyte tea party representatives — all of whom signed the Grover Norquist Pledge — precipitated your election as Speaker in January 2011, which coincidently seems to mark the beginning of extreme dysfunction in our nation’s capital.

I have listened to you and some of the ‘young rascals’ who were elected in 2010 under the tea party platform.

When I listen, I hear some really great sound bites, focused almost entirely on the federal government.

There is no one I’ve met who wouldn’t like to see smaller government and reduced government spending — sweetened by the magic elixir of reduced taxes.

The real problem seems to be: Government (as we see and interact with it from outside the Beltway) includes federal, state, county, local, schools and a vast number of entities which operate in the public sector as ‘quasi-government’ agencies.

As a citizen, voter and taxpayer in the U.S., I know I pay: federal income taxes; federal excise taxes; state income taxes; state sales taxes; county property taxes; county sales taxes; city property taxes; city sales taxes; city sewer taxes; city library taxes; and property taxes levied by my local school district. I can quantify the majority of those taxes: what I can’t quantify is the amount of other government and quasi-government fees and taxes I pay daily, weekly monthly or annually: highway and bridge tolls, parking fees, hotel occupancy fees, motor vehicle fees, MTA fees, license fees, daily use fees, and park access fees, most of which are invisible to me.

You and the ‘young rascals’ have some great rhetoric: What I don’t hear from you and your tea party cabal is dialogue, discussion, research or new ideas about re-engineering our overall government in the U.S. for enhanced efficiency and longer term sustainability.

Mr. Boehner: With your intractable and rigid focus on cutting spending at the margins and continued tax breaks for the ultra-rich, I think you and your tea party followers may be threatening the very essence of the United States and our economy as a going concern.

That thought leads me to believe that you and some (or all) of your tea party cabal may be guilty of treason because your actions are diametrically opposed to the best interests of my fellow citizens, voters and taxpayer of the United States of America.

It is my hope, Mr. Boehner, that come Monday, December 31, 2012, you and your followers will move away from treason to align with the majority of American citizens, businesses and American society to ensure a rational, sensible and sustainable solution to the ‘fiscal cliff’ dilemma which currently threatens our country.

Thank you in advance for considering my opinions, and hopefully, for adjusting your posture to a more inclusive and mainstream position.

Sincerly,

The Walrus
Mount Vernon, NY 10552

Other People’s Money

August 25, 2012

On the eve of the Republican Convention in Tampa, I keep thinking back to the movie, “Other People’s Money” which starred Danny DeVito in the role of “Larry the Liquidator.”

Larry was a Vulture Capitalist who was noted for buying up under-valued firms; then breaking them up into component parts; selling off the parts; and making lots of money for himself and his partners.

In this scene from the movie, the essence of the dilemma emerges: http://www.youtube.com/watch?v=p7rvupKipmY

Gregory Peck as the current executive in charge of New England Wire and Cable is immersed in a critical vote at the company’s annual meeting which could allow Larry and his Vulture Capital Firm to take control of the company, which would result in closing down the company and putting hundreds of people out of work. Permanently.

New England Wire and Cable was modeled on the many indigenous American family-owned small manufacturing companies which took root in New England in the 19th century. The inspiration for the theme of Other People’s Money was a real company in Seymour, CT which went through a fatal and permanent intervention by some Venture Capital Pirates around 1990.

Back in the Golden Age of Pirates (approx. 1650s to the 1730s), the pirates were self-declared. They typically didn’t dress up in suits, fly in private aircraft, or ride in chauffeured black cars. Today’s pirates operate openly in daylight; they pay taxes (albeit at greatly reduced rates vs. regular working people); and many own multiple mansions in delightful places around the world.

I imagine a shortened version of Other People’s Money (Part 1) where the name of Larry’s firm was changed to “Brain Capital.”

Then, I envision Part 2 as a take-off which is focused on ‘off-shore blocker’ strategies where the principals of Brain Capital explain their strategies:
http://news.yahoo.com/bain-documents-romney-offshore-investments-used-blockers-avoid-185957445–abc-news-topstories.html

Part 3 of the series could contrast one or more successful U.S. entrepreneur(s) who have invested their own money into a business that manufactures some product and where 50 to 500 people work full-time at decent wages with benefits, against a principal from Brain Capital. Part 3 would contrast the effective tax rate (and amounts paid) by the actual entrepreneur and all of the employees (year after year) vs. the tax rate (and amount paid) by the Vulture Capitalist in the current year. Don’t forget: once the Vulture Capitalist liquidates the company, there will be no further jobs; no further purchases; and no further local property tax, sales tax or income tax collections.

Part 4 of the series could be a lesson on the multiplier effect of all of those employees; the goods and services purchased by the manufacturing company; and so forth, vs. the absolute finality of the liquidation of a struggling but operating business.

To a great degree, the contrast between a real American entrepreneur and a Vulture Capitalist is very similar to the contrast between hard-core, tea-party conservatives and main-stream Democrats (plus what some might call ‘Centrist Republicans’).

The hard-core Right seems to be laser-focused on reversion to a society and economy that mirrors Medieval Europe and Feudalism, where the majority of main-stream residents in the U.S. seem to continue to favor the more egalitarian approach on which the United States was founded and has operated until very recently.

Through some very clever sound bites and an inordinate amount of attention on trivial but emotionally engaging issues, Tea-Party conservatives have polarized our society in an unprecedented way.

Best example of this would be Obama-care — which was inspired by the health care reforms enacted in Massachusetts under the leadership of former Gov. Mitt Romney.

Obama-care is not a perfect solution — primarily due to the amount of compromise that was required to get it passed — but the majority of experts tell us that it is a significant move in a positive direction.

Yet, there are a number of elected officials (and their disciples) — ‘Hard-Core Right’ — who continue to hammer on REPEAL!

What are their reasons, what are their real objections? Here is a synopsis: http://theamericandrivein.com/2010/11/21/why-repeal-obamacare/

As Jon Stewart may have already said — while stamping his feet and whining: “Just because!”