Monday, July 26, 2010

What can that maniac be thinking?: "Waterloo" by David Frum

David Frum is what I would term a moderate on the conservative side and it seems now that the fringe conservatives are dumping anyone who would dare agree with sound fiscal policy put forward by Barack Obama.

As a moderate who is seen to wobble left and right depending on the issue I am happy to see the fringe make major errors such as these.

Damon Musselman, David Frum, welcome to the middle.


What can that maniac be thinking?: "Waterloo" by David Frum

What can that maniac be thinking?: "Two Santa Clauses" by Thom Hartmann

Like a voice in the wilderness I have been writing about the economic problems that we face in the U.S.

The largest problem facing the U.S. is the economic illiteracy of the American voter.

While we are electing congressmen to office who either do not know history or have forgotten history and the effects of political decisions on the economy the average American voter does not even know how to question a candidate on the subject of economics.

What can that maniac be thinking?: "Two Santa Clauses" by Thom Hartmann

Wednesday, June 23, 2010

Slow response to the Gulf spill or media sensationalism?

Getting a handle on what happened once the Deepwater Horizon exploded and sank has been a task of searching for information regarding the disaster.

What I found was that the government response was quite rapid given what they knew and what British Petroleum admitted.

There was an article posted on Slate.com yesterday in the context of what it will cost and how the cost of the spill is determined that details what I found. You can read that article at: 100 Million Barrels of Oil in the Well, 100 Million Barrels of Oil.

The initial information was obtained by satellite from photos that indicated that 5,000 barrels a day were being released and the initial response was based on that figure. The problem is that the photos cannot indicate the grade or type of crude which would help in determining how much oil was being dispersed below the surface.

The explosion occurred on April 20 and on April 23 British Petroleum ROV reportedly found no oil leaking from the sunken rig and none from the well. On April 24 the Coast Guard announced that the well was in fact leaking.

On April 28, based on satellite pictures, the NOAA estimated that the leak was likely 5,000 barrels a day. The company refused to allow scientists to perform more accurate measurements of the flow saying that it might distract from efforts to stem the flow. BP was accused of having a vested financial interest in downplaying the size of the leak.

BP was accused of having failed to disclose results from its tests of chemical dispersants used on the spill,and that BP had withheld video showing the true magnitude of the leak.

On May 12, BP released a 30 second video of the broken pipe. Experts contacted by National Public Radio and shown the footage estimated the leak rate at from 50,000 barrels a day to 100,000 barrels a day.

On May 19 BP established a live feed of the oil spill after hearings in Congress accused the company of withholding data from the ocean floor and blocking efforts by independent scientists to come up with estimates for the amount of crude flowing into the Gulf each day.

For 22 days BP had prevented the administration from having any true idea of the rate of flow.

A Flow Rate Technical Group was formed and put the volume of oil flowing from the blown-out well at 12,000 to 19,000 barrels per day, and the government increased its official estimate to that range on May 27. A member of the Flow Rate Technical Group said the group was only provided a seven minute segment of low-quality video selected by BP, which showed a lot of variability from very low to very high flows. Now 37 days out and the estimates were still far short of the true flow rate.

By April 24 BP still had no idea how much crude oil was flowing from the well and their efforts were based on the assumption that the outflow had stopped. Containment and Cleanup.

On April 28 the US military and Coast Guard joined the cleanup effort and by April 29 69 vessels of various types were involved in the cleanup.

On April 30 Obama sent the Secretaries of Interior and Homeland Security and the Administrators of EPA and NOAA to assess the disaster.

Within 10 days Obama had responded to what was then thought to be a 5,000 barrel a day leak and BP was still stonewalling the facts while claiming that they has recovered 3 times as much oil as they said had leaked from the well.

We now know that the outflow from the well may be as much as 100,000 barrels a day and that British Petroleum is guilty of stonewalling the evidence of the true nature of the disaster.

When Obama called for a $20 billion set aside from British Petroleum Joe Barton (R) of Texas apologized and called it a "shakedown". Barton is the biggest recipient of oil and gas industry campaign contributions in the House of Representatives. Barton has collected $1,447,880 since 1989.

Georgia Representative Tom Price (R) called it "Chicago-style shakedown politics."

Republican Representative Michele Bachmann of Minnesota called it a "redistribution-of-wealth fund".

The true cost of the cleanup and payment for lost wages, environmental damage, etc. will certainly run over $50 billion and likely will reach $100 billion.

Funny thing: BP has lost over 50% of its value since the spill occurred but after they agreed to the set aside their stock was up.

Tuesday, March 9, 2010

Two Americas: Where to from here?

If you look at the history of the U.S it is a history of two Americas.

The first U.S., from 1776 until WW I in 1917. Until WW I the U.S. was pretty much a backwater nation.

The second began with the end of WW I and accelerated with WW II in 1941, What we lost during and after those two wars was our family connections. Up until then families generally hung together in the same households or at least the same communities. Most homes were multi-generational and the generation or generations in the middle provided for the care of the oldest and youngest generations.

World War I brought about a change and the second war propelled young men from the farms and cities to new places that they found interesting enough that many of them returned to their original homes only briefly and then left for other places they had seen. They married in locations distant from their parents and the family disconnect was in progress. The older generation no longer had the close support of their children and grand children.

Since the Second World War we have been a nation on the move. We have relied more and more on the government to provide the assistance that had been previously provided by close family ties. There were a host of additional factors like the availability of employment and corporations buying out family farms as examples which added to the family disconnect.

Now the U.S. is certainly in decline. I think we all agree on that point. We won't see the destruction of the U.S. as happened to Rome. It will simply become "just another nation" among many.

The return to our previous multi-generational families is not possible. Who then cares for your mother and father in their old age? You can say "My parents are well set in their retirement." or "My retirement is assured." but certainly all of us will not be well set for retirement.

If you divorce, who cares for your children? Many men are not providing the support that their children need and you can always take the tack of saying "Not me. I am a responsible father." This then implies that you are able to see into the future and predict your future circumstances. What happens to you and your family if, God forbid, you become unable to provide for your family for any of a number of reasons?

Bureaucracies are, by their nature, not the most efficient or effective organizations to deal with these problems but what other options are provided for us? I have seen other alternatives but what type is to be selected? Commercial for profit company? This necessitates a profit to investors. Non-profit? Those that I am familiar with have an outlay of 20% or more for requesting donations but this does not require such an outlay. Philanthropic organizations? They are apparently well run but how are decisions made to distribute the funds available to them?

All I have read is the ranting of fear for the loss of a dollar to help someone in whose shoes the ranters have never and can never walk.

I reiterate a previous statement that I made: It is the responsibility of every citizen to make sure that only those who deserve our support are getting it.

Economics, Part III Political Philosophy and the Economy

Political Philosophy and the Economy


To paraphrase William Shakespeare - "The fault, dear people, is not in our stars, but in ourselves.

The political philosophy which affects the economy is not so much a philosophy of liberal or conservative as it is a matter of what should be under the control of government and to what extent. The extremes are either total control of business or none at all.

We are now suffering the results of 20 out of the last 28 years of no control or oversight of the mortgage and investment industries

While members of each side vary in their idea of what constitutes adequate control liberals lean toward tighter controls and conservatives tend to believe in a hands off approach.

The idea that the companies themselves should be the subject of control is erroneous in both philosophies. The company in and of itself is an inert entity under the control of the men who manage the company. The only aspect of a company that needs to be held in check is the size of the company as it relates to the industry in which it exists. No company should be so large in relation to its industry that it affects the direction of the industry itself.

Past examples of businesses that dictated the direction of an industry existed in the late 1800 with Carnegie Steel/U.S. Steel, the Vanderbilt Railroad Empire and Standard Oil Company.

Each of these companies used different methods to obtain control of the direction of the entire industry in which they existed.

From 1921 through 1929 the Harding, Coolidge and Hoover administrations took the hands off approach to its extreme ending in the disastrous depression of the 1930's.

During the Franklin Roosevelt years, 1932 to 1945, extreme economic recovery measures were taken including many public works programs that put Americans back to work. Roosevelt was blamed for socializing America but the policies that he put in place worked to begin a recovery that was then assisted by the coming of World War II. The necessity of building the American war machine continued the effort to provide jobs and adequate pay for the average American worker.

During the decades of the late 1940's, '50's, '60's and '70's oversight of business continued unabated with modifications as the need arose under both Democratic and Republican administrations and the United States continued its recovery from the Great Depression.

In 1980, with the election of Ronald Reagan, the hands off approach was again in vogue and the relationship of debt to Gross Domestic Product began to surrender the gains it had made in the previous fifty years. The eight years under Reagan cost 18.5% gain in the debt to GDP ratio. George H.W. Bush continued the policies of Ronald Reagan with a 12.2% gain.

The first four years under Bill Clinton resulted in a 3.0% gain as he fought to get the ratio back in the negative direction but started seeing results during his second term with a drop of 9.3%.

With the election of George W. Bush government policy again reverted to a hands off approach and the results of his eight years in office was an 11.9% gain.

In the current economic situation certain companies have become so large within their various industries that they cannot be allowed to fail. Examples of this are the automobile industry which Ford, Chevrolet and Chrysler Corporation dominated. It has been estimated that the failure of any one of the "Big Three" would have resulted in the loss of at least a million jobs in the automobile manufacture industry from suppliers to retail sales. These companies were on the brink of failure as a result of poor decision making and the incompetence of upper management.

The mortgage lending industry started a snowball of problems for other industries through the issuance of sub-prime mortgages with what they called "creative financing". Schemes such as stated income and variable rate mortgages were advanced with full knowledge that the home buyers would eventually fail to be able to make the mortgage payments resulting in foreclosure.

In the insurance industry in which AIG became such a huge entity, in the banking industry there are a number of very large banks that required government assistance to prevent them from going under and in the investment industry Bear/Stearns was forced into merger with J.P. Morgan. The insurance, banking and investment industries were brought to their knees through misguided decisions to invest in mortgage packages containing the sub-par mortgages when the men responsible for the well being of the company failed in their obligations to assess the packaged deals in which they invested

The issue in each instance involves the decisions of management at the very highest levels. The CEO's, CFO's and COO's were either ignorant of the decisions being made and enacted or were complicit in trying to enrich the company and themselves at the expense of the average American. These are examples of incompetence at the very best and unethical conduct at the very worst.

Another issue contributing to the economic recession to an extent are the methods of granting compensation to the highest levels of management. Whether the company performs adequately under the direction of management or not compensation is guaranteed and we never hear of that compensation being reduced due to a company underperforming.

The only exception to this was the decision of Lee Iacocca to accept a compensation of $1.00 per year until Chrysler Corporation turned around under his leadership.

History has prooved that every time that an administration makes a decision that affects anything but the size of the company in relation to its industry it is incorrect. It is not the companies themselves that are responsible for our economic woes it is rather the men who direct these companies and make the decisions.

The elected officials who govern our nation need to enact laws that maintain the ethics of the men who oversee the operations of the companies. These laws need to be armed with teeth that punish rather than just act as a slap on the wrist. It is one thing to see an entire industry affected by outside events but quite another to see an individual company performing poorly as the top level management continues to be compensated at exorbitant levels.

It is necessary that Boards of Directors are held responsible by the shareholders for the competence of the persons they hire to run the companies.

In a letter I sent to the Securities and Exchange Commission in April of 2006 I requested that rules be changed so that compensation would be more open to public scrutiny. http://www.sec.gov/rules/proposed/s70306/lwaggoner040606.htm

It is the American public which holds the responsibility for the economic well being of our nation. Our Congress writes and passes legislation and the president either approves or disapproves that legislation.

Every voter needs to be aware of the impact of political decisions with respect to their effect on the economy and question very closely the proposed economic policies of every candidate for national office.

Economics, Part II Why YOU are losing the economic battle

Too Big to Fail
Why YOU are losing the economic battle

The answer to this statement is relatively easy to understand if you will bear with me for a two page explaination. It requires a basic knowledge of three topics generally conceded as being dry and boring but they areas of interest to me. Professional treatments of these subjects tend to become too deep with explanations of the underlying cause and effect. The topics are political philosophy, economics and history.

First a look at history and then an explanation of how it ties to current economics and political philosophy.

The Gilded Age and the Progressive Era - 1870 to 1914
During the last 30 years of the 19th century several men were able to take control of the steel, petroleum and railroad industries and form corporations that eliminated competition by various means.

The railroads
Cornelius Vanderbilt and his son William bought out and consolidated many of the railroad companies in the eastern United States enabling them to cut operational costs which in the end forced their competition out of business.

As the railroad industry grew without government regulation they were able to generate enormous profits using any method no matter how corrupt it might be. Eventually the Vanderbilt fortune topped $100 million, an immense sum during that period. Common practices of the railroad companies such as forming dummy companies and hiring themselves out at huge prices and reaping enormous profits while bribing congressmen to keep quiet about the scandals became a disgrace. Railroad companies inflated the value of their stocks and gave out noncompetitive rebates to client companies in return for exclusive service. The Vanderbilts were also known widely for their lack of respect for the working man.

Although state laws were passed to regulate the railroad industry the Supreme Court set a precedent, by ruling on the Wabash Railroad case, stating that only the federal government could regulate interstate commerce.

The steel industry
Andrew Carnegie, a Scottish immigrant, built a steel empire from a single production plant using a tactic known as vertical integration by buying out companies to supply everything needed to produce his steel and the companies that shipped and sold it as well as competing steel companies.

He eventually sold the company to banking magnate J. P. Morgan who used the company as the foundation of the U.S. Steel Corporation. By the time he passed away he had become one of the wealthiest men in America with a fortune of over $500 million.

The petroleum industry
While there was very little demand for oil prior to the Civil War demand for petroleum products increased dramatically during the period of1880 to the early 1900's with the need to lubricate and run the machines of industry and the coming of the automobile.

John D. Rockefeller, founder of the Standard Oil Company used the tactic of horizontal integration by buying out competing oil producers and refiners to the point that there was virtually no competition. Standard Oil became one of the first monopolies, or trusts, that cornered the market of a single product, petroleum. Standard oil produced all of the lines of fuel and lubricants needed by the growing industrial age and automobile industry.

Many of these wealthy businessmen came to believe in the theory of natural selection proposed by Charles Darwin and believed they were superior to the lower classes.

Deja vu all over again
From 1980 through 1991 and again from 2001 through 2009 the United States presidents Ronald Reagan, George H.W. Bush and George W. Bush revived the political philosophy of laissez faire, an economic doctrine that opposes governmental regulation of or interference in commerce beyond the minimum necessary for a free-enterprise system to operate according to its own economic laws.

Their ignorance of the disastrous results of this type of governing during the Harding, Coolidge, Hoover years is a great example of either being oblivious to or forgetting history. These policies led directly to the recession of 2006 to the present time. During the 20 years that these three men held office as president they managed to increase the debt to GDP ratio by a whopping 42.9%

The only event that saved the current economic situation from becoming a full blown depression was the election of Bill Clinton to the presidency during the eight intervening years between the two Bush administrations.


Clinton's policies reversed the decline of the GDP to debt ratio over the span of his years in office with a net of 6.8% after fighting to control the economy and suffering a loss of 3.0% during his first term. This record is an amazing feat when considering that the congress, for six of those eight years, was dominated by the opposing party.

Be aware
Whenever there is an opportunity to enrich oneself when there is no one watching there are certain men who will take unfair advantage of their fellow man. The idea that government can take a hands off approach to business and commerce is rife with examples of the greed and corruption of the few.

Americans need to have a basic knowledge of history because everything repeats due to the fact that our elected leaders are not well versed in history. Economics is basic as is political philosophy.

I am neither a Republican nor a Democrat but I do believe in fairness and I believe that government, we the people, owes help to those who cannot help themselves. This last is undertaken with full knowledge that greed is not solely the province of the rich and there will always be some who will attempt to take unfair advantage. It is the responsibility of ALL individuals to take steps to prevent this from happening.

Monday, March 8, 2010

Economics, Part I The Impact of Presidential Direction


With three exceptions all presidents, Republican and Democrat, since World War II have done well in reducing the balance of debt to GDP. Those three exceptions are Ronald Reagan, George H. W. Bush and George W. Bush.

The policies of these administrations of a hands off approach to corporate America allowed corporate decision makers to radically bend the rules of fair business practices to their own advantage at the expense of working Americans.
  1. Creative lending by the mortgage lending industry led to loans being issued to home buyers who could not qualify using standard lending practices.
  2. The banking industry bought into these packaged loans with low front end interest rates and very high back end interest rates without foreseeing the disaster waiting to happen when homebuyers were not able to meet their mortgage payments.
  3.  Investment institutions and individuals built schemes that fleeced investors of their money.
  4.  Corporate officers at the highest levels were awarded huge financial packages unrelated to the performance of the companies that they headed.
This table lists the gross U.S. federal debt as a percentage of GDP by Presidential term since World War II. The current gross federal debt as a percentage of GDP (83.4% at the end of 2009) is currently the highest it has been in 59 years, reaching levels last seen in 1950-1951 in the aftermath of the world war.

The information below lists the starting and ending debt to GDP ratio, the increase in debt and the increase in debt to GDP ratio.
U.S. president, Party, Term years, Start debt/GDP, End debt/GDP, Increase debt ($T), Increase debt/GDP (increse in debt to GDP is highlighted in red)

Roosevelt/Truman, D, 1945-1949, 97.6%, 98.2%, 0.05, +0.6%
Harry Truman, D, 1949-1953, 98.2%, 74.3%, 0.01, -23.9%
Dwight Eisenhower, R, 1953-1957, 74.3%, 63.9%, 0.01, -10.4%
Dwight Eisenhower, R, 1957-1961, 63.9%, 56.0%, 0.02, -7.9%
Kennedy/Johnson, D, 1961-1965, 56.0%, 49.3%, 0.03, -6.7%
Lyndon Johnson, D, 1965-1969, 49.3%, 42.5%, 0.05, -6.8%
Richard Nixon, R, 1969-1973, 42.5%, 37.1%, 0.07, -5.4%
Nixon/Ford, R, 1973-1977, 37.1%, 36.2%, 0.19, -0.9%
Jimmy Carter, D, 1977-1981, 36.2%, 33.4%, 0.28, -2.8%
Ronald Reagan, R, 1981-1985, 33.4%, 40.7%, 0.66, +7.3%
Ronald Reagan, R, 1985-1989, 40.7%, 51.9%, 1.04, +11.2%
George H. W. Bush, R, 1989-1993, 51.9%, 64.1%, 1.40, +12.2%
Bill Clinton, D, 1993-1997, 64.1%, 67.1%, 1.18, +3.0% (*see note below)
Bill Clinton, D, 1997-2001, 67.1%, 57.3%, 0.45, -9.8%
George W. Bush, R, 2001-2005, 57.3%, 62.9%, 1.73, +5.6%
George W. Bush, R, 2005-2009, 62.9%, 69.2%, 2.63, +6.3%
note: The first three years of the Clinton administration were spent reversing the policies of the previous two presidents.

What will happen in the future is evident. In order to reverse the failures of the Reagan, Bush, Bush presidential years it will take massive amounts of tax revenue.


This has happened before in U.S. history from 1921 to 1929. The George W. Bush  failed to remember history. His policy of laissez faire has caused the United States problems before.

The presidencies of Warren G. Harding, Calvin Coolidge and Herbert Hoover ended in the disaster of the Great Depression of the 1930's

Harding started the era that marked the end of the Progressive era, Coolidge and Hoover followed suit. All three men were Republicans as was the Congress that all three dealt with.

All three men felt that government should be limited when dealing with business as their actions during their presidency reflected. During their terms business prospered, but ended in the disastrous Depression.

It should not be forgotten that the George W. Bush administration initiated the bailout of American businesses. barack Obama has made govern ment moneys available to certain portions of commerce and inductry to assist with the recovery. That money is not a gift it a loan that must be repaid.

Just as Franklin D. Roosevelt was blamed for running up the national debt with his policies,
Barack Obama is being blamed for running up the national debt when, in fact, the moves he is suggesting are the only appropriate road to solvency of the United States.