Life in the fast lane

With the national debt sitting at 13.7 trillion dollars, the president and minions (not onions, but those 535 legislative folk elected by us) are "fighting" for us trying to come to a deficit reduction agreement. Will this work?

The Republicans want to accomplish budget balancing without increasing taxes. The Democrats want the wealthier among us to pay more. The Republicans want drastic cuts in spending. With a budget deficit at roughly 1.5 trillion dollars both seem to have a mathematical arguement.

The rub is they are not talking about balancing next year's budget. They expect us to believe things will get better if they take 10 years to get to balance. That means there could be an additonal eight to ten trillion added to the national debt before the budget is ever balanced. With the current national debt equal to our current Gross Domestic Product and Moody's bond rating service downgrading our debt instruments publicly, how can we rationally expect to sell that much new debt over the next ten years? At what interest rate? Who will buy it as an investment expecting a rate of return and return of the principal amount?

The current budget "negotiations" will result in a market for U.S. Treasury securities limited to those with ulterior motives. Those who want a position that will give them power over the United States. The average investor will not want to take the risk becasue they cannot afford it. The average financial terrorist will have the finances to take the risk and the inclination to press the advantage. That is to dictate to the debtor nation policy, economic decisions, etc. Think it can't happen?

We have engaged in deficit spending for decades and have little tangible to show for it. The attempt to create a socially less riskye society was noble to the more charitable of us, but left us with a deteriorated education system, less manufacturing capacity and jobs, and loss of control of our financial resources since we have to pay the debt service and entitlements first. We borrow just to stay even.

Nothing short of immediate budget balance will yield a tangible financial benefit in the near future. That is a long shot for one reason. The government is too big to control. Try asking people from who and from where one would get a consolidated statemnet of operations for the federal government. How much was the deficit really? All the information that is published is estimated long after the fiscal year is closed. There is no set of documents that a leader can sit down to review with his department heads and say "you are over budget, get it fixed now!!!!!!". That is how any CEO leads his "successful" company. If this can't be done by the federal government and done now, then it is too big to control. It must be smaller
and manageable.

It is against this background that the current negotiation in the government should be viewed. Think its impossible? Only if you don't try. It would be drastic action. It may have to play out over a budget year. But it most certainly must be the yardstick against with all candidates in 2010/12 are measured.

Going Off the Grid?

In difficult times, common sense should be our guide. Look at what you do each day and ask two things. What's the goal, what's the benefit. Simplify each task, simplify each with only the most essential and productive tasks.

Family budgets are the same. Spending sensibly should be the goal no matter what the environment but during times between jobs its more critical. The common sense part of reviewing spending is made tougher when your target is the household telephone. That great icon of the baby boom generation may now be a Smithsonian style relic.

Why you say? As time has gone on, everyone in our household has acquired a cell phone. As teenagers my children were told they could have a bare bones phone so we could get in tough with them if need be without having to bother other parents. friends of the children, etc. As they moved out of the house, they took the cell phones with them, combining the cell phones in to their new household.

My wife and I also got cell phones for emergency calls relating to aging parents. The result? A family of five with five different phones, none of them nailed to a wall or sitting on a side table.

The mobility - time issue is not the only benefit of these new phones. Miniaturization has taken the technology to a level of convenience unheard of in recent history. The sub compact car was such an inconvenience its use was limited to only a percentage of the total trips one takes in an average day. Gas mileage was a plus, insurance rates were not. Micro technology has made cell phones almost stealthy.

The time honored, time worn home phone of the fifties family has changed places with the cell phone. With a cellphone, its almost as if you can carry your communication household with you wherever you go. Its not multi-tasking anymore, it's everytasking. Everywhere, every time, anytime, all the time. Any phone limited by working at only one location is a relic. A souvenir of the past.

Getting rid of the home phone implies leaving our childhood behind, leaving familiarity in the dust. It took over a month to come to terms with cutting off our home phone number. What cost am I leaving out of the analysis? Who have I forgotten to notify. If I forget someone or come company, doctor, creditor, how will they call and "Hey, you forgot me+. My cell number isn't in the book. Did I remember to put the cell down as an alternative? Finally, you just say "DO IT".

Now its done. The monthly budget is one terminated bill better off. All is right with the world. It made so much sense. We will be fine. Now where is that converter box the TV guys kept yelling about.

Hell's Bells

If you went to college and took any kind of economics course, you were introduced to the bell curve. That simplistic little shape that makes up a monument in Philadelphia also is a staple of mathematicians who try to explain this nations economy.

It starts out simple enough. In the beginning, a company is new and its products or services are innovations because unique sells as well as price and function. "You too can call the space shuttle from your living room" gets a lot of attention. The more people want this new fangled phone thingy, the more units get sold. Assuming of course that phone thingy is a good idea and actually works. At this point, the left side of the bell, sales go up as does revenue, as do profits, as do jobs. Time passes and competition develops. This forces prices down making the thingy more affordable, meaning the market for the thingy gets bigger. At the top of the bell curve, everything is rosey.

Then a new product happens, replacing the thingy and we have the right side of the bell. Everything declines as consumers move on the to the "gizzy". This thing can take a picture of the Mars probe nearing the planet and lets you vote on a name for the first Martian. It does not yet have a universal language feature so we can tell him what we named him. Sales of the thingy decline as it is replaced by the gizzy.

On economy is a huge number of bell curves taken together. All kinds of products, all kinds of companies, some trying to remake themselves while others just disappear. The bell curve also works for skill sets. Individual skills are replaced as technology advances, workers are replaced by those who have newer skills applicable to new technologies. Jobs change in character or go away entirely.

Employment statistics are the result of bell curves super-imposed on each other. Some companies are growing while others are dying. Some are adding employees while others are laying off. Always, the supply of new jobs must compensate for those lost (terminated).

The foundation of innovation and productivity is education. It is no co-incidence that the decline of Americas economic fortunes has coincided with the decline of its education system relative to other countries. In the fifties and sixties America was well ahead of other nations in productivity. Our workers could handle more complicated tasks using more advance equipment. The larger wage cost per hour was more than offset by the number of units our workers could produce in that hour. Today, other nations have caught up with our level of education lowering their labor cost per hour and taking jobs away from us.

This is part of a recipe for a nation in decline. Other factors are hurting us but the way we teach and what we teach is a big part. Who should focus on changing that is the key to the solution. Stay tuned for that one.

The Shooting - An Act of Stupidity

The Act -

We live in a nation with free speech guaranteed by it's constituion and Bill of Rights. Amendment 1 in the Bill of Rights states "Congress shall make no law respecting an established religion , or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people to peaceably to assemble, and to petition the Government for a redress of grievenaces." Simply put, we are guaranteed a two way transaction. There is a speaker and a listener. Both have responsibilites to the Constitution. The speaker should not yell fire in a crwded theatre when there is no fire. The listener should let the speaker finish a point and can respond verbally. On Saturday last, a U.S. Congresswoman and multiple bustanders were shot in public. The congresswoman was a democrat in a very conservative state with open carry gun laws. She was shot in an public gathering

The Weapon -

The Aftermath -

The Deficit From the Bottom Up

It seems the federal deficit has become the new version of American Idol. We started with great interest in the subject, then after week after week of exposure to this topic, we get saturated with the coverage (or exposure) and flip the channel to another video diversion. To complete the analogy, maybe the appropriate replacement programming would be ABC's "Wipeout".

The Constitution dictates that all revenue bills originate in the House of Representatives (Article 1 Section 7). Simply put, the House of Representatives does the budget and initiates all spending bills.

One of the cornerstones of conservative thought is that taxes should be as low as possible. The wisdom of that position is that you leave more money in the pockets of the people that earned it and they will spend some (increased economic activity, higher tax revenue) and they will save some (more money flowing in to banks, some of which can be loaned to companies and citizens who spend it, thus creating economic activity that is taxable also).

When you hear talk about the size and chronic nature of the deficit, the debate almost always comes with a call for lower taxes creating higher revenue. A few lone rangers (Senator Coburn comes to mind) stay on topic and bring up spending but most don't. That's exactly backwards and the heart of the problem.

The representatives of the people can establish taxes, which is the bureaucracy's balanced budget spending amount. If taxes are deemed to high, the people's representatives vote to lower them and spending must be adjusted accordingly. Our politicians have corrupted the process so we think of spending as a separate issue from revenue. No one (or not enough) has the courage to battle spending down to the revenue level. If you watch the news, the greatest amount of air time is devoted to the spending bills. That exposure causes the elected officials to "protect" the current spending levels no matter what. If it fits within government revenues, that's fine. If it doesn't, thou shalt not reduce spending. Although the preceding seems to be carved in stone, no one holding the stone tablet can be remotely compared to Moses or his higher higher up authority.

We can't solve the deficit because the political debate has been hijacked by those who would narrow it down to only a small portion of the issue. Revenue? Don't increase taxes to cover spending. Spending? Don't cut it to match revenue, just establish what is off limits, add lip service to cutting what is left, and leave the gap (known as deficit) to be reported and subsequently buried in arcane reporting of actual numbers and ignored by the politicians and citizens alike.

Please note that many states and municipalities have a balanced budget amendment in their Constitution or city charters. The one's that don't are making news for another reason these days. I refer to the "b" word, bankruptcy. Laugh, chortle, and guffaw at Oklahoma all you want America. We have such an amendment. The same with the other states who require living within their annual income, and champion not using a giant credit public card. When California, New York, and maybe our Federal government are in default or filing bankruptcy, the rest of us will be chugging along in life minding our checkbooks.

Once again the wisdom of the little common man and woman (please note veiled reference to traditional marriage here) will triumph.

Does the NCAA make a difference?

Here it is New Years Day. The climax of life's great pleasures, the annual football orgie. Wall to wall excess. The last and biggest of 35 bowl games named after everyone but your local chemical cockroach killing company. What was a tight little fraternity of 8 or nine bowls has fallen victim to the philosophy of "everybody" must get a trophy to feel good about themselves, or must get a bowl check and the extra month of practice to feel good about themselves. That's read have something to sell to recruits. These things are now named after everything from potato chips to cars.

Parallel to this is the circus that is Cam Newton and the Ohio State five. Newton's father (a preacher no less) supposedly shopped his son's services around for something like $150,000 to $180,000. Newton was let off the hook because it could not be proven that the player did not know what the father was doing. At Ohio State, Terrel Pryor and four other starters were suspended for selling team memorabilia to outsiders and pocketing the money. Total value of the money changing hands was about $2,000 to $2,500 per player. The suspension was for the first five games NEXT YEAR. Head Coach Jim Tressel said they could only play in the Sugar Bowl if they promised to return next year. What?????

Big time college football has gotten too big for the NCAA rule book. The enforcement division cannot keep up with number of violations if it wants to investigate each incident thoroughly. The only solution is to cut the ticky tack violations out of the rules and just punish "major" misconduct. This is the direction the conference consolidation is taking us.

Eventually, the BCS conferences will leave the NCAA and form their own umbrella organization. The BCS conferences are where the football money is and football money is power. Money means TV, TV means market size. With rare exceptions, the BCS conferences cover the top TV markets in the country. The ones they don't have are covered by mid-major football programs that are gradually migrating to BCS conferences. TCU to the Big East is a logical stretch but it still happened.

The new non NCAA umbrella will pay the players a stipend and that will be no problem given the TV money that flows to the major schools. What Oklahoma and Georgia opened up in 1982 (that right of schools to sign there own TV contracts) is at the core of this. That's where the "BIG Ten" network, the "SEC Network, et al, came from.

Until the conference re-alignment is done, and its isn't yet, we will have the above contradictions in the definition of a "player" in the NCAA. We will still have our post season orgy that climaxes today. But pause for a moment today and reflect on where we have come from. The Four Horsemen, Doc Blanchard, Roger Staubauch are fond memories of the baby boomer's childhoods or before. Things aren't that way any more. Pleased pass the Fiesta Bowl chips and call the shop and see if my bowl game muffler is installed yet. I have seen the enemy and he just converted third and long.

Making Choices - Not Limitless

I like to live vicariously through Tom Silva and Norm Abrams. For those who aren't schooled in Public Broadcasting, they are the principals on "This Old House". The current project gives me pause for reflection.

The "old house" is getting an outside deck on several levels. For safety as well as appearance, the decks have railings surrounding them. The decking material itself is a recycled composite with some plastics in it. The rails and posts are all plastic. In this lies the conundrum.

Plastics are petroleum based. They are used in construction to replace actual wood, which saves our forests, which is an environmental benefit. The plastic material is made of, among other things, petroleum. Petroleum is about 80% imported, some from our least favorite trading partners. Namely Venezuela, several middle east countries, etc. In this particular transaction, we are saving or preserving our forests, greening America, at the expense of running up our trade deficit. One raw resource replaces another. Is this a net benefit.

A trade deficit is paid for by U.S. dollars. Currency is similar to any other product or commodity. If the supply is greater than the demand, the price goes down. If the world economy is flooded with U.S. dollars, the exchange rate goes down. The dollar is worth less in terms of other currencies. Since we have a trade deficit overall and we pay our bills mostly in dollars, the price of the goods we import goes up when the value (exchange rate) of the dollar goes down. Thus, the cost of the plastics that goes in to our wonderful "old house" that entertains me so much, goes up. Meaning the cost of the house renovation goes up. Meaning fewer people can afford to renovate their houses if they use the same product. Meaning we want to return to wood if it is the cheaper material, cutting down the trees we try to save. In order to keep the renovation market vibrant, employing more carpenters, plumbers, electricians, and loggers who cut down trees.

Is it a net benefit to replace the use of one dwindling resource by using another dwindling resource that is imported? Maybe in the short term, but not a long term solution if you consider the overall economy. My parents and Scoutmaster in my childhood and adolescence taught me to leave a campsite better than you left it. That's the admirable goal of most environmentalists. What we face today is a declining economy as long as we continue to rely so heavily on imports for what amounts to a basic necessity of life, spelled P-E-T-R-O-E-U-M.

Nuff said about the obvious.