Where A Good Environmentalist Would Put Her Sunday Paper

We hear the latest campaign to save American forests and their absorption of CO2 focuses on toilet paper. The British Guardian offers this quote from a scientist in one of America's leading environmental organizations, NRDC: This is a product that we use for less than three seconds and the ecological consequences of manufacturing it from trees is enormous," said Allen Hershkowitz, a senior scientist at the Natural Resources Defense Council. "Future generations are going to look at the way we make toilet paper as one of the greatest excesses of our age. Making toilet paper from virgin wood is a lot worse than driving Hummers in terms of global warming pollution."

Finally, the anal nature of environmental puritanism has come out in the open. Before we switch to recycled toilet paper, as the Guardian says 40% of Europe does, we should like to know what chemicals are used to reprocess paper, where those chemicals go, how much energy is used, and where the chemical inks that are removed go.

Also we might note that even recycled toilet paper cannot be recycled again. Now, if all the environmentalists who enjoy reading the Guardian or The New York Times would simply recycle those forest destroying pages in their bathrooms, we might believe they are serious about environmental toiletry. Their practice would warm the heart and not the planet.

Presidential Vocabulary Doesn't Inspire Confidence

At his news conference with the British Prime Minister, President Obama responded to a question about the plummeting stock market by saying, "What I am looking for is not the day-to-day gyrations of the stock market... but the long-term.''

As a gifted writer and speaker, Mr. President, you should know that a gyration is a rotation around a central point. Since Americans elected you for hope and change, the market has been on a steady downward trend that has wiped out over 30% of the retirement savings plans of millions of Americans and the pension funds of unions and churches, and the endowments of colleges and universities and charitable foundations.

We suppose that a steady downward spiral could be a form of gyration, but it’s one that is worth a president’s attention. Yes, this trend is recorded on the Wall Street that the President has criticized, but it's a trend that reflects the entire economy. Paying attention is part of staying in touch with the people.

Mr. President, we know you do not have an MBA like the former president, so it is unfair for the press or critics to laugh at you for saying, "On the other hand, what you're now seeing is profit and earnings ratios are starting to get to the point where buying stocks is potentially a good deal, if you have a long-term perspective on it.''

We appreciate the confident investment advice, Mr. President, and while we understand you studied International Relations and law, but it's important to know that a ratio is not X ‘and’ Y but X ‘to’ Y, and the correct term is not “profit to earnings” but “price to earnings ratio.” Price means the price of the stock, something very very different than profit.

As millions of homeowners and pensioners know, all the profit in a price can disappear very quickly. Profit and price, of course, both begin with a P and the tongue does slip occasionally as you probably noticed when the press guffawed about your predecessor’s slips.

It’s forgivable in the heat of a campaign to slip up and say, “I’ve now been in 57 states,” or that they speak Arabic in Afghanistan, or to declare 10,000 dead in a tornado that killed only 12, or to speak of “the bomb” that fell on Pearl Harbor (even if you are a native Hawaiian).

However, a president who understands that confidence moves markets and the economy needs to convince citizens that he knows the difference between a gyration and a trend, between a profit and a price. In politics ignorance and confusion can come with a very high price and no profit.

Will Barney Frank Have Himself Arrested?

In an interview on CNBC on March 5, Representative Barney Frank said financial regulation was necessary, but "Perhaps most importantly, the American public has the right to know what enforcement actions are contemplated against those irresponsible and, in some cases, criminal actions that lead to the current situation.”

While he did not name names, we would like to note the following irresponsible statement by a man overseeing Fannie Mae and Freddie Mac as they were going bankrupt and losing billions of dollars invested by pension funds and other Americans, all the while still promoting subprime loans, and making large donations to members of Congress.

“I do not think we are facing any kind of a crisis. That is, in my view, the two government-sponsored enterprises that we’re talking about here, Fannie Mae and Freddie Mac, are not in a crisis. We recently had an accounting problem with Freddie Mac that led to people being dismissed, as appears to be appropriate."

"The more people, in my judgment, exaggerate a threat of safety and soundness, the more people conjure up the possibility of serious financial losses to the treasury, which I do not see. I think we see entities that are fundamentally sound financially and withstand some of the disaster scenarios. I do not think at this point there is a problem with a threat to the treasury." (Sept. 10, 2003)

These are statements by Rep. Barney Frank, House Financial Services Committee Chairman Barney Frank who runs virtually unopposed. Since 1989 he took over $40,000 in campaign donations from FNMA and he once had a romantic relationship with a FNMA executive. His 2006 campaign took in over $200,000 from real estate, banks and mortgage lenders. These institutions suddenly began to dominate his list of top donors in 2004 and continued to dominate in 2006 and 2008.

Rep. Frank has not yet said what enforcement actions are appropriate in this case.

A Fair $200 Billion Stimulus/Tax Cut and Emancipation Proclamation

If President Obama wanted to immediately pump $200 billion into the American economy, give all tax payers a simultaneous rebate, and emancipate Americans from 3.8 million days of unpaid enforced labor (read 'slavery'), it can be done quickly by simple legislation. First I explain the figures.

The annual report from Nina Olson who is chief of the IRS Taxpayer Advocate Service tells us how much time and money Americans spend to comply with a tax code that she says requires a "sanity check."

She estimates the cost of compliance to be $193 billion a year. Others estimate as much as $300 billion. So I use $200 billion. Every earner must fill out a form. This is unpaid, forced labor, usually known as slavery. Americans spend 7.6 billion hours in this work, or 3.6 million full time person-days of labor.

About the 20 volume 16,000 page long tax code Nina Olson says, "The tax laws should be simple enough so that most taxpayers can prepare their own returns without professional help, simple enough so that taxpayers can compute their tax liabilities on a single form . . . "

Allowing for certain necessary boiler plate legalese and a few qualifications, Congress could pass and President Obama could sign a 10 page tax code. The heart of it would read something like this: Every American shall pay a tax of 17% on that part of his or her earnings that exceed $35,000 a year.

That would exempt tens of millions of the lowest paid Americans from all federal income tax. It would emancipate millions more from involuntary servitude. It would allow the 80% who pay someone to help with taxes to save those millions of dollars. It would give much needed certainty to investors and entrepreneurs. And it would still bring in the same amount of taxes the government gets now, and probably more since fewer people would cheat.

How's that for an instant, fair, and understandable stimulus that works?

Now Do Republicans Get It?

Quick, look, bipartisan agreement—Republicans lost Congress and the presidency because they were not Republicans. Democrats loved to talk about the big spending and deficits approved by President Bush and the Republican Congress. They welcomed several chances to turn greedy and licentious behavior into examples of a general Republican failure to live up to their own moral righteousness. They could get away with this because Republicans were often too slow in distancing themselves from self-disgraced colleagues.

Under Bush the Republican Party, like the Soviet Union, always had a few brave and vocal dissidents who said the Party had lost its way. Fortunately, they were not treated as badly as Soviet dissidents (or even as badly as Democrat dissenters like Joe Lieberman). Today it is fashionable among Republicans to say Sorry, we screwed up. We didn’t act like true Republicans. That’s how the new head of the Republican Party began his reform campaign: “Republicans did not listen, spent like out of control liberals and voters made them pay for their mistakes in 2006 and 2008.”

There we have bipartisan harmony—Republicans were not Republicans. They deserved to lose.

Whether from sincerity, to win public approval, or to keep up with the Democrats, the Republicans chose as their new Party chair a black man, former Maryland Lt. Governor Michael Steele. Perhaps Republicans chose him from all three motives, but judging motives is the kind of thing over which Democrats spend an inordinate amount of time and political capital.

Republicans chose well. Joe Biden once said President Obama was successful because he was "the first mainstream African American who is articulate and bright and clean and a nice-looking guy." Steel’s kind of average looking but bright and articulate and conservative with broad appeal among black voters. He looks like a Republican four star general.

He walked into office and declared, “Your Party’s OPEN for business and I am cleaning house.” Sounds like he gets it. Not if his recent invitation to an Oregon fundraiser and party renewal event indicate what he gets.

Who are the honorary guests at this “renewing and rebuilding" event? Same Republican Senator who’s been in Washington throughout the Bush term without much dissent. He is accompanied by rich and well established Republicans. Nothing against these folks, but how does their dominance demonstrate a commitment to finding new voices and talent?

Oh, and did I mention it’s a talking heads event? That’s the way to encourage participation and demonstrate new thinking.

“OPEN for business”? For a price. $40 to hear the speech. $1,000 for a VIP reception. If you want to eat, please write a check for $10,000. And no matter what you pay, please wear a business suit.

As a kickoff to fulfill a promise to widen and rebuild the Republican Party this event says Michael Steele or the Party planners just don’t get it. The Party of the $10,000 meal is a party of limited appeal. Sure, both parties resort to such exclusionary events to raise the political war chests, but Democrats can get away with it because they never hesitate to flay those who pay. In fact, some of the most prominent Democrats who pay to play often indulge in self-flagellation. Republicans, perceived to be the party of the fat cat, are held to a higher standard. If they want to prove they are different, they should hold themselves to a higher standard.

THE PRESIDENT CAN WRITE, BUT CAN HE DO MATH?

PRESIDENTIAL MATH: Our Future Depends On It

President Obama’s promise to cut the federal deficit in half in his first term relies on his assumption that the real Gross Domestic Product (GDP) will grow 3.2% next year, 4% in 2010, and 4.6% in 2012. We know he can write, but can he calculate?

He did not tell us how he calculated future GDP so let’s ask if history says his results, and thus the future hope he promises, is reasonable.

Since 1930 the average annual growth rate of GDP was 3.4%, and that included three years of WWII when it was over 17%. If we begin in 1945 average Real GPD increased 3%. In the nine years and 36 economic quarters from January 2000 through December 2008 real GDP grew faster than 3% in only 9 quarters. (All figures from US Bureau of Economic Analysis)

Conclusion: President Obama rests his economic plan on the calculation that real GDP for the three years starting in January 2010 the economy will grow faster than its 64 year average since WWI and that it will consistently grow faster than it did in 25 or the last 36 quarterly reporting periods. If the President would show us how he did his math, we would know whether we should call that math presidential or political.

The President As Investment Adviser Suggests Health Care

NATIONAL HEALTH CARE: Follow the metaphors.

President Obama is a gifted writer and chooses his words carefully. During the campaign when he tended toward the complex, supporters said he was “nuanced.” Paying attention to his choice of metaphor and the nuances of his words makes his message quite clear. Take health care as an example.

The President in his state of the union address used the word investment almost a dozen times. Before, during, and since that address he has often referred to $634 billion for health care as a down payment. He asks us to believe, in other words, that he will take from us some $634 billion as our investment manager and use it as the down payment on a health care system.

Let us put aside the fact that 47% of the country did not choose Mr. Obama to manage their investments, and that almost certainly the 53% who voted for him to be President, were not voting for him to manage their investments. Since he is going to invest for us, I pose two questions.

First, if $634 billion is the down payment on our investment, what is the total cost of this business? He is not saying. Are we prudent investors to hand over $1,800 for every man, woman, and child in this country as a down payment that obligates us to entirely unknown future costs?

Second, what is the nature of this health care business our investment manager wants us to get into? Ultimately, he and advisers have told us many times, it is a national health care system run by government. In other words, the government would create an HMO (Health Maintenance Organization) with a monopoly on service and whose board of directors are several hundred politicians who know little about medical care or even biology and almost as little about business and investing. Their management team will be tens of thousands of anonymous bureaucrats. Many will be chosen not for expertise but for political connections. Most will be almost impossible to fire, no matter how incompetent.

Fortunately we already have some data to evaluate how prudent this investment might be. The government through Medicare, Medicaid, the VA, SCHIP, and other programs already owns 47% of the medical care business. Costs have risen much faster than inflation. Medicare operates its hospital insurance in the red. While most businesses can and do cut costs to break even, the costs of running the government’s share of health care have risen steadily over 40 years.

President Obama is admirably clear in how he is going to manage our money and what he will do with it. What is not at all clear is how many Americans of any party would willingly give their money manager the green light on such an open ended investment.