"Whenever the people are well-informed, they can be trusted with their own government." Thomas Jefferson
Economic System

The Welfare State -- You Didn't Build That

Melanie Sturm | @ThinkAgainUSA Read Comments - 6
Publish Date: 
Thu, 08/02/2012


Last week, amidst the firestorm over the words “you didn’t build that,” actor Sherman Hemsley passed away. Americans remember Hemsley for playing George Jefferson, TV’s popular upwardly mobile black businessman.  Known for “movin’ on up to the east side” out of Archie Bunker’s neighborhood, we cheered George as he strutted triumphantly into his “deluxe apartment in the sky,” having “finally got a piece of the pie.”


Imagine George’s reaction were anyone to tell him that government was integral to his success, or that he didn’t build his business on his own -- he’d slam the door while hollering “Think Again!” 


Considering half of small businesses fail within five years, entrepreneurs like George deserve credit for more than “a whole lotta tryin’ just to get up that hill.”  Despite the risks of failure, George made it “in the big leagues” because he possessed unique entrepreneurial traits: business acumen, self-sacrifice, leadership and a willingness to hurdle government obstacles. 


Personal fulfillment derived from “odds-beating” industriousness is why America’s founders enshrined the right to pursue happiness in our national creed.  Earned success is both materially enriching and spiritually uplifting – and the source of America’s extraordinary prosperity.


Now in the midst of what CBS News labeled “the worst economic recovery America has ever had,” risk-takers like George deserve encouragement, not derision -- nor the toxic cocktail of tax hikes and increased regulations they face. Since 1993, their small businesses have created two-thirds of private sector jobs.  Furthermore, they and their employees are among a shrinking percentage of Americans who pay taxes to a government whose current annual deficit is the size of President Clinton’s first budget.


When tax-hike proponents justify expansive government by praising its most legitimate and necessary functions, they’re like David Copperfield, expertly distracting us with one hand so we don’t notice the other. The concern isn’t spending on roads, bridges, teachers or fireman; it’s the 60% of the federal budget consumed by our massive welfare state -- a catchall for Social Security, Medicare, Medicaid, and dozens of other “safety net” programs created by vote-hungry politicians.


Because all citizens -- not just the poor -- receive federal benefits, we’re all self-entitled “welfare queens” now. Consequently, welfare state defenders know it’s the proverbial “third rail” – politicians touch it at their peril.


The welfare state is the single biggest financial problem we face, annually consuming more than the combined cost of the Iraq and Afghanistan wars plus the TARP bailouts. Like the “blob,” it grows by devouring everything in its path, requiring us to borrow $41,222 per second just to keep government running. At almost $16 trillion, the national debt exceeds the size of our economy and is growing so rapidly, the Congressional Budget Office predicted it could cause a permanent recession by 2025.


Like an overweight jockey riding an emaciated thoroughbred, our bloated government sector is not only crushing the private economy, it’s handicapping our opportunity society. Americans are aspirational and self-reliant people, so it’s heart wrenching to note that after spending $15 trillion in the “War on Poverty,” America’s poverty rate has barely budged, food stamp dependency is at a record high, and the percentage of Americans in the work force is at a record low.


As economist Herb Stein said, “If something can’t go on forever, it will stop.” New York Times columnist Bill Keller called for that last week writing, “We should make a sensible reform of entitlements our generation’s cause.”  


But now that we’re in the fourth consecutive year in which the US Senate has abdicated its duty to pass a budget for fear of electoral consequences, where are the courageous leaders willing to discharge this fiscal suicide bomb? How do we secure America as a beacon of opportunity (and preserve benefit programs for the generations of Americans paying for them) unless we insist on the distinction between a welfare program and a welfare state?


Our founders were concerned America would reach this moment. John Adams warned: “Democracy never lasts long.  It soon wastes, exhausts, and murders itself.  There was never a democracy yet that did not commit suicide.” Americans are concerned too, according to last week’s Rasmussen survey in which a record low 14 percent expect today’s children to be better off than their parents.


We didn’t build the welfare state, but now that it’s crumbling and imperiling our way of life, we have the opportunity to transform our government so that it will serve us better.  Doing so will renew the moral promise inherent in the American Dream while making it accessible to all.


With free markets and limited government, entrepreneurial risk takers like George Jefferson can deliver renewed opportunity and prosperity, just as they took us from a colonial backwater to an economic superpower.


Think Again -- so our children can earn “a piece of the pie.”

French vs American Revolutions — Vive La Différence!

Melanie Sturm | @ThinkAgainUSA Read Comments - 4
Publish Date: 
Thu, 07/19/2012


The French celebrated Bastille Day last week, 219 years after beheading Marie-Antoinette in the French Revolution’s Reign of Terror. To this day, she’s the poster-child for upper-class excess, entitlement and insensitivity -- the ultimate “1 Percenter.”

However, Think Again before believing every demonization you hear, especially without factcheck.org. In truth, though a privileged aristocrat, Marie-Antoinette was not only a faithful Good Samaritan, she actually never uttered the notorious catchphrase “Let them eat cake.” Never mind those silly details -- social justice was at stake!

By portraying Marie-Anoinette as selfish and out-of-touch, the revolutionaries justified their bloodthirsty mob rule and indiscriminate savagery. Declaring “liberty, equality and fraternity,” they ushered in an anti-democratic period of unlimited governmental power, civil strife, and economic despair, though eventually Enlightenment principles transformed France into a vibrant democracy.

Today, France has Europe’s most state-directed economy, and among its most stagnant and indebted. Prioritizing “the collective interest,” the French prefer government to free market solutions spending more on social welfare than any other developed country. Recently, the anti-wealth rhetoric of newly elected President Hollande -- and his plans to hike taxes – made London the sixth largest French city, to its mayor’s delight.

Similarly Enlightenment-inspired, though resentful of strong government, American revolutionaries devised a system to protect individual liberties. James Madison wrote, “If men were angels, no government would be necessary.  If angels were to govern men… controls on government would (not) be necessary.  In framing a government… you must first enable the government to control the governed; and in the next place oblige it to control itself.”

While the French were sticking dissenters’ heads on bayonets, Americans enacted a Constitution designed to disperse authority in order to protect the moral promise in our Declaration of Independence: that every individual is born with equal and inalienable rights to life, liberty, property, and the pursuit of happiness. Thus, the American Revolution facilitated the creation of the freest and most prosperous society on earth.

Over the last century, while America’s free economy boomed attracting immigrants to our opportunity society, politicians were busy encumbering it, à la française. They instituted the income tax, asserted extra-constitutional powers to regulate, dabbled in cronyism and created entitlement programs that now consume 65 percent of the federal budget. Once 3 percent of gross domestic product, government spending is now 25 percent, crowding out the private economy and producing daily deficits of $4 billion.


Consequently, we suffer French-size economic stagnation, unemployment, and debt (up 50 percent since January 2009). Poverty rates are the highest since tracking began in 1959; food stamp dependency is exploding; and the percentage of Americans with a job is the lowest in decades. Not surprisingly, two-thirds of Americans say we’re on the wrong track and that there’s too much government power and too little individual freedom.

Meanwhile, clueless that government policies influence economic decisions, politicians now propose increasing taxes. “Taxmageddon” -- the toxic mix of year-end tax increases – is causing businesses to defer hiring and investment. Even if limited to the top two-percent with incomes over $250,000 (which includes small businesses responsible for half of private sector jobs and $720 billion in earnings), tax increases would create serious recessionary headwinds while funding only 8.5 days of federal spending, per the Congressional Budget Office. This is a blueprint to cripple job creation, and 23 million job-seeking Americans.

Though they agreed it was economically injurious to hike taxes in 2010 when the economy was growing at twice its current rate, tax-hikers argue it’s now about fairness while referencing the “roaring 90’s” when rates were higher but before explosions in spending, debt, and stagnation.  What's fair about increasing taxes knowing the vulnerable will suffer disproportionately?

What is fair considering 2009 IRS data shows the top one-percent and top five-percent paid 37 percent and 64 percent respectively of federal income taxes, while the bottom half paid two percent? If the richest aren’t yet paying their fair share, doesn’t that suggest they don’t merit their earned success?  By denying some Americans their earned success, doesn’t that undermine our opportunity society and social cohesion?

Having migrated toward French values, practices and even their anti-wealth rhetoric, its hard to recall our Founders' belief that government’s role is to protect – not grant -- individual rights and property.  To reinvigorate our free society and market economy, we need a true “fairness agenda”: a simpler tax code with fewer special interest loopholes, no more corporate welfare, and reforms that preserve entitlement programs for future generations.

Most importantly, we must recover the private initiative that French historian Alexis de Tocqueville found exceptional in 1830s America: ““In every case at the head of any new undertaking, where in France you would find the government ... in America you’re sure to find an association.” 

By renewing our commitment to individual liberties and the ethic that each of us – not government -- is our brother’s keeper, Americans “have it in our power to begin the world all over again,” as American revolutionary Thomas Paine wrote.

Wouldn’t our Founders want us to Think Again?

What's Love Got to Do With Health Care?

Melanie Sturm | @ThinkAgainUSA Read Comments - 2
Publish Date: 
Thu, 07/05/2012


Tamara Shayne Kagel made waves recently when she wrote a column in the Jewish Journal of Los Angeles titled “I Don’t Want to Date a Republican.” Clarifying her fears, she pondered with horror: “What if I have Republican babies?” Now smitten, she’s had to Think Again.


Having crossed the partisan Rubicon from insularity to open-mindedness, Kagel says she now respects and admires her boyfriend who, she acknowledges, “values helping the poor as much as I do -- just in a different way.”


To arrive at this tolerant Zen state, Kagel recalibrated her moral compass, the antidote social psychologist Jonathan Haidt advocates in “The Righteous Mind -- Why Good People Are Divided by Politics and Religion.”  Haidt cautions, “Beware of anyone who insists there is one true morality for all people, times, and places.” Comedian Steven Colbert didn’t buy Haidt’s thesis insisting “not just that I’m right; almost more importantly is that you are wrong.“


Last week, as if aping Colbert, many media, academic and political elites insisted opponents of the Affordable Care Act (ACA) were villainous and treacherous, including Supreme Court justices who might rule the law unconstitutional. Hardball’s Chris Matthews compared Chief Justice Roberts to the judge who upheld the Fugitive Slave Act, but after Roberts became the swing vote, he seemed to morph from Darth Vader into Luke Skywalker.


Disturbed by this Star Wars mentality, polls show public confidence in media and government at record lows. This week’s Rasmussen survey of Supreme Court perceptions confirmed the widening gap between the political class and mainstream voters -- the Court’s favorability doubled from 27 to 55 percent among the political class but dropped from 34 to 22 percent among mainstream voters.


Every American wants our health care system to be more efficient, affordable and accessible. As world-class consumers, we expect cost containment, improved quality and more choices -- we get that in our cell phones, why not our healthcare? We’ve watched Apple compete by continuously innovating, creating new markets and must-have products at prices unimaginable a decade ago. Meanwhile, market entrants like Android offer choices to consumers for whom a phone (never mind an iPhone) was previously unaffordable. 


Not surprisingly, Americans rejected government-centric solutions that interposed Washington bureaucrats between doctors and patients and did little to address the healthcare cost explosion. Nevertheless, à la Colbert, lawmakers insisted they were right and opponents weren’t merely wrong, but evil. Despite public outrage, Congress passed the ACA on a party-line vote aided by political payoffs, accounting gimmicks, deceptive language, and parliamentary trickeries never before used for such far-reaching legislation.


As unsettling is the perception that last week’s Supreme Court ruling -- which rewrote the ACA in order to find it constitutional and used reasoning that politically-diverse legal experts regard as flimsy -- was made to protect the Court’s legitimacy in the eyes of those who define illegitimacy as anything with which they disagree. If political calculations factored into Court deliberations, doesn’t that undermine judicial integrity?


Most importantly, two years into the 2,409 page law and 4,103 pages of associated regulations, we know it’s “dreadful public policy,” as non-partisan Washington Post columnist Robert Samuelson wrote: Its “attempt to achieve universal health insurance coverage is a massive feat of social engineering that, by its sweeping nature, weakens the economic recovery and antagonizes millions of people.”


Moreover, its promises are false: health insurance premiums have risen $2,200, not declined by $2,500; official cost estimates nearly doubled with further increases expected, thus increasing the deficit; and millions of Americans will lose their insurance and doctors as companies dump workers into government health exchanges to avoid escalating healthcare expenses.


Now consider the moral travesties.  Not only does the law perpetuate the largest transfer of wealth from the young to the older in world history, it promises a quantity and quality of care it can’t deliver while stifling the medical innovation on which the world depends for continuously improving health outcomes.


The story of Deamonte Driver, a 12-year old Medicaid beneficiary, is instructive. Unable to secure appropriate and timely treatment, he died of an infection that started with an abscessed tooth -- not because he was uninsured, but because he was government-insured.


The ACA’s proponents won’t mention these fiscal, economic and moral challenges.  Like used car salesmen, they tout loss leaders (universal coverage and 26-year olds on parents’ plans) and free extras (contraception) – all attainable with cheaper and less disruptive policies like tax credits and high-risk pools.  How do we separate the facts from the sales pitch, and if the deal is so good, why do the well-connected get waivers?


With so much at stake, lawmakers must recalibrate their moral compasses. Having done so, Kagel personifies Haidt’s message that love and mutual respect engender the willingness to see those with opposing views generously, improving everyone’s outcomes.


If elected leaders won’t love and respect us, we must Think Again in November.

The Green Wizard: Natural Gas Not Renewables

Melanie Sturm | @ThinkAgainUSA Read Comments - 5
Publish Date: 
Thu, 05/10/2012


As if accompanying Dorothy en route to the Emerald City of Oz, Americans seek a green wizard to fulfill our hearts’ desires -- a world powered by renewable energies like solar, wind and bio-fuels.  Bedazzled by Glenda the Good Witch’s solar-powered ruby slippers, we want the green-brick-road to lead us to a cleaner energy future. 

However, without Auntie Em to awaken us to reality, Americans must Think Again. Though cast as the Wicked Witch of the West, over the last decade the conventional energy industry has revolutionized America’s energy outlook.  Today we’re the most energy-endowed nation in the world, with enough clean, reliable, abundant, and cheap natural gas to last for generations. 

It’s “like adding another Venezuela or Kuwait by 2020”, according to Pulitzer-prize winning energy expert Daniel Yergin who believes the world energy map now centers on North America, not the Middle East. Energy consultant Wood Mackenzie estimates that tapping new reserves would generate one million jobs by 2018 and generate $803 billion in governmental revenue through 2030. Additionally, these new extraction technologies require far fewer wells, though they present fresh environmental challenges that several states (including Colorado) have addressed with new regulations to protect the environment and secure water supplies. 

Thus, rather than crucify the conventional energy industry, we should celebrate the entrepreneurialism and technological ingenuity that’s enabled the US to become a net energy exporter for the first time since 1949. The government need only permit development of new reserves -- not subsidize -- to further American energy independence, fuel our vehicles, lower energy costs and reap economic gains.

Meanwhile, promoters of green energy policies continue to argue that “investments” in renewable energies are environmental and job-creation boons for America, though our journey along the green-brick-road proves otherwise. Whether evaluating wind power in tornado-swept Kansas or solar energy in sunny California, renewable technologies are woefully uneconomical, wickedly unreliable and surprisingly unsound environmentally.

It’s understandable Americans dream green, considering we were told in 2008 that by investing $150 billion over the next decade in renewable energies, we’d reap five million new jobs.  But as former Treasury Secretary Larry Summers noted, “The government is a crappy venture capitalist”.  That’s because lobbying prowess and political viability outweigh economic viability when government picks winners and losers. 

After “investing” $110 billion since 2009, the sector is littered with taxpayer backed, bankrupt companies like Solyndra, Beacon Power, and Ener1, all of which paid bonuses before going under. Reuters reported last month “the wind industry… has shed 10,000 jobs since 2009 even as the energy capacity of wind farms has nearly doubled”… while the demonized “oil and gas industry added 75,000 jobs.”

The truth is, industries that aren’t economically viable don’t create real jobs, and those that are viable, don’t need subsidies. Plagued by competitive disadvantages like sun and wind intermittency, and expensive land, capital, transmission and backup capacity, these technologies are uncompetitive, small market players and remain subsidy-dependent.

Despite receiving 53.5 percent of federal financial support for the electric power sector, wind and solar supply only four percent of US power at a cost 100-300 percent more than conventional sources, according to the Energy Information Administration. A University of Wyoming study notes that because green policies increase prices, the “economic benefits derived from building renewable energy facilities in the short-run are more than offset by losses in economic output and employment”, thus hurting the poorest and most vulnerable.

Additionally, given renewables’ green patina, many don’t appreciate their adverse environmental impacts beyond the eyesore, noise, water usage, and wildlife destruction. Called “energy sprawl” by the Nature Conservancy, renewable energies require vastly more land while producing significantly less energy than conventional energy.  Most disconcerting, their incurable intermittency requires utilities to rely on conventional power to cycle up when there’s no wind or sun, and power down when there is, thus diminishing carbon reduction advantages.

If policymakers weren’t brainless scarecrows, cowardly lions and heartless tin men, they’d adopt Bill Gates’ proposition that cheap energy is “a fantastic vaccine” for the economy.  That’s what Americans deserve – a booster shot to deliver authentic solutions, real jobs and genuine economic growth. Moving beyond fossil fuels will happen eventually when superior and affordable energies are scaled for mass use.

Energy development isn’t a zero sum game, as the Wyoming study concludes: “Environmentally responsible development of fossil fuel resources could be complementary with renewable energy development, creating jobs and generating tax revenues to ensure a robust economy capable of creating and funding innovative renewable energy technologies of the future.”

Given our economic straits and the remoteness of the green dream, the underlying question is how much more are Americans willing to pay to harness wind and sun. Isn’t it time to demand that our leaders propose energy solutions based not on ideology but on how to best guarantee prosperity for generations of Americans?   

Think Again – a secure, affordable and environmentally sound energy future is not over the rainbow.


Sex, Lies and Videotaped Government Scandals

Melanie Sturm | @ThinkAgainUSA Read Comments - 4
Publish Date: 
Thu, 04/26/2012


What do you get when you cross George Orwell’s Animal Farm with John Belushi’s Animal House? Government Gone Wild! 


If you assume that’s the title of a porn movie about U.S. secret service agents cavorting with prostitutes in foreign countries, or employees of the U.S. Government Services Administration (the GSA manages federally-owned property) whooping it up in Las Vegas at taxpayers’ expense, Think Again.


The hard truth is that the larger government grows, the more Orwellian and “Animal House” its conduct. Belushi’s character “Bluto” exercised no greater restraint around free beer than did GSA Regional Director Neely and his employees, whose exploits at their $823,000 Las Vegas “team-building” soirée were videotaped, only to dominate newscasts this month. Bluto couldn’t have carpe diem-ed on his parents’ allowance better than Neely who wrote in an invitation to personal friends: “We’ll pick up the room tab…. I know I’m bad, but…why not enjoy it while we have it….Ain’t gonna last forever.”  

Since government depends on resources drawn from the real economy, consider these facts: after the GSA’s Inspector-General reported Neely’s misconduct, Neely still received a 2011 bonus; the average GSA salary is nearly $92,000, $40,000 more than median household income; and the GSA’s budget rose 119 percent in 2011.  Furthermore, the non-partisan Congressional Budget Office reported this January that federal employees enjoy greater job security and earn significantly higher compensation compared to private-sector workers.


Having worked in a large bureaucracy (the World Bank), I believe most public servants are decent, skilled, and dedicated, though rarely are “per diem” allowances unspent, or self-justifications un-uttered. It’s a truism that people won’t spend other people’s money as carefully as they spend their own. Unlike household budgets that strive to boost savings by minimizing expenses, government bureaucracies spend what they’re given while justifying more for next year.  They also lack the expertise and market discipline to “invest” wisely, evidenced by “green investments” in now-bankrupt companies like Solyndra.


Here's the ultimate question: why transfer more money from the real economy to those who are intrinsically more wasteful, negligent and indifferent to its ultimate good? To curb Bluto-like behavior, voters mustn’t allow irresponsible conduct they wouldn’t otherwise tolerate.  If your child spent irresponsibly while racking up credit-card debts, wouldn’t you confiscate his card?  Good governance, like good parenting, means establishing and enforcing reasonable limits.


Yet, politicians charged with stewarding America’s finances have acted like the pigs in Animal Farm who pronounced “all animals are equal, except some are more equal than others.”  Exempted from the self-discipline and frugality associated with American Exceptionalism and prosperity, they’ve presided over the greatest scandal -- an explosion of government, an avalanche of debt and the mugging of our children’s future.


April 29th marks the third consecutive year in which the Senate hasn’t passed a budget. Vested with the authority to confront and steer America through fiscal problems, the Senators’ inaction reflects the ultimate “piggish” dereliction of duty.  It’s also illegal, though conveniently, there’s no penalty for breaking the 1974 Budget Act. 


Senate Budget Chairman Kent Conrad said last year, “History is going to judge whether we have the courage, character, and the vision to stand up for America’s future. Those who take a walk, those who turn away, those who don’t have the gumption to stand up, are going to be judged very, very harshly.”  Though Conrad intended to pass a budget resolution this month, he was over-ruled by Senate leadership. Believing they can evade electoral consequences by not voting on difficult budget matters, they mirror the corrupt, greedy, and myopic leadership of the pigs in Animal Farm.


Economist Milton Friedman, one of America’s greatest apostles for freedom and free markets, believed politicians are finger-in-the-wind types who can be trained: “The important thing is to establish a political climate of opinion which will make it politically profitable for the wrong people to do the right thing.  Unless it’s politically profitable for the wrong people to do the right thing, the right people will not do the right thing either.”


In other words, the onus is on us. Politicians will concern themselves with our interests only if they think we care. If we don’t care that they’ve violated the law by refusing to adopt a budget, and that they’ve spent us $16 trillion into debt, what do we care about? 


Demand accountability and restraint, and don’t allow the word trillion to be normalized, after all, a trillion hours ago dinosaurs roamed the earth!  Don’t wait for the right people to get elected; remember, Bluto became a US Senator despite his 0.0 GPA. It’s a basic rule of life -- If we tolerate out-of-control Animal House behavior and indifferent Animal Farm attitudes, we’ll just get more of it.


Think Again. It’s not only a fiscal imperative -- it’s a moral one.




Buffett Rule: Tax Fairness or Farce?

Melanie Sturm | @ThinkAgainUSA Read Comments - 5
Publish Date: 
Thu, 03/01/2012


“The higher up in the tree the monkey goes, the more of his backside that shows,” goes the maxim. It would be hard to climb higher than Warren Buffett, the world's most celebrated investor. However, as the namesake of the Buffett Rule that imposes higher tax rates on the wealthy, Buffett and his backside dangle precariously “out on a limb.”

Residing atop Buffett's tree is New Jersey Gov. Chris Christie, known to deliver the best rhetorical broadside, probably because of his broad backside. Last week, Christie buffeted Buffett, forcing him to Think Again.

After two years of traumatic budget austerity, Christie's 10 percent tax cut for all New Jerseyans is central to his fiscal revival plan. Designed to stimulate economic growth, job creation and entrepreneurialism, Christie expects Jersey's economic pie to grow so more “haves and soon-to-haves” generate more tax revenue. After eschewing Buffett's Tax, Christie challenged Buffett to put up or shut up by writing the government a check, to which Buffett conceded, “It's sort of a touching response to a $1.2 trillion deficit, isn't it? That somehow the American people will just all send in checks and take care of it?”

Perhaps unwittingly, the “Oracle of Omaha” revealed the hard truth: No reasonable amount of taxation can address the catastrophic levels of spending, deficit, debt and doubt that plague Americans.

Even the 49.5 percent of Americans who aren't currently paying federal income taxes — a status for which they're wrongly disparaged since other taxes they pay support government (state, payroll, property, sales, gas) — know that increasing tax rates on high earners won't “take care of it.” Incredibly, confiscating the taxable income of America's millionaires and billionaires would only yield $938 billion, enough to run the government for three months.

Ominously, the nonpartisan Tax Foundation estimates the Buffett Rule could raise $40 billion annually, chicken feed compared with our deficit and bullish considering the United Kingdom's new wealth tax generated less revenue from top earners than before its implementation.

Most insidious, a large majority of America's small businesses, the sector responsible for creating two-thirds of all new jobs since 1996, file individual (not corporate) returns, thus ensnaring them in the Buffett Rule. Imagine the surprise of the technology entrepreneur who wants to expand her business but finds herself in Buffett's tax class!

The dirty little secret is that to reduce the deficit or avoid spending cuts, we'd need a “soak the middle class” strategy. That's because 98 percent of America's taxable income is in households that earn less than $250,000. As Buffett admitted, “The purpose of the Buffett Rule is not to close the deficit gap.”

So why promote the Buffett Rule if it's economically injurious and fiscally imprudent? Because in an election year, budget gimmicks and fairness illusions trump growth, job creation, tax revenue and economic logic. This isn't tax fairness; it's tax farce.

The million-dollar question is, What is fair? Is it fairer to equitably divide a stagnant or shrinking economic pie or to grow the pie so everybody gets more, albeit unevenly?

Since first implementing the income tax a century ago, we've agreed on the latter while operating the industrialized world's most progressive tax system. According to 2009 IRS data, Americans with incomes less than $100,000 paid an average rate of 8 percent while those making more than $500,000 averaged 25 percent. Furthermore, the top “1 percent” currently pay 38 percent of America's income taxes while the top “10 percent” pay 75 percent.

But as Buffett notes, “You can do pretty dumb things when you've got a big checkbook.” The real problem isn't that Americans (rich or not) pay too few taxes; it's that government is so over-extended, it's transferring hundreds of billions of dollars to the affluent. Why should a farmer making $2.5 million be eligible for farm subsidies? Should Buffett be entitled to the same Medicare and Social Security benefits as those without corporate jets? Should wealthy backers of green energy be entitled to billions in below-market loans whether or not they're political donors?

As the president's bipartisan Debt Commission recommended, wealthy Americans shouldn't get benefits they don't need nor tax preferences that distort and undermine our economy. But withdrawing voters' goodies isn't smart politics when you're trying to secure electoral majorities. Conversely, it's politically wise to distract voters from current realities like the following: One in six Americans lives in poverty — the most since tracking began in 1959; government dependency is at an all-time high; and the percentage of Americans with a job is the lowest in decades.

Imagine the possibilities if Buffett turned his attention to the challenges of income stagnation. He already knows that American prosperity derives from entrepreneurial activity and the incentives that inspire it, having once said, “You can change behavior by incentives, but you can't usually change behavior by sermons, although people try every Sunday.”

Think Again, Warren — that's good advice.

Capitalism's Critics Are Intellectually Bankrupt

Melanie Sturm | @ThinkAgainUSA Read Comments - 3
Publish Date: 
Thu, 01/19/2012

When Paul Simon sang “Mama don't take my Kodachrome” in 1973, he claimed he'd “read the writing on the wall,” but he couldn't have foreseen how a transformative technology — making photos from digits — would render obsolete his precious color film. The global brand icon that revolutionized photography, making it affordable and convenient for ordinary people, now teeters on the brink of bankruptcy. Unfortunately for Kodak workers and the residents of Rochester, N.Y., consumer choice — not Mama — vaporized Kodachrome.

Because election season coincides with economic stagnation, lost jobs and defunct companies are political hot potatoes, putting capitalism on trial. Before joining free-enterprise bashers who bemoan investors who find opportunity in “the gales of creative destruction,” Think Again. As Kodak's ascent and decline demonstrate, this tenet of capitalism is what sparks entrepreneurship, innovation, growth and continuous progress, improving everyone's standard of living.

Preoccupied as we are with economic hardship, it's hard to appreciate the upending phase of “creative destruction.” But without disruptive transformations and the financial capital they attract, the entrepreneurial innovation that fueled America's economic preeminence — and job-creators like Boeing, Apple, Amazon, FedEx and Intel — couldn't have occurred. To paraphrase labor leader Samuel Gompers, the biggest enemy of the worker is an unprofitable, poorly managed company.

We'd also be saddled with outmoded horseshoes, floppy disks, typewriters and eight-track tapes. By reallocating scarce resources to better businesses such as automobiles, digital memory devices, laptop computers, CDs and online retailers, consumers realize previously unimaginable conveniences and value as obsolete products end up in the dustbin of history.

Capitalism is like cancer surgery — though risky and unpleasant to watch, it's a life-enhancing, regenerative process allowing productive cells to flourish where unhealthy ones once permeated. Since not all practitioners are well-trained surgeons, the process can be messy and imperfect. Sometimes the patient weakens before recovering vitality; sometimes he dies, making room for the healthy.

What's worse is when government subverts free-market capitalism by rescuing the suicidal from the consequences of their own errors. When they connect the nearly dead to life-sustaining “bailout-IVs,” governments play Dr. Frankenstein — creating economic zombies who dwell malodorously in our midst, suck up scarce resources and prolong everyone's suffering. What's protest-worthy are the prolonged and expensive hospital stays as government gets to appear beneficent with other people's money! This is “crony capitalism.”

In free enterprise, companies must reinvent or bear the consequences. Consider Smith Corona, the world's leading typewriter manufacturer, whose consumer breakthroughs included the automatic carriage return, electronic dictionaries, grammar checkers, word processors and the PDA. This reinvention process stopped in 1992 with the classically ironic shortsightedness of its CEO, who dissolved the company's joint venture with Acer Computers, saying, “Many people believe the typewriter and word-processor business is a buggy-whip industry, which is far from true.“ By 1995, Smith Corona was bankrupt, and Acer was the world's fourth-largest computer company.

Smith Corona learned the hard way that maintaining one's practices can be a formula for obsolescence. In contrast, Apple Computer, now the world's most valuable company, faced bankruptcy in 1996 before its reinvention accomplished the greatest turnaround in corporate history. It took rehiring founder Steve Jobs — whose reinvention followed being pink-slipped a decade prior — to reposition the company, its product line and marketing strategy.

Struggling companies whose shortsighted and complacent management fail to reinvent can be attractive to private equity investors who believe their risk capital (not taxpayers) and expertise can enable small and sometimes-troubled companies to profitably reincarnate. Though risky and uncertain, corporate turnarounds involve losing excess weight, consolidation and the injection of new ideas and fresh money. Successful ventures yield returns commensurate with the risk and “smart money” reputations; failure assures the reverse.

When opportunistic politicians cherry-pick failures in order to compare “turnaround capitalists” to rapacious corporate raiders or “vulture capitalists,” they're themselves birdbrains whose intellectual honesty is as compromised as their intellectual capacity. Where is the advantage in stealing from yourself? That's the implication when “turnaround capitalists” are accused of looting the companies they own.

As Mr. Eastman spins in his grave and Kodak struggles with its own death spiral, ambitious politicians prey like vultures on our economic insecurity, luring votes with tales of government-insured utopia. Real leadership involves explaining that in a world characterized by constant change and where status quos lead to obsolescence, Americans have historically prospered, often in the wake of adversity, chaos and even failure. Considering the scores of American companies founded during recessionary times, Americans should be reassured that the free market on which innovation and economic dynamism depend is the key to renewed prosperity.

Unfortunately, expecting intellectually bankrupt politicians to Think Again may be futile since, as Upton Sinclair observed, “It is very difficult to make a man understand something when his salary depends on his not understanding it.”

America's New Years Resolution:Fiscal Fitness

Melanie Sturm | @ThinkAgainUSA Read Comments - 1
Publish Date: 
Thu, 01/05/2012


Politicians are like New Year's revelers whose resolutions to get fit are as habitual as their unhealthy lifestyles. The most undisciplined merrymaker continually ups the weight-loss ante —10 pounds last year, 20 pounds this year — just as undisciplined politicians alleging fiscal prudence have upped their borrowing limit 4,967 percent since 1962, 67 percent since 2009.

If you thought politicians were pummeled into fiscal restraint after last summer's debt-ceiling debacle, which led to America's credit downgrade by S&P, Think Again. In fact, 2011 ended with debt reaching the new limit of $15.22 trillion compelling Treasury to request another $1.2 trillion debt ceiling increase. This time the increase will happen easily because new rules require both House and Senate disapproval to block it — not likely.

Like a long-running soap opera whose actors change though the story line doesn't, we spend $4 billion more than we have every day — and growing. Since 2008, spending skyrocketed past our historical average of 20 percent of gross domestic product to 25 percent.

The problem isn't merely the amount of debt — though as Sen. Obama asserted before voting against the 2006 debt-ceiling increase, “Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren” — it's the size of the debt relative to our economy that reflects poor economic health. With our debt-to-GDP ratio at 100.3 percent versus 69.8 percent in 2008, we're living on “borrowed” time unless politicians stop deluding themselves that a stagnant private sector can finance a growing public sector.

The eurozone crisis offers America a timely warning that the battle of the spending and debt bulge is an existential one. Europe's saga is our “Chronicle of a Death Foretold,” except America can avert doom by slashing spending levels and lifting private-sector burdens. If Sweden, Ireland and a new reform-minded Spanish government can do both — the reverse of what we've done during the Great Recession — America should, too.

Americans agree, as 71 percent told a Rasmussen poll last week that Washington should cut spending. Absent the political will to reform entitlements and lower spending to pre-2008 levels, “the country is going through one of its longest sustained periods of unhappiness and pessimism ever,” observed Democratic pollster Mark Penn.

Distracted as we are by domestic matters including the media-hyped Republican primary horse race, Americans aren't focused on the international implications of a downgraded superpower. An America in economic distress undermines our capacity to perform the valuable role we've played since World War II — to promote global economic growth and political stability, especially among the poorest nations.

America is the most important trading partner to the world, inducing countries to adopt economic freedoms that enabled our prosperity, including limited government, property rights, free trade and a stable currency. Economically free countries enjoy greater growth, opportunity, civil rights and life expectancy, as evident on the Korean Peninsula, where South Koreans have dramatically better lives than their northern cousins, and in China, where 450 million people were lifted out of poverty after economic liberalization.

America used to rank second in the Wall Street Journal/Heritage Index of Economic Freedom (behind Hong Kong) but fell to ninth this year (below Canada, Ireland and Denmark), reflecting deteriorating business freedom, increased government spending and a weaker currency. Reversing this trend is essential to growth and job creation, otherwise we risk becoming collectively poorer as the world becomes progressively dangerous.

Dictatorial regimes, strategic adversaries and state terrorism sponsors tread more carefully when America is strong; conversely appearing weak and distracted emboldens enemies, frightens allies and undermines U.S. interests. Being a downgraded superpower renders us vulnerable and less prepared for emerging global threats including: a nuclear-hungry Iran intent on Israel's destruction and the transformation of an extraordinarily volatile Middle East; a jihadist-infested nuclear Pakistan; an increasingly militarized China to whom we owe $1.1 trillion; and a nuclear North Korea whose new, 26-year-old dictator poses many challenges.

Stuffed with pork, America suffers from the economic equivalent of arteriolosclerosis, the kind that presages fiscal heart attacks. The symptoms include the loss of our AAA credit rating, fragile business confidence, economic stagnation, persistently high unemployment rates and chaotic financial markets.

Nevertheless, a coronary isn't inevitable. Bequeathing our children a weaker, divided and vulnerable America is a choice, not our destiny. America's economy is the world's largest, producing one-quarter of global GDP, thanks to a 100-year average growth rate of 3 percent. Therefore, our singular objective should be to reclaim the growth that creates jobs and opportunity, not redistribute an ever-shrinking wealth pie nor designate economic winners and losers. First, however, we must accept that even the most prosperous nation in world history can't afford the government we've acquired.

As this election year debuts, voters must implore elected officials to Think Again — return America to “fiscal fitness” or risk being “bypassed” next November. 

Think Again

Melanie Sturm | @ThinkAgainUSA Read Comments - 1
Publish Date: 
Thu, 03/31/2011

When I told my mother that The Aspen Times had offered me this column, she was concerned I would be maligned for expressing my views. After all, elite opinion-makers often paint conservatives as bigots and worse, an unseemly prospect for her nice Jewish daughter.

Notwithstanding my mother's concern, I'm delighted for this opportunity to offer readers perspectives they might not otherwise have considered. Whether readers change their mind is less important than whether they “Think Again.” Hence, the name for this column, because I believe in Mahatma Gandhi's dictum, “In true democracy, every man and woman is taught to think for him or herself.”

What most compels me to write this column is my dismay at the gradual erosion of American values and the simultaneous rise of an entitlement culture. It's tempting to want favorable treatment while expecting someone else to pay for it. But when we displace responsibility and blame others, we stifle the inclinations that made us great. Like the frog that can't detect the source of its gradual demise, Americans must be prodded to jump out of the boiling water.

Throughout our history, we've been the “land of the free and the home of the brave,” and a beacon to the world. Rugged individualism is in our national DNA. Our nation emerged from the unlikely victory of an outmanned army led by a valiant and stoic general, George Washington, who is our greatest American icon. We're all about overcoming adversity and stiff odds to grow, innovate and progress, and it's our hardiness and brazen independence that made us the freest, most creative and most prosperous nation in world history — and the most charitable. It's in our national creed to extend the underprivileged a “hand-up,” though not a “hand-out.”

Immigrants who flocked here did so to parlay pervasive opportunity into the American Dream. I am the lucky descendent of immigrant grandparents who, through tenacity and fortitude, realized their dream of a better life in the melting pot of America.

At the same time, other countries have thrived by adopting our values and practices. In my tenure at the World Bank, I witnessed the turn-around of countries that implemented our American model of limited government and free markets, while those that rejected it were caught in a cycle of dependency, corruption, market distortion and further poverty.

It's because of our unique “American Character” that De Tocqueville coined the term ”American Exceptionalism” in 1831. He observed an America characterized by a strong work ethic, self-reliance, independence, productivity, creativity, entrepreneurialism, charity and personal responsibility. Today, these values are being displaced by a growing sense of entitlement that is not only unsustainable, it has a corrosive effect on our identity as citizens ... it makes us smaller.

As America has moved away from our founding principles (limited government, liberty, and the American work ethic) many of our citizens have become less independent, less self-reliant and more expectant. All the while, special interests have ravaged our political culture and economic viability. Politicians, interested mainly in self-preservation, indulge us by feeding unrealistic expectations for favorable treatment, like parents who don't set boundaries for their children.

But as any parent knows, a sense of entitlement is toxic because it undermines initiative and gratitude and breeds self-centeredness, unhappiness and anger, giving rise to feelings of victimization and resentment when the “toys” are taken away. If we won't tolerate a sense of entitlement in our children, why should we accept it in our fellow citizens?

We shouldn't, because these attitudes undermine everybody's economic security, propelling us toward “Greek Tragedy” — a dead-end where our national debt has grown so large, it's the greatest threat to U.S. national security, according to Admiral Mike Mullen, chairman of the Joint Chiefs. Despite the class warfare waged by unprincipled politicians, Americans know we can't simply tax the rich to meet the demands of a burgeoning and unaccountable bureaucracy.

So, I ask you to consider this advice from an old sage: “Everyone should have two pockets, each containing a slip of paper. On one should be written: ‘The world was created for me.' And on the other: ‘I am but a humble servant.' The secret of living comes from knowing when to reach into each pocket.” Currently, too many of us reach only for the paper “The world was created for me.”

President Kennedy discouraged the entitlement mentality and invoked American exceptionalism when he urged, “Ask not what your country can do for you, but what you can do for your country.” As Americans, we should “think again,” revert to the values that made us great, and reach more for the paper in our other pocket, “I am but a humble servant.”


The problem isn't GE, it's you and me

Melanie Sturm | @ThinkAgainUSA Read Comments - 0
Publish Date: 
Thu, 04/28/2011

Even with Tax Day in the rear-view mirror, many are still agog that General Electric is paying hardly any corporate income taxes, despite reporting a profit of $14.2 billion. As though GE hit the jackpot, many politicians claim to be shocked, shocked that gambling is going on here!

Lest you think Corporate America is at it again, sticking it to the little guy, please Think Again. While it's cathartic to rail against multi-nationals that legally finagle lower tax burdens, doing so misses the real culprits. If you want to censure someone for shipping jobs and capital overseas, blame our elected leaders who made the rules.

The problem isn't that companies exercise their fiduciary duty to maximize shareholder profits through creative tax avoidance. That's the symptom. The cause is the political system that incentivizes GE to conduct its business in a way that is detrimental. One should read the story of GE as a cautionary tale of perverse incentives and adverse consequences caused by intrusive government.

Whenever government intervenes in the economy, it rarely considers the law of unintended consequences, which warns that many of our problems derive from solutions to other problems we face. Well-intended policies can hurt those they were designed to help. Trade protectionism increases prices and weakens economic growth; welfare provokes dependency; and policies that deem banks “too big to fail” lead to moral hazards, and more bail-outs.

So, considering that U.S. corporate tax rates are among the highest in the world, it shouldn't surprise when U.S. corporations move operations, jobs and profits to countries with lower tax rates. Since 2002, GE eliminated 20 percent of its U.S. workforce while increasing accumulated off-shore profits from $15 billion to $92 billion.

California, previously a bastion of entrepreneurialism, opportunity and prosperity, is suffering because of high state tax rates, onerous regulations and adverse labor arrangements. According to Chief Executive Magazine, California is the worst state in America for job and business growth, which is why its unemployment rate is one-third higher than the national average as companies abandon California at a rate of 4.7 per week.

But the biggest reason for GE's negligible income tax bill is its “striking ability to lobby for, win and take advantage of tax breaks,” as noted by The New York Times. Last year alone, GE spent $39 million (that's $73,000 for each U.S. representative and senator) lobbying Congress for billions in tax breaks.

It's “crony capitalism,” not a free market, when government favors the politically connected — whether big business or big labor. This isn't the limited government our Founders crafted to secure our inalienable rights. They purposefully circumscribed (and enumerated) the powers and authority of the federal government in order to reflect the will of the people, not powerful elites. We severed ties with that other type of government on July 4, 1776.

Our Founders would be distressed today, for when our government tinkers, or worse, commands the free market, it creates dangerous conflicts of interest and moral hazards — Petri dishes for adverse consequences. Why did Wall Street banks make and sell synthetic sub-prime loans that ultimately helped precipitate the financial crisis? Because federal housing policies and government-sponsored entities like Fannie Mae and Freddie Mac spawned a seemingly profitable market in loans to people with bad credit.

Though increasing home ownership was a worthy goal, our elected leaders ignored the risks (and their duties) in order to cater to the housing and finance lobbies. Crony capitalism jeopardizes our economic futures because elected officials are motivated to govern in a way that is best for those who got them elected. This unholy alliance between politicians and their patrons undermines everyone's economic security because today's winners can be tomorrow's losers, depending on the political favors due.

Al Gore admirably conceded conflicts of interest when he announced he no longer supported corn-ethanol saying, “I had a certain fondness for the farmers in the state of Iowa because I was about to run for president.” If only elected leaders would abandon crony capitalism, it would bolster the free-enterprise system and the common good.

But first we need to abandon our unrealistic expectations of government. Next time you hear a politician exclaim, “Vote for us for free ice cream,” I hope you'll Think Again. Assume the ice cream has never been free, has actually cost us a fortune, and eating it in excess has caused our dangerously unhealthy state.

If we stop expecting government to solve all problems and meet our every need, political incentives will change. Then, not only will government serve us better, our democracy and economy will be better served.


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