http://www.u4prez.com//Blogs/ericgurr/Default.html ericgurr's Blog en-us Fri, 12 Feb 2010 13:41:17 EST Fri, 12 Feb 2010 13:41:17 EST Intralink Custom Development webmaster@u4prez.com webmaster@u4prez.com http://www.u4prez.com//Blogs/ericgurr/The-ten-biggest-threats-to-The-United-States-of-America.html The ten biggest threats to the United States Increasing terrorist threats, global warming, health care, or mounting deficits and debt. We hear the constant drumbeat from the right and left everyday. If we take the politics out of the equation, and rely on history, which of these are most likely to cause widespread chaos, and even destruction in the United States? The answers may surprise you. 10. Global warming, or the solution to global warming. While on our list global warming is the least of our concerns, the issue is still a huge threat to the United States and the entire world. If the global warming theorists are correct, history shows us that human intelligence will probably find a solution. In fact a former Microsoft executive has already found a solution that is so cheap it is literally less than a rounding error in one year of government spending. This is the sulfur dioxide solution which mimics a volcano, and though I'm by no means a scientist I have yet to uncover any serious risks with the solution. The hysteria surrounding the issue has softened somewhat, but both sides still hold steady to positions that empirically seem at best untenable. Some evidence of a warming trend is still compelling, but the near term disaster scenarios appear to have been largely exaggerated. The proposed cap and trade solution is as much a threat to The United States (near term) as global warming itself. For a comparison and to put the issue in historical context we can look to the early years of the Roosevelt administration. Roosevelt was working to solve a problem, unemployment and poverty, and inadvertently probably exacerbated the problem. By introducing uncertainty in to the business world, he caused an investment freeze that would last effectively until 1938 when the New Dealers were thrown out and stability returned to the financial markets. While Cap and Trade may not exacerbate global warming, it would have similar effect on the overall economy to Roosevelt's crack down on business, and increases in spending. Nature abhors a vacuum, and business abhors uncertainty. Cap and trade legislation will have the effect of injecting uncertainty throughout the economy. Investment in new and more efficient products and services will contract mightily until the investors can be certain a period of stabilization has arrived. Politicians world wide would be well advised to slow down the fixes, and increase the research over the next decade. 9. Intelligence gathering and foreign policy This is the most difficult for me to gauge in terms of importance. I think I could have just as easily ranked it first. Over the last 25 years I've read about 3000 books. More than 80% of them non-fiction, and of those, mostly histories of the last two or three hundred years. I do not consider myself an amateur historian, or "student of history" because I read these books, but because I often check foot notes and other sources, and read contrary opinions. As an amateur historian I thought I had a good understanding of foreign policy, diplomacy and the scope of the old KGB, CIA, MI5 and other information gathering services throughout the world.Then I read the Sword and the Shield, also known as The Mitrokhin Archive. It is the work of a form KGB archivist who diligently copied and collected thousands of pages of notes from the archives of the KGB. It is not only the most fascinating work of non-fiction I have ever read, I believe it is also the most important foreign policy book of the last 100 years. Any politician, left or right, who speaks on issues of foreign policy, intelligence gathering, or the cause and effect of war who has not read this book cannot possibly understand the big picture. There has been much debate on the issue of hiring "undesirables" for intelligence gathering. The United States and a handful of other Western countries have also shown a reluctance (at least publicly) to cross the line when it comes to intelligence gathering. The history of the KGB shows clearly that other nations and peoples do not exercise the same level of restraint. I correlate historically the KGB with the current round of extremists operating at the fringes. While they clearly may not have the technology, or the budget available to the KGB or the CIA, they have something that is actually more important. A ruthless ideological pursuit of intelligence. Unchecked the capacity to pursuit intelligence, and the value of the information collected will grow. Information will not only increase the size of terrorist operations, but the frequency. The more information your enemies have, the less costly it is for them to attack you. Thus when noted British spy Kim Philby told the Soviets not only who the agents were, but when and where they were being parachuted in to Soviet territory, the cost to stop them was a few hours of labor and gas for the truck to go pick them up. There are two sides to the intelligence sword. Diligence in protecting vital information is of course important, but just as important is counter intelligence. Without a top level security clearance it is of course difficult to assess this issue. But a few spectacular failures lead one to believe that our intelligence gathering is at best marginal. 8. Terrorist attacks Lack of intelligence and information on the enemy of course gives rise to more terrorist attacks. When an attack takes place, the human suffering extends well beyond the victims. Their families, friends and others feel a palpable loss that can of course not be properly addressed with mere words. The direct suffering is horrible, and to those like myself who believe that violence and taking of a life are the ultimate crimes it should be addressed with all resources available. But the specific and direct human suffering at loss of lfe is only part of the bigger picture. Even an unsuccessful attack exacts a heavy price on the entire nation. Trade and commerce are restricted, and the freedom of movement (one of the essentials of happiness and liberty) is also severely impacted. As the intelligence gathering and effectiveness of our enemies increases, we could see the evolution of economic terror that cripples the infrastructure of the nation. The possible scenarios are endless, and the only anti-dote is effective counter-intelligence. 7. Fiscal policy Perhaps I could better have worded this as, "lack of fiscal policy". For the lest few years it has become all to apparent that The United States doesn't really have a fiscal policy. Congress doesn't have a core set of guidelines, or even a rudimentary structured that could be considered a fiscal policy. While often listed as the greatest threat, history continuously shows us that a poor or non-existant fiscal policy is often righted by the constraints of monetary policy. If the leaders of a nation understand money and how it works, they tend to preserve the value of money. Thus when the money runs out, the spending slows, or they begin borrowing to cover the shortfall. As long as monetary policy is focused on maintaining the currency, interest rates rise and act as a backstop to excessive debt, and thus fiscal policy is again forced in to line. Lacking a fiscal policy that self imposes limits on congress, the spending, debt and printing of money do not stop until the house of cards collapses. Thus we find ourselves with a bit of a Catch-22. If our monetary policy were sound, fiscal policy could only get as bad as the cash on hand, and ability to borrow would allow. If fiscal policy were sound, we would have no need to borrow money excessively, nor would we have a need to print money. Were congress to declare any fiscal restraint, or rather limits, at all a stabilization in the money supply and debt would be at least a possibility. Without a fiscal policy the people who would buy our bonds have no way to estimate the value of the investment. 6. Debt Government debt causes a chain reaction. The domino effect first hits the big business, who must compete with the government for large sums of money, and then trickles all the way down to the young adults trying to buy that first car or home on credit, only to find that interest rates are high and choices limited. The debt spirals back on the government as pressure grows to "inflate" some of the debt away in an effort to keep interest rates low, and the voters happy. Debt also limits the flexibility of government. Large portions of the budget must be dedicated to paying the interest on the debt thus furthering pressure to cut, or scale back spending, or failing that politically unpopular choice, to print ever more money. Perhaps the most dangerous aspect of government debt is precisely the same aspect of debt that is most dangerous to business; for awhile it hides the truth. When credit is free flowing, businesses and governments make short term decisions under the false impression that they can grow themselves out of the debt, and resume real profitability. In the case of government the assumption is that with short term borrowing for a few years, the pump of the economy can be primed to pay the interest, and the principle on the debt,and eventually operate in the black. The months turn to years, and the years turn in to decades, and the gains either do not materialize, or they are plowed back in to more interest on more debt. Eventually the mountain of debt raises eyebrows and even the loan sharks won't lend money. When this situation confronts business the enterprise is forced to file bankruptcy and try to restructure debt. Those at the bottom of the pile lose everything. Governments have no such option. So they resort to printing money, or repudiating the debt. 5. Political corruption To say that politicians are corrupt is to say that the earth is round. The first politician in history may not have been corrupt, the second surely was. The problem reaches a tipping point during times of crisis. The corrupt politician becomes a corrupt human being and will do anything to hold his power. At this point in history the devils take over and while the nation may retain its original name and geographic boundaries the people stuck inside experience a level of misery unfathomable by most people in The United States. Sadly this is all too often the case and the history books are filled with the stories of death that reaches in to the millions. There is however no template for the people who become tyrants. While Lenin was a brutal ideologue, Stalin was just brutal. Hitler was a frustrated artist, and the Angka Loeu all highly educated Marxists who once in power were content to kill, maim and otherwise displace until the fear guaranteed at least their own security. And sometimes the dictators were just crazy as in the case of Sadaam Huessein and Kim Jong iL The only common thread we can find is that all were fighting for the common man. The forgotten peasant, who is just as quickly forgotten once the tyrants have power. For a thousand years prior to the twentieth century wars were waged in the name of religion. More people died in the name of God than just about any other name. In the Twentieth Century more people died in the unknown name of the common man. The Proleteriat become the cause, the motivation and ultimately the victim. The root cause of his misery was political corruption in the pursuit of unlimited power. Be it the luxurious rewards of politics, or the naked power over another human being, corruption was always the path. The corruption begins with all political corruption, selling favors. A piece of legislation that includes a new bridge or exit ramp, a favor to a senators home state, or the big prize of a favor to an entire group. Unions often the beneficiary in the twentieth century, ideaologues lately. When there are not enough voters to bribe, one politician bribes another with the promise of a prestige job should he lose the election. In this job, the lucky politician believes that he will be able to thus sell more pull and influence, and continue to line his pockets or stroke his ego. The bottom has been reached when the practice is considered nothing more than good old fashioned horse trading. The politicians quicly forget that the horses they are trading do not belong to them. But no matter, the taxpayer has grown weary of the fight. The corruption reaches the dangerous level when there are no more favors to give, and no more of the taxpayers money to hand out. He knows his end is near so he must necessarily take the ultimate step in political corruption; destroying his enemies. At first it is personal attacks, often through the back channels of a friendly media. Quickly exhausted he moves directly to the mind of his enemy. Questioning first intelligence, and then sanity. When these cards are played, he moves to have his enemies thrown to gaol, and when the jails fill up the killing begins. Santayana warned that those who fail to learn the lessons of history are doomed to repeat it. We are told that that this is the lesson of history. Santayana was a bit to vague. The real lesson of history is that when the citizens fail to protect themselves against the corruption of the political class they will surely lose their freedoms, and often their lives. 4. The decline of journalism Many rate this as a higher threat, but history again offers us some hope. While the older forms of journalism are struggling, new models which integrate television with the world wide web are growing. While the growth of media outlets has offered us new choices for news, it has also exposed and perhaps deepened the ideological bent behind the news. The left may be correct in labeling Fox news as right leaning. This is surely the case with commentators such as Beck, Hannity and O'reilly, though it is hard to consider Van Sustern a right wing ideologue. During the news portions of Fox's programming it is much more difficult to paint with the same brush. Of course Maddow and Olbermann at MSNBC are no less partisan than Fox. The truth is that Rachael Maddow often brings important issues to light. Not as a journalist, but as a commentator. Olbmermann, John Stewart, Sean Hannity and others could make similar claims, and they would be correct. No one has had more success with this than the much maligned Glenn Beck. Mr. Beck had the unfortunate luck of being correct and factual in some of his accusations against members of President Obama's staff. An exclusive with Andrew Brietbart's news outlet Biggovernment.com exposing corruption at Acorn furthered Beck's standing among the right, and raised the ire of the left. But the real story, and the real threat is that none of the recognized journalists picked up on these stories with any zeal to investigate the validity or sort through the facts and fallacies. Even more troubling is that since Matt Drudge uncovered Ms. Lewinsky's tale of the little blue dress, the recognized journalists and main stream media have not only broken no blockbuster stories, the few they attempted have blown up spectacularly. This was no more evident than with Dan Rather's amateurish reporting on the George Bush National Guard story. When the recognized journalists abandon the professional ethic they lose credibility We the people are forced to look to other venues for our news. Sometimes these venues provide a valuable service. Other times they simply feed the frenzy. The end result is that real news becomes lost and trusted only by those who are inclined to believe. If Racheal Maddow discovers that Dick Cheney has grand designs on fighting terrorism that will impact our freedom, the right dismisses the story because the messenger is a "leftist". If Glenn Beck exposes corruption within the White House that threatens the economy or our standard of living, the story is dismissed becuase the rank and file of the left have been conditioned to believe that he is a right wing nutcase. A professional journalist should feel compelled to investigate. In doing so he would find that there weren't many more critical of the Bush administration than Glenn Beck, and Ms.Maddow has expressed concern that portions of the Patriot act, still in effect under President Obama, are a threat to the freedom of all citizens. 3. The Demographic time bomb and the fatal flaw in the new health care bill. The shortfall in funding of Medicare is incorrectly estimated at anywhere form 30 to 40 trillion dollars. The reality is that no one can possibly know and the number is potentially much smaller. This thought of course goes against the grain of current conventional wisdom so I'll explain quickly. Health care costs are escalating, but much of the escalation can be tied to a few specific segments and illnesses. All of the illnesses, diabetes, cancer and heart disease are dependent on early detection and thus diagnostic tools. In the current health care legislation (which is admittedly in a state of flux) manufacturers and investors in new diagnostic and treatment equipment will be subjected to a new 2.5% tax. This tax will change the risk profile and drive investment out of the health care segment, thus increasing the cost. If logic and reason prevail ( a long shot under any political power) the tax increase would become a tax credit to increase investment in the technology and thus lower costs. The natural order of prices is to go down. This is because technology increases efficiencies and productivity, thus of course lowering price. Nowhere should this be more evident than in the health care segment. In fact, other than universty education (also largely controlled by government) it is difficult to find an area of the economy where technology has not caused prices to fall. So if Medicare costs and health care costs in general could fall drastically with the proper investment incentive, what risk do the baby boomers pose? The answer is of course social security payments. These payments are also wildly underfunded, and technology offers little in the way of cost containment. The problem is two-fold in that a small cut in the payments today, which could save the system, would probably doom the party proposing the cut, and thus drive costs even higher as politicians back track in an attempt to buy votes. In the end, this dichotomy will result in a solution that will lead to the biggest threat facing the nation, hyper inflation caused by debt monetization. In plain English; printing money. As politicians are confronted with losses during elections they will print money to keep the social security payments coming. The short term benefit will be to the politicians. The long term catastrophe will affect everyone, but in an odd twist most the burden will fall on the senior citizens relying on social security. Their payments will continue to be adjusted every year, but the money they receive will lose most of its value in the first couple of months of the increase. This is exactly what happened in Weimar Germany when workers were paid twice every day to get rid of the money as soon as possible before it lost more purchasing power. A loaf of bread in the morning will be $100, by the end of the day $200 or more is not inconceivable. For those on a fixed income, there is nowhere to turn. 2. Monetary Policy History can be misinterpreted to bend the conventional wisdom. It is a game politicians and pundits love to play to make their cases. But monetary policy offers no escape. The record is clear. Nations that print money to pay down debt will fail. The governments either collapse, as in the case of Weimar Germany, or must be held together through fear and intimidation as in modern day Zimbabwe under the financial stewardship of Gideon Gono. In ancient Rome the coinage is minted with less silver, During the heyday of the Spanish empire a huge influx of real silver from South America, Schacht in Weimar Germany and the aforementioned Gideon Gono in Zimbabwe all have take the path of inflation. All have failed the people of their nations. The United States of America has embarked on a monetary policy that is not only misguided, but dangerous. Part of the problem is the historically unique nature of the American dollar. Hundreds of billions (actually trillions) of American dollars do not circulate within the American economy. In China, the American dollars are simply held. In Zimbabwe, Syria, Lebanon, and dozens of other nations, American dollars are used as the local currency. The street vendor accepts an American dollar and gives a piece of fruit to the carpenter in the morning. At the end of the day, he takes some of those American dollars and gives them to a farmer for more fruit. The farmer takes some of his dollars and pays his workers with them. The money never comes back in to The United States, and does not even indirectly purchase American goods or services. It left the country to purchase a good or service initially, but it never returns to circulate or cause inflation. This is vitally important, and I have yet to see an economists place this in to its proper context. Printing money does not by itself cause inflation. The treasury can print ten trillion dollars tomorrow without causing any inflation at all. How? By burying the money in the ground. This is what happens every day all over the world. The faith in the American dollar still supercedes the faith in just about any other currency worldwide. For decades this has put a damper on inflation. China, Russia, Japan and other governments (more properly central banks) hold these dollars for the same reason. They believe that the dollar will always maintain some of its value. The dollars that these nations and central banks hold have been properly identified by pundits and economists as having an inflationary risk. But here again, they don't get, or at least present, the entire picture. The experts fail to factor in all of the expatriate dollars. Those U.S. dollars that act as a local currency in other nations. No one has any idea of how much money is actually out there. Estimates range from just a few billion, to hundreds of billions. The pundits and politicians believe that Ben Bernanke and Timothy Geithner have the tools and knowledge to forecast inflation and thus will apply the brakes to prevent hyper-inflation. A study of history shows us clearly that no such crystal ball exists when it comes to hyper-inflation. I CANNOT TELL YOU WHEN HYPER-INFLATION WILL HAPPEN, BUT I CAN TELL YOU HOW. AND I CAN TELL YOU THE DAY IT WILL START Hyper-inflation is generally not something that unfolds over years. There is historical precedence for it, but it is not the norm. During the Weimar years and in to World War II France was experiencing a crippling inflation, but it took decades to unfold. Because of the unique status of the dollar, we will know no such luxury. At some point in the not too distant future, one nation will begin to lose faith in the U.S. government's resolve to maintain a strong dollar. The most likely nation is China, but it need not start here. For our purposes, we'll call this nation A. This nation will decide that the risk of holding hundreds of billions of dollars is too high. On a Friday afternoon when the markets have closed in The United States, they will begin selling their dollars for euros, gold, or some other currency. On Saturday morning, nation B will see what has happened, and realize that the dollars it holds are now worth much less, and they will begin to sell. This will precipitate the crash in the dollar. The speed at which information spreads will exacerbate the effect, and by Monday morning the dollar will be in free fall. Over the course of the next few weeks, billions more dollars will start to come back in to the United States as the regional trust (think Zimbabwe) collapses, and the money is rushed in to America to buy as many goods as possible while the dollar retains some value. For a few short months (maybe only weeks) it could be the best of times. American companies will be bringing in record profits as the dollar is repatriated. When reality sets in, things will get bad. We won't be able to use these dollars to buy anything from other nations. While this may help the American car industry, the cars won't be worth much because where are you going to purchase the gasoline to drive them? Now we compound this problem with every other raw material or finished good from outside the United States and the end result is clear. I don't believe I need to go much further with this. It should be clear that hyper-inflation will lead to ruin for everyone. The nine previous threats listed are my list, but not unique. What I believe is unique is that there is a core premise to each of these problems. It's easy to say the hyper-inflation and monetary policy poses a huge threat to the United States. It is easy to show that fiscal responsibility is necessary for future growth, and that Social Security is going to straing the budget for decades to come. The question is why does this happen? Why do politicians insist on spending more money than we have, and then instead of fixing the problem, why do they resort to printing money? The answer is a dichotomy that is as old as politics itself, geopolitics. 1. Geopolitics All of the threats listed above have at their core a central premise, a nexxus of fiscal destruction if you will. The term is often used to refer to describe world politics, but a more precise meaning is political ideology that is pushed from one region or culture to another. The idea can best be described as, "I know what's best for you, and I'm going to make sure you get it." Let us use California as an example. The state is in dire financial straights to say the least. Businesses are leaving to escape the crushing tax burden, social services are on the edge of collapse, and the people of California are slowly moving from frustration to outrage. But let us take a look at just how high these taxes really are. The top tax rate on income is 10.55%, for those with incomes over $ 1 million per year, while a single making just under $50,000 per year is still taxed at 9.55%. The sales tax rate is 8.5% and varies by city. Hardly what anyone would consider a confiscatory tax rate. But when we factor in the top Federal income tax rate of nearly 40% we begin to see the problem. Right out of the gate the California family with an average income loses about half of their money to Federal income taxes, state income taxes, social security taxes and other taxes and fees. The small business owner is hit even harder. Now let's look at the amount of money received by California for all of those taxes they pay in to the system. In 2005 according to the taxfoundation.org Californians sent 289 billion dollars to Washington D.C. They recieved 242 billion dollars back. From 1996 to 2005 California sent 484 billion dollars more to Washington than it received. The public debt (the amount of money owed by the citizens of California on behalf of thier government) was less than 100 billion dollars as of third quarter 2009. How is this possible? Geopolitics is the answer. The people of California like the services the state of California provides. They have elected politicians at the state house to provide these services, and the reality is, the politicians have done a good job of delivering them. There is waste and fraud to be sure, but the services have been delivered. The problem is that a 10% state income tax rate is not enough to pay for it. So with just a 10.5% tax rate, there should be plenty of room to increase those taxes to pay for the services. Alas, geopolitics stepped in, and nullified the solution. While Californians were enjoying the services provided by their state governments, they decided that the people of Alabama, Indiana and New York could use these services as well. So they elected politicians to go to Washington D.C. and spend some more of their hard earned money so everyone else can have these services. Even if the people of the other states didn't want them. California could have (and should have) had it all. They fell in to the geopolitical trap and assumed the the rest of the nation wanted what they had, and in the process, they bankrupted themselves. What would have happened if the politicians in Washington D.C. (elected by the people of California) had said, "We do not wish to push or political positions on the people of Alabama, and thus we don't want them to have any of our money." ? Well, over the same ten year period the state of Alabama received 102 billion dollars more from Washington D.C. than they sent. And this with a population of just about 5 million people as opposed to California's 37 million people. As i mentioned during the ten years from 1996 to 2005 California's politicians in Washington D.C. took 484 Billion dollars out of the state. Had the state been just balanced in its export of political ideology the politicians in Washington would be asking California for a bailout, instead of the other way around. Had they pushed fiscal conservatism, which was in their own best interest, the state would have over one trillion dollars in financial leeway, even at current state spending levels. And this is of course a very conservative assessment. Much of federal spending originates with California's politicians and large number of electoral votes. Had this been just cut in half at the federal level, California would enjoy the trillion dollars. While Alabama was sending fiscal conservatives to Washington to represent their desires, California did not. They sent to Washington the same type of people they sent to govern their state. Geopolitics corrupted the interests of both states. Alabama should logically have elected die hard conservatives to state government (which they did) and sent liberally minded politicians like Nancy Pelosi, Barbara Boxer and Dianne Feinstien to Washington. California should have had Pelosi, Boxer and Feinstein in state government, and sent fiscally conservative Republicans to Washington D.C. Had this happened California would currently have no debt, be flush with cash and would enjoy lower tax rates. Instead of cutting social programs because of the recession, they could expand programs, and still lower taxes. The lure of geopolitics and the ambition for power of California's politicians motivated the citizens to act against their own self interests. This same dynamic plays out across the globe and has for all of recorded history. The Romans wish to push their world view on the rest of the world. The English believe the white man's burden is to bring the white man's civilization to Africa, and the people of Massachusetts wish to push their politics on the people of New Jersey. The intentions are usually good. The result is usually misery for all involved. Written by Eric Gurr gurreric@gmail.com Sun, 17 Jan 2010 00:00:00 EST http://www.u4prez.com//Blogs/ericgurr/The-ten-biggest-threats-to-The-United-States-of-America.html http://www.u4prez.com//Blogs/ericgurr/What-does-the-U4prez-election-say-about-2010.html In the 2009 election at U4prez a Republican won for the first time ever, and a fiscally conservative Independent won the independent primary. Not only that, the Independent took votes from both primary parties. U4prez has always leaned a little left, with previous elections going to moderate Democrats, or left leaning independents. Does this bode well for the GOP in 2010? Those looking ahead to the 2010 elections continue to focus on the elections of 1994. The better comparison is 1938. When we look more closely at the elections of 1994 and 1938 we come to the conclusion that not only is a GOP takeover in the house likely, it is almost a foregone conclusion. The politically oriented television shows, talk radio and the web are filled with chatter about 1994 and the Republican takeover of Congress. While there are some parallels we cannot look to 2010 without also taking a hard look at 1938. In 1994 President Bill Clinton’s approval rating was actually rising from a low of 40 in late August to 48 in late October just before the elections. This would seem to indicate that voters were pinning the blame on Congress, and not the President. In 1938 Franklin Roosevelt lost a whopping 71 house seats despite a late October approval rating of 60% which further makes the case that a Congress doesn’t need an unpopular president to cause a big loss of seats. Another interesting parallel is that the races in ‘38were largely ideologically driven, and not necessarily party driven. Roosevelt campaigned for liberal Democrats who supported the New Deal in primaries against incumbent conservative Democrats. In the end just a single conservative Democrat lost his seat. We see some pundits today arguing that President Obama’s high approval dictates that his party may not lose control of the house. As we have shown, a high approval rating will not help. Let’s first examine 1994 and the primary reasons for the shift in voter sentiment. Health Care debacle The Hillary Care legislation was perceived as a takeover, poorly constructed and done in secret. Also led the populace to believe Democrats were incompetent. Corruption The bounced checks scandal affected both parties, but was largely tied to the Democratic Party’s leadership, and resulted in the loss of the seat held by the Speaker of the House Tom Foley. Contract with America New Gingrich’s contract with America was a tangible document that voters could point to as a guide for getting the government under control These three factors combined resulted in the loss of the house despite a recovering economy. The experts were predicted big gains for Republicans, but very few saw the tidal wave of voter anger and even fewer predicted the GOP would win the House. The results for the Democrats were 52 seats lost in the house, and 8 seats in the Senate. 15 Democrats who had been elected in 1992, lost in 1994. http://en.wikipedia.org/wiki/United_States_House_of_Representatives_elections,_1994 In 2006 31 new Democrats were elected to congress. 24 more seats were captured by the Democrats in 2008. All 55 of these seats are at some level vulnerable. The story of 1938 tells us that if the economy doesn’t improve, many more will be vulnerable. Now let’s take a look at the 1938 races. In 1936 Democrats picked up seats in the House, and FDR was reelected. In 2008 Democrats picked up seats in the house and Democrat Barack Obama was elected In 1938 the primary reason for the Republican gains was the economy. The “Roosevelt Recession” had pushed unemployment back up to nearly 20%. Another issue in 1938 was that Union violence and strikes were spreading, and many of these Unions were tied to the Democrats in the minds of the voters. Today we see a similar (albeit much less violent) connection between the Democrats and SEIU, and Acorn. After four years with control of Congress, and two years of a Democrat in the White House, so far things have clearly gotten worse economically. The 1938 races were decided along ideological lines, more than party lines. Although the Republicans picked up 71 seats, the number was buttressed by the number of fiscally conservative Democrats who held on to seats, or beat Democrats who were New Deal supporters. The shift thus was widespread and put an immediate end to Roosevelt’s big government programs. The economy was much better in 1994. Some misconceptions about the past. 1978 should be used as a better guide than 1994. 1978 was actually a pretty good year for Democrats in Congress. They lost just three seats in the house, and 3 in the Senate. Jimmy Carter’s mid term however was completely different than what we expect in 2010. The unemployment rate had fallen over the last sixteen months and there were still lingering effects of Watergate. All Politics is local. When things are going well, this is true. But history shows us when the economy is bad, all politics are not local. Nor are all politics national. The lesson of history is that when unemployment is high, all politics, and all elections are decided on very personal issues. If we look at the losses in 1994, we can see that already, 55 seats should be considered high risk. Looking at some specific House races Florida The Democrats have a big problem in Florida where there are currently 10 Democrats up for reelection in 2010. Suzanne Kosmas soundly defeated Republican Tom Feeney in the 2008 election, but even she didn’t feel comfortable voting for the Health Care legislation. She did how every vote for cap and trade, so her seat is clearly in jeopardy. Perusing the blogs we find that many on the left will abandon her because she didn’t vote for the Health Care bill, but many independents are going to paint Democrats with a broad brush, and piling Cap and Trade on Top should all but insure a pick up here for the Republicans. The 24th district in Florida is an easy pickup for the GOP, as is the 8th district where Alan Grayson hails from. But this is just the beginning. In the 22nd district Ron Klein supported the health care bill. Even before he cast that vote his approval rating was slightly below 50%. In the 2nd district Allan Boyd has become a fixture, and is considered safe, but when we look a little closer we see that if the GOP offers a formidable challenge, Boyd could be shown the door. Boyd won big in 2008 but he won in a district that was carried by McCain. Wexler seat goes GOP Democrats lose 4 seats, possibly 5 Senate Republicans are hoping to pick up two or three seats in the Senate in 2010. They should be much more confident. If the races are targeted for the state, they will do quite well, and could even get control of the senate. That is a long shot, but as you will see, not as long as it was six months ago. The Senate races are even more like 1938 than the house races. There are 18 Democratic seats up for election in 2010. - Blance Lincoln Loss for Democrats , can’t get over 50% in the polls, moderate so won’t get an influx of out of state money. State Senator Bob Johnson is considering a primary challenge. Which of course will further deplete funds. The latest polls show that she trails every Republican challenger, and won in 2004 with only 54% of the vote. Pickup for GOP -Patty Murray Loss for Democrats (but it should be close if economy stabilizes) The State of Washington, which is considered solidly Blue. But in 1994 the state turned out Democratic party congressmen, including the speaker of the house Tom Foley. Washington State has an independent streak that does not bode well for Senator Murray. And the independents are leaving the Murray tent in droves. According to SurveyUSA Senator Murray had an approval rating of 56% in June which had eroded substantially to just 47% by August. According to Seattle Weekly the numbers among independent voters show a massive shift away from Murray. When we pull all of this together, and consider that this seat was considered completely safe just a few months ago, it becomes clear that Murray has a tough road ahead of her, and this will probably go GOP. -Chris Dodd loss is at this point a foregone conclusion Dodd is closely tied to the banking collapse and doesn’t lead any of his potential opponents in polls. -Harry Reid a huge loss for Democrats Reid is the Senate Majority leader and the state of Nevada has suffered from the housing collapse. Nevada has become accustomed to an always growing economy and some of the lowest unemployment numbers in the nation. As of September the unemployment rate is a whopping 13.5%. This is nearly Deperession era unemployment, and when the real numbers of people who have given up is factored in, it’s even worse. -Arlen Specter loses Specter flipped to the Democrats, but there is a real chance he may not even when the Pennsylvania primary. Pat Toomey has been in the race longer than anyone else, he is building name recognition across the state, and will win comfortably. -Kirsten Gillibrand loss in New York This is for Hillary Clinton’s old seat, and if Rudy runs, game over Gillibrand. -Illinois open seat goes Red This was a contrary pick just two or three months ago, as most believe Illinois will stay Blue. Lately polls have shown GOP contender Ron Kirk as much as seven points ahead of potential Democratic challenger Alexi Giannoulias. -Michael Bennet loses in Colorado Already trailing Jane Norton, Bennet will lose. Colorado continues to do better than than average when it comes to unemployment, but the trend they have followed since September of 2008 is the same. In other words, they started off in a better position. The voters in Colorado are not immune to the fear spreading across the rest of the nation, if the economy gets any worse, Bennet is out for sure. If things get a little better, he could retain the seat, but it looks to be a long shot at this point. Why 2010 could actually be worse than 1994 for Democrats The old bromide that all politics is local doesn't hold up in a bad economy. We see this pattern historically repeated, and 1938 was no exception. All politics and all elections are personal. The key to 2010 is the independent voter This is the current thinking and if it holds up, it is bad news for Democrats. But if we see a repeat of 1938, there is much worse news. The key will be the independent voter, and two specific types of Democratic Party voters. These are not the Reagan Democrats, rather they are people who have lost their jobs, and have no immediate hope of finding another job, or those Democrats who fear losing their jobs. When an election becomes personal all bets are off and no incumbent is safe. Fri, 27 Nov 2009 00:00:00 EST http://www.u4prez.com//Blogs/ericgurr/What-does-the-U4prez-election-say-about-2010.html http://www.u4prez.com//Blogs/ericgurr/The-Great-Collapse.html The current economic crisis is considered a recession, on the verge of depression. The reality is that we are not entering another great depression and the more proper term is "The Great Collapse". What has happened in the past, usually will happen in the future. I approach this problem not with the fuzzy mathematics of the economist but with the certainty and empirical evidence of the historian. Recessions and Depressions are trying times for the citizens of a nation. Collapses are a completely different situation. An economic collapse is followed by exponential increases in misery. The more comfortable the population at the time of the collapse, the more violent the retribution. In the United States all but two of the recessions since the Great Depression of the 1930's have been precipitated by the government and specifically the Federal Reserve Bank. These recessions were designed to slow down economic growth, and thus prevent a more serious down turn. Real recessions are usually tied to inventory adjustments. Real economic depressions are usually tied to the popping of a specific bubble, that ultimately spreads throughout the economy at large. The current and continuing crisis could correctly be tied to the bubble in housing prices, but only to a point. And we must look at a few other issues surrounding the collapse in prices to find the underlying cause of the Great Collapse. I should digress for a moment and explain my labeling as a collapse. The Great Collapse is not just a collapse in the price of houses, rather it is a collapse in residential and commercial property, a collapse in credit, and a collapse in the faith of the dollar. The Obama administration has incorrectly blamed former President Bush for this economic mess. The real culprit is the congress with the complicity of the Federal Reserve Bank and several other government agencies. All of these government entities worked in concert to expand not just credit, but credit aimed at increasing home ownership. Purchasing a home always creates a stimulative effect on the economy at large. Homeowners must have lawn movers, washing machines, painting and other maintenance supplies. When the government pushed home ownership on to people who could barely afford the payment and taxes, they failed to consider all of the other associated costs. This was compounded because from the casual outside observer it looked for awhile like every segment of the economy was growing. On closer inspection, we were spending like crazy to make a house payment, pay the new higher utility bill, and buy all the things that are required of the home owner. It was a lofty goal to be sure, but the corresponding effects ran up prices, and greatly increased the risk model of the lenders. Had the risk been naturally mitigated (through higher interest rates) much of the collapse could have been avoided. Alas government stepped in to "secure" the loans and the Mortgage Backed Securities industry exploded. Let's put this in plain English. Banks were not only encouraged, but were in many cases forced in to making very risky loans. The full faith and credit of the U.S. government was enjoined to back these loans through Fannie Mae and Freddie Mac. The loans were then packaged in to very simple (yes, they were simple) instruments and resold. When the peddlers of these packages realized how risky they actually were, they brought in mathematicians to hide the simplicity of the risk through ridiculous equations that were supposed to "balance the risk". They way they did this was by assigning arbitrary scores to the loans, and then mixing up the packages with some high scores and some low scores. While this was a brilliant marketing and sales strategy, it of course lacked any historical pretext or economic validity. Once a small number of the loans went in to default, behaviors changed and all of the loans were now at greater risk. Which loans were risky was anyone's guess. When the tipping point was reached, and a certain number of loans went in to default, the entire package of loans was worth less than what it was purchased for. In short,the balance sheet was ruined and there was no easy fix. Now any financial institution holding these devices found itself unable to lend money, and in some cases unable even to operate its business. Cash flow was negative. This negative cash flow spread throughout the economy. Companies like General Motors were not able to pay the monthly bills and service their debt load. Universities throughout the country had been training business leaders for years that business was no longer business, it was all finance. The manipulation of debt was regarded as some kind of holy grail for business success. Any small businessman or business owner from thirty years ago could have told you this was not sustainable. The collapse in real estate thus precipitated a collapse in credit, and the house of cards collapsed. The government and the Federal Reserve worked together to try to fix the balance sheets. What they did was in its most basic form enter new numbers in to the balance sheets of the banks, and removed the failed mortgages putting them on the balance sheet of the American taxpayer. They did this by printing money. Money is kind of like apples, oranges and computers, the more you have, the less it is worth. ****Why the Great Collapse is potentially so dangerous**** The credit collapse is not rebounding it is in its infancy. When the world comes to the realization that all of the new credit is being offered with newly printed money, the dollar will collapse. Once again the economists and politicians believe that we will see this coming. History tells us clearly that we will not. Currencies collapse not over a period of years or even months, but often in the span of a few days. If just one or two holders of dollars decides that they must reduce their risk the collapse will accelerate and become a final tipping point in to anarchy not just in the financial markets, but in all aspects of life. The scenario is not difficult to imagine. Suppose China were to realize that they have 1 trillion dollars at risk. They do not wish to cause a panic, but do realize that they must unload half a trillion dollars quickly and convert them to gold or Euros. At the same time Russia, or another country sees what is happening and also unloads a few hundred billion dollars. Over a single weekend the speculators world wide see what is happening and panic. They begin to sell dollars. Suddenly millions of people are trying to get rid of dollars and convert them to gold, silver, or other currencies. In the span of three days the dollar would fall to a fraction of its current value, and could conceivably collapse entirely. If the United States government follows the historical lead of Gideon Gono in Zimbabwe, Hjalmar Schacht in Weimar Germany, or countless other financial power brokers since the days of the Roman empire they will attempt to fix the short term problem by printing more dollars. This will ensure the finality of the collapse. *************************** How do we fix it? I've always like the analogy of an economy to a building. It must be built on a solid foundation. The foundation of a strong economy for more than two thousand years has been consistent. A stable currency is the bedrock of not only stability but growth. You can grow your economy only when the currency is stable. Over the past fifty years we've built an economy not on a foundation of reinforced concrete, but ballons. Balloons are more fun to use as a foundation because you just pump more air in to them, and the structure rises. The problem of course is that when one or two of the balloons pops, the rest cannot support the weight of the structure. The way we fixed problems like this in the 1800s was to let the debt be reckoned. Investors lose money, families lose homes and lending is limited to only those with sound credit, and a realistic ability to pay the money back. Families restrain their spending, businesses only borrow that which can be serviced out of positive cash flow. Those who have lost become wiser in the future. The businesses that were built on the old fashioned foundation of positive cash flow begin to prosper and grow, and within a year or two we return to prosperity. So am I advocating a return to the gold standard? No. There are two reasons that a return to the gold standard isn't the fix. First, it won't work. We simply don't have enough gold in reserve. The price of gold would jump to something on the order of $100,000 per ounce. Secondly, and this is most important, empirically there is no need for a gold standard. When we get to the core of the gold standard, gold becomes a yard stick. We don't print more money than we can back with gold at the current worldwide price. If we try to print more money we must simply pay more money to our creditors so the exercise is futile. But we can accomplish a sound currency by simply stopping the printing presses and addressing the damage that has already been done. The expansion of credit should be based on the ability to repay the loan and the profit motive. Many economists and a few politicians tie monetary policy to fiscal policy. The rest of the politicians (and I mean most of them) have no understanding at all of monetary policy or history. But this correlation to fiscal policy is not right. Monetary policy is dependent on regulatory policy much more than fiscal policy. The expansion in money supply will cause inflation once the currency begins to circulate. There is no way around it. But we can lessen the effect of inflation by decreasing regulation and thus increasing productivity. Productivity is the only antidote to inflation when money supply is increasing. Friedman and the rest of the Monetarist may have been correct in suggesting that money supply determines economic performance. Today, far too many people leave it at that. They neglect to study the underlying issues surrounding the manipulation of money supply. When it is considered, they simply tell you we must contract the money supply when the economy rebounds. To date no nation has been able to manage the contraction without causing damage somewhere else. I believe one of the biggest reasons for this is that the monetarist don't have any power over the politics. Current Fed chairman Ben Bernanke is a student of the Great Depression. I think that most of the things he espoused in the before he became chairman were correct. When he became chairman he seems to have lost his religion, much like his predecessor Alan Greenspan. Greenspan was a former Ayn Rand acolyte who became a big spending, money printing monetarist shortly after assuming his position. Bernanke once believed that if the government was to increase the money supply it should do so through tax cuts. This would have been a better approach than the targeted stimulus. The trillion dollars in stimulus money have led to an unemployment rate now well over 10% and it shows no signs of shrinking. This is because there is no computer in the world big enough to tell you how people are going to respond to the recession. Everyone acts in his own interest, and his actions are based on what he believes to be a logical outcome to the act. ****The first step is to fix the foundation***** To fix the problem, we first need to fix the currency. The best way to do this at this point is to increase productivity. We can easily increase productivity by lowering the cost of doing business. The only way for government to do this is by de-regulating. We could also increase productivity and reduce business cost by lower the cost of oil. Oil effects everything. It is the golden commodity that magically effects the cost of every other commodity. The government need do nothing but get out of the way and let the oil companies drill for oil. Stop the expansion of the money supply, and increase productivity through every means possible. ****The second step is to fix the risk model**** To do this we must slow down the spending and regulatory machine congress is creating. We need look no further than the currently proposed health care regulation. Republicans have been shouting to all who will listen that Medicare is 40 trillion dollars in debt, by which they mean underfunded, and thus we cannot pile on additional government spending or we will destroy Medicare. Very sober economists tell us that if the government were using real accounting methods, we would expose this debt and it would be "on the books". This is not true at all. Health care is much like any other industry in the modern world. Its future costs will be largely determined by technological innovation. While the promised outlays are real, the cost itself is unknown until we get closer to the date which the money will actually be spent. If innovations proceeds unfettered the cost will go down. Congress in its infinite wisdom has decided to do everything in its power to halt that innovation. THERE IS NOTHING MORE DANGEROUS IN THE CURRENT HEALTH CARE PLAN THAN THE 2.5% TAX ON MEDICAL DEVICES. This tax will create an instant barrier to investment in health care technology. To fix this problem congress should remove the tax, and lower the capital gains tax on health care related technology to a big fat 0. This is the kind of policy that lowers risk and encourages nvestment and innovation. To lower costs and increase productivity and investment throughout the rest of the economy, the capital gains tax rate should cut in half. On the health care side we would see much of the money currently sitting on the sidelines go to work finding a cure of cancer, more efficient and affordable design of medical devices, and lower cost treatment for diabetes. Imagine for just a minute how cheap health care would be if MRI machines were like computers and the cost fell by 70% or more. Health care costs would plummet. **** The third step is to prime the pump**** This is largely at odds with what I have suggested previously, and I get that. But we have so screwed up the initial stimulus spending that it has actually been counter productive. Congress and the president have been trying to prime individual pumps, or segments of the economy. The cold hard truth is that fixing roads and repairing potholes does nothing to increase productivity. Thus it has no mechanism to create real jobs. In an economic downturn today, small business creates all of the jobs. We need to prime the pump of the entire economy. Everyone needs to benefit, because we have no way of predicting the actions of people. Here is the only stimulus plan that will work. It should be paid for by cutting spending, and if congress cannot agree where to cut, it should be cut across the board at the federal level. There are more than 1 million small businesses in the United States of America. Those of you that work for a large business are still entirely dependent on small business. General Motors and General Electric cannot survive without the employees of small business buying their products and services. The stimulus price tag for one year would be three hundred billion dollars. Yes, it is big money. The money should be returned to small business. This sounds like Obama's current plan to offer tax incentives to small businesses that hire new employees. That plan will fail spectacularly. This is because small busines A, may not need more employees, it may need to purchase a new fleet of trucks, or new computers, or machine tools. If he cannot keep his current employees busy, why would he hire more, and how would that grow the economy? It will not. If on the other hand he receives a check for then thousand dollars for every employee up to ten employees, he can buy what he needs. Then the small business owner at company B who sells and installs equipment will hire people.This is Keynesianism at its finest. We cut spending and government does what it does best, gets out of the way. But we cannot simply print the money to do this. We must cut spending to pay for it. In less than three months unemployment would be falling, GDP would rise, and real productivity would be increased. If we couple this with regulatory changes, and increased incentive on investment we can fix many of the problems that confront us. Why is this so simple? Because the truth is economics is simple. Supply and demand are always dependent on productivity and cost. Today is not the day for cap and trade, new environmental regulations, and massive expansion of health care spending. Tomorrow may be that day. Today is the day to rebuild the foundation of the economy. We must do it the same way that it has been done successfully for thousands of years. From Queen Elizabeth to Ronald Reagan, we must return to the things that work. History has delivered to us the gift of a clearly lighted path. But that path has a fork in the road which is just as clearly lit. On one path our future is secure, and we enjoy our lives as we have. The other path leads to misery the likes of which we have not seen in centuries. During the Great Depression, the faith in the dollar was never in serious jeopardy. Today, this is not the case. When currencies and credit collapses, governments collapse. Nations with a history of representative government do not tend to devolve in to tyrannical and repressive governments. This is however slim consolation. A broken government does lead to persecution of those the populace believes to be at blame. It is never satisfying to blame an individual, the masses prefer to blame smaller groups. The biggest problem our nation faces has little to do with economic policy or politics in general. It has to do with our mistaken belief that stability and comfort are the norm and that freedom and liberty are generally protected. They are not. The lesson of history is not that those who fail to learn from it are destined to repeat. This nothing more than an obvious bromide used by politicians to scare you in to buying their policies. The real lesson of history is that citizens who are not diligent in protecting their freedoms will lose those freedoms, and in many cases their very lives. History shows us clearly that the natural progression of man and government is a short burst of prosperity followed by a Hobbesian existence, nasty brutish and short. We are at the historical tipping point. There is no time left. Those on the left of the political spectrum must now come to the realization that there is no money left for big government programs. There may be in the future, but you must live to fight another day. Those on the right must realize that the Republican politician in Washington does not have a good track record of over turning laws or eliminating programs. They may de-regulate, but if they return to power they will face the same pressure to print money. If you want to know if the politician is on the right track, his words should not be comforting, but honest and quite frankly a bit frightening. There is always hope for tomorrow, but hope runs thin with time. Now is the time to rally around the words of former president Bill Clinton, "It's the economy stupid." When the economy is growing and the treasury is flush with cash all things seem possible and many are possible. When the currency is devalued, the debt burden is overwhelming and businesses are regulated to the point of stifling the entire economy, nothing is possible and misery is on the only thing on the menu. Before we begin the arguments of the future, we must fix the foundation. Fri, 06 Nov 2009 00:00:00 EST http://www.u4prez.com//Blogs/ericgurr/The-Great-Collapse.html http://www.u4prez.com//Blogs/ericgurr/Good-luck-to-all-three-candidates-in-the-general-election.html This is going to be an interesting race. Our first year we had a Democrat win the election, Faustus, followed by the independent Learning conformity. It will be interesting to see if Erock can be the first Republican winner. U4prez has often been ahead of the curve politically and will be in my opinion a good indicator of what will happen in the real elections of 2010. I also would like to congratulate all of the candidates who ran for real office this year. Mduminiak ran for Mayor of his town. He did not win, and that is the norm for most candidates of public office thier first or second attempt at office. During the election we will be working on updating the site. The new changes will be rolled out one week after the general election. We have some exciting things coming up for next year. Another blog contest, a new feature (more of an expanded feature) called soundbites, and a mobile version of U4prez so you can make soundbites from anywhere. Please keep in mind that it's the elections are all in fun, but they do reflect real choices and real debate to some extent. U4prez has always stood above many of the other political sites in that all voices are heard. We are not a conservative site, a liberal site, or even a site for third parties. Rather this is a forum, and social networking site for those of you who are engaged in the political process a little more than the average Joe. Thu, 05 Nov 2009 00:00:00 EST http://www.u4prez.com//Blogs/ericgurr/Good-luck-to-all-three-candidates-in-the-general-election.html http://www.u4prez.com//Blogs/ericgurr/Bad-news-for-Obama.html The New Jersey Governor's race has been called by several news outlets and it looks as if a Republican will be elected. The last time a GOP candidate beat a Democrat in New Jersey was in 1993. Just one year later the GOP took the House of Representatives and the Senate in Washington D.C. The numbers under the covers are even scarier for Democrats. In many counties in New Jersey Republicans picked up huge vote swings over the last election in 2008. In Virginia Republicans swept all three big races. In New York it appears from early returns that the Democrat could win the house seat, but this is as worrisome as the New Jersey race. In New York's 23 district the Democrat Owens doesn't even face a Republican challenger. Despite running against a relatively unknown third party candidate the Democrat is only slightly ahead. If we use history as a guide a couple of things are becoming very clear. The big health care overhaul proposed by the Democratic leadership is now all but certain to fail, much as Hillary health care went down fifteen years ago. It also would appear that the Democrats will lose many more than the average of 17 seats in the house in a mid-term election. The GOP now appears well positioned to pick up in excess of 30 seats in 2010. If New Jersey is an indicator, the GOP could in fact take the house just as they did in 1994. Tue, 03 Nov 2009 00:00:00 EST http://www.u4prez.com//Blogs/ericgurr/Bad-news-for-Obama.html http://www.u4prez.com//Blogs/ericgurr/A-brief-summary-of-a-rather-exhaustive-analysis-of-the-house-health-care-bill.html Having just finished Gilbert’s biography of Churchill and The rise and fall of the third Reich I thought I was in position to digest the text of H.R. 3200, also known as America’s Affordable Health Choices Act of 2009. I promised a brief summary, so here it is. I am not a doctor, or health care worker of any kind, so I cannot, and will not attempt to pass any judgment on the particular details of patient care. The proposed health care legislation is a rough read, to say the least. To properly assess a plan of this size and scope you must address it holistically. When you analyze the plan as a plan and not as an amalgam of solutions the gaps in logic become profound. • There is little effort at addressing the change in demand, and consequently supply, once the plan is implemented. • This change in demand will necessarily affect the entire pricing and cost structure of businesses, which is also not addressed. This will logically lead to massive job loss in low profit margin markets like manufacturing. • There is no risk assessment strategy for the plan, and pilot testing exists for relatively few components of the plan • There is no escape hatch. If the plan fails, and ends up costing four or five times the current estimates, we are stuck with it. After reading the plan and studying it in more depth than I think many politicians have, I have come to the conclusion that the opposition to the plan is misguided. The devil is not in the details, it is in the methodology and sadly, basic financial underpinnings of the plan. In short, they do not exist. These omissions are potentially catastrophic. When you factor in the penalties and requirements of businesses, it’s difficult to see how the plan could possibly work. As the price of health care to many individuals falls, more will visit the doctor. How many more we cannot know. As the demand for services rises, the cost must rise. As the cost rises, employers are further pinched. To escape, they must cancel their offering and let employees enter the government plan. This puts further pressure on the taxpayer, and the treasury. As the money continues to dry up, businesses who do not provide insurance, will see the penalties increase, along with the premiums creating a conundrum. Every business will have a different point of failure along the cost curve. As lower profit margin businesses close, tax revenues will dry up, and of course the penalty fees from those businesses, thus further aggravating the problem. As more people enter the government option, and we get closer and closer to a single payer, there becomes less incentive for the customer to conserve cost, and demand further escalates. Any time you attempt to address a complex problem, with a complex solution you must begin with the basics of formulating that solution within a time tested framework, so as not to destroy the organization. In this case, the organization is the United States of America. The plan should thus flow as follows. 1. State your premise 2. Define specific solutions to the problems you are trying to address 3. Define clearly the methodology for implementing the solution 4. Analyze potential costs/benefits 5. Perform risk assessment 6. Create a fall back plan Throughout the entire document, there is very little mention of cost. And worse still, no attention at all given to a fallback plan if disaster strikes. When cost is mentioned, and funds allocated, they are without any substantive support for the dollar amount. When price is not mentioned, but clearly necessary, the bill attempts to defer these difficult decisions to the secretary. Thus we find: _____________________________________________________________________________ SEC. 223. PAYMENT RATES FOR ITEMS AND SERVICES. (1) IN GENERAL- The Secretary shall establish payment rates for the public health insurance option for services and health care providers consistent with this section and may change such payment rates in accordance with section 224. And from section 224 (1) IN GENERAL- The Secretary shall establish payment rates for the public health insurance option for services and health care providers consistent with this section and may change such payment rates in accordance with section 224. (3) FOR NEW SERVICES- The Secretary shall modify payment rates described in paragraph (2) in order to accommodate payments for services, such as well-child visits, that are not otherwise covered under Medicare. (4) PRESCRIPTION DRUGS- Payment rates under this section for prescription drugs that are not paid for under part A or part B of Medicare shall be at rates negotiated by the Secretary. (c) Encouraging the Use of High Value Services- To the extent allowed by the benefit standards applied to all Exchange-participating health benefits plans, the public health insurance option may modify cost sharing and payment rates to encourage the use of services that promote health and value. d) Non-uniformity Permitted- Nothing in this subtitle shall prevent the Secretary from varying payments based on different payment structure models (such as accountable care organizations and medical homes) under the public health insurance option for different geographic areas. _____________________________________________________________________________ As you can clearly see from this small sampling, no one has any idea how much all of this is going to cost. This is addressed by giving the secretary almost unlimited power to set prices. Of course this is one of the biggest mistakes politicians make when coming up with a big spending plan. It’s easy to set a price, but much more difficult to control the cost. Having established that the cost of the care is completely unknown, we now turn to an even bigger problem; the financing of this plan has very little flexibility, and there is no accounting for the change in behavior which will take place after implementation. This next piece of legislation is perhaps the worst. ________________________________________________________________________ (b) Reduction of Employee Premiums Through Minimum Employer Contribution- (1) FULL-TIME EMPLOYEES- The minimum employer contribution described in this subsection for coverage of a full-time employee (and, if any, the employee’s spouse and qualifying children (as defined in section 152(c) of the Internal Revenue Code of 1986) under a qualified health benefits plan (or current employment-based health plan) is equal to (A) in case of individual coverage, not less than 72.5 percent of the applicable premium (as defined in section 4980B(f)(4) of such Code, subject to paragraph (2)) of the lowest cost plan offered by the employer that is a qualified health benefits plan (or is such current employment-based health plan); and (B) in the case of family coverage which includes coverage of such spouse and children, not less 65 percent of such applicable premium of such lowest cost (2) APPLICABLE PREMIUM FOR EXCHANGE COVERAGE- In this subtitle, the amount of the applicable premium of the lowest cost plan with respect to coverage of an employee under an Exchange-participating health benefits plan is the reference premium amount under section 243(c) for individual coverage (or, if elected, family coverage) for the premium rating area in which the individual or family resides. (3) MINIMUM EMPLOYER CONTRIBUTION FOR EMPLOYEES OTHER THAN FULL-TIME EMPLOYEES- In the case of coverage for an employee who is not a full-time employee, the amount of the minimum employer contribution under this subsection shall be a proportion (as determined in accordance with rules of the Health Choices Commissioner, the Secretary of Labor, the Secretary of Health and Human Services, and the Secretary of the Treasury, as applicable) of the minimum employer contribution under this subsection with respect to a full-time employee that reflects the proportion of-- (A) the average weekly hours of employment of the employee by the employer, to (B) the minimum weekly hours specified by the Commissioner for an employee to be a full-time employee. (4) SALARY REDUCTIONS NOT TREATED AS EMPLOYER CONTRIBUTIONS- For purposes of this section, any contribution on behalf of an employee with respect to which there is a corresponding reduction in the compensation of the employee shall not be treated as an amount paid by the employer. _______________________________________________________________ Why is this so bad? Because no two businesses are exactly the same, and a financial consulting firm operates on a wildly different profit margin than a twenty person landscaping business. For the manufacturer operating on a thin profit margin, there is no escape. If you are currently paying more than 35% of the total premium for your dependent care, you will be paying less if the bill is passed. That’s good right? Not if the company you work for is operating on a thin profit margin, and can’t afford to pay you at your current salary level, and provide health insurance at this premium level. He could not legally lower your salary to cover his loss. You are simply out of a job. That is the employer’s only option. Should the employer decide to drop coverage entirely he is faced with the 8 percent tax, if total payroll is above $400,000 ___________________________________________________________________ SEC. 412. RESPONSIBILITIES OF NONELECTING EMPLOYERS. ‘(c) Employers Electing to Not Provide Health Benefits- ‘(1) IN GENERAL- In addition to other taxes, there is hereby imposed on every nonelecting employer an excise tax, with respect to having individuals in his employ, equal to 8 percent of the compensation paid during any calendar year by such employer for services rendered to such employer. ‘(2) EXCEPTION FOR SMALL EMPLOYERS- Rules similar to the rules of section 3111(c)(2) shall apply for purposes of this subsection. __________________________________________________________________ Now that you are out of work you are forced in to the government option. Even if you start your own business and wish to purchase your own insurance you legally cannot. ___________________________________________________________________ (1) LIMITATION ON NEW ENROLLMENT- (A) IN GENERAL- Except as provided in this paragraph, the individual health insurance issuer offering such coverage does not enroll any individual in such coverage if the first effective date of coverage is on or after the first day of Y1. __________________________________________________________________ Could the plan still work? There is absolutely no way of knowing. I cannot know, President Obama cannot know, and neither the Democrats nor Republicans in congress can tell you if this plan will work or not. Without a detailed financial analysis, a pilot program, analysis of the pilot program results and much more attention to detail on the potential behavioral changes, no one can possibly know. It could work as advertised, but this seems highly unlikely. It could entirely wreck the financial system of the United States, but this is also unlikely, as it would be abandoned long before it reached that point. Or one would hope. The most likely scenario is that the plan will cost significantly more money than the 1 trillion dollars estimated over the next ten years. But this is just the icing on the cake, and is related only to the changes in behavior. If the fees and penalties for business are excessive, or if they change frequently, the cost will skyrocket as more people lose their private option and are forced in to the public option. Again, without much more detailed financial analysis, and a pilot program, it is impossible to know. Is there a solution? At this point I cannot conceive of any solution without a detailed cost analysis, and the results of a pilot program. There is no effective way to determine the behavioral changes among the people who will now have health insurance, or the businesses who will see a drastic change in cost structure. Business is so restricted under the plan that it is logical to expect many will simply cancel policies for their employees. If the plan were implemented in a single state, which represents a realistic cross section of America, we may have a foundation to build upon. Without this information everything is just a guess. A final note: When I say that we cannot know the outcome I don’t mean “I” cannot know. Or you and I cannot know. I mean there is no logical way for anyone to know with any degree of certainty how much this will cost. If a politician tells you he is sure this will not cost more than X number of dollars, he is lying. We can argue the finer points of the proposed legislation, we cannot argue the cold hard facts. The cold hard facts are that no financial analysis is possible at this time. This is the state of business ventures every day. This is why we create fall back plans, and perform a risk assessment and cost/benefit analysis. But this is not a business venture. This plan affects your health, your life, and the lives of every citizen of the United States of America. The only logical next step is to stop, re-evaluate and at least come up with some benchmarks and a fall back plan. Anything short of this is irresponsible. I have included below some of my notes, and excerpts from the bill which support my positions. We begin our analysis with Division A of the bill referred to as “Affordable Health Choices”. ____________________________________________________________________________ (a) Purpose- (1) IN GENERAL- The purpose of this division is to provide affordable, quality health care for all Americans and reduce the growth in health care spending. (2) BUILDING ON CURRENT SYSTEM- This division achieves this purpose by building on what works in today’s health care system, while repairing the aspects that are broken. (3) INSURANCE REFORMS- This division-- (A) enacts strong insurance market reforms; (B) creates a new Health Insurance Exchange, with a public health insurance option alongside private plans; (C) includes sliding scale affordability credits; and (D) initiates shared responsibility among workers, employers, and the government; so that all Americans have coverage of essential health benefits __________________________________________________________________________ Now at this point I was expecting to see some summary costs, fees, etc. Alas I was disappointed. I continued reading the document and found by the time I had reached Subtitle B Public health insurance option, still no cost estimates. But I did find this, which is actually good news. ____________________________________________________________________________ (b) Offering as an Exchange-participating Health Benefits Plan- (1) EXCLUSIVE TO THE EXCHANGE- The public health insurance option shall only be made available through the Health Insurance Exchange. (2) ENSURING A LEVEL PLAYING FIELD- Consistent with this subtitle, the public health insurance option shall comply with requirements that are applicable under this title to an Exchange-participating health benefits plan, including requirements related to benefits, benefit levels, provider networks, notices, consumer protections, and cost sharing. (3) PROVISION OF BENEFIT LEVELS- The public health insurance option-- (A) shall offer basic, enhanced, and premium plans; and (B) may offer premium-plus plans. ____________________________________________________________________________ The public option must adhere to the standards outlined for the private option, and they shall offer basic, enhanced and premium plans, and maybe even premium-plus plans. (The premium-plus plans I’m sure will be provided to members of congress, but that’s another story). And finally just under the above section we arrive at section 222 premiums and financing. Now we are getting somewhere. Well, perhaps not. ___________________________________________________________________________ SEC. 222. PREMIUMS AND FINANCING. (a) Establishment of Premiums- (1) IN GENERAL- The Secretary shall establish geographically-adjusted premium rates for the public health insurance option in a manner-- (A) that complies with the premium rules established by the Commissioner under section 113 for Exchange-participating health benefit plans; and (B) at a level sufficient to fully finance the costs of-- (i) health benefits provided by the public health insurance option; and (ii) administrative costs related to operating the public health insurance option. (2) CONTINGENCY MARGIN- In establishing premium rates under paragraph (1), the Secretary shall include an appropriate amount for a contingency margin. What is the appropriate amount for the contingency margin? Isn’t this rather important? (b) Account- (1) ESTABLISHMENT- There is established in the Treasury of the United States an Account for the receipts and disbursements attributable to the operation of the public health insurance option, including the start-up funding under paragraph (2). Section 1854(g) of the Social Security Act shall apply to receipts described in the previous sentence in the same manner as such section applies to payments or premiums described in such (2) START-UP FUNDING- (A) IN GENERAL- In order to provide for the establishment of the public health insurance option there is hereby appropriated to the Secretary, out of any funds in the Treasury not otherwise appropriated, $2,000,000,000. In order to provide for initial claims reserves before the collection of premiums, there is hereby appropriated to the Secretary, out of any funds in the Treasury not otherwise appropriated, such sums as necessary to cover 90 days worth of claims reserves based on projected enrollment. (B) AMORTIZATION OF START-UP FUNDING- The Secretary shall provide for the repayment of the startup funding provided under subparagraph (A) to the Treasury in an amortized manner over the 10-year period beginning with Y1. (C) LIMITATION ON FUNDING- Nothing in this section shall be construed as authorizing any additional appropriations to the Account, other than such amounts as are otherwise provided with respect to other Exchange-participating health benefits plans. ___________________________________________________________________ Two billion dollars is allocated for initial claims, and no further funding is authorized. The obvious question is; If this is not enough money, how do the doctors, nurses, and hospitals get paid? _____________________________________________________________________ From Division D Public health and workforce development Development SEC. 2002. PUBLIC HEALTH INVESTMENT FUND. (a) Establishment of Funds (1) IN GENERAL- There is established a fund to be known as the ‘Public Health Investment Fund’ (referred to in this section as the ‘Fund’). (2) FUNDING- (A) There shall be deposited into the Fund-- (i) for fiscal year 2010, $4,600,000,000; (ii) for fiscal year 2011, $5,600,000,000; (iii) for fiscal year 2012, $6,900,000,000; (iv) for fiscal year 2013, $7,800,000,000; (v) for fiscal year 2014, $9,000,000,000; (vi) for fiscal year 2015, $9,400,000,000; (vii) for fiscal year 2016, $10,100,000,000;Comments (viii) for fiscal year 2017, $10,800,000,000;Comments (ix) for fiscal year 2018, $11,800,000,000; and (x) for fiscal year 2019, $12,700,000,000.Comments (B) Amounts deposited into the Fund shall be derived from general revenues of the Treasury. (3) BUDGETARY IMPLICATIONS- Amounts appropriated under this section, and outlays flowing from such appropriations, shall not be taken into account for purposes of any budget enforcement procedures including allocations under section 302(a) and (b) of the Balanced Budget and Emergency Deficit Control Act and budget resolutions for fiscal years during which appropriations are made from the Fund. _______________________________________________________________________ Now the above section is critical to the entire health care bill. This is because of course with an increase in coverage; we can expect some corresponding increase in services demanded. With an increase in demand, must come an increase in supply, and this is partially covered under this section. What we find is a well thought out overall strategy, with an absolutely amateurish approach to the funding. For starters, the allocation is completely backwards. When facing an unknown, it is always best to front load your effort. In other words, the money allocated for 2019, should have been allocated for 2010. This is just common sense problem resolution and risk assessment. To be completely fair, I did find one area where an increase in demand is accounted for. ________________________________________________________________________ SEC. 1147. PAYMENT FOR IMAGING SERVICES. (a) Adjustment in Practice Expense to Reflect Higher Presumed Utilization- Section 1848 of the Social Security Act (42 U.S.C. 1395w) is amended-- (1) in subsection (b)(4)-- (A) in subparagraph (B), by striking ‘subparagraph (A)’ and inserting ‘this paragraph’; and (B) by adding at the end the following new subparagraph: ‘(C) ADJUSTMENT IN PRACTICE EXPENSE TO REFLECT HIGHER PRESUMED UTILIZATION- In computing the number of practice expense relative value units under subsection (c)(2)(C)(ii) with respect to advanced diagnostic imaging services (as defined in section 1834(e)(1)(B)), the Secretary shall adjust such number of units so it reflects a 75 percent (rather than 50 percent) presumed rate of utilization of imaging equipment _________________________________________________________________________ But it turns out this is actually just as troubling. If the bill anticipates this big of an increase in utilization of imaging equipment, does it not follow that everything else should go up at least this much? Because the health insurance plan offers greater access to health care services, and the cost of these services (the price) has changed, we know from years of study that the behavior of the consumers will change. But there is no way to even hazard an educated guess as to how much it will change. As with every single dollar allocated to the program, they are simply haphazard guesses with absolutely zero statistical analysis behind them. We see the problem repeated just below for community health centers and the national health service corps. _________________________________________________________________________ TITLE I--COMMUNITY HEALTH CENTERS SEC. 2101. INCREASED FUNDING. Section 330 of the Public Health Service Act (42 U.S.C. 254b) is amended-- (1) in subsection (r)(1)-- (A) in subparagraph (D), by striking ‘and’ at the end; (B) in subparagraph (E), by striking the period at the end and inserting ‘; and’; and (C) by inserting at the end the following: ‘(F) Such sums as may be necessary for each of fiscal years 2013 and 2019.’; and (2) by inserting after subsection (r) the following: ‘(s) Additional Funding- For the purpose of carrying out this section, in addition to any other amounts authorized to be appropriated for such purpose, there are authorized to be appropriated, out of any monies in the Public Health Investment Fund, the following: ‘(1) For fiscal year 2010, $1,000,000,000. ‘(2) For fiscal year 2011, $1,500,000,000. ‘(3) For fiscal year 2012, $2,500,000,000. ‘(4) For fiscal year 2013, $3,000,000,000. ‘(5) For fiscal year 2014, $4,000,000,000. ‘(6) For fiscal year 2015, $4,400,000,000. ‘(7) For fiscal year 2016, $4,800,000,000. ‘(8) For fiscal year 2017, $5,300,000,000. ‘(9) For fiscal year 2018, $5,900,000,000. ‘(10) For fiscal year 2019, $6,400,000,000.’. TITLE II--WORKFORCE Subtitle A--Primary Care Workforce PART 1--NATIONAL HEALTH SERVICE CORPS SEC. 2201. NATIONAL HEALTH SERVICE CORPS. (a) Fulfillment of Obligated Service Requirement Through Half-Time Service- (1) WAIVERS- Subsection (i) of section 331 (42 U.S.C. 254d) is amended-- (A) in paragraph (1), by striking ‘In carrying out subpart III’ and all that follows through the period and inserting ‘In carrying out subpart III, the Secretary may, in accordance with this subsection, issue waivers to individuals who have entered into a contract for obligated service under the Scholarship Program or the Loan Repayment Program under which the individuals are authorized to satisfy the requirement of obligated service through providing clinical practice that is half-time.’; (B) in paragraph (2)-- (i) in subparagraphs (A)(ii) and (B), by striking ‘less than full time’ each place it appears and inserting ‘half time’; (ii) in subparagraphs (C) and (F), by striking ‘less than full-time service’ each place it appears and inserting ‘half-time service’; and (iii) by amending subparagraphs (D) and (E) to read as follows: ‘(D) the entity and the Corps member agree in writing that the Corps member will perform half-time clinical practice; ‘(E) the Corps member agrees in writing to fulfill all of the service obligations under section 338C through half-time clinical practice and either-- ‘(i) double the period of obligated service; or ‘(ii) in the case of contracts entered into under section 338B, accept a minimum service obligation of 2 years with an award amount equal to 50 percent of the amount that would otherwise be payable for full-time service; and’; and (C) in paragraph (3), by striking ‘In evaluating a demonstration project described in paragraph (1)’ and inserting ‘In evaluating waivers issued under paragraph (1)’. (2) DEFINITIONS- Subsection (j) of section 331 (42 U.S.C. 254d) is amended by adding at the end the following: ‘(5) The terms ‘full time’ and ‘full-time’ mean a minimum of 40 hours per week in a clinical practice, for a minimum of 45 weeks per year. ‘(6) The terms ‘half time’ and ‘half-time’ mean a minimum of 20 hours per week (not to exceed 39 hours per week) in a clinical practice, for a minimum of 45 weeks per year.’. (b) Reappointment to National Advisory Council- Section 337(b)(1) (42 U.S.C. 254j(b)(1)) is amended by striking ‘Members may not be reappointed to the Council.’. (c) Loan Repayment Amount- Section 338B(g)(2)(A) is amended (42 U.S.C. 254l-1(g)(2)(A)) by striking ‘$35,000’ and inserting ‘$50,000, plus, beginning with fiscal year 2012, an amount determined by the Secretary on an annual basis to reflect inflation,’. (d) Treatment of Teaching as Obligated Service- Subsection (a) of section 338C (42 U.S.C. 254m) is amended by adding at the end the following: ‘The Secretary may treat teaching as clinical practice for up to 20 percent of such period of obligated service.’. SEC. 2202. AUTHORIZATIONS OF APPROPRIATIONS. (a) National Health Service Corps Program- Section 338 (42 U.S.C. 254k) is amended-- (1) in subsection (a), by striking ‘2012’ and inserting ‘2019’; and (2) by adding at the end the following: ‘(c) For the purpose of carrying out this subpart, in addition to any other amounts authorized to be appropriated for such purpose, there are authorized to be appropriated, out of any monies in the Public Health Investment Fund, the following: ‘(1) $63,000,000 for fiscal year 2010. ‘(2) $66,000,000 for fiscal year 2011. ‘(3) $70,000,000 for fiscal year 2012. ‘(4) $73,000,000 for fiscal year 2013. ‘(5) $77,000,000 for fiscal year 2014. ‘(6) $81,000,000 for fiscal year 2015. ‘(7) $85,000,000 for fiscal year 2016. ‘(8) $89,000,000 for fiscal year 2017. ‘(9) $94,000,000 for fiscal year 2018. ‘(10) $98,000,000 for fiscal year 2019.’. __________________________________________________________________________ Both of these sections attempt to address the supply side issue of the equation, yet both are more heavily loaded in the out years. This is an exponential problem, because it takes four years for someone to become a nurse. And of course many more years to become a doctor. The health care clinics that could off load hospitals in the early and frantic years of the legislation are more heavily funded ten years from now. Eric Gurr is the founder and operator of U4prez.com. He can be reached at gurreric@gmail.com Wed, 12 Aug 2009 00:00:00 EST http://www.u4prez.com//Blogs/ericgurr/A-brief-summary-of-a-rather-exhaustive-analysis-of-the-house-health-care-bill.html http://www.u4prez.com//Blogs/ericgurr/What-if-healthcare-reform-fails.html The one question that must be answered is not being asked. The current debate over the democrats health care reform proposal has become as emotional as the debate over the war in Iraq. Both sides are making some very good points. But there is one question that must be addressed. What if it doesn't work? What if this bill destroys an already shaky economy, and makes life even worse for those it is intended to help? This is not as far fetched as it sounds. This plan could, if enacted, knock the foundation from out of an already struggling economy, and push us in to another Great Depression. We could see a return to 33% unemployment, 50% under-employment, and the remainder under constant pressure and stress. A FEW THINGS THE REPUBLICANS, DEMOCRATS AND PUNDITS AREN'T TELLING YOU There are plenty of green shoots to give us reason for optimism. These green shoots are not the ones the Wall street financiers and their friends are looking for, they are the old fashioned green shoots that have stood the test of time for centuries. Personal savings rates are rising, and personal debt is slowly falling. This is always a solid foundation for a recovery. Savings must go up, and debt must fall before orders for goods and services recover completely. Despite what all the famous economists and politicians say, this point is not debatable. Both groups would do well to study a little factual history to place theoretical economics in context. Because this is the case, we must tread lightly when it comes to spending more money. (We being the government of the United States.) Massive amounts of debt have been heaped upon future generations of Americans over the last few years. But what they aren't telling you is that our generation already has a huge obligation to pay in public debt. HOW THE CURRENT PLAN COULD DESTROY THE ECONOMY, AND HOW TO FIX IT With the rosiest of scenarios, the plan will cost upwards of 1 trillion dollars over the next ten years. Half of this cost will be paid for with a surtax on wealthy Americans. The truth of the matter is that the surtax on wealthy Americans must be used to pay for the coming shortfall in Social Security payments, and it's a small down payment on the amount that is really needed. There is no mathematical formula that shows any of this new health care spending can be paid for, even with larger tax increases. I MUST REPEAT THIS SO YOU UNDERSTAND IT CLEARLY. THERE IS NO MATHEMATICAL EQUATION THAT SHOULD EVER LEAD YOU TO BELIEVE THAT THIS HEALTH CARE PLAN CAN BE PAID FOR OUT OF ANYTHING OTHER THAN DEBT. THE AGING POPULATION OF BABY BOOMERS MAKES THIS IMPOSSIBLE. With the economy currently under water, it makes even less sense to embark on a program that could cost more jobs, and thus further erode the tax base. This Catch-22 has not been discussed by the Democrats, which is understandable, but what's more confusing is even the Republicans have not brought up the issue. We like to believe that our elected politicians are among the best and brightest the nation has to offer. This is not the case. Any decision which requires an investment on the scale of this health care reform bill demands a serious risk analysis study. This has not been done. When you start to consider the failure of this plan (as relates to the economy at large) you begin to see the danger. If the plan fails, the economy follows suit. What is failure? It's not as hard to fathom, and it's not at all unlikely, as you may believe. If the plan reduces health care costs of the average American, it is not immediately a success. If this lowering of costs, results in even a modest increase in unemployment, we will have unleashed a chain reaction, which will cause an economic implosion. We currently teeter on the brink of recovery, and a further slogging along with a jobless recession that could last years. If the health care reform bill is passed, it could very easily push us off of the path of recovery, and in to the Greatest of Depressions. As companies cut back to recover the cost of rising taxes, more homeowners go under water, and stop spending money, which causes even more people to lose jobs, homes, and ultimately health care. WHAT IS THE SOLUTION? This is the worst possible time to try out a massively expensive plan, the economy is not strong enough to sustain a failure. I believe both parties, and most Americans would like to see a health care safety net. To be fair, this would benefit the middle class much more than it would the wealthy or the poor, but it would solve the biggest problem, which is financial ruin due to a catastrophic illness. We could afford a plan to cover a catastrophic illness. This would probably cost about one tenth of the current plan and could kick in when an individual or family incurs costs exceeding ten thousand dollars per year. At ten thousand, you may need a ten year loan to pay it back, but it could be done by most in the middle class. We must then shelve the idea of addressing health care on such a large scale as is currently proposed until such time as the economy is growing, jobs are being added, and both public and private debt are shrinking. Until then, any government plan at all that requires massive amounts of cash, is a risk to every American. Before lending your support to this plan, or any health care plan which costs this much money we must ask the one tough question. What if it doesn't work? Fri, 24 Jul 2009 00:00:00 EST http://www.u4prez.com//Blogs/ericgurr/What-if-healthcare-reform-fails.html http://www.u4prez.com//Blogs/ericgurr/The-economy-now-belongs-to-Obama.html The massive tax increase surrounding the "climate change bill" has passed the congress. Obama's most adventurous economic gamble is now on its way to the Senate where Republican's have no voice to speak of. The most interesting thing about this bill is the effect it will have on the working poor and middle class. Only 44 Democrats stood with working class Americans to try and stop the tax increase. In the end, it wasn't enough. No longer can President Obama say he inherited a bad economy. It now belongs to him for better or worse. This radical change in American industry, manufacturing and energy policy will have profound effects for years to come. In another broken campaign promise, only Democrat Nancy Pelosi read the bill according to some reports. Congressman John Boehner, Ohio Republican, tried desperately to at least allow for some debate on the measure, but was over ruled by Democrats anxious to stick heavy tax increases on many of the companies the taxpayers just spent billions bailing out. The stock market as a forward looking indicator is expected to trend down over the next several months as fallout of the bill becomes clear to investors. The only question left is has Obama along with the liberal Democrats just opened the door for massive gains by Republicans in 2010, as the tax increase under Clinton did in 1994. Fri, 26 Jun 2009 00:00:00 EST http://www.u4prez.com//Blogs/ericgurr/The-economy-now-belongs-to-Obama.html http://www.u4prez.com//Blogs/ericgurr/The-Republicans-biggest-mistake.html The Republican leadership (whoever that is) has a problem. The party has lost power across the board in Washington D.C. and in many states. The politicians in the party are divided over what needs to be done to regain power. Some advocate a return to conservative principals, neocons still push national defense as the primary issue, and still others believe the party must take a small turn to the left. The top of the party is clearly divided, and the Democrats love to talk about it. The media is also reporting on this divide and the lack of a clear leader. As the owner of a political website, and someone who spends a good bit of time on political websites like u4prez.com, freerepublic.com, and other sites with political discussion like digg.com and reddit.com, I've discovered that the rank and file Republicans aren't so confused. Gay marriage, and a handful of other social issues may be areas of concern, but the grass roots is strongly united on fiscal responsibility and low taxes. So how did the Republicans lose so much, so quickly? The mistake the Republican leadership is making has its roots at the dawn of the Reagan administration. Since the 1980s, the party has defended its free market position without defining exactly how free markets work in an economy, and how a free market capitalist society is defined. The Democrats have exploited this fatal flaw, and allowed the Republicans to be defined as pro business, while the Democrats define themselves as for the working poor and middle class. Recent events have shredded this notion, and it has become clear that the pro business (at least big business) party is clearly the Democrats. The mistake is this: The free market is determined by the people who buy things, not the people who sell them. How do Republicans fix this? To regain confidence, and start winning elections again, the Republicans have a bit of teaching to do, and a bit of marketing. They will need to explain to the American people not only why free markets are not pro business, but in fact, how the free market system is the only system that is actually designed to give the power to the people. It's not that free marketers are anti-business, it's just that government has no responsibility for ensuring a businesses success. General Motors and Chrysler went bankrupt because the people of the United States told them they must go bankrupt. Their products were deemed by you to hold less valuable than Ford, Toyota, Honda and other competitors. The bailout of these companies at the hands of the Bush and Obama administrations was clearly against the will of the people. The Republicans must explain the principles of free market capitalism and uphold them vigorously. When the citizens stop buying products or services from a company, the company must fix the product/price value, or go out of business. Neither the government nor the executives at General Motors decide what type of car to make, and how much to charge for it. Under free market capitalism that job belongs to the people. The people should decide not only what kind of cars are built, but also what kind of crops are grown, what kind of health insurance policies are created, how much debt a company can hold, and how much we pay for any good or service. When the government attempts to regulate or control business, it is granting a benefit to one business over another. Some regulation is necessary. In a complete laissez-faire capitalist system, there would be no safety regulations, and this of course would be dangerous. But we can still have free markets, and freedom cannot exist without free markets. You don't have much power. It's a hard pill to swallow, but its true. Local state and federal governments along with the judicial system arbitrate much of your life. But the power you should have, is the power over what you do with your money, which is the fruit of your labor. You have the right to decide if GM, Ford, Citibank, or the small hardware store on the corner goes bankrupt, or otherwise out of business. This right is one you must fight for, or you've lost everything. But there is more to it than just your freedom to decide what you buy and how much you pay for it. Republicans have also missed an opportunity to show why free markets are more efficient. No group of government employees can put the wide variety of products on the shelf as efficiently as the people. When the free market decides that we don't want to eat asparagus anymore, the grocery store figures it out in a matter of days, and stops buying asparagus from the asparagus farmers. The farmers quickly realize they must change crops, or they will be out of business, and prices are kept low. When the government decides, it takes meetings, the collection of data from different sources and regions, and one must navigate the political waters. If asparagus farmer A, donated to the politician, he is going to be subsidized, with your money. You'll pay for the asparagus whether you want it or not. We see this unfolding with the auto dealers who are being shut down. The Republicans have told the American people for thirty years that they are in favor of less government intervention in business, and more free market capitalism. Now it's time to tell them why. The opportunity to show clearly that free markets (and thus the Republican party) are the party of the middle class, and that big government intervention is pro big business is here. The evidence is in front of every American, every day. If the Republicans lose this opportunity, they will never get it back. Wed, 17 Jun 2009 00:00:00 EST http://www.u4prez.com//Blogs/ericgurr/The-Republicans-biggest-mistake.html http://www.u4prez.com//Blogs/ericgurr/Hyperinflation-bankruptcy-and-the-United-States.html If you listen to the pundits, the economists and the politicians, we are about to enter a period of deflation, hyperinflation, a rebound in the economy, or another Great Depression. And for every opinion there is an expert refuting that opinion. What does history tell us about the future? Over the last week or two one of the biggest stories has been this article by Ellen Brown http://www.globalresearch.ca/index.php?context=va&aid=13673. Brown makes the case that Hjalmar Schacht let the cat out of the bag and said the real reason for hyperinflation in Germany was speculation, and not government printing of money. This story is old news, and in fact was told often in the 1920s by Eastern Germans. These folks (or Volks if you will) blamed Jewish speculators. The reality is a bit more boring. Schacht as president of the Reichsbank introduced a new Reichsmark based on Gold and able to be negotiated outside the country. The Germans also stopped printing any new money, and cut government spending drastically. This is exactly what Keynes told the Germans to do in 1922. It just took them 18 months to get the lesson. Once a currency is tied to gold or otherwise stabilized, the speculation ends. When I hear a pitchman for gold say the value of gold will rise I can't suppress a chuckle. The value of gold has never changed, the value of the dollar falls, and so the price of gold in relation to the currency under attack falls. In short, speculation was only a symptom of hyperinflation, not the cause, and Weimar's hyperinflation was caused by the same forces that caused Austrias, and Zimbabwe later on in the century. Government spending, borrowing and printing too much money. There are really two lessons here. The first is of course speculation is by-product of a weak currency, it doesn't cause inflation, and in fact in a stable currency, it cannot. The other lesson is just as important. Many politicians around the world are citing keynesianism as the premise for increasing the money supply. This isn't stretching Keynes, it is simply a lie. Keynes knew that printing money and rampant spending would cause inflation and after a point hyper-inflation. There exists no theory of economics, and no mathematical equation that would allow a nation to expand its money supply at the levels we are seeing, without a corresponding rise in productivity. So what will happen in The United States? The historian will tell you that inflation is a certainty. But hyper-inflation is not yet inevitable. To understand what is really happening you'll need to understand one thing about hyper-inflation. It is in fact a form of bankruptcy. Perhaps I could word it better by saying it is an attempt by politicians to avoid bankruptcy. And we all know what bankruptcy is, right? Here we have a slight problem. It turns out most of us don't understand what bankruptcy really represents. Bankruptcy is not when you run out of money, it is when you run out of resources. General Motors is the perfect example of this "new" bankruptcy definition. They ran out of money, but few if any resources were sold off to raise money. The United States may very well experience hyper-inflation and the horrors accompanying a mass devaluation. If we do,it will have been a tragic failure of our politicians to understand basic economics, and recent history. To avoid the slow starvation and strangulation of hyper-inflation, we will of course need to stop printing money, and cut the budget. But to suggest that the damage is done isn't really true. The United States is rich in resources, both natural and human. Unleashing these resources will boost productivity, and increase the value of the currency. The exploitation of natural resources has gotten a bad reputation lately. But this is just clap trap. Every dollar ever created has at its root the exploitation of natural resources. The politicians in Washington could get away with increasing the money supply without causing hyper-inflation, if they started a massive effort of deregulation of exploitation of natural resources, and human resources. As the economy starts to rebound, we would need to cut government spending at all levels, and begin to pull money back out of circulation. History tells us this won't happen until the people have suffered severe back pain as a result of hauling wheel barrows full of currency to the market three times every day, lost their life savings, and sunk to a level of misery that affords no lee-way to the progressive politician. Tragically the interregnum is usually marked by scapegoating and either race or class warfare that exponentially increases the destruction. THE BRIGHT SPOTS AND HOPE FOR THE FUTURE. The United States has a wealth of resources to exploit, and the rule of law usually returns from its vacation just in time to save the nation. Much of the money government spends doesn't really help anyone but the government bureaucrat receiving a paycheck to administer the program. And so deep cuts are never as painful as the politicians believe. The rugged individual is in-bred in most Americans. We are a nation that still believes strongly in individual responsibility and a strong work ethic. The United States has a great track record over the last four or five decades of avoiding race and class blaming. By the time Hitler took over Germany, anti-semitism had been festering for sixty years. Elections held every two years allow us to get back on the right track quickly. As an amateur historian there is only one certainty I know of in history. Nothing is inevitable. By every objective observation, Russia at the turn of the century should have become a liberal republic and growing industrial power. World War II should have been easily avoided by checking Hitler early in his adventurism. And The United States should have run her economy aground in the late 1970s and early 1980s. But these things didn't happen. In every case one or two singular events was changed, and caused either mass slaughter of entire races, or an economic revitalization that restored a nation. Hyper-inflation may be likely in the very near future, but it is not a certainty. Ninety percent of economists believe the economy will recover soon. This may not happen and we could have another Great Depression. But nothing on the horizon should lead us to believe that a Lenin, Hitler or Mao is waiting in the wings to seize power and slaughter millions of innocent human beings. The recent struggles in Iraq have again shown us clearly the dangers of armed conflict, and much as Vietnam did in the seventies, will cause all of us to assess future wars with a keener eye. Lessons of the past are much more widely available to the masses, and the information spreads much more quickly. Economic policy mistakes should be remedied much more quickly than ever before, and thus the bad times should be easily mitigated. But I say again, nothing in history is predictable, or inevitable. Eric Gurr egurr@intralinkinc.com Thu, 28 May 2009 00:00:00 EST http://www.u4prez.com//Blogs/ericgurr/Hyperinflation-bankruptcy-and-the-United-States.html http://www.u4prez.com//Blogs/ericgurr/Will-a-state-secede-from-the-union.html Rick Perry, governor of Texas, has broken the seal on the secession movement. In the past, the rhetoric was confined to small groups without broad support. Now that the sacred seal has been broken, talk and action will intensify. While many politicians may cringe at the suggestion that The United States may not stay together, the idea is not only logical, it makes sense for everyone. The United States has a population of over three hundred million people, and of course not all of them have the same philosophy of government. It would be easy to lay the blame for the movement at the feet of the Democrats, but it would also be wrong. The Republican party has a tough time communicating what free market capitalism really means. The left around the world has painted a picture of free markets as being pro business. When you understand Adam Smith (the father of free market capitalism) you understand that it is in reality just short of anti-business. The recent bailouts and business-government partnerships are starting to expose the truth to more people. Socialist and Statist governments are inclined to be pro-business. If the United States were a free market nation, a bailout would be impossible. We the people would decide which businesses succeed or fail, based on whether or not we decide to purchase their goods or services, and the price we are willing to pay. What is the root of the secessionist movement? The driving force at the grass roots level is of course money. Many Americans are rightly disturbed by the transfer of their wealth, and the wealth of their children, to companies that made risky investments, or were poorly managed. This is new territory for the government. The transfer started under George W. Bush with his bank bailout and auto makers bailouts, and the Obama administration has really poured on the spending with additional bailouts and stimulus packages. Citizens of more fiscally conservative states are finding that there money is being redirected from their pockets, and sent to other states. In years past politicians from both parties have used the guilt factor to increase spending for the "needy". This tempers the backlash from the populace as they realize they are to sacrifice a new boat, or nicer home, for the greater good of society. Today, citizens are being asked to sacrifice their children's education, vacations, and even the home they are in, so that money can be transferred from their wallets to multi-billion dollar corporations. When we add more government controls and regulations on everything from cigarettes, to fast food and guns, we begin to see the problem. Government is now coming at everyone at some level, over some issue. This piling on is causing those fringe secessionist movements to became mainstream very quickly. If Texas were to secede, and move back to the real center (the constitution) where free-market capitalism and individual liberty were paramount, we could avoid real trouble in the not so distant future. Those who don't like the direction of a larger more intrusive government would have a place to go. Those in Texas who believe government should make more decisions in people lives would be free to leave. There will never be a nation on earth that all the citizens believe is perfect. But in the United States the dividing line has became clear, and it cannot be fixed. In a recent poll, over half of Americans now believe that socialism is a better than free market capitalism. The recent tea parties, and strength of secessionist rhetoric shows that there are significant numbers of Americans who disagree. A non-violent, logical separation of Texas (or other states) from The United States at this point may save anguish and even lives a few years from now. With two years of U4prez under my belt, I think I have my finger on the pulse of America better than many of the pundits and politicians in this country, and I say with 100% confidence, the chasm between us has grown too large to be reconciled. Governor Perry will be painted by many on the left as an extremist. I would ask that you reconsider his position and his statements. Would it not be better for all concerned to simply part ways amicably? To those who are passionate on both sides of the issue, is there any hope for compromise? How many minds have you changed? How do you reconcile the man who longs for individual liberty, and free markets, with the man who desires a centrally planned government, and equality of wealth? Where is the middle ground? What does the future hold? It doesn't take a crystal ball to see that our nation is headed towards contentious days. Glenn Beck, Governor Perry and other voices starting to ring out must be heard. These are not loners holed up in cabins in the mountains. These are serious man, with serious disagreements with the direction of the nation. They each have millions of supporters. We have now crossed the Rubicon and must begin to seriously address the desires of the secessionists, and the desires of the millions of Americans who see more government as the answer to our problems. If we do not address desires logically, reasonably and calmly, we will be addressing demands with fists. We have come so far, we must at all costs avoid the plunge into violence and despair. There is no reason that capable men and women cannot come together and agree to disagree and go our separate ways, as friends. Neither of the new nations would escape some bruising and hurt feelings, but both could emerge with the kind of nation they desire. The notion of separation is now out there among us. We would be better to learn from history and address it with reason and logic, and store the empty rhetoric, arguments and violence in the history books. Thu, 16 Apr 2009 00:00:00 EST http://www.u4prez.com//Blogs/ericgurr/Will-a-state-secede-from-the-union.html http://www.u4prez.com//Blogs/ericgurr/The-toxic-asset-bailout-will-kill-us-all.html THE TOXIC ASSET PROGRAM IS A HUGE FRAUD, AND THEY KNOW IT. The latest bailout of the "toxic" assets is the most ill conceived and most dangerous of all the bailouts to date. There is not an economist on the planet who believes that drastically increasing the money supply will not cause inflation. Increasing the supply of money, by definition, must cause inflation. What will happen to the price of these "toxic" assets, when all of this money cycles through the economy and we have inflation? The price of assets will rise. If the Obama administration is hell bent on spending money, they are spending in precisely the wrong location. You could not conceive of a worse plan if you tried. They would get the exact same result by simply removing or revising mark to market and save more than one trillion dollars. They know the prices of these assets will rise. There is no other logical outcome. This plan is custom designed to absolutely wreck the economy, and no honest economist can disagree. The logic is irrefutable. You cannot re-inflate an asset bubble. They are trying to re-inflate an asset bubble twice, with one fell swoop. This is the biggest issue confronting our economy and our future. The "experts" who say this is a good plan have money in the game. They know what the outcome will be. I need you to ponder this for just five minutes, and a light bulb will go off above your head. When you realize that inflation is a sure thing, and that this latest plan hits you with inflation, and takes your money to accelerate it at an even faster pace, you are going to be outraged. Mark to market is forcing valuations of good assets down, and rampant government spending and expansion of money, which will cause inflation, will drastically increase the price of these assets in the future. The very tool that the Obama administration is using to fix the problem, will actually, make the problem worse for the sound banks. This is simple to understand. The bankers are stuck in the old mindset that inflation kills banks. Yes, that is true, but it only kills sound banks. The banks that are teetering will be "saved", to screw things up again, and the sound banks will get the shaft as they will be paid back in dollars worth much less than what they originally lent. In short, these bailouts are corrupting the risk model not just at the equity level today, but for years to come. Those who get the bailout money and these assets at reduced prices that you, (and I mean you sitting there reading this) will help them pay for, will make out like bandits. They will buy highly discounted assets, just before the inflation strikes. The bad banks will no longer have these assets (or loans) on the books, so they will be in a stronger position. When the bailout money cycles through the economy, the sound banks will be losing money left and right as inflation eats away at the value of the dollar. It would be hard to conceive of a plan worse than this one. This private/government partnership is simply welfare for those who purchase the depressed assets. And the American citizens who pay for all of this, will really get stuck with it, because as the value of their dollar is falling, the government will be taxing them to pay back the money it borrowed for the bailouts. Let's look at this from a microeconomic point of view. Your local bank has three houses which are in foreclosure. The bank is going to lose money because the prices have fallen. You should be able to go upgrade and buy a bigger house now, because prices have fallen. This was and is the only solution, and it is in fact what is being done. The only difference is, you aren't being given a choice, you are being forced to buy the asset, and you don't actually get it. It's like buying a car, and giving it to a stranger in some other state. Oh and the stranger happens to be the bank that lent the money on the car in the first place. Bubbles must be allowed to burst. When it's done, it's done. You cannot create another bubble to replace the one that popped. Economists understand this clearly, and so do historians, and so will you if you think about it for a few minutes. If you could re-inflate the bubble, why did it pop in the first place? This is the sad truth. Instead of letting these bad assets be reckoned to the proper value, the President and Congress have decided to make all assets lose their value. This is done through inflation. Through the smoke and mirrors you will believe that this worked great, for awhile. The price of your house will go up. But when you realize that your wages haven't followed, and that the price of everything else has gone up, you'll start to see clearly what has happened to you. So what should have been done? Absolutely nothing in haste. Had the banks been allowed to fail, the assets would have been purchased at fire sale prices (just like they will be under Geitner's plan) but you the taxpayer would not have been stuck subsidizing the banks with the loss. The Fed and treasury under Bush, and then Obama should have approached this entire problem for a sound monetary policy point of view, and not as a re-inflationary exercise. Have you noticed that we never did experience any deflation? If this doesn't convince you that inflation is on the way, I don't know what will. If deflation and the money supply become a big issue, you can always let the taxpayers keep more of their money, and this will boost the economy, without causing all the undue inflationary pressure. AIG, Citibank and others could have even received small pockets of money (in the form of loans) after they had made an effort to unload some of the bad investments. And let's be clear, these assets are not "toxic" they are simply houses and buildings that banks lent money on, and they are no longer worth what they once were. Nothing to see here, this happens all the time. But this time it happened on a bigger scale. Washington D.C. went in to panic mode, and started throwing money at the problem. But throwing money at a problem doesn't really address the underlying issue does it? Especially when you aren't really throwing money at it, so much as paper. Democrats and Republicans alike must come together on this and stop it now. This will cause an exponential rise in inflation and misery. This is not complicated. The government is hitting you on one side of the head with the tax, and the hitting you on the other side of the head by taking your money, purchasing these properties, and then selling it right back to you. There is only one logical reason for this program. It is custom designed to cause the good banks to fail. Dick Morris and Rush Limbaugh are aware that this program has been designed to fail, but they have missed the obvious mechanism for the failure. Inflation will kill the sound banks, putting the rest of them in the same boat as Citi, AIG, and other financial institutions. This latest "rescue" package will accelerate the process, and pull the rug of financial stability (all that is left) out from under you. Author: Eric Gurr egurr@intralinkinc.com Thu, 26 Mar 2009 00:00:00 EST http://www.u4prez.com//Blogs/ericgurr/The-toxic-asset-bailout-will-kill-us-all.html http://www.u4prez.com//Blogs/ericgurr/Schumer-proposes-suspension-of-Constitution.html Senator Chuck Schumer today expressed a desire to target specifically the recipients of the AIG bailout with a targeted tax rate of 100% on their bonuses. This is clearly unconstitutional and Schumer is well aware of the illegality of his proposal. Article I, Section 9, paragraph 3 of the constitution provides that: "No Bill of Attainder or ex post facto Law will be passed." For those who may be unclear on exactly what this means we can refer to the Federalists papers and James Madison. He wrote the following, "Bills of attainder, ex post facto laws, and laws impairing the obligations of contracts, are contrary to the first principles of the social compact, and to every principle of sound legislation." The bonuses of course were in poor taste, but the government owns 80% (and thus complete control) of AIG, and chose correctly to honor the original contracts. President Obama himself has argued that their is nothing legal that can be done. But Schumer proposes to suspend our constitution and pass this one illegal act. The question one must ask is which of your rights may Senator Schumer decide to suspend next? There can be no doubt that this is a deliberate and traitorous attack, and that Schumer should be immediately impeached and removed from the Senate. While liberals and Democrats may argue this point, those who value civil liberties as a high priority must be moved to action by this attack. The economy is in a tough spot, and the public is right to be outraged. But the outrage should be at those who voted to bail these businesses out in the first place. Had they gone bankrupt, the contracts would have been voided legally. To suspend the constitution to rectify a wrong that senators like Schumer and Dodd voted for in the first place, is not only stupid, it is dangerous. In these divisive times, perhaps here is a principal that we as Democrats, Republicans and independents can rally around. If we give up the constitution, all is lost. I urge everyone to write his or her Senator and demand removal of Charles Schumer from the senate as the first order of business. Though we are divided on many issues, we must stand together in support of the Constitution and against those like Mr. Schumer who wish to tear up one of history's greatest documents to score political points. He can go no lower, and for this we cannot stand. Tue, 17 Mar 2009 00:00:00 EST http://www.u4prez.com//Blogs/ericgurr/Schumer-proposes-suspension-of-Constitution.html http://www.u4prez.com//Blogs/ericgurr/Obama-and-Geitner-nothing-for-business.html Things are starting to get wierd. The stock market continues to dive, and Obama offers nothing to stem the flow. When people's IRAs and 401Ks drop in value, they need to save more money, not spend. The mortgage problem grows and more banks fail, and Tim Geitner wants to talk about Global warming. Geitner also predicts that the "rich" people who make up 28% of charitable giving won't stop giving because it's no longer a tax deduction. Can someone please get this Geitner fellow a basic economics book? Obama could help the nation out tremendously by just throwing a few scraps to small business. Lower the cap gains tax rate to 10%. It would show he will at least give businesses a few scraps. Repeal Sarbanes Oxley and free up some of that money for investment for the bigger companies, or God forbid, profits so the stock market can bounce back a little. Does anyone think any of these bailouts or stimulus plans are going to work? Does anyone at this point doubt we would have been better of doing nothing? Had Bush and Obama let the markets work this out, we would at least have found the bottom, and some investment may have returned. Instead we've spent all of our money bailing out AIG, GM and countless banks. When it gets worse, and it will get much worse, where will the money come for unemployment you've been promised? The middle class has paid in to the social safety net for fifty years, only to have Bush and Obama give it to unsound banks, and poorly run businesses. To see Obama and Geitner tell business to go to hell is not only bad policy, it's stupid. They have not offered a single policy or tax incentive to help business (other than GM and that is suspect to say the least) they are not even offering lip service. Those Democrats who were elected to congress in 2006 and 2008, along with the governors should probably start packing their bags today. My friends this is getting uglier by the hour. The social unrest this nation will experience when the middle class finds out that thier safety net has been spent, and the soup lines and Obamavilles are all that is left is going to be historic in nature. If you think martial law will secure the cities think again. Russia couldn't get its Army to fire on the citizenry, what in the world would ever lead you to believe America's army will keep the peace? Do you really think a soldier is going to fire on his father, brother and uncles in the name of big government spending? Here is what will happen, and this doesn't require a crytsal ball, we've seen it before across the globe. 1. When the FDIC runs out of money to insure your deposits there will be a massive run on the banks. 2. Geitner will fire up the printing presses to make good on the promise. 3. Mounds of cash will flood main street, wiping out the value of the deposits. 4. Citizens will start lining up at unemployment offices demanding their share of the safety net that they paid in to for decades. 5. The first riots will break out at government offices. 6. The elected officials will have no choice but to cut the food stamps and section eight payments, the medicaid and other social services. 7. The riots will spread like wildfire from the inner cities to the suburbs. 8. All hell will break loose. 9. Geitner, Pelosi and Frank will continue to fight global warming, while millions are fighting for food. 10. The elections in 2010 will be a massive bloodletting. Radicals will rise to power. The only question is will they come from the left or right. The real danger is in the level of inflation. In the early days of hyper-inflation, the masses believe that we have turned the corner. The spending looks like it's working. If this times out properly for the Dems, they could pick up more control of the house and senate, the blue dogs could be thrown out with the Republicans and we could find ourselves in a full fledged Marxist revolution. There are two distinct right wings in this country. The fiscal conservatives, and the social conservatives. If the fiscal conservatives take over, we will experience a short severe downturn, followed by a return to real money (gold standard?) free markets, massive dergulation and a sound foundation for rebulding the economy. If the social conservatives take over, it's anyone's guess. My best guess at this point is the United States will look like a South American banana Republic in the 1970s. Constant changes in government and laws. Breakdown in the rule of law. Rampant crime, chronic unemployment and chronic wars to divert the attention of the citizenry. There is time (months not years), but a real leader needs to emerge. Someone who talks straight and in plain English. Nations do not survive by printing money, increasing the burdens on business and furhtering uncertainty in the capital markets. We've tried the bailouts, we need to let this ship sail on its own for a few months and find the bottom. Yes, it will be rough for a few quarters, but the safety net will be maintained, and we will come out of it in a better position. We will know which banks and businesses are sound, we will know what the real price of housing is. If you don't want a life of Hobbes (nasty, brutish and short), we need to act now. Drill for oil everywhere (On Mt. Rushmore if it pays) Oil effects the price of every single product and service in the world. Stop expanding credit. Hyper-inflation kills nations and governments. Find the bottom. This means no more bailouts, period. Deregulate deregulate deregulate. If a regulation is not tied to physical safety, can it. Cut spending on everything. Even social security checks need to be cut by 10%, Take it now or lose it entirely in two or three years. Get out of Iraq, Afghanistan, and everywhere else now. It's not an issue of anything but money. We tried, we declared victory, we're going home. Employ the use of massive violence against terrorists and their supporters. This is the regular course of history. Embrace business and the wealthy as the antidote to a bad economy. Tell the people the truth. California is broke, and cannot be bailed out. The voters must make some tough decisions. The nation is catching up to California, and we cannot afford to repeat her mistakes. If we do exactly as I say, your future is bright, do it not and you will soon find the real definition of poverty, and hopeless. Author is Eric Gurr Founder of U4prez.com egurr@intralinkinc.com Thu, 05 Mar 2009 00:00:00 EST http://www.u4prez.com//Blogs/ericgurr/Obama-and-Geitner-nothing-for-business.html http://www.u4prez.com//Blogs/ericgurr/A-more-balance-monetary-policy.html Proposal for a new monetary policy for The United States Monetary policy, simply put, is the way the government or central bank controls the supply of money. When a nation operates on a gold standard no new money can enter the system, until more gold has entered to back the paper currency. Our current monetary policy is based on confidence in the note itself, or more properly put the value of the note. If the purchasing power of one dollar is relatively stable, those who save money are comfortable with the risk of lending the dollar, because the principle will be paid back with the same purchasing power it had at the time it was lent, plus a profit in the form of the interest paid. When the government puts too much money in to circulation, we have the inflation which lowers the future purchasing power of the dollar, and so forces the lender to raise the interest rate, to compensate for the loss of purchasing power over the term of the loan. When we have deflation, the borrower is reluctant to take money from the lender when he will have to pay it back with a dollar holding much more purchasing power than he got in the first place. Without a gold standard, how can are we to calm to waters? Today we rely on the good will and intelligence of the politicians to reign in the inflation. As Mises has opined, if the people believe the inflation will end, then the inflation can continue. But if the people come to the realization that there is no end to the devaluing of the currency (no end to the inflation) the money is no longer trusted and becomes quickly worthless. The good will and intelligence of politicians over the last few decades has become less apparent, to say the least. The nation needs a check on the amount of money the government can print and the amount of new credit that can be issued. The monetary policy I propose is by no means perfect, but it will put a check on the politicians and prevent them from inflating the currency until it collapses. There are two measures we can use to limit the government and central banks efforts to inflate the money supply. The first is deflation. If the dollar falls by 1.3% over a twelve month period (lagging) we should be safe increasing the supply by 1.3%. We can also use overall productivity. If the productivity of the nation (as measured by labor, or the BLS Business Sectory Output, or some mix) rises by 2.3%, we can thus increase the money supply by 2.3%. In times of war or economic stress, we could even boost the supply above these levels as long as the rise could happen only once every few years, and not exceed productivity by more than a point or two. The history of monetary policy shows clearly that nations who do not exercise restraint in the growth of the momey supply are destined for a prolonged period of suffering and economic decline. I also have had no luck in finding a situation where rampant inflation has been rectified by government sponsered, measured deflation. It would appear that once the damage has been done, the best we can hope for is setting a new floor for the currency. In a world awash in as much private debt as there is public debt, this would not seem to be a viable solution anyway. This is by no means a gold standard approach, and is as open to abuse as any restrictions placed on the politicians. But it would be a starting point, and it would at worst, give the people some measure of confidence that the printing presses won't roll forever, and the treasury won't by its own bonds until the money becomes worthless. During tough economic times it is important to understand that some of the reckoning (if not most) is healthy in the long run. The desire of politicians to inflate the currency to pay off the public debt, and lower the value of wages in real dollars paid to unions and other interests groups can quickly devolve in to an economic collapse. A firewall is needed today, to put a backstop on the amount of future damage. A monetary policy that limits the credit expansion will go a long way to perserving our future once we are out of the current doldrums. Author is Eric Gurr and can be reached at egurr@intralinkinc.com Mon, 23 Feb 2009 00:00:00 EST http://www.u4prez.com//Blogs/ericgurr/A-more-balance-monetary-policy.html http://www.u4prez.com//Blogs/ericgurr/Chuck-Devore-to-challenge-Boxer.html Californian Chuck Devore resigned his position as Republican whip to protest the California budget and the tax increases. Now he has really thrown down the gauntlet and is challenging Senator Barbara Boxer in the 2010 California senate race. One may be tempted to say that Chuck Devore was grandstanding when he resigned, they would be wrong. A glance at Mr. Devore's voting record shows that this is a politician who knows how to say no. On 24 budget and tax issues in California from May of 2006 to December of 2008, Devore voted No, voting yes on only 2 issues, one of which was procedural. Devore is also a strong social conservative which should ignite his base, and his opposition to gay marriage would garner him some of the crossover votes that materialized in the 2008 election. Devore has embraced the web like few other politicians and appears to have learned from President Obama's use of social networking to boost his profile. He uses twitter.com regularly and was featured in the Wall Street Journal as a savvy internet politician. Although he is blogging on his own site, he hasn't yet connected his campaign site to the social networking/bookmarking world, which he must do to complete the web triangulation. If Devore makes this move in the next couple of months, he can generate sufficient web popularity to stifle any counter moves by Boxer and further raise his profile among the all important moderates and independents. This may seal the deal for him in 2010. The social bookmarking resource was no more apparent than during the fight for Proposition 8, which showed clearly that when an issue hits digg.com, reddit.com and other social bookmarking sites, the independent minded voters will pick up on the buzz and have no problem crossing party lines. In what has got to be the strangest (and most under-reported) aspect of the 2008 campaign, the social networking and bookmarking was driven by the supporters of Prop 8, but exposure works both ways and the end result was that the web publicity actually hurt the cause and Proposition 8 was defeated. Devore, by starting early, will be in a position to get his message out on the web on his own terms, and thus be much less susceptible to last minute pushes by the Democratic grass roots A strategy effectively used by the Obama campaign. In 2004 Boxer crushed GOP challenger Bill Jones by 20% in the polls. But Jones was a big supporter of the war in Iraq when it was becoming unpopular in California and the economy was good, which always favors incumbents. Boxer will have a much tougher time with Chuck Devore and if the economy remains the primary issue, Devore could actually pull this off. While Boxer was pushing for the Obama Stimulus package, Devore was fighting tooth and nail to stop tax increases in California. The differences between the two candidates on this single issue may be enough kill Boxer's chances at a fourth term in the Senate. When coupled with an early effort at framing the debate, and setting his position on the web Boxer surely has an uphill climb ahead of her. If Devore leverages his web marketing savvy and raises enough cash to be competitive on the airways, he could in the right environment win this race. The fiscally conservative Republicans clearly have a winner in Chuck Devore, and I think by the time this election really gets rolling, fiscal conservatism may be all the rage. In Ohio former congressman Rob Portman has entered the race for the open senate seat of George Voinovich who is retiring. Voinovich was more moderate on fiscal issues, and this could be a good retention for the GOP. The other interesting races to watch will be the primary challenges of moderate to liberal Republicans like Arlen Specter of Pennsylvania and perhaps even John McCain in Arizona. The chances of the GOP retaking the senate look dim in 2010, but if the economy continues to falter, I can quickly spot a few Democrats that my be very vulnerable. Blanche Lincoln from Arkansas and Byron Dorgan of North Dakota are both considered moderate Democrats. But in tough times, and from traditionally red states, this may not be enough to let them hold their seats. Harry Ried from Nevada is doing everything in his power to bring projects to the state, but the truth of the matter is these projects often help very few people, and could even backfire if the stimulus plan fails to revitalize the economy. The bottom line for the GOP is the economy. If the unemployment rate hits 10% or just under, the Republicans could conceivably pick up three or four seats. I don't see thas as being enough of a crisis to shake loose some of the East coast democrats like Dodd, Leahy, or Mikulski, or safer seats in other states like Patty Murray of Washington and Russ Feingold of Wisconsin. If unemployment is above 10%, and all this spending causes inflation, all bets are off. In an odd twist of fate, the most vulnerable seat right now looks to be Boxer. California is already a mess, Boxer voted for the stimulus which will be seen by voters as a vote for the California budget. Devore is a certified fiscal conservative is already pressing his case on the web. Put it all together and you have the recipe for a big upset. Sun, 22 Feb 2009 00:00:00 EST http://www.u4prez.com//Blogs/ericgurr/Chuck-Devore-to-challenge-Boxer.html http://www.u4prez.com//Blogs/ericgurr/How-we-got-in-to-the-economic-mess.html Dangerous times are ahead. Of this there can be no doubt. The United States of America is in a mess of historical proportions. The economy is foundering, government at all levels spends too much money, the public debt is soaring and the first of eighty million baby boomers has become eligible for Social Security and Medicare. Making matters worse, we are in the midst of two wars and a struggle against terrorism. How we got in to this mess is not very complicated. Much of the economic growth over the past few years was driven by credit. Individuals and businesses were able to borrow money easily, based on the equity in their homes. Congress pushed this further by coercing banks to lend to those with less than perfect credit through a law called the Community reinvestment act. This coupled with low interest rates caused the prices of houses to rise. This was an artificial price rise not based on a limited supply of housing. This artificial rise in prices allowed homeowners to borrow more and more money against the artificial equity. Banks, investment houses and other businesses bought these loans and put them on their books as assets that were rising in value. Everyone jumped in the pool and borrowed more and more money based on the rising property values. This simple bubble was not sustainable. When property values began to fall back to their real levels the assets were worth less money, and offered less security to the lenders. When the big banks and investment houses went back to the other banks to borrow more money, they didn't have the assets to borrow the money and were thus denied. The same thing began to happen to individuals. In the business world this happened because the board of directors would hire a financially savvy CEO, CFO executive management team. These highly educated businessmen confused the balance sheet of the company with the cash flow statement. They were running their businesses based on a bottom line of assets that were at the core tied to property values, instead of monthly cash flow. When the property values shrank, their ability to borrow money shrank, and many of them went bankrupt. This type of pyramid business management only works as long as property values are rising, and you can borrow more money against future values. The same thing happened to individuals. Homeowners were not living on their income, they were living on the future value of their homes. Businesses that were on the edge , in other words could make it on cash flow, but just barely, also began to collapse as the economy shrank and their revenues shrank accordingly. The department of treasury tried to fix this problem by giving the banks and businesses another loan. Congress tried to fix the problem by increasing spending on specific projects, instead of increasing productivity and cash flow throughout the economy, which also cannot work as the money doesn't circulate throughout the economy. That is the entire mess in a nutshell. People were living beyond their means, and businesses were run by those with no real experience in the cash flow side of operating a business. All was well until the never ending supply of credit ended. This is just stage one of the crisis, and is in fact the good news. What do you think will happen to the commercial property market when all of these bankrupt businesses wind up operations and the oversupply of office space goes on the market? This will be the bad news. What will happen next? Congress will try to spend our way out of this mess, by selling bonds against the future. Only now the assets that may have helped secure that future have fallen, so investors will be less likely to buy the bonds that the treasury issues. So the department of the treasury will buy them, by simply printing money. This will cause inflation, which will increase the value of assets. But it will cause so much inflation that interest rates will need to be raised to astronomically high rates to offset the risk of further inflation, thus freezing the markets from the lenders side. In about four years the businesses will fire the CEOs who managed from the balance sheet, and hire small business owners to run the businesses the way they were run in the 1950's (from a cash flow basis). The people will realize the government can't spend our way out of this so they will vote for politicians who tell the truth. The only way out of this is to reckon the debt. The only way to do that is to increase productivity and effiency by lowering taxes and paring back regulations. The only way to lower the taxes is through massive cuts in federal and state level spending. At this point we will go through a long stretch of very minimal government spending, very few wars, and lower the public debt. Then we will have the bases for a solid foundation for growth, at which time the whole cycle will be repeated. In the meantime, it's going to be a rough ride. Tue, 17 Feb 2009 00:00:00 EST http://www.u4prez.com//Blogs/ericgurr/How-we-got-in-to-the-economic-mess.html http://www.u4prez.com//Blogs/ericgurr/How-to-fix-deflation.html How to fix the economy during recession and deflation We can use the housing price collapse of 2008 as a perfect example of how to fix a currency problem. The initial bank rescue package (TARP) was intended to buy "toxic" assets to relieve banks of the pressure caused by devaluation of these assets. Secretary of the treasury Henry Paulson switched gears and instead decided to give the money directly to the banks so the banks had more money to lend. He did this through the purchase of bank stock. In concert the Federal Reserve Bank lowered interest rates and bought more bank bonds. This was supposed to inject money in to the economy, restore confidence in the people and thus right the ship. It did not work, and the reasons are obvious. The Fed and Treasury cannot incease the amount of currency, and thus offset deflation, if the currency doesn't circulate. The government can print trillions of dollars and not cause inflation. How? By burying the money in a deep cave. This is essentially what transpired after the first effort at TARP. President Obama and the Democrats in congress created a stimulus package designed to inject even more money in to the economy to further prime the pump. The stimulus package however became heavily weighted on bailouts of state governments and specially designed spending on infrastructure that creates short term jobs. The bailout of the states will largely go to state bond holders, who will in turn sit on the money until a clearer picture of the economy emerges. The tax cut portion of the package is very small and temporary and isn't enough money to drive lending. To summarize, the three pieces of stimulus were designed to inject money in to the economy, but failed to craft a plan for the circulation of the money once injected. This is why the initial stimulus failed. What was the missing link? All businesses run on cashflow, not the balance sheet. A balance sheet is simply a reflection of past and future cash flow. To incent the banks to lend money, the government needed to remove not only the negative cash flow, but the uncertainty surrounding the potential positive cash flow in the bad assets. This could have been accomplished, and may yet under new Treasury Secretary Tim Geitner's plan, by purchasing the toxic assets. At this point the banks have one certainty, cash flow is going down because no payments are coming on the suspect assets. The banks have also increased their deposits with the money delivered to them from the government on the sale of the assets. Instead of just giving the banks money by purchasing their securities or stocks, the money the taxpayers spent would be backed by a tangible asset. The banks are also incented to lend money to increase, or at least replace, the lost cashflow. The debate on how these assets are purchases is not really important other than in the speed in which they are reckoned. Because of the cirulation required to boost lending, a speedy liquidation isn't all that important. Now we have solved half of the problem. But what if there are no borrowers? For some strange reason politicians have come to the conclusion that a bank flush with cash will circulate the money and stimulate the economy. This isn't true at all. Lending requires two parties, a lender and a borrower. To cause the money to circulate, spending must have already rebounded. This is the reason the Great Depression stretched on for such a long time. Roosevelt and Hoover both injected money in to the economy, but didn't bother to insure that it circulated. In 1932 Hoover raised taxes, which slowed spending, and throughout his administration Roosevelt's hostility to business created a climate of fear in the capital markets, which also prevented the money from circulating. (This is admittedly only one example, there are dozens more during the depression.)If we imagine the circulation of cash in an economy as a whirlpool, credit is at the outside of the vortex and cannot be pulled in to the system until the strength of spending necessitates a need for further capital. This is the point where congress and the president must step in to prime the pump. In an economy as large as that of The United States, large infusions of cash are needed, and it must start with the people and small businesses. There are two ways to do this. The first is through massive tax cuts, the second is with massive cuts in regulation. Both may be temporary in nature, and if history is a guide, probably need not last any more than six to nine months. By this time the spending will have strengthened to the point that cash was moving so fast, credit was needed to further investment and productivity. The banks having been both relieved of the uncertainty of bad assets, and deprived of cash flow have no other option but to cede to the borrowers demands, and start lending money again. Thu, 12 Feb 2009 00:00:00 EST http://www.u4prez.com//Blogs/ericgurr/How-to-fix-deflation.html http://www.u4prez.com//Blogs/ericgurr/Is-Obama-Insane.html If the definition of insanity is doing the same thing over and over and expecting a different result, I must content our president is insane. The so-called stimulus plan is nothing new. Governments in Japan, France, Sweden, Argentina, Brazil and countless others have tried this approach. The United States tried it under Roosevelt during the Great Depression, it did not work then, it will not work now. A few specific examples. Germany after World War I Brazil in 1990 (inflation rate reached 30,000% The lost decade in Japan My question to Mr. Obama is thus: What leads you to believe that this will work? During the Great Depression President Roosevelt paid farmers not to grow certain crops and to destroy millions of hogs to raise the price. This at a time when people were starving. Today President Obama wants to take hundreds of billions of dollars out of an already bad economy, and give it state governments. The same state governments (like California) who have wasted their money for years and now find themselves at the brink of bankruptcy. This administration and the spending plan have become dangerous! In the past I've written that my biggest concern was the baby-boomers and social security. This is no longer in my view the biggest threat facing our nation. Social Security payments will be cut in half within ten years, and perhaps as soon as five years. THE BIGGEST PROBLEM WE NOW FACE IS WAR IN EUROPE AND CIVIL UNREST AT HOME Many will comment that this is alarmist rhetoric. No, it is in fact history. Facism took root in Europe during the thirties in response to a devalued Mark in Germany and economic strife in Italy. This pattern will be repeated in the coming years. As the economies of the world crumble, people will look for a scapegoat. When a critical mass rallies around the cry of these despots, war is sure to follow. Here in the United States, it is not unlikely that separatists groups will arise, and will have political power. Those without political power will resort to violence. When this pattern of history begins to repeat itself the world will once again look to the United States for assistance in fighting tyranny. When the people of the United States try to help they will find that the government has looted the treasury and there is no money left to buy bullets. Recessions and Depressions can be good things. They expose weakness in the economy, they expose bad businesses and bad banks. When the bottom is found these assets are liquidated and we can begin to build a stronger future. This is not happening today. We are taking the path of least resistance by borrowing from our future and printing money. The word crisis is attached to every perceived social injustice. How many times have you heard the word from politicians in the past? We still talk about the health care crisis, the environmental crisis, the oil crisis, the banking crisis. Let me tell you my friends you are about to learn the meaning of the only crisis that matters, the survival crisis. My fear isn't that the stimulus package will not work, my fear is that spending will work. GDP will stabilize and the unemployment rate will stabilize or go down. But this will only encourage the Democrats to spend more money, and the Republicans will have lost the will to fight. The next spending package will be smaller, but will not work, to be followed by the biggest monstrosity yet. And then the wheels of the economy will collapse entirely. I watched President Obama's press conferece in stunned silence. I felt sure that the media would understand that we are headed for disaster, Obama said it himself. Not one member of the press brought up Japan, the hyper-inflation of South America, or the spending failures of the Roosevelt administration. Listening to Obama respond to the questions was even more disturbing. The man doesn't appear to posses even a basic understanding of economics. Perhaps I am wrong. Perhaps Mr. Obamas ego has not gotten the best of him and he is not insane. There is only one way to tell. We must force the media through e-mails and phone calls to demand action. If they can force him to answer the question, "What historical precedence leads you to believe this will work?" maybe they can force him in to a moments reflection and we can pull back from the brink. If not, we face tragedy. This is the case because today, it would be so easy to fix the economy. We have burdened business with excessive taxes and regulations for decades. We should peel back a few layers of regulation, eliminate the corporate tax, lower the tax rate on incomes for all levels of income, raise interest rates (to stabilize the dollar), and increase the deposit requirement for banks. We should let the bad businesses fail, let the bad banks fail, and sell the assets for whatever can be gained. The economy would grow, as it always has when this is the path nations have followed. I don't believe this will happen. We will follow the path of Hoover by raising taxes, and the path of Roosevelt by spending ever more to smaller interest groups in an effort to hold power at any cost. I hope that cost is not your life. Tue, 10 Feb 2009 00:00:00 EST http://www.u4prez.com//Blogs/ericgurr/Is-Obama-Insane.html http://www.u4prez.com//Blogs/ericgurr/Recessions-Depressions-and-this-mess.html Recessions, depressions and this mess It has been my observation that when you have an opinion that is at odds with most of the world, you are usually wrong. This time I am pretty sure I'm correct and most of the experts, at least in Washington D.C. have it wrong. Recessions are usually caused by inventory adjustments. Factories over produce creating a supply glut at a given price, and most lay off workers until inventory shrinks, or lower the price to move the products. With the explosion of information over the last three or four decades these inventory adjustments have become much more mild, and in some businesses nearly non-existent. Recessions are generally over in a nine months or so, but can extend for a year or two. Depressions start out as recessions and get worse. The tipping point is historically when unemployment reaches 25%, but a recession lasting two or three years with unemployment at 15% or more would these days be considered catastrophic, and by most observers, a depression. Often a panic of some sort is the turning point, and systemic problems cause the economy to unravel. So what is this current economic mess, and what caused the collapse? The conventional wisdom is that congress pressured banks to make risky loans to individuals purchasing houses. This created an over supply of houses at current price levels. If this were true, then we should be in the midst of a mild correction, and home owners would be forced to stay in their homes until such time as prices stabilized. We would see a contraction in GDP, largely due to a loss of construction jobs, and the corresponding slow down that these workers would effect by not purchasing computers, cars, appliances and other goods and services. This is largely what Republicans and Democrats believe is the problem. Democrats tend to view all economic downturns as driven by a lack of money in the system. So we get stimulus packages and bail outs. Republicans believe that the fix is to allow the markets to find level ground, and that injecting cash in to the economy will cause more harm in the long run by creating inflation. BE WARNED: THIS MESS IS SOMETHING ENTIRELY DIFFERENT. Just as the housing crisis was starting to unfold, the price of oil was going up. This put a further pinch on those homeowners who were just scraping by. Just prior to the economic troubles, congress was unable to find a way to stop an influx of illegal migrant workers, putting downward pressure on jobs. It gets worse. Just at the time when the world needs to look to the United States for a stable currency, congress and the new president are injecting trillions of dollars in to our economy, which will drastically devalue the dollar. Just at the time when the automakers need increases in efficiencies, and incentives to lower costs, congress is pushing for new mandates that will cost automakers billions of dollars. I could go on for quite some time, but the facts are fairly obvious. At every turn, our political leaders are making the wrong decisions. This is not out of any kind of malice, but more a result of a failure to understand a systemic failure. Why is this happening? If we look at the very way congress is constructed and operates, and that our political leaders are elected, a clear picture starts to emerge. Most politicians are career politicians. They are not experts at viewing large scale systemic failures. As soon as a member is elected to congress, he is put on a few committees and is expected to master a specific issue. This leads people to look for the problem at a core level where they may have a certain level of expertise. This is the exact same reason many large businesses fail. Their CEOs look for a core problem. But in systemic failure, the problem may be caused by the interaction of several seemingly unrelated events. This does not necessarily mean that the problem is complex, it simply dictates that several smaller issues are conspiring to create a major problem. Unchecked, this problem will spread throughout the system and cause a catastrophic failure from which recover is either impossible, or unlikely without a complete change in the system. This is exactly where we are today. If President Obama and congress do not address the systemic issues there is no hope for a recovery over the long haul. An 819 billion dollar party will of course lead to good times for a few selected groups or individuals, but it cannot and will not fix the problem. When the cash drug wears off in a few months, we'll be in much worse shape. Prices will go up, unemployment will rise, and even hard assets will become less valuable in real money. When this virus affects the entire world, wars and violent civil unrest are sure to follow. So how do we fix it? The first step is to stabilize the system. We will still have failures, but we can mitigate their effects by addressing the few underlying issues and strengthening the foundation. The foundation of an economy is the value of the currency. This is wonderful news for those who peddle in reason and logic, but horrible news for the politicians who peddle in shiny happy people. The way to strengthen the currency is to stop printing money and expanding credit. Businesses and banks will fail as a result. But when the currency is strong, and the borders are secure from foreign armies, nations ultimately prosper. Over five thousand years, this is the one constant. The second step is to address supply and productivity. But how do we do this when there are literally millions of products and hundreds of millions of consumers who want and need an undefined cornucopia of these products? We need to find a core ingredient. Thankfully, we have a core ingredient that affects the cost and price of every product and service made; oil. This is only the first step, and I'm sure my friends on the left will be miffed at my simplicity, but the fact remains, lower oil prices lower the cost of everything. The third leg of this recovery tripod is government spending. When the government steps in to borrow money, it competes with businesses and individuals. Stimulus packages also direct money and resources by government mandate, as opposed to the free market. The free market is not some evil corporation, it is you. The individual decisions you make. You let the businesses know clearly which products and services you desire. When the money is directed towards these products and services, profits arise. When come profits, come competition as others enter the fray to try and deliver the good or service at a lower cost to you. When the system foundation of the economy has been addressed, the economy will stabilize and in fact start to grow again. Then and only then can we start to look at micro-managing certain aspects of the economy, at which time our politicians will surely mess it up again. For now we must be clear on things. This is not as the Republicans seem to claim a normal recession caused by over supply. It is neither as the Democrats assert a problem of not enough cash in the system. If I were president, I would veto every bit of legislation that does not strengthen the currency, or increase the foundation of supply. As I am not the president, I would suggest you take up religion. You may find some solace in the bible, you will surely not find it in the economy for the next few years. Fri, 30 Jan 2009 00:00:00 EST http://www.u4prez.com//Blogs/ericgurr/Recessions-Depressions-and-this-mess.html http://www.u4prez.com//Blogs/ericgurr/If-I-were-President.html The information explosion of the last fifty years has rendered one old product obsolete. We no longer need the crystal ball to see the future. I find it curious that this wealth of information is not consulted when politicians try to manage the economy. Well before 2012 it will become painfully obvious that the stimulus programs and bailouts proposed and passed by congress have had little positive effect on the average American's life. The last year of the Hoover presidency and the first years of The New Deal have been accelerated in the early days of the Obama administration. Businesses large and small are already paralyzed by fear. This palpable fear is rightly placed in government. The question on every business owner and manager's mind is, "What's next?". If I were the president, a quick look through my history books would show that we are not in uncharted waters. Coolidge and Reagan both faced similar economic conditions early in their presidencies. And both responded with legilstative efforts to cut taxes and government spending. Coolidge of course cut much more spending. The roaring twenties is a time often categorized as filled with greed and speculation. The truth is quite a bit different. Productivity soared in the decade and the Great Depression was not a result unfettered capitalism, but unfettered government. My first step would be to grease the skids of productivity and supply. This can be accomplished quickly and easily. A lowering or elimination of the corporate tax would stimulate the economy immediately. Lower capital gains taxes have also proven to be stimulators. I would also overturn the Sarbanes-Oxley legislation, HIPPA, the Family Leave Act, and the Americans with Disabilities Act. Most of these ideas are well intentioned. But Sarbanes-Oxley didn't stop Madoff from pulling the biggest Ponzi scheme in the history of the world. Neither did it stop Fannie Mae from cooking the books and making bad loans. The cost is born entirely by consumers who must pay more for products from honest companies to implement Oxley. Corporate taxes are also entirely paid for by you and I and every other consumer in America. HIPPA, and other legislation conceived to "help" the middle class and add fairness, has simply raised the cost of health care and employment, thus putting further strain on the economy. The incremental increase in regulation over the past few years, coupled with a bubble in the house market caused this mess. To fix the problem, we must peel back the layers of regulation and let the economy rebound naturally based on the needs and desires of consumers. Increase in productivity and supply are a first step. In my next blog entry I propose to show you your future. In early 2009 America is in a mild recession with a small decline in GDP, and a moderate rise in unemployment. By 2012, these will be viewed as the good old days. Thu, 29 Jan 2009 00:00:00 EST http://www.u4prez.com//Blogs/ericgurr/If-I-were-President.html http://www.u4prez.com//Blogs/ericgurr/Why-universal-health-care-cannot-work.html The study of economics is the study of scarcity, and the allocation of scarce resources. The principles on how we address scarcity have been developed over centuries. The perfect example of this scarcity comes for Thomas Sowell. In his book basic economics Sowell uses Beach front property as an example of a scarcity. Suppose that the government would dictate that everyone is entitled as a basic human right to a beach front home. This of course could never be accomplished because there isn't enough property on the beach for everyone to have a home. We find the exact same dynamic in health care. To become a doctor you must go through years of education and training. This training is costly both in terms of dollars, and the time invested. But the tools the doctors use, mri machines, x-ray machines, surgical tools and facilities are also scarce, technically difficult to develop and thus the price is high. In short, there are very few mechanisms in place to allow the price to fall, and it can never fall enough that all of the health care that everyone wants can be made available to everyone. We are left with the beach front property conundrum. Logically there are only two choices if we are to socialize medicine. We can either ration health care by lottery, or politicians can see that their friends and supporters get the care. Most politicians of the left respond that we will of course ration the care, but we ration it based on need. Politicians on the right will of course agree that we must ration the care, but would rather it be rationed by individual choices and based on price. This leaves the decision to the individual and the doctor or health care provider. If no agreement can be made, or the individual cannot afford the care, he cannot expect to receive such care as he may want, and even need. The left than of course responds that this is unfair. Why should a rich man be allowed to have a heart transplant, but not the poor man. The problem with this approach is that the scarcity still exists. The resources dictate that everyone cannot have a heart transplant. The doctor the nurses and the manufacturers of medical equipment must also be paid for their effort. So in essence, the rich man still must pay for the heart transplant through higher taxes, but the poor man may get the transplant. Thus we are back to the lottery, or the corruption. The politicians decides either by picking a name out of a hat, or giving the transplant to his friend who may be either poor or rich. The left is attempting to have it both ways, but the truth of the matter is, this is impossible. Where the left is deceptive is in the philosophy. Karl Marx and Adam Smith both realized that the scarcity of resources required a decision to be made. Marx said the politicians should make the choice, Smith said the choice should be made by the individual. Modern politicians say that no choice need be made. We simply remove the scarcity. What they cannot do is explain how this would ever be possible. The reason they cannot explain it, is that there is no solution to this particular scarcity. Tue, 27 Jan 2009 00:00:00 EST http://www.u4prez.com//Blogs/ericgurr/Why-universal-health-care-cannot-work.html http://www.u4prez.com//Blogs/ericgurr/Tim-Geitner-Genius.html So we must overlook Secretary of Treasury designate Tim Geitner's obvious tax fraud because he is a genius. The best man in the country to run the department. Geitner's proposal is to give hundreds of billions of dollars to banks to shore them up. But this isn't the job of the secretary of treasury. His job is to preserve the value of the currency. Were Mr. Geitner to pick up a history book he would find that across the globe, and across history, cash infusions never work. In fact they are often the first step towards ruining the economy of a country. History shows clearly from the Spanish Empire, to the Wiemar Republic, to the banana republics of South America, that when a government turns on the printing press, bad times are coming. Inflation is a genie that cannot easily be put back in to the bottle. So what would a real "genius" do to fix the economy? Clearly the first and most important step is to keep the currency strong. If the dollar holds a high store of value, all the banks can fail, and we will recover. The price deflation will eventually bottom and confidence in the currency will bring new lenders in to the market. This confidence in the dollar will also allow these lenders to charge reasonable interest rates with the knowledge that inflation will not eat away at the investment. If the genius Mr. Geitner gets his way, he will crank up the printing presses, cause very high inflation, and what little capital is left to lend, will be lent at exceedingly high interest rates to offset the erosion of the principle. The stimulus program offered by Obama and the Democrats in congress has a similar flaw. The lions share of the money is spent after the next two years, and most of it is financed through debt. Much of the so called stimulus is for infrastructure, which can be stimulative but only if the infrastructure can grease the skids of productivity. Rebuilding roads and bridges is necessary, but it does nothing to increase the efficiency of the economy. When we put all of the bailouts and stimulus packages in a nice neat little package what we find is a Keynesian model of government spending on steroids. If the economy were in recession because of over supply issues, or lack of infastructure to deliver goods and services to new markets, this approach may work. But in a recession caused by excessive credit, more credit is simply more poison and not an antidote. All governments must do three things to survive. The first is to provide a military for defense against foreign invaders, the second is to insure the domestic peace, and the third is to to protect the currency. Everything else can be accomplished at the local level. The massive increases in spending proposed by Geitner and congress don't address any of the issues. The obvious question is; "What leads Mr. Geitner to believe that this will work?" Fri, 23 Jan 2009 00:00:00 EST http://www.u4prez.com//Blogs/ericgurr/Tim-Geitner-Genius.html http://www.u4prez.com//Blogs/ericgurr/The-sophistry-of-politicians-and-emperical-reason.html Perhaps I should first preface my meaning of the word sophistry. I am referring to the Greek classical meaning of the word. Protagoras created the Sophist philosophy not to arrive at any great truth, rather to create a school to teach effective argument skills. The opinion does not matter, what matters is that the sophist win the argument. From at least the seventeenth century, lawyers have been taught this fine art. Today it has been honed to a high art form. President Obama has been educated in this philosophy his entire life. Thus when he formulates an argument, he is simply drawing on his educational background all the tools necessary to win in the court of public opinion. But what happens when sophistry runs counter to empirical data? How does one lead, when his argument is not based on history or even reasonable theory, but based instead on his skills as a rhetorician? If the sophist (political leader) wins his argument, and his "opinion" runs counter to the facts, we are left with a less desirable outcome. Let's look at a real world example. During his campaign Barack Obama stated that he would like to raise the capital gains tax rate. This is based on no history, or sound economic theory. In fact, history shows us time and time again that raising capital gains tax rates lowers capital investment, lowers revenues to the government and stifles economic growth. The Republicans running for office around the country were clear on this point. They wanted to keep capital gains tax rates at current levels, or reduce the rate further. But they lost. How can this be? The obvious answer is that the rhetoric and sophistry of the Democrats was better than that of the Republicans. One issue does not normally make or break a campaign, so lets look a little deeper. One area of the current cause of the recession that is often overlooked is the price of oil. When the housing collapse first started to accelerate, it didn't accelerate in a vacuum. Higher oil prices were pinching the middle class. Thus as interest rates were adjusting and house payments were going up, the cost to fill up your gas tank went up as well. Supply and demand is the basic tenant of any economic theory. Yet Democrats were able to win the argument against increasing oil supplies which would have lowered costs. In a strange twist, the collapsing economy has caused demand to fall, and oil prices fell accordingly. There was no logic at all to the Democrats enviornmental concerns as there hasn't been a spill from an off shore oil rig in decades, and the small foot print of a rig in Alaska in AnwR would have been all but unnoticeable. Excellent argument was able to overcome empirical evidence. This same dynamic is played out in global warming. No issue is more harmed by this Protagorian Sophistry than science itself. Those who master the art of rhetoric have succeeded in removing intelligent design from classrooms across the country. But increasing empirical evidence has rendered Darwins evolutional theory as hollow. The evolution of the species may not be in doubt, but how was life created? What cosmic accident cause the perfect aligning of all of these protein strands and amino acids to create the first strand of DNA? Mr. Dawes, a world famous atheist says it is in fact intelligent design. Surprised? How is this possible? Dawes says that aliens from another planet were the intelligent designers. The logical man of course asks the natural follow up; "Who created the aliens?". My point in all of this is that while sophists make for excellent corporate lawyers, they in fact don't make good leaders. Leadership from Alexander, to Elizabeth, to Obama must always carefully consider logic and reason. In political history, logic and reason are best derived from a thorough understanding of history. To quote Socrates: "Who would you hire to fix your shoes?" A cobbler of course. So I ask you; "Who would you hire to fix your sink? A plumber of course. Who would you hire to fix a technical problem in government?" Author is Eric Gurr Mon, 19 Jan 2009 00:00:00 EST http://www.u4prez.com//Blogs/ericgurr/The-sophistry-of-politicians-and-emperical-reason.html