Whiskey Tango Fox

During the State of the Union Address last week, President Obama clearly demonstrated his lack of understanding of popular culture when he offered us the slogan:

'Win The Future.'

That cliche is almost as lame - perhaps lamer than - President Gerald Ford's "Whip Inflation Now' and the associated WIN buttons. Worse, his supposedly inspiring slogan generates the abbreviation 'WTF' which, as used in text messages and on Twitter, simply means 'What The F*&k'.

Even though the President of the United States is regularly described as the most powerful man in the world, that really only refers to his ability to reduce the planet to a smoking, radioactive, ruin. The Constitution places very significant limits on the President but he can wield real power through his ownership of the bully pulpit and possession of the biggest microphone.

To keep that power, however, the President must be perceived as both serious and credible. Whiskey Tango Fox provides him no help.

Advice to President Obama on the State of the Union Address

The Constitution of the United States (Article 2, Section 3) states that the President "shall from time to time give to the Congress Information on the State of the Union".

Nothing in that clause requires the President to give a speech to a joint session of Congress. but Presidents Washington and Adams did choose to speak to the Congress. Beginning, however, with the third President (Thomas Jefferson - elected in 1801) and continuing through the presidency of William Howard Taft (1909 - 1913), Presidents contented themselves with a written message.

Yesterday President Obama gave the now traditional State of the Union Address to a Joint Session of the Congress. As usual, it was boring, took far too long (over an hour) and, given the size and complexity of our country, was woefully incomplete.

All those, not just Presidents of the United States, who venture to speak in public, would do well to remember this advice, provided by President Franklin Delano Roosevelt:

“The key to a good speech? Three things. Be clear. Be brief. Be seated.”

The Constitutional requirement to provide information to the Congress can, and should, be met with a detailed written document. What the nation needs from the President is not a laundry list of statuses, programs and policies but a speech that informs, encourages, uplifts and unites.

In short, this was an opportunity for leadership which President Obama, like so many before him, simply squandered.

What a waste!

Paging Mr. Darwin

"Paging Charles Darwin. Paging Mr. Darwin.

Please return immediately to your office where there are customers urgently awaiting your attention."

Where there is no nearby traffic light or marked crossing, pedestrians must choose between a long walk to the nearest light and crossing the road where they happen to be. Those who choose to walk without benefit of a marked crossing, specially those who proceed head down, cell phone to ear, and looking in the opposite direction to the oncoming traffic - if they are looking anywhere, are obvious candidates for immediate extinction.

Last year nearly four thousand pedestrians were killed by automobiles in the United States. While, in most States, pedestrians legally have the right of way, such petty legalisms are always trumped by the Gross Tonnage Rule - a variation on 'Might makes Right'. Those, therefore, who tread in dangerous places would be well advised to keep a good lookout. The alternative is a high likelihood of joining the other discards on Mr. Darwin's rubbish heap.

Your correspondent, yesterday, only narrowly avoided three members of this clearly-unfit-to-breed sub-species. He does not believe that any of them will thank him.

Headscratcher (9)

Writing in the Wall Street Journal, newly seated Senator Pat Toomey (R-PA) suggests that the there would be few problems if the Congress declined to increase the U.S. Government's statutory debt limit. His position is that, since the interest due on the national debt is less than ten per cent of tax revenues, all that needs to be done is to pass a law to ensure that the Treasury gives priority to debt service.

Senator Toomey does mention that there will be some consequences:

"If we do not raise [the debt ceiling], the government's tax revenue will enable us to fund roughly two thirds of projected expenditures, including interest payments. Without the ability to borrow the other third, spending cuts would be sudden and severe: Projects would be postponed, some vendor payments would be delayed, certain programs would be suspended, and many government employees might be furloughed."

What he does not say, however, suggests a level of ignorance and intellectual dishonesty that makes him entirely unqualified to serve in the United States Senate.

At the moment, one third of what the government spends is borrowed, so, what would really happen if the debt limit was not increased - even if the Treasury managed to avoid an default on the national debt?

Here are some examples:

• Salaries for Federal Employees - including serving members of the military - would have to be reduced by at least one third. Probably more for those not covered by collective bargaining agreements.
• Pensions (military and civilian) as well as Social Security payments would be reduced by a similar amount
• Medicare payments to doctors and hospitals would be delayed for a month and then only paid at sixty cents on the dollar.
• Payments to States for Medicaid, reduced below their already low level,will result in extreme financial stress as former recipients descend on hospital emergency rooms which are required to provide care regardless of whether they have any prospect of receiving payment.
• Withholding of funds due to government contractors will result in cessation of work, massive lay offs, and suits filed against the government for breach of contract. Many of these contractors will go bankrupt.

Senator Toomey's so-called solution will, almost certainly, result in a stock market collapse. That the bond market will treat us no better than Greece is a given. As a result, the cost of refinancing maturing debt - if it can be done - will rise to exorbitant levels.

We will not likely find ourselves in a double dip version of the current recession. Instead, we will be looking at a reprise of the Great Depression. Nor is a second American Revolution unthinkable. Except that this time it will more resemble the French Revolution with armed mobs besieging the Capitol and politicians hanged by the neck from convenient lamp posts.

While Senator Toomey is correct in noting that we have a spending problem, it is not something that can be solved by April of this year. Nor can it be solved by defaulting on the government's obligations to its employees, contractors and retirees.

Your correspondent has two questions:

1. What planet is this man from?

2. Why did the Wall Street Journal provide space on its editorial pages for the Senator to peddle such arrant nonsense?

A headscratcher indeed!

The Corruption of Language (11)

Lewis Carroll, writing in 'Through the Looking Glass' one hundred and forty years ago, accurately captured the reality behind the spin that politicians, PR flacks, press secretaries and other forms of public low life, use in their efforts to fool us and to achieve their objectives without being challenged:

"When I use a word," Humpty Dumpty said, in a rather scornful tone, "it means just what I choose it to mean -- neither more nor less."

If they think we are that stupid, shame on them. If we fail to challenge them, shame on us.

Civil Discourse

As it is now, political discourse in the 19th century was less than civil. When Mark Twain penned these words, he might better have been described as an optimist rather than as a speaker of truth:

"It is by the goodness of God that in our country we have these three unspeakably precious things: freedom of speech, freedom of conscience, and the prudence to never practice either." (emphasis added)

If partisans - of all shades - were to remember that just because one has the right to say something does not necessarily mean that to act on that right is wise. Words really do have consequences and the children's mantra 'sticks and stones may hurt my bones, but words will never hurt me' is an expression of hope rather than a description of reality.

Your correspondent realizes that it is not a useful expenditure of time and effort for him to try and hold his breath while waiting for change.

Market Failure

In our politics, there is a much discussion of property rights but too little discussion of an obscure economic concept known as an externality.

An externality is a real cost, arising out of the production of goods or delivery of services, that is neither reflected in the price paid by purchasers nor the expenses incurred by the producer or provider. Since the existence of externalities is evidence of market failure, the remedies - if remedies there are to be - must take non-market forms.

A simple example of an externality is the creation of local air pollution and, hundreds of miles down wind, acid rain as a result of burning coal to generate electricity without either removing the sulphur prior to combustion or capturing the sulphur dioxide at the smokestack. Costs were inflicted on the world without any payment by those who caused the problem. Nor, since there was no cost to the utility, was there any market incentive to desist.

In the USA in the early 1990s, that issue was addressed by a combination of regulation and market forces. A 'Cap and Trade' program was established regulating the total permitted emissions of sulphur dioxide and allowing emitters to buy and sell emissions permits. Each year the total allowed emissions were reduced. Since the program was introduced, the production of acid rain, traceable to power plants in the USA, is much diminished. Without government action, however, the problem would still exist.

Many externalities involve using the commons - air, water, land - as free or cheap dumping grounds for pollutants. Those who pay little, sometimes nothing, for the privilege of disposing of excess fertilizers, sediments, sewage and other by-products contained in untreated or only partially treated storm water degrade the environment. In addition, there is so-called non-point source pollution. In plain language that means fertilizer that was applied far in excess of actual needs. Farmers spend a bit too much, which they think is their right, but the nation suffers greatly.

If that does not meet the definition of an externality - and therefore market failure - what does?

Homeowners, drivers, cities, States, farmers and all who discharge waste have little or no market incentives to reduce their impositions on the rest of us. As a result, the only entity capable of exercising ownership rights over these resources is government, representing the People.

If government were merely to charge a price for discharging these pollutants, it is all too likely that there would be no significant change in behavior. Perhaps the cost of living would increase modestly but no effective market signals would be sent to polluters. The situation where sellers have largely unlimited power to pass costs to buyers, as would be likely in this situation, is another form of market failure.

A classic case of so-called property rights versus the environment involves the Chesapeake Bay. Between storm water run-off from roads, parking lots and housing developments, discharges from poorly designed and maintained septic systems, and overloaded municipal sewage treatment plants as well as the leaching of fertiliser and manure from farms in the watershed, the Chesapeake Bay is in poor health.

The cause is not just the direct poisons (industrial waste, oil and rubber from roads, air pollutants dissolved in rain water) that find their way into the water. As much as anything, it is farmers who, collectively, are a very large contributor to the problem.

Fertilizer (which includes manure) helps things grow and fertilizer is cheap. Unfortunately, farmers - like alcoholics - seem to believe in the idea that, if some is good, more must be better. The result is that excess fertilizer leaches out of fields and into the waterways that feed the Bay. Poorly designed manure piles from dairy farms and, even worse, the industrial grade chicken producers on the Eastern Shore of Maryland also provide additional natural organic nutrients to the Bay.

So what is wrong with additional nutrients? Don't they help things to grow in the Bay?

Indeed these nutrients encourage growth. Unfortunately, the species that feast upon the overdoses of fertilizer are algae which both block sunlight - therefore stunting the growth of underwater grasses - and consume far more than their fair share of oxygen. The lack of grasses and oxygen leads directly to the disappearance of oysters, crabs and fish. Sometimes, these conditions lead to anoxic decay with the production of foul smelling - even flammable - gases.

Last year, the U.S. Environmental Protection Agency - after too many years of ineffective activity - finally came to a comprehensive agreement with the States bordering the Chesapeake Bay. There was much grumbling over the cost but all , including the District of Columbia, agreed to take serious actions that would result in restoration of the Bay.

Now, however, the American Farm Bureau and the Pennsylvania Farm Bureau have filed suit in Federal Court to overturn the regulations. According to a report in the Washington Post - http://tinyurl.com/4sm9b8e - they claim that the costs of the cleanup will devastate farms and possibly drive them from the region.

In reality, they are claiming the right to dump THEIR rubbish into OUR Bay at no cost to themselves but at much direct cost to the watermen of Maryland and Virginia as well as to all of those who use the Bay for recreation. The costs of a dying or dead Bay are not particularly easy to quantify (at least not without starting a serious argument) but they are undoubtedly substantial.

Fortunately, the Federal Government, on behalf of all citizens, has asserted our collective ownership rights to the Bay. Since setting a price on these discharges would be unlikely to provide the desired result, regulation is the choice. Farmers must accept their collective responsibility and, if they can not manage the slightly increased cost, go out of business. Farmers, like all other businesspeople, must operate efficiently if they wish to prosper - or even survive.

Their property rights (the term of art is 'right of innocent enjoyment and use') can be assured but not to the extent that their activities result in degrading our common property together with our right to enjoy it or to make a sustainable living from it.

There is civil society and there is selfish society. Your correspondent much prefers to live in a civil society where there is respect for the rights of others. Sadly, it appears that these farmers, or their representatives, are consumed with short term and selfish desires. Our rights, in their opinion, must be subordinated to their desires.

That vast sums of taxpayer money are used to subsidize farmers only adds insult to injury.

Investing Strategies (4)

To those who manage their own money, especially to those who buy individual stocks, the process can sometimes feel like wagering on the outcome of a beauty contest. No matter how much time and effort is expended on research to find good businesses in which to invest, the outcome - at least with respect to capital gains - will be determined by everyone else in the market.

To continue the beauty contest metaphor, the problem is that one of the beauty contests on which one can wager is for the Miss Afghanistan title where all of the contestants are wearing burqas. Another is for the Miss Africa title where the contestants are of many different ethnicities so their physical characteristics vary widely. To add to the difficulty in picking a winner, the judges in this contest all seem to be Chinese.

It is one thing to develop one's own opinion as to who should win. To predict the decision of the judges - which is how the bet is won - when many of the facts are hidden or when the criteria for victory are unspecified is an order of magnitude more difficult.

On the other hand, even though capital appreciation is uncertain, a modest hedge is available that can be identified by those that do their homework: buy good stocks that pay decent dividends. Even if it takes the judges a while to come round to your point of view, at least you will be paid - even if only modestly - to wait.

Note: In the interests of full disclosure, your correspondent manages his own money, buys individual stocks, favors - but not exclusively - those that pay dividends, and picked some beauty contest winners last year although he also picked some substantial losers.

What if Mark Twain was wrong?

The new Congress is in session and already shows little resemblance to a body that is willing to address the very real mid and longer term issues faced by our nation.

The House, apparently desiring not to waste time with commemorative resolutions has banned them and is, instead, wasting its efforts by scheduling debate and a vote on a bill to repeal the so-called Affordable Care Act (ObamaCare). The repeal effort, while likely to pass the House, will go no further.

If it is truly the case - as is likely - that the Congress will work diligently to avoid hard issues, Mark Twain's harsh words are applicable:

"Sometimes I wonder whether the world is being run by smart people who are putting us on or by imbeciles who really mean it."

"Suppose I were an idiot. And suppose I were a Congressman. But I repeat myself."

"No man's life, liberty, or property is safe while the legislature is in session."

"Whenever you find yourself on the side of the majority, it's time to pause and reflect."

But what if Mark Twain was wrong? Such would be an unexpected pleasure but your correspondent, being something of a cynic at heart, does not plan to hold his breath.

Congress and the Constitution

The 112th Congress will convene tomorrow and the leadership of the House of Representatives has decided that the entire text of the United States Constitution shall be read aloud as a part of the proceedings. Whether a significant fraction of the members will be in attendance or, if so, will actually pay attention is another matter.

Although we could hope that our Representatives would have a thorough understanding of the Constitution, it is clear from their past statements that few do. Here, then, are a few thoughts that may help:

1. The first three words of the Constitution are "We The People" not "We the States".
2. The tenth Amendment states: "The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people." (emphasis added)
3. To deprive some half a million citizens of any representation in the Senate and of full representation in the House, merely because they happen to live within the boundaries of the District of Columbia, is another of the injustices perpetrated by the Constitution. Consider correcting this - urgently - even if there is a modest partisan political cost.
4. Not even the authors of the Constitution agreed on what it meant. If you haven't yet done so, read the Federalist Papers: if you have read them, read them again.
5. The will of the people is not paramount so stop saying that it is. The people could vote to reinstitute slavery or to deny the vote to men (women are a majority now) or to recriminalize adultery and homosexuality - as they once were in many States - and set the penalty to death by stoning as in Iran. While these are unlikely outcomes, one reason for the existence of the Supreme Court is to protect the People from themselves.

Understand that the Constitution specifies how the government is organized, enumerates certain powers of government, and guarantees certain individual rights. It's one exercise in social engineering was Prohibition. Mandated by the 18th Amendment, which was adopted in 1919, Prohibition was unusual in that it limited the freedoms enjoyed by the People. It was an almost immediate disaster but was not repealed until 1933. Avoid social engineering and absolutely shun any constitutional reductions in freedom.

Consider that we are currently fighting two wars, in Iraq and Afghanistan, and that we have also fought numerous wars since 1945 without benefit of a Declaration of War. The Constitution (Article 1, Section 8, Clause 11) gives the Congress the power to declare war. Use this power to stop the President from involving us in foreign adventures at great cost in lives and treasure. Let the need to go to war be the subject of debate except when we are directly attacked.

There is no need for a Balanced Budget Amendment. Budget deficits, while frequently abused, are an essential part of financial management. What would have been the outcomes of the Revolutionary War, the Civil War and World War II had we been unable to borrow to finance those efforts? The solution is restraint and the willingness to say 'NO' to those who demand benefits without the will to pay for them. Since the majority of government expenditures are transfer payments, and the majority of voters are now net takers from the treasury, this will be hard. George Bernard Shaw described well your dilemma:

"A government which robs Peter to pay Paul can always depend on the support of Paul."

The Constitution and the Bill of Rights (the first ten Amendments) were a very flawed document - slavery, denial of women's right to vote, and the appointment of Senators by State Legislatures among them. It is still not a perfect document so treat it with caution and, particularly, mind the words of Thomas Jefferson who understood that the authors had no special knowledge or insight and was well aware of the risks of treating the Constitution as a sacred document immune to change:

"Some men look at constitutions with sanctimonious reverence, and deem them like the arc of the covenant, too sacred to be touched. They ascribe to the men of the preceding age a wisdom more than human, and suppose what they did beyond amendment. . . . Let us follow no such examples, nor weakly believe that one generation is not as capable of taking care of itself, and of ordering its own affairs . . . Each generation is as independent of the one preceding, as that was of all which had gone before."

So be modest in your actions and seek to serve the long term interests of your country rather than the short term interest of yourselves or of some strange ideology.

Resolutions for the New Year

Your correspondent knows better than to waste his time making New Year's resolutions which, probably sooner rather than later, he will disavow because they commit him to activities that are time consuming, expensive, healthy or boring. Besides, the result is too often embarrassment when he finds himself abandoning such resolutions.

He is, however, not above dreaming up resolutions that he would like to see other people adopt. Here are a few:

• For newly elected Republicans: realise that Senate Democrats have the votes to deny repeal of the so-called Affordable Health Care Act (ObamaCare) and, even if there are sufficient defectors to pass a bill, an unachievable two thirds majority is required to override President Obama's veto.
• For journalists: resolve to reduce the number of cliches and tautologies.The term 'veto pen' is a gross irritant, while 'snow blizzard' wins the 2010 prize for redundancy
• For all politicians - particularly Democrats: spend a little time reflecting on the idea that Bill Gates and Warren Buffet, rich as they are, both work really hard and are Americans. Doesn't that make them 'working Americans'?
• For all consumers: realise that 'Buy Now, Pay Later' has governed spending for too long. Comedian Will Rogers was ahead of his time when, in 1928, he anticipated our most recent thirty year spending binge with these words: "Spending money we have not earned, to buy things we do not need, to impress people we do not like." Save first and spend later.
• For Tea Partiers, who believe that the budget can be balanced if only waste, fraud, abuse, earmarks and the Departments of Energy and Education are eliminated: know that it will be a lot harder than that. Many sacred cows must die and oxen be gored before the objective can be achieved.
• For all those who are devout: remember that love, not hate, is the essential message of every religion.
• Finally, for those who still believe in Santa Claus, the Tooth Fairy and free lunches: know that Charles Ponzi is dead but his successors are waiting for you.

Wish lists, of course, are exactly that. Your correspondent is not entirely pessimistic but is, unfortunately, not certain that much in the way of change will actually occur in the next year. He would be pleased to be proven wrong.