Government Money: Where It Comes From and Where It Goes

There are 312 million citizens in the United States, 147 million submit tax forms, 69 million paid no money on those forms and 78 million did pay money. Therefore 66% of tax form submitters paid taxes.

50 million people receive money from medicaid, 46 million from medicare, 52 million from social security, 5 million from disability, 7.5 million unemployment, 44 million from food stamps and 24 million from "tax credit." The average individual receiving money given--not paid--from the government receives 20 thousand dollars a year.

One can see that the straight charity activity of the government would be quite manageable had the government not decided to become an insurance agency in medicare and social security.

The Balanced Budget Amendment

The balanced budget amendment notion has never made sense other than as ironic anti-government revenge. Certainly no one can think that a government, with a fluctuating economy and uncertain international responsibilities, can manage its budget closely enough to be balanced regularly. It would be like a business without a line of credit. And, of course, it gives legislators the ultimate excuse to raise taxes to fulfill their balanced budget requirements as they deal with the new and unexpected cost that arose. But it does turn government on its head by creating a legislative straitjacket to produce a desired end, just like government does all the time.

But, irony aside, it is an admission of failure. You can not legislate competence or good will or good motives. Those qualities are found, not legislated, and are in men, not laws.

Lying Back at the Numbers

A number of years ago Sports Illustrated did an article on the emerging fighter Sugar Ray Leonard and how he might be helped and hindered with regard to marketing himself to white America. One factor, deemed a negative by the writer, was Leonard's illegitimate daughter whose picture he flaunted on his sock during bouts. A mitigating factor, it was offered, was that within the black community this was quite common--over 70% of kids were illegitimate--and that might soften the effect among white Americans. The following week several letters to the editor proclaimed outrage of what they perceived as a misprint; it was inconceivable to them that 70% of black children were illegitimate. It must have been 7%.

It was indeed 70% and still is. There is, however, a part of us that has difficulty with the astonishing. Facts outside our norms are not dealt with well and often just ignored or forgotten, like a bad date or an unpleasant illness. So it is with the recent statistics on net worth of families. According to PEW Research (maybe with an ax to grind) the median net worth of white households in 2007 was $134,992, in 2009 it was $113,149. The median net worth of black families was $12,124 in 2007 and in 2009 it was $5,677. Net worth not income; assets minus debt.

These are numbers that most will see and squeamishly look away. An objective person must look on these numbers with horror. Initially some will point out the discrepancies, of course, and call to the barricades. Some will muse this kind of disparity will be socially destabilizing, although being on the lower end of the scale in America has little connection to poverty when seen in a broader geographical--or temporal--framework. Moreover inequality always exists, if and how it becomes destabilizing appears no more defined than coffee house surmise.

But there is a real and obvious problem here that has nothing to do with comparisons. The black community has amassed no wealth. They clearly are living from check to check. They have no savings, no fallback position in a crisis, nothing for a down payment, no extra money for a luxury, no extra money for school, no money for a rainy day. A dental bill is more than a problem, a fender bender a disaster. Most of all, all of the country's discussions must be obscure to them. Taxes are meaningless, interest rates do not apply, the housing market an abstraction, savings and the very notion of self denial towards a desired end--a concept most Americans would think inherent to the nation--the stuff of a foreign culture. Somehow the black community has managed to live in a nation of great flux, immigrants coming and going, with mandatory affirmative action and have remained separate from the basic heart of the country.

The only thing more numbing is how this came about and where it is going.

If Confidence Falls in the Forest...?

The battle drags on. Productive vs. nonproductive spending. Freedom vs. planning. Confidence in macro policies vs. caution.

First, Robert Reich for the State (from Slate):
"If consumers can't and won't buy, and employers won't hire without customers, the spender of last resort must be government. We've understood this since [massive] government spending on World War II catapulted America out of the Great Depression --reversing the most vicious of vicious cycles. We've understood it in every economic downturn since then.

The only way out of the vicious economic cycle is for government to adopt an expansionary fiscal policy -- spending more in the short term in order to make up for the shortfall in consumer demand. This would create jobs, which will put money in people's pockets, which they'd then spend, thereby persuading employers to do more hiring. The consequential job growth will also help reduce the long-term ratio of debt to GDP. It's a win-win.

This is not rocket science. And it's not difficult for government to do this -- through a new WPA or Civilian Conservation Corps, an infrastructure bank, tax incentives for employers to hire, a two-year payroll tax holiday on the first $20K of income, and partial unemployment benefits for those who have lost part-time jobs. . . ."

And the always cautious Amity Shlaes on the other side:
On the lessons of Japan and the '30's: http://www.washingtonpost.com/wp-dyn/content/article/2008/12/09/AR2008120902785.html

A State in Search of a Statesman

Ideology, the enemy of practicality, will always be with us but nowadays it is stalking the land. Data, information, studies and the like are analyzed with Procrustean logic, joined with heartfelt beliefs and conclusions are hammered into place. Contradictions are burned like heretics, certain analysts are placed on The Index and uncertainty is bridged by revelation and faith. Political advisers comb through focus groups for positive and negative phrases and speakers repeat them like a chant or mantra in any speech or interview.

Years ago the first President Bush promised "no new taxes." When the Iraqis invaded their neighbors, the Kuwaitis, and threatened the Saudi oilfields President Bush created an alliance of world leaders and nations that hated each other, attacked and defeated the fourth largest army in the world in days with casualties limited virtually to vehicular accidents then mercifully stopped the combat when the Iraqis fled home. To pay for this unplanned event, he raised taxes. He was immediately vilified, his previous supporters ran a third party candidate against him who had never been in politics who won 18% of the vote--virtually all from Bush supporters--and allowed Clinton, an unknown, to be elected with a rare and low plurality. The angry voters felt vindicated--until the Clintons emerged as their worst nightmare and they suffered with them for two terms.

We now face a conflict between what some believe we should do with government and what some believe we can afford. This debate will not involve specifics. Indeed there has not been a budget submitted for the country in two years except for Obama's budget earlier this year which was voted down 97-0. What will be debated is the cost of corporate jets, the cost of the President's holidays and the possible change in interest rates if the opponent does not yield on his position. If the opponent does yield, it will be the defining slogan of the campaign next year.

Problems are important in this great nation only when they become politically useful.

No Lobbyist Left Behind

While we are being told always that the independent voter is the crucial piece to any successful campaign and election, we see in Washington two sides negotiating from positions hostage to their peripheral antagonistic bases. There is no plan to solve a problem; there is only maneuvering to force the opponent into repudiating some position that will outrage its already outraged support. The majority watch helplessly as the intense hourly evaluation of "no progress" is dutifully reported. Problems that have been apparent for more than a generation are being ignored as if a wreck was slow motion and could be suddenly reversed on demand.

Years ago Michael Crichton wrote a book connected to the question of global warming and opined that the American political system was dependent upon creating arbitrary crises before anything could be done and what was done usually had a random connection to problem solving. We were "a state of fear."

One of these days we will need a statesman or two for more than theater.

Aeschylus as a Military Man

In response to some cynicism re: Aeschylus' grave marker: "Aeschylus, the Athenian, Euphorion's son, is dead. This tomb in Gela's cornlands covers him. His glorious courage the hallowed field of Marathon could tell, and the longhaired Mede had knowledge of it"
A link to the underrated Edith Hamilton:
http://english.emory.edu/DRAMA/Aesch.html

Is a Good Military Man Hard to Find?

A discussion arose last night about the status of the military in the minds of Americans. From Washington to MacArthur it appears to be quite high. MacArthur even emerges from Korea with favor--even after being removed by Truman. Whatever happened, happened in the '60's, with its understandable opposition to a mindless war diffidently fought. And each event was meticulously dissected by an omnipresent and hostile press. The military, widely regarded around the world, began to slip from the American esteem; on campuses it became the enemy. Colleges, defended by these very soldiers, refused to allow the military to recruit on campus and this bizarre decision was accepted as reasonable and honorable. Recruitment for the war itself was reduced to a lottery, a matter not of duty but of luck.

Things seem changed. Now, when politicians discuss some military question, one waits for the military man to speak who you know will be bright and honest. The close watching press, "embedded" in the military side like a tick, shows the conflicts in a better light because the caliber of men is so high they cannot avoid it. No one approved of Rolling Stone's mishandling of General McCrystal recently and every pundit mourned his loss.

Historically the military man was usually the leader--or about to become him. When the Americans set the government up, some anxiety clearly existed over this possible problem of leader and army so that civilian control over the military--which worked so poorly in Vietnam--could protect the republic from the expression of military influence. There is no reason why this can not work. Several military leaders have become civilian leaders from Washington on. And the man's qualities will always be the great filter on his actions.

But actions count and conflict is a wonderful place to see the real man. (Perhaps a reason why violent sports are so popular in this country is our need to see real men.) Aeschylus, the greatest Greek playwright and one of the world's two best, wrote over 90 plays and was considered by his time to be the inventor of tragedy and an enhancer of Greek culture at a time when it had no rival. When he died there was no mention of his art on his gravestone; it said only "Marathon Warrior."

Axion Power

Early companies are like children, coddled, self absorbed, full of promise. Axion Power is a bit atypical in that it has been around for a few years and has been the recipient of a good amount of investment money that it has spent on research and development of its proprietary product, an asymmetrical battery with a carbon negative electrode. The essence of the technology is that the degradation from lead sulfate deposits on the negative electrode does not occur --or occurs very slowly--on the carbon electrode. As a result the battery has a better charge acceptance, a longer life, and, if used in as the element in stop-start engines, uses less hydrocarbon and produces less carbon byproducts.

Regardless of how one feels about pollution and global warming, legislative changes are in place to influence them in a profound way in the near future. Penalties start in 2012 in Europe and are progressive depending on the degree of noncompliance. Moreover, penalties apply to the entire fleet, even if only a few makes are non compliant. Penalties start in 2016 in the U.S..

Surveys of the car battery industry are interesting and surprisingly little publicized. By 2020 it is estimated that 94% of all cars made will have a two battery, stop-start system in place; only 6% will be electric.

A trip to Axion's annual investor meeting is a treat. Axion has been working out of an old battery factory in New Castle, Pennsylvania. (It would probably be impossible to get a permit to build a new facility these days.) The meeting was held at the local country club. Understandably it was a small group. Several members of the development team spoke about the science and technology but all the speakers were possessed by the quiet assurance of a card player with a strong hand. The science seemed to be enough for them; there was nothing for the business to prove. Indeed questions about their own technology seemed to fascinate them. For example, a question about degradation of their lead carbon battery over long term trials was raised and the the researcher was thrilled to talk about it. A question that worried investors to the researcher was an opportunity and a proof of concept. The degradation was in the positive electrode which never happened before because the negative electrode deteriorated so fast that the positive never had a chance to degrade. Their new technology now gave them an opportunity to see and investigate something entirely new!

This is a big market. Even a small part of the impending stop-start market would be big. The executives seemed casual about their applications there. Car companies seem to absorb good technology; good technology never penetrates them. So they plan to continue their research and development with the confidence it will prove out. They are working on a scalable battery unit with applications for wind and solar as well as business and residential use. But their real thrust is the locomotive industry where they think they will solidify their proof of concept.

A trip to their manufacturing and research facilities was illuminating. They have two production lines for lead acid batteries with several research areas where they evaluate batteries and their products. They have a second facility where a second generation robotic production line turns out their carbon electrode. (This facility was unmarked and had a "For Sale" sign in the front of it as if they were a CIA front.) While the robots ran, a section of he facility lost its power much to the ironic enjoyment of the staff.

Every young company is an under-the-radar monster to its creators. Axion is in a technological area that is an under-the-radar monster by government fiat. Whether they can fill that space is yet to be seen but while talking to a group of investors one of the technicians said, "It's nice being here. A few years ago I would go to a conference and no one would talk to me. Now everyone wants to know what we are doing."

The Cares of Medical Care

While medical charts have become more formulaic, they always have at their core an emphasis upon the essential patient concerns and these are usually summarized in the opening of the document. A patient office visit summary recently came across my desk beginning: "..is a 65 year old man whose lifestyle is remarkable for no history of physical abuse, no history of sexual abuse, no history of verbal abuse, normal amount of stress and regular seat belt use." The medical history goes on to discuss the patient's diet, exercise patterns, tobacco and alcohol habits, and contraception practices. In the second paragraph it is noted that he has blood in his sputum of recent onset.

This is a revolutionary document. True, the physician is following a template dictated by some agency and is filling his obligation to that agency (to get paid) and then is moving on to the meat of the matter. But the distortion is real, the agency's imprint is real and the change in the emphasis of patient care is real.

A social fraction of the medical whole is being made the reciprocal.

GDP as Bling

GDP is consumer spending, plus government outlays, plus gross investments, plus exports, minus imports. With the exception of exports, GDP measures spending.

But GDP does not distinguish between spending on good project vs. bad projects, between spending that results in production vs consumption, between debt financed and savings financed spending. There certainly must be differences.

Say the Pittsburgh Pirates, as an entity, have a budget of 45 million dollars and they are going to spend 7 million dollars on a power hitting first baseman. Is spending that money for Pujols the same as it would be for Overbay? Would things be the same if you borrowed money from next year to buy Pujols? Either way buying Pujols is a good deal for the team, in no way is buying Overbay a good deal. And going into debt to buy Pujols is still a good deal.

The problem here is that GDP is a poor marker, an inaccurate stat. It measures--except for exports--consumption, not production. It substitutes consumption for wealth.

That is a trailer park error.

Atlanta's Burning Question

Interestingly, the Atlanta school department involved in the administrative led cheating scandal must now take an on-line ethics course followed by an on-line exam.

One can only wonder if they will cheat on the ethics final.

How Do You Spell the New Means-Tested Medicare?

So now the debate over government costs will include a debate over means-testing for medicare. The money taken out of people's earnings for years with the promise that it would be available for their medical coverage in their old age is not actually going to be available if they do not meet certain income requirements. This is only fair, it is said, as people with more money do not need the help. Why, then were they told to contribute in the first place?

This ex post facto justice has little to do with justice and a lot to do with cost cutting aimed at groups that can not complain. Moreover, it is the first public admission that this welfare state creation is a myth and in so much trouble its goofy architects are willing to confess to it.

How do you spell the new means-tested Medicare?

MEDICAID.

Inadvertent Social Security Honesty

"I cannot guarantee that those checks go out on Aug. 3 if we haven't resolved this issue because there may simply not be the money in the coffers to do it." Thus spake President Obama regarding the Social Security check payments due in August.

But how is this possible? For years we have heard the payments from Social Security were guaranteed, were isolated and protected. They were in a "lock box" earning interest just waiting to be sent out. Indeed, the tiny privation effort that President Bush suggested was ridiculed and defeated because it introduced an element of risk into this safe system. The Chileans might be able to take such chances but there would be no risk for us.

Does this mean the money is actually not there?

The New Janissaries

Some remarkable numbers have emerged that describe the decline of the middle class of black Americans as reported by The Economic Policy Institute.

As Algernon Austin said in the Institute's report, "In 2009, for every dollar of wealth the average white household had, black households had two cents." The median net worth of white American households had fallen 24% from $134,280 in 2007 to $97,860 in 2009. For black households it had fallen 83% from $13,450 to $2,170. $2,170!

These are shocking figures. Certainly the housing crash had something to do with it but the disparity in both value and percentage fall is horrifying.

There's more. While the blacks make up 10% of the civilian labor force, black Americans make up 18% of government workers; 25% at Treasury, 37% in Education, 31% State, 38% HUD, 42% Equal Opportunity Commission, 55% government Printing and 82% at Court Services and Offender Supervision.

These numbers are being talked about now as a risk for Obama's reelection hopes. As the government comes under increasing criticism and costs are cut, the black population that is so overrepresented in government will suffer most. So, the wise ones ask, will they resent Obama and not vote for him?

That is a moot question. This incredible discrepancy between two groups in productivity and wealth cannot go on without some new balance being created.

Where the Rubber Meets the Road

The European Parliament has commissioned a study of light powered vehicles: 2 wheel mopeds to motorbikes, three wheel and quad. These vehicles, called "L Vehicles", make up 3% of transport mileage with considerably higher proportion of pollution, 2% distance mileage and 16% of traffic deaths.

It is likely the Parliament will come to a rational, thought-out decision here.

While they are at it, perhaps they could comment on the wisdom of individuals making their own choices for spouses.

Sincerity Is Not Enough

In the middle of "West Side Story", as Anita sings "He'll murder your love, he murdered mine!" a man stands up in the audience and declares the women on stage "sluts", the play "immoral" and the coming conflict "unsatisfying" because "not enough of the criminals in the play die."

As Antony, in "Antony and Cleopatra", starts the beautiful speech reworked from Plutarch describing Cleopatra's sailing down the Nile ... a woman stands up in the audience screaming the play is a slur upon the Middle East, is unjustly critical, and arrogantly pictures the East as voluptuous and decadent in an effort to inflate the West and the West's masculinity.

A woman is adjusting her new hat in the mirror of the ladies' room when a woman enters and volunteers she does not like the hat, its color or style.

The righteous carry a heavy burden: A truth that must, must be shared. It is a moral duty, a responsibility. For who does not want to hear the truth? This search for the truth is inspiring and wonderful in us. It is the essence of scholarship and art, it is at the heart of scientific curiosity. But truth, as the New Testament clearly shows, can not be dictated.

Truth fills, it does not penetrate.

Justice and Honor 2

Anyone searching for metaphors on how the courts deliver a decision, not justice, need go no further than the Casey Anthony case.

One may offer countless rationalizations: The jury wanted to go home, there was a reasonable doubt as there was no witness, there was no definitive motive, the television crime programs have raised the bar for evidence, people are uncomfortable with the death penalty. But this case was a battle between circumstantial evidence and innuendo. The family itself has been destroyed by the women's defense. Sexual abuse, conspiracy in an accidental death, perjury have been lightly raised as compliment to the heavy prosecution circumstantial suggestions.

The essence here is that this is a combat for victory, not truth, and the major weapon is uncertainty. The minor benefit is entertainment. Strangely, this culture is remarkably certain about a lot of difficult questions--global warming, WMDs, how to raise children, the effect of deficit spending--but when faced with a staggering imbalance of evidence, it defers.

Perhaps later, Casey and O.J. will meet and search for the two perpetrators together. A reality series may develop. Love may bloom.

Justice and Honor

A man is in line at a nightclub when is and his party are approached by a drunk. The drunk blathers obscenities and, when ignored, sucker punches the man from behind. The man turns on him and the drunk retreats to a nearby policeman and claims he was attacked by the man in line.

A man is walking through a large crowd with small group, one a voluptuous woman. Pushing their way through the crowd towards them is a group of young men. As the two groups merge a moment, one young man grabs the girl's breasts and then the two groups separate in the crowd.

A man is returning from the night shift and is stopped at a red light at about eleven o'clock when he is rear-ended. He get out and inspects the damage. His car is scratched but the car that hit him has serious grill damage. The other driver gets out of the car full of apologies and is clearly drunk. He says the accident was his fault and is terrified if the event is reported he will be arrested. He promises to have the car fixed if only the man will keep the event private and not call the police. The man feels sorry for the drunk and agrees. They exchange phone numbers and he goes home. The next morning he is awakened by a state trooper who says he is being arrested for backing into a man's car at a red light and fleeing the scene.

There are probably a number of problems in society that would be solved by the re- institution of dueling but not many because, as as most feudal societies recognized, most people will not play by the rules. (In most feudal societies, the very possession of weapons was illegal for the lower class.) In daily intercourse one is tempted to look for honor and justice but any such search in the examples above would be dangerous and perhaps fatal. There is no protection for the average man from someone who will not play by the rules, especially if one has much to lose and one has little. The only sane position is self-defense: Call a cop, report the event, state your position for the record and end it.

Justice and honor are pursuits, ideals, which guide peoples' lives. They are not endpoints. They are learned and taught in time, not in a moment, and only to the willing. And they can not be enforced. Even the courts know the truth when they say, "In court, you don't get justice, you get a decision."

A Bad Lesson from Sports

I heard an interview recently with a serious and successful business man who talked about the economy, unemployment and the business world in general. One thing he said stuck, especially to my medically sensitized brain. He was speaking about hiring and firing people and said he never hired a bad or incompetent guy. The employees he picked were always up to the job. He fired only in two instances; first, in a business downturn as his business was growing and was sometimes stressed to make payroll and , second, in the instance of an employee under performing. He said that when an employee underperformed it was never because he could not do the job. His failure was always due to the same problem: The employee always had a poor ability to assess himself and always, always, overestimated his performance.

Humility. Caution. Critical self assessment.

We live in a very sports obsessed world. The athlete trains himself in many ways; one focus is to win. How to win is taught. He never learns that a task is too big, too complex. He never learns he is outgunned because, if he does, he is beat before he starts. Blind optimism is a particularly athletic trait; confidence is paramount and sometimes tips the balance. And lack of confidence can kill. The great competitors take advantage of this and make the competition more than just the sport; it becomes a complex battle with history and personality and texture and, if his opponent accepts the new ground rules, he is beat. Muhammad Ali was a genius it this; Patterson the perfect victim of it.

But this does not work in the real world. The real world is indeed complex with history and personality and texture that all must be considered and managed. Confidence and brashness might beat the cornerback but it does not solve problems. Self assessment is hard and may be a success trait. The highest scoring students in self esteem testing are the lowest scoring students in grades.

It is significant that the first--and sometimes the only--Greek word the student learns is hubris.

Alternative Logic

A recent article by Peterson in Seeking Alpha raises an interesting and rarely discussed point: non-ferrous metals are crucial in alternative energy projects. And non-ferrous metals are rising in cost faster than petroleum. The average person in the world uses 4200 pounds hydrocarbons and 35 pounds of non-ferrous industrial metals.

How will the non-ferrous metals be substituted economically for the hydrocarbons?

And where will we get these newly needed metals?