Todd Weber's Random Thoughts

November 14, 2010

The Good, the Bad and the Ugly

I am so very happy that Washingtonians rejected the initiative to implement a state income tax on November 2nd. Also good was the repeal of a recently enacted tax on bottled water, candy, etc. Disappointing was the failure of initiatives to end the state’s liquor monopoly, which I think was due to fear-based ads that convinced non-thinking lemmings that hard liquor is somehow more dangerous than other alcoholic beverages, and that it is better for the state to have exclusive selling rights. It assaults my libertarian sensibilities.

Even more disappointing was the re-election of Senator Patty Murray. Ugh! No surprise, really, in this very left-leaning state, but so frustrating. My sympathies to Dino Rossi for striking out in his third run for high office (two prior attempts at the governorship). Six more years of Super-Spender-Socker-Mom will do no good for the nation.

On another note, if you like inflation you’ll love the Federal Reserve’s plan to pump $600-billion new dollars into the national economy, which they deceptively call “Quantitative Easing.” This increase of the money supply will de-value the dollar (to which many foreign governments have vehemently objected) and cause the price of everything to go up, up and away. So, if you haven’t noticed increases in the price of groceries and gas so far, start paying attention. As you do, you will see them continue to rise indefinitely, and if the predictions of some inflation experts are correct, it will have drastic effects on our daily lives.  Whatever cash we have will be worth less and less, meaning the products we want to purchase will cost more and more. What we pay $5 dollars for today may cost $10, $15, or more in a very short time. 

For this, we have to thank Ben Bernanke, Chairman of the Federal Reserve, and ultimately President Barak Obama, who determines the nation’s monetary policy. Of course, Obama supports this Qualitative Easing because it moves us further toward his Socialist vision for America by exacerbating the present economic crisis, which he and his Progressive cohorts believe will create the opportunity for them to rush to the rescue with still more Socialist solutions. Remember the words of Obama’s Chief of Staff, Rahm Emmanuel, “Never let a crisis go to waste.”

We can only hope that the recent election of many conservatives to Congress will be the beginning of the end of our nation’s mad dash toward Socialism. I am cautiously and skeptically optimistic.

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October 12, 2010

No State Income Tax for Washington! No on I-1098!

Here is the  letter I sent today to the editor of my union’s newspaper in response to a letter from a supporter of the pro-income tax initiative in the state of Washington. In respect of his privacy, I have withheld the name of the person to whom I am responding.

Dear Editor,

I am writing in response to Mr. X’s letter in the October 2010 issue of the News Review titled “Shell Game” in which he made several bold, yet unsubstantiated statements to support his argument in favor of I-1098, which would create a state income tax in Washington.

He suggested that millionaires are to blame for the sorry state of the economy, and said, “No matter how much the local millionaires try to lie about it, it is an inescapable fact that the more money one has, the more they owe the society…”

I am certainly not a millionaire, nor do I know any. However, I am a firm believer and supporter of the right and freedom of individuals to pursue profit and prosperity through any and all legal means available, and to keep and use the fruit of their labor as they choose. As one who hopes to one day achieve such prosperity myself, I respect and admire those who have already done so.

Wealth is not a zero-sum game in which we all draw from a limited pool of resources and those who get ahead do so at the expense of those who do not. To say that “Wages in the private sector are falling because CEO wages are rising” is unfounded and preposterous.

Instead of inciting discontent, class envy, and trying to pull successful people down to a common level of mediocrity and misery, we ought to celebrate the freedom and opportunities that make success and prosperity possible and find ways to encourage and inspire the rest of us to better ourselves through hard work, creativity and thrift.

A state income tax is not the answer to Washington’s economic woes. Currently, forty-one states tax personal incomes. California is one of several states which have both retail sales taxes and income tax, and both are among the highest in the nation. How well is that working for California? Can you say, “bankrupt”? The point is that implementing an income tax in Washington will not solve the state’s problems any better than it has for California. The problem is not too little revenue, but too much spending.

Mr. X believes millionaires owe more to society than the rest of us and that taxation is the proper means of obtaining such “contributions” (read: compulsory redistribution). I whole-heartedly disagree. Many high-wealth individuals already give back to society of their own free will – the way it should be. For example, Jack Benaroya donated over $15.8M to build a home for the Seattle Symphony, now known as Benaroya Hall, for the benefit of citizens of Seattle.

Paul Allen plans to leave the majority of his $13-billion estate to fund scientific research, and his charitable giving already totals over $1-billion. Moreover, The Allen Family Foundation recently announced $3.9M in new funding for 41 non-profit organizations in the Pacific Northwest (Seattle Times, 7/15/10).

The Seattle Times (5/24/10) notes that numerous “Microsoft alumni have founded and supported more than 150 non-profit organizations and social ventures working around the world…Employee giving and company matching funds totaled almost $90M last year…”

The Bill and Melinda Gates Foundation gave $27M to help the urban poor in Africa (Seattle Times, 9/30/10). As part of their “Giving Pledge,” Bill Gates, Warren Buffet and many other super-rich have voluntarily pledged to give substantial portions of their wealth to charity.

These are only a few examples of the countless individuals and corporations who, every year, voluntarily give back to, as Mr. X said, “the society that provided them with the situations and opportunities to accumulate that wealth in the first place.”  All this is beside the well-known fact that wealthy Americans already pay “a higher overall tax rate than any other group,” while “about 10 percent of households pay no net federal taxes” (New York Times, 4/13/10).

I believe the solutions to our economic challenges include: 1) reducing the size and cost of government; 2) relieving businesses and individuals of onerous tax and regulatory burdens; and 3) encouraging personal responsibility and industry rather than a sense of entitlement.

The real “shell game” is in the continual surrender of our wealth and freedom for the promise of ever-more governmental care and provision. Let’s stop whining and confiscating the success of others, and start taking responsibility for ourselves.

February 4, 2009

Obama limits executive pay, but socialism still on the way

Filed under: Politics — Tags: , , , , , — tkweber @ 11:10 am

I applaud President Obama’s action limiting to $500,000 the pay of executives of corporations receiving bailout money from the $700 billion Troubled Asset Relief Program (TARP).  I was against the bailout plan, but since it is done, and tax-payer dollars were used to keep these failing businesses afloat, then the government should have a say in how the money is spent.  Executives should not be rewarded for failure at public expense.

However, I’m still concerned about the government being so deeply involved in private business and the market.  Despite all the reassurances from the administration, I’m concerned that our nation continues to be led further into socialism.  If the new $850 billion Economic Stimulus Package, recently passed by the House and presently before the Senate, becomes law, it will be a gigantic leap in that direction.  Many are calling it the new New Deal, a repeat of FDR’s New Deal of the 1930s. What most fail to realize is that the old New Deal made the Great Depression much worse and of longer duration than it would have been if the government had kept it’s “benevolent hand” to itself.  I fear that the path being chosen by the Obama administration, like that of FDR, will make the present economic troubles much worse and last much longer.  What’s more, I fear that the only likely solution to such a situation may be the same as it was for FDR: another world war. 

Read about Obama’s recent action here: http://www.msnbc.msn.com/id/29003620 

I highly recommend this excellent book: The Forgotten Man, A New History of the Great Depression, by Amity Shlaes, New York: Harper Perennial (2007)

November 13, 2008

Stop the (money) Presses!

Filed under: Politics — Tags: , , , , — tkweber @ 5:00 pm

Belly-up to the bar, ladies and gentlemen!  There’s plenty for everyone! 

It was only a matter of time, really.  Once the government started passing out money by the billions, everyone comes running.  Auto makers, airlines, huge conglomerates, and now state governors and city mayors are all asking Momma Government for generous handouts.  Who’s next?, I wonder.  Bowling alleys? Shoe repair shops? Carnival workers? Starbucks?  That merry band of Con-men, oops, Congressmen (and women) just keep writing checks while “Saved by Zero” plays softly in the background (no offense to The Fixx).

I’m beginning to think the guy was right who called in to a radio talk show during the hagling over the $700b bailout bill and suggested it would be cheaper and help more people if the government just sent $1million checks to all 350-million Americans.  Of course, my first thought was, “Yeah, right. That would only cause run-away inflation.”  But, how would that be worse than what is sure to result from the welfare feeding frenzy we’re seeing right now?  The national debt is rapidly climbing toward infinity, and all the so-called “relief” from the government is most likely to cause even more pain in the future, as is usually the case with government “solutions.”  If businesses and individuals no longer have to opperate by sound principles and strategy, knowing they have the government to bail them out when they drop the ball, what do you think will happen to productivity and growth?  And, who’s going to pay the bill for all of this fiscal largesse, anyway?  Our children, grand-children and great-grandchildren – if they can.

What happens if Russia and China and others decide to throw down a serious military challenge and we no longer have an economy strong enough to field sufficient forces to meet it?  Appeal to the French?  Non merci! 

The American people need to wake up and demand fiscal responsibility from the government and one another.  Let those businesses fail that should fail, and let others take their place.  Would that hurt?  Sure.  But we can get through it.  And, we’ll be stronger on the other side.  The present course we are on will only make us weaker and more vulnerable to our enemies.  STOP the money presses, please!

May 20, 2008

Investment Industry’s Suicidal Self-Interest

The May 2008 issue of Money magazine contained a one-page interview with New School university economist, Teresa Ghilarducci, titled: The Plan to Save Early Retirement, in which the economist contends that the U.S. government should scrap 401(k)s and IRAs and replace them with a government funded, mandatory, universal savings plan.  Under her plan, the government would contribute $600 a year and require people to deposit 5% of salary to their “guaranteed retirement account.”

 

What is her reasoning for this?  People are living longer and saving less, she says, and “a rich nation ought to be able to ensure a secure old age.”  How would this system work?  The government would have to “negotiate with the money-management industry.”  I was more than a little miffed by the socialist overtones of the article, so I emailed a letter-to-the-editor.  It didn’t get printed in the June issue.

 

In the June 2008 issue of Kiplinger’s Personal Finance (I subscribe to both magazines), a similar one-page interview appears titled, Savings Accounts From Day One, featuring Professor Michael Sherraden, director of the Center for Social Development at Washington University in St. Louis.  Professor Sherradan argues for “a lifelong system of accounts for everybody to save for important life goals – post-secondary education, homeownership, additional job training…retirement security.”  He points to “One bill in Congress [that] calls for $500 for all children and an additional $500 for the poorest.”  Who would manage such a plan?  “The major asset managers.  Good plan features would be simple investment options and low costs.”   

 

Then, it all became clear.  Two investment magazines run nearly identical articles in successive months promoting a government mandated, government funded, investment system for every citizen (and presumably non-citizens, too) operated by the investment management industry, for fees, of course.  I sent a letter to the editors of Kiplinger’s, too; but I don’t expect it to be printed there, either.

 

There is nothing “new school” about Ms. Ghilarducci’s plan to save early retirement.  It’s just more European-style, nanny-state, big-government.  Professor Sherraden should re-name his department at Washington University: The Center for Socialist Development.

 

Why do people who are supposed to be so much smarter than the average bear continue to look to Europe as the shining example of modern civilization?  Do they not see that Europe is crumbling under the weight of big-government socialism?  They have an aging population that is entirely dependent upon government welfare, which is entirely dependent upon high levels of taxation, which is entirely dependent upon taxable wage-earners – a pool that is rapidly shrinking due to Europe’s unsustainably low birth rate.  When there are no more people to tax, there will be no more government-supplied benefits, and then what?  It is a wholly unsustainable system.

 

Here in the United States, we have the likes of Barack Obama, Hillary Clinton, and the entire Democrat party who want to implement similar European-style socialism, and the financial services industry is cheering them on.  Why?  Follow the money.

 

The financial services industry is apparently licking its chops at the prospect of three-hundred-million-plus mandated retirement accounts from which they will collect management fees.  And, don’t think for a minute that such fees would be along the lines of the 1%-or-less that Vanguard charges on many of its accounts.  As with all government programs, it may start out small, but the case would soon, and continually, be made for higher and higher fees as the burden of managing such a monstrosity would put a tremendous strain on the ranks of selfless, public-serving asset managers.  Yeah, right.

 

Of course, we would then see an explosion of asset management professionals emerging from universities to get their piece of the action, just as the number of lawyers has increased like a population of rabbits to take advantage of the increasingly litigious nature of our society in the last thirty years.  At the same time, the lobbying efforts of this increasingly powerful sector would result in ever-higher government “contributions” to the mandated retirement accounts, as well as the fees paid to asset managers, which in turn would result in ever-higher taxes (enforced “contributions” to the government).  This, of course, will result in diminished economic investment and growth nationwide, less technological innovation, fewer jobs, more unemployment, a greater burden on the already terminal social security system, and so forth.  It would take only a few years, perhaps a decade or two, for the U.S. to end up in the same sorry condition as the nations of Europe.  Indeed, we are already, in many ways, headed in that direction.

 

This is the certain result of the investment industry’s apparent suicidal self-interest.  By promoting such a socialistic, mandated, tax-funded, universal retirement plan by which they hope to enrich themselves, they are also building the gallows on which they – and us all – will hang.  No doubt, they would be hugely enriched by such a plan – perhaps an entire generation of money-managers.  But, eventually the well will run dry, and the richest, most prosperous and free nation in human history will join the rest of the has-beens.  Prosperity will turn to poverty, not only monetary, but also in terms of will, creativity, liberty and spirit.  

 

Rather than supporting a plan for financial and societal suicide, it would serve the financial services industry and the entire nation much better to promote the virtues of self-reliance, personal responsibility, self-discipline, delayed gratification and thrift.  The investment industry ought to be pressing for parents and schools to teach basic financial management to children to encourage saving and investing on their own for a lifetime of financial security and prosperity, from which the industry and society would benefit not just for a generation, but forever.

 

Let’s stop listening to elitist academics who believe they have the answers for all of us knuckle-dragging ignoramuses who can’t think or act for ourselves – we who have built the greatest nation on earth.

 

Todd Weber

 May 20, 2008

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