Whistle Blowers

The recent release of classified information by, Edward Snowden and Bradley Manning has brought renewed interest in the Pentagon Papers. Back in the days of the Viet Nam War, then Secretary of Defense Robert McNamara order a group of specialist in the Pentagon to write an extensive up to date report on the Viet Nam War. He was concerned about all the false information that the government was putting out and wanted and honest record for posterity. One of the specialist was Daniel Ellsberg and he was so concerned about the lies that the government was disseminating he decided to reveal the truth. Here is the part of which I was not aware. He said he tried many times to get someone in the government to listen to him but no one would. When I first heard about Snowden, I thought he should have gone to the authorities rather than leaving the country. Here is a quote from the Ellsberg interview: . "I wasted years trying to do it through channels, first within the executive branch and then with Congress." "During that time, more than 10,000 Americans died and probably more than a million Vietnamese," Ellsberg says."That was a fruitless effort, as it would have been for Manning and Snowden," he says. Perhaps the only course of action for Snowden was the way he chose. I may have to reconsider my first impressions of Snowden.

Iran Contra

One of the darkest moments of the Reagan Administration is known as the Iran-Contra affair. The US traded arms to Iran for money to be used to fund the Contras in Nicaragua who were fighting the Sandinistas who were backed by the communist. Now it appears we are facing something similar in Libya. The latest story is that the US was funneling weapons from Libya to Syria by way of Turkey. In Reagan’s case it was illegal because congress had passed something called the Boland Act that prohibited such activity. In this case The President said the US would provide humanitarian aid but not weapons so the most he can be guilty of is lying since this was going on when he made those claims. If we ever find out what happen at Benghazi he may be exonerated but perhaps we may never know. Stay tuned!

Disability

One government program that you don’t hear much about is disability under social security. When I was working, I helped people apply for this and it was difficult to qualify. In recent years we have witnessed an upswing in the number of people who are qualifying and this is directly related to the number who are applying. There is a direct correlation between the level of formal education and the number on disability. This is caused by two reasons. First people with less education are more likely to apply and second the income they receive is close to what they earn by working. For example a man with a wife and two children earning $30,000 per year would qualify for $1,100 per month for himself and another $700 for the family. This would be about 75% of his working wages. A man making $100,000 would get a family benefit of $4,000 per month which would be only 50% of his wages. In addition a man who is obese can still work behind a desk but not in a factory where physical labor is involved so an overweighed man with less education will likely qualify. The numbers applying and thus the numbers qualifying have increased rather dramatically since the start of the recession in 2008 and this has helped hold down the unemployment figures but with 11 million now receiving benefits the fund will be depleted in 2016. Just add that to the socials security fund, the Medicare fund and Medicaid as another area where the government is going broke.

Fast Food strike

There are strikes going on around the country this week at Fast Food Restaurants. The employees are demanding a living wage and I am with them all the way. This has been on my mind since the low pay at stores like Wal-Mart was brought to the public’s attention. This is a something that should be on the minds of all working Americans. The basic questions is would you, as a consumer, be willing to pay more to support higher wages. How much more, can be determined with some straight forward calculations. In general the cost in the fast food industry can be broken down into the following three categories: One-third for materials, one- third for expenses and one-third for labor. If a burger cost $3 then one dollar is for labor so if we double the wages from $8 per hour to $16 per hour the burger would cost $4. For most people working full time this would not be a doubling of their salary, since they qualify for government benefits that would be reduced if they earned more. Many of these full time employees, especially the ones with children, receive and extra $10,000 per year from the government in the form of child tax credit and earned income credit. With salaries going to $16 they would likely lose about half of this. I do not often eat out but I am curious as to what would happen if Burger Kind charged $4 and McDonalds charge $3. Would Burger King go out of business? Is there a way to convince all fast food placed to double the salaries? As the owner of a fast food place I would be delighted to increase salaries if I knew my profits would not be adversely affected and if all places raised pay then it would be a wash. The only ones who would be hurt would be the customer. When viewing this from a macro-economic picture be advised that if every business doubled everyone’s salary then the price of everything would increase accordingly.

Black crime

The recent discussion about black crime in America, is centered around two main reasons. The first says it is poverty and lack of jobs that leads to crime. The second says that the breakdown of the black family is the cause. The argument for the second reason, centers around historical data. In the 1930’s the number of blacks in prison hovered around 25%. This was a time when black poverty was higher than today and the number of blacks in school was lower than today. Today the number of blacks in prison is over 35%. The disintegration of the black family can be traced to the birth of the Great Society in 1965. Up until that time, single moms were left to their own devises to survive but that all changed when the government stepped in to provide benefits, that had always been the responsibility of the father. In the beginning the government replaced dead beat dads but it wasn’t long before single women figured out that they could get an apartment, with food stamps and health care just by having a baby. The black community was hit the hardest and over time the number of single black moms increased from 25% to 75% and the family unit was shattered. The black males saw their contribution to the family replaced with government programs and they felt useless. Out of anger and spite they began to “dis” their women and that was the model that little boys saw growing up in homes without dads. With no dad about these boys never learned to respect authority and this carried over to teachers, coaches and law officers. Increasing crime fueled by drugs resulted in increased incarceration rates. This is still going on today and many black leaders refuse to face this. They still believe that more programs will solve the problem. There are many studies showing that the way out of poverty for young black women is to stay in school and not have children until they marry. There are also many studies that say young black girls have babies to escape poverty. Some have children because they need someone to love and some have children to get away from their mothers. Regardless of the reason they chose to have a baby, the fact remains that they are in for a tough life.

Ecotality

A company named Ecotality was given $100 million to set up recharging stations for electric cars in different metropolitan areas. This was part of the Presidents pledge to have 1 million electric cars on the road by 2015. The project like many associated with electric cars was a flop. The reason given for failure was the unexpected low demand for electric cars. While it is true that the number of electric cars sold was far less than predicted, this project would have been in trouble even if the projected sales had been met. I say this because the equipment installed would take several hours to charge up a car. Can you imagine the American public waiting around for hours to get their car charged? If you took a trip you would drive for a couple of hours and then charge for a couple and so on. I don’t think so!

college cost

Our US Congressman, John Kline, is the Chairman of the Education Committee and recently held a town meeting to discuss the cost of college. Since I feel this is a subject that is grossly misunderstood, I wrote to him regarding this issue. I contend that no person would miss out on a college education because of the cost. I further contend that there are three ways to minimize the cost. To begin with just about every student is within a short drive to a college or university so the first step in reducing cost is to live at home and attend a local school. The parents will continue to provide room and board and the student can work part time during the school year and full time in the summer and earn enough to pay for books, fees and tuition. At the University of Minnesota, the premier institution in our area these cost would be about $15,000 per year. By working long hours in the summer and about 15 hours a week during the school year a student can earn this much. The second way and this is particularly useful for those students who live in rural areas more than driving distance from a college, is to use the online degree courses. If I had two people applying for a job and other things being equal, I would choose the person who got their degree online. It takes maturity and self-discipline to study alone without the direct help afforded to those in the classroom. Finally the GI Bill is available for all who have good health and I think this is the best way. A person agrees to serve three years on active duty and they are eligible for three years of benefits, that includes, all tuition and fees, $1,000 per year for books and $1,000 per month housing allowance increasing to $1,500 with children. A person can start night school while they are on active duty and many earn a full year of credit that way. When they retire they can go to school full time and finish a BA in three more years. You have served your country and finish six years out of high school and no debt. I went to college in the 50’s and the GI Bill had stopped so, I like many of my friends, worked full time and went to school part time. I graduated in nine years and I had a job plus nine years of work experience and no debt. Contrast that with today where students graduate in four or five years and no work experience and no job along with thousands of dollars of student loans. This is just one more example of the unintended consequences of good intentions. Outstanding student loans at 1.2 trillion have now surpassed person credit card debt. This debt is preventing young people from owning their own home and for many delaying marriage and children. The only thing the student loan program accomplished was to encourage schools to raise tuition.

Unemployment

The unemployment figures come out every month and they just confuse the issue. Historically about 63% of people eligible to work are working but that percentage dropped during the last recession and it has not recovered. Here are the numbers: March 2008: 62.7 percent March 2009: 59.9 percent March 2010: 58.5 percent March 2011: 58.4 percent March 2012: 58.5 percent March 2013: 58.5 percent This shows that over the past four years the number of people starting jobs and the number of people retiring have just about equaled the new young people coming into the work market but we have not recaptured the jobs lost during the recession. Normally after a recession the lost jobs are gained back in a couple of years.

GDP

The preliminary reports on the second quarter GDP are out today and the experts are happy with the 1.7% growth. Since the first quarter results were revised downward from 1.8% to 1.0% it might be a realistic assumption that the second quarter may also be revised downward. The point is that GDP below 2% is very poor by historical standards as the average growth rate in the US since 1980 has been 3.1%. The recession in the early 80’s was statistically worse than the latest and yet within 2 years the GDP was over 7%. It is expected that the GDP will rise quickly after a recession but that has not happened this time. In addition long term unemployment is much worse than in the recovery in the 80’s. Something is wrong and experts disagree on what it is. I don’t trust any of them because their reasons seem to be along party lines and thus they have lost credibility

QE 3

We are now 10 months into Quantitative Easing 3 as the fed has been pumping 85 billion per month into the economy since last September. This money is used to buy back junk mortgages from banks and to buy government bonds and both of these increase the money supply. When the Fed adds money to the system they do not fly over the country dropping dollars so that everyone has an equal opportunity to gather up some wealth but they instead give it to a select group, in this case the big banks. Economist will tell you that when the Feds print up money those who get it first, get the most and this flies in the face of the Presidents concern about the widening income gap between the rich and the middle class. This gap has widened at an increasing rate since Quantitative Easing 1 started in November of 2008. With QE 1 totaling 1.7 trillion and QE2 adding another 900 billion and QE3 so far up to 850 billion the result has been a 5% decline in average wages. But during this same time income for the rich has increased 19%. As predicted the first to get the money make out the best.

Detroit

The City of Detroit made it official today, when it filed for bankruptcy. For those who watch this sort of thing it was no surprise. Each city has its own particular problems but one thing they all have in common, is payments to retirees in the form of health care and pensions. While these were the result of collective bargaining, there was a built in distortion because of public unions. It happens at all levels starting with city unions, county unions and state unions. It is also a part of teachers unions. It is the reason why a liberal no less than FDR warned against public unions, in that he knew when people gained the power to determine their own benefits, they would overdo it. One example of how this works would be to look at county workers. The situation would be the same if you looked at state or city workers. The county workers organize and form a union. They then select a candidate to run for county commissioner and then they proceed to get him elected. They help him with their votes, the votes of their relatives and friends. They help him by campaigning door to door calling on their neighbors. They help him by holding coffee parties in their homes along with financial aid to help pay for his campaign. Once elected, they select another candidate and repeat the process and promise those in office, their help in reelection campaigns. Next they sit down across the table from these elected officials and negotiate their benefits. The public unions across the country started this process just after WW 11 and they have worked long and hard to achieve the success they now enjoy. There was nothing illegal or unethical about what they did. It was the American way. Set your goals, work hard to achieve them and then enjoy your success. They have now become the victims of their own success and thus the reason why FDR warned against them. In regards to Detroit why doesn’t the federal government step in like they did with the auto industry? The city is 19 billion in debt and the Fed is printing up 85 billion per month so they could just pay off the city’s debt. This would set the precedent to bail out all of the other cities that will fail over the next few years. If the government can give billions to the big banks, why not give billions to the cities? Could it be those city employees who are going to lose their promised benefits don’t have a lobbyist or perhaps they don’t have enough votes? So much for looking out for the little guy. Now on to the more serious situation in California where it is said that, as goes California so goes the country. Here cities, counties and the state are deep in debt much like many other states and they recently raised taxes on the rich that is expected to bring in about 6 billion dollars per year. Now you might think that this money would go toward reducing the deficit but you would be wrong. It will be spent on education. If world peace broke out and the US no longer needed to be concerned about national defense and we freed up 700 billion, do you think this money would be used to reduce the deficit or do you think all the elected officials would line up to spend this new found treasure, to provide benefits to their constituents to guarantee their reelection? California is now proposing a state tax of 3% on all earnings to take care of people when they retire. The reasoning is that the state will have to provide for people when they get old so they might as well collect up front to cover the future cost. This is similar to social security and you see what has happened there. They transferred the social security fund money into the general account to provide current benefits in other areas. I suspect the same thing would happen in California with their new 3% tax. The elected officials would quickly line up at the government trough to start new programs to get votes. Once this is approved to can bet the 3% will rise just as what happened to social security that started as one percent and is now 6%. Jack