Former New Orleans Major Ray Nagin Found Guilty

You may not have heard about this conviction.  For some reason it got little coverage on NBC, ABC, CBS, MSNBC & CNN.

You might also have gathered (quite accurately) that I believe the Department of Justice is frequently guilty of selective (and/or unethical) prosecution.   I have yet to see a case where Eric Holder’s posse picked on his Democratic cronies when the defendant was innocent.  I would hypothesize that the bias is the other direction.  I distrust the Justice Department.  I believe they are political and are much more likely to chase their enemies than their friends.  And yet based on their actions over the last decade, I could never be confident beyond a reasonable doubt about anything they tell me.

I have not read the transcripts but my guess is that if you and I were on the jury we also would have arrived at the same decision as this jury did - guilty. Here is one report: “Over the course of the two-week trial, prosecutors presented testimony from more than a dozen contractors, city officials and investigators who detailed a series of alleged payoffs involving Mr. Nagin and the granite-countertop business he formed with his sons, Stone Age LLC. His sons weren't charged.” But then again, I don’t know about all the side deals the DOJ extracted to bring forward this evidence.

It is quite possible that Nagin cost the City of New Orleans more through simple incompetence than outright dishonesty.  Not that two negatives make a positive.

I see dishonesty in the private sector every day.  But here is the difference. When an individual or company has been looted or stolen from, they act quickly and decisively to try and claw back some of their damages in civil court.  And the referees maintain a fair game most of the time. This happens less often in the public sector.

Nagin was convicted on February 12 and of course he can still appeal the conviction.  If is conviction holds up, what should the penalty be?

Mayoral corruption is bad, but not quite as serious as judicial, police or prosecutor corruption.

I rate different forms of corruption as follows:

1   1) Judicial corruption (see the Kids for Cash case in North Eastern Pennsylvania).  When a judge is corrupt, he has all the power. There is nothing worse.

     2) Police corruption.  When a policeman or FBI agent is willing to hide evidence or lie then the chance of a fair trial is nil.  When this is discovered, it should be punished severely.

     3) Prosecutor corruption.  When a prosecutor is willing to encourage lies or indict a defendant that she know is innocent (for political reasons),  it is a horrible miscarriage of justice.  Especially if the defendant does not have sufficient resources to fight (most of the time). This is the reason I have become convinced that we should set aside the death penalty.

     4) Political corruption. This is all too common.  Our politicians at a minimum consider each and every day if their next vote/decision/action/statement will help or hurt their chances at reelection.  When the politician is in an executive role (like the former mayor of New Orleans) then the consequences of corruption are even more pronounced.

     5) Regulator corruption.  These people usually get caught.

     6) Private corruption.  Try bribing an honest policeman and you will serve some serious time.

Don’t despair Mr. Nagin.  When you complete your prison term, you can move to Chicago and probably reemerge in Illinois and Chicago politics.

Hate crimes for NFL fans

Steven Colbert on his Feb 11, 2014 show: "Could the NFL have its first openly gay player and if so will rooting against his team be a 'hate crime'?"

I am pro gay rights.  I am also against the entire notion of greater punishment for "hate crimes" than "non-hate crimes".  Let's determine the sentence based on what actually happened rather than the very subjective motive question.

I was lucky. Rex Shelby was not!

I was lucky! Rex Shelby was not!

Cara Ellison’s fascinating, deeply troubling, but well-written account
of the Enron Broadband trials in her new book Blogging Enron, The
Enron Broadband Story, will really annoy and should scare the dickens
out of you.

It is a story of government lies, a guilty-until-proven-innocent media
bias, Big Brother, judicial incompetence, and most importantly
prosecutorial misconduct.  The bad guys and women were the Department
of Justice (DOJ) prosecutors and the biased judge.  Until I see
evidence to the contrary, I will refer to it as the Department of
Injustice (DOI).

Rex Shelby unfortunately became the poster child for the ravages of
this abuse.  It could have been me.

Rex is about my age.  We both have degrees in Math and Computer
Science.  We both spent time in the Air Force (he reached Captain – I
only made it through the second year at the United State Air Force
Academy.) But he continued down the technology route where I moved on
to the energy and ultimately energy trading business.

Let’s go back to January 20, 2000.  It was the annual Enron Analyst
Conference (for those that reported on the company in the financial
community) at the Hyatt Regency in Houston.

Rex had been with Enron for just a few months (after the acquisition
of Modulus Technologies).  I had worked for the company for six plus
years.

I would soon to be appointed Enron Europe CEO in May, 2000 (I was the
Enron Europe President and COO on January 20, 2000). We were both
hard-working, honest innovators at Enron, like the vast majority of
our Enron colleagues.

I made a short presentation (I was one of 19 speakers) about Enron
Europe early in the morning (lucky for me the stock did not move much
during my talk as this would have put a much bigger target on my
forehead.)  But despite my inability to “move the needle” on the stock
price, it was a day I will never forget. (It increased my net worth
substantially. I admit that I care more about putting money in the
bank than Rex does.)

About an hour after my presentation, Louise Kitchen who was heading up
a big project:  “Enron Online”, gave a terrific presentation about an
exciting innovation in the energy world.  Enron Online was an online
trading platform where Enron offered the best price to buy and the
best to sell for commodities all over the world. This definitely got
the audience’s attention; it moved the needle.

Back to Rex.  He had prepared two separate two-minute video
presentation for the January 20, 2000 Enron analyst conference in
Houston.  Only one of the videos was shown.  Rex did not make a
prepared presentation but was there to host Sun Microsystems
executives and then participated in the Enron Broadband Services Q&A.

The Enron Broadband presentation started energizing the room (unlucky
for Rex).  By the end of the day the Enron stock had risen by 26% - in
just one day.

In the next couple of days Rex exercised and sold his vested stock
options and I exercised and sold about 15-20% of mine.  It turns out
that Rex and I would have made much more money if we had waited later
in the year when the price hit a peak of $90 on Aug 23.  After the
2001 Analyst Conference (a year later) the price was in the low $80’s
and after that I sold another 15-20% of my shares as well.  When the
stock price started heading down later that year (remember the dot.com
bubble), I started kicking myself for not having sold it all. I was
lucky I didn’t.

Unlike Rex, I was never dragged into the Houston witch trials. I hope
that I would have had the courage to hold my head up high with as much
perseverance and integrity as Rex and his codefendants. I think I
would have. But I will never know for sure – and hope to never find
out.

This book does an outstanding job of laying out the government’s abuse
of these defendants and all the travesties in the process:

1)      The first federal prosecutor on the case John Kroger, admitted
in his book Convictions (please don’t bother buying it) that the Bush
Administration was pressuring the DOI (that’s not a mistake -
remember, I have replaced the word Justice with Injustice) to “get
scalps quickly”.  In the same book, Kroger said: “Here, the end – the
ultimate convictions of Ken Lay and Jeff Skilling – appeared to
justify our questionable tactics.” In this case “questionable” is a
euphemism for dishonest and unethical.

2)      The judge was over her head and refused to act as a fair and
impartial referee.  In Judge Vanessa Gilmore’s first book in 2010 she
accurately describes herself as a “Judicial Diva”. I don’t know about
you but if I am the defendant in a trial for my life, I want a tough,
fair and knowledgeable judge not an opera singer.

3)      The notion that the Enron defendants could get a fair trial in
Houston where virtually every poll showed that 85% of the population
expressed a view that any Enron defendant charged was automatically
guilty and should be convicted, was ludicrous.  The judge denied the
defense motion without comment.

4)      I used to think the power of the government to cut deals with
some defendants in order to get convictions of others made sense.
This book will convince you otherwise.  The way the DOI threatened 200
unindicted coconspirators with indictments in order to encourage
selective memory and outright lies will absolutely disgust you.

5)      The prosecution did nothing to protect the physical evidence
of the Enron Broadband Operating System even though the DOI’s major
thesis was that it didn’t exist or if it did that it didn’t work very
well.

6)      The government withheld evidence and sometimes delayed handing
over evidence for so long that it became useless for the defense.  How
effective will you be if you have to screen thousands of emails the
night before a big trial?

7)      Once the government did not receive a single guilty decision
on 200 counts in the trial they were bound and determined to force the
defendants to a second trial despite their constitutional protections
against double jeopardy.  Judge Gilmore would have let them get away
with this.  The Court of Appeals would have let the prosecution
trample the defendants’ rights.  Thankfully the US Supreme Court
unanimously said “no” in the case of Scott Yeager.  This should have
been the end of the fight for Rex Shelby but it wasn’t.  And it was
too late for Joe Hirko who had decided the government would never stop
pursuing him and settled for a 16 month prison sentence.

8)      The cost of putting on a defense is in the millions and
sometimes 10’s of millions of dollars. No money – no defense.  It also
takes virtually all of the defendant’s time to engage and participate
in the process – for Rex Shelby that was nine long years.  So unless
one is so wealthy can afford not to work for a decade, he is up a
creek (in a federal penitentiary) without a paddle. The technical
legal term is “screwed”.  And of course the way the prosecution draws
up the indictments and overcharges everyone, if one is convicted then
he/she is facing life in prison.  No wonder so many copped a plea.
Only about 3% of those indicted by the DOI go to trial – the other 97%
are convicted via plea deals.

I hope that if I faced this kind of personal crisis, I would have
worked as hard, kept my head as high, and persisted with my underlying
integrity that has served me so well as the defendants in this case
did.  I can’t say that I might not have slipped; but after reading
this saga, I have recommitted to those principles.

Thanks Rex Shelby!  Thanks Scott Yeager! Thanks Joe Hirko! And thanks
Cara Ellison for all the detailed research and caring enough to
actually dig into the details, ask the right questions and not going
along with the mob.

Here is a link to the Amazon book.

Why would we pay attention to the government statistics?

Why would we pay attention to the government statistics?  We could simply rely on the best non-government stats for:

1)      Unemployment  stats;

2)      Inflation rates;

3)      GDP;

4)      Total government debt;

5)      Total government unfunded liabilities.

Every government has an agenda –generally to make themselves look good.  If they can cheat of the stats, they look a little better.

If you trust the US Justice Department please read this book.

If you trust the US Justice Department please read this book.

The is the story of dishonest and inept government - oh that again. If you thought that the US and the UK were countries that valued the rule of law and due process, then read this riveting tale.

The Natwest Three made a mistake (but didn't break the law) when they didn't disclose their intention to personally buy into a deal that Natwest had just sold. But the US prosecutors amazingly used this "mistake" to claim that these UK citizens working for a UK company in the UK had somehow broken US law? Say again?

Hear firsthand about gross abuse and absolute lies by US prosecutors. We have generally grown to accept that politicians lie on a regular basis. But as long as it is a "good lie" - well that's OK, we will look the other way.

And the same for prosecutors. If it is a lie that helps put Jeff Skilling or Ken Lay in jail then that's a bit messy but good in the long run. But wait there's more. If it brings the big guys to their knees, then why not use the same technique on the little guys (even if they are bankers). No problem as long as it's not you.

The notion seems to be that it is OK for the government and specifically US prosecutors to lie if it is for the greater good - in other words if they "know" that someone is guilty (by virtue of their intuitions and a quick read of the facts) then it is acceptable for the prosecutors to themselves break the law and lie to "catch" the perpetrators.

Spam phone calls

If I get a spam email, I can mark it as spam on most email providers today.  I will probably not hear from that jerk again.  Why don't Verizon and AT&T have the same options for "spam" phone calls?

The Kelly Criterion

Kelly Criterion

One formula that helps avoid Gambler’s Ruin (losing it all), while betting the optimum amount is the Kelly Criterion, first described in 1956 by J.L. Kelly. It is used by some traders and professional gamblers, and I have started considering it when deciding the right amount to bet on any single lawsuit.

This formula comes complete with a mathematical proof and tells a trader, gambler, or investor how much one should optimally bet, based on the probability of winning the bet and the payoff amount if the bet wins.  The formula assumes no ties.

Shown below is the general formula:

Here is an example where you have a chance to bet $1, and collect $2 if you win ($ 1 original bet plus the $1 profit [the variable labeled “b” in the formula]). I call this a “2X” bet. In this example you have a 60% probability of doubling your money; the Kelly Criterion says that you should bet 20% of your bankroll (or your entire net worth, if your net worth were all in the form of cash).

This formula demonstrates quite logically that:

          1) for a 2X bet you should not bet anything unless the probability of winning is above 50%. In fact, if the probability is below 50%, you should try to find a way to take the other side of the bet or trade (go short).

          2) At a 51% probability of winning, Kelly suggests that you should bet 2% of your bankroll.

          3) At an 80% probability of winning, Kelly suggests that you should bet 60% of your bankroll.

Kelly’s original paper made the point that the criterion is only valid when a series of bets are made. Even though the formula says that one should bet 98% of your bankroll when you have a 99% chance of winning a 2X bet, that still leaves you with a 1% chance of going broke—too high for me, at this stage in my life.

Although I am comfortable taking risks and making substantial bets, the Kelly Formula feels more aggressive than my inner voice approves. Obviously, for a lawsuit investment I have to adjust the formula based on the probabilistic estimate of when the bet will pay off, and then adjust it based on my assumed discount rate (the amount that reflects the discount for getting paid later.) And a minor detail is that I never know the exact odds. But even if I did know the exact odds, I can’t conceive of putting 60% of my net worth on the line, even if I had a marvelous 80% probability of winning. So maybe I need to take my own advice and get a little specialized psychotherapy—so I can de-wussify and get on board with making bigger bets.

All-In

Many successful entrepreneurs, traders, and investors take measured and intelligent risks, trying to avoid at almost any cost the all-or-nothing bet. This is after all, the ultimate risk of Gambler’s Ruin. The younger you are the less reckless it is violate this aspect of the rule because you have on average a smaller bankroll and more time to recover if you lose it all. If you are poor, you are likely to have no alternative to the all-in bet. This is why I encourage young people to get started on their entrepreneurial ventures sooner rather than later. I love it when a 14-year-old puts every last dollar he owns into a lawn mower to start his landscaping business—as long as he keeps enough capital to fill up the gas tank.

And the Survey Says…

I wanted to know how my friends and family would answer questions related to the Kelly Criterion. I asked them to complete the following survey:

I have three questions for you about how much of your bankroll you would wager in three different circumstances.

I start with the premise that you are playing an absolutely fair, honest and random game.  For example it is the picking a chip out of a hat.  Some of the chips say “win” and the rest say “you lose”. If you win, you double the amount of your bet; if you lose then your bankroll shrinks by the size of your bet.

You know in advance exactly what the chances are of winning.  In every case, you are 30 years old (please try to adjust your thinking to how you would have played or will play this game at this age.) You have a bankroll of $100,000 which is all the assets you have in this world and your bankroll is all you have to get you have to work with. You have no home, no IRA, no retirement, no job. The random contest you are playing is always in your favor but sometimes it is more in your favor than other times. The three conditions we will consider are 60%, 75% and 90%.  In other words you have either a 60%, 75%, or a 90% chance of doubling the money you bet. Another way of looking at it is that you have a 40%, 25%, or a 10% chance of losing the amount of your bet.

For each of these percentages, what percentage of your bankroll would you bet?  (the choices are between 0% and 100% in 10% increments.) Let’s go.

Question 1) At a 60% probability of doubling your bet, what percentage of your bankroll would you bet?

Question 2) At a 75% probability of doubling your bet, what percentage of your bankroll would you bet?

Question 3) At a 90% probability of doubling your bet, what percentage of your bankroll would you bet?

Discussion of the Survey Results

·       I asked everyone to imagine they were 30 years old, and had a $100,000 cash bankroll that comprised their entire net worth.  I wanted to minimize the bias that as people get older they generally shy away from bigger risks. I was intentionally silent about if the participant had children or “big responsibilities”.

·       Sometimes what people say they will do differs from what they will actually do, when the rubber meets the road.  If I had about $5-10 million dollars I was willing to invest in a real live experiment, I am sure I could have found 50 30 year olds to take the test with real money.  It was not that important to me.

·       For each of these questions, the Kelly Criterion calculates the optimum answer (based on one bet in a long series of bets).  If you know exactly what the probability of winning and the exact amount of the payoff, the Kelly Criterion tells you the optimum amount to bet.  Theoretically, if you always bet this amount, over many opportunities, on average after many bets, you have the greatest chance of having the biggest ending bankroll.

·       If you bet less than the Kelly Criterion amount, you are being “risk averse”, to your detriment.  If you are betting more than this amount, you are taking greater risks that optimum, also to your detriment, on average in the long run.  If you bet zero, when you have a 90% chance of doubling your bet, you are “ultra risk averse”.  If you bet 100% of your stack, you are going “all-in”.

·       I was surprised that the survey results didn’t show a more risk averse average response from my friends and family—maybe I hang around some “weird” folks.

·       The survey results show the “Wisdom of the Crowds”.  Although the responses varied greatly, the average results for each question are reasonably close to the Kelly Criterion—although, some participants were very risk averse and others quite willing to lay it all on the line.  I declare the aggregate results rational, although I might be saying this because my answers were close to the average results.

·       The results showed that on average, the more the bet approached “all-in” or 100% of one’s bankroll, the more conservative the response, relative to the Kelly Criterion.  I consider this reasonable.  The question, as framed, never promised that the participant was going to get to make the decision 1,000 days in a row.

·        The biggest diversity of answers came on the third question.  We had three respondents that said they would not bet a penny (even though they had a 90%) chance of doubling their money, and four that said they would bet their entire bankroll. Slightly different risk tolerances.

Here is a summary of the results:

1. Probability of Win	60%	70%	90%	Total
   Kelly Criterion Percentage	20%	50%	80%
   Survey Average Amount Bet	25.8%	39.26%	59.26%
   # of  Risk Averse	28	49	56	133
   # @ Kelly Percentage	15	14	9	38
   # Greater than Kelly Percentage	38	18	16	72

The End of the University as We Know It

Very well written piece by Nathan Harden.  


I loved the enthusiasm and agree that this is where we should be headed.  But because of all the subsidies for the existing system and parents students don't pay enough attention to the amount of debt they are picking up. I think that change will be far slower than in the music industry.

Under New Management

The sign that really confounds me is “Under New Management  – In other words, “Those jerks that were running this place before are long gone. And the new management can’t possibly by as bad as the prior management.”  

Hustling to make a little money!

I really get a kick out of Mark Cuban. If I was going to start a new business I would give my right eye (perhaps an exaggeration) to get a few hours of his time to pick his brain. But alas in today's world you can get some of it free at blogmaverick.com.

This small piece shows how he thinks about making money with a very small investment is not the kind of idea one would hear from Obama or other career politicians.

Hate Crime versus the First Amendment

Hate crime. These crimes occur when a perpetrator targets a victim because of his or her perceived membership in a social group. This as opposed to a polictically correct jerk that beats me up for no other reason than he can.

First, I defy you to find one case in the US when hate crime laws were enforced when a minority assaulted a white man because he was white or heterosexual. Prime example of selective prosecution.

More importantly it is an infringement of the first amendment. I can hate you and I can tell the world that I hate you and that is “generally” protected by the first amendment. But combining the first amendment protected statement that “I hate you because you are a Libertarian” with the violent assault is double trouble.

If I assault you for any reason I can be convicted of a felony and perhaps go to jail for a few years. Let’s say two years at the state pen.

But if I tell you that I hate you (because of the group you belong to) while I assault you then instead of going to prison for two years then I might be sent there for four to five years.

So in essence we are sending the politically correct assaulter to prison for two years and sending non-politically correct assaulter to prison for four years. The only difference is that the outspoken assaulter told his victim that he hated the victim (because the victim was a Libertarian) while he was beating him up.

If I am a victim I really don’t care what your motivations are when you are assaulting me. Don’t do it for any reason. And if you do beat me up then I don’t want you to get any special time off because you are politically correct.

If you choose to assault me because I am a white heterosexual male, then I think you should go to prison just as long as if you beat me up because I am rooting for the San Francisco Giants against the Dodgers in Los Angeles.

Great story about science, math and engineering

"Freeman Hrabowski says the United States is not producing enough scientists and engineers - professions critical to creating more jobs."

Our unemployment insurance system sends the wrong signals.

I have heard liberals argue recently in favor of growing and extending our unemployment insurance programs. But I have real problems with how unemployment insurance as it is currently structured and financed today.

Let’s consider an example of Bill, an employer who is considering hiring Joe. If there were no employee taxes, no unemployment insurance, no benefits and no other employer costs, it would be simple to calculate the cost at say $10 an hour. And as long as Joe can generate at least $11 in increased revenue for Bill then Bill is ahead as an employer by $1 an hour. But it is not that simple. Bill must also pay perhaps $.50 an hour for unemployment insurance, $.75 an hour for social security and Medicare employer contributions, $1 an hour for workers compensation insurance and $2 an hour in health care benefits. All of a sudden Joe’s cost to Bill is $14.25 an hour (not to mention increased liability insurance, capital costs, management time and other overhead costs). So if Joe can still only produce $11 in marginal income, Bill lays Joe off. And then you know what happens? Bill’s cost for unemployment insurance goes up even higher (say to $.75 an hour) because Bill has a history of laying employees off so he is deemed to have increased the cost of providing this insurance.

This last characteristic about employer’s cost of unemployment insurance is another disincentive to hire anyone in the first place. Why hire anyone on the margin? If Bill guesses wrong, he not only loses on his underlying bet but his future cost of business will increase along with his higher unemployment insurance premiums. Our incentives should encourage, long-term employment, mid-term employment and short-term employment. At least when Joe is working in what might be a short-term job, he is learning, producing and positioning himself far better to land his next gig than sitting at home collecting unemployment insurance.

I am fine with charging an employer for workers compensation insurance. Because that is a real cost attributable to more work and is roughly priced according to how dangerous the work is. It reflects approximately the marginal cost of each additional hour of work. All things being equal, we would rather encourage safer work than less safe work. This charge to Bill reflects real costs associated with the industry in which Bill operates, and does not subsidize dangerous jobs by making safer jobs less competitive.

But it is counterproductive to charge employers for the cost of unemployment insurance. It makes marginally profitable employees and prospective employees less profitable and sometimes not profitable at all. When the later happens people lose their jobs and go onto unemployment insurance, raising unemployment insurance premiums and increasing the subsidies from government.

I am all for a limited safety net provided by government. But government ends up subsidizing unemployment insurance benefits and recently has extended them to up to three years.

We should be simplifying our safety net. If you don’t have enough money for food, basic housing and medical care I support helping these folks. But the system would be far more productive if we streamlined it and separated it from the issue of whether the individual just lost his job.

I have liberal friends that argue that unemployment benefits are a great way to pour money into the economy. And it might do some of that. But this trick might have had more positive benefits when most of what these unemployed people consume goods that were manufactured in the US. That is rarely the case today. The government is subsidizing unemployment benefits today and creating jobs, but most of them are in China.

So what are the factors that have led some socially liberal democracies to economic success while others, like Greece are in the tank?

My liberal friends point to how well some social democracies have fared in the last few decades – namely Germany, Norway, Canada, and Australia. But they rarely bring up Greece.

Sometimes they attribute the economic success to a big comfortable safety net for their citizens. Sometimes they point to the success of a high tax, big entitlement society. Just recently a friend tried to attribute the financial success to the 35 hour work week in Germany and France.

But let’s face it, the success of an economy has hundreds if not thousands of different factors. Many are pure luck, some aspects are systematic and some are cultural. To begin with if a country starts out relatively wealthy it has a better chance of doing well several decades later. If a country is landlocked in the middle of Africa, with poverty-stricken countries around it, the odds of the country breaking out economically are slim. How wealthy would Saudi Arabia be today without its oil?

But Greece may be example number one of a country with many substantial advantages that have been squandered. They borrowed to the hilt to support a huge entitlement system and now will be paying the price for decades to come.

Here are a few of the advantages that Greece has had since World War II: It was a beneficiary of the Marshall Plan. It has plenty of (Western World) coastline, has been a member of the EU since 1981, and is a top tourist destination (15% of the GDP) with a terrific climate. It is close to a huge and prosperous region and has a thriving maritime industry.

But Greece has obviously had its difficultiesl. In 2009, Greece had the EU’s second-lowest Index of Economic Freedom (after Poland). In other words it prefers unions to free markets. It also turns out that its government had been lying about the amount of its debt for years. The cost of living in Athens is about 90% of that of New York City. It has a recent history (and possibly longer than just recently) of political corruption and maybe one of the worst records in the Western world of citizens cheating on taxes. It is left-wing and still has an active Communist Party and another political party called "The Party of the Radical Left."   Trade unions are strong and pervasive. Along with Spain and Italy, Greece faces a flood of illegal immigrants.

So what are the factors that have led some socially liberal democracies to economic success while others, like Greece are in the tank (granted Greece has done better than poor countries in the heart of Africa)? To start with, Canada, Australia and Norway are incredibly rich in energy and other natural resources. And we all know where those prices have gone in the last decade. And these three plus Germany are near huge and prosperous markets. All of them have an advantage of many English speakers (my hypothesis is that a higher percentage of Norwegians speak English than those residing in California). It is hard to find German executives that don’t speak excellent English. And English is at least today a competitive advantage if one does not speak your customers’ native language. And all four countries have all spent relatively little on National Defense and policing the world compared to the US.

So my point is that is silly to attribute any country’s success to one factor. It is not even several factors that make the difference. It is hundreds of different forces combined with where a country starts that together lead a country to economic success or failure. Many times a country benefits from pure good fortune, for example being occupied by America rather than Russia after WWII. The US ended up with over half of the world’s manufacturing capacity immediately after WWII. Sometimes a country is simply unlucky because it has no natural resources, no wealthy neighbors and is in the middle of Africa. And if a country can borrow enough to support its life style and entitlement programs (like Greece did), sometimes economic troubles can be masked for years.

The left continues its uncivil assault on the Tea Party !

The left continues its uncivil assault on the Tea Party calling them “terrorists”. Why? Because the Tea Party, has the audacity to advocate reduced federal government spending and is willing to use its small position in Congress to hold out.

Democrat Representative Mike Doyle said: “We have negotiated with terrorists. This small group of terrorists have made it impossible to spend any money.” Joe Biden agreed saying: “They have acted like terrorists.”

And in a NY times opinion piece yesterday entitled: "The Tea Party's War On America:" said: “You know what they say: Never negotiate with terrorists. It only encourages them. These last few months, much of the country has watched in horror as the Tea Party Republicans have waged jihad on the American people. Their intransigent demands for deep spending cuts, coupled with their almost gleeful willingness to destroy one of America’s most invaluable assets, its full faith and credit, were incredibly irresponsible. But they didn’t care. Their goal, they believed, was worth blowing up the country for, if that’s what it took. For now, the Tea Party Republicans can put aside their suicide vests. But rest assured: They’ll have them on again soon enough. After all, they’ve gotten so much encouragement.”

The Socialist left does not care about a fair and open debate. They “know” what is best for this country and if you and I will simply accept their math, their accounting, their projections and their promises, they will surely tone down their language to a more civil level.

Let's reduce the US Corporate income tax rate

There is much talk about increasing corporate income taxes (which represents about 9% of all Federal revenues). But consider that today the amount that we collect (as a percentage after credits and special tax breaks) is close to the total amount collected in other countries. How about this proposal: Let’s make the corporate tax rate (foreign and domestic) a flat 10% (instead of the nominal 35% today). You get zero tax loss carry forward. If you lose money one year you eat it. If you make money the next year you pay 10% of your profit (sorry General Electric). Very simple and we will spend far less on tax accountants and attorneys.

This should give an advantage (on one of many factors) to US companies and should result in more jobs being created in the US rather than abroad. But let’s make up for lower tax revenues on the back side. For individuals let’s increase both long-term capital gains rates and corporate dividend rates from 15% to 22%.

The value of the S&P and the Dow would immediately go up on this news. This would result in optimism not seen in years and this alone would translate into optimism of CEOs deciding whether to open a new plant or not in the US. We would collect more revenues from these categories (in total) and we would create far more jobs.

My brother's three requests to Republican Leadership

Three requests to Republican Leadership

Like many Americans, I have watched hours of coverage of the Debt Limit circus in Washington. As a Republican, I have had my moments of pride during the past months but more often I have been discouraged by the behavior and game playing of the leaders of my party. My frustration centers on the fact that I am a parent first, an American second and a Republican third. As a citizen of this country that has offered me so much opportunity, I have one primary wish. I want my children and their children to have similar opportunities. With this in mind, I offer the following three requests to the Republican leaders:

Lead the way on transparency: Virtually every budget reduction proposal is based on inflated baseline projections and very weak financial models. Political leaders are purposely misleading the nation about the true state of our budget and the actual impact of proposed "cuts". If the Republican party is going to be the party of transparency, you must address the following distortions that you help propagate:

1) Baseline projections must assume flat spending. Slowing the growth of spending is not a cut. It is only a smaller increase. If public companies used your language to describe their forecasts, the executives would go to prison for fraud. Stop using misleading financial projections.

2) Revamp the CBO models: By law, the CBO models distort the impact of budget cuts and tax increases on the economy. If tax rates go up, there is downward pressure on the economy. If tax rates go down, there is a lift for the economy. Why do you continue to allow the CBO to publish bogus impact projections? Lead the way on changing the laws.

3) Plan for rainy days: Is there a single budget plan that has been put forth that assumes that we will have a recession in the next ten years? What about natural disasters or increased military conflicts? Every responsible adult has some sort of rainy day fund built into their financial plans. Where have you planned for rainy days in your proposed budgets?


Lead the way on shared sacrifice: The only way that our nation will get out of this financial mess is with shared sacrifice. Real and perceived. Most reasonable and knowledgable people realize that increased revenue must be part of the solution to our deficit problem. The deficit is too big to solve with cuts alone. Lead the way in identifying revenue opportunities that are the most supportive of economic growth (or that do the least damage). This is critically important for both practical and political reasons. People are willing to sacrifice if everyone is pitching in. I see five obvious revenue opportunities that show shared sacrifice:

1) Means testing for Social Security: People like me should not see a dime. I would not be happy, but we must all do our part.

2) Establish means based deductibles for Medicare: Once again, I should be expected to pay more.

3) Establish very high tax rates for inheritance. Inherited wealth is like winning the lottery and it should be taxed accordingly. It is far more important we leave our children with a country on firm financial ground and the opportunity for them to succeed than to leave them with lottery winnings.

4) Establish progressive tax rates for capital gains and dividends. The reason that the most wealthy Americans have lower tax rates than the high income working Americans is that they get to pay low taxes on their capital gains. We need to make this far more equitable.

5) Revamp the tax code: The tax code creates tremendous economic inefficiencies by distorting the financial impact of our actions. Cut the deductions and the gimmicks and then lower the rates and you will get more revenue and increased economic activity.

Lastly, lead the way on trusting the American people. Spend your time educating about the realities of our financial mess. Explain the Laffer curve. Show the realities of our unfunded liabilities. Be the party that tells the truth and has the courage to suggest that we must make sacrifices today for the benefit of our children. If you show real leadership, you will be given the opportunity to capture the White House and the Senate. Keep in mind, that if you don't lead, Obamacare goes into affect and pushes us over the deficit cliff and there is almost no way for us to give our children the opportunity that our generation had.

Jim Sherriff
Austin, TX

The liberal media loves to link being conservative with being violent

The Norway attacks were atrocious. A single mad-man created such havoc and mayhem. My thoughts and prayers go to my friends in the Oslo area.

But this article is an affront to the vast majority of those on the political right. It is typical of the type of liberal media hate speech against those that believe in smaller government, fewer taxes, right to free speech, right to own a firearm and managed immigration. Here are some of the expressions they use with glee: “right-wing fundamental Christian”, “right-wing extremist”, “hate speech”, “rightist extremism”. And of course the author advocates the restriction of what non-liberals can say and to whom and how they criticize the left.

This writer, and the NY Times in general, love the opportunity to paint those that believe in less government (generally referred to as the right) as “far-right” thugs. This killer was a psychopathic criminal. And we don’t really know what his views were other than being anti-immigrant.

I go back to my earlier post that the left-right descriptors are a very poor way to divide the political spectrum. http://getbackjack.blogspot.com/2011/06/what-does-it-mean-to-be-far-left-or-far.html

But the liberal media loves to link being on the right with advocating violence. And we have to fight back (peacefully) to set this record straight.

Is there a difference between Socialism and Communism?

Wikipeida defines Socialism as: “an economic system in which the means of production are publicly or commonly owned and controlled cooperatively, or a political philosophy advocating such a system”.

Wikipedeia defines Communism as: “ a sociopolitical movement that aims for a classless and stateless society structured upon common ownership of the means of production, free access to articles of consumption, and the end of wage labor and private property in the means of production and real estate.”

As a practical matter, Communist countries have been more totalitarian than European Socialist countries. But this may be the result of a small sample size rather than a fundamental difference.

In US politics, describing Obama as a Socialist is absolutely accepted by the GOP (and elicits little push back from the left). But calling him a Communist is viewed as “over the top”.

In Socialism and Communism the “means of production are publicly or commonly owned” (think US banks, Government Motors, NASA, public school, Midicare, Obamacare, Social Security, and flood insurance).

Private property in all these cases tends to be taken over by the state.
So is Obama a Socialist, a Communist, or neither?

Is a welfare state with open borders sustainable?

Is it a good idea to combine a welfare state with open borders? Milton Friedman the famous libertarian economist suggested that the US could benefit from an open border policy (he later modified this view). But he assumed that we would not hand out benefits to new immigrants at the rate we give them to existing citizens.

The left is a strong advocate of an open US border that allows any immigrant to cross into the US and become a citizen (and of course vote for them). They also happen to be an advocate of a strong safety net (code for welfare state).

So a welfare state (with public housing, aid for dependent children, state and federal disability insurance, old age pensions, unemployment insurance, school breakfast, lunch and dinner programs, public health insurance, public dental programs and public education) is one thing if the population is stable. But how expensive would it be if we were once the richest country in the world and then opened our borders to anyone that wanted to cross (legally or not)?