The Grand Finale!

Thursday, September 04, 2008

We ended up in the car driving back from Pennsylvania as Barack Obama was giving his acceptance speech at the Democratic National Convention. The man is a very good orator...at least when he has a teleprompter. Listening to him speak of change and the promise of America it was easy to get caught up in the moment, to get drawn into the words and to find yourself nodding in agreement. Reagan had this gift - to use the power of delivery to convert people to his position even when they continued to disagree. I printed the text of the speech to read on the flight to Birmingham Friday night, alone in my thoughts and away from the power of his delivery. As one would expect from a great orator with weeks to prepare and refine a speech containing many controversial things, it is tough to really break it down from what it sounds like he says into what he really says.

The speech began as they most always do, with a nod to his family and his upbringing. Standard Operating Procedure. But it quickly gets interesting. I am going to tackle his speech in the order his gave it.

"It is that promise that has always set this country apart - that through hard work and sacrifice, each of us can pursue our individual dreams but still come together as one American family, to ensure that the next generation can pursue their dreams as well."

Wow, who can argue with that? I can because it is a very subtle distortion of the promise of America. He's right, the promise of America has always been that this is a country in which each person can pursue his or her individual dreams, but it is more than a stretch to add the qualifier "come together as one." When it comes to the role of the federal government, America comes together as one only on rare occasions and under certain circumstances. We are not some collective consciousness that works as a whole for the betterment of our comrades. We are a nation of individuals, following our own dreams until a threat or a need arises that forces us to put aside our own lives and come together as one, but this is only temporary. These events are so rare that they are easy to remember – September 11th, the Tsunami disaster, hurricane Katrina, to name a few. Obama's vision of a constant unity that exists above and beyond our individual lives is not part of the promise of America; it is a redefining of that promise through the prism of early twentieth century progressivism. If it were just this one mixed message I would write it off as nothing more than lazy language or a simplification of a complex thought, but, as we have already heard this theme in previous speeches and will again in this speech, I must conclude that this was not an accident.

"Tonight, more Americans are out of work... More of you have lost your homes and even more are watching your home values plummet. More of you have cars you can't afford to drive, credit card bills you can't afford to pay, and tuition that's beyond your reach. These challenges are not all of government's making. But the failure to respond is a direct result of broken politics in Washington and the failed policies of George W. Bush."

There is a lot here, but we will start with the unemployment rate. Ignoring the debate as to just how much direct control a president has over the unemployment rate, this assertion, while technically correct, is a little misleading. The current unemployment rate is higher that it was when Bush took office. That is beyond question. What Obama ignores is that it is still extremely low at about 5.7%. I am not old enough to remember the unemployment of the 1970s but I do know it was a lot higher than 5.7%, yet to hear Obama you would think we are in the midst of the Great Depression. I'm actually not going to dig any deeper into this because I think it was a one-off cheap shot. The real meat of that paragraph is in the last sentence - "failure to respond."

In my previous blog, I outlined some of the new and expanded tasks of government in 'world as it should be.' We can now add to that list Barack Obama's belief that the federal government should be actively involved in bad home mortgage decisions, bad auto loan decisions, and credit card debt. He acknowledges that some of these problems are not the fault of the government (however, there is a VERY strong argument that government pressure on mortgage lenders to make loans to marginally qualified borrowers, along with their failure to enforce already existing laws, played a big role in our current sub-prime mess), but he quickly assumes that the federal government should step in and bailout individuals who make bad decisions.

Just a few sentences later he adds another role for the federal government to play –"We are more compassionate than a government that lets...families slide into poverty..."

I cannot emphasize this enough - in the world as he sees it there is no part of our lives in which the federal government will not be involved.

I am completely ignoring the fact that he lays the blame for it all at George Bush's feet. This is really getting absurd. I am not a "W" fan, but the guy is not single-handedly responsible for everything bad that happens, none of the good things that happen, and every bad policy decision for the last thirty years. By the end of this campaign George Bush will have been responsible for the Cuban missile crisis, the fall of the iron curtain, the eruption of Mount Vesuvius, and Noah's flood. Good grief.

"John McCain has voted with George Bush ninety percent of the time."

I know he wants to do everything he can to tie John McCain to George Bush, but someone needs to remind the Senator that George Bush doesn't vote for anything. Again, I cannot chalk this up to lazy language when he has had weeks to prepare. This is a deliberate play on the ignorance of the average voter when it comes to how things actually work in Washington.

"How else could he (John McCain) propose hundreds of billions of dollars in tax breaks for big corporations and oil companies but not one penny of tax relief to more than one hundred million Americans?"

The United States has one of the highest corporate tax rates in the world. Contrary to what Obama and his party would have you believe, corporations pay LOTS of taxes. I know because I prepare the returns. My firm gets paid very well to minimize those taxes as much as possible but they still pay handsomely. [The recent news about the thousands upon thousands of corporations that do not pay taxes on big profits was a flat-out distortion of the truth. S corporations do not pay any federal income taxes because the shareholders report all of the profit on their personal returns. The corporation is technically not paying any income taxes but the profits are still being taxed - as personal income.] There is some pretty strong evidence that indicates the lowering of corporate income taxes would slow the exporting/outsourcing of jobs, would encourage foreign investment in the U.S., and would encourage existing domestic businesses to bring more of their foreign income into the U.S. All of these things would stimulate our economy. We will revisit this entire idea shortly.

The second part of his statement is even more misleading than the first and it is the same argument put forth when George Bush was trying to get his tax cuts pushed through. The most recent data from the IRS tells us that there are about 100 million Americans, the bottom 40% of the returns filed, who did not pay any income taxes. None. This begs the question - How do you give a tax cut to someone who doesn't pay any taxes? Apparently in the 'world as it should be' this is possible but it's not in the real world.

Obama wraps up this series of attacks on McCain with this gem - he would "privatize Social Security and gamble your retirement. It's not because John McCain doesn't care. It's because John McCain doesn't get it."

To Barack Obama, investing in the stock market is gambling. A single male born after 1966 and earning average wages will receive an average rate of return on his Social Security taxes of about .5%. Yes, you read that correctly, 1/2 of 1%. He would earn better than 3.0% if he put it into a bank savings account - and this totally ignores the fact that if he dies and has his own account, the money goes to his heirs, whereas with Social Security it goes to the government. How is making more money and getting to keep it and leave it to your family a gamble? There is another way to look at this. Investing in the stock and bond markets, and even putting money into bank CDs, is an investment in the future economic development of the United States. Why would Barack Obama tell you that to invest your retirement money in our economy is the same as gambling? And he says John McCain doesn't get it. The Social Security program is not about good investments or about helping people in retirement. It is about POWER and control.

But he was just getting warmed up!

He (McCain) has subscribed "to that old, discredited Republican philosophy - give more and more to those with the most and hope that prosperity trickles down to everyone else. In Washington, they call this the Ownership Society, but what it really means is - you're on your own. Out of work?... No health care?... Born into poverty?... You're on your own."

We are now back to taking shots at McCain and the Republicans for cutting taxes on people who pay taxes and giving bigger tax cuts to people who pay more taxes. I find it very, very interesting that a man who has gone out of his way - all the way to Berlin, in fact - to imitate President Kennedy, would completely ignore the fact that Kennedy also followed that "discredited Republican philosophy." If you cut taxes, it stimulates the economy. I find it even more interesting that Obama and the Democrats will readily admit that the rebate checks that were sent out last year did, in fact, stimulate the economy. How is it possible that a rebate will stimulate the economy but tax cuts will not? It will and he knows it. His position is not about doing what is best for the economy, it is about power and control and using the money of a few to buy the votes of the many.

There is one other subtle, but very important, piece of that quote. Barack Obama believes that a tax cut is not letting people keep more of the money they earn; to him that money already belongs to the government and a tax cut for someone with a high income who pays high taxes is simply the government giving "more and more to those with the most." This last point is so important I am going to repeat it – to Obama a tax cut is not letting someone keep more of what they earn, it is the government giving someone more money.

We also can add two new jobs for the federal government in the world as it should be - keep people from being "out of work" and do something - he doesn't say what - for someone "born into poverty."

Throughout the next several lines of the speech he goes on and on talking about "the fundamental promise that has made this country great" without ever telling us what it is or what it means. At one point I actually thought he was going to get it right - he was so close.

"When I hear a woman talk about the difficulties of starting her own business, I think about my grandmother, who worked her way up from the secretarial pool to middle management, despite years of being passed over for promotions because she was a woman. She's the one who taught me about hard work. She's the one who put off buying a new car or a new dress for herself so that I could have a better life. She poured everything she had into me."

But it was a bait and switch! He told us about his hardworking grandmother who DID understand and live the promise of America. He drew us in, tugged at our heartstrings, and then shared with us his vision of the promise of America -

"What is that promise? It's a promise that says each of us has the freedom to make of our own lives what we will, but that we also have the obligation to treat each other with dignity and respect...that businesses should live up to their responsibilities to create American jobs, look out for American workers, and play by the rules of the road. Ours is a promise that says government...should do is that which we cannot do for ourselves - protect us from harm and provide every child a decent education; keep our water clean and our toys safe; invest in new schools and new science and technology... That's the promise of America - ...the fundamental belief that I am my brother's keeper; I am my sister's keeper."

Apparently it is now the job of the government to make sure that we are nice to each other and treat each other with "dignity and respect." Those are noble qualities and it would be nice if we all observed them, but is that a job for the government? It certainly isn't in the Constitution. How do you enforce it? What if you are disrespectful of someone? Is that a federal offense? We can add this to the list of new jobs for the government.

I would love to ask Barack in which article of the Constitution he has found the outlining of the responsibility of American businesses to "create American jobs, look out for American workers, and play by the rules of the road." I have read the Constitution, the actual original Constitution, along with most of the writings of the men who wrote the Constitution, and none of it says anything about those things at all. I would also really like to ask him what exactly constitutes the "rules of the road," how do you enforce it, who decides what it is, who wrote it, do they teach it in law schools? Basically, what the hell is he talking about?

Then he outlines even more jobs for the federal government: "protect us from harm," "keep water clean and toys safe," and "invest in new schools and new roads and new science and technology." Man, this list is getting pretty long. How in the world is he going to pay for all of this?

Finally, he closes this line of thinking with one of the most popular lines in our Constitution, "I am my brother's keeper; I am my sister's keeper." Uh, no. Where is he getting this stuff? I mean, I know where he's getting this particular stuff, but no matter what role Judeo-Christian values may have played in the founding of this country, it is NOT in the Constitution of the United States as a job of the federal government. Think about what it means to be someone's keeper; think about the level of involvement one must have in the life of the one being kept. This is the government Barack Obama wants to create.

He then changes gears and gets back to policy items.

"Unlike John McCain, I will stop giving tax breaks to corporations that ship jobs overseas, and I will start giving them to companies that create good jobs right here in America. I will eliminate capital gains taxes for the small businesses and the start-ups that will create the high-wage, high-tech jobs of tomorrow. I will cut taxes - cut taxes - for 95% of all working families. Because in an economy like this, the last thing we should do is raise taxes on the middle-class."

Well, to start, I don't really know of any tax breaks for corporations that outsource, but I will concede the fact that 1) there could be something out there of which I am not aware and 2) he may be playing with the words and facts a bit to make a point. Regardless, that does pose a bit of a problem. I will get back to that problem in just a minute but first I want to point out that I think I have prepared maybe ten small business returns that had capital gains taxes and the amount of tax, combined, is very small. This might be the biggest deception in the entire speech. That entire sentence from the cutting taxes to the benefits for start-ups and high-tech jobs is pure puppy poo. It doesn't make any sense. Oh, it sounds good, but it is just intentional, misleading gibberish. That sentence tells me either his tax advisers are complete morons who have no understanding of the tax code and how it affects American businesses or he knows the American people don't have the first damn clue what he's talking about so he can say whatever he wants - as long as it sounds good it is good. Okay, back to the problem above.

He insists he is going to cut taxes on 95% of all working families. Well, under our current tax laws only about 50% are paying taxes, thus 50% are not paying taxes. If we take 95% of 50% that leaves us with 2.5% of working families having to make up the difference. But we aren't finished, yet.

"I'll help our auto companies re-tool, so that fuel-efficient cars of the future are built right here in America. I'll make it easier for the American people to afford these new cars... I'll invest 150 billion dollars over the next decade in affordable, renewable sources of energy..."

Add those things to our list of new jobs for the government. Incidentally, it was this same line of thinking that has led to Amtrak becoming, essentially, a nationalized railway. It sounds like he is well on his way to having the federal government in the car business. All of the big three American auto makers are on the verge of bankruptcy. If he is going to have auto companies to build these cars the federal government is going to have to bail them out and pay off or guarantee their debts. Not only will the government be building the cars but it will be helping the people buy the cars they are building! So, in addition to tax cuts for 95% of working families, he is also going to give tax cuts to companies that keep jobs in America, develop new jobs, produce renewable energy and build automobiles.

I do find it amusing that he has no problem at all giving billions of our tax dollars to companies that have bankrupted themselves but calls it greed when an oil company wants to keep more of the money they earned. Nevertheless, he has been spending billions upon billions, potentially trillions of dollars over a period of years, and, at the same time, giving tax cuts to 95% of American families and some select companies. Something doesn't add up…

And he continues to spend money on education and health care and increased benefits. I'm not going to go through all of those things again, except for one line:

"If you commit to serving your community or your country, we will make sure you can afford a college education."

The government offering to help a soldier afford a college education doesn't bother me in the least, but "commit to serving your community" makes me raise an eyebrow. What exactly does that mean? He doesn't say, but there is something about the federal government offering financial incentives for the youth to do something in the communities that just sounds a little too Hitler Youth for my tastes.

Finally, he tells us how he's going to pay for it all, including the tax cuts.

"I've laid out how I'll pay for every dime - by closing corporate loopholes and tax havens that don't help America grow... I will also go through the federal budget, line by line, eliminating programs that no longer work and making the ones that we do need work better and cost less..."

I really don't know what to make of the first part of his plan, "closing corporate loopholes and tax havens that don't help America grow." I am not terribly familiar with the taxation of international transactions, but it sounds like he is telling us that large, international companies should be expecting massive tax increases, which will certainly discourage non-U.S. businesses from coming here and will discourage U.S. businesses from expanding into foreign markets. It also concerns me that helping America grow functions as some sort of litmus test as to which companies will be subject to tax increases. Should we expect some sort of commission that will examine every company in America to determine if it helps the country grow and subject it to additional taxes if it doesn't meet their standards? So, the first part of his payment plan calls for huge tax increases on international business, making an already uncompetitive U.S. tax environment even less appealing, and potentially opening up an entirely new method of determining taxability based on the company's ability to help America grow. The people who run large, international businesses aren't dumb. Why would they continue to do business in the United States if they are a foreign corporation, or remain located in the United States if they are a domestic corporation, if taxes are so high that they lose money by being here?

In a recent Wall Street Journal op-ed, the dean of Columbia University Business School, R. Glenn Hubbard, points out that the increases in Social Security and Medicare spending alone would require that federal taxes be raised by more than 50% to make up the shortfall. In Obama's plan there will be no reduction in those benefits and 95% of American families will get a tax cut, which means that 2.5% of the people are going to see their income taxes more than double to make up the difference from Social Security and Medicare alone – and that is assuming his tax cut is very small. The bigger the tax cut, the more that 2.5% will have to pay. It is worth noting that this 2.5% contains most of the small business owners. But he isn't finished raising their taxes.

As we have moved through his vision of the 'world as it should be,' Barack Obama has outlined an expansion of government unprecedented in its scope - a government that will be involved in every aspect of our lives from cradle to grave and is going to require almost unimaginable amounts of tax revenues to fund. It sounds wonderful to hear a candidate talk about cutting spending on existing programs to help make up the difference, but the last year in which the federal government spent fewer dollars than it did in the previous year was 1954 – the year following the end of the Korean War. Prior to that, the last drop occurred in 1946 following the end of World War II. Only twice since 1940 has the federal government actually cut spending, yet Barack Obama, insists that, not only will he be the first president to get congress to cut spending, he is going to get them to do it on a massive scale – all without cutting benefits.From there we briefly move into foreign policy.

"You don't protect Israel and deter Iran just by talking tough in Washington… If John McCain wants to follow George Bush with more tough talk and bad strategy, that is his choice…"

I commend this approach. It is indeed impossible to rely on diplomacy alone to protect our freedoms and those of our allies. It is his attack on Bush and McCain that is interesting because just a few sentences later he offers his strategy for dealing with Iran and Russia -

"I will also renew the tough, direct diplomacy that can prevent Iran from obtaining nuclear weapons and curb Russian aggression."

In other words, he is going to talk tough in Washington. Doh! Only in his 'world as it should be' is his strategy different than Bush's.

As he approaches his grand finale he tugs at our heartstrings again:

"When Washington doesn't work, all its promises seem empty. If your hopes have been dashed again and again, then it's best to stop hoping, and settle for what you already know."

His psychology is accurate but his entire premise hinges on a critical assumption – we should be turning to Washington with our hopes and Washington is broken when it is unable to satisfy them. But this should not come as a surprise because it fits into his vision of the world as it should be. His is a world in which the government is the ultimate provider from birth until death; education, employment, and retirement; health care and personal finances; a government that gives to each according to his or her need and takes from each according to his or her ability. His is a world in which the government stands to eliminate the need for personal responsibility – he has a program to make sure none of us are held accountable for our bad decisions. This is a government that bears no resemblance to the one conceived by our founders and that made us the most prosperous, powerful, free nation in the history of mankind.

Just to summarize what we heard during the convention, here is a list of the new jobs and roles that Barack Obama believes should fall under the control of the federal government:
"Build an economy"
"Provide opportunity to work"
Provide "health care for every American"
Provide "education from preschool to college"
Become an "instrument of public good"
"Transform the economy"
"Help them (people that get knocked down) get back up"
Help people who have "lost your homes"
Help people whose "home values plummet"
Help people with "cars you can't afford"
Help people with "credit card bills you can't afford"
Help people with "tuition that's beyond your reach"
Help "families that slide into poverty"
Make sure we treat each other with "dignity and respect"
Force companies to "create American jobs, look out for American workers, and play bythe rules of the road"
"Protect us from harm"
"Keep water clean and toys safe"
"Invest in new schools and new roads and new science and technology"
Encourage a society in which I am "my brother's keeper; my sister's keeper"
"Help our auto companies re-tool"
Help the "American people afford these new cars"
Use financial incentives to encourage the youth to "commit to serving your community"

Is there a role for the federal government in any of these areas (and the thousands more in which it is already involved)? Yes, especially in the areas of clean water and protecting us from harm. I am not making an argument for no government, but I am extremely cautious as to what these open-ended statements mean to Barack Obama when placed within his vision of the world as it should be. A strong, capable military and the willingness to use it in the face of a threat will certainly help protect us from a certain kind of harm, but an all-powerful police state that is involved in every aspect of our lives would help protect us from other kinds of harm. Given his vision of the role of the government I have to think he was referring to the latter rather than the former. There is a place for our federal government and at times it must get involved in our lives, but what Obama wants to create is beyond that, beyond anything ever conceived by our Founding Fathers, much closer to the government envisioned by Vladimir Lenin than the one James Madison helped create.

His 'world as it should be' is one in which the government provides the ultimate security blanket for every aspect of the lives of its citizens but at a monstrous cost. The price for a world of complete security is a complete surrender of our freedoms. As someone much wiser once observed, "Any society that would give up a little liberty to gain a little security will deserve neither and lose both."