Next!

Thursday, August 28, 2008

Man, I'm glad I'm not watching these things. Standard Operating Procedure. Talk about the family. Check. Tell everyone about your great parents. Check. Tell everyone how much you love the country. Check. Talk about God. Check. Try to be witty. Check. Above all things mention Pennsylvania, we need those electoral votes. Check. Now we can get to it.

Uh, not really. I sure hope this speech sounded better than it reads. I can sum it up in one sentence: Every bad thing that has happened on the entire planet in the last eight years, from hurricanes and earthquakes to home foreclosures and social unrest in Rwanda, is George Bush's fault (with John McCain's support) and electing McCain will just bring four more years of bad things.

This is a hard speech to break down because all of the 'guts' of the speech are short, one or two line quips, demagoguery at its finest, that require very long, detailed answers and explanations. It plays on the prejudices and, quite honestly, the lack of understanding of the audience. I won't go through them all, but I will give a couple examples.

"He (McCain) voted 19 times against the minimum wage for people who are struggling just to make it to the next day. That's not change. That's more of the same."

I'm not going to really get into this because this is not the time and place for a full blown economic analysis of the effects of minimum wage laws. I will simply throw out a couple of thoughts that might indicate there is much more to the story than what is being presented by Senator Biden.

For example, there is some pretty strong empirical evidence that shows increases in the minimum wage reduce the number of low-wage jobs – if you increase the minimum wage to help lower income workers you actually reduce the number of low income jobs to be had. If that is the case, have you helped or hurt the low income worker?

At the same time, there is quite a bit of data that suggests very few of the 'working poor' are actually employed in minimum wage jobs. A recent study indicates that about 75% of workers earning minimum wage live in a household with a family income 50% higher than the poverty line, with an average family income of about $40,000 per year. If that is the case, then changes in the minimum wage really don't do a whole lot to help many people.

I will also throw this out there just as food for thought. It has, admittedly been a couple of years, but I did a little digging at one time trying to find a job that paid minimum wage. I couldn't find one. I am certain they exist, but everything I could find – sacking groceries, carrying boxes, cleaning floors, etc., - all paid more, and, in some cases, quite a bit more. It certainly seems like the supply and demand mechanism of the market has already pushed the 'real' minimum wage above that required by law.

Enough about that. My point is that there is more to voting against minimum wage increases than whatever Biden is trying to imply.

"Even today, as oil companies post the biggest profits in history, nearly $500 billion in the last five years, John wants to give them another $4 billion in tax breaks. That's not change. That's the same."

I have written about this before, but I'm going to throw it out there again. Using just Exxon as an example, since it is the biggest oil company out there - in 2007 Exxon posted a $40.4 billion profit. Wow, that's a lot of money – and it is their AFTER tax profit. They paid $30 billion in taxes. THIRTY BILLION IN TAXES. That works out to an effective tax rate of 42.6%. Even if the entire $4 billion in tax breaks went to Exxon for a single year (which it doesn't), it would have reduced their 2007 taxes down to $26 billion and reduced their effective tax rate to 36.9%. It is painfully clear that Biden's remarks are much ado about nothing. It makes for a great sound bite because the numbers are big and people hate high gas prices, but there has to be more to this story, otherwise, it just doesn't make sense.

"Barack Obama will transform the economy by making alternative energy a national priority and in the process creating 5 million new jobs and finally, finally freeing us from the grip of foreign oil. That's the change we need."

I think it should be fairly obvious that the next president, regardless of his political party, is going to make reducing dependence on foreign oil a national priority. Their reasons for doing so and methods employed may be different, but it is going to happen. Now pretend you are the CEO of ExxonMobile or any other oil/gas/energy company. What are you going to do? Do you think that CEO will throw up his hands, say 'Well, we had a nice run," and sit around counting his money while their stock tumbles (and his stock options lose value), profits decline and they march towards bankruptcy or do you think he will get his people working as fast as possible to develop new ideas to stay on the forefront of energy supplies and to continue their profitability? I am certain it will be the latter (according to their annual reports they are already doing it), if for no other reason than their jobs (and their stock options) depend on it. At the same time you have to wonder, who will be the most efficient at developing those alternative energy sources – a company whose financial future depends on it or a government passing out grants and contracts? Would we be better served in letting ExxonMobile spend their billions of dollars on their own research and development or taxing ExxonMobile, taking a cut for ourselves, and giving that money to someone else for research and development?

Again, I am not arguing in favor of one or the other here. I am just pointing out that Biden has thrown out a great 'one-liner' that has some resonance with the voters but really very little substance on its own. It requires deep and significant thought to address. I will say that it seems pretty clear that his position is that the government can make better decisions that the market.

"I have never seen a time with Washington has watched so many people get knocked down without doing anything to help them get back up."

This hits on the theme from the two previous speeches. I have to ask the same old question, is it the job of the president, or the federal government for that matter, to help people 'get back up'? Furthermore, is it even possible for a government to do this? How does it ever decide who needs help and who doesn't and how much to give when it gives? Can any national government ever manage that effectively for a country of our size? Regardless, it does serve to offer more insight into their view of the role of government in our lives:

"Build an economy" and "provide opportunity to work";
Provide "health care for every American" and "education from preschool to college";
Become "an instrument of public good" and work for "the common good";
Stop "giving windfall profits" and "transform the economy"
And now, "help them get back up."

And that is just from three speeches. Cradle to grave, start to finish. Their 'world as it should be' includes an omnipresent government involved in every aspect of our lives.

"Barack Obama's going to deliver that change, because, I want to tell you, Barack Obama will reform our tax code. He will cut taxes for 95 percent of the American people who draw a paycheck. That's the change we need."

Man, that sounds good in a speech. 95% of the American people what draw a paycheck will get a tax cut! Sweet! Yeah, stick it to those rich jerks in the top 5% that don't pay their fair share! Except that it is a complete pile of horse poo. According to the IRS, in 2006 a tax return had to have an adjusted gross income of $153,542 to be in the top 5%. A nice living, but not exactly jet-setting. And that same top 5% that everybody knows doesn't pay their fair share, paid 60.14% of the income taxes paid.

So, we now have a plan that puts the government into almost every minute of our lives: providing education, jobs, health care, retirement, and a safety net for when bad things happen. All while giving tax cuts to 95% of workers. Huh? The only way to make this possible is ENORMOUS tax increases on that top 5% (which includes a huge number of the small business owners providing the vast majority of new jobs in this country) and on corporations (which provide the rest of the new jobs and the stocks that most of us have in our retirement portfolios).

If you are a small business owner, or a well-paid professional for that matter, which makes more sense to you: You can (1) work your butt off, hire more people, increase productivity and earn a relatively large income only to see most of it go to taxes or (2) you can cut your productivity, not hire the extra help because it isn't needed, and work only a fraction as hard, yet end up with the same 'take home' income because you stayed out of those high tax brackets. Which choice would you make? What kind of tax plan institutionalizes punishment for achievement when it is going to require greater and greater tax revenues? The exact same reasoning applies to corporations as well. When you reach the point where every additional dollar of income is costing you more in tax than you are making in profit, why keep increasing income?

I'm stopping here. I've already said too much. It's just more of the same. One line jabs with little substance that play well in a sound bite.

And just in case you are wondering, I am going to tear up the speeches at the Republican convention, too, although it will be much more difficult. Unlike the Democrats, the Republicans have a history of saying all the right things. The Democrats have (mostly) bad policy but at least they generally tell the truth about it. The Republicans are generally just hypocrites that say one thing to get elected and do another once in office. That is the real legacy of the Bush administration.