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Wednesday, July 27, 2011

THE DEBT AND THE DEFICIT


What would you say is the most serious threat to the United States? The Economy? Crime? Terrorism?  Many experts would argue it’s our own fiscal irresponsibility.

Our never-ending legacy of deficits is the growing fiscal cancer that could one day destroy America.

How many times have we heard that we are going to cut waste, fraud and abuse?  How many times have we listened to the same old rhetoric about the partnership between government and the people?  All those empty promises about not leaving this burden to future generations.

Kennedy, Johnson, Nixon, Ford, Carter, Reagan, Bush I, Clinton, Bush II have all echoed the same sentiments in speeches but ultimately their words ring hollow as the National Debt continued to grow. 


If you should somehow spend more money this month than your income, you would have a “budget deficit”.  To cover your shortfall, you borrow using your credit card.  The amount you borrow is your debt. As we all know, you must pay interest on your debt.  If you do this month after month, you will need to continue borrowing and racking up more debt interest. After some time you can end up with the interest payment on the loan becoming the largest item in your budget.

A good illustration of this situation is to take a look at the 2009 Budget for the U.S.: Social Security - $610 Billion, Medicare - $330 Billion, Medicaid - $ $204 Billion, Military - $607 Billion, everything else - $936 Billion.

Now compare those figures to the 2008 Federal revenue figures: Personal income taxes - $1,220 Billion ($1.2 Trillion), payroll taxes (FICA) - $910 Billion, corporate income taxes - $345 Billion, other revenue - $46 Billion. 

The deficit that year was $410 Billion.


As I write these words the U.S. National Debt is $14 Trillion and growing. The means that each and every taxpayer now owes $130,048.

The crazy thing about that number is that just a few years ago (February 2007) the debt was “only” $8.7 Trillion. At the same time our Gross Domestic Product (GDP) was $13.5 Trillion.  Many times you will hear people speak of our debt to GDP ratio.

A country’s Gross Domestic Product represents the total dollar value of all goods and services produced over a specific time period - you can think of it as the size of the economy.

The Budget Deficit is the sum total of all annual deficits and surpluses going back to the beginning of our Federal Government in 1776.

The debt-to-GDP ratio is one indicator of an economy’s health. In the above example the ratio is 64%. Our GDP right now is $14.8 Trillion so the debt to ratio today is 98%.  While our debt has darn near doubled, our output hasn’t grown very much.

The war for our independence created much of our early debt so you might say it’s in our national DNA. 

After the American Revolutionary War, on the first day of our federal government (March 4, 1789) we were $75 million in debt, which was approximately 40% of the economy (GDP).  Our founding fathers were so alarmed that they immediately set about paying it down. By 1835 the Federal Debt was zero.  The only time in American history that this has happened.

In the last 40 years we’ve had 35 budget deficits and 5 budget surpluses.  Clearly, if we’re going to get out of this mess, we’re going to have to reverse that trend.

Given our history what do you think our chances are? The very existence of our country hangs in the balance.

Thursday, July 21, 2011

A Drug-Free America and the explosion of the prison population

 You know, we Americans are a strange bunch. We come up with the darnedest solutions to our problems.  We’ve been brow beaten for years into believing we have a raging crime wave in our midst.   This usually takes place in political environments so what do we do?  Far too often we allow their fear mongering to goad us into taking the bait.

That bait tends to lead to our ever escalating incarceration rates in the United States.
Back in 1970 we had approximately 330,000 prisoners in the U.S. Today there are approximately 2.3 million Americans in prison. Are we to believe that there are 7 times as many criminals in the country today?  The key question is: are we seven times safer as a result? If not, we’re paying a hell of a price for insecurity.

We now have more prisoners in America than China and they have 1 billion MORE people in their country. Think about that..  We have more prisoners than any other country in the history of the world and we’re supposed to be the land of the free. We now have more prison guards than Marines; More prisoners than military soldiers.

What we are doing isn’t working.

How we got here is a bit of a mixed bag.  The war on drugs had a huge impact on the increase along with a general  “get tough on crime” attitude. Lord knows, no politician wants to appear to be “soft on crime”.

Here in California of course, we instituted a “Three Strikes” penalty years ago that certainly added fuel to the fire.

Are we trying to create a drug-free America? Is that even desirable? Prohibition didn’t work. Why would this?  When you lock up a pedophile, little kids are certainly safer.  But when you lock up a drug dealer, you create an opportunity for the next man in line. I think we can all agree that drug use is NOT subsiding?  Are drugs any harder to obtain? I doubt it.

In June 2006 a prison study by The Commission on Safety and Abuse in America’s Prisons discovered that within three years of their release, 67% of former prisoners are re-arrested and 52% are re-incarcerated, that’s the sort of  recidivism rate that calls into question the effectiveness of America's corrections system, which costs taxpayers $60 billion a year.

Sheesh! For that kind of money we send them all to Ivy League colleges.

Since 95% of inmates are eventually released back into society, ill-equipped to lead productive lives. We have to decide how to do two things: 1) Apply some sort of punishment but one that works? and 2) Institute a rehabilitation process that brings them back into society as a well-functioning citizen.

We don’t want to give things to criminals for their sake, we want to give things to criminals for our sake.

What do think about crime and punishment? Are you satisfied with the exploding prison population or do you see a different way? Hopefully your ideas are a bit less expensive for taxpayers and a lot more effective.



Thursday, July 14, 2011

Captain America, Superheroes and the rise of the Modern Supervillain

Fans of Marvel Comics know that Captain America: The First Avenger is due for release in a little over a week. That got me to thinking about the origin of Captain America in particular and super heroes in general.

A superhero is a fictional character that is usually dedicated to protecting the public. I always enjoyed superheroes as a kid. Outside of the comic books, this is the Captain America that I grew up with: Classic stuff.

What I didn’t know was that Captain America was an intentionally patriotic creation, he initially appeared in March 1941 an was often depicted fighting the Axis powers of World War II. From what I understand he was one of the most popular character during the wartime period. 

Captain America’s alter ego, Steve Rogers, was a sickly young man who was physically enhanced to the peak of human perfection by an experimental serum(steroids?, growth hormone?) in order to aid the U.S. war effort. In addition, Captain America is armed with an indestructible shield that can be thrown as a weapon.

Anyway, I started thinking, if we were to create a modern day superhero to save us from evil, what attributes would he/she possess? What weapons would they wield? Would they have a sidekick?  We don’t have Hitler, Mussolini or Hirohito to deal with but we do have more than enough evil doers to keep our modern day hero busy.

One of the most attractive things about superheroes is that they have no problem circumventing laws in order to kick some ass.  They have their limits of course, but they will get the job done. That’s what we love about them. Perhaps the role of  an unemployed newspaper reporter(or auto worker) can serve as our hero’s alter ego.  We’ll call him Hugh Jorgan.

Independent Wealth           
Many superheroes have great wealth(i.e. Tony Starks, Bruce Wayne) or an occupation that allows for minimal supervision (i.e. Clark Kent as a reporter).  Of course, being unemployed kind of covers this as well.  Since we’re in control here, part of this story will be that a distant relative died and left him half a billion dollars.

Special Powers and Abilities
Expert mixed martial artist and marksman
Master engineer and laboratory scientist
Superior intelligence (enhanced to the peak of human potential)
The Ability to redistribute wealth undetected. I think Madoff’s victims would sign off on this one.
Invisibility – So that he could travel undetected.  This would include the ability to avoid motion detectors.
The ability to neutralize the influence of lobbyists. I’m not sure how this would be accomplished but it needs to happen.

Arch enemies
Who needs the Red Skull, Lizard Man, or The Joker when you have the likes of Bernie Maddoff, Alan Greenspan, Larry Summers, Joseph Cossano, Angelo Mozilo, street gangs, Terrorist organizations(al-Qaeda,Taliban, etc.) and assorted Washington lobbyists to do battle with?

Weapons and equipment
Captain America has a shield,  Thor has his hammer, Batman has the Batmobile and other “bat tools”.  Our guy will have to have something comparable. How about a tricked out Prius? A super enabled iphone? James Bond type cufflinks? You know, the kind that can deflect bullets and/or secretly record a congressman accepting a bribe.

Moral Code
Practically all superheroes possess a strong moral code, including a willingness to risk their own safety in the service of a greater good without any expectation of a reward.  Boy, would that be a breath of fresh air.

Achilles Heel
He’ll have only two: Junk food and Reality TV.  One happy meal would render him useless for a prolonged period of time. One hour of the Kardashian’s would turn him into a babbling idiot.

If you could create a superhero for today what would yours look like? Who would their arch villains be? What special abilities and weaknesses would they have? What special weapons would they use in fighting crime and maintaining order?

Thursday, July 7, 2011

Casey Anthony and the our never ending car wreck


Why is the American public so fascinated with these ‘Reality TV’ stories and subsequent trials? It reminds me of a freeway accident. We will complain about traffic congestion only to find out that the cause of said congestion is a bunch of “looky loos” gaping at a car crash.  And what do we do when we approach the crash site?

I guess that is basically what these type of cases represent: the car crash that we don’t even need to leave our collective couches to witness.  Every news channel brings the blow by blow into our homes on a continuous loop.

As certain as day follows night, talk show hosts, attorneys, and even psychologists will be invited to weigh in with their opinions on the case(s) as well as to provide their analysis as to why the public is so deeply fascinated with them.

The Casey Anthony trial got me thinking about several other famous cases in the recent past that have dominated the news and talk show circuits.  Each of these cases in there own way have transfixed millions daily as they wound their way to the inevitable end and breathless anticipation for the next great case.

Take a little stroll with me down memory lane as we revisit some of the most fascinating, absorbing ratings magnets of the last 20 or so years and  their attraction factors.  Attraction factors are the reasons why I believe the public became so enamored with the case and subsequent trials in the first place.


1) The case of Scott (and Laci) Peterson.
You all certainly remember Scott Peterson, don’t you?  Scott was the handsome, young husband who went fishing on Christmas Eve leaving his very pregnant wife at home.  At least that was his story.  As it turns out Laci Peterson was last seen alive on December 24, 2002. Scott was convicted of first degree murder of Laci and second degree murder of their unborn son.

Attraction Factor(s): A young, good looking couple. Sex and betrayal: Scott had an affair with another woman (Amber Frey) during the period of time that his wife was “missing”. And of course the factor of an unborn baby.


2) The Rodney King Trial / LA Riots.
One evening back on March 1991, a young man by the name of Rodney King was driving on a Los Angeles freeway.  Apparently Mr. King was speeding in his Hyundai and was subsequently pursued by a couple of CHP officers.  A chase ensued and before long several police cars and a helicopter joined in.

Eventually the car was stopped and the occupants ordered to get out. Long story short, several L.A. cops were captured on film beating the hell out of Rodney King. This footage has been replayed so many times a CNN executive referred to it as “wallpaper”.  On its’ surface it looked like an extreme case of excessive force.

Despite the videotape, and what many thought would be an “open and shut case”, a jury in Simi Valley concluded a year later that the evidence was not sufficient to convict the officers.  That jury decision led to an explosive riot/uprising throughout Los Angeles as many citizens vented their disapproval of the verdict.

Attraction Factor(s): Race, racism and the murky history of the Los Angeles Police.


3) The Menendez brothers
Take a life of privilege and advantage and sometimes it’s still not quite enough.  Joseph Lyle Menendez and Erik Galen Menendez are brothers who are known for their conviction in the highly publicized trial for the 1989 shotgun murders of their wealthy parents. Both brothers are expected to spend the remainder of their lives in prison.

The murder and subsequent trial of the Menendez brothers was a media sensation to say the least. Court TV broadcast the trial regularly back in 1993. The first trial ended in two deadlocked juries. The second trial was a  bit less publicized. I guess you only get one bite of the apple no matter who you are.

Attraction Factor(s): Wealth and betrayal, of course.  I mean, killing your own parents?


4) Oklahoma City Bombing Trial
When the Alfred P. Murrah Federal Building was destroyed on April 19, 1995 many media pundits rushed to judgment under the assumption that foreign terrorists were most likely to blame.  Imagine the egg on their faces when it was determined that the culprit was a young, white, American named Timothy McVeigh. The bomb claimed 168 innocent lives and triggered the largest criminal investigation case in U.S. history.

In the irony of ironies McVeigh timed his attack to coincide with the second anniversary of the deadly fire that ended the siege at Waco.
Within 90 minutes of the explosion, McVeigh was stopped by an Oklahoma State Trooper due to his driving without a license plate(dumb).

Attraction Factor(s): Home-grown terrorism, treasonous behavior,  U.S. citizens at odds with the federal government.


5) The Trial of Casey Anthony
The latest version of “soap opera” media-driven, made-for-TV trials involves the case of Casey and Caylee Anthony. When 2-year old Caylee Marie Anthony went missing by in June of 2008, her disappearance attracted media attention throughout the United States. Her mother, Casey Anthony, failed to report her daughter missing for over 30 days. Caylee's skeletal remains were eventually discovered on December 11, 2008, five months after her disappearance.

Casey Anthony was indicted on charges of first degree murder. She continued to maintain her innocence throughout her trial. Of course, Casey was found not guilty of first degree murder, aggravated manslaughter of a child, and aggravated child abuse. She was, however, found guilty of four counts of providing false information to a law enforcement officer. This jury decision has upset many throughout the nation.

Attraction Factor(s): The murder of a small child.


6) The O. J. Simpson murder case
Has to be considered the absolute granddaddy of all recent, “reality tv” court cases. Where to begin? The so-called "Trial of the Century" had it all. A black hall of fame football legend and actor O.J. Simpson was tried on two counts of murder regarding the 1994 deaths of his white ex-wife and her friend, Ronald Goldman. The grisly crime scene, subsequent investigation, the warrant for O.J.’s arrest and the famous “Bronco chase” through the L.A. freeways.  And this was all before the trial!
The trial took place from January 29 to October 3, 1995, and featured the “dream team” legal counsel of Robert Shapiro, Johnnie Cochran, F. Lee Bailey and Alan Dershowitz.  By the end of the criminal trial, national surveys showed wide differences of opinion between most blacks and most whites in terms of Simpson's guilt.

Once again, the tainted reputation of the L.A. police was brought into light by Cochran and the defense team.  Police misconduct was alleged and no doubt played a large role in the trials outcome. Simpson was found not guilty of the murders of Nicole Brown Simpson and Ronald Goldman.

Later, both the Brown and Goldman families sued Simpson for damages in a civil trial. On February 6, 1997, a jury unanimously found there was a preponderance of evidence to hold Simpson liable for damages in the wrongful death of Goldman and battery of Brown.

Attraction Factor(s): Race(black husband/white wife), sex, wealth, celebrity, fame, police misconduct.

Did I miss any major “reality TV” trials? Why do you think we continue to follow these soap-opera stories? What does that say about us?


Wednesday, July 6, 2011

The New Reality: Economic Health and austerity?


The party is over and it appears as if the nation is in full hangover mode.

After having come face to face with a mountain of debt, consumers are now leading the way out by paring down their debt. The national savings rate has reached 6.4% from a low of 1.0% in 2005.  Total household debt has fallen from its peak at the end of 2007 at 138% of disposable income.

The National Savings Rate refers to an estimate from the U.S. Commerce Department of the amount of income left over after subtracting consumption costs and expenditures.  It doesn’t actually measure the amount of money Americans are saving or investing over the long-term.

The latest statistics from the Federal Reserve indicate that the total amount of consumer debt in the United States stands at nearly $2.4 trillion.  Based on the 2010 Census statistics, that comes to nearly $7,800 of debt for every man, woman and child living in the U.S.

So just how does that debt breakdown in terms of credit cards or the purchase of a new automobile?  Roughly 33% of all consumer debt, as of October 2010, is what is referred to as revolving credit.  The best example of revolving credit would be credit card debt.

The other 67% of that debt is derived from “non-revolving” type loans. This type of debt  includes: automobile loans, student loans, loans on boats, trailers, or even vacations.

The  incredible shrinking U.S. household debt
The amount that the average American household owes fell for the seventh straight quarter, a total of 6.5% since 2008, the Federal Reserve says.  It would appear as though the “easy-money” boom has given way to a strong contraction in borrowing(and spending).

How does all of this effect a consumer driven economy? At the end of the day is it a net good or a net negative when we become savers? It seems like a case of, “Damned if you do, damned if you don’t.”

Although the decline in indebtedness has improved Americans' personal balance sheets overall, it also has contributed to weak consumer spending, putting a drag on the economic recovery.

It seems obvious to me that consumers didn’t just rack up all that debt overnight.  If so, it seems that it could take a while to reduce it.  While consumers continue to wrestle with debt reduction their struggles could have a dampening effect on the economy.

What do you think? Is there a manageable way to keep a consumer-driven economy on track humming along without seeing consumers drowning in a sea of debt?