I am confused. The fuddy duddy mayor of New York, Michael Bloomberg is at it again. In his personal war on obesity in which transfats have been banned from restaurant food and calories have been posted on all menus, he tried to have a tax imposed on sugary drinks. Now he has proposed banning the sale of soft drinks of over 16 ounces in restaurants, fast food eateries, delis and theatres. Of course, there has been the usual reaction from the usual suspects. Those on the left have praised the move as vital to health, those in the industry have criticized it, those on the right have railed against the intrusion into ones personal space. Here are some comments from the news stories.
"I appreciate what he is doing in taking steps to alleviate a problem that is bigger than New York," Queens resident Melissa Friedman, 28, said of the proposed ban. "I think it's good."
Michael Jacobson, executive director of the Center for Science in the Public Interest, a Washington D.C.-based consumer group, called Bloomberg's measure a "pioneering proposal" and "a very important step." "It promises to be the most effective way to reduce consumption of a product that causes obesity," he said.
"I think Bloomberg and the New York City Department of Health are acting in the public's best interest, even though some may view it as inappropriate and an invasion of personal choice," said Joy Bauer, a registered dietitian in New York City and nutrition expert for NBC's Today show.
Bonnie Taub-Dix, a registered dietitian in New York City, says, "No one needs a soft drink the size of a small swimming pool. I'd like to shake our mayor's hand by taking this bold move. If people continue to supersize — they won't fit into their favorite size."
Without the temptation of large drink, people will have to opt for the smaller portion, said Hershkowitz, a Florida State University student who is interning at US Weekly magazine.
What was missing from everything I read were two obvious questions. The first is does this mean the banning of free refills and two, what prevents the patron from ordering two 16 ounce drinks?
My high school class celebrated its 50th reunion. (Booker T. Washington, Atlanta, GA). It was a blast. I had not seen any of them since graduation and had to walk around looking at name tags. Only two I recognized just from their faces. However, each was introduced and a video screen had the senior photo of that person displayed. I recognized all the old photos. I guess I evoked a similar reaction. Since I left Atlanta for college and never again socialized with any of my classmates, I was different from the vast majority of them who stayed in Atlanta. Only one other person came from out of town (Washington, DC). My close friends either had moved away from Atlanta or were dead. It was sobering to note that of the 354 who were in the class, 94 were now dead and almost a third of the dead males died in Viet Nam.
What was also interesting was that none of the organizers of the reunion were from the two college prep homerooms. I wonder if there were any lingering resentments amongst them. When you looked at the graduation program and the list of “best of” and honor diplomas all were from the college prep homerooms, only two of us attended. Moreover, just one person on the high honors list was still residing in Atlanta (I did an internet search). Interestingly enough, the college prep designation was apt in that all those I located were doctors, lawyers, professors and one was CEO of a venture capital firm (I wonder if he will vote for Obama).
Remarkably everyone looked great. There was not a single person who was overweight. Very few looked their age. All looked prosperous. One woman was the subject of a crush. I told her “you know I had the biggest crush on you”. She said that she knew but didn’t give me the time of day. That was not unexpected since I was a full two years younger than anyone in the class. I remember her as being much taller then – the only male in the class shorter than me was a midget. That was why I may have been the only person in the history of American high schools who never had a date. I was the same age as those two classes behind me, and generally shorter than even the girls. As a senior I wasn’t about to date eighth or ninth graders (we had 5 year high schools). I socialized with a group of super smart boys and girls. What happened to them? One of the girls is now an anesthesiologist in Alabama. I tracked her down when I learned of the death of her father and called her office. She called back to thank me but had no interest in any further contact – she never even inquired about me or my family. One of the girls was a teacher in DC who married the older brother of one of the boys in the group. We saw each other in DC a few times but it was apparent that we had drifted apart. Another girl was now dead. The last is married to a professor ironically at Ohio State and did not respond to my email (sent to her husband). The three guys are all dead (one in Viet Nam, one from a heart attack, one from AIDS).
Here in Appalachia bluegrass music is indigenous and popular amongst many of the (white) inhabitants. There may be some black aficionados but I don’t know any. Yet, one of the most popular groups is a black one - the Emmy winning Carolina Chocolate Drops. I was introduced to them when they gave a concert benefiting a not for profit on whose board I serve. They say unabashedly that they are bringing back traditional Negro jig music (wow! What would Al Sharpton say about that phase?) Now this is different from blacks in country music like Charlie Pride and Darius Rucker. Bluegrass is much more basic and elemental and is associated with poor white hill people rather than rural whites from the Deep South. So in order to be in this tradition, one would have to have roots in a place where there were very few blacks (no plantations in this part of the world). However, there were blacks sprinkled about Appalachia – many being miners in Kentucky and West Virginia - and their most enduring legacy is the banjo which is derived from an African instrument. Many of the famous blues singers were from that tradition (Josh White, Brownie McGee, Sonny Terry and Blind Boy Fuller). Modern blues singers such as Keb Mo and Eric Bibb incorporate some bluegrass into their work but are not traditionalists like the Chocolate Drops. My longtime girlfriend is kin to the famous Carter Fold whose home is in southwestern Virginia. She tells stories of AP Carter and his friendship with a black musician Lesley Riddle who met in 1927 in Kingsport, TN. AP and Maybelle Carter opened up their home to Riddle and learned not only his gospel, blues and railroad songs but also his slide and finger picking techniques that were the standard of black musicians of the time. AP toured with Riddle throughout the region and adapted his tunes and techniques to his own style and recorded them. My girlfriend often refers to herself and her family as “Melungeons”. The Melungeons are an interesting story since until recently no one knew their origins. They were dark skinned with broad noses and were thought by some to be of African descent. But understandably Appalachians denied it saying that they were descended from Portuguese sailors or Turks or Gypsies. Still Melungeons were discriminated against and in several instances were the subject of court cases accusing them of being black. They prevailed in those cases which established them as being not black if not quite white. However, results from a genetic study have just been published in the journal of Genetic Genealogy which will upset many in Appalachia. The evidence supports an African heritage. It is postulated that intermixing occurred between African and white indentured servants in Virginia in the 1600s before the institution of slavery. Is my girlfriend upset? Quite to the contrary. She is delighted. Welcome to the sustah hood.
Isn’t it interesting that the Obama campaign has decided that its primary strategy is to attack Bain Capital? That Mitt Romney had left the firm to run the Salt Lake City Olympics is beside the point, Obama has decided to tie Romney to what it contends are egregious sins. In so doing it is attacking venture capital and capitalism. Obama has vigorously defended the attack ads and the ranting of surrogates, however it did back away from Jim Clyburn’s (D-SC) liking Bain to a rapist. Clyburn said "This is not an attack on free enterprise," Clyburn, D-S.C., said on MSNBC. "I don't take contributions from payday lenders. I refuse to do that. That's free enterprise. ... And there's something about raping companies and leaving them in debt and setting up Swiss bank accounts and corporate businesses in the Grand Caymans. I have a real serious problem with that." Note that he aligned venture capitalists with payday lenders saying “This is not an attack on free enterprise”! Huh? What Obama is doing is going after Romney because he cannot tout his record. What Romney has to do is stay on message and just brush off the attacks. Romney needs to point out that capitalism has made this country great and that the great experiment wandering away from capitalism has resulted in the slowest recovery on record. Obama wants to contrast his goals: changing the basic economic tenets of American capitalism and economic “justice” with what he claims characterizes Romney: getting rich on the backs of working class Americans. As Clyburn contends Romney and Bain Capital destroyed jobs, bought businesses, saddled them with debt and drove them into bankruptcy. However, I have yet to hear anyone point out that Obama has done something similar with the automobile bailouts. Thousands of jobs were destroyed, dealerships were closed, plants were closed and GM still owes the government $14 billion and Chrysler owes it $1.3 billion. The only difference is that Obama did it with someone else’s money while Bain Capital risked their own.
I am perplexed. I have great respect for the Federal Reserve and think that its framers were brilliant. Rather than leaving the central bank in the hands of politicians who would debase the currency as soon as they could, the Fed instead is independent and should be apolitical. Of course it isn’t, but in the main it has worked pretty well producing among the lowest rates of inflation in the world. The question is then why has this Fed been so irresponsible? The Fed is made up of really smart people and perhaps the least smart ones are sitting on the Board of Governors. I have known many of the Fed economists and many of its presidents, I cannot point to a single economist who was not very capable and only to one president that I was not certain about. This is not true for the governors but generally speaking all were fairly bright people. All at the Fed understand their mission and any of their websites will point it out. This is from the San Francisco Fed/s website:
“What are the goals of U.S. monetary policy?
Monetary policy has two basic goals: to promote "maximum" sustainable output and employment and to promote "stable" prices. These goals are prescribed in a 1977 amendment to the Federal Reserve Act.”
The narrative goes on to say that the Fed can only pursue the goals of output and employment in the short run and to try to do it in the long run will not work.
“Persistent attempts to expand the economy beyond its long-run growth path will press capacity constraints and lead to higher and higher inflation, without producing lower unemployment or higher output in the long run. In other words, not only are there no long-term gains from persistently pursuing expansionary policies, but there's also a price—higher inflation.”
So the question is why has the Fed pursued a monetary policy that has debased the currency, exploded the monetary base and has laid the foundation for inflation? Also it has done this by keeping the Fed funds rate near zero in a no-growth economy. Doesn’t it know the consequences of its actions?
The answer is yes it knows but it thinks that it can sop up the excess reserves when the economy starts to heat up. It created those excess reserves by purchasing asset backed securities from distressed markets and Treasurys directly from the Treasury. Again I have no trouble in the Fed buying securities from anyone other than the Treasury. But purchases from the Treasury are inflationary and are the source of the increased government spending. Why the Fed didn’t tell the administration to take a hike is beyond me. What I need someone to explain to me is why the Fed has done this in the first place. Surely, a collapsing dollar, hyperinflation and world wide inflationary recession cannot be the legacy that Bernanke has chosen. But that is the path he has put us on.
One area in which there is a clear case of racial superiority is “How do all those white guys get their women to mow the grass?” Have you ever seen a black woman cutting grass? Me neither.
Obama’s poll numbers among women are falling. I wonder what would happen to those numbers if Michelle became pregnant?
We now hear the clamor for republican dominance. Now only the presidency and the house but also for 60 seats in the senate. The defeat of Coburn’s bill to eliminate duplication made It is clear that the democrats will never vote to slow down government spending and lower the national debt. So in order to get the senate to go along with deficit reduction, you need 60 votes. However, the government stunk it up when the republicans were solidly in charge and when the democrats had all three. Personally I think that we are better off when we have gridlock.
Speaking of dominance, does anyone think that if the feds got really serious, adopted Simpson-Bowles, lowered the amount of government spending – rather than the rate of increase, by bringing entitlements under control, that there would not be serious political repercussions, with the likely result that the democrats be voted back into power? Look at France as an example.
One of the ideas of bringing social security under control is to roll back benefits by instituting a means test. This is an absolute nonstarter. Those of us who have contributed the max to social security for all these years know we have been ripped off. As I have said, I have maxed out payments for 30 years and get $2,500 a month (less than a 1 percent return) while my mother never earned over $24,000 a year and her state pension is $2,000 a month more. So now you want to rip me off even more? Forget it. Its my money and I want it back.
Did you know that only 20 percent of American workers contribute an IRA?
As I pointed out before, the amount of government spending on entitlements takes up all the tax revenues so absolute spending reductions must occur in entitlements. Of course the way to go is to not affect spending on current recipients of social security and medicare. Rather by raising the full benefit age to 70 and indexing it to life expectancy will minimize public dissent.
JP Morgan Chase just lost $2 billion in a derivatives trade. The long knives are out with the president and the treasury secretary crowing that if Dodd-Frank had been fully implemented, this would have never happened. You want to bet? No amount of regulation has ever prevented mistakes from happening among the regulated or the regulated figuring out a way to get around the law in the first place. Jaime Dimon, head of Chase has said that the company’s trading did not violate Dodd-Frank. Also, the loss was in the investment banking arm and not in the bank itself. Since the bank was not affected, what is the big deal? Actually there is no big deal. The bank lost is own money from its investment bank and not any money from its deposit bank so the FDIC is not involved. So now the question is whether it should be illegal for investment banks to use their own money to make money. That seems to be an issue for the board of directors and the shareholders and not for the government to decide. Moreover, the total assets of the bank is $2.2 trillion so it is no surprise that its quarterly dividend will not be affected and the stock price has started moving back up. Yet you would not know this if you listen to the president who wants even more heavy handed regulation. The president has said that JP Morgan was making bets while Dimon says that the bank was hedging against financial risk. Banks hedge against risk all the time. If the administration were to step in and ban all derivatives then the banks would actually be more exposed to financial risk of interest rate changes – but the administration is apparently ignorant of this fact. Well a relevant question is how much money has the Obama administration lost in its ill-fated green initiatives? I bet you it is many times the $2 billion loss of JP Morgan Chase. In Chase’s case, the head of trading has been fired and replaced. How many Obama administrators have been fired for their bad decisions? Precious few if any. While the GSA head has been placed on paid leave for his waste of taxpayers money, if he were at Chase, he would be collecting unemployment rather than being on what amounts to a paid vacation.
Note: Blogger has changed its look for us bloggers. I hate it. I can't find anything. I can't find any comments made by readers so please forgive me if I do not respond right away to comments.
One important issue that will have gigantic ramifications on the elections in November has been entirely ignored. You have heard of the October surprise. Well what of the September surprise? Its the looming hitting of the debt ceiling coming in September. I am sure you remember the debate of the issue last year. What we got out of that charade was an even bigger mess than that which was in place before. Recall that there were mandatory "cuts" that were split 50/50 between domestic and military budgets. The "cuts" have mean that federal government spending has proceeded apace at adding around $5 billion a day to the national date. Indeed, I wrote a piece on this saying "we've been had". If you recall I have written much on this topic (Just say no - March 6, 2011). In order to control government spending, I prefer my 20 percent solution where the government cannot spend more than 20 percent of the previous year's GDP. However, already in place is a law that limits government spending - the debt ceiling. When the issue looms again we will be treated to endless commentary on "shutting down the government". You can imagine the handwringing and angst. The democrats are off the hook since every one of them will vote to increase the ceiling. They will sit back and revel in the agonies of the republicans who will be in the eyes of the crosshairs. Do they shut down the government right before the election or do they raise the ceiling? All the pundits will say that if they capitulate and vote to raise the ceiling, they have abandoned their smaller government mantra and might lose their base and be pilloried as hypocrites. If they vote to keep the current ceiling which in fact will impose a hard cap on government spending, the media will attack them with even more vigor. They will scream that social security checks will stop, the military won't get paid, seniors will be imperiled, babies will die, students will not be able to attend college and just basically locusts and famine will plague the land. Of course all that is nonsense since the government can still spend an obscene amount of money - $3.8 trillion. Its only that the amount cannot keep growing and the government will have to decide how to allocate what they have granted themselves last year rather than granting themselves more this year. So the question is "what will Mitt Romney say?"
My old University of Georgia classmate Bob McTeer recently posted this to his blog:
What key indicators have traditionally signaled a healthy, robust economy that is vital and independent of monetary injections or government subsidy?
I would vote for entrepreneurialism, which the government can’t do much to promote except stay out of the way.
If that is the case, then it is telling that new business startups have been at a record low Reuters reported on May 2.
WASHINGTON (Reuters) - The pace at which new businesses are created in the United States dropped to a record low in 2010, a troubling development for an economy that is struggling to achieve higher growth rates necessary to reduce high unemployment.
The latest Census Bureau data, published on Wednesday, showed the startup rate fell to an all-time low of 7.87 percent from 8.10 in 2009.
The figures are based on a survey conducted by the Census Bureau's Center for Economic Studies and the Ewing Marion Kauffman Foundation, a nonprofit organization that focuses on entrepreneurship.
The startup rate peaked at 13.02 percent in 1987. Startups are critical contributors to job creation, and the declining trend could help explain the economy's sluggish recovery from the 2007-09 recession.
"There are a lot of questions as to why the economy has been slow coming out of the recession, and it is possible that some of that could be explained by the decline in the trend of startups and new firms in the U.S. economy," Javier Mirada, principal economist at the Center for Economic Studies, told Reuters.
Well Dr. Mirada is wrong. The slow recovery cannot be explained by the slow pace of startups. Quite the contrary, perhaps Dr. Mirada is too young (or too old) to remember 1987. But 1987 was a year of slow growth with slower growth forecast for 1988. There was a Black Monday in October 1987 which was the largest single day decline in the Sow since the Great Depression and the country was still reeling from the previous year's recession. Yet in the face of all this, new startups were at a record high. Why? Well one of the reasons was that the 1985 recession was accompanied by record layoffs of white collar workers displaced by technological advances. One of the results was that these college educated workers started their own companies. Why is that not happening now? My guess it is because of the ever increasing burdens of regulations on small businesses and the uncertainties surrounding costs of healthcare and taxes.
There is a video that describes why balancing the budget is impossible. No it is not akin to my posting regarding rejecting the proposed balanced budget amendment. Recall that you can balance a budget either by decreasing spending or increasing taxes or both. As I observed when the senate rejected a reduction in the budget by a paltry $10 billion, our politicians cutting spending is virtually impossible leaving increasing taxes as the only choice. What the video shows is that federal nondiscretionary spending (social security, medicare) is equal to tax receipts. This means that if you would have to eliminate federal spending on everything else, to have a balanced budget. Of course, nondiscretionary spending is nondiscretionary because the government says it is. Nonetheless, everyone knows that in order to control federal spending then the spending on social security and medicare must be corralled. After the video makes these points it wimps out. Its solutions are no solutions at all. So I offer a few real solutions of my own that will work.
1. Eliminate duplication
2. Eliminate automatic escalators
3. Raise the full benefit age in social security to 70
4. Privatize medicare and medicaid
5. Privatize social security with a benefit floor guaranteed by the federal government
6. Institute a flat income tax with no exemptions
7. Limit the growth in the number of pages in the federal register
8. Institute an aggressive review of all regulations by all federal agencies
9. Mandate that regulatory burdens must be reduced by at least 5 percent per year. (We did this when I was at NCUA).
10. Limit federal pay (including perks) to no more than 10 percent over the average pay for the same position in the private sector.
11. And of course, cap the federal budget to 20 percent of the previous year's GDP.
The political silly season has spawned the pandering to the stupid. First the president has taken to speaking trips to colleges telling them that the congress is going to double the rates on student loans. One of the things that frustrated me when I was teaching was that this generation has information at their fingertips and are too lazy to use it. Well if they decided to google the student loans, they would find that the doubling of rates would only be on new loans and not on existing ones. Thus, the college audiences should go ho-hum, what’s the big deal. Also they would know that it was the democratic congress and the democratic president who signed the law that will cause the change. So the president is assuming the students are either stupid or ignorant. Sadly most of them are both. The second salvo of pandering to the stupid is to stupid women with the Life of Julia (http://www.barackobama.com/life-of-julia). Here we have cradle to grave government assistance to women who obviously cannot provide for themselves. Tellingly, Obama’s Julia doesn’t ever have a man, never gets married yet opts to have a child. What message is this sending other than the government is the male substitute for women such as “Julia”. The Heritage Foundation has posted its conservative approach to Julia (http://blog.heritage.org/a-better-life-for-julia/?gclid=CJqQn4XY568CFcSa7QodrDms2g). Regardless, the women that I know are apparently not the norm. The polls show that women as a group favor a more activist federal government than do men. The women I know, even the liberal ones, fear government intrusion into every aspect of their lives. They treasure their freedoms and they are just as suspect of left wing intrusions as their NOW sisters fear right wing intrusions. Thank goodness I don't know Obama's Julia and hopefully she will only exist in the ether of the internet.
If Joe Biden were a republican he would be ridiculed and lampooned and make Dan Quale look like Einstein. In case you missed it, the other day he gave a speech in which he compared Obama's foreign policy with that of Teddy Roosevelt assuring the audience that "Obama has a big stick". Here is the video: http://www.cbsnews.com/8301-503544_162-57422403-503544/biden-on-foreign-policy-obama-has-a-big-stick/. Enjoy.
An old friend while a sitting senator told me once that a moderate was like a person walking down the middle of the street and getting hit by traffic going in both directions. True words today. It is an interesting contradiction that all the pundits are obsessed with the moderate independent voters while our moderate elected officials are an endangered species. Seemingly lost in the reporting of politics in America is the polarization of America’s political parties. We have widespread reporting of Obama aide David Axelrod’s statement that Republicans in the congress are operating “under a reign of terror imposed by the party’s conservative wing. The commentary accompanying this accusation accept this as truth. Of course this is part of the never-ending demonizing of the Tea Party. Apparently, the Obama campaign have decided to campaign against the Tea Party and tie it to the republicans. Such a strategy is curious given the results from the last election where the Tea Party can take a great deal of credit for 80 new congressmen and republicans taking control of the house of representatives. Missing from the discussion is the change occurring in the democratic party where Blue Dog congressmen are being ousted by leftist democrats. The Blue Dogs once a force in the democratic caucus with 54 members suffered defeats by republicans in the 2010 elections. The republicans argued that even though the Blue Dogs were moderates In the mold of Scoop Jackson, they still were going to vote for Nancy Pelosi for speaker and reinstall the leftist democratic leadership. After the bloodbath in 2010, there were 25 Blue Dogs left. Then because of redistricting, several Blue Dogs including Heath Shuler (D-NC) opted not to run for re-election. Then in recent primaries, the Blue Dogs have suffered defeats at the hands of the democratic left wing. Tim Holden (D-PA) and Jason Altmire (D-PA) lost to leftists (now called “progressives”) who ran with union support criticizing their votes against Obamacare and clean energy. Now why people in Pennsylvania would support “clean energy” which wants to destroy coal mining is beyond me. Mike Ross (D-Ark) has said that it is now tough to be a moderate in this congress. If the two parties now find it difficult to find compromise on tough issues, it will be neigh impossible in the next one congress.
Harold A. Black is professor emeritus in the Department of Finance, University of Tennessee, Knoxville having retired after 24 years of service. He has served on the faculties of American University, Howard University, the University of North Carolina - Chapel Hill and the University of Florida. His government service includes the Office of the Comptroller of the Currency and as a Board Member of the National Credit Union Administration. He also has served on the boards of directors Home Savings of America and its parent company, H. F. Ahmanson & Co., Irwindale, California prior to its merger with Washington Mutual Savings Bank, on the board of New Century Financial Corporation, Irvine, California, then the nation’s largest real estate investment trust and as director and later chairman of the Nashville Branch of the Federal Reserve Bank of Atlanta. He writes an occasional article for the Knoxville News-Sentinel at http://www.knoxnews.com/staff/dr-harold-black/. His web page is haroldablackphd.com