Author Archives: jparquette

Recent survey results describe trust in the Federal government at a historic all time low; only 17% of Americans are “positive” about their government in the latest Gallup poll, and 63% were negative.  An August Pew Research poll reported that only 22% were even “basically content” with how our leaders are running the country.  The Old Testament prophet Jeremiah admonished God’s people for their misplaced trust, “They have dug themselves cisterns, broken cisterns that hold no water.”  Broken cisterns are useless for hydration and a trap for those who are pushed into one.

Trust begins and ends at the top.  The Obama administration to date has been a crushing failure at almost every turn, most especially in managing the economy.  Beginning with the ill advised Keynesian borrowed trillion dollar stimulus that by almost any measure was a catastrophe – a boondoggle of pork, waste and no lasting jobs; he rounded the corner with the trillion dollar Obamacare 2,500 page mystery bill and is still going strong with literally ten thousand pages of new, business choking regulations from the Environmental Protection Agency, the Labor Relations Board and an inflated health care bureaucracy.   President Obama is doing his utmost to keep his promise to “fundamentally change America.”  His “hope”, however, is not keeping well and has turned sour.

If you recall, he recognized at the beginning of his administration that the massive deficit caused by Federal overspending was not viable; he pledged to cut the deficit in half by the end of his first term (see video link).  President Obama needs some remedial work on the placement of his decimal points.  He doubled the deficit and is still working hard to grow it some more.   When the opportunity arose during the debt ceiling debate to step back from the brink to make significant cuts, he instead dragged out overwrought class warfare rhetoric and, as Washington loves to do, deferred the hard decisions to yet another feckless committee.  He already had a report from a bipartisan deficit reduction commission (Simpson/ Bowles) and didn’t like what he heard, so ignored its conclusions and recommendations.  He’s still waiting to hear what he wants to hear, but his ideology keeps tripping on those ruinous and pesky facts.

After almost three years, this is now the Obama economy without a doubt. Following the much heralded (by the administration) “Recovery Summer” of 2010, we’ve suffered through five straight quarters of declining GDP growth.  Manufacturing is moribund, and housing remains a smoking, overturned hulk on the side of the tracks.  Our cisterns are leaking.  Could it be that it was simply a terrible idea to put our trust in a first term U.S. Senator with radical ideology, a record of voting “present” as a state legislator and some community organizing experience for the toughest executive position in the world?

There was another Illinois politician who did know what virtuous leadership requires.  In 1855 Abraham Lincoln was an ambitious leader in the Illinois State House of Representatives.  The opportunity arose to run for the U.S. Senate, a position he understood then as possibly his last and best opportunity for higher office.  The Illinois House would decide the outcome.  After several ballots his tally stood at 47 votes, four shy of the 51 he needed for victory.  The Douglas Democrat, James Shields, had 41; another Democrat, Congressman Lyman Trumbell, had 5.  Trumbell, like Lincoln, was part of a fragile coalition of Whigs, No Nothing Party members and anti-slavery Democrats who opposed the Nebraska Act and slavery.  The Trumbell supporters would not budge because as anti- slavery Democrats, they believed they could not be reelected if they voted for a Whig for the Senate.  After it became clear to Lincoln that even as the clear front runner he could not win, he asked his supporters to switch their allegiance to Lyman Trumbell in order to secure an anti slavery Senate seat for Illinois, which they did, some literally in tears. This coalition of Whigs, disaffected anti slavery Democrats and the remnants of the No Nothing party ultimately formed the basis of the new Republican Party.  Lincoln sacrificed his political aspirations for a moral truth – the essence of virtuous leadership.

Lincoln never addressed a joint session of Congress.  Although Washington and John Adams had done so, Thomas Jefferson submitted written remarks to be read by a clerk to the legislature. Jefferson regarded the President speaking to a joint session as too monarchial, modeled after the Speech from the Throne to Parliament in Great Britain.  The tradition of refraining from the regal persisted for over a hundred years until Woodrow Wilson revived the State of the Union address in 1913.  Perhaps another joint session is only to be expected from a President who would be king.

 This week we await yet another “jobs plan” from President Obama, another speech, his default response.  From an effective leader we might expect a specific financial plan to curtail the growth of government and entitlements with relief for small businesses and tax payers.  I sincerely hope so.  From President Obama, more than likely, it means just one more political speech with the extra pomp of a joint session just as he harangued Congress for Obamacare.  I anticipate a superfluous non event into which even the most avid Democrat will struggle to stay tuned.  Who are the Sox playing that night?

Thomas Paine, “The Crisis”, 1776.  “If there must be trouble, let it be in my day, that my child may have peace.”

In 1995 Marvin Phaup, a Deputy Assistant Director in the Congressional Budget Office, wrote a damning report about the potential lethal risks to the U.S. economy in Government Sponsored Enterprises, specifically Fannie Mae and Freddie Mac, due to the combination of their being backed with the full faith and credit of the United States and legislation passed in 1992 during the Clinton administration that lowered their capital reserve requirements.  By lowering reserves well below any prudent guidelines required of other lenders, the onus fell on the taxpayer to pick up losses. 

The perceived security of U.S. government guarantees allowed Fannie Mae to make far riskier loans and attract investors to supply the money than otherwise would have been  possible.  The advantage generated savings and benefits to Fannie Mae of around $7 billion per year.  Mr. Phaup’s analysis of how these savings were (and weren’t) passed on to the lower and middle income borrowers inspired him to name these GSEs “spongy conduits” because of the billions that wound up in the pockets of investors and senior executives of the organizations, particularly James Johnson, the brilliant CEO of Fannie.  Over $2 billion of the annual benefit was absorbed into the organization, not passed along as lower costs to borrowers.

James Johnson, once a roommate of Bill Clinton’s at a Martha’s Vineyard strategy session in 1969 for the Eugene McCarthy campaign, was a skilled manipulator of regulators and legislators, a lightning fast and brutal negotiator.  He forged symbiotic relationships with key Democrats  like Barney Frank to keep the lens from focusing on what was going on behind the black curtain; Mr. Johnson personally made millions, placing him in the upper echelons of executive compensation.  His well funded marketing and lobbying organization sold the myth of Fannie Mae’s noble mission to put more Americans into homes.    Johnson spread a lot of money around to secure the support of politicians and advocacy organizations like ACORN.  He and Bill Clinton fashioned the National Partners in Homeownership in 1994, and we were set on the path that greatly damaged our economy 14 years later.

Fannie Mae cranked up its formidable lobbying and public relations machine at the first hint of a threat to the channel of taxpayer guaranteed money.  Mr. Phaup was maligned, even spreading rumors of mental illness, when he (and then CBO head, June O’Neill) couldn’t be intimidated into mitigating their report as many other skeptics had backed away during Johnson’s lucrative reign.  When unable to alter the report, Fannie leveraged its cronies in congress and the main stream media to suppress the report’s significance.

In 1999, it got worse. A “beaming” President Clinton signed into law the Gramm-Leach-Bliley legislation that finished off the 1933 Glass-Steagall Act, which had protected consumers and investors from fraudulent bankers for over six decades: the much criticized deregulation of banks and investment houses that blurred the lines and gutted the rules.  The bill was backed by financial luminaries like Alan Greenspan, longtime head of the Federal Reserve, and Lawrence Summers, then Treasury Secretary and later senior financial advisor to Barack Obama.  The Bush administration bought into the fairy tale of home ownership for those who couldn’t afford them and the train rolled on undeterred.

A blog post is too limited to explore the multiplicity of greed from homeowners to mortgage brokers to bankers to investors to politicians with the labyrinths of Credit Default Swaps and Collateralized Debt Obligations.   I suggest reading Gretchen Morgenson’s and Joshua Rosner’s “Reckless Endangerment” and Michael Lewis’ “The Big Short” for a much more comprehensive viewing.

The point of a synopsis of the roots of our ongoing problems is Mr. Phaup’s superb “spongy conduits” metaphor.  Big government and its unwieldy, huge bureaucracy full of self serving czars and drones are spongy conduits by their very nature.  The current occupant of the White House is a particularly wearying exemplar (see Norman Podhordetz’s WSJ  current editorial), but the truth remains: only limiting the money and power that government accrues and misuses can control the creature.

Canada saved its economy with severe austerity measures in the last decade by doing deep government cuts and layoffs.  Government jobs shrunk, entitlements dwindled and the unemployment rate, even with shedding many public jobs, dropped.  Now Canadian currency has rebounded from an almost 30% discount to the American dollar to parity and even a premium.  Texas is a domestic example of what a partnership between limited government and private business can achieve for economic growth and job creation.

It’s not that government makes plenty of mistakes (which it does) or even that it’s full of corruption and greed (which it is), the benchmark is the entity itself: its size and power.

George Washington wrote in a letter to General Phillip Schulyer during the earliest part of the war for American independence.
“We must do our best with Mankind as it is, not as we wish it to be.”

As much as I despise retail shopping, I have two guilty pleasures in this regard: hardware stores and book stores, both of which can hook me for as long as my wife will tolerate.  She is far more patient in book stores because we share the attachment.  In the romantic comedy, “You’ve Got Mail”, Tom Hank’s mega corporate bookstore puts Meg Ryan’s “The Shop Around The Corner” out of business.  Like its 1940 forbear, Tom and Meg fall in love as e-pen pals, just as Jimmy Stuart and Margaret Sullavan fell in love in the original movie as snail mail correspondents.  In the real world, however, so many shops around so many corners felt the axe when Borders or Barnes & Noble set up down the street with few regrets from the big company.   I have fond memories among the shelves of those specialty stores.

Friday, Borders itself failed to emerge from last winter’s Chapter 11, and all their stores began final liquidation sales.  E-readers, Amazon, the expense of running brick and mortar stores and the intense schedules of harried shoppers spending more of our discretionary income on the internet were too much to overcome.  Their late entry into e-commerce, unlike Amazon and B&N, left Borders laboring to catch up, and they never did.

Will the eccentric bibliophiles who tend to staff even the corporate stores slide off into impracticality and the ranks of structural  unemployment?  I most ardently hope not.  We will be culturally poorer for the loss.  Along with librarians, these engaging, lovely folks are resources that enrich our lives.  In our home, we buy, borrow and read fifty or more books a year, and add another dozen or more as gifts.  How gloomy it will be to bid farewell to pleasant browsing of friendly books among kindred spirits.  As regular buyers of books on line (some from Borders) and an ardent e-reader user, I feel a bit complicit in their obsolescence.

If these gentle souls join typewriter repairers, wagon wheelwrights and many who once worked in our factories in that most intractable category of structural unemployment, they will add to an increasingly troublesome segment.  Estimates are that upwards of 8 points of the 9.2 points of unemployment rate consist of those who need work but have skills which are necessary less and less frequently.  Following the recent financial crisis, the United States added double the percentage of its citizens to the unemployed than any other Western country.  Some of these were cyclical, albeit long term, in construction and housing related  categories, but an alarmingly large group cannot find work doing jobs in which they were once so capable because those jobs have been displaced by technological advance or off shore competition.  They are structurally unemployed.

One of the most distressing aspects of the persistent high jobless rate is the long duration laid off workers spend looking and hoping and looking some more.  Some simply give up; others acclimate to unemployment and extended benefits.  They are discouraged and fenced in by limited or specialized (and increasingly less needed) skills in the accelerating pace of change in business.  That curve is likely to continue to steepen.  The percentage increase of structural unemployment among those looking for work for more than twenty six weeks is far greater than the increase in structural unemployment for those who have found jobs in less time.

The current administration has done precious little to address this crisis.  New manufacturing and new products require substantial capital investment, which is indispensable to generate competitive productivity.  This expense will create well paying jobs, or at least jobs which deliver sustainable income.  The ruinously expensive and feckless efforts of the Obama  administration focus on quick fix, unshovel ready jobs and fattening the minions of government to enforce and ladle on job killing regulations.

Misnamed health care reform and thousands of pages of new regulations to implement an ideological agenda bring about burdens crushing growth in private business.  The long term, serious work of encouraging cash investment waits largely ignored.  Political posturing, spin, hissy fit press conferences and blame placing frustrate those who would innovate and those who sit and wait.

We will persist, however, in hope and to read and to learn.  My wife, Rita, remains resolutely faithful to paper and bound books; many, however, are dropped on the back porch by FedEx.  She gets regular thank you cards from Amazon.  As is my habit, I stockpile a small treasury of books to enjoy on my vacation in late August.  Already three are set aside with great anticipation:
ready to read on my Nook.

We face an organized, well funded and pervasive effort to separate God from government.  The separation of Church and State is a baseline tenet of our Constitution.  However, an objective student of American history knows the intent of the Bill of Rights was not to sever God from American life, but to proscribe a state sponsored church as was the case in England at the time of the Constitution. This unhappy marriage leads to censorship, persecution and prejudice, if not violence. Many came to the Americas to seek the freedom to worship as they pleased.

Constitutional separation of Church and State notwithstanding, it was implicit in the worldview of the founding fathers and  authors of the Constitution that faith and human consciences formed in moral principles were inherent to the functioning of a democracy. Whether Deist like Thomas Jefferson or committed traditional Christian like John Adams, all agreed that a healthy and vibrant republic would persist provided the citizenry who governed (and their representatives) were educated on the issues and shared unyielding common moral values fostering honesty, hard work, keeping promises and active, informed participation in self rule.

Only a population which agrees on universal virtues, embraces necessary self sacrifice and eschews unbridled self-interest is worthy and able to govern itself over time.   Absent these virtues, as de Tocqueville aptly observed, democracy risks collapsing into anarchy, tyranny or some uncontrolled variation of mob rule (e.g. The French Revolution or the carnage of the 1918 Russian White and Red Armies).   The essential soundness of mind, spirit and faith of the American people enabled and ennobled the great American experiment.

To attempt to disconnect our discourse in the public square from faith is dangerous in the short term, and fatal in the long term.   Amusing atheism full of the glib, caustic wit of ‘plausible liars’ is well entrenched in academia and popular media.  This deluge has “educated” our young people for two or more generations. Vigilance, discernment and knowledge are central to our cultural survival.  As the old sergeant on “Hill Street Blues” used to say, “Be careful out there!”

A muddle of “I’m OK, You’re OK – every stray opinion is of equal value” lives out there in books, movies, TV, magazines and the internet.   Fertile ground is created for the kind of confusion that prevails in clever wordplay on the topic.  In other quarters religion has been downgraded to feel good soporifics. Little wonder why the young are uncertain and adopt what is easy – doing nothing.  Why commit to or be challenged by or form their consciences on cotton candy: sweet, pretty and utterly devoid of substance?

Our culture seems to have fallen into a disturbing contradiction:  we love things, and use people.  In that darkness, we will benefit by perceiving the light of the Ten Commandments not as strictures or fun spoilers or prissy; they are guidelines to growing in virtue.  As woeful as we can be at living virtuous lives, we incrementally progress in this lifelong pursuit only through relationships – with God and with each other.  In the process of grinding and polishing our way to virtue through relationships, we make it possible to live together with mutual support in a political structure called democracy.  Virtue gives our lives worth and the structure to embrace freedom.  Without virtue, democracy seeks order in dangerous places and will be lost in one tyranny or another.

That helpless sensation when we read the political news originates in the misunderstanding that one person’s voice is lost in the cacophony that threatens to overwhelm all public discourse. The sensation is real; the underlying perception is not. On a local level, while legislators are beleaguered with fund raising and reelection, most of them remain sensitive to their constituency. If you truly want an education, spend a few dollars and attend a fund raiser: what is humorously labeled ‘a time’ in little Rhody. Access is cheap.

If specific legislation elicits more than a couple of phone calls or emails to a local legislator, their interest is piqued. When an issue prompts a dozen or twenty constituents to weigh in, the hallway whispers and nervous cell phone calls can pass a tipping point. The scramble to a safe harbor will alter a vote or relegate newly proposed, damaging law to a quiet death in committee. Threatened with a looming vote for which they will be accountable to the electorate, many politicians will opt to cut a coffee shop deal, avoiding a potentially exposed position.

Anyone who has testified at a public hearing of a state level House or Senate subcommittee probably has witnessed the arrogance of power or experienced the derision visited upon the citizen who dares to challenge those who hold it. Irrespective of the gauntlet, fear of public embarrassment, even humiliation, is not justification for lacking the courage to speak up. The correct response to the self satisfied incumbent is to give them pause with the united voices of a committed few.

In the Book of Judges, God directs Gideon to reduce his army of 22,000 to defend His people from the hoards of Midian, Amalek and the Kedemites. The first cut to 10,000 sent home all who were not experienced, courageous warriors, any who were afraid. The Lord told Gideon that even fewer were needed for His purpose. The final winnowing seems at first to be mysterious: He instructed Gideon to observe his troops after a long hot day, when they came to a source of water. Those that knelt to drink with their face in the water were sent home; those who scooped the water to their mouths and lapped it from their hand were retained for the battle. What is the significance of this screening?

With no informed theological basis I believe the criteria were these: those that lapped the water from their hand remained watchful and wary; they controlled their thirst to maintain vigilance against threats. Self control, intelligent observation, relentless watchfulness. All were warriors; only three hundred did what was necessary. The few remaining were sufficient. They still are.

With some notable and well targeted exceptions, President Obama has dialed down His Agenda for the ramp up of his reelection campaign.  In order to secure his voter base, he focuses on fund-raising and the continuation of his class warfare theme.  Finding sufficient votes beyond his base – the white, liberal independents that bled away since 2008, well, that will need his best efforts to feint towards the center and assuage the fears fired up in the trickery and single-mindedness of passing the health care usurpation.

His fund-raising events break all records. In his first year of office he attended 22 fund-raisers; President G.W. Bush held six in his first year. The pace continues unabated including three fund-raisers this past weekend, while government spending similarly breaks all records. Meanwhile the debate stagnates in the legislature to  manage our astonishing deficit. The Obama deficit alone this year exceeds the entire federal budget of FY 2000. With default looming, the gold standard of bonds, U.S. Treasuries, is in danger of being downgraded by Moody’s and Standard & Poors for the first time ever because of the size and growth rate of the nation’s debt – almost $50,000 for every man, woman and child in the country. Each of us has another mortgage. We are on track to become Greece.

Big government with money to spend and voters to control, Keynesian economics gone wild, is a mainstay of the Democrat and Presidential program. In the face of all evidence, Democrat leadership is inextricably caught up in the credo that professionally managed bureaucracy (an oxymoron, if ever there was one) under the control of a liberal/socialist leaning government will solve all our problems. Ratcheting up inexorably the degree of authority necessary to leverage this unworkable miracle is inevitable: that authority is what they crave and that is what we have at stake in the 2012 election.

Ms. Pelosi famously stated, we need to pass the bill (Obamacare) to know what’s in it. As we learn more and more of the details including the virtually unrestrained power of the Independent Payment Advisory Board and the staggering costs layered into the bill, it becomes increasingly clear, we were hoodwinked once again. A McKinsey & Company report in June upped to 78 million their estimate of currently privately insured citizens that will be cut loose by their employers. The numbers are simple: the average small business cost to the company after employee contributions for health insurance is $4,150 for a single plan and $9,773 for a family. Many already struggling small businesses can opt for a $2,000 fine per employee and consign them to the exchanges. If they have fewer than 50 employees, they get an exemption from even that fine. It is no surprise that the National Center for Policy Analysis projects those to be dumped into the exchanges at between 87 and 117 million. The original Congressional Budget Office used the administration’s assumptions of 24 million covered by the new exchanges, of which only 9 to 10 million would be due to losing their coverage with their employer.

With the original administration numbers, the CBO estimated $500 billion in additional Federal spending over the first decade of the plan. Using the McKinsey numbers or the NCPA projections, the costs in reality will fall between $1.5 trillion and $2 trillion: unaffordable costs to layer on to the already unfettered burden. Obamacare has to go; it won’t go as long as its author remains in the White House and Harry Reid remains leading the Senate.

The Democrat dominated House, Senate and Executive branch failed to pass a budget in two years. No budget – like trying to manage a household with no regard to spending, no relationship between income and expense, maxing out the credit cards until they’ll take no more. The newly Republican led House passed a budget within months of having the votes. Yet the response of our President to fiscally responsible, necessary spending cuts proposed by House leadership is to insult our intelligence and play to his voter base with tired rhetoric that spending cuts must be accompanied by tax increases (or his even more tired cliché, revenue enhancement).

His proposed solutions?  Class warfare.

Get rid of tax shelters for the rich: most repeated refrain from President Obama is to eliminate the deduction for corporate jets and oil drilling subsidies. Could there be a more cynical, emotional chord to play for the almost 50% of lower income voters who pay no taxes now, most of whom are Democrat voters? Charles Krauthammer recently ran the numbers. Getting rid of the corporate jet deduction would completely cover one year of Obama deficit (not annual spending, just the borrowing), if those dollars had been collected since the time of Jesus – 2,000 years. The oil drilling subsidies (tax credits to encourage domestic energy production) would cover one year of Obama deficit in 700 years. If we put in place both “tax increases to the rich” and collect the extra dollars for 100 years, we’ll handle the Obama deficit for February. But this mantra makes for strong, outraged sound bites for his voter base, and does nothing to discuss seriously the hard decisions necessary to shrink government spending.

To raise taxes on everyone making more than $200,000, another favorite Obama refrain, would indeed cover the deficit, if only each one of them would pony up an additional $3.5 million a year. Among successful small business owners, who make more than $200,000 and generate the majority of new private sector jobs, the uncertainty about the fiscal future, future taxes and the profligate regulations produced by the Dodd/Frank financial reform bill, the EPA and Obamacare has paralyzed new job formation in that critical segment.  The president promised his stimulus bill of just under $1 trillion in borrowed or printed money (another clichéd euphemism – quantitative easing), would keep the unemployment rate below 8% with ‘shovel ready’ jobs. The unemployment rate  rocketed to above 10% and settled back into a firm 9.1%.

No solutions beyond grabbing more of the citizenry’s money, he continues to fan the flames of class divisiveness accompanied by crippling debt and unemployment. The country has paid a heavy price for the inexperience and doctrinaire left ideology many feared from this president. It is past due to rectify that mistake.

Favorite current bumper sticker: 2012, End of an Error.