Category Archives: Politics and government

“The only way to be sure of catching a train is to miss the one before it.”  G.K. Chesterton

Throughout my nearly forty years in the lumber business, I have taken on many responsibilities from time to time.  One of the sidebars that intrigued me was my industry’s sometimes shaky marriage with railroads.  Demurrage charges accrue when the local railroad sets a car of freight on our siding to be unloaded, and the receiving yard takes too long to unload the product and release the car back for pickup.  Demurrage fines can be dear, railroads are enthusiastic to assess them, and the owners of lumber companies hold managers accountable for expediting unloading to avoid them.

Western fir plywood is still a frequent rail traveler, although in times past before manufactured engineered wood products came to the fore, Canadian or West Coast Douglas Fir timbers rode the rails and landed in one yard or another every day.  Now like most things, the set and release are done on line, but I remember often calling a bored dispatcher in some remote dingy railroad office to let them know to pick up their empty.  We kept a careful log in a three ring binder tracking car numbers, dates in and out, product and related purchase orders to the mills to document not infrequent disputes over charges — especially during the reign of the late, unlamented federally run Conrail.

“If you board the wrong train, it is no use running along the corridor in the other direction.”  Dietrich Bonhoeffer (Lutheran theologian and member of German Resistance, murdered by the Nazis)

When diesel was cheap in the seventies, many small railroads lost a lot of business to more flexible trucking companies.  In bankruptcy or near bankruptcy, some of the well connected owners of these railroads lobbied the government hard to bail them out, which, of course, it did, nationalizing the operations of poetically nostalgic names like Erie Lackawanna and Lehigh & Hudson River.  $7.65 billion later and losing nearly a million dollars a day, it was privatized by President Reagan and sold to Norfolk Southern and CSX.  Both companies to this day are chugging along with multibillion dollar annual profits.  Shares for both are trading near their all time highs.

The complexities undergirding their success are beyond the scope of a blog post, the obvious point is that private business out performs the bureaucratic, cholesterol clogged arteries of government run enterprises.  Profit, necessary cost efficiencies and the capital magnet of profitable companies drive success.  Self perpetuating bureaucracy, less than accountable cost structures and the ability to either print or borrow unlimited funds drive more Kafkaesque fiefdoms.

As the rollout of Obamacare continues to make bad news, we are reminded of other train wrecks of Federal programs.  We have yet to see the “rest of the story” when the mandate for small businesses is finally allowed to kick in.  The administration illegally breaks off pieces of the unmanageable bill and postpones other parts time and again to time the next disaster until after the election cycle.  But I suppose pain delayed and deferred is better than immediate suffering.

“Neither a wise man nor a brave man lies down on the tracks of history to wait for the train of the future to run him over.”  Dwight D. Eisenhower

What has me worried next is the nationalization of medical records set for October go live, part of the Patient Protection and Affordable Care Act (the irony in the bill’s name is beyond imagination).  The story this week of Target’s insecure records that resulted in somewhere between 70 and 110 million customers gives us pause.  Credit card numbers, PIN authorization codes, names, addresses and even email addresses were hacked.  Presumably Target has the most up to date security for these records available, but…..

Another story this week told of the vulnerability of offsite access to databases through Virtual Private Networks.  In recent weeks we’ve read of NASDAQ and Snapchat being hacked.  None of these companies lack Information Technology sophistication or concern for the privacy of their records.  Target is thought to be an inside job.  As Edward Snowden showed with his million plus record theft of our country’s deepest secrets, all it takes is one person with an agenda and a grudge.

Do we think that every county hospital and doctor’s office with access to a national database will have the security and IT capability of NASDAQ or Target?  The national database of medical records will tell who has AIDS, who has been treated for STDs, who has struggled with depression or bulimia or had an abortion or breast enhancing surgery, which job applicant has an expensive history of drug use or cardiac problems, members social security numbers – all of it will be there.  The intention to make more accessible and easily transferable all of our health records may or may not be benign to our brave new world, but it will undoubtedly leave us vulnerable.

“Concentrated power is not rendered harmless by the good intentions of those who create it.” Milton Friedman (Nobel Memorial Prize winning economist)

This week we are told that the administration finally chose not to renew the contract to the Canadian company, CGI Group, which was hired to oversee key aspects of the egregious healthcare.gov rollout.  Nobody got fired, including the inept Secretary of HHS, Kathleen Sibelius. Hundreds of millions were spent with CGI, who’s Executive Vice President, Tony Townes-Whitley, went to Princeton with Michelle Obama, belonged to the Princeton Black Alumni association with her and donated to the Obama campaign – a fortuitous coincidence no doubt.  Now after one of the most visible IT debacles in history, they don’t get their contract renewed.  No penalties, no claw back, no anything.

The House of Representatives on Friday passed the Health Exchange Security and Transparency Act with all Republicans and 67 Democrats.  The bill would require the health exchanges to notify victims of identity or information theft within the exchanges.  The administration lobbied Democrats hard to vote against it.  The self proclaimed most transparent administration in U.S. history opposes the Security and Transparency bill and threatens to veto it if enough Democrats in the Senate are persuaded by their nervous constituents to join their House colleagues.

As dear Alice wondered after going down the rabbit hole, it gets curiouser and curiouser!

 “This train don’t carry no con men, this train;

This train don’t carry no con men, this train;

This train don’t carry no con men,

No wheeler dealers, here and gone men,

This train don’t carry no con men, this train.”  This Train is Bound For Glory, Woody Guthrie

Eleazer Arnold’s Splendid Mansion

Walking through Lincoln Woods, we emerged onto Great Road in Lincoln, RI.  Looking for a place to warm up, we happened upon Arnold House and took the short tour with a member of the historical society.  It was built in 1693 and originally called by the local residents “Eleazer’s Splendid Mansion” after its first owner and builder, Eleazer Arnold, who farmed the surrounding 140 acres.  His splendid mansion even after additions over the years is insignificant compared to the overwrought and pretentious McMansion of the early twenty first century. Gracefully proportioned lines fit perfectly with a New England landscape.  “Stone-enders” modeled the former homes in western England of the seventeenth century immigrants.  The west end of those houses consists of three feet of four to fourteen inch stones laid tightly and mortared together; the remainder of the structure was wood post and beam framed with wooden pegs and hand forged nails.  Leaded glass windows were small to be more easily defensible from indigenous raiders and to limit winter air leaks around the glass.  Many of the original wide pine boards, the oak carrying beams and three fire scorched stone fireplaces with their stone hearths are still in place.

The massive stone end is coated on the exterior with local white limestone mortar and tapers from bottom to top, providing vents for multiple walk in fireplaces – one on each floor.  The west end orientation in England presented a staunch bulwark to retain heat and defeat the prevailing winds.  In Lincoln, the stone faces to the west as well, paying no heed to the fiercest storms in New England blowing in from the northeast.  Even though the Arnolds had lived in early Rhode Island for over twenty years, apparently common sense and local conditions had little chance against traditional practices.  The Rhode Island stone-ender is a metaphor for the human condition of “this is the way we do it because this is the way it is done.”

“The pessimist complains about the wind; the optimist expects it to change; the realist adjusts the sails.”  William Arthur Ward

Returning back through the New England woods, I was struck by the persistence of this metaphor in many aspects of our culture and especially in government.  The “audacity of hope” is a conspicuous illustration.  In 2008 Barack Obama railed against the dysfunction in Washington that he was going to remedy. Two groups were singled out: “the typical politician playing the same old tired cynical games,” craving reelection fund money and the oft maligned lobbyists who used “money and influence (to) drown out people’s voices.”  Reiterating this catchphrase incessantly, he boasted that his campaign had not taken a dime from lobbyists or Political Action Committees. He would shun special interest donations to his campaign and find his money from “the working men and women who dug into what little savings they had to give five and ten dollars to this cause.  Supporters had an opportunity to rally around, “Not this year.  Not this time!”[1]  Together with Obama, they could build “a nation healed.  A world repaired. And an America that believes again.” Thrilling and “fundamentally changing America” with “hope and change.”

“Hope is a soufflé that doesn’t rise twice.”  Bill Galston, Deputy Assistant on Domestic Policy to President Clinton and Senior Fellow of the Brookings Institute

“He is trying to recapture his innocence, yet all he succeeds in doing is to inoculate the world with his disillusionment.”  Henry Miller

Great Horned Owl taken 12-8 on Angela’s garage
The calm of a waiting predator, watching.

 

I am like a desert owl, like an owl among the ruins.

I lie awake; I have become like a bird alone on a roof.

Psalm 102: 6,7

“When you’re 50 you start thinking about things you haven’t thought about before.”  Eugene O’Neill

Still in our early twenties, we withheld some of our Federal income taxes for 1969, the year we lived in Boulder, to express our displeasure at the conduct of the war in Vietnam.  Woefully naïve on several counts, I wrote a note with our tax return clearing up in excruciating detail why we were doing so.  Martin Luther King and Bobby Kennedy were dead, and the world seemed bleak. Returning to Massachusetts with our infant daughter, we were living temporarily with my parents waiting for a cheap winter rental to open up on Mashnee Island off Cape Cod.

How they found us remains a mystery, but as I was coming home from work one evening driving my hand painted 1956, flathead six Chevy pickup truck, two tired looking gray men in rumpled suits pulled into my father’s driveway driving a dirty gray Ford Crown Vic.  Apparently, they had been waiting for me.  The younger of the two had a black band fedora; the older one had a close cropped fringe of salt and pepper hair with nothing on top.  I had a lot of hair and jeans stained from climbing trees.

The older one in charge, whose name has long receded, gave me his card and explained that they had no issue with our political views, which were our prerogative to hold, nor did they care to debate – very clear there would be no debate.  However, they had come to collect the taxes due plus penalties and interest.  It wasn’t a lot of money, but taxes were taxes after all and not an option.  He rattled off his bullet points unapologetically by rote without a smile or a threat or an alternative.  First they would attach and drain, if necessary, our checking and savings accounts.  If we had no such accounts, they would garnish my wages.  If I lacked a job, they would lien our house.  If we had no house, they would take our truck.  He looked over at the Chevy pointedly.  Which would I prefer?

 And so it goes.

Raushenberg’s “Canyon”

A story in this week’s WSJ reminded me of this incident for some reason.  Lifelong art dealer, Ileana Sonnabend, died in 2007 leaving her considerable collection to her heirs, Nina Sundell and Antonio Homem.  The heirs were forced to sell about $600 million dollars worth of their heritage to pay the $471 million in death taxes due on them.  ($600 million was more than was due, but of course, taxes were owed on the proceeds from selling them – capital gains taxes on the death taxes.)  Of course, there was a catch with one of the pieces: Robert Rauschenberg’s “Canyon”, created in 1959 and appraised at $15 million by the IRS.

The collage legally couldn’t be sold because it contained a stuffed bald eagle; selling it would violate the 1940 Bald and Golden Eagle Protection Act and the 1918 Migratory Bird Treaty.  That Rauschenberg before his death filed a notarized letter in 1988, stating that the eagle had been killed and stuffed by one of Teddy Roosevelt’s Rough Riders long before the 1940 law was in effect, made no difference.  The art work could not be sold; the auction house said it was worth nothing as a sale item.  The family filed an affidavit claiming that due to the inability to sell it, there was no value, and therefore no taxes were due on the inheritance for it.  Aha, responded the IRS, since there was a “gross understatement” of its value by the owners, the IRS value had now been upped to $65 million, so the tax bill was $29.2 million plus $11.7 million in penalties for understating its value.   Plus interest.

After five years of expensive legal wrangling, the painting, which had been on permanent loan for display by the owner at the Metropolitan Museum, was donated to the Museum of Modern Art, also in New York.  The painting had been exempt from Wildlife Service penalties as long as it was on loan to the museum, so now it passed with the same waiver to the MOMA.

And so it goes.

The hang up on avoiding the fiscal cliff is the tax rate on the top 3% of earners, not the tax dollars paid, but the tax rate.  While President Obama has proven to be a poor to middling CEO in his role at governance, he is a near genius at politicking, perhaps learned through political infighting during his bureaucratic years as a community organizer.  The tax rate increase he has drawn as a line in the sand has little to do with revenue – the dollars that would be collected are a little spot of yellow in a great snow drift.  The tax rate increase has everything to do with driving a wedge and causing as much consternation as possible amongst his political enemies.

Bear with just a few numbers.  In 1958, the top 3% of earners paid marginal rates as high as 91%, a progressive erotic dream, but almost no one paid those rates because of the pages of loopholes and deductions available.  The total income of the top earners was 14.7% of all income earned, and they paid 29.2% of all federal income taxes.  Many of the loopholes have been closed or capped already, and in 2010 the elite 3% earned 27.2% of all income; their percent of all taxes paid rose to 51%.  Middle and lower income earners (the bottom two thirds) earned 41.3% of all income and paid 29% of all taxes in 1958.  In 2010, their share of earned income had fallen to 22.5%, but their share of taxes paid plummeted to 6.7% of all taxes.

So, indeed, the rich have gotten richer, and their relative tax burden reflects that proportionately, but almost 50% of the rest of us pay no federal income taxes whatsoever.   The compulsion of the progressive liberal is not about “fairness”, it is about redistribution, punitive measures against the successful and ideology.  But even more so, it is about casting chaos into the opposition and twisting the knife.

And so it goes.

“They’re trying to kill me,” Yossarian told him calmly

“No one’s trying to kill you,” Clevinger cried.

“Then why are they shooting at me?” Yossarian asked.

“They’re shooting at everyone,” Clevinger answered.  “They’re trying to kill everyone.”

“And what difference does that make?”

“That’s some catch, that catch-22,” he observed.

“It’s the best there is,” Doc Daneeka agreed.

Catch 22, Joseph Heller

A story is told about Winston Churchill that may or may not be apocryphal, however the significance for us is timeless.  After the war was over and Sir Winston unceremoniously voted out when his indomitable gift of leadership and candor became politically inconvenient, he was invited to speak at a gathering at Cambridge University.  He sat through the formal dinner with his bulldog visage unreadable, silently contemplating the tribute that dominated one wall, memorializing the long list of Cambridge alumni and students who laid down their lives to protect their country from being brutally incorporated into the Third Reich.  The dean finally concluded his endless extravagant introduction lauding Churchill, and how his soaring rhetoric saved the British Isles.  An expectant hush settled on the listeners, awaiting inspirational brilliance.  Sir Winston stood wearily and looked out over hundreds of fresh young faces, survivors whose brethren would never return.  Glancing once again over to the wall, he spoke, “Never give up, never give up, never give up.”  Churchill settled back into his chair.

The usually laconic, if not truly morose, Senate Minority Leader, Mitch McConnell, burst out laughing when Treasury Secretary Timothy Geithner proffered the Obama administration’s “compromise” solution to avoid jumping over the “fiscal cliff” on January first.  Without a scrap of compromise or one inkling to slow down spending, its raison d’etre was taxes, taxes and then, again, more taxes, and even those barely cover a couple of weeks of Federal expenditure. Not a serious proposal, only more political posturing and dialectic of class struggle. To add to the comic relief, the proposal suggested that Congress should abdicate its responsibility to approve debt ceiling increases.  “Leave it to us and avoid the unseemly bickering,” suggested the Executive Branch.  Perhaps that is the rub that incited McConnell’s rarely seen mirth.

The administration kicked off the reign of the 44^th president with an unprecedented level of unstimulating stimulus spending at the staggering level of $800 billion larded on in 2009.  The unprecedented soon became business as usual with spending levels sticking at the newly established benchmark, resulting in undreamed of deficits, over $1,000,000,000,000 (one trillion) a year.  This deficit and the negotiations to raise the debt ceiling resulted in the beggar’s choice deal that dug the chasm looming ahead and deemed by a gleeful media as a “fiscal cliff”.  $16 trillion in debt (and counting), and the compromise solution only addressed asking more from the taxpayers with the rhetoric about fairness and redistribution.  Not a syllable about specific proposals to curtail diarrhea profligacy.

One provision, raising the estate taxes on the “wealthy” from 35% to 55%, would result in the breakup of long held family ranches and farms.  Ranches and farms are by definition illiquid, with their “wealth” consisting of hundreds or even thousands of acres of agricultural land – land owned for generations.  Every nickel of the income derived from these businesses and the income of their owners has already been taxed, every acre taxed each year with property taxes.  Yet when the principle owner lacks the good sense to stay alive, the heirs are subject to the “death tax”.  Their only option is either taking on insupportable debt or selling off some land to pay the taxman.  Estate taxes are deeply rooted in progressive egalitarianism and antipathy to any attempt to pass along the hard earned net worth of the successful to their heirs.  Not just the oft cited Paris Hilton or Kim Kardashian excesses, but privately held farms, ranches and businesses are to be crushed with burdensome taxes at the passing of the owner.

Perhaps the least understood and therefore mostly avoided debt discussion is not the fiscal deficit that shows on the Federal balance sheet.  The debt that is held “off the books” is far worse.  Like Enron, which sealed its own ruin by concocting sophisticated accounting to hide liabilities, the Federal debt that isn’t declared on the balance sheet is shocking to comprehend.  Think icebergs.

The promises made to those who have paid into the system their whole working lives are not stipulated in Federal deficit reports.  The mostly unfunded liabilities of Social Security, Medicare and federal employees’ future retirement benefits already are over $86.8 trillion, 550% of Gross DP.  Much has been made of our stated deficit of $16 trillion crossing the line of 100% of GDP. Quick addition of both the stated and unstated deficits is $102 trillion or about $310,000 for every man, woman, child and transgendered person in the country.  You only thought you had worked all your life to pay off your mortgage and credit cards.  Think again.

Secretary Geithner stated unequivocally that Social Security is not on the table in any debt discussion under any circumstances.  Why?  My cousin, David, is an unrepentant Connecticut/Manhattan progressive, yet somehow remains very intelligent and a good guy.  I have full confidence that he and I could sit down with a halfway competent accountant and come to an agreement to fix Social Security funding for the foreseeable future over a couple of beers.  Eliminate the cap (satisfies taxing the rich), stop the ridiculous pandering of cutting the Social Security contributions of all of us employees, gradually continue to raise the retirement age to reflect the increased longevity of our citizens, and we’re just about done.  How about another beer?  Why can’t our elected officials do the same?

 Nearly 49% of the voting population chose Door “B” to common sense and responsibility.  We lost, but cannot surrender.  Never give up, never give up, and never give up.  For the sustainability of this noble Great Experiment of ours.  To remain true to our ideals and consciences.  For our children and grandchildren.  Sing, but keep going.

“Let us sing alleluia here on earth, while we still live in anxiety….So, then, brothers (and sisters), let us sing now, not in order to enjoy a life of leisure, but in order to lighten our labors.  You should sing as wayfarers do – sing but continue your journey… Sing, but keep going.”  St. Augustine