A letter to a church about RISK

 This is part of a letter we are getting ready to send to our church congregation.  I'm posting it so you can see the tie between the business of church and spirituality. I thought I would let you  in on the logic used to expand ministry..

Do you know when elite, wealthy entrepreneurs make most of their money? It’s during Recessions. They purchase broken businesses and fix them, buy on the cheap, or start a new venture, hang on, and see it come to fruit when things return to normal. Thus they are one-up on the market and development. FLCS is somewhat like a business.  Income and expenses fluctuate, sometimes like a roller coaster. Yet we know God’s kingdom grows most during tough times—the first 3 centuries, China’s last 70 years. Is this counter-intuitive? No, Christians hold forth the gospel message when the world loses hope.

            God calls us to risk for our faith, not build a fur-lined nest. People often save for retirement thinking they’ll siphon off a bit of interest to make golden years golden.  But businessmen don’t think about savings this way.  They save to have a backstop.  If I try something risky and it blows up in my face or starts too slowly, then there is a savings backstop. Jesus’ final parable was the Parable of the Talents.  3 slaves each received an allotment of talents of gold.  Two of them doubled their money, but one got scared and buried his talent gaining nothing. The master took that slave’s talent away and gave it to the guy with the most. So too must our faith be exercised and shared or it withers.  A church must  find fresh ways of sharing the faith, or it is on its way to death and having its doors closed.

            There’s no way around risk.  But we have the ultimate backstop.  Jesus death and resurrection forgives us, and His relationship lasts forever. Wa Hoo! FLCS, like a business, possesses true faith and a monetary backstop for recession, inflation, and rejections of Christianity. Tough times coming? It is time to find bold new ways to give the world hope. But what would that mission be?

            We’ve appointed a team of 10 people to study this, who have especially followed the clue that we have a young, energetic, Master of Arts, Theology Deaconess in our midst. They’ve seen how a deaconess could play a significant part in this.  What would a bold venture be?  Perhaps it would be an initiative to expand our scholarships and greatly increase the size of our school, thereby teaching our faith.  Perhaps it would be a ministry to young moms and parents of the 71 family units who send kids to our school but have no church home.  Or would it be to serve assisted living and nursing care in a substantially greater way? Or what?

            Here’s where we need your input.  Enclosed is a quick congregational survey.  The last line asks you to dream about new outreaches and ministries. Please take time to think carefully and fill this out. You’ll find a return box for surveys in the narthex. Results will be shared with Pastor, elders, and our mission study team.

Productivity produces wealth

 

If one studies conquests and the clash of civilizations it has been popular to label the conquerors as exploiters.  Their morals are condemned and their causes explained to show why (corruption and exploitation) one society is rich and another poor.  But despite the popularity of these exploitation theories, in the actual historical record they are rare.  Usually the mundane reality is that productivity produces wealth. 

            Exploitation theories have condemned European imperialism and colonialism.  But when the Europeans left Africa, instead of the continent becoming richer, the nations there saw national incomes and living standards fall significantly. The same was true when Romans left Britain and when every Chinese dynasty fell.  The overlords brought labor skills and abilities that the natives lacked.   Conversely, slavery, the ultimate exploitation, has never made slave-owning regions more prosperous. This was true comparing the antebellum North with the South in USA.  Northern Brazil with lots of slaves, was poorer than southern Brazil, populated with free Italian, German, and Japanese immigrants. So why do people choose to believe such bunk? Anger is the motivator. The true answer is that there are often great differences in productivity and wealth. It’s easy for the loser or their sympathizer to blame poverty on someone else’s malfeasance. But envy of someone rich is precisely what the last 2 of the 10 Commandments warn Christians against.

            Changes of productivity of the conquered can often be traced to transfers of cultural capital.  The English had laws, banking and improved agriculture that they transferred to the Scots. Henceforth,18^th century Scots had an explosion of prosperity. Western Europeans brought the industrial age to Eastern Europe.  China transferred a great deal to Japan and Korea. The Cowboys married the Oklahoma Indians and today we see Oklahoma rising from a poor state into the middle. Human capital, as it is transferred is often a boon to the lesser developed party, whether they be conquerors like the barbarians who invaded Rome (or the Hebrews who invaded Canaan) or conversely, Germans who brought industry to Brazil and transformed Argentina into an agricultural breadbasket. The Italians have been winemakers from California to Australia, transforming dry pastureland into wealth-giving vineyards.  The dominance of overseas Chinese who pick up ideas and teach production is stunning.  In 1994 the 36 million overseas Chinese had a higher GDP than all of Communist China.

            Perhaps no country has had more success in spreading productivity and culture than USA.  It derives wealth from a free market of goods and ideas of many immigrants. Its notion of Liberty and republican democracy has spread to nearly 70 countries in 200 years. Evidently free men work harder and smarter. John Locke, father of modern psychology, derived six principles from the Bible that he insisted people would thrive under—Liberty, Equality, Tolerance, Natural Law, Separation of Powers, and Rights—especially property rights.  Dinesh D’Sousa is an author and film maker. When he was an Indian exchange student at Dartmouth, said that people would come up to him and say, “Oh, you’re from India. I love India!” And he would say, “What part do you love? That the electricity works only 3 days a week—you just don’t know which days?  Or is it the constant riots between Muslims and Hindus that claim thousands of lives?  Wife burnings? Or is it 400 languages where no one can understand his neighbors unless they use English?”  Dinesh said he never asked if they admired the malnutrition. His dream of coming to America started by watching a socialist propaganda film in India in grade school where the narrator said that USA was a horrid country.  There were lots of food lines.  Indeed the film showed some poor Americans standing in line getting food. Another kid next to Dinesh gave him the elbow and whispered, “They are all FAT! I want to go to a country where even the poor people are FAT.” And so D’Sousa came to America, studied economics and began to understand that a system based on Christian liberty principles is superior.  This then led to the Christian faith and a spiritual walk that he claims has transformed his life. Truly the Holy Spirit will set up circumstances in your life, uniquely aimed at your heart, to bring God’s faith!

Hippies and lockdowns

 

1980.The guy who had been my major professor on my Phd. in theoretical physics called me.  There was a new thing going around campus called Political Correctness.  He and I were like minds.  He an Alabama nerd and a whizz at numbers, and I a ranch kid who wanted to know how everything in the universe worked. But it seemed, he speculated, that every lazy hippie had become a sociology or psychology prof and they were the movers of the PC thing.  So what does PC mean?  Well, he said, it means you can’t ask certain questions.  Preposterous! I objected.  Whatever happened to Academic Freedom.  No, if it affects their views, you can’t ask, he insisted and they have a view of science that certain assumptions cannot be challenged.  This is crazy, I said.  You mean if that work I did with Brown and Bark (2 climatologists) on climate cycles offends them, you can’t ask?  Yes, exactly. 

            Little did I know I was speaking literal truth.  I scoffed at PC.  It would never succeed against scientific inquiry.  But it did!  Those who advocate climate cycles are shut out of grants and government programs.  They are in the same malaise as Einstein was when he tried to challenge Newtonian mechanics or any doctor from the 18^th century that challenged bleeding the patient.  They were outcasts for an era.

            When my colleague talked about hippies, everyone in the 80s knew how that was.  The “greatest generation” fought WW II, came home with many issues of war they just wanted to forget and not talk about.  They left suburban homes to work long days in the city and left the wife to raise the kids.  The boys suffered most—hippies who had a poor role model of dad.  They dressed in outlandish styles like women, grew long hair, took no responsibility, and when war came said “Hell no, I won’t go”—as much out of cowardice as conscience.  The rich ones got away with it, collected degrees at college and became professors. That was part of my Baby Boom Generation. Now my same generation is chewing on their tails like the lion in Wizard of Oz because of COVID19.  We must shut down!  We must trust government! Some states in USA have been under various shades of lockdown for 10 months.  Is it working?  Well, it flattened the curve of cases for the initial 4-week trial.  Then they upped the ante to lock down until the pandemic was over.  It didn’t work but that’s okay because it feels good to do something. 

            Especially the politicians.  Their normal mode of operation is to take Stands.  They stand for the end of racism or free speech or a border wall.  Just don’t ask them to actually do anything.  If they ever solved a matter, that would rob them of a Stance.  Now comes much research and “The Great Barringtron Declaration” that illustrates the lockdowns are not working. “Current lockdown policies are producing devastating effects on short and long-term public health.”  Precisely what they meant to protect.  It has doubled 48,000 suicides per year, increased cancers 30% because of non-screening (150,000 deaths) and increased drug and alcohol use by unknown amounts. Are we fools or what?

            Meanwhile the schoolkids and the 20-somethings are having their lives crushed.  Fauci and Azar and the CDC and the VA are all saying they never meant to imply that business should be closed down outdoors.  Pols didn’t listen.  Masks aren’t very effective except to stop the worst of spray spittle.  Pols didn’t listen.  Nobody can truly define a non-essential worker.  Pols didn’t listen.  All of it playing to the hand-wringers over 65.  But count me among the ranch kids.  Nothing you do, including simply riding a horse comes risk-free.  And when my kids and grandkids are having their future ruined to sauve senior fears, my blood boils.  The hippies want to silence Christianity which they rejected, Institutions and traditions, statues of Lincoln—tore them all down. Now we’ll have perhaps an octogenarian leader and lockdowns.  Don’t blame me if I cheer the revolution of entrepreneurs and workers who lost their dreams. Hippies had it coming.

Oct 1 1949

 

Oct. 1, 1949 was one of the most monumental days in history but nobody notices. Just one week before, President Truman announced “We have evidence that within recent weeks an atomic explosion occurred in the USSR.”So how did they get the secrets of atomic bomb?  Ask the Rosenburgs. Or maybe ask the 1527 communists who had infiltrated the federal government.  Our cryptologist women of the Venona Project would later discover 406 of them as Soviet operatives.  (McCarthy’s estimate of 51 was far too low.)  The opening of the Soviet Union’s KGB files provided the rest of the names.  On Oct. 14, 11 communist leaders were found by federal court to have conspired to overthrow of USA. Lesson: This is what happens when you aren’t guarded about communist and fascist fanatics.  Nations such as China can destroy us. So can clever  socialist rioters in cahoots with sympathetic government officials.

Oct. 1 began a nation-wide steel strike that didn’t end until Nov. 11.  No wages agreed to but the union managed to get a massive increase in pensions, thus setting the stage for future contract agreements by unions.  Hence, part of the financial disasters in many manufacturers we have seen recently played out. They were due to the fact that current management kicked the can down the road, letting their company become pension providers in such extremum that they could no longer remain solvent in some future date.  Lesson: the same can be true of a country which promises more than it can deliver. On Oct. 26, 1949, the Minimum Wage Act was voted into perpetual continuance raising from 40 cents per hour to 75.

Sept. 7- Oct. 1 most of the Pacific Islands were transferred from military control to the US Interior Dept. as Territories. The month before Congress passed a program to encourage Alaska development and future statehood. USA was never colonial-minded and already plans were being made for these tiny populations to choose whether to remain territories or commonwealths or some other arrangement. Lesson: a wise move. By January we would be involved in arguments about protection of Taiwan-Formosa. Truman didn’t want it; R’s did. A colleague who was born there and immigrated declared that the R’s made a helluva wise move.

Finally, a couple days later, Congress appropriated funds for reforestation and revegetation of national forests and range lands—some argue, the first true environmental legislation.

Free Trade?

Has trade ever been free?  I’m serious.  I farmed the first 26 years of my life and read extensively about Ag tariffs.  Seems that Europeans and Japanese (whose farmers aren’t efficient as Americans—no big tractors and large farms—have a lot of people still on the land, hence many voters) get squeamish about lowering Ag tariffs while we beg for it.  In the end, we charge no taxes and they continued to load taxes on.  That ain’t fair!  Taxes on autos are 2.5% incoming into USA.  They are about 25% on average on US cars going to foreign ports. Trump knows this chicanery well and embedded in his tax on aluminum and steel was the proviso that if any other country would simply adjust tariffs down to equal US (level the playing field) they’d be exempt on exporting to us.  Or bring your plants to this country.  Or lower your trade surplus. Exemptions can be had in a variety of ways.

            But here’s the reality.  The Economist, a European mag, has been seething with Trump-hate long before he was elected.  Why?  Many in this country were pointing out that he is more of a moderate than an arch-conservative. Wuropeans should love this!  But they hated him passionately because he spoke about the trade deficit and unfair trade that he vowed to change.  Scared them spitless.  Importing into Uncle Suckerville with no taxes while protecting your own products in Lower Slobovia is the heart of their game. 

            So will Trump create a trade war and sink our economy?  Not likely since trading partners can still get an exemption by simply playing fair. Mexico and Canada may get exemption simply by making some other adjustments.  But don’t trade wars hurt us?  Time for a personal story.  When I went to college in the 60s, you could ask econ profs what caused the Great Depression.  Why did 12 pitiful years happen here but recession was soon over in Europe/Orient.  You couldn’t get a similar answer from any two profs.  That, for a 19-yr-old, was a red flag that adults didn’t know Jack.  But beginning with the Monetarist School of Economics in the 80s, it was proven that the G.D. largely happened because a normal recession was turned into a long-term depression when USA killed off international trade.  Congress passed the Hawley-Smoot tariff that rocketed tariffs from 17% to 68%.  Fast forward to the 1990s when I was teaching elderhostels for OU.  We had a class on the 20s and 30s.  One day I noted the recent proofs that FDR’s tariff caused, not alleviated, the Depression. The class of 70 and 80-aged people, many of whom thought FDR was God, couldn’t believe it!  Even when I invited a guest lecturer from OSU to talk about the evidence, they refused to believe. 

            The short answer: If we quadruple or even double tariffs on All Goods, we risk economic troubles.  But simply demanding fair trade is a much smaller game. And consider, what if Trump wins? Then USA will come out a big winner.  Those R’s who steadfastly defend Free Trade must be reading a different financial report than the ones Trump and I do.  Or they are just standing up for a theoretical free trade while having approved many trade deals which are anything but. They mean to change nothing.  Since I’ve come to appreciate just how entrenched the Swamp is, I suspect this later.

Getting around government

I’m from that old school of keeping your nose clean and “subject yourselves to the ruling authorities” as St. Paul said. But pols put idiot laws in place and bureaucrats just do it.  As that old oil-finder Rufus LeBlanc used to say, “You gotta be smarter than what you messin’ with.”  Here are some tricks to get around government in the housing business.

            Light bulbs.  Feds outlawed incandescent bulbs.  So I bought about 400 bulbs in 2012.  Now I have used up all but the 100Ws so I have to go to Texas.  Texas has an exception for light bulb  who make bulbs in Texas can sell in Texas.  (not interstate commerce)  Go to Walmart in Gainesville and fill your trunk.  Why do landlords want incandescents? Renters take all the bulbs when they leave costing $30-50 every time a renter turns over.  But 22 cent incandescents = a couple bucks.  So my gamble to a three year supply, by which time I figured the price of CFL’s would decrease or another bulb would come along.  After all, people with migraines and other disorders can’t function with fluorescents.  (Does that make you want to go to Washington and kick some lawyer/legislator in the shins?)

            Sure enough, MIT is working on a new incandescent that saves 3.5 times the energy.  Will be on the market in 3 years.

            Roofs.  Some smarty pants decided to make a new code that says that composition shingle roofs can have no more than 2 layers and that the substrate must be continuous wood.  In the prior millennium it was always thought that wood shingles were a good substrate and the more layers of shingles added, the more waterproof.  Think of the consequences of this new code.  It means that an old roof must be stripped of shingles, new decking put on, and then a new roof, all done in a couple days before it rains.  Means a large roofing crew. And of course everything must be inspected.  The old days of hiring a wine-o for 20 bucks a square (100s.f.) is over.  It now costs about  $150 per square and the big crew guys have no competiton.  Roofing has become a “licensed and bonded skilled trade”.  Roofing guys drive around in $80,000 pickups.  And the roof is no better than it ever was. 

            Get around this by over-roofing with steel, which is still legal.  It was once twice as expensive as comp but is now about the same price.  Lasts 40 years. Pisses the code inspectors and other roofers off because they can’t legally stop you.  But your insurance will be a bit higher.  If you have a house fire, it is harder for firemen to chop through steel and blast water in an attic. 

            Motor Oil.  It is illegal to dump motor oil but not to treat railroad ties.  I got around the problem of renters who left me with undisposed oil by lining driveways with railroad ties and encouraging them to paint it on the ties when they finish a change.  Preserves my ties and landscaping.  Now if we could just figure out what to do about all those old tires they leave.  It costs $5 fee to take a tire to the dump.  It used to be $2 but then Kansas didn’t want all the old tires and they raised their fee to $5.  It worked for awhile as everyone brought their tires to OK.  So we had to raise the fee in retaliation.  Oh wait! I have a solution.  Collect old tires until the city has free dump week and then haul them off for No Fee. 

            Don’t Paint.  The EPA suddenly noticed that an Act from the 1970s allowed them to demand everyone have a license to paint.  Any property that is not your domicile must be painted by a licensed Lead Paint expert.  Any transgression will cost you a draconian $3250 per day.  It cost me $650 to get a lead license.  If I find lead, I must drape the entire building and use a white suit and proper disposal techniques. If only six square feet of surface is disturbed by any sort of repair (think of a HVAC guy putting in a return air duct) any paint and patch must be done by a guy like me.  So basically every old home in USA is now defined as a toxic waste dump.  In large cities, competitors make a game of turning each other in to the EPA. This law is so unpopular now, even among painters, that Obama’s EPA flying monkeys are turning it over to the states. (Funny.  Someone must have noticed that old 1970s law had this provision too.)

            But rather than drape a house with tarps, I just put on siding.  You can cover a surface and it is deemed undisturbed.  Likewise you can add a 3/8 inch layer of sheetrock to interiors and cover old walls too lead-y to simply paint.  Other than that, catch me if you can.

            Government is like a business that has never been re-organized.  I long for a President who will first order a thorough investigation into the EPA, re-organize and then hand out pink slips for everyone who has been part of these fiats.  Or give them new jobs or guarding the border in remote Sonora/Arizona.

Making Money

  Man, I’ve made money since Obama got elected!  Hope you Dems have too. A lot of investors think the bottom is dropping out when a Democrat gets elected Prez, so they ease out of the markets.  Then they plunge in when a Republican wins.  They should do the opposite.  It’s never as bad as they think after a Democrat wins or as good as when an R does. Normally markets are independent of politics unless politics specifically target them.

37 recessions in US history and then always comes a recovery.  Recessions always last less than two years, so when Obama took office we were very due for recovery.  Sure enough, in July 2009 it began.  I was worried about inflation under Obama—due to the spending increases and debt-- and my son and I had a lot of discussion.  He said, No, Obamacare is putting a mandate on employers to buy healthcare for employees or pay a $2000 fine. Costs will increase. That will make them think twice about hiring more.  This may be a rare jobless recovery. Sure enough, I invested heavily in stocks and they recovered smartly but not jobs and ordinary folks suffered. 

It was like the government and Fed went crazy trying to stimulate.  When the Fed lowered rates to zero, they couldn’t go lower.  So they started buying bonds with the QE programs.  The money put into big banks hands went into stocks and Wall Street skyrocketed.  I just rode and rode and rode. What a hoot!  A Dem who hands gifts to Wall Street and Mega Bankers, then screws the little guys.

After a recession, the bubble corrects—housing this time.  But Obama started threatening the small town lenders that he would shut them down if their books showed any bad loans.  Result was that banks didn’t foreclose and instead of housing doing a correction in a year or two, it went on 6 years and nobody could get a loan, so if you had cash, you could buy houses on the cheap.  I really loaded up.

Add this all up and the future doesn’t look so great with a Republican likely to win.  Small banks are the economic stimulators and they’ve been damaged.  95 million adults with no jobs. Obamacare mandates and EPA  regulations killing several industries. Doubled government debt that will weigh down future administrations.  The dollar might to be replaced as currency standard and that will mean everybody will pay more in interest and exports will go down.  Russia and China and Iran probably disrupting international commerce—and we got precious little military to challenge them.  You think maybe a smart guy like Joe Kennedy should get out? I suppose all you Dems are rich because your guy was in. What do you smarties think?  

Trumpcare and Trumponomics

For a better analysis than I can write on Trump’s replacement for Obamacare, see Matthew Herper on Forbes.com. His conclusion: Trumpcare is more like a Dem program of vastly expanded central power than Obamacare is at present.

Concerning tax reform, it looks like the Donald is in collusion with the Chamber.  Some of his ideas like lowering corporate tax rate to 15% is welcome and long overdue.  We lose businesses to inversion by having the highest corporate taxes in the world.  He wants to get rid of the Death Tax.  Kudos there.  This is a tax that collects practically no revenue because the rate is so heinous and everybody has a trust.  Good riddance. 

But then Uncle Donald wants to reduce the number of brackets to 4 from 7.  Big whoop.  And by reducing the max from 39.6% to 25%, you know what he will have to do to remain revenue neutral is tax the bejabbers out of the upper middle class.  Then too he promises to take a majority of Americans off of income taxes altogether.  I get nervous at such talk.  This is a Peronist dream.  When a majority of people who pay no tax, show up on election day to dictate what the taxpayers are going to pay for their benefits, this becomes the politics of Argentina.  What I’d like to see is everyone paying tax.  Pay 5 bucks if you can’t afford anything.  Then you will have some skin in the game and can hold your head high, “I pay my taxes just like Trump!”  Both parties have been trying to outbid each other with this tax populism and few realize what disastrous ends result.

The reason few people start small businesses these days, is the tax and regulation burden.  This is no big deal for a major corporation with a room full of accountants.  But for a guy making $10,000 a year, working out of his pickup truck, filing a half-inch thick business and personal tax filing is One Big Deal.  Will reducing the number of brackets lift 20 pages of depreciation schedules from the forms? Will it reduce the 10 pages of forms justifying income streams?  Will it take Congress out of the loophole writing business? Would the IRS not be able to deny tax-free status to conservative groups any longer?  Nope, nope, nope, nope.

Cap Gains goes down to 20% from 24.  Big woop.  Here’s the dirty little secret about cap gains.  Only 14% of long term ownership taxes collected are from stocks traded on Wall Street.  The far larger collection of revenue is from sale of assets like a farmer selling a piece of land or a small business guy selling his shop and tools.  One year in his life, he cashes in and makes good money and that’s the year that IRS takes him to the cleaners with 39% tax rates on “recovered basis” and 24% cap gains on any amount larger than he paid.  Why get into business when Big Government takes most of it in the end?

So in sum, Trump’s tax reform is just rejiggered rates that advantages fat cats and big corporations, but does little to spur entrepreneurism.  The far better program is Rubio’s which eliminates cap gains and allows expensing of equipment.  Ditto Chris Cristie’s proposal which is like this.  Better by far would be a fair tax as espoused by Huck and Carly and possibly Cruz.   

Yet another reason there are no jobs

            The Patriots, whom I dislike, and the Cardinals, who I am a fan of, have both been hit with recent scandals.  The fans of other teams love to loath the rivals and all the talk on sports radio about how people want to see the team with the trouble “get nailed” is almost astonishingly obtuse by my perspective.  In each case, the investigating authorities have announced that chief suspects are underlings and that management had little idea it was happening. 

            May I point out that this is every business-owner’s nightmare.  That wino you hired as a dishwasher might pinch some woman’s butt in the elevator and she sues you for $50 million.  Your entire business can go bankrupt, simply due to a crazy minimum wage person you hired.  Thus, I predict that fast food will increasingly be automated as fewer and fewer workers start making $15 an hour.  A machine doesn’t have the liability of a rogue employee. Our society is increasingly ordained and ordered by lawyers who defend the lower class workers most susceptible to bad behavior while suing businesses because they aren’t perfect.  And you  wonder why all those people you saw on TV in Baltimore are out of work? 

            Yet to date, I have never heard a pundit on the tellie tell this story.  Business is ultra cautious about who they hire and what they instruct.  Nonetheless, some flunkie is going to try to hack the Astros and then you will lose a dozen draft picks and get fined a couple million.  The entire sport, not just your team will lose repute.

            And it’s not that these are just a few odd happenings.  The general public goes around like a loaded gun looking for litigious events.  The first thing you need to learn to survive in business is to take an interest in customers so that they go away happy or at least proud of themselves that they raised a stink.  Remember, that $29 million hot-coffee spill McDonalds had to pay started because the local manager thought that $488 in doctor bills was excessive and wouldn’t pay for it.  Pay the 488 and send flowers and check on her well-being for two weeks thereafter, dummy!  The public is ready to shake you down. 

            Meanwhile workers are separating into two groups, the haves who get education, skills,  morals and jobs.  The have-nots who are not held to standards for responsibility.  There’s a government program trying to serve everyone who can blame their misbehavior and lack of skills on some sort of victimhood.   

            We ate dinner the other night at a Chinese buffet.  I looked up midway through my won ton and saw a guy come to the cashier and he began hollering about how his food wasn’t done and he was not going to pay for it.  Cashier was the boss who couldn’t come up with words and let this guy stalk off in a huff.  I resisted the urge to follow the lard ass customer and ask whether it was his second or third plate where he noticed the food was unfit.  And didn’t he voluntarily take it off a buffet line?  You took it.  Can’t you just quietly push it aside?  Instead I handed the boss a twenty for our meal and told him to keep the small excess.  “You’ll need it to defray the cost of that Hottentot who refused to pay.  We used to run a restaurant and know what you are going through.”  Suddenly he brightened, going from whipped puppy to businessman again and thanked me for coming to his place. 

            But here’s my point.  This is one more nail in the coffin of entrepreneurship.  Regulate everything to death, demand Obamacare mandates, then play lawsuit roulette, and pretty soon you get an economy that cannot recover from a recession, growing at one and a half percent a year, like Portugal.  Are we proud of ourselves, Americans, for 93 million people who aren’t working?  For negative wage growth since the recession ended? More business closings in 2011-14 than openings—first time that has ever happened in our 408-yr. history?  I dunno.  You still wanna play the game?

Obamacare's impending disaster

I was visiting with a friend and fellow small businessman.  We are both 64 and male.  He said his health insurance had risen from $4000 a year to $11,000, from 2009 to 2014.  Those numbers are similar to mine. Our insurers are both mutuals—essentially non-profit insurance companies. “How can this be!” my Obama-supporting friends will protest. 

            Here’s how.  First Obamacare demands that many more things be covered than used to characterize a policy group for my friend.  He’s covered for pregnancy and birth control now.  He’s also gotten a little older. But the big reason for his costs is that he now gets lumped together with all the people who were poorly insurable, the dope smokers with pierced eyebrows, the rodeo cowboys and others who take health risks, the extremely obese who refuse to diet.  Entrepreneurs like him don’t smoke or have a lot of vices.  Starting your own business is harrowing and difficult with little room for doing stupid stuff.  If you want to start a business from scratch, you must first save up some scratch, usually 30 or 40% of your start-up costs.  Discipline.  And insurers know that a small businessman is no hypochondriac.  He laughs about how he had hernia surgery and the day the doc released him from the hospital, he was back working.  Better “moving slow” than no sales at all.  So, his $7000 “tax” (as the Supreme Court called the mandate) is now supporting the poorly insurable and approximately 1 million new people who have health care (8 million announced by Obamacare consist of 6.1M who were forced off their old policies and .9M who signed up but never paid their premiums).

            Armchair theorists were telling us last winter how people who now had insurance would feel free to start their own businesses.  Sorry. Entrepreneurship works the other way around.

            But next year we both go on Medicare.  Enjoy Medicare while you can.  The seniors have all screamed about loss of Medicare.  Neither party nor any federal official will ever take Medicare away.  But here’s what is happening.  As a single payer system, the single payer just refuses to pay as much as it used to.  Within ten years, Medicare payments will be about half what they are today—already down 30% from 2005.  So Medicare will become like Medicaid in some sense.  The situation won’t pay for a doc or hospital to take the patients.  What then? They will check to see if you have a handsome supplemental. (Another $4000 or $11,000 policy)  By the Hippocratic Oath, docs aren’t supposed to discriminate on the basis of ability to pay, but there are other methods to determine if a patient can be a client or have a procedure. (1 in 50 doctors now take Medicaid)  The docs will continue to shut down practices, either to “retire” or join large clinics and hospitals. You’ll probably see a Physician’s Assistant if you are on Medicare.   

            The other shoe hasn’t dropped.  That’s when employer mandates will be enforced.  Heritage Foundation estimates 60-90M people will lose their employer subsidized insurance.  Yikes! There are only 145M full and part-time workers.  That’s roughly half of everybody.  So all those people will soon be trying to navigate Healthcare.gov, and paying $11K like my friend.

            Now just think about where all this takes us.  We have gone through all this hope and change so far to add just another million folks.  It is costing the average self-insured person 44% more.  This disaster will soon spread to about half the working population.  Our economy is sunk when everyone gets their bill.  Of the 1600 healthcare insurance companies in 2009, we are now down to about 400 and falling. 

            Is there any reason not to vote conservative Republicans into office to fix this mess?    

Income and employment statistics

I love statistics. Not only do they tell a story but often they help you perceive BS when you hear it simply by doing a small calculation in your head.  Here’s a few statistics I gathered this last year concerning this income inequality discussion and a few more on employment.

            Median family income for 2013 was $51,404.  Ponca City compares with $49,566.  That’s about $2K higher than median household income and is over double the per capita income. So you have to watch out what is quoted. What do different taxpayers pay?  Here’s a table.

                        Make    % of all taxes    %of their income

Bottom 20%      <15k span="" style="mso-tab-count: 2;">                0.3%                 1%

Middle Quintile   31-58K              9.4%                 11.1%

Top Quintile       >77K               67.9%               23.2%

Top 5%             >145K               59.7%               23.6%

Top 1%             >371K               38.9%               28.9%

And so we see that the rich don’t pay less, they pay the largest % of their own income and a giant amount of all income taxes.  This table doesn’t count payroll taxes and the income amounts refer to “taxable income”, i.e. after deductions and exemptions, not AGI.  Now this table may not square with stuff you have read about how 47% don’t pay taxes.  That figure refers to Net taxes. They receive tax benefits like earned income credit or welfare funds that move their net to below zero. And please note that even among the bottom 20%, they pay income taxes.  There are individuals who are farmers and small businessmen who can’t get earned income credits or any welfare during a bad business year. 

            So what class of people makes the most?   My vote goes to federal workers. They make an average of $81,258 and when you add the generous benefits, it grows to $121,600.  Seniors are the best off age group, but they also show large contrast.  Some have nothing but Soc. Sec. and others have savings.  75% of 50-64 year olds have less than 30K saved (average is $120,000).  Half of people make it to 65.   Of those who do, 80% have net worth of <35k avg.="340K).<span" style="mso-spacerun: yes;">  Only 40% have pensions.

            54% of all people in lowest quintile move to a higher group within 10 yrs.  20% of households are on food stamps.  If you define ‘the rich’ as the upper 20%, then 2/3 of them are small business owners.  That’s about 15% of all taxpayers.  Small businessmen comprise 27% of all taxpayers and create 70% of new jobs.  So if you tax the upper quintile, you damage small businesses and jobs considerably.  By the way, small business owners work 67 hrs a week on average, so these aren’t leisurely folks living off inheritance. 

            I did a study of what poor people have to live on since I wanted to know if they had enough to afford my houses and apartments.  If a single mom with two kids (SM2K) makes nothing, she qualifies for TANF, WIC, food stamps, Sect. 8 housing, and Medicaid.  This varies by state but in OK is about $22K.  However inequalities in households mean that 18-20K of assistance is most likely.  If the recipient starts making money, at about $5K income they lose TANF but start getting EITC.  As income grows to 23K the SM2K continues to net about 20K all the way.

            Only 1% of income earners makes minimum wage but 26% make less than twice minimum wage.  As of this last fall, there were 145.1 million people employed, full and part-time.  There were 133.6 M employed full time or had 40 hours per week on multiple jobs.  There were another 12.1M unemployed and looking for a job, which gave 7.7% unemployment at that time.  There were 88.5 M adults who weren’t working out of 245.7M adults over age 16.  In the crudest sense, “unemployed” means the percent of people with don’t have jobs, so the above statistics yield 36% unemployment.  Of course some are retired, some go to college, some don’t give a fig about having a job that doesn’t pay cash, etc.  But here’s the crazy thing. In NV 2009 there were 232M adults, 80.0M not working, and 144.5M employed.  So in essence employment has gained practically nothing, but they quoted 10.2% unemployment.  People have really revamped their lives and aren’t looking anymore.  Social Security disability has grown from 8.5 M to 14.0M in this time and costs the federal gov’t  $260B which works out to about $18K per recipient (They actually make about 11,200.  Rest is “overhead” which includes about 20% estimated fraud).

            Finally those 133.6M who had full-time employment consist of 112.6M in private enterprise and 21.0M in government jobs. That leaves out agriculture.  There are another 1.5M farmers and farm workers who make wages and another .6M family helpers on farms. So anyway, you have about 114M who work in the private sector and support the 315M with mouths to feed.

Obamacare kills an industry

The medical device tax puts a tax on Gross Profits of 15%.  Think about that.  That’s not net profit, but rather the markup.  This is guaranteed to kill just about any product that doesn’t make at least 15%, which few device projects do.  So what is happening?  Abbott Labs spun off their device manufacturing from their pharma and those jobs are now going overseas to Switzerland.  Just about every other company is doing something like this.  When it is over, Obamacare will have driven an entire industry out of the country along with the jobs. Thank the Dems who hate business.

So have you heard this story on TV?  I haven’t.  Seems the broadcasting folks all have degrees in political science and none are former business owners.  Hence it remains for the Republicans to explain in simple language what is happening in so many areas.  The “He Said, She Said” journalists don’t understand or tell it. It is imperative that we get the story out.   

Lawsuits from the gays

I keep getting forwarded emails about how this group or that is going to sue the rest of us over discrimination.  The latest has been how gays will sue everyone from the wedding photographer who refuses to do their event to the Catholic Church for having doctrine against gay marriage.  While the latter may happen—but I doubt it; the RC has a lot of resources to fight back, will fight to the death over this, and perfect First Amendment rights to their faith—I can tell you how to handle the former.

      For better or worse, I have a good deal of experience in rental applications and coming face to face with litigious people who want to rent and believe, like street lawyers, that it is first come first serve. I’ve also been deluged by job applicants who demand, in an entitlement sense, that I hire them.  Here’s the answer.  You cannot discriminate on 8 specific subjects—race, creed, gender,age, etc. These are established by courts.  And gayness may be added to this with marriage or specific state statutes that are in place.  But you certainly can discriminate against anything else. Perceived inability to pay the bill would be one case.  “I just didn’t like his interview” is perfectly fine to nix an applicant.  And in the case of people who project entitlement and lawsuits, I usually said ‘no thanks.’  The bottom line is that a business can choose to not do business on practically any grounds except the sacred 8 grounds.  I suppose this would allow people to discriminate against certain groups (by making up an alternate excuse)though I never did this.  To me it was just super-important to know how to avoid a lawsuit. 

      I have run into a lot of middle managers who are on Church or Chamber or Government committees who don’t understand this.  They are extremely fearful of anyone who belongs to one of the 8 groups of significance.  I suppose this comes from a lot of company fearmongering in their training.  Look, you don’t have to hire someone who has African ancestry just because they appear on your doorstep.  Look at their skills the same way you’d do anyone else.  But what seems to overwhelm these committees is when someone brings up some nonsense about how,say, she’s pregnant.  Then some supervisor from ABC company starts dire warnings about how you dare not discriminate against this (true) and the groupthink of the committee seems to boil down to “well then we have to hire her.”  An independent businessman would say, “Well, can she lift the 100 lb. sacks of feed?”

      So then will the gays sue everyone in the wedding business?  Not if they do their business right.