Saturday, April 30, 2011

Let's Not ReWrite The History of Our Constitution.

The Tea Party Movement is a force to be reckoned with, it will be a major player in who will be nominated to office as well as win in the fall of 12. This is a wonderful change from the apathy that has plagued most Americans about the political world going on around them for decades.

I do have some concerns though. One of them is that, while I am thrilled with the new embrace of history, our founding, and our Constitution that is burning like wild-fire through the Tea Partiers, I am concerned about who is teaching them. Or at least who they might be hearing explain it. Most people do not read for themselves, the average American man reads less than one book a year. That means they "learn" from being told by others, who likely learned from being told by others, and on and on, like looking into a old barbershop mirror.

When this is the method of disseminating information, it can be twisted, and perverted to the point of destroying that they hope to protect. Have you ever played the telephone game? A friend of mine, who was a surveyor, explained it to me this way. If you are surveying land, you start at the known point and then measure to where you are going. If you get off just a hair at the beginning your final measure can be off by miles. That is exactly what is happening with so many factions in the movement. One of which is the Ron Paul following who are, like so many others, trying to co-op the movement for their own purposes.

Ron Paul's teaching of the Constitution is close, but then veers off to the point that it doesn't even resemble the original document or intent of our founders. Listening to Ron Paul reminds me of the speeches of Clement Vallandigham, one of the main Copperheads during the Civil War.

The more I think about what I am hearing from the Paul followers, and far too many of the Tea Partiers is a strictly Jeffersonian version of the founding. While Thomas Jefferson was one of the great leaders and key players in our founding, he was not the only voice heard. The Constitution is not reflective of the Jeffersonian view, in fact Thomas Jefferson was anything but a fan of the Constitution he thought it was tyranny. He advocated a revolution every twenty years, than no generation should be bound by the former generation's laws.

The Constitution was probably not 100% loved by any of the founders who fought and debated throughout that hot summer in 1787. The final product wasn't any one man's, but a truly compromised document to get while not total support by any, enough support by all to pass it. The result of this Melting Pot of ideas was a recipe for the greatest nation in the history of mankind.

When I hear the Ron Paul followers, and some of the Tea Party folks, parroting the purity of Jefferson and the evil of Adams, and Hamilton it is scary. Thank God, we don't have a nation designed exclusively by any of them, but a compromise of those different views.

For a point of order, Thomas Jefferson and John Adams were no where near the writing of the Constitution. Both were overseas that summer, Jefferson as ambassador of France, Adams as same for England. Alexander Hamilton was not happy with the Constitution he wanted a much stronger document, but realized quickly it was the best he could hope for at the time and became head salesman of it writing most of the Federalist Papers, along with James Madison, and John Jay.

There were very many different views, different understandings, different experiences that were involved in that room creating this magnificent document. It was those differences that made it great. We were blessed by God that these brilliant men, the most educated men who may have yet ever filled our representatives, were able to work past those differences to create our Republic. Two of the most key men in getting this done were Benjamin Franklin, who didn't write much, debate much, but was able through the respect the others held for him to get them back on track when needed. The key was the presence of George Washington, the least educated man in the room, but whose larger than life presence and perfected leadership skills, and quiet demeanor was able to keep all the competing factions working toward a common goal.

We do not want to re-write the Constitution in Jefferson's image as Ron Paul and his followers do, we don't want Hamilton's, or any one's, we had the greatest mastermind meeting in history, why just take one.

Wednesday, April 27, 2011

Obama's Easter Sermon, What Was He Learning?

On Easter Sunday the Obama family went to church at Shiloh Baptist Church to hear a sermon by Pastor Wallace Charles Smith. Pastor Smith has a record of pushing a very race baited agenda. During his sermon, Smith chose to attack the original Constitution of the United States, and our founders. He spoke of the 3/5th person classification in the Constitution for slaves.

One of the biggest problems we have in trying to learn our American history is the lack of knowledge and understanding of the broader story surrounding the topic. This one issue has been lifted out by so many with agendas to promote. Most people know very little about what actually happened in any historical context.

Let's take a look at this one issue, but let's not look back with our own current understanding and experiences and try to project them on those debating the draft of that Constitution that hot summer of 1787. The slave debate was already between the North and the South was already under way, it had been 168 years since slavery began in America in 1619. Keep in mind it was deeply entrenched long before the idea of a free Republic was even dreamed of.

Frankly it was a miracle that the many diverse interests in that room were able to create a brand new nation, birthed the most successful Republic in the history of man that summer. There were large states and small, heavily populated and sparsely populated, there were business driven states, and agrarian driven, and of course slave states and free states, all who demanded that their interests were considered and protected.

The Senate was created with two Senators who would be chosen by the States to represent their own interests. Since these men would be chosen by the States and appointed to the Senate, they knew that they would be men of means and stature in their states. So the Senate was designed to give the small states equal say since all would have two votes. It was also created as a voice for the wealthy of the nation.

The House was created with a representative for up to thirty thousand citizens. So this was a nod to the large or heavily populated states since they would dominate the votes in the House. Each state was only guaranteed one Congressman for those small states. The House was generally considered a place for those who were not necessarily of wealth, thus the People's House.

Now at first glance the idea of only classifying men and women as only 3/5ths of a person sounds like the result of glaring racism. However, as Paul Harvey would say, the rest of the story. Why did this 3/5ths rule come about?

The Southern, slave holding states, wanted to have each slave counted as a person. This was because at that time there were more slaves in the South than there were free men. By counting the slaves for the House Districting would guarantee the South would dominate the House of Representatives and would be able to push through whatever agenda they wanted.

Most of those from the North in that room were either outright anti-slavery, or leaning strongly that way. What they didn't want was giving the South a free hand in being able to vote every new state that would be added later as a slave state. They hoped to limit the growth of slavery, or even eliminate it. The hostility between the representatives from the North and South during this debate was so hot that they realized it was going to kill the Constitution before it began. To keep the Constitution alive they had to actually write a rule that the very word "slavery" would not be allowed to be spoken during the rest of the Constitutional Convention or in the House or Senate for the next twenty years. They were terrified that if it was spoken the debate would get so hot that the South would pull out and no longer join the new Republic.

The 3/5 rule was a final compromise to keep the Southern Slave states from forever controlling the House, but it gave them a dominant position at first, creating a situation where the Southern States would actually ratify the Constitution and make The United States of America a reality.

The irony, what appears to cast the U. S. Constitution a racist document by classifying African Americans as 3/5ths of a person was actually designed to ultimately keep slavery from spreading and growing in America. Those who held slaves, wanted to continue and grow it as an institution wanted each slave counted as a full person. It was those who wanted to end slavery and curtail it's growth didn't want to count them at all, but settled on 3/5ths.

For us to understand our history, we need to learn more about it than the headlines.

Sunday, April 10, 2011

Can You Believe The Federal Government Turning Down Money?

It is hard to believe that there could have ever been a fight about the Federal Government accepting a gift of money, but here is a story of one of those times. Of course in the end they did take it, and anyone who has ever gone to Washington has benefited from it.

A British chemist died in 1835 and willed his fortune to the United States government to "increase the knowledge among men." This estate came from James Smithson, the illegitimate son of the Duke of Northumberland. Smithson's legacy was about a half million dollars, the equivalent of more than ten million dollars today.

President Andrew Jackson and many other American politicians were not in favor of accepting a gift from the son of a British nobleman. It was less than twenty years since the British army had burned Washington D.C. during the War of 1812. The Star Spangled Banner war. Senator John Calhoun spoke for many when he said is was "beneath the dignity of the United States to receive presents of this kind."

However, there was one very prominent American statesman who stood up to advocate acceptance of the gift. Former President John Quincy Adams, son of second President John Adams. He was currently serving as a Congressman from Massachusetts. Through much of his career, Adams had advocated government support of the arts and sciences. He said the country had "an imperious and indispensable obligation" to put Smithson's money to good use. Adams eventually convinced a reluctant Congress to accept the grant, and spent years making sure it was put to good purpose.

After the money was accepted it there was a nearly ten year battle over how to spend it. During that time the government invested it in a shady Arkansas land deal, much of the money was lost, but Adams forced the Congress to replace the fund, thus preserving Smithson's request.

John Quincy Adams may have been the most prepared man to ever fill a post in the government. For those who say that the founders didn't believe in career politics, even looking past that every one of the founders continued in the service of government most of the rest of their lives, no one more so than John Quincy Adams. he started his career in public service at 14 when he was his father's secretary in Paris, then again in Holland. From Holland he was hired away from his father by the Ambassador of Russia and became his secretary. Of course he was the first son of a former president to follow in his father's footstep into the White House. He later came back as a Congressman until he fell to a stroke on the floor of the House. But maybe his greatest legacy is his stewarding of James Smithson's gift, The Smithsonian. You can see James Smithson's tomb today inside the Castle of the Smithsonian on the National Mall.

Sunday, April 3, 2011

Each Election Has Long Term Impact.

As we suffer through one of the worst presidents and administrations in generations, if not ever, we hold out hope to throw them out in 2012. I recall conservative friends of mine who didn't believe Obama could cause much damage in one term. I wonder how many think that now?

Each election has consequences, presidential elections have long term consequences long after new administrations have taken their place. Let's look back to Jimmy Carter and his administration that lasted from 1977 through January of 1981.

Jimmy Carter's deficit spending caused the Fed to have to monetize (print) 13% more money to cover it. That 13% when velocitized (put in the market) created 12% inflation, a very high number in American history. This caused Paul Volcker to raise interest rates to 21% to stagnate the economy, pull that extra money out of the marketplace and slow down the inflation. This was all part of the term stagflation where inflation sucked up your buying power while people were out of work or incomes remained flat at best.

During Carter's years the very fabric of life for American families changed forever. Just look at housing prices. In 1975 the average price home in America was about 25,000.00 just slightly higher than they had been since 1960. From 1975 until 1980 the average price went from 25,000.00 to about 50,000.00. The price increases have not slowed down until 2008. Game changer. Let me ask you a question, did the price of real estate skyrocket, or did the value of money shrink? For those who didn't buy and ride the inflation train it was devastating to their net worth. For those who did, they were able to keep more value to their earnings. Just in the last twelve years statistics show that the average homeowner has between 31% and 46% more net worth than does the average renter. Further it is cheaper to own than rent like homes in three quarters of all American cities. So those who didn't own and didn't have that vehicle to stay even with inflation took huge economic hits.

When you have inflation your cost of living skyrockets. To combat this families changed their lifestyles. Mothers who had children at home who went to work to help support their families went from 37% in 1975 to over 70% in 1980. After factoring in the costs of supporting another person working outside of the home, child care, auto costs, clothing, etc. most of the income went to pay the increased taxes on the family. The percentage went as high as 77% but dropped for the first time in 2004 to 73%.

So now we have most children in day care, parents schedules stressed, to pay for more expensive housing along with everything else. If you run studies of pricing, you will see that most of America's inflation started during Carter's years, and we are still paying for it.

Now we have Barack Obama and his Administration, who have increased deficit spending during the first 18 months that has required the Fed to monetize (print) 120% more money, it is just now starting to velocitize to the market place, and we are all seeing almost all of our commodity purchases skyrocketing in price. Who knows were it will go. I have no idea what to tell you do to hedge against this coming inflation, other than if it repeats Carter's history housing might be the best hedge long term.

The best news from the Carter years is that he wasn't able to appoint any Supreme Court Justices, because those judges push agendas for decades to come. Unfortunately Obama has already put in two highly politically active judges to promote his ideology for at least a generation or two. Just one more area of great damage we will have to over come.

If nothing else, hopefully, more Americans will start to understand that Presidential politics are not only for four years, but for generations each.

Saturday, April 2, 2011

What's Truly At Stake On Budget Battle

As the politicians in D.C. debate budgets, fighting over a few billion here and there, we here from one side that anything more than a ten billion dollar reduction would cause starvation and draconian consequences. The other is trying for one hundred billion reduction. Both are silly, inconsequential numbers against our 1.7 trillion dollar deficit for just this year.

We are hearing from the Republicans that we will be seeing real deep reductions across the board, not just in discretionary spending in their new budget they will be proposing yet this month. We better hope that they are serious. One thing or sure the Democrats and Unions will be going full court press fighting every dime planned to be reduced.

It is past time for a drastic life saving diet for our Federal government. The patient is critical and without a massive change may well be terminal.

Where are we financially? Is it our national debt, or entitlements that are about to kill us?

Federal Debt: 9.1 Trillion.

Unfunded Social Security: 7.9 Trillion.

Unfunded Medicare: 22.8 Trillion.

Medicaid: 35.3 Trillion.

75% of the budget is non-discretionary and entitlement based.

Just with Medicare, Medicaid and Social Security we have $1 trillion deficits. Once dominated by defense spending, these three categories now account for 44% of total Federal spending and are steadily rising. Even after defense and interest payments on the national debt are excluded, remaining discretionary expenses for education, infrastructure, agriculture and housing constitute at most 25% of the 2011 fiscal year federal spending budget of $4 trillion. You could eliminate it all and still wind up with a deficit of nearly $700 billion! The only chance of recapturing our budget is through entitlement reform.

If we pretend that the $65 trillion of entitlement liabilities were fully funded in a “lockbox,” much like Social Security is falsely thought to be. Actually,then the interest expense on the $75 trillion total debt would equal $2.6 trillion, close to the current level of entitlement spending for Social Security, Medicare and Medicaid. What do we pay now in interest? About $250 billion. Our annual “lockbox” tab would rise by $2.35 trillion and our deficit would be close to 15% of GDP!

The assumption that we can grow our way out of this debt burden, might be possible if it was only the $9.1 trillion in Federal debt. That would be 65% of GDP and well within reasonable ranges for national debt burdens. However others such as Pete Peterson of the Blackstone Group and Mary Meeker, have shown, the true but unrecorded debt of the U.S. Treasury is not $9.1 trillion or even $11-12 trillion when Agency and Student Loan liabilities are thrown in, but $65 trillion more! This country appears to have an off-balance-sheet, unrecorded debt burden of close to 500%of GDP!

In an article titled "USA Inc" by Mary Meeker, and recommend by Paul Volcker and Michael Bloomberg, said if the USA were a corporation, then it would probably have a negative net worth of $35-40 trillion once our “assets” were properly accounted for. However closely estimated that number might be, no lender would lend to such a corporation. Because if that company had a printing press much like the U.S. to print more money at will, that lender/saver would have to know that unless there were massive entitlement cuts that the loan would be defaulted in at least one of these ways:
1) outright default.
2) By accelerating higher inflation.
3) By a declining dollar, which is happening in front of our eyes.
4) By manipulating policy rates and Treasury yields far below historical levels.

William Gross, founder and manager of PIMCO who manages over 1 trillion dollars in securities has advice for Americans below.

“I sit before you as a representative of a $1.2 trillion money manager, historically bond oriented, that has been selling Treasuries because they have little value within the context of a $75 trillion total debt burden.
Unless entitlements are substantially reformed, I am confident that this country will default on its debt; not in conventional ways, but by picking the pocket of savers via a combination of less observable, yet historically verifiable policies – inflation, currency devaluation and low to negative real interest rates. Our clients, who represent unions, cities, U.S. and global pension funds, foundations, as well as Main Street citizens, do not want to be shortchanged or have their pockets picked. It is incumbent, therefore, in order to preserve the integrity of the U.S. Treasury market along with its favorable global interest rates, and to promote a stable U.S. economy, that entitlement spending be reduced, and that future liabilities be addressed in terms of healthcare and Social Security cost containment. You must attack entitlements and make ‘debt’ a four-letter word.”

William H. Gross

The Republicans promise us that they are going to be serious in reducing or entitlement spending on the budget we will see next month. First of all, let's pray that they are serious. Second, we must all get behind them and help champion these cuts to everyone we know, family, friends, and coworkers, because everyone will have things removed that they want to keep. If the Republicans are defeated, or frighted off from trying to gain control of our deficit spending, our out of control budget, then all will be lost.

This is going to be our generations American Revolution, we are fighting a monster who wants to eat us, we must defeat it and push the debt down.