Let’s review the promises that Barack Obama made during the campaign:

  1. Capital gains tax increase, not to increase revenue, but to deliver fairness.
  2. Tax increases for Americans that create and employ the large majority of their fellow citizens.
  3. Bankrupt the coal industry ( his words, not mine ), the industry that provides 56% of our electricity.
  4. Raise electrical costs through targeted ‘fees’ in order to control usage.   Obama said this will cause ’skyrocketing’ power bills.
  5. Due to the financial performance of the oil industry, Obama has promised targeted windfall profit taxes on this industry.
  6. Environmental ‘cap and trade’ system that will effectively drive the manufacturing costs in this country to the highest in the world.
  7. $1 Trillion dollars of new government spending, over and above what is already being spent, over the course of his first four years.
  8. Increased focus on targeting employment quotas to insure that companies are correctly focusing on government mandated affirmative action.  This will drive compliance costs within companies to well above their current levels and put a definitive restraint on new hiring.
  9. More taxpayer bailouts of union dominated industries  ( those that still exist ).
  10. Card check, effectively taking away the employees right to a private ballot when deciding on union membership.  Not all, but many companies will shutter their factories and move operations overseas rather than be subjected to increased unionization of manufacturing.

The flood of capital exiting the markets is a direct result of planning for the economic climate that has been promised by the new executive branch.  To argue otherwise is absolute folly.  Businesses and investors are not going to wait for the door to close, they are going to exit the building before they are chained to the devastation.

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The U.S. has just elected a 47-year old man with no discernible executive experience to take on the most difficult executive position in the world.  By any measure of necessary background and accomplishments, Senator Obama is not yet qualified to take on that task.  Judging from the cabinet that he is beginning to put together, he may actually be admitting to that fact.

Most presidents will appoint known entities from past administrations in order to move quickly and show continuity to other countries and financial markets around the world.  These type of selections lend themselves to solidifying our much deserved reputation as the most stable country in the world.  However, Barack Obama made so many promises to so many different belief-groups around the theme of change, you would think that some of his cabinet positions would reflect that theme.  You would think so, if you made the mistake of assuming that there was more behind-the-curtain than was shown during the campaign.

There is no substitute for experience, hard work and success.  Unfortunately, Barack Obama’s success has been confined to running campaigns and not much else.  There is no magic elixir to defend our country, fix our economy and provide for a better future for the next generations.  All too many of our fellow countrymen seemed to buy in to the possibility that ‘the seas would stop rising’, ‘ we will begin to take care of the sick’ and ‘France will like us.’   The seas are going to do what the Sun tells them to do, the 600,000 physicians in this country have been taking care of the sick for generations and I don’t much care what France thinks.

Barack Obama may be disappointing his almost hypnoticized followers with appointments like: Hillary Clinton, Tom Daschle, Eric Holder, John Podesta and Rahm Emanuel, however, he may also be acknowledging that he can not accomplish even a small percentage of that which he promised.  The other thing that experience will bring is the knowledge that it takes a lot more to be an effective leader than simply appointing strong, experienced individuals to do the heavy lifting.  The efforts must be coordinated by an individual who understands where he wants them to go and can convince them to go there together.

The next six months will tell us a lot.

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We all have friendships that start due to proximity, continue through shared ideals and sometimes get lost due to divergent personal paths.  Pedro Corzo and I met in the 4th grade at Meadow Park Elementary School in West Palm Beach, Florida.  Pedro came from a strong family whom had migrated from Cuba to pursue the American Dream.  His family worked hard to establish themselves within the growing agricultural community in western Palm Beach County, FL and were reaping the benefits of their hard work.  The success eventually entailed owning their own small farming operation.  Given my own ties to an immigrant heritage and parents who constantly reinforced the benefits of working hard, Pedro and I had a lot in common and we got along from the first time we met.

I always remember Pedro smiling and in a good mood.  He and his older brother, Alfredo, were only separated by a year or two and were very close.  Pedro’s mother and father were strict but no more so than my parents and they always made me feel at home.  Pedro was a solid student and went on to be the starting center on our high school football team.  Fitting for a teenage football player, Pedro drove a beautiful 1966 ( I am relying on a faulty memory )  red Ford Mustang that he cherished.  Whenever I could, I would steal a ride home in that car just to see the expression on other people’s faces as it went by.

Pedro went on to get a college degree in Florida and this is where we started to lose touch.  I went to the University of Virginia and would only see Pedro occasionally on overlapping college breaks over the years.  As we graduated from college, careers and family obligations caused us to lose touch and I am the worse for that.  I would see his parents as I visited mine, but I never stopped by to say hello, even briefly.

As I was reviewing some of the invitations to our most recent high school reunion, I saw Pedro’s name listed as having passed away.  A lump in my throat soon grew to a knot in my stomach as I looked into the details behind Pedro’s death.

After college, Pedro went on to a successful career with Del Monte as a regional manager based in Arizona.  Pedro married and was starting a family.  During what was a routine task for someone with his role at Del Monte, Pedro was driving his Ford Explorer between farms, which sometimes involved being on remote roads.  The details of what happened next are a bit hazy as they rely on the information that was pieced together by police.

Apparently, three individuals set about to commit a murder and reports say they were targeting someone of Latin descent. Rocks were rolled onto the road, impeding the path of Pedro’s Ford, so much so that he would have had to stop the truck and get out.  Pedro, being an ex high school lineman, was not a small man and could defend himself, hell, I would have given him good odds against three others in that situation—if it weren’t for the firearms.  They assassinated Pedro and buried him in a shallow grave not too far from where they forced his vehicle to stop.  At the time of his murder, Pedro left behind his wife Shelly, a young daughter, Veronica and a son, Pedro, Jr. who was one month away from meeting his father for the first time.

The three men that committed this crime were captured in Montana, but were very close to being let go, according to The Arizona Republic,

“The arrests were made at 3:45 p.m. Thursday, about the same time Corzo’s widow, Shelly, 34, made and emotional plea for her husband’s killers to be brought to justice.  Officer Toman Baukema of the Montana Highway Patrol spotted Harrison’s 1985 Chrysler New Yorker driving about 20 miles under the legal speed limit on Interstate 90.  He noted that the occupants were young and that the car was loaded down.  Baukema ran a database check on the license plates and learned the car was associated with two runaways from Missouri who were possibly armed, and he pulled it over, he told the Republic.

Harrison admitted having weapons and produced two rifles and a shotgun.  But Montana authorities did not have any reason to think a crime had been committed.  “We basically decided we weren’t going to do anything to them,” other than call their parents and secure the weapons, Baukema said.  Baukema then spoke to a detective in Missouri who told him that the trio may have been planning some criminal activity in Arizona.”

As you can tell from the newspaper’s wording, two of the assailants were young, 15 and 16, while one was 22 years old.  Three young punks, with no respect for life, would take the life away from an individual who was truly living the American Dream.

I do not get even a passing grade on keeping up with Pedro as we began our adult lives.  It was not because we grew apart, I know, if he were alive today, we could sit down and talk as if no time had passed at all ( The subject matters probably wouldn’t be much different either).  I am sorry for those lost times and for the fact that his son and daughter will not get to spend time with a man that I am proud to have had as a friend.

The anniversary of Pedro’s passing is a little under two months away and I think about him often.  May God bless his family and, from an American with Gaelic heritage to an American with Cuban heritage:

Deep peace of the running wave to you.
Deep peace of the flowing air to you.
Deep peace of the quiet earth to you.
Deep peace of the shining stars to you.
Deep peace of the infinite peace to you.

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Nov
17

As Congress contemplates giving a ‘loan’ to domestic auto manufacturers, there are some questions that should all be answered in the affirmative if we are to move forward:

  1. WIll the loan require a change in the structure of the businesses to bring costs in line with competition?, specifically:
    1. Will new management be brought in to fix the decades worth of mistakes by the current management?
    2. Will the UAW be required to lower its wages and benefits?
  2. Will the federal government lower the corporate taxes that are the second highest of industrialized nations?
  3. Will the federal government decrease the regulatory hurdles required to operate a business of this size?
  4. WIll the federal government send a message to foreign countries that are allowed open access to our markets to open up theirs? ( Japan, EU )
  5. Will the federal government make this loan without requiring different regulatory and tax hurdles be overcome?

If we give them one out, the ball will simply be pushed down the field in the hopes that the overall economic recovery will lift up these structurally failing businesses.

That very economic recovery will be stalled by one of the many initiatives being planned by Barack Obama, namely; naturalization of illegal immigrants combined with socialized medicine ( imagine what hospitals will look like under that scenario ).

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Nov
16

The global bullies are readying themselves for an assault on America and her allies.  Sensing a new, naive leader in America—-Russia, China and the Israeli hating nations around the world are not waiting until January 21, 2009 to start their sabre-rattling.

Russia and China are meeting with Cuba and Venezuela over the next several months.  I am sure the fact that Cuba is just 90 miles off the coast of the U.S. and is sitting on potentially rich oil reserves, in waters that Obama-Pelosi-Reid will not let us touch, has nothing to do with it.  In fact, our allies in Europe have moved in to close their own economic package with Colombia, while Obama-Pelosi-Reid delay our deal in a sellout to the labor unions.  We are being hit by friend and foe alike.

The modern day equivalent of the PLO has now demanded that Israel retreat to its pre-1967 borders and cede partial control of Jerusalem to the Palestinians.  Apparently, once Israel makes this one last concession, it will no longer be threatened by the Arab world.  Israelis must be worried with the coming administration of Barack Obama.  He has skirted every opportunity to take a strong stand with one of our best allies at a time when their very existence seems to be more in question than at any other time in my life.

There can be only one POTUS at a time and I do appreciate Senator Obama keeping a low profile in the waning months of President Bush’s final term, however, the international thugs are not on our timeline.  They understand that President Bush will only act militarily in the event of a pending national security threat, so the posturing begins now with the full blown actions to be initiated in the new year.

This country has been tested in the past, when we appeared weak to outsiders, and proved our metal.  Hopefully, our new President will surpass expectations and stand strong.  I wish we had some type of track record to verify that strength lies within him.

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A stop-gap loan to the domestic auto manufacturers will do nothing to address the problems facing the management at those companies.  Their cost of doing business is entirely too high when compared to their competition in the industry and when compared to the aggregated manufacturing costs in the United States.  Structural reformation is the only solution to their near term ( read 3-5 years ) and long term problems.

Bankruptcy would be a terribly hard pill to swallow but it does not mean the immediate shuttering of doors and locking of gates.  Ford, GM and Chrysler would simply be turned over to their debtors and potentially sold or restructured.  This would afford new management the opportunity to break away from the burdens of poorly negotiated union contracts and move operations out of overly taxing states.

The alternative would be to have Nancy Pelosi and Harry Reid take control of the domestic auto manufacturing market.  Hyperbole, perhaps, but there will be more regulatory burdens and union handouts as a result of any bailout of these manufacturers.  The issues, which have created the financial woes of the Big 3, will simply be compounded.

The Democratic Party is heavily in debt to the unions for their get out the vote efforts and direct campaign contributions.  Despite what is being billed as a landslide in many quarters, Barack Obama received approximately the same amount of votes as George W. Bush received in 2004 and that is with population growth and overwhelming turnout in certain demographic groups.  The unions, despite decreasing membership, still provide the margin for Democrats.  Congressional leaders will not allocate $50 Billion to the auto industry without guarantees for unions, over and above what is already in place.

In addition, the environmental lobby gives substantial funds to the Democrats in local and national races.  These ‘environmentalists’ will not allow the Democrats to bailout the car makers without increasing the already burdensome regulatory controls.  Artificially high standards for gas mileage, auto body composition ( read biodegradable body parts ) and ‘green’ mandates will dominate any legislation specifically geared to ’save jobs.’

In short, bankruptcy may be the only solution to the rebirth of domestic auto manufacturers.  An industry that was caught flatfooted three decades ago by the Japanese has been kicked to the curb once again.  New management and a new focus could hardly do worse.

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As we continue to hear about another industry, not company, but industry, that needs to be bailed out by the taxpayer, the chief question that comes into my mind is—-Where are the pride and accountability in the management of these companies?

As you steer through the management profiles of the companies on Wall Street that failed, the insurance companies that failed, the automobile manufacturers that are failing, the airline industries that will soon be begging at the public trough, you encounter a printing press of MBA’s from the top 20 programs in the United States.  These are the best and the brightest business minds in the country?  Begging Nancy Pelosi and Harry Reid to come in and give them an insured loan because they can’t manage their cash flow?  There is a reason that comic strips like Dilbert and TV shows like The Office are popular—there is more than just a little truth in the profiles of corporate management.

What is bred in today’s corporate environment is obviously not risk taking and speaking truth to power.  Certain segments of Corporate America have turned into political arenas that rival D.C. in their willingness to promote individuals based on the go-along-to-get-along strategy of management.

If the overarching nemesis of Fannie Mae and Freddie Mac were causing concerns within the financial community, why weren’t our business leaders going to Congress and outlining the problems while financially disassociating themselves with the structurally flawed system?

If the union benefit packages, the CAFE standards, the business tax environment, etc. were causing such long-term headaches to the management of our domestic car makers, why were they not making the case, leading the charge for change and defending their business?

As energy prices have escalated, dramatically impacting the transportation industry, where were the business leaders, telling the public about their cost structure and helping to identify the solutions to produce cheaper energy?

There are 435 members in the U.S. House of Representatives and 100 members of the U.S. Senate.  Most of these individuals are lawyers who don’t have the faintest idea of the challenges facing small and large corporations in this country.  It is not enough to whine and cry about the regulations and taxes imposed by these individuals on your industries and then return back to these same clueless legislators to help you ’save jobs.’

I firmly believe that the individuals that get into and are graduated from the U.S.’s top MBA programs are incredibly intelligent people with great potential.  The time has come for these same people to stop looking at the institution from which they graduated and start setting new goals that include driving their company toward excellence——excellence in marketing, excellence in finance, excellence in operations, excellence in R&D, excellence in customer satisfaction, excellence in human resources.  In addition to these internal metrics, our business leaders must acquire pride in management performance that would not allow you to even entertain the thought of going to the taxpayers in order to save your business.  That simple sin of pride can drive a lot of good, when properly deployed.

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Nov
11

Thank You!

Without your service and sacrifice, along with that of your families, this great country does not exist.  We owe you our freedom, our prosperity and our future.  Not only that, it is incumbent, on those of us who do not serve, to demand our legilslators put more emphasis on providing you with the necessary resources to assist in your transition back here at home.

Words combined with actions are the only true way to thank you, but, for now, and for myself and my family—Thank you for my freedom!

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Nov
10

The New FDR

Posted by: Todd MacLeod - Category: Economy - No Comments

Amity Shlaes recently wrote a book detailing the dramatic economic failure of FDR’s policies ,“The Forgotten Man: A New History of the Great Depression.” Ms. Shlaes shares a brief summary of the comparisons between Obama’s plans and FDR’s in today’s NYPost:

“….Although Roosevelt got a slow start, he poured billions into the economy in his first term - an unprecedented action for a US leader in peacetime. Federal spending doubled between 1933 and 1936, the year he ran for reelection. The year 1936 saw a deficit of 2.6 percent of the economy, compared with say, a surplus in 1930. The economy did grow in those years. But it never got back to its old 1929 level. As soon as FDR stopped doling out the cash (in 1937, after the election) the economy crashed again. The stock market plummeted. Five years into the New Deal, in the winter of 1937-1938, two in 10 were again unemployed.

Then there is infrastructure, a project Democrats have been talking a lot about lately. With each point that unemployment rises, their proposal to create jobs by building bridges, roads or buildings looks more attractive. Again, the New Deal is the model here. Right here in New York, we think nostalgically about the New Deal when we cross the Triborough Bridge or travel in the Lincoln Tunnel - both New Deal projects.

The states, too, lavished cash to create infrastructure jobs in the ’30s. Many structures that were built were solid. But they didn’t bring recovery, either. Evidence from that period suggest that government was crowding out the private sector. The Tennessee Valley Authority, for example, dealt mortal blows to a private employer that wanted to electrify the South, Wendell Willkie’s Commonwealth & Southern. For every state-relief job created, about half a private-sector job was lost.

Even more than specific New Deal projects, Obama and his fellow Democrats are evoking Roosevelt’s leadership style. In school, we learned that it was FDR’s personality that pulled the country through the Depression. If only, the suggestion is, we can have a strong enough leader, Americans will also find recovery again. We need some “bold persistent experimentation” of the Roosevelt variety.

There is evidence, however, that FDR’s very strength was a negative, because he used it to give himself a license to do true experimenting. In his second inaugural address, FDR said that he sought “an instrument of unimagined power for the establishment of a morally better world.”

No one knew what it meant, and markets were terrified. Everyone feared FDR would regulate or prosecute them next. Businesses refused to invest. The 1930s’ second half proved frustrating for the country: The economy was always recovering but never quite recovered. The Dow didn’t get back to its 1929 level until the mid-’50s.

These facts are important to bear in mind. The New Deal inspired. But it is the wrong deal for the country, even now. “

So, let’s put that in perspective.  The economy was in bad shape when FDR took over in 1933, of that there is no doubt.  However, FDR pursued an avenue of societal change and structural reinvention.  This drained the economy of needed capital for over seven years prior to the start of WWII.  No tax cuts, no helping businesses control costs, no reduction in the amount of regulation burdening industry, in fact, the exact opposite.  Massive government programs, most of which are with us today, and all of those are technically bankrupt.  Remember that FDR did not have the competition, from other countries, that we are facing today.  In addition, it was much more costly for a business to relocate its operations in the 1930’s due to the logistical issues associated with the movement of people and goods.  So, a much easier environment to make these changes without the worry of businesses going elsewhere.  Even with those advantages, FDR’s economic policies can be fairly judged as financial failures.

Now let’s transport ourselves to 2009, with countries biting at our heels to offer more incentives to business and much lower tax environments coupled with the fact that the movement of people and product is much easier today, our ability to recover from FDR-type programs will be tested.  Assuming we can overcome these government burdens in the same timeframe that we recovered before, the following timelines are what we can look forward to in the event of a tax-and-spend-circus:  If you are in your late 50’s to early 60’s, you will not see the economy recover, to it’s pre Fannie Mae/Freddie Mac collapse levels, until you are in your late 70’s to early 80’s.  If you now have children in elementary school, the economy will not recover until they are in the mid to late 20’s.  If you have children that just graduated from college, they will not see the economy recover until they are well into their 40’s.

We have time as a nation to stop this continuation of poor government fiscal performance.  If President Obama pursues goals with the philosophy of FDR, which I hope he does not, but my gut tells me he will, we can stop it in it’s tracks in 24 months.  In order to accomplish this, the default conservative party ( Republicans ) must define who they are, correctly identify leaders and act on a platform that is pro-growth for the private sector.

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The rush to redefine conservatism and what the baseline should be to re-energize the basics of conservative governance are overlooking the obvious.  We already have the necessary thinking, documents and arguments in place to begin anew.  As Scott Johnson over at Powerlineblog has pointed out this morning:

“Robert Frost urged us to “choose something like a star” to stay our minds on and be staid. For conservatives, that star is the principles on which the United States was founded.”

Not as simple as you would think, but true.  The translation of many of those ideals into modern times is needed, however, the basics of our government, where we need to go and how we can get there all reside in our founding documents and national charters.  Conservative leaders only need the personal courage to realize that we do not need to reinvent the wheel, their leadership abilities and intelligence will be reflected by their willingness to look back in order to move forward.

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