Thursday, September 15, 2011

The Attack Watch -- Obama's Special Timepiece

Presidents rarely wear jewelry. But they do wear watches, and Obama recently showed his newest timepiece to Americans. Its designers call it the Attack Watch, mainly because it records the time of every written and verbal attack on the president.

As you might imagine, the dials on this watch are spinning faster than the centrifuges enriching uranium for Iran's nuclear bomb. For the safety of the president's wrist, we hope the Attack Watch is properly insulated.

Unfortunately, the Attack Watch does not record attacks perpetrated by Islamic terrorists. Thus, had the Attack Watch existed a decade ago, it would not have registed the attack on 9/11.

Meanwhile, the Attack Watch is designed to conduct its own attacks. The attack feature will activate itself in the closing days of the 2012 presidential election. At that time it will spam websites supporting the Republican nominee with millions of e-mails slamming that person for either being a Texan or being a Mormon. Hitting hard on his place of origin and/or, if possible, religion. Liberals go for that.

Attack Watch, new Obama campaign site to ‘fight smears,’ becomes laughing stock of conservatives

As the 2012 presidential campaign heats up, President Obama’s campaign team has set up a new Web site,, to challenge negative statements about the president made by Republican presidential candidates and conservatives.

Obama for America national field director Jeremy Bird told ABC News that the site’s goal is to offer “resources to fight back” against attacks. Mostly, that means fact checking statements from the likes of GOP presidential contenders Mitt Romney and Rick Perry and conservative commentator Glenn Beck and offering evidence to the contrary. The site is designed in bold red and black colors, and uses statements like “support the truth” and “fight the smears.”

The response to the site has been less than stellar.

(Image via Twitter) On Twitter, where the Web site has an account to help Obama supporters submit evidence of “attacks” on the president using the hashtag #attackwatch, nearly every tweet about the site — mostly from conservatives — has ridiculed it.

“There's a new Twitter account making President Obama look like a creepy, authoritarian nutjob,” an Arizonan tweeted. “In less than 24 hours, Attack Watch has become the biggest campaign joke in modern history,” a contributor to conservative blog The Right Sphere wrote. The contributor linked to the following parody commercial for Attack Watch:

Tommy Christopher of Mediaite noted sarcastically of the site, “Great. Sounds like a terrific content-generating resource for right-wing bloggers, too. Everybody wins!”

While the initiative is reminiscent of a similar online effort launched during the 2008 campaign, called Fight the Smears, the intimidating design and language of the new site seems to be what’s causing a bigger ruckus.

Fight the Smears looked and felt far less scary, quoting Obama at the top of its page in a classic hope-change statement: “What you won’t hear from this campaign or this party is the kind of politics that uses religion as a wedge, and patriotism as a bludgeon — that sees our opponents not as competitors to challenge but enemies to demonize.”

Attack Watch, on the other hand, uses the shorter tag­line, “Get the Truth. Fight the Smears.”

It’s safe to say that in its 24 hours of existence, Attack Watch has already backfired, becoming a tool for conservatives to use against Obama 2012. A tweet by conservative author Brad Thor summed up the critics’s argument: “Wow, not only are Obama & Co. incredibly thin-skinned, they're paranoid.”

Update, Wednesday, 5:11 p.m.

Obama 2012’s press office just returned an earlier request for comment. According to deputy press secretary Katie Hogan, 100,000 people signed up for the site in the first 24 hours.

“This site is a tool providing our supporters with the facts they need to fight back against lies and distortions about the President’s record,” Hogan said.


Monday, September 12, 2011

ETFs and MLPs, Handy for Do-It-Yourself Funds

Create Your Own MLP Fund For Higher Returns

Buying small positions in several high yielding MLPs can be more profitable than investing in an MLP ETF or ETN. After adjusting for management fees, the net return of ETF and ETNs is considerably lower than the highest yielding MLPs. This chart lists some of the most popular MLP ETFs and ETNs with their management fee subtracted from the yield:

MLP ETF/ETN Mgmt. Fee Yield Yield minus Fee
Alerian MLP ETF (AMLP) 0.85% 6.4% 5.55%
Tortoise Energy Capital ETF (TYY) 0.95% 6.5% 5.55%
Cushing 30 MLP Index ETN (MLPN) 0.85% 7% 6.15%
UBS E-TRACS Alerian MLP ETN (MLPI) 0.85% 5.3% 4.45%

In addition to lower yields, MLP ETFs do not appear to offer the same level of safety as other sector ETFs. Tortoise (TYY) declined 70% from its 2007 high during the 08-09 recession. Aside from Alerian, the volume is considerably lower for MLP ETFs than MLPs themselves. ETNs have their own set of risks due to their unique credit structure.

The primary safety feature of ETFs is diversity. Buying several small positions rather than one or two large positions, creates security and protection should something unexpected befall an individual MLP.

MLP ETFs have their purpose. Investors sitting on cash looking to generate income while waiting for better market conditions can park their money in these ETFs and collect 6% while they wait. They do not have to worry about K-1 forms and tax issues. Tax-deferred accounts cannot invest in MLPs without going through ETFs.

However, for income-oriented investors who are willing to hold MLPs for many years, creating a personalized fund of higher yielding MLPs may be more profitable. The following chart is an example:

MLP Yield
Energy Transfer Partners (ETP) 8.16%
Boardwalk Pipeline Partners (BWP) 8.32%
Kinder Morgan Energy Partners (KMP) 6.68%
Buckeye Partners (BPL) 6.5%
Plains All American Pipeline (PAA) 6.6%
Dorchester Minerals (DMLP) 7.13%
Average Yield 7.23%

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Friday, September 09, 2011

Saab Story

What happens when costs exceed revenue? Here you have it. The Saab Story of a niche carmaker with unsustainable operations. However, does the unfavorable flow of costs and revenue mean the company is at the end of the line? Maybe not. What does the interest from China mean? It means that like many other products sold around the world today, the next generation of Saabs may come from China.

Saab, Denied Court Protection, Faces Bankruptcy

On Thursday, a Swedish district court rejected Saab’s bid for protection from its creditors, leaving the automaker with few options other than filing for bankruptcy. The company reportedly owes its suppliers 150 million euros ($210 million).

“The situation is fairly grim,” said Jack Nerad, an executive market analyst at Kelley Blue Book, in a telephone interview Thursday. “I don’t think we’re going to see an 11th-hour rescue. When Saab was orphaned by General Motors and no other car company came in to scoop it up, a lot of us became concerned about its future.”

Saab was previously controlled by G.M.

Victor Muller, the automaker’s chairman and chief executive, announced on Thursday that it would appeal the Vanersborg District Court ruling. In the interim, however, the two largest unions representing the company’s workers would probably file petitions demanding that the company enter bankruptcy.

Saab, with production essentially idled at its primary plant in Trollhattan, Sweden, since April, has 3,700 employees, and unpaid August salaries may be the issue that finally forces the company into bankruptcy.

“If the company itself does not find another solution or seek to put itself into bankruptcy, we could be forced to do so in the next few days,” said Stefan Lofven, head of the IF Metall North Alvsborg union, which representing 1,500 Saab employees, in a statement reported by Reuters. The union will decide within a few days whether to ask that Saab be declared bankrupt, added Leif Hakansson, a spokesman for the union.

Saab had said that a voluntary reorganization would not include its overseas affiliates, including Saab Cars North America, but bankruptcy would impact the ability of those divisions to do business.

Saab had hoped for a lifeline from Chinese automakers Pang Da Automobile Trade Company and Zhejiang Youngman Lotus Automobile, which together would have invested 245 million euros and taken majority ownership, but that option had not been approved by Chinese regulators. The Swedish court expressed skepticism that the deal could move ahead in a timely fashion.

“We regret that Saab Automobile is not going to get the time it needs until the funding from Pang Da and Youngman arrives,” Mr. Hakansson said in a statement.

Reacting to the court ruling, Mr. Muller said on Thursday that the company was now “completely unprotected” and asked stakeholders to “hold their horses.”

“We are not dead yet,” Mr. Muller had told a news conference on Wednesday after the submission of the application to the court. The same phrase was used by Timothy Colbeck, the chief operating officer of Saab Cars North America, at an owners convention last month in New Jersey. On Thursday, however, it was not clear what would keep the company alive.

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Wednesday, September 07, 2011

Halliburton Hitting Paydirt

Halliburton Shares Set To Strike Oil

Halliburton is an oilfield-services company that engages in well drilling, completion, production and evaluation. With a market cap of $38 billion, Halliburton is the second-largest oilfield-services company in the world and a dominant player within North America.

The stock has fallen dramatically in recent months, mainly because oil proces have dropped. Fortuntately for investors, Halliburton has little to do with the price of oil, and does not benefit from huge increases or decreases. Drillers don’t stop drilling just because the price of oil drops from painfully expensive to plain old expensive. The production and drilling of oil continues, and that’s where Halliburton operates.

Halliburton is more of a technology play than a play on oil prices. Demand for the company's services is driven by the need for more oil and is not directly a function of the price of oil, or at least it shouldn’t be. Simply put, it is there to help the oil companies drill and improve efficiency. Halliburton is very good at what it does, in recent years its engineering capabilities, innovations and advancement have increased total production 75% and led to a 50% reduction in pumping times. One of its biggest technological advancements, horizontal drilling, is now being implemented by companies all over the world.

In addition to this, recent booms in domestic drilling in North America have led to a surge of new orders and new business generating billions in revenue. Halliburton continues to be on the rise and growing vastly. This year it's on pace to hire 11,000 new employees in America alone! All-around business is booming, and we believe the stock is cheap and a great value. Below are 10 reasons Halliburton is bullish and 10 reasons why you should invest:

10 Reasons to be Bullish on Halliburton:

PEG = 0.59. Halliburton holds a PEG ratio of 0.59, making it a bullish indicator as the lower the company's PEG ratio, the more cheaply valued it is. Companies with PEG ratios under 1 are undervalued -- another reason we believe Halliburton is a strong investment.

P/S = 1.83. Halliburton holds a P/S ratio of 1.83, a good valuation and strong indicator. Value investors look for P/S ratios under 2 as they show great opportunity. Another thing to consider is the fact that low P/S Ratios and rising stock prices tend to be a good basis to invest in growth stocks that have suffered a setback, something that definitely suits Halliburton, as it has been unfairly hit with share prices falling as much as 30% over the past few months as many investors correlating the fall in the price of crude oil and Halliburton’s share price too much. Over the course of the past decade, Halliburton’s P/S ratio has been below-average, making it a good indicator of value.

ROE = 20.7%. Halliburton’s return on equity averaged out over the past three years is 20.7% (22.49% in 2011), a strong indicator going forward, especially considering the fact that Halliburton plans to grow and further reinvest money within.

ROA = 12.55%. Equally impressive, Halliburton continues to show effective upper-level management with strong return on both assets and equity.

Forward P/E = 9.5. Halliburton sports a cheapish forward P/E of 9.5. That represents a discount to rivals like Baker Hughes (BHI) (10.1), National Oilwell (NOV) (11.5), and Schlumberger (SLB) (14.0).

92% analyst buy rating. Halliburton is highly regarded among Wall Street analysts, with 95% projecting the stock to outperform the S&P 500 going forward.

82.50% held by institutions. Halliburton is held by forty-two hedge funds. HAL represents 4% of T. Boone Pickens BP Capital’s portfolio' Ken Griffin’s Citadel holds more than 2 million shares; Ken Heebner holds a $170 million position; Jim Cramer holds it in his charitable trust.

$5.9 billion total revenue. Net income for the 2nd quarter of 2011 was reported at $747 million, vs. $483 million in the 1st quarter prior year. Total revenue’s improved to $5.9 billion from $4.4 billion in the same quarter last year. Operating income increased to $1.2 billion from $762 million in the June quarter of 2010 on the improving pricing environment and higher equipment utilization.

$1.4 billion cash balance. Halliburton currently is cash-flow-positive with a cash balance of $1.4 billion. Like we always say, “Cash is King!”

Dividend yield = 0.9%. It’s not much, but something is better than nothing, and a near 1% dividend yield is not bad especially considering the fact that Halliburton is such a high-growth, speculative stock to begin with.

Demand for Halliburton’s specialized services will continue to grow in the booming Oil & Gas industry. As the economy improves, so will Halliburton's prospects; expect revenue streams to increase too. With strong analyst coverage, upbeat projections, and the fact that HAL is now trading at 12.8 times 2011 earnings, we project Halliburton’s shares to rise to $75 per share, a total yield of 81%. Just like Schlumberger, the oilfield services specialty stocks are ready to explode.

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Tuesday, September 06, 2011

Obama's Dead Letter Office

A downgrade of the US credit rating, unemployment stuck at 9.1%, and now this -- the pending failure of the Post Office. Imagine what it will mean for Obama's election hopes if 120,000 mailmen are laid off before November of 2012.

Postal Service Is Nearing Default as Losses Mount

Sunday September 4, 2011, 6:00 pm EDT

The United States Postal Service has long lived on the financial edge, but it has never been as close to the precipice as it is today: the agency is so low on cash that it will not be able to make a $5.5 billion payment due this month and may have to shut down entirely this winter unless Congress takes emergency action to stabilize its finances.

“Our situation is extremely serious,” the postmaster general, Patrick R. Donahoe, said in an interview. “If Congress doesn’t act, we will default.”

In recent weeks, Mr. Donahoe has been pushing a series of painful cost-cutting measures to erase the agency’s deficit, which will reach $9.2 billion this fiscal year. They include eliminating Saturday mail delivery, closing up to 3,700 postal locations and laying off 120,000 workers — nearly one-fifth of the agency’s work force — despite a no-layoffs clause in the unions’ contracts.

The post office’s problems stem from one hard reality: it is being squeezed on both revenue and costs.

As any computer user knows, the Internet revolution has led to people and businesses sending far less conventional mail.

At the same time, decades of contractual promises made to unionized workers, including no-layoff clauses, are increasing the post office’s costs. Labor represents 80 percent of the agency’s expenses, compared with 53 percent at United Parcel Service and 32 percent at FedEx, its two biggest private competitors. Postal workers also receive more generous health benefits than most other federal employees.

The Senate Homeland Security and Governmental Affairs Committee will hold a hearing on the agency’s predicament on Tuesday. So far, feuding Democrats and Republicans in Congress, still smarting from the brawl over the federal debt ceiling, have failed to agree on any solutions. It doesn’t help that many of the options for saving the postal service are politically unpalatable.

“The situation is dire,” said Thomas R. Carper, the Delaware Democrat who is chairman of the Senate subcommittee that oversees the postal service. “If we do nothing, if we don’t react in a smart, appropriate way, the postal service could literally close later this year. That’s not the kind of development we need to inject into a weak, uneven economic recovery.”

Missing the $5.5 billion payment due on Sept. 30, intended to finance retirees’ future health care, won’t cause immediate disaster. But sometime early next year, the agency will run out of money to pay its employees and gas up its trucks, officials warn, forcing it to stop delivering the roughly three billion pieces of mail it handles weekly.

The causes of the crisis are well known and immensely difficult to overcome.

Mail volume has plummeted with the rise of e-mail, electronic bill-paying and a Web that makes everything from fashion catalogs to news instantly available. The system will handle an estimated 167 billion pieces of mail this fiscal year, down 22 percent from five years ago.

It’s difficult to imagine that trend reversing, and pessimistic projections suggest that volume could plunge to 118 billion pieces by 2020. The law also prevents the post office from raising postage fees faster than inflation.

Meanwhile, the agency has had a tough time cutting its costs to match the revenue drop, with a history of labor contracts offering good health and pension benefits, underused post offices, and laws that restrict its ability to make basic business decisions, like reducing the frequency of deliveries.

Congress is considering numerous emergency proposals — most notably, allowing the post office to recover billions of dollars that management says it overpaid to its employees’ pension funds. That fix would help the agency get through the short-term crisis, but would delay the day of reckoning on bigger issues.

Postal service officials say one reason for their high costs is that they are legally required to provide universal service, making deliveries to 150 million addresses nationwide each week. They add that a major factor for the post office’s $20 billion in losses over the past four years is a 2006 law requiring the postal service to pay an average of $5.5 billion annually for 10 years to finance retiree health costs for the next 75 years.

But the agency’s leaders acknowledge that they must find a way to increase revenue, something that will prove far harder than simply slicing costs.

In some countries, post offices double as banks or sell insurance or cellphones. In the United States, the postal service is barred from entering many areas. Still, the agency is considering ideas, like gaining the right to deliver wine and beer, allowing commercial advertisements on postal trucks and in post offices, doing more “last-mile” deliveries for FedEx and U.P.S. and offering special hand-delivery services for correspondence and transactions for which e-mail is not considered secure enough.

Mr. Donahoe’s hope is to cut $20 billion of the $75 billion in annual costs by 2015. To do that, he wants to close many post offices and slash the number of sorting facilities to 200 from 500 and trim the agency’s work force by 220,000 people, from its current 653,000. (A decade ago, the agency employed nearly 900,000.)

The postal service has the legal authority to close facilities, although community opposition can make the process difficult. To placate critics and cut costs, officials say they would seek to run some postal operations out of stores like Wal-Mart or to share space with other government offices.

Cutting the work force is more difficult. The agency’s labor contracts have long guaranteed no layoffs to the vast majority of its workers, and management agreed to a new no layoff-clause in a major union contract last May.

But now, faced with what postal officials call “the equivalent of Chapter 11 bankruptcy,” the agency is asking Congress to enact legislation that would overturn the job protections and let it lay off 120,000 workers in addition to trimming 100,000 jobs through attrition.

The postal service is also asking Congress for permission to end Saturday delivery.

Given the vast range of stakeholders, getting consensus on a rescue plan will be difficult.

Senator Susan Collins of Maine, like many lawmakers from rural states, vigorously opposes ending Saturday delivery, which would trim only 2 percent from the agency’s budget. Ms. Collins, the ranking Republican on the committee overseeing the postal service, said the cutback would be tough on people in small towns who receive prescriptions and newspapers by mail.

“The postmaster general has focused on several approaches that I believe will be counterproductive,” she said. “They risk producing a death spiral where the postal service reduces service and drives away more customers.”

The post office’s powerful unions are angry and alarmed about the planned layoffs. “We’re going to fight this and we’re going to fight it hard,” said Cliff Guffey, president of the American Postal Workers Union, which represents 207,000 mail sorters and post office clerks. “It’s illegal for them to abrogate our contract.”

Senators Carper and Collins do back several of the postal service’s main ideas to avoid default, including recovering around $60 billion that some actuaries say the agency has overpaid into two pension funds. Although the Obama administration is working closely with the senators to find a solution, it has signaled discomfort with the pension proposals, questioning whether the postal service really overpaid.

Meanwhile, Representative Darrell Issa, the California Republican who is chairman of the House Oversight Committee, says the pension proposals would amount to an unjustifiable bailout that would not solve the agency’s underlying problems. He is pushing a bill that would create an emergency oversight board that could order huge cost-cutting and void the postal service’s contracts — a proposal that not just the unions, but Senators Carper and Collins oppose.

Fredric V. Rolando, president of the National Association of Letter Carriers, warned of disaster if partisanship keeps Congress from acting.

“This is about one of America’s oldest institutions,” he said. “It survived the telegraph, it survived the telephone, and we have to do everything we can to preserve it and adapt.”

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Dow 13,000 in Sight

Dow 13,600, here we come

Eminent analyst forecasts 18% market advance over the next six months

Sam Eisenstadt is projecting a powerful rally

CHAPEL HILL, N.C. (MarketWatch) — Here’s some cheery news to usher investors into the long Labor Day weekend:

One of Wall Street’s most eminent analysts is forecasting an 18% return for the stock market over the next six months. If he’s right, the Dow Jones Industrial will be trading around 13,600 by next February, and the S&P 500 index will be above 1,420.

The analyst is none other than Sam Eisenstadt, the former research director at Value Line. Prior to his retirement in late 2009, Eisenstadt had spent 63 years at that firm. At the time, its flagship publication, the Value Line Investment Survey, was in first place for risk-adjusted performance over the three decades the Hulbert Financial Digest had been tracking advisory performance.

Though in retirement, and well past the age when most others have long since given up following the market’s daily gyrations, Eisenstadt remains as close a student of the stock market as ever.

One of his areas of focus is a complex econometric model that forecasts where the market will be in six months’ time. The inputs to his model are monthly readings of numerous economic and financial variables over the last six decades — back to 1952, in fact. While Eisenstadt stresses that no model is perfect, he reports that the model’s track record over the last six decades have been statistically quite significant.

(For the statistically minded among you, he reports an r-squared of 0.45 for its six-month forecasts since 1990.)

During the time that I have been reporting Eisenstadt’s forecasts on this website, they have for the most part acquitted themselves quite well:

•In December 2009, Eisenstadt forecasted a 20% return for calendar 2010. The Wilshire 5000 actually gained 17.2% for the year, after dividends. Not bad.

•In December 2010, Eisenstadt forecast an 11.9% return for the first half of 2011. The actual return of the Wilshire 5000 total-return index: 6.1%. Again, not bad.

•This past July, I reported that Eisenstadt’s model was forecasting a 5.7% return through the end of the year. Though four months remain in that forecast, the market since then has fallen 8%. The best you can say in this case is that the jury is still out.

In an email earlier this week, Eisenstadt reported that his model is sticking to its bullish guns — forecasting an 18% return over the next six months.

Eisenstadt conceded that such a return “sounds too good to be true.”

But, he added, he’s learned over the years “not to question the numbers [produced by his model] nor attempt to rationalize them.”

Eisenstadt’s forecast is consistent with the bullish conclusion I reported earlier this week from a contrarian analysis of advisory sentiment.

You might wonder, however, how his forecast can be squared with September’s reputation as being bad for the stock market. Note carefully, however, that even if this coming month turns out to be a disappointing one for equities, there will remain five more months after September for the market to live up to Eisenstadt’s forecast.

We can only hope that it’s on target.

Thursday, September 01, 2011

Obama and his secret life as James T. Kirk, starship captain

Obama, over and over, displays his mediocrity. Worse, he fears things that work -- the creation or jobs by opening more territory to oil and gas drillers -- and he supports failure by backing the flying-carpet, pseudo-science of today's solar technology. Instead of building and strengthening the nation by delivering easily attainable solutions, he relies on wishfulness and dreams that are decades from realization. But rather than funding the science that will -- eventually -- turn his dreams into reality, he has chosen to pretend that Star Trek is real, that we can travel at Warp Factor 10 and that there is a Tranporter room in Starship America. Obama and the Burden of Exceptionalism Post-'60s liberals, with the president as their standard bearer, seek to make a virtue of decline. By SHELBY STEELE If I've heard it once, I've heard it a hundred times: President Obama is destroying the country. Some say this destructiveness is intended; most say it is inadvertent, an outgrowth of inexperience, ideological wrong-headedness and an oddly undefined character. Indeed, on the matter of Mr. Obama's character, today's left now sounds like the right of three years ago. They have begun to see through the man and are surprised at how little is there. Yet there is something more than inexperience or lack of character that defines this presidency: Mr. Obama came of age in a bubble of post-'60s liberalism that conditioned him to be an adversary of American exceptionalism. In this liberalism America's exceptional status in the world follows from a bargain with the devil—an indulgence in militarism, racism, sexism, corporate greed, and environmental disregard as the means to a broad economic, military, and even cultural supremacy in the world. And therefore America's greatness is as much the fruit of evil as of a devotion to freedom. Mr. Obama did not explicitly run on an anti-exceptionalism platform. Yet once he was elected it became clear that his idea of how and where to apply presidential power was shaped precisely by this brand of liberalism. There was his devotion to big government, his passion for redistribution, and his scolding and scapegoating of Wall Street—as if his mandate was somehow to overcome, or at least subdue, American capitalism itself. Anti-exceptionalism has clearly shaped his "leading from behind" profile abroad—an offer of self-effacement to offset the presumed American evil of swaggering cowboyism. Once in office his "hope and change" campaign slogan came to look like the "hope" of overcoming American exceptionalism and "change" away from it. So, in Mr. Obama, America gained a president with ambivalence, if not some antipathy, toward the singular greatness of the nation he had been elected to lead. But then again, the American people did elect him. Clearly Americans were looking for a new kind of exceptionalism in him (a black president would show America to have achieved near perfect social mobility). But were they also looking for—in Mr. Obama—an assault on America's bedrock exceptionalism of military, economic and cultural pre-eminence? American exceptionalism is, among other things, the result of a difficult rigor: the use of individual initiative as the engine of development within a society that strives to ensure individual freedom through the rule of law. Over time a society like this will become great. This is how—despite all our flagrant shortcomings and self-betrayals—America evolved into an exceptional nation. Yet today America is fighting in a number of Muslim countries, and that number is as likely to rise as to fall. Our exceptionalism saddles us with overwhelming burdens. The entire world comes to our door when there is real trouble, and every day we spill blood and treasure in foreign lands—even as anti-Americanism plays around the world like a hit record. At home the values that made us exceptional have been smeared with derision. Individual initiative and individual responsibility—the very engines of our exceptionalism—now carry a stigma of hypocrisy. For centuries America made sure that no amount of initiative would lift minorities and women. So in liberal quarters today—where historical shames are made to define the present—these values are seen as little more than the cynical remnants of a bygone era. Talk of "merit" or "a competition of excellence" in the admissions office of any Ivy League university today, and then stand by for the howls of incredulous laughter. Our national exceptionalism both burdens and defames us, yet it remains our fate. We make others anxious, envious, resentful, admiring and sometimes hate-driven. There's a reason al Qaeda operatives targeted the U.S. on 9/11 and not, say, Buenos Aires. They wanted to enrich their act of evil with the gravitas of American exceptionalism. They wanted to steal our thunder. So we Americans cannot help but feel some ambivalence toward our singularity in the world—with its draining entanglements abroad, the selfless demands it makes on both our military and our taxpayers, and all the false charges of imperial hubris it incurs. Therefore it is not surprising that America developed a liberalism—a political left—that took issue with our exceptionalism. It is a left that has no more fervent mission than to recast our greatness as the product of racism, imperialism and unbridled capitalism. But this leaves the left mired in an absurdity: It seeks to trade the burdens of greatness for the relief of mediocrity. When greatness fades, when a nation contracts to a middling place in the world, then the world in fact no longer knocks on its door. (Think of England or France after empire.) To civilize America, to redeem the nation from its supposed avarice and hubris, the American left effectively makes a virtue of decline—as if we can redeem America only by making her indistinguishable from lesser nations. Since the '60s we have enfeebled our public education system even as our wealth has expanded. Moral and cultural relativism now obscure individual responsibility. We are uninspired in the wars we fight, calculating our withdrawal even before we begin—and then we fight with a self-conscious, almost bureaucratic minimalism that makes the wars interminable. America seems to be facing a pivotal moment: Do we move ahead by advancing or by receding—by reaffirming the values that made us exceptional or by letting go of those values, so that a creeping mediocrity begins to spare us the burdens of greatness? As a president, Barack Obama has been a force for mediocrity. He has banked more on the hopeless interventions of government than on the exceptionalism of the people. His greatest weakness as a president is a limp confidence in his countrymen. He is afraid to ask difficult things of them. Like me, he is black, and it was the government that in part saved us from the ignorances of the people. So the concept of the exceptionalism—the genius for freedom—of the American people may still be a stretch for him. But in fact he was elected to make that stretch. It should be held against him that he has failed to do so. Mr. Steele is a senior fellow at Stanford University's Hoover Institution. Among his books is "White Guilt" (Harper/Collins, 2007).

Monday, August 22, 2011

Taxes and the Tax Code -- what a mess

Golub makes some excellent points:

My Response To Buffett And Obama

Before you ask for more tax money from me, raise the $2.2 trillion you already collect each year more fairly and spend it more wisely


Over the years, I have paid a significant portion of my income to the various federal, state and local jurisdictions in which I have lived, and I deeply resent that President Obama has decided that I don't need all the money I've not paid in taxes over the years, or that I should leave less for my children and grandchildren and give more to him to spend as he thinks fit. I also resent that Warren Buffett and others who have created massive wealth for themselves think I'm "coddled" because they believe they should pay more in taxes. I certainly don't feel "coddled" because these various governments have not imposed a higher income tax. After all, I did earn it.

Now that I'm 72 years old, I can look forward to paying a significant portion of my accumulated wealth in estate taxes to the federal government and, depending on the state I live in at the time, to that state government as well. Of my current income this year, I expect to pay 80%-90% in federal income taxes, state income taxes, Social Security and Medicare taxes, and federal and state estate taxes. Isn't that enough?

Others could pay higher taxes if they choose. They could voluntarily write a check or they could advocate that their gifts to foundations should be made with after-tax dollars and not be deductible. They could also pay higher taxes if they were not allowed to set up foundations to avoid capital gains and estate taxes.

What gets me most upset is two other things about this argument: the unfair way taxes are collected, and the violation of the implicit social contract between me and my government that my taxes will be spent—effectively and efficiently—on purposes that support the general needs of the country. Before you call me greedy, make sure you operate fairly on both fronts.

Today, top earners—the 250,000 people who earn $1 million or more—pay 20% of all income taxes, and the 3% who earn more than $200,000 pay almost half. Almost half of all filers pay no income taxes at all. Clearly they earn less and should pay less. But they should pay something and have a stake in our government spending their money too.

In addition, the extraordinarily complex tax code is replete with favors to various interest groups and industries, favors granted by politicians seeking to retain power. Mortgage interest deductions support the private housing industry at the expense of renters. Generous fringe benefits are not taxed at all, in order to support union and government workers at the expense of people who buy their own insurance with after-tax dollars. Gifts to charities are deductible but gifts to grandchildren are not. That's just a short list, and all of it is unfair.

Governments have an obligation to spend our tax money on programs that work. They fail at this fundamental task. Do we really need dozens of retraining programs with no measure of performance or results? Do we really need to spend money on solar panels, windmills and battery-operated cars when we have ample energy supplies in this country? Do we really need all the regulations that put an estimated $2 trillion burden on our economy by raising the price of things we buy? Do we really need subsidies for domestic sugar farmers and ethanol producers?

Why do we require that public projects pay above-market labor costs? Why do we spend billions on trains that no one will ride? Why do we keep post offices open in places no one lives? Why do we subsidize small airports in communities close to larger ones? Why do we pay government workers above-market rates and outlandish benefits? Do we really need an energy department or an education department at all?

Here's my message: Before you "ask" for more tax money from me and others, raise the $2.2 trillion you already collect each year more fairly and spend it more wisely. Then you'll need less of my money.

Mr. Golub, a former chairman and CEO of American Express, currently serves on the executive committee of the American Enterprise Institute.

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