Sunday, January 10, 2010

Cutting Back

The company I work for, like most companies, had a difficult 2009. Our revenues were down and so as a result, we had to reduce our staff some, be more frugal in our expenses, and be more selective in how we spent our money. Everyone had to make some sacrifices. We actually ended 2009 on a positive note and everyone is optimistic about 2010. Since we are in better control our expenses now and run more efficiently, as we hopefully grow our revenue in 2010, we should be more profitable and be in a better position to invest our surplus to help continue to grow the business.

On a personal note, everyone in the company took a salary reduction this year. As a family, we have had to learn to be more frugal in our expenses and more selective in how we spend our money. We survived and now as we enter 2010, we are in a better position financially since we run our household more efficiently.

Why is it that government never has to go through that? When their revenues are down, they end up spending more money which they borrow from future generations. Few in the government took a pay cut. Layoffs only happened on the local levels. As described above, having to cut back is not pleasant but as we go through it, we emerge in a stronger position. If government would make the hard choices and cut back when they don't have the money, it would be painful for some and the politicians would get complaints from many but in the end, it would make government run more efficiently. It is a natural process that works if allowed to be carried out.

Sunday, January 3, 2010

Seen and Not Seen

After taking the month of December off from blogging, I'm back in 2010. I read a great quote recently from Frederic Bastiat who wrote a number of essays on economics and politics in the mid-1800's. Here is the quote:

"There is only one difference between a bad economist and a good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen.

The State opens a road, builds a palace, straightens a street, cuts a canal, and so gives work to certain workmen - this is what is seen, but it deprives certain other workmen of work, and this is what is not seen.

When a government official spends on his own behalf one hundred sous more, this implies that a taxpayer spends on his own behalf one hundred sous less. But the spending of the government official is seen because it is done; while that of the taxpayer is not seen, because alas! he is prevented from doing it"

Our politicians are just that - politicians. They are not economists and as a result act like bad economists - only looking at what is seen. It is our responsibility as the people to let our politicians understand the unseen impacts of their policies on us. If we don't speak up, they will continue to implement short-sighted, politically motivated policies that will have many unforeseen consequences that continue to drag our economy down.

I got this quote from an excellent article by Lynn Harsh of the Evergreen Freedom Foundation. You can read the full article on page 3 of the following link:

Haute Counture Economics

Sunday, November 29, 2009

The Science is Settled

This week, emails from several global warming researchers were exposed to show collusion in manipulating the data to show "evidence" of global warming when the "evidence" was not that convincing. According to the emails released, that data shows that the earth has not warmed for the last decade but the researchers have manipulated the data to show that it has. This now raises doubts about the science of global warming and if we can truly believe what we are being told. This includes the statement I have heard from many that the "science is settled" on global warming and now we have to figure out what to do about it.

We should always be wary of any scientist that declares "the science is settled". For example, we can say that the science is settled in regards to gravity. It is true that we understand the law of gravity, how it works, and how it changes with respect to distance and mass. However, we do not understand why it happens and the underlying cause of gravity. The law of gravity was introduced by Newton in 1687. It has since been superseded by Einstein's general theory of relativity but for most purposes, Newton's law is still valid. We have over 300 years of science since Newton's discovery and I would still say the science of gravity is not settled since we still cannot explain it's origins.

As for global warming, we do have data that shows the earth warms and cools. We have theories as to why it warms and cools but these theories are far from settled science. In fact, the science is so unsettled that we struggle to come up with an accurate weather forecast 1 week out.

Here is my theory - when someone tells you that the "science is settled", they want you to accept their theory without question so they don't have to debate it with you. Now a good scientist will question that theory and try to disprove it. I'm open for debate!

Sunday, November 22, 2009

Give it to us Straight

In front of Congress this week, our Treasury Secretary testified that the TARP program was winding down and some of the leftover funds would be used to pay down the deficit. When I read that, I thought that is like saying we are going to use the remaining credit limit on our credit cards to pay down our mortgage. You cannot use borrowed money to pay down your debt.

We need more straight talk from our government officials. When I hear things like "deficit neutral", "paid for from savings", or "lower costs", I really wonder what sort of "spin" they are using to make that justification. I realize many don't really question these statements but we should. We cannot solve our country's problems if we refuse to accept the truth and demand straight talk from our politicians. I realize that the truth will be hard and we probably won't like the solutions. We are in a state of denial and we need to face the facts. The fact is, ss a nation, we have max'd out our credit cards. We need some serious debt counseling!

Sunday, November 8, 2009

Checks and Balances

I have come to the conclusion that there are many in this country that believe we can rid our society of all our ills if we can just implement the perfect system of government. For example, there are those that believe we can get rid of violence if we ban guns, we can get rid of obesity if we ban transfats, we can get rid of global warming if we ban SUV's, or we can get rid of corruption if we ban political contributions. This all stems from a belief that it is the system that lets us down rather than individual people. To all those people, let me say that there is NO perfect system without perfect people.

Our founders understood this clearly and that is why they put in a system with multiple checks and balances. It is not perfect because people are not perfect but it puts limits on government since there is always a check on power and the needs of any one group are balanced against the needs of other groups.

As frustrated as I get with government, I still believe in our system of checks and balances and that good government will ultimately prevail. The biggest check on government is the people themselves. If we don't agree with the direction of the country, we can vote in new representatives. To make this work, we have to be engaged in what is going on because ultimately, there is no check on us. If we the people do not demand good government, we will get what we deserve.

Sunday, November 1, 2009

1787 vs. Today

The original constitutional convention in 1787 consisted of 55 men who spent 4 months in lively debate in drafting a 4-page constitution. There were major issues to resolve such as the power of large states vs. small states, how to address slavery, the role of the federal government vs. the state governments, and how much power to grant to the people. There were strong opinions on both sides of these issues and in the end each delegate and state had to compromise to achieve the final draft of the constitution. The delegates themselves wrote the words of the constitution and there was often debate over individual words. The delegates all served at their own expense and endured a hot and muggy summer in Philadelphia in a closed room with no air conditioning.

Fast forward to today and we have strayed far from that standard for making legislation. We now spend hours or days in debate (if that) on 2000 pages of legislative language written by someone else. Our congressman all get paid for their work (and many find ways to make significantly more than their salaries), they have staffs to write their bills, and they debate in a spacious and air conditioned room. We have heard this year that many congressmen don't even read the bills they vote on.

How do we get back to the ideals of 1787? We can start by getting rid of the staffs of our congressmen. Let them have a secretary and that is it. If they were forced to write their own bills without the benefit of a staff, then we might get more real debate and less grandstanding, shorter bills that can be understood and explained, and politicians that can be held more accountable to the people that elect them.

Sunday, October 25, 2009

Special Interests and Lobbyist

A common refrain in the political debate is the accusation that special interests and lobbyists are behind any attempt to express opposition to any particular plan or idea. A special interest is a group of individuals that have a common interest. Lobbyists are paid by special interest groups to exert influence on members of Congress to push forward their desires. Having political office holders complain against the special interests and lobbyists is like an alcoholic complaining about having cirrhosis of the liver. Lobbyists have influence because Congress and the political parties let them have influence.

Our political leaders should listen to special interest groups. They should be aware of the effects of legislation on different groups and special interest groups are able to represent the views of the people they represent. The problem is that our elected leaders let money influence their decisions and this is the problem. If an alcoholic wants to avoid getting cirrhosis of the liver, they can stop drinking. If politicians want to lessen the influence of special interest groups and lobbyists, they can simply stop taking their money. They should still listen to the viewpoints of special interest groups - that is their job, but they don't need to be influenced by how much money they can give to the candidate.