Stewardship Journal

Tax Surplus Isn't Spending Money

2011-11-13T11:44:00.002-05:00

To the editor:
In the Friday November 11, 2011 edition of your publication was an article on South Carolina’s state budget surplus. http://www.thestate.com/2011/11/11/2041941/panel-adds-400-million-to-states.html.

In the article, Mr. Beam’s opening paragraph frames the dilemma inherent in South Carolina government when he says, “SC Lawmakers will have an extra 920.5 MM to spend.” It isn’t extra. And the idea that this is lawmakers’ money to spend is exactly what is wrong today in government at all levels.

Mr. Beam goes on to describe the problems in the SC economy: “The state’s labor force is growing faster than new jobs are created. Permits to build single family homes are at 30-year lows. And inflation is increasing faster than wages.” Given these concerns in the economy, how can the legislature simply look at the people’s money and decide that it’s theirs to spend. No amount of government spending will solve these problems. In fact, citizens may be better off getting some money back in their pockets to help with these economic concerns instead of state government keeping all of it to spend. Unfortunately this won’t happen.

The article editorializes on programs that “provide vital public services”. Our problem is that we haven’t made any difficult choices on what is truly “vital”. We can’t provide all things to all people. Nor can we look to our government as the sole source to solve problems in the economy. The legislature has a tendency to overcommit and the current dilemma in social program funding is one of several budget areas where we have borrowed from the future revenues by not being willing to make the tough choices today on what is “vital”.

Having been involved in analysis of the state’s pension crisis, I can testify that our state government has already made promises to state employees it can’t keep. The first iteration of the hard choices associated with this crisis came last week as the Budget and Control Board voted to reduce the annual cost of living adjustments for retired state employees. A $20 Billion shortfall in pension dollars will come home to roost at some point. These promises preclude spending on Medicare, road construction, education, or the mental health programs Mr. Beam mentions in his article and are an example of legislators not deciding on what is vital. The dollars we spend today instead of paying down these debts will only further hurt the economy in the future and cause a downgrade in South Carolina’s credit rating. Legislators must make the hard choices on what is actually vital for the future prosperity of our state, beginning with not viewing tax surpluses as “spending money”.

A reader writes about "the message of conservatism"

2009-06-29T10:48:00.004-04:00

Walker McKay, my good friend, wrote me the other day as a follow up to my last entry, "Are we just now figuring this out?" He is exactly right when he says:

"Bill: I don’t think we have lost the message of conservatism for a generation, but maybe the Republican party has lost conservatives for a generation. I think the message of conservatism is stronger now than ever, there just isn’t a viable “party home” for it."

Thanks to Walker for the input.

Are we just now figuring this out?

2009-06-26T13:02:00.003-04:00

Recently, I received an email from Republican U.S. House member Joe Wilson (SC-2) discussing the fact that "Spending is out of cotrol in Washington." http://joewilsonforcongress.com/home/2009/06/spending-is-out-of-control/

(This realization is only slightly later than his endorsement of John McCain for President.)

http://www.fitsnews.com/2008/01/22/joe-wilson-is-tardy/
http://shotpolitics.com/wilson-staff-loses-release-endores-mccain-anyway.htm

Below is the reply I sent regarding his correspondence:

Dear Mr. Wilson:

Thank you for your recent email correspondence entitled, “Spending is out of control.” As I read it, I was struck by the fact that if we as Republicans had simply had this outlook on spending during the period when we were the majority party we wouldn’t be facing the spending crisis you discuss in your correspondence. Because you chose not to stand up to the Bush administration on the expansions of government under their watch, or to the appropriators within our own party, we lost the faith of many of the voters even within our own party. I fear that your request for action may be too little, too late, and that we may have lost not only the majority, but also the message of conservatism for a generation.

Power vs. Principle

2009-05-31T22:43:00.002-04:00

The recent government takeover of General Motors and various financial institutions is distasteful to the business community and political conservatives. However, the nature of our national demographic means that this type of government intervention is more likely. Politicians will come under increasing pressure to meddle in the private sector to protect the financial well-being of the baby boomers as they reach their “golden years.”

If the speech given by Senator Lindsey Graham at the South Carolina Republican convention is any indication, then we will see more politicians willing to compromise principle to get reelected. Senator Graham vehemently challenged the delegates that “if you want to win, you’d better decide to moderate on issues to get something done.” Senator Graham went on to mention that because President Obama is such a likable guy that conservatives will have a tough time defeating his agenda.

So we already see the death of fiscal responsibility as there is no strident opposition to the Obama administration and influential members of Congress like Senator Graham have adopted the go-along-to-get-along mentality. If there isn’t the political will today to try to stop the taxpayer funded bailouts (with no union concessions) then how will there be any political will to ask for stewardship on any other issue that affects the boomer retirement hopes. Who will argue the other side for the future generations who have to pay for the government bailout of the pensions of the current retirement generation? The silence on government takeovers will allow the “likable” liberals to enact an agenda that erodes any hope of a resilient American economy in the future. Conservatives need to get the guts to answer the question, “What hill are we willing to die on,” and then stick to the principles of our founders.

The Rule of Law and Liberal Hypocrisy

2009-05-31T22:36:00.001-04:00

This past week, President Obama cut a deal to save General Motors that cast aside the existing contracts between the company and the companies bondholding creditors. Normally these moves could only take place in a rightly constituted bankruptcy court. However, in the current economic environment, we have obviously suspended the rule of law in an effort to return political favors to labor unions while hiding behind the stalking horse of saving the economy.

While unions were given concessions for their investment stake in the company at a dollar-to-dollar basis, including preferred stock paying a 9% dividend, bondholders were told to accept equity stakes at ten-cents-on-the-dollar or get nothing. This level of government intervention into capital market contracts is growing almost by the day as the current administration, with no business experience, plays with taxpayer money to make politically driven decisions about whom to save in the recessionary economy.

As The Wall Street Journal reported today,

Even after nine months of extraordinary government intervention, the scope and complexity of the General Motors Corp. rescue present a thicket of conflicts unlike any seen before in Washington.

The federal government is likely within weeks to emerge as the principal owner of a storied U.S. corporation whose factories and products touch the lives of tens of millions of Americans. It will simultaneously serve as the company's regulator, tax collector, customer, pension backstop and lender.

The Obama administration is making up the rules as they go. The only hope to keep the federal government from continuing to become increasingly entrenched in the affairs of private enterprise is for state pension funds and other large institutional creditors to stand up and say enough of the Obama administration running roughshod over creditors’ rights.
At this point we have put significant taxpayer funds into dying business models. Why should the taxpayer expect anything different when we continue to see the Washington attitude of “it’s our money to use as we see fit, and we’ll do what it takes to maintain power.” The Obama administration seems to have added the sentiment, “So whatcha gonna do about it; we’re in charge now.”

Punishing a true stimulus

2009-04-30T22:12:00.002-04:00

Recently, a bill was introduced by California Representative Henry Waxman that, if passed would effectively raise the marginal tax rate on oil and gas companies. What amounts to a punitive measure by a liberal member of the U.S. House is in keeping with the policy measures of an overly ambitious Democratic Party majority. The repeal of the Section 199 deductions for oil and gas companies will hurt our interests in three key ways.

First, a tax increase on oil and gas will pass through to consumers at a time when we can least afford to see consumer spending on goods and services erode further. According to the Bureau of Labor Statistics, we have seen the steepest drop in consumer spending since the beginning of the measurement. Further taxes on energy will only prolong this downturn.

Second, U.S. national security is undermined when we raise taxes on U.S. oil and gas companies. The issue of energy independence is not one where we have an option; we must allow our oil and gas companies use their resources for research and development for new sources of energy, not for tax dollars to be spent on government programs that have little or no return on investment.

Third, it is wrong for Congress to give money to industries that are struggling and pay for it by raising taxes on those that are healthy. Such measures move us philosophically backwards in encouraging companies to produce more profit through more efficient operations. Instead it seems that Mr. Waxman and The White House have decided that in order to support out-of-control spending and government intervention in dying business models they are going to tax everything they don’t like, even if it hurts the nation as a whole. In an effort to pay for “stimulus” by raising taxes on oil and gas companies, they are actually hurting a crucial underpinning of economic recovery; low energy prices.

Someone, stimulate leadership

2009-02-14T01:30:00.005-05:00

This week, I had the opportunity to hear an elected official holding statewide office address a group of business people on the state of the economy. In the room were owners of companies who never have the luxury of just looking at the problem, but who must get up every morning and figure it out and pray for provision. The government official gave grim news on declining tax receipts, oversized state government and stated that there was “no good news.” I kept waiting for the proposal, “So here’s what I’m meeting with leaders about…” There was none. I left confused, having admittedly missed the point.

Today, Peggy Noonan summed similar sentiments in The Wall Street Journal:

Politicians keep saying, "People have to begin to understand we're in bad shape," and "People should realize it's a crisis." I think they know, Sherlock. Do you? Our political leaders are like a doctor who rushes to the scene of a terrible crash, bends over a hemorrhaging woman and says, "This is serious, lady, you can't take it lightly." She looks up at him: "Help me, do something, I'm bleeding out!" The doctor, to the local TV cameras: "I hope she knows she's in trouble."

No longer can we afford to have politicians who castigate the others with whom they share power as a way to pass the buck. You were elected to work together to solve the problems that arise, not simply report the news.

Leadership is the willingness to say, “If it goes well, it’s time to credit everyone else. If it goes poorly, it’s time to look in the mirror.” Unfortunately, we’re not seeing many examples of that today because maybe the only safe thing in the economy is to keep accruing years on a government pension by being reelected. Getting reelected today seems to mean making sure you’re showing people the problems, not proposing solutions. Solutions are messy. If it doesn’t work, it’s easier to be on the outside passing judgment and placing blame.

The wonderful thing about the people in that room is that they will survive, and they will lead, even if the public as a whole never gives them accolades. They can’t afford to simply diagnose. They have to stop the bleeding and get the patient on her feet again. They will provide the examples of leadership for the next generation and maybe even the politicians.

We aren't likely to spend our way out of this

2009-02-10T22:48:00.006-05:00

What the Democrats would have us believe is that they are on a crusade of economic statesmanship when really it is simple legislative consumerism designed to protect political turf. I believe President Obama is sincere when he says we are in a dire situation, but it seems that he has simply given Congress a license to continue to do what they do best; spend.

Why is spending really a concern? Why shouldn’t we fund all these initiatives out of the federal coffers? Why shouldn’t we just send our Congressman up the hill to get our share?

Because according to David M. Walker former Comptroller General of the Untied States, we can’t afford to do so. In an article published last spring in Politico, Mr. Walker wrote:

"The current federal fiscal policy has created a disconnect between today’s citizens and future taxpayers. Baby boomers and current retirees benefit from today’s government spending and tax policies, while our children, grandchildren and generations to come will be expected to pay the bill for today’s excess consumption.

From a broad perspective, many in Congress think that since the U.S. is currently the world’s sole superpower, we will always be able to borrow from foreign countries whenever necessary at attractive interest rates. Unfortunately, the government — like too many Americans — has become addicted to debt.

With a federal deficit in the billions, government appears numb to running large operating budgets every year, irrespective of the state of the economy or the existence of wars. The resulting deficits and related debt burdens are set to escalate dramatically when baby boomers retire in big numbers.

To put things in perspective: Absent meaningful reforms, income tax rates would have to more than double from today’s levels for the federal government to deliver on its promises and pay its bills."

In his March 15, 2008 editorial in The Wall Street Journal, South Carolina Governor Mark Sanford expressed a similar concern when he wrote, “Since 2000, the federal budget has increased 72%, to $3.1 trillion from $1.8 trillion. The national debt is now $9 trillion -- more than the combined GDP of China, Japan and Canada. Add in Medicaid, Medicare and Social Security commitments, and as a nation we are staring at more than a $50 trillion hole -- an invisible mortgage of $450,000 for every American family.”

These concerns were being voiced before we began to consider spending an additional $4 Trillion on “stimulus measures” in the form of industry bailouts, interest rate cuts and spending measures. The currently debated stimulus package is supposed to be the new and improved version of the economic stimuli we have had over the last 11 months that add up to $1 Trillion. We keep spending hoping that we can maybe return to the heyday of 2006 when anyone could get a house for nothing, everyone was comfortable and consumers had their wallets open. The risks that came along with that environment have come to roost. Are we really trying to get back to those “good old days?”

American consumers have already gotten the message and begun tightening their belts. Personal consumption is down by 3.5% and savings rates have doubled year over year to 2% (the 60 year average is 7%). If only we could get government to follow suit. Sales tax and income tax will be down, but state and local governments tend to lag in dropping tax receipts so they are just now figuring out that spending like it’s 2006 won’t work. State governments from both parties are looking to the federal government for a rescue. It seems like we’re determined to treat an economic hangover with more liquor.

If over-leverage is what got us into this mess, then more spending and increasing leverage isn’t likely to be the long-term solution. Some of the stimulus might actually be worthwhile, but no one has the willpower to flow it in over time to see what actually works. What we are likely to be left at the end of it all is higher taxes, higher inflation, a weaker dollar and higher energy prices. The prevailing attitude seems to be, “As long as we get ours as the entitled society today, our progeny can figure all that out for themselves.”

The gift we have yet to open

2008-12-25T17:32:00.002-05:00

In spite of the economic turmoil facing the world this Christmas, there are many blessings for which to be thankful. I remember Christmas when I was young and a sort of game my parents and grandparents used to play with us and with each other. On Christmas morning some gifts had to be reserved for last and invariably, they were always the best gifts; the biggest gifts; the gifts no one expected. Even as economies and governments stumble, we are reminded of a higher hope at Christmas that God’s plan has not failed despite our limited perspective of not having opened all the gifts.

God’s gift of His Son is in itself beyond our comprehension. That God would come to Earth as a baby is most difficult for our minds to conceptualize. That He would die to purify us from our sin is no less fantastic to our reason. That He would rise up from death is also an amazing gift of hope. These gifts foreshadow the gift that only Jesus could make possible through His willingness to sacrifice.

How often do we simply look at the packaging of the gift? It’s actually still somewhat politically correct to talk about Jesus as a baby, but the gift God gives us through His Son is so much more. The gift is a God who reaches out to us in the form of a servant; subjecting himself to the law He created so that in fulfilling the law and dying though blameless we might be able to open the greatest gift of an eternal relationship with God.

The gift of eternity in Heaven with Our Creator Father is the gift we look at under the tree and wonder what it holds while the giver smiles, knowing that it is beyond all we can ask or think.

Trampling Posterity

2008-12-03T08:51:00.001-05:00

Who was Jdimytai Damour? He was a temporary worker in a Wal-Mart on Long Island, New York who was trampled to death by shoppers as he unlocked the door on “Black Friday.” His family must be in shock, that someone who showed up to work chasing the American dream was instead trampled by it.

In the current economy, it appears that the desperation of consumers to buy continues. Have we really become a group of people whose mindset is the ultimate in short-term? Have we really descended into a lack of manners in our conduct and an outlook of, “Have to have it now regardless of whom I have to trample to get it?”

We need look no further than government for the answer. Short-term thinking has ruled our nation from the highest levels. The attitude to often seems to be, “As long as I have my power, and as long as voters have what they want today, we’ll trample anything we have to, including the future financial stability of the nation to get it.” Legislative spending initiatives have grown at rates that no reasonable person could expect an economy to sustain. We have put our future at risk by avoiding the hard issue of reform of government-run entitlement systems of Social Security and Medicare/Medicaid which are threatened with insolvency. We have refused to balance our federal budget and continued to spend more than we make each year with no plan for repayment

The most recent example is the possibility of loaning money to automakers for the sole purpose of keeping people at work in a failed system. Thankfully, the U.S. Congress didn’t acquiesce at the auto executives’ first visit to Capitol Hill, but now the loans to a group of auto manufacturers who can’t seem to make money is being labeled as an economic stimulus. It is not economic stimulus to bailout the least efficient players in an industry. It would actually be a stimulus to give money to the successful companies and let the failed business models go by the wayside, but in either case the capital markets should make those decisions, not government.

A “loan” with no anticipated repayment is a “gift”. Our government seems to understand this well. If we aren’t able to repay our national debt, then why should we expect industries to be able to do so? Unfortunately, in the interest of providing gifts today, the future generations are likely to be trampled by the rush for short-term gratification of political interests.

Moral Hazard, Moral Bankruptcy

2008-11-26T10:23:00.000-05:00

With the announcement this week that the federal government is putting even more money into Citigroup to keep it afloat and the sentiment in Washington leaning toward keeping the U.S. auto makers in business as well, it seems that there is no end to the amount of money we’ll end up printing in an effort to “stimulate the economy.” That notion of stimulating the economy probably helps the medicine go down as politicians describe why we’re undertaking these measures. However, let’s at least be honest about it; this isn’t actually going to stimulate the economy as much as it will pull our bacon out of the fire in the short term only to have another day of reckoning later.

We’re now on the proverbial slippery slope. Where does it stop? It probably doesn’t stop soon. Will legislative bodies at the state and federal levels finally decide to be fiscally disciplined in spending on other measures in order to focus our economic resources on meaningful stimulus like tax cuts, or will we just spend to save the economy today only to raise taxes on our grandchildren to levels that douse any incentive they have to grow wealth? Will legislative bodies at all levels cut the pork out of the budgetary diet in order to save our economy, or will short-term thinking continue to pervade every aspect of government? Given the fact that we haven’t put aside other spending while in a two-front war, we probably won’t for this crisis either.

The government bailout of financial companies is disagreeable enough, but at least I can ascend to the point that we need bank solvency (which isn’t an economic stimulus; it’s a critical driver). But we don't need to make automobiles in the U.S. We need to let bankruptcy laws work. Taxpayers shouldn't be forced by their government to take risk in a failing auto manufacturing system when capital markets have decided that the risk is unpalatable.

As a capitalist society, we seem to have simply increased the moral hazard. In insurance, moral hazard is the prospect that someone insulated from risk may behave differently from the way he would behave if he was fully exposed to the risk. The common example is someone not locking his car because; after all, he has insurance if it is stolen. Our government, in providing rescue funds has most likely increased the behavior of risk taking in the future by insuring investors from loss. Actually, investors may be less prone to take risks since it appears that the beneficiaries from the current bailouts are executives, not investors.

Morally bankrupt may be a good definition for the current situation. Because of our lack of moral leadership and resulting attitudes on stewardship of resources, we continue to have legislative bodies in our nation with the attitude of, “Let's maintain our power as long as we can by giving people anything they want.” Where will it stop?

As our heirs figure out where we lost our influence as a nation, they are likely to ask, “Why didn't they make the hard choice to stop?”

The Morning After Election Day 2008

2008-11-05T22:17:00.002-05:00

Last night, I stayed up to watch the speeches by both candidates for President. I was struck by the common tone in each man’s remarks. Both were magnanimous and selfless in their demeanor. Both gave me hope that statesmanship might still be alive.

This morning at breakfast, my children asked about the outcome; “Was it Senator McCain or Senator Obama?” (We had already corrected them throughout the campaign that both men had titles of respect and should not be referred to simply by last name despite what they heard in the media.) When they learned that the candidate we supported had not prevailed, I squelched any grumbling. I still had the words of both men in mind and reflected on their mutual rebuke of partisan rancor as I told my children that the election was over, that the nation had selected a new leader, that the man we had supported had asked us to support the President-Elect, and that the President-Elect had asked for our help.

My children don’t remember any election where there wasn’t continued animosity over the result. I’m not sure I do either. We teach our children to shake hands after a hard-fought game on the athletic fields and yet too often they watch adults behave badly in politics.

Both men made the case that we all have a responsibility in the effort to prosper our nation. No one knows how long the honeymoon will last, but at least for a brief moment we have the opportunity to encourage the next generation to do away with the idea that the losing side should bitterly throw mud at the winners while the winners gloat. Perhaps it serves as a reminder to us all that leadership means coming together for common purposes, even if our candidate doesn’t win.

The Washington Liberals? Really?

2008-10-11T10:31:00.003-04:00

This week I received a mass email from an incumbent member of South Carolina’s Congressional delegation entitled “The Washington Liberals,” in which I was asked if I’d heard that he was the target of liberal attacks. Unsurprised that he would be, I read on as he discussed his agreement with the “Washington Liberals” that “this is a change election year.”

He noted that taxpayers were mad with Speaker of the House Nancy Pelosi and Senate Majority Leader Harry Reid over the way they have “spent money hand over fist,” and over the fact that a “Democratically controlled Congress has kept us dependent on foreign oil and how their irresponsibility has led to this economic crisis.”

I’m certainly no fan of Ms. Pelosi or Mr. Reid. However, as a conservative, by this point in the email I must admit I was shaking my head thinking that the writer of the email was hoping to appeal to a mindset that may be dead. It is dunderheaded thinking that allows us to simply point the finger across the aisle and claim that all the problems have occurred in the most recent Congress, in which Democrats controlled both houses.

Spending money “hand over fist” was one of the primary reasons Republican leaders claim to have lost the majority in the 2006 election cycle. Ironically, this complaint on spending comes from a Congressman whose website proudly lists $700 Million in spending initiatives in the last budget cycle. Moreover, the failure to address looming energy issues has been a problem just as much in previous Congresses over the last decade when controlled by Republicans.

Everyone seems to agree that change is required. I think the change people seek is an environment where politicians admit that they may be as much at fault as the other party and then provide solutions.

Given the fact that most of the issues we face didn’t simply show up in the last two years, I think the proper approach for an incumbent who has served for the last seven years is to be more solutions-minded, showing that the experience counts for something other than having learned to simply shift the blame.

The genesis of the no-fault foreclosure, bankruptcy, etc.

2008-08-06T23:09:00.004-04:00

The recently passed housing legislation, signed by President Bush last week, has something for everyone. Republicans got protection in place for the mortgage lenders, Democrats got protection in place for borrowers. Who says bipartisanship is dead? Even though the passage of the legislation is likely to give some short-term-feel-good reaction in the economy, the long-term result is likely to be only further government intervention in the marketplace. Instead of natural market activity allowing for players to either take advantage of opportunities, or take their lumps without a government-provided safety net, we appear to be in the beginning stages of a 1930’s-style big government growth phase.

One aspect of the housing legislation of particular concern is the $4 Billion provided to local municipalities to purchase, restore and resell foreclosed properties. I’m not sure how many local municipalities ought to have a Federally-sponsored “no down payment” real estate business, but Congress and The President obviously seemed to think that the various city and county officials could make a go of it. Maybe the thought is that the extra income will offset other declining tax revenues. There will probably be increased sales of the books and DVD’s offered via infomercials at local taxpayer expense.

Over the last week, too, there has been increased talk of a bailout of U.S. auto makers. Since the housing legislation was such a bipartisan success, perhaps members of both sides of the aisle are looking at all the goodies that can be loaded in that bill as well. Why say "no" to this initiative either. Here again, it is unlikely that in an election year, Congress will have the stomach to allow market forces to rule. Both sides surely fear the commercials run by opponents if plants in the Midwest shut down. Even Senator McCain has said he would be in favor of such a plan leaving conservatives to scratch their heads at where we went wrong.

Obviously, it appears that those in elected office have lost faith in the American enterprise and the resilience of the people. Instead of letting market forces take effect and have the winners win and the losers learn from failure, we have created the business equivalent of the kindergarten playground where everyone gets to win and the most important thing is that everyone’s self-esteem is intact; particularly the self-esteem of the politicians as they go home to face voters. Unfortunately we cannot afford to continue to bailout everyone in crisis with a government program or bipartisan legislation. The taxpayers don’t win that game, and our nation will end up looking for the world bailout on our currency and Treasury debt. That bailout isn’t likely to appear.

Meanwhile, as Congress looks for more ways to put band-aids on skinned knees, we risk bleeding to death from policies of past entitlements and bailouts that created the largess of government we have today. We’re left to wonder about the long-term effect in 70 more years of the current government reaction to the climate of “it’s not my fault.”

Driving towards bankruptcy

2008-06-28T15:10:00.001-04:00

During the week ended June 27, oil prices hit a record high of $142 per barrel. With the continual increase in energy prices over the last two years, the question echoing through the halls of Congress these days is, “Who is to blame for high gas prices?” In typical Washington-knee-jerk-reaction-because-it’s-an-election-year fashion, Congress is looking everywhere for the evil culprit to punish so that the voters will feel like something has been done to alleviate consumer pain. Unfortunately, this type of short-term thinking is what got us here in the first place.

Instead of pursuing increased domestic fossil fuel, or providing incentives for Detroit to adhere to higher fuel efficiency standards, political authorities have tried to ignore issues related to energy policy until a crisis has reared its ugly head. Now, the failure to focus on sound policy is threatening our economic stability for years to come.

Because of the economic effect of rising oil prices, policy makers are hard-pressed to find a quick fix and one group that is getting thrown under the bus is “Speculators.” As if they were the mustachioed villain tying the damsel to the railroad tracks, some in Congress and the media have pointed out this group of commodity investors as a major influencer of oil prices. The thought is that these investors are bidding up oil prices by buying financial instruments based on the anticipated future price of oil. While these instruments do have some effect on commodity prices, to regulate these players out of the market would create an even more disastrous situation in which there was increased volatility in the price of commodities such as oil.

There is no doubt that the price of oil has had a significant negative effect on the U.S. economy. There seems to be little understanding in Washington though of the interlocking relationship between the value of the U.S. Dollar and the price of oil. As the prospect of a weaker U.S. economy is reflected in a declining Dollar, the price of Dollar-denominated oil goes up. As oil producing nations get paid in Dollars that are worth progressively less, they raise the price of the oil to offset the decline in value. Stemming the decline in the Dollar would have an immediate effect in stabilizing and lowering the price of oil.

The unfortunate truth in the Dollar’s decline is that it reflects the economic viewpoint of the world that our economy is relatively weaker and a major driver of this viewpoint is our national debt. As long as we continue to borrow from the rest of the world (ironically; in increasing amounts from oil producers like Saudi Arabia) to fund our government and its tendency toward legislative consumerism (increased spending to make all the constituents happy), our Dollar will continue to decline. As we approach the tipping point of baby-boomers collecting from welfare programs, the problem will only deepen. As a result, we will continue to see rising oil prices and an ongoing threat to our economy and our way of life unless our political leaders get the will to make the difficult decisions to stop spending frivolously and reform entitlement programs.

It is easy to find the election year boogie-man on Wall Street, but if our Congress would like to see who is at fault for higher oil prices, they should start by looking in the mirror.

What's spending got to do with it?

2008-06-16T22:31:00.001-04:00

When the Republican Party lost the majority in Congress in 2006, Senator Lindsey Graham was reported to have said that Republicans lost because, “We had been spending like drunken sailors.” The problem is actually much deeper. The Republican Congress had failed to do what they said they would do which was reduce the size of government and be more efficient with the taxpayers’ funds. Republicans had lost the mantle of “the conservative party,” and it seemed that the phrase was even more an oxymoron than originally thought.

A friend of mine, Josh Gross, who is a political consultant, and I were recently discussing the relative merits of politicians we know. Josh commented that one politician in particular was “strong on defense, but weak on spending.” I retorted that spending is a national security issue. As our nation borrows increasing amounts from foreign governments that are not necessarily friendly to our interests (i.e. China and Saudi Arabia), we endanger our ability to exert influence in the world. As I told Josh, “No one picks a fight with their bankers.”

Both mainline political parties are to blame for the current economic conundrum. Neither party has been willing to ask for sacrifice and restraint on spending. Instead, Congressional earmarks continue to proliferate. Recently, Senator Jim Demint authored a budget amendment that would have instituted a one-year moratorium on Congressional earmarks and the amendment was defeated with 71 “nay” votes in the Senate. Remarkably, all three Presidential contenders (Senators McCain, Clinton and Obama) voted in favor of the moratorium. It seems that their collective support indicates that no one running for national office would want to be seen as a spendthrift even as appropriators in Congress see it as the path to reelection. The defeat of such an amendment also shows the lack of willpower in the Congress to go home and tell voters that pork barrel projects will have to wait given that we are trying to fund a war. (Of note; in South Carolina we aren’t funding any wars but our General Assembly is no more inclined to spend the people’s money wisely.)

Given the comment I have attributed to Todd Long in my entry on May 21 that “a politician thinks about the next election while a statesman thinks about the next generation,” it is clear that the rationale for votes against the earmark reform measures constitutes the politician’s mindset and not the statesman’s. In 2003, the Federal Budget exceeded $20,000 per household for the first time. Most would suspect that the growth in budget expenditures was related to the post 9/11 efforts in war and homeland security spending. In fact, as these programs grew, there were no offsetting cuts in discretionary domestic spending. According to the Heritage Foundation, "non-defense discretionary spending has grown 55 percent under President Bush." Earmark items grew in the same period. Sadly, these increases are in spite of the fact that our nation is in a war that has budget implications of its own.

As if the size in spending per household weren’t enough of a bitter pill, in 2003, the U.S. Treasury collected less than $17,000 per household. This deficit has continued in the following years as well. In fact, we’re all receiving “stimulus checks” from the Treasury to encourage us to spend money when we’re already in the hole fiscally. So, where do we get the difference? Since 2001, borrowing from foreign lenders to fund the deficit has also grown at annually increasing proportions. As the “boomer” generation moves into collection mode on welfare programs, these deficits are likely to increase. Will we see any offsetting cuts in federal spending to fund these programs even though we haven’t sacrificed domestic spending to date for the current war?

While we borrow from foreign lenders to fund our legislative consumerism, confidence in our future economic viability erodes, our currency’s value declines, and energy resources denominated in dollars increase in price.

As we examine the world stage and our national security, our nation and its leaders must understand that prudent fiscal policy is strong foreign policy.

The "Civic Mindset"

2008-06-05T15:19:00.005-04:00

Recently I had the opportunity to spend a Saturday morning near Beaufort, SC with 150 or so other gentlemen thinking about the future of the conservative movement. I left feeling hopeful that there were changes afoot that would allow for a greater sense of stewardship in the cultural mindset.

Among the speakers at this gathering was Roy Williams (not the basketball coach at UNC or NFL player). Although he may disagree with my description, Mr. Williams is a marketing consultant to businesses large and small on trends, branding and the way customers think about buying decisions.

So what, I asked, does this have to do with conservatism? He explained that, in a pendulum fashion, societies swing from a “civic” cultural mindset to an “individualist” cultural mindset and back over the span of an 80-year cycle. He commented that in popular music and literature these cultural shifts were evident. His thought was that we have recently seen the height of the individualist movement in the 1990’s for that cycle and that we have begun to swing back to a civic mindset. The last height of the civic mindset was the 1930’s in which government was tasked with solving all the social ills of the day. In that decade, we saw the modern social programs and large government institutions come into existence. In that phase of the cycle, there was a societal push to rally around a common cause and sacrifice the individual pursuit for the good of the nation.

Mr. Williams stated that if we are indeed moving into a societal phase of civic mindset, the people are more likely to elect leaders who are “open, natural and uncontrived.” The Barack Obama phenomenon makes sense in light of this. Is there a chance that conservatives can find a similar candidate who conveys a genuine sense of conviction about the future of the nation? As Mr. Williams said, “In the civic generation, leaders are more likely to be elected if they are seen as nonpartisan thinkers rather than partisan ideologues.” As conservatives, we should find such leaders or be prepared to lose the civic movement to eloquent speakers who believe that government is the answer.

South Carolina Governor Mark Sanford posed a concern at the conclusion that the civic movement may mean that we see even larger government as the people look for government to solve their issues. My hope is that precisely the opposite will occur; that people will make civic sacrifices for the good of the nation. Programs that were originally part of the civic mindset have now become servants to the individualistic mindset’s chant, “Forget everyone else, I want mine.” Since bigger government hasn’t delivered long-term solutions, conservatives should lead from the perspective that the civic movement will mean reductions in government by a people who are willing to sacrifice the government program that benefits themselves in order to preserve the blessings of Liberty for posterity.

Better Late Than Never for Fred Thompson

2008-05-27T20:08:00.006-04:00

I was not a Fred Thompson supporter in the 2008 Presidential primary, instead thinking that Mitt Romney was the best choice given his business leadership credentials and smaller government ideas. However, Mr. Thompson was published on the editiorial page of the Wall Street Journal on May 23 and had he penned his comments prior to the South Carolina primary, I would have had to seriously consider supporting him. Entitled, “The Death of Conservatism is Greatly Exaggerated,” the editorial opens with comments on the recent Congressional losses by conservatives and states that the revival of the conservative cause “will require avoiding the traps of pessimism or election-year quick fixes.”

Unfortunately, I’m not sure the trap of election year quick fixes can be avoided by those who seek to maintain power at all costs even if it means doling out funds to everyone who has his hand out. As we saw in the years of Republican control up until 2006, even Republicans will grow government until the electorate turns over the tables and throws the money changers out of the temple.

It seems that over the last decade Republicans have lost their conservative credentials and have bought into the fallacy that government programs can solve every problem. Because the Republicans have been ineffective at reducing government when they promised they would and instead grew government, the American people seem to have decided that bigger government is the only option offered by either party. At least the Democrats have the decency to say openly that they are in fact for bigger government to solve the issues of the day.

In his editorial, Mr. Thompson goes on to say:

"Some conservatives try to avoid philosophical confrontation with liberals, often urging solutions that would expand the government while rationalizing that the expansion would be at a slightly slower rate.
This strategy simply has not worked. Conservatives should stay true to their principles and remember:
- Congress cannot repeal the laws of economics. There are no short-term fixes without longer term consequences.
- In a free and dynamic country with social mobility, there will be great opportunity but also economic disparity, especially if the country has liberal immigration policies and a high divorce rate.
- An education system cannot overcome the breakdown of the family, and the social fabric that surrounds children daily.
- Free markets, not an expanding and more powerful government, are the solution to today's problems. Many of these problems, such as health-care costs, energy dependency and the subprime mortgage crisis, were caused in large part by government policies.
It's not that conservatives today no longer believe in the validity of these principles. They just find it difficult to stand strong when the political winds are blowing so hard against them."

Why is it that conservatives have lost the will to fight? Is it because there is no leadership for the conservative movement on the national level in the Executive Branch? So many elected officials who purport to be conservatives either have decided that it is easier to simply point the finger across the aisle and blame the other party for the lack of solutions or are afraid to admit that conservative principles require sacrifice. It’s easier just to allow government to perpetuate itself rather than ask the electorate to make sacrifices in order to shrink the institution from which those officials think they derive their power.

Mr. Thompson alludes to the sacrifice issue as well in his conclusion:

" ...Conservatives must have faith that, more often than not, Americans will make the sacrifices necessary to preserve national security and prosperity.
A political party that adheres to conservative principles should have continuing success – especially if its leadership believes in those principles and is able to articulate them."

At this point, it appears that we are still waiting for the leadership that can articulate those principles and not simply fill our ears with rhetoric against the other party. Only by speaking rationally about these beliefs and then acting on them can a party with a conservative philosophy be entrusted again with control at all levels government.

The lesson from Mr. Thompson; maybe it takes getting out of the political scene to clearly articulate a statesman-like message on conservatism. I just hope people are still listening.

Statesmanship vs. politics

2008-05-21T00:48:00.000-04:00

In searching for the writing of others on “stewardship in government,” I found an interesting statement on a website for Todd Long, a Republican candidate for Congress in the Florida 8th Congressional District: “A politician thinks about the next election. A statesman thinks about the next generation.” I don’t know Mr. Long, but I wish I’d come up with that one myself.

The short-sighted activities of current politicians have created a house of cards for our posterity. In particular, the unsustainable levels of spending and national consumption are largely due to an attitude amongst our leaders that to ask the people to sacrifice for tomorrow is unpopular and will only result in being sent home. Such thinking isn’t leadership at all.

While we ask our armed forces and their families to make sacrifices (for some the ultimate sacrifice) in a time of war, we the citizens at home have not been asked to sacrifice anything for the war effort or otherwise. It doesn’t appear that our government has the fortitude to ask the people to sacrifice for the war and much less so for the future generations by reforming entitlement programs such as Social Security and Medicare or proposing solutions on health care or energy policy which may be controversial even within their own parties.

These issues require leadership. Leadership requires statesmanship. I echo the question I hear so many ask, “Where have all the statesmen gone?” Currently, it seems that those who hold high office seek only to denigrate the members of the opposing party in an effort to “rouse the base,” rather than work collaboratively on solutions to issues that determine the fate of our nation for the next generation. We need statesmen who build credibility by clearly communicating the issues and calling on constituents to make necessary sacrifices rather than holding on to power at all costs by pretending that pressing issues will fix themselves simply by maintaining the status quo.

In 2007, I attended the South Carolina GOP’s annual Silver Elephant Dinner at which Sean Hannity of Fox News was the keynote speaker. A significant amount of the time was spent on what I’ll call “Clinton humor.” It occurred to me as Mr. Hannity spoke that as Republicans we had lost the initiative as the party of ideas and had instead become the anti-Democrat party. I’m certainly not suggesting that Democrats are any more pure in their rhetorical attacks against Republicans. Both parties have lost any sense of magnanimity. Solutions don’t come out of rhetorical statements against the other party. Even though there are those who enjoy the “red meat” of politics, we cannot afford the cynicism that these acerbic partisan rants breed in the electorate if we are to inspire the nation to make sacrifices as stewards of the blessings of Liberty for posterity.

Theodore Roosevelt once said, "It is character that counts in a nation as in a man." My hope is that we can find statesmen and leaders who have the character to ask the nation to stand on its.

Defining "Stewardship"

2008-05-18T23:55:00.000-04:00

In February of 2003, I was in Boston on business and was invited to have dinner at a very nice restaurant with the incoming president of a 6th generation family-owned company and his executives. The entire city was in the midst of a record snowfall and the dinner was a leisurely one because, I think, all the parties were avoiding having to venture into the bitter cold.

As we talked and ate, I asked the gentleman who was just about 40 at the time, how his family had been able to achieve the milestone of successfully turning over the reigns of the family business to him after already having survived five prior generations. I told him that I worked with companies everyday that had difficulty transitioning to the second or the third generation, and yet his family had clearly done what seemed impossible for most. He didn’t hesitate in his reply and offered a one-word answer: “Stewardship”.

I paused and then said, “In the South where I come from, that word has a connotation of donating money to the Church. What does it mean up here?”

He laughed and commented, “We’ve always defined ‘stewardship’ as ‘leaving things better than you found them.’”

Delightful as the evening was and as insightful the conversation, that definition has haunted me ever since. Over the last few years, I have become increasingly concerned that we, as a nation and a culture, have lost any sense of stewardship. The idea that we would leave anything better than we found it seems so distant in a culture where our political leaders seek to remain in power at all costs with no sense of fiscal discipline. Stewardship requires sacrifice today so that we preserve for tomorrow’s generations.

The idea of preserving for tomorrow was very much on the minds of the founders of our country when they agreed on the very mission statement for our government; the preamble to The Constitution and its final purpose, “secure the Blessings of Liberty to ourselves and our Posterity.”

This journal seeks to explore and expound on the ideas related to stewardship and the role of government and the people in our nation.

Since that evening meal on a snowy night in Boston, and upon these recent reflections on the intent of those who risked everything to found our nation, I have thought it ironic that the gentleman who shared his views on stewardship with me shares the surname of one of our original patriots. His name is Kevin Hancock, president of Hancock Lumber.