Attacking The 4th Incentive

There are hundreds of polls and dozens of "top 10" lists that attempt to convey the things that motivate people to work. There are many nuances, and various levels of granularity. But from these polls and lists, there are an obvious Top 3, followed by several other less critical ones, but powerful motivators nonetheless. Behold, the Top 3 Motivators to Work:

1. Pay The Mortgage
2. Spending Money
3. Health Benefits

Not surprising, right? These are probably the reasons why many of you go to work. These are well-ingrained, culturally-inherent motivators. Think about it. If someone asks you, "why do you work?", these top three get rattled off pretty quickly. But something is changing. It's slow, and it's methodical, but something is changing. Let me pose the question a different way, with a bit more specificity, "why do you work, when everyone else who works can take care of those three things for you?".

In the past 11 months, the current administration has created a program to pay your mortgage for you if you get a little bit over your head. They've extended Unemployment Benefit durations in 13 week chunks in repeated fashion, and our Congress will in all likelihood be passing a National Health Care bill that will cover people who currently don't have coverage. So, there you have it. Why work when everyone else that works will take care of these things for you?

I grew up in a family where work ethic was king. My grandfather spoke with great pride when he described the three jobs he had (at once). From his 4 a.m. alarm to his midnight bedtime, he worked to do the following: 1) pay the mortgage, 2) have spending money to save some and provide essentials for his family and 3) to provide health insurance for his family. I wonder what he would think if he was alive today. Not to dovetail too far into any one of these motivators, but do people even save like they used to, now that Social Security is in place (which, by the way is under water, broke, insolvent and destined for failure in the next 20 years)?

OK. This is depressing. Let's focus on what we can do next, right? Well, if the recent past is prologue, the best way to address these issues is to attack the 4th biggest incentive, right? I mean, if we are trying to completely motivate people to stay home and not work, we might need to attack the 4th biggest incentive for working. What's that? Socialization in the Workplace. After the obvious financial incentives to work, people strive to establish social relationships through work. People enjoy the knowledge stimulation and relationships they establish with like-minded co-workers. So, what can we do?

My suspicion is that soon after we create the world's first successful National Health Care program, Senator Reid and Speaker Pelosi will turn their attention to the 4th Incentive. I am assuming that we will see a new bill in Congress to address the creation of Conferences, Meetings, and "Work Space" for those who don't work. I mean, how can we discriminate against them, right? If everyone else gets to attend meetings and conferences and such, why shouldn't they? Think about it. This is great. We'll poll all people who don't work to find their interests. We'll take people with an interest in Finance for example, and break them up into groups of 10, and set up meetings for each group to review fictitious General Ledgers, Balance Sheets and Income Statements. We'll give them software to perform edits, create graphs and charts, and then they can present to other groups with their findings. Maybe we can come up with some funding to send people on "business travel" to conferences in cool locations. I think we can call the program, Business for the Unemployed Relief Program (BURP).

So, once we completely eliminate every incentive to excel in the workplace (i.e. increase taxes for those who excel the most, continue to take the fruits of the labor from those who labor, to pay for those who refuse to labor, etc.), what will be next? Maybe we'll be able to to print more money and just pay everyone the same amount to do nothing.

Massachusetts Flip Flop

Five years ago, Massachusetts had the very interesting prospect of having a Republican governor (Mitt Romney) be given the authority to name a replacement for the US Senate Seat occupied by then Presidential candidate John Kerry if Senator Kerry were to win the election. You see, Massachusetts, like many states, had a Constitution that empowered the sitting governor to name a successor to a US Senate seat if said seat were to become vacant. Well, as you likely already know, the Massachusetts legislature is seated with a super Democratic majority. They quickly took the Constitution into their own hands, and passed an amendment revoking that power from the governor, and turning it to the people through a Special Election. Let that sink in. The governor no longer has the power to appoint someone to an open US Senate seat. The people will now do so through a Special Election, within 5 months of the seat becoming open.

Well, as the story went in 2004, Senator Kerry remains a Senator. Mitt Romney stepped down as governor and pursued a presidential run himself in 2008. The governor of Massachusetts is a Democrat, Deval Patrick. And now, in August of 2009, our country lost one of its long-standing leaders and Senators, Edward M. Kennedy. And per the amendment passed in 2004, a Special Election will need to occur. See above. A seat is now open. Within 5 months, an election will occur where the people will vote to name the successor. Again, this was voted in by the Democrats in 2004, "to empower the people to utilize their right to vote".

But hang on. Don't go so fast. The Massachusetts governor is now a Democrat. And there is some crucial legislature about to pass through the chambers of Congress in Washington (think Healthcare). The Democrats could use that seat now. Senator Kennedy's seat will remain unfilled for several months until the Special Election can occur, passed into law by the Democrats just five years earlier. But now, since the Democrats will be the impacted party, a call for swift legislative action is being made to reverse that law and to re-empower the governor to appoint someone to the seat. And by the time I write my next entry, I suspect it will be passed into law and we will have a new US Senator from Massachusetts. (Let's hope Governor Patrick doesn't pull a Blagojevich on us. But I don't think he will. There is so much integrity in Massachusetts politics for something like that to occur. I mean, who would manipulate law with backdoor deals and such?)

I am not a fan of Republicans. And I am not a fan of Democrats. True stories, like the one above, can be told and re-told over and over again about both of these parties. I ask you this, is this why we elected these people to office? Did we ask them to tear up, and then tape back up our Constitutions? To pick and choose which elements they like, and to discard the elements they don't? To flip flop based on who is in office, who has the majority, who has the most at stake? And to do it under the guise of "this is what Teddy wanted as a dying wish"? Using a man's death to swindle deals is disturbing, if you ask me.

On whichever side of the aisle you reside (or if you are like me, you don't pay too much attention to aisles, but rather to the individuals standing in the chamber), I hope this infuriates you. I hope it disgusts you enough to seek true change. Our president campaigned and got elected on a premise of "change". In 2004, Massachusetts changed law to suit the needs of an elected majority, NOT the needs of all individuals, as all our constitutions propose. And now, in 2009, our President supports another change, yet again to suit the needs of an elected majority (his majority), NOT the needs of all individuals. Until we elect officials that strive to represent 100% of their constituency, and not just the 40something% that got them elected, we will continue to see stories like the one above.

Change. Yes, we can. Hope. Change is coming. Yeah, right.

Musings about American Recovery and Reinvestment Act

This morning, I sat in 15 extra minutes of traffic than usual. In fact, it's been a solid month where I've spent 15 extra minutes in traffic. You see, my commute goes through a section of Interstate 90 that is under construction. There is a very pretty sign that informs all the drivers that it is funded by the American Recovery and Reinvestment Act.

From what I can tell, the American Recovery and Reinvestment Act helped save some jobs. For one, the sign company that makes those signs got some new business. That's good. The auto industry got so much of the hype, but I guess that the American Sign Manufacturing companies were pretty critical to the economy, too. I'm glad someone was looking out for them. See? Stupid me, I would have overlooked their need for a bailout. Further, the four empty construction trucks on the off ramp in the midst of construction were saved from being victims of the "Cash for Clunkers" plan. (Wait, didn't we want those traded in? I noticed that all four trucks were domestic and that none of them were hybrids. Strange. I would have thought they'd operate off ethanol or battery. Perhaps my eyes deceived me.) And even further, thank goodness that Dunkin' Donuts was able to get some business from the 5 workmen that were standing on the off ramp drinking coffee. Not only did we save those 5 workmen their jobs, but we also assisted Dunkin' Donuts by giving those workmen the income to purchase those coffees. And further, since we all know that the economy provides ripple effect after ripple effect, we also helped Wrangler Jeans because the jeans these 5 workmen were wearing will undoubtedly wear out their bottoms soon, at least I presume so, from sitting on the guard rail while drinking their coffees.

While I was driving by, and thinking about how this all helped stimulate the economy, I thought of the thousands of drivers who are losing 15 minutes every morning due to the increase in traffic. And since I like to think of ripple effects, I was wondering how the companies for whom all these people work are affected by the lost productivity from all these workers. I'm sure the net value these people provide to the GDP is far less than the GDP contributed by the workmen with their Dunkin' Donuts coffee.

I know I've said it before, but I'll say it again, thank goodness we have elected officials who know more about economics than I do.

Stimulus, Taxes and Healthcare, Oh My!

A funny thing happened during the "Cash for Clunkers" debacle. Our government learned that if people had more money in their pockets (i.e. in this case, a $4500 credit), they do something very profound with it...they spend it. I wonder if that would work if taxes were lowered and people had more money in their pocket? And if they spent the additional money, I wonder if it would stimulate the economy? And if the economy got a boost like that, I wonder if it would put more people to work to offset the overall spike in demand? And if more people went to work, I wonder if that would translate to lower unemployment? And if unemployment was lowered, I wonder if that would translate to a smaller deficit since less money would be spent on our welfare state? Thank goodness our elected leaders know more than I do. See? I would have gone and decreased government spending and lowered taxes.

The great state of Illinois is adding candy to the list of items that will now bear the full brunt of the highest sales tax in the country. In Chicago, candy will now get the same 10.25% sales tax as clothing, shoes, automobiles, etc. You see, candy used to be considered "food". And "food" was only taxed at a little over 2%. Now that candy is no longer "food", it gets the full 10.25%. But, there's a silver lining. Some candy has flour in it, and flour is the determinant if the item is "food". Snickers? Candy. Kit Kat? Food. Seriously. I'm not kidding. Let's play along. Three Musketeers? Food. Butterfinger? Candy. So, if you're in the checkout line and you have a chocolate craving, remember to buy "food" and not "candy". Pick up the Kit Kat, and leave the Hershey's Chocolate Bar behind. I'm looking forward to the bailout of the "candy" makers, since they were unfairly impacted by this new tax. Coming September 1 to a theater near you.

I lived in England for a year, and had the "benefit" of socialized healthcare. My salary (bartender/waiter) was clearly "lower class". My tax rate was astronomical. And my doctor had dirty hands, didn't wear gloves and seemed annoyed that I would ask any questions when he prescribed me an antibiotic without looking at me for longer than 3 minutes. Oh, and my wait was well over 2 hours. Thank goodness we formed a nation back in 1776 (severing ties with England) and yet we are still smart enough to take over their best traditions. I'm going to buy some Billy Bob teeth now so that I can prepare myself for my new dental outlook.

To our elected officials, for years I have felt like you and I were simply on a different side of an argument. I favored adherence to the Declaration of Independence and to the Constitution of the United States, preserving the rights of every individual, and you favored quotas, patriot acts, "progressive" taxation (i.e. legalized Robin Hood) and spending money you don't have. But now, you have gone further. You have offended me. You have offended my intelligence by not only presenting falsehoods in the name of "yes, we can" and "change", but you have spit on the traditions that our country and your predecessors held dear. People used to earn what they got. You've taught us that we can do nothing and still get. What will happen when the "getters" outnumber the "earners"? It's not that far away.

Affirmative Distraction

I am a white man. I was born that way. Barring major surgery, I'll die that way. Because I did nothing to choose my skin color or my gender, I should not be proud of them nor should I be ashamed of them. I should not brag about them nor should I hide them. However, a funny thing is occurring that makes me wonder how my life would be different if I was not a man or if I was not white.

A few years ago, I had an itch. I've always had an adventurous mind, having dabbled in bold travel, creative writing and the performing arts. But I settled down after not too long. I got a stable job and established myself in a successful career with a large consulting firm. But the adventurous mind was still at work, and like I said, I had an itch. So, I left. I started a consulting firm, attempting to invent a new business model with a focus on extreme quality, modest margins and affordable pricing. And we got some momentum. I found my adventure, my calling, my passion.

As we've attempted to grow the business organically, we've encountered the obvious challenge any entrepreneurial venture faces, business development. And so, we've put on our thick soled shoes. We've networked the networks. And we've pounded pavement, looking to use our reputation, our resume and our references to land us new work. Companies have been impressed. But then they ask "the questions".

"Are you minority owned? Are you female owned?"

"Ahhm. No, we're not...I'm the owner", I state with a level of apology. Apology! I was born. I grew up. I learned my trade. I started a business, doing it the right way. And I'm apologizing. But wait, there's some good news. The companies that I'm calling on tell me, "don't worry, there's a way around it. We can set your company up as a subcontractor to one of our minority-owned vendors...they only take a 10% margin".

Is this really what we want for our country's version of "free enterprise"? Most economists will tell you, markets by nature weed out the bad and reward the good (government intervention of the US automotive industry notwithstanding). However, if law limits how successful the good can be based on skin color or gender, are we in a free enterprise system anymore? I believe the answer is obvious.

If I complain loudly, we risk losing the "privilege" of being a subcontractor and donating 10% of our service fees to someone who did nothing to earn our business. If I stay silent, I contribute to the growing demoralization of entrepreneurs.

Does anyone have the name of a good plastic surgeon?

Patriot Acts

When King George's government elected to tax tea and limit the choice of what kind of tea the colonies could obtain, patriots dressed up like Native Americans, stormed boats in the harbor that were importing tea, and dumped the tea into Boston Harbor. That act was illegal, by law. The patriots broke the law to prove a point, to stand up for their basic civil rights, later documented in the Declaration of Independence and later, in the United States Constitution.

A few years later, the local elected leaders (note: farmers, lawyers, doctors, etc.) in the colonies, true "representatives" of their constituents, signed a document that formalized their intent to commit treason. Yes, treason. Treason against the royal government that enacted law after law without appropriate representation from the colonies. We as modern day Americans, applaud that signing, that document and that day. Have we forgotten what they did? They committed treason. And for that act, they could have been hanged.

And a few years later, many of these same leaders created a government that was based on preserving the rights of every individual, not as a collective. But each and every individual, even those that wanted to speak out against the government.

Fast forward to 2001. Shortly after one of our country's darkest days, September 11th, 2001, our government, still operating under our same Constitution, voted to violate rights of every individual. The "Patriot Act" was passed, under the guise of protecting us. Yet this very act was one of the greatest inhibitors to the very freedoms sought so fervently by the true Patriots during our country's birth. This act granted our government the rights to listen to our phone calls, to entry into our homes and to monitor our internet usage. For a country governed by a Constitution that is supposed to protect its people FROM the government, we passed an act called the "Patriot Act" that now puts the government in control of its people. We used to fight wars against governments that did this to its people. Now, we've done it to ourselves.

I applaud our current administration for eliminating our country's recent practice of torturing people who have been neither convicted nor indicted of any crime. Torture is what we wage wars against. We should never use it as a tactic. When we use terrorism to fight terrorism, we have become our own enemy. So kudos to this administration for turning back some of the measures that made us no better than the people we are fighting.

I hope our elected officials go further. Much much further. Let's take the Patriot Act off our books. Let's preserve the Freedom of Speech and allow my cell phone calls to occur without Big Brother listening. Let's preserve each and every individual's right to succeed or fail. If I fail, it's on my watch. If I succeed, don't take the fruits of my labor to reward the failures. If you do that, you incent me to fail, too.

Without swift changes, we are moving towards the need for another Declaration. It will probably look a lot like the first one. Maybe we should rewrite the words and pretend it's a new idea. Is it treason if we all re-sign the original?

Please Make Howie Go Away!!!

Apologies for not having written in awhile. I've been watching a lot of sports of late, March Madness, late NBA and NHL playoff pushes, MLB, etc. I do have my priorities. Anyhow, as I've been watching TV, upon the 477th time Howie Long came on the screen to talk about Chevy and how it compares to Honda, a funny thing struck me.

GM is using MY MONEY to advertise TO ME to buy a car I WAS NEVER INTERESTED IN. I know this is probably obvious, but I need to dissect it further. People we elected voted to take our money and invest in a car company we weren't investing in and whose cars we weren't buying. Apparently, our elected officials know better than we do about how we should spend our money. Anyhow, they took our money, invested in GM, and what does GM do? Advertise to us that we should buy their car. I know this expression got a lot of use and misuse during the last election. But talk about lipstick on a pig.

I would have loved to have been in the executive conference room when the leaders at GM were deciding what to do with the bailout money. "Hey guys, nobody is buying our cars. Our cars are getting out-done by our foreign competitors. Nobody is investing in our stock. What should we do?"

And the solution? Hire Howie Long to tape dozens of commercials in an attempt to convince me that the cars are actually good. Don't change the labor practices that cause your prices to be too high. Don't change the product choices that make your products impractical for the everyday consumer. Instead, let's advertise our way out of this mess. Let's take the bailout dollars we received FROM YOU and advertise TO YOU that you should have been giving us your money all along through purchasing our cars. They didn't get our money the old-fashioned way, i.e. by earning it. They got it the same way any other panhandler gets money for their fix, by sticking their hand out and begging for it. And to say that I'm surprised that they are misusing my money would be like saying I'm surprised that the crackhead who got a dollar from me used it towards his next purchase of smack.

Past performance is the best indicator of future performance. It applies to dating, working and yes, spending. But apparently, our government seems to think that past performance is NOT a good predictor of future performance. Thank goodness they stepped in and took my money and did the right thing with it. And to think I would have invested in companies that have proven successful track records. How very foolish of me. Thank goodness we elected people who know better.

Inhospitable to Hospitality Industry

Well, here we go again. Government intervention begets government intervention. And around and around we go. Last week, I posted a blog here that conveyed the expected ripple effects of increasing taxes on small businesses, not the least of which is reduced revenues for other critical businesses crippled in this current economy, including the catering and hospitality industries (i.e. restaurants, hotels, etc.). The more money you take away from people who could have and would have spent it, the less they will have to spend. This seems so obvious, and like I've said many times before, this is simple math. I'm not quite sure how I can help stimulate the economy if my government (through its words and actions) encourages me to cook for myself, do my own ironing, etc. instead of dining out every so often or utilizing a dry cleaners. Do they not realize that reducing my dispensable income translates into less revenues for the businesses I use? Do they not realize that less revenues for these businesses translates to unemployment for workers in those industries? Unfortunately, the answer is no. They don't realize it.

We all have heard by now the backlash engineered by Congressman Barney Frank (D - Massachusetts) when he criticized what seemed like every financial institution for spending money on marketing (e.g. stadium naming rights), client satifaction (e.g. hosting clients at golf events) and employee retention (e.g. bonuses to the highest performers). Subsequently, we have seen a dramatic (and I mean jaw-dropping dramatic) decline in season ticket renewals, hosted quarterly meetings and sales-incentive trips. And guess what has happened, hotel leaders have petitioned to Congress (Link to Article on Hospitality Industry backlash.) to "ease up" on the rhetoric. Why, you ask? Because their industry is being crippled by the REACTION to Barney Frank's REACTION!!! Companies are spending less out of fear of perception issues.

Side note and perhaps a future blog topic: the best employees are not being adequately rewarded by their employers, which means they are now less-incented to be the best.

So what will our leaders do to resolve this? Perhaps a "bailout" for the hospitality industry? Print some more money, sell some bonds to China to keep the hotel business afloat? Maybe we could mail out vouchers to everyone making less than $30,000 a year for a one-night stay at the hotel of their choice, and our government can reimburse the hotels with their freshly printed money? Mark my words, there will be a government reaction to this problem. It might be embedded in some future "stimulus package" and may not get the publicity of the auto bailout. But it will happen.

My Dad and I think our ancestors in our family tree may have had a candle business. But when electricity came along, the candle industry was crippled. Perhaps we can apply for a retroactive bailout. On my Mom's side, we think that our ancestors ran a buggy business. When Henry Ford, that evil entrepreneur who didn't like the status quo, invented an automobile, our buggy business went under. Another retroactive bailout for me.

When does this end? When will we elect leaders who actually read our Constitution? When will we elect leaders who actually adhere to our Constitution? Perhaps we can host a convention at a resort hotel to discuss the merits of the principles of our founding fathers' view of free enterprise and free markets. Ugh. We can't do that just yet. We're not sure if the hotel industry will survive long enough to host our little delegation. Perhaps they need a bailout.

Will someone please invite me to a tea party? In Boston, perhaps?

My Unanswered Letter

Below is a letter I wrote to an Illinois Senator. I wrote it on Saturday, November 1st, a mere three days before the Presidential Election. I wrote it to vent. In fact, this letter is the genesis for this website. To I'm sure nobody's surprise, I received no answer. Perhaps it's because, there is no answer.

The letter is my attempt to simplify economics, to personalize it so that people see the very real ramifications of "distribution of wealth". At first glance, you might say, "he's bluffing". I'm not bluffing. These are the measures I now need to take. And make no mistake about it, another government program, stimulus, tax, subsidy, you-name-it will result to deal with the ramifications about which I speak. It is inevitable. Simply read history.

Letter to an Illinois Senator on 11/1/08. A few words have been changed to protect the innocent.

Dear Senator,

My name is Brian King. I am the founder and owner of a small business in Chicago, Illinois. It is structured as an S-Corporation, which as you know, means that the Net Revenues of the company “flow through” to my 1040 Tax Return. Keep in mind, I don’t treat these revenues as “my money”. I view them as corporate holdings for future purchases, payroll during economic downturns, etc. Between my payroll income and the S-Corp revenues, my household will be one of the millions of Americans impacted by proposed tax increases. But rest assured Senator, I will NOT be the only one impacted by the tax increase imposed on ME. Below are some of the additional impacts:

1. My employees will receive smaller year-end bonuses, thereby reducing their income and of course, the income tax they pay.
2. To compensate for my lost income, I will no longer use the luxury of the dry cleaners for laundering and ironing. I will do it myself.
3. To compensate for my lost income, I will no longer use the cleaning service that comes to my house once per month. I will do it myself.
4. To compensate for my lost income, I will no longer use the “handy man” service that comes to my house once per quarter. I will do these tasks myself.
5. To compensate for my lost income, I will no longer use the landscaping service that manicures my yard. I will do it myself.
6. To compensate for my lost income, I will no longer dine out as regularly as I once did. I will cook more meals myself.
7. To compensate for my lost income, I will no longer travel as regularly as I once did. I will stay at home.
8. To compensate for my lost income, I will no longer donate the same amount of money that I used to donate to March of Dimes, United Way, American Lung Association and my alma mater.
9. I presume that other income earners similar to me, as well as my employees who will receive smaller raises and bonuses, will also need to take similar actions.
10. The dry cleaners, cleaning service, handy men, landscapers, waiters, waitresses, restaurant owners, travel agents, airline pilots, hotel managers, etc. will all be working for companies that take in less revenues because of the actions above. Some may even lose their jobs.

Did you intend this? Probably not. But I ask you this. What letters of apology will you write to these impacted people? What taxes will you raise to support the increase of Americans on unemployment? What government intervention program will you create next, to offset the debilitating impacts your tax policy will have on the American people? When you figure it out, let me know.

Sincerely,

Brian King

Why All The Anger Over Misuse of Bailout Money?

It's been a strange and wild ride since we first learned of the acronym, TARP. Then Treasury Secretary Henry Paulson and his successor Timothy Geithner have thrust economic and industry terminology such as TARP, bailout, AIG, Citigroup, GM and stimulus into dinner table conversation. And the once least observant of political events are now "expert" in the subject. And the old "experts" and the new "experts" are all angry right now. It seems as though republicans and democrats, conservatives and liberals, libertarians and greens, and socialists and capitalists are all in agreement on one thing. They are all angry. How can companies like AIG who have received incomprehensible billions of taxpayer dollars be justified in using those dollars to pay offshore counterparties and executive bonuses? I ask a different question. Why all the anger?

When a teenager returns home after curfew seven nights in a row, and after each indescretion, the parents decide to make the curfew later for each subsequent night, what do you think the teenager will do on the next night? When a child throws his cereal off his high chair each morning, and the parents cheer and praise the child and give him more cereal, what do you think the child will do the next time he gets cereal? When a dog bites the postal carrier every morning, and the dog owners reward the dog with a meaty bone after each bite, what do you think the dog will do when the postal carrier comes the next day? When so-called domestic automotive companies decide to build worse cars than their so-called foreign competitors, charge more for them, pay more for their labor, PAY many of their employees to STAY HOME, negotiate assembly line stoppages for all union members even if their line was not impacted, and the government gives each of those companies $25,000,000,000, what do you think those companies will do with the money? When AIG makes terrible investments, abysmal decisions time and time again, essentially gambles away money with reckless abandon with the equivalence of "putting it all on black" on the roulette wheel and laughing when it comes up red, and the government gives them $180,000,000,000, why are people angry when they give some of that money away in bonuses? Why are people angry when they use more than half the money to pay counterparties, many of whom are foreign banks?

The bottom line is simple. When you reward idiocy, stupidity, insubordination and recklessness with billions of taxpayer dollars, one conclusion should be made. You will get more idiocy, stupidity, insubordination and recklessness. What would make you think otherwise? It has been widely said and widely agreed, "if you want less of something, tax it. If you want more of something subsidize it". The lesson here is clear. Our government has assessed the performance and behaviors of General Motors, Chrysler, AIG, Citigroup, etc. and has concluded, "hmmm...I like that. I want more of that". They have chosen to take MY money and YOUR money and invest in companies that have a proven track record of failure. If you want more of something, subsidize it. So again, why are they now angry that they got more of the same?

We got into this mess because we as a nation (individuals, companies and our government) borrowed money we could not afford to pay back. Our government's conclusion? Borrow more money. Brilliant. I repeat the point from above, if you want more of something, subsidize it. If you like being in debt, as an individual, company or government, borrow more money. Again, brilliant.

Let's get back to AIG. Think of what could have happened had we let bankruptcy run its course. The very contracts Mr. Liddy says could not be broken (i.e. paying back all the counterparties) would have been broken through bankruptcy. Lessons would have been learned, through the restructuring of AIG and the bankruptcy debt negotiations with these counterparties. Risk-friendly financial institutions who got burned and felt the pain would reduce their risk. I repeat, lessons would have been learned. And behaviors would have changed. Instead, we get more of the same.

Curious. In 2008, did you invest in AIG? Did you invest in Citigroup? How about GM? I didn't either. Even though we as individual investors wanted nothing to do with putting our money in these companies hands, our elected officials decided that we don't know best. They decided to take our money anyhow, against our better judgement, and reward idiocy and recklessness. Worse, they borrowed money from China and told them "don't worry, future Americans will pay you back". And what did we get for our investment? Idiocy and recklessness. And an angry government wondering how could this have happened.

In subsequent Novembers, I hope you as a voter teach our government what is supposed to happen to idiocy and recklessness.

Housing Bubble Stays Afloat

Whenever prices surge for a particular product, others try to jump on the bandwagon and produce the same product. Additional supply rushes to the rescue. That's what markets do. When housing prices were exploding, developers were turning out new homes, new subdivisions and new communities in droves. I repeat, that's what markets do. Because of the explosion of housing activity, people who never before could afford a home (and frankly, still couldn't in true financial terms) rushed to the buying scene before prices climbed too high.

And risk-friendly lenders were willing to take on the risk, because they were backed by the federally subsidized Fannie and Freddie. "It's not MY money", they thought. When the government is willing to back these mortgages (thanks to my favorite Reinvestment Act, they had to, since no bank wanted to hold onto these toxic mortgages), the lenders thought "heads I win, tails the taxpayers lose". No wonder they took on more risk. There was no downside.

Well, here we are. It is what it is. Now what? People realized soon after moving into their new homes that they couldn't afford to live there. So they needed to sell. Supply side started to surge (see new development comments above). Demand waned. And prices dropped. Soon, people who put 0% down and were paying interest-only loans owed more than the home was worth. The same could be said for people who put 3% down and had sub-prime mortgages. Etc. Etc. And prices continued to drop. That's what markets do.

Meanwhile, there were people on the sidelines ready to benefit. A recent article on CNN.com titled "For one man, foreclosure a shot at his housing dream" (Linked Here) told a wonderful story of a young man and his family on the verge of closing on their first house. It would not have been possible had it not been for the depressed housing market. Depressed? This guy was ecstatic about the housing market. As prices dropped, demand came to the market. That's what markets do.

And there's more demand out there. There are young couples with high school educations, a couple of children and one of the parents working two jobs. They are living modestly, renting and saving their money, hoping that they may have the opportunity to do something that just 18 months earlier, they never thought possible. They are hoping to buy a home. Prices have dropped 40% in their neighborhood. And if it comes down just 5% more, they will be ready to afford the home they always hoped to own.

But there's a problem. A certain bill was just passed to help keep people in "their homes". The expression that our president uses "their homes" is kind of funny. FYI....if you put 0% down and pay an interest only loan, you don't own the home. You don't own it until you own it. Simple math. Anyhow, we have a government that defies that math, chooses to defy that common sense. And that government, the very leaders that the aforementioned young couples helped elect, is now PREVENTING them from buying a home. That's right. They are artificially keeping home prices higher by allowing the guy who decided to throw caution to the wind and buy a home he could not afford, to stay in "his house" that he doesn't own. And our government will take money (higher taxes) from the people who did everything right (i.e. entrepreneurs, market makers, 60 hour/week workers), to pay for the people who did everything wrong, including that guy who is still in the home he couldn't afford. And to make it worse, we'll refer to the home in question as "his home".

Just think of what could have happened. We could have rewarded the young couple who did everything right (working, saving, renting, etc.), and allow them to buy a home at the true MARKET price. But instead, we come up with a plan to keep that guy in "his home" (which as I cleared up before, isn't his since he owes more than it's worth). And further, we let him refinance at a better interest rate than the people who did everything right can get, and not to mention, at a price point that artificially inflates the market. So now, the people still paying their mortgages ontime have a higher rate than the guy who faulted. And the couple hoping to buy a home can't, because prices haven't come down enough for them to afford it, due in large part by our saving the guy who faulted.

Whenever the government comes up with another program to bail out someone or some company or some industry who clearly did some things very poorly, ask a simple question about that program, specifically about where the money is coming from. At whose expense? At whose expense will we bail out banks? At whose expense will we bail out people who borrowed more than they could afford? The answer is in your mirror. And once you've come to grips that it's your money that's being used, consider who's distributing your money, and consider who's receiving it.

I have to go. I need to write a letter to my bank letting them know that I've ceased to make payments on my mortgage. I'm going to refuse payment until I get a better rate. Wish me luck!

The Plight of the Individual

I am a believer of the inalieanable rights as depicted in the Declaration of Independence. I am a believer that government's true responsibility is to protect the fundamental rights of "each and every" individual. Unfortunately, I am also a believer that my governments here in the United States of America, in my state of Illinois, in my county Cook county and in my city of Chicago are in violation of my rights each and every day.

And so, I will write about it. As an individual, I will exercise my right to free speech. And as individual readers, I hope you will exercise your right to decide what you will read and what you will discard as folly. I am eager to write about a number of topics, from our country's culture of enablement and entitlement to state competition for residency of businesses. I am eager to write about tax policies and subsidies. I am eager to write about government spending, public education, social security and the state of healthcare in the United States. I am eager to write about the two-party system, career politicians, religion, lobbyists and earmarks. And I am eager to write about the state of mind of the American worker.

I hope you read. You don't have to read my writings, but of course, I hope you do. Regardless of which paper, which site, which blog, diversify your knowledge and expand your inbound channels of information. And certainly, make your choices yours.

My hope is that our great nation resumes its role as a global leader of brilliance. My hope is that our great nation resumes the spirit of enterpreneurialism that made us so great. And my hope is that we reverse the dangerous trend upon which we are riding at too furious a pace, a trend where fewer and fewer individuals are producing and greater and greater numbers are idle, reaping the benefits of the producers.

In my eyes, it begins with me. And when I say "me", I mean "us". Not as a mass. Not as a collection. Not as a majority. Not as a minority. Not as a society. I mean ME the individual, and YOU the individual. And all the other individuals that comprise this country. It is time that "you" and "me" and the rest of "you" out there begin to communicate about "your" rights. I will no longer tolerate someone telling me that something I cannot choose is "patriotic" of me. Only I can choose to be patriotic. Only you can choose to be patriotic. Someone should not tell you to be so.

And so, through the spirit and memory of the true Patriots, I declare my Independence. It begins here. It begins now. I look forward to the path this will lead.