Friday, June 1, 2012

2012 and the Failure of American Leadership

One thing is certain, and that is that America is uncertain.  When historians write the record of the Obama Administration, they will likely marvel at how America went from swaggering and unfounded bravado to utter insecurity in less than half a decade.  America still has its best asset intact: its people.  What it no longer has is a government capable of getting out of the way of those people so they can do what they do best: work and innovate.

There is a myth about America, that Americans don't want to work and largely view a living as their automatic due.  This is true of some Americans, just as it is true of any society.  The mood in America is ugly precisely because Americans are not indolent.  They don't want a handout, they want their economy back and they want to go to work.  Americans are angry because they can't find work.

The choices before Americans are dire.  On the one hand, we have a President whose record of job creation with public monies is absolutely laughable.  On the other hand, we have his challenger, a man whose idea of capitalism is to put up a small amount of cash to purchase a company, borrow huge sums of money to finance the rest of the purchase and large dividend payouts for himself and his partners, only to default on the loans and liquidate the companies in question afterwards.  Put simply, Mitt Romney is a charlatan who admittedly likes to fire people and tells amusing little anecdotes as to how his father shut down factories.  Whatever you may think of Mitt Romney's work with Bain Capital, one thing is indisputable: the man is tone deaf.



In an economy with 20% real unemployment, you do not prance around the country talking about your Missouri foxtrotter, nor do you advertise that you like being able to fire people.  Remarks may be taken out of context, but the fault still lies with the candidate for providing the fodder in the first place.

The story of America over the past eighty years has been one of utter mismanagement.  Even before that, we had problems with fiscal responsibility.  However, consider the following statistic: since 1940, America has had 12 official budget surpluses in 72 years.  That means that for 60 of those 72 years, the American federal government ran deficits.  You cannot say that we need to get back to fiscal responsibility, because there was never a great legacy of said responsibility to begin with.  It's even worse when you consider that four of those twelve budget surpluses relied on borrowing the surplus receipts of Social Security withholding in order to construct a surplus. In truth, we've had 8 annual surpluses in the past 72 years.

The issue with deficits and debt dates back to the founding of our Republic, but the earliest federal governments we had were notably better than modern era federal governments about paying off debt. In 1796, the government embarked on a sixteen year period where it had 14 annual surpluses and 2 annual deficits.  The War of 1812 caused debt to explode, but afterwards the federal government produced 18 surpluses in 20 years and paid off over 99% of its debt.  Consider that after the Civil War, the government managed to produce 36 annual surpluses in the next 47 years; moreover, after World War I, the government pumped out 11 consecutive surpluses.

Debt has always been a fact of life for this Republic, but we used to elect officials who understood the importance of repayment.  Hence, we had more annual surpluses than deficits over time.  What liberals and even modern day Republicans will point to is the historical national debt to excuse their malfeasance, but nothing changes the fact that past governments used to pay off that debt over time by producing surpluses. Modern incarnations of our federal government do not, and if they do, it is only by looting the retirement funds of current Social Security payees.

Today, the federal government is so entrenched in every facet of our society that cutting its spending would allegedly produce economic cataclysm.  Jobs would be lost, economic suffering would increase, and our nation's economy would no longer be a bedrock of stability and prosperity.  Not all jobs are created equal, however, and that is what neither of the present major party candidates will tell you.

The emphasis on privatizing government misses the point; the government shouldn't be in many of the areas being privatized to begin with.  You don't need to outsource the jobs; instead, you need to cut the government's role.  But let us examine what a private contractor's cost really is to the American taxpayer so that we can see why both major party presidential candidates are idiotic in their prescription for fixing the deficit and by extension the national debt.

Let's consider administrative support positions, which "involve examining, reviewing, developing, adjusting, reconsidering or recommending authorization of claims by or against the federal government." The government employee who performs this task is compensated to the tune of $57,292 per year.  The private contractor makes around $75,637 for performing the same task. That's not all: the private contractor bills for the services as well, to an average of $276,598 annually.  In short, the private contractor charges over 5 times as much as the government employee for doing the same job, with no demonstrable difference in productivity or efficiency to show for it.  Additionally, if the same private contractor was working within the private sector for a company performing similar services, he'd make far less.  Private contractors for the government charge 3.66 times what a private sector employee would charge a private sector employer in terms of billing.

This, according to a study by the Project on Government Oversight that found that government workers would be less expensive in 33 of the 35 occupations surveyed.  Given that we have $700 billion in private contract work annually, you can imagine the savings if you only spent 20% of that total hiring a government worker.  But that isn't the end of it, because many of these contracts are cost-plus contracts and the government signs on to contributed to defined benefit retirement plans for contractors.  Those plans are under the control of private companies, whose officials control the level of benefits offered and the investment strategies of their employee's retirement funds.  Those funds have to be fully funded, so if the company officials screws up and loses a bunch of employee money on a bad investment, your federal government gets to make up the difference.

In the Energy Department alone, the Government Accountability Office reported a five year liability of $37 billion.  That's one department of the federal government over a mere five years.

Now, President Obama will point to these statistics as a reason to avoid outsourcing government jobs.  Mitt Romney will still likely favor privatizing government jobs and he'll talk about the free market and this and that, but no government contractor ever has to deal with the free market.  The free market does not produce cost-plus contracts, lined with sweet honeypot clauses that enable contractors to pad their costs and profits with questionable accounting.  No, a free market company would scream to no end about the financial misfeasance involved in such accounting by an outside contractor, because it has a fiduciary obligation to its shareholders.  But the United States federal government has no such obligation to you.  You as a taxpayer cannot sue them for breach of fiduciary duty when they mismanage such contracts and allow your tax dollars to be siphoned off for questionable billing practices.  You'd be laughed out of federal court.  That's the difference between a taxpayer and a shareholder.  But what Mitt Romney and Barack Obama both will not do is simple and telling as to their shared philosophy: question why in the hell the federal government has any role in a particular area to begin with.

Mitt Romney won't because his core philosophy is opportunistic.  The people he can outsource those jobs to are likely campaign contributors.  Barack Obama won't because his core philosophy is ideological, and he believes that government has a near limitless role in American society.  And that, ladies and gentlemen, is why you as taxpayers and citizens will lose regardless of who you vote for in 2012.

We have a president who said his stimulus bill would keep unemployment below 8%. It did not.  He also pledged to cut the deficit by the end of his first term.  He did not.  He said that his healthcare reform legislation would cut the cost of family premiums, and it did not.  By 2021, such premiums are projected to rise to half of the median family income, effectively placing insurance for families out of reach for most Americans.

We have a challenger who says that his past record in private equity will translate to the Oval Office, and he can create jobs as a result.  There's only one problem: being the head of Bain Capital is not the same as being the head of the United States.  Mitt Romney is not going to march in and unilaterally implement his proposals into action.  You will have four more years of gridlock with Congress, and a president who yet again blames the mess he inherited and the do-nothing Congress that came with it.

You've already seen a preview of what Mitt Romney's executive skills can do when holding a public office.  Look at Massachusetts: he was 47th in the nation in job creation, and real wages declined in his state while rising everywhere else.  He engaged in semantic parsings to avoid getting a reputation as a tax hiker by raising fees instead of tax rates.  It was, like so many of his accomplishments, rooted in skillful disingenuousness.

Neither one of these men can lead us through what is most certainly going to happen in the next four years.  Europe is on the brink of collapse, and Europe has historically looked to the United States to fix it when it collapses.  China is a paper tiger, built on a mirage of credit even more so than our own economy over the past decade.  With a trillion yuan bailout, the misallocation of Chinese resources into ghost cities and empty malls will have dire consequences for the Chinese people and the world at large. The derivatives bubble that collapsed our financial sector has been inflated even more with over $28 trillion in bailouts, loans, and guarantees.  The regimes of the Middle East and North Africa are all collapsing under the weight of incompetent leadership, corruption, Proven leadership has never been so desperately needed at any other time in our history to stave off the prospect of a Weimar Republic in Asia comprised of a billion Chinese people who were promised prosperity and delivered a per-capita GDP on par with El Salvador and Albania, along with rampant corruption in their local government.

The two major parties have clearly failed to put forth a candidate who can win anything other than an election.  Of the minor parties, only one candidate stands out, and that is Gary Johnson of the Libertarian Party.  He has a record as a former governor that speaks to his ability to manage with fiscal responsibility and a willingness to say no.

The time has come to plausibly entertain the unthinkable, and that is a candidate outside of the two party system for the presidency.  Johnson's positions on social issues can appeal to libertarian minded  Republicans and liberal Democrats alike.  His fiscal record and the positions thereof, combined with his accomplishments as a Republican governor in a Democratic state, speak to his ability to get things accomplished reasonably within the powers of his office.

This is not the time to be arguing about the federal government's role in social issues. The world at large is on the precipice, and we can ill afford four more years of failed American leadership.  It is time to lead, and the first step begins with electing a candidate who can lead.  With that in mind, I endorse Gary Johnson's candidacy for President of the United States of America.