All posts by Frugal Ron

Frugal Ron is passionate about numbers. If something can't be quantified, how can it be discussed? He loves questioning those things that others hold sacred.

Facts and Something Very Different

Facts and research driven policy making are hallmarks of Barack Obama’s presidency.  In contrast, Republicans develop a policy and then make up “facts” to support their proposals. This difference leads to legislative failures and more seriously, divides our country.

While Obama will go down in history as one of our most analytical and cautious presidents, today’s Republicans will be remembered as some of history’s most reckless and irresponsible. Adding fuel to the Republican misinformation juggernaut is Fox News. The Pulitzer winning Pundifact/Politifact rates 58 percent of the statements on Fox News as Mostly False, False or Pants On Fire False. (http://www.politifact.com/punditfact/tv/fox/ ) Even worse, Fox News is a beacon of accuracy compared to Republican entertainers like Rush Limbaugh.

An example of what happens when bad advice is invented and followed is Republican President George W. Bush’s  2003 Iraqi invasion. Bush and company ignored analysis from NATO allies and almost everyone else that Iraq did not have weapons of mass destruction (WMD). As United Nations weapons inspectors were getting ready to certify that Iraq had no WMD, Bush, with lock step, unquestioning support from almost every Republican in Congress, ordered an invasion because they knew they were right and everyone else was wrong. The resulting mayhem and civil war:

  • Killed a quarter million Iraqis and more than 4,000 US soldiers while destroying the lives of thousands more with  physical and psychological injuries.
  • Displaced hundreds of thousands of Iraqis who previously lived together peacefully before the destruction of the Saddam government.
  • Democratic elections put the majority Shiites in power in Iraq. The Shiite government established domestic security and military ties  with Shiite Iran, making Iraq a satellite of Iran and thereby upsetting the balance of power in the Mideast.
  • Put the Shiites in control of the Iraqi government, army, police and judicial system.
    • Consequently pushed Sunnis out of the jobs they held in the government, army, police and judicial system
    • Brought about the formation of ISIS by displaced Sunni army veterans with support from other now unemployed Sunnis.
  • Of course, weapons of mass destruction were never found.

In case after case, Republicans ignore research and simply go their own way. And then, when their policies explode in their faces, they refuse to acknowledge data that quantifies their failures.

Facts and a learning curve?

Most of us tend to learn from our mistakes. Not today’s Republicans. After being burned in Iraq, logically one would want to stay out of other wars we have no reason to get involved in. Yet Republicans would risk World War III to teach Russia a lesson about annexing parts of Ukraine and for some reason seem to think that we can solve the thousands of years old war in the Middle East between Sunnis and Shiites. The only thing  guaranteed is a large-scale ground operation against ISIS will  bringing home far too many body bags filled with U.S. soldiers.

In economics, it is mostly the same story. Republicans are fixated with cutting taxes. In the 1960’s Democrats cut taxes on the highest income bracket from 90 percent to 70 percent. Federal government tax receipts increased at the lower tax rate.

However, when President Ronald Reagan lowered the top rate into the mid 30 percent range, tax receipts went down. Every subsequent Republican tax cut has led to lowered tax receipts, bigger deficits and higher unemployment. What the rest of us can learn from this is that if tax rates are extremely high, cutting them will increase tax receipts. When tax rates paid by the highest income taxpayers are in a more moderate range as they have been over the last 40 years, cutting them only increases the budget deficit. Republicans can’t seem to grasp this reality.

Figure 1

Sources: Bureau of Economic Analysis, Table 1.1.5 Gross Domestic Product, http://www.bea.gov/iTable/iTableHtml.cfm?reqid=9&step=3&isuri=1&904=1980&903=5&906=a&905=2015&910=x&911=0, September 28, 2015; Department of Labor Statistics, Labor Force Statistics from the Current Population Survey, Seasonal Unemployment rate; Bureau of Economic Analysis, Table 3.2 Federal Government Current receipts and Expenditures, http://www.bea.gov/iTable/iTable.cfm?ReqID=9&step=1#reqid=9&step=3&isuri=1&904=1980&903=87&906=a&905=2015&910=x&911=0, September 28, 2015

As Figure 1 illustrates, when the federal government’s Spending balance as a percent of Gross Domestic Product (otherwise known as the budget deficit) gets more negative, the percent of the workforce that is employed drops. The trend is unmistakable. Tax cuts increase the budget deficit and employment drops. And yet, in the most recent budget

So why did Republicans push for (and get) an agreement to extend dozens of special tax breaks, totaling some $680 billion in lost revenue as part of the 2015 budget reconciliation? Again, Republicans just plain KNOW the tax cuts will generate much more revenue for the government.

Note: The Spending balance is the difference between the federal government’s receipts and expenses, otherwise known as the government deficit because it is so often negative. To negate the effects of inflation, the Spending balance is shown as a percent of Gross Domestic Product.

Republicans and their alternative reality

Over and over, on issue after issue, Republicans live in a fantasy land they have created. Ignoring research illustrating that access to contraceptives and education are keys to lowering abortion numbers, Republicans slog ahead attempting to outlaw the procedure. They choose to ignore research finding, “If effective contraceptive use is widespread, abortion rates can be very low even in countries where fertility is low and where the rate of sexual activity among unmarried women is high. The lowest documented abortion rates are in Belgium and the Netherlands, countries that rely on contraception to maintain low fertility. In both countries, abortion services are provided without charge to the woman, and abortion is legal under broad conditions.”  https://www.guttmacher.org/pubs/journals/25s3099.html

Few things offer more entertainment than white male Republican congressmen or senators trying to give some type of rationale for a policy that makes no sense whatsoever. Republican  2012 US Senate candidate Richard Mourdock tried to justify his stance of outlawing abortion even in cases of rape or incest by stating that a woman who gets pregnant by her rapist is carrying “a gift from God” and must have the child. Rape victims were not amused.

Fellow 2012 Republican senate candidate Todd Akin from Indiana didn’t help the Republican cause stating “legitimate rape” rarely causes pregnancy. Not exactly an outlier among Republicans, former Congressman Akin was elected by Republicans in Congress to serve on the House Science Committee before his ill-fated Senate bid.

While shorter lived and not nearly as controversial was the Republican reaction to the Ebola virus. Without doing any research, and assuming Ebola spread like influenza, many Republican presidential candidates got on the hysteria bandwagon and called for a total embargo on travel to and from affected areas in Africa.

President Obama calmly got the facts on how the disease spreads. Employing the U.S. military to help aid workers reach dangerous areas in Africa, the disease is in regression and never posed a threat to the U.S.

The press’s job is no winnow the truth from the chaff. Obviously, this puts them at odds with Republicans. Always the victims, Republicans demonize the “liberal press”, whose only sin is bringing out the facts Republicans chose to ignore.

Republicans, wrong again

Perhaps the best example of current Republican wrongheadedness is climate change. Determining if governments need to take action to slow the causes of climate change doesn’t need any advanced scientific degrees, just understanding  playing the odds and risk analysis.

Over the last twenty years, approximately 97 percent of climatologists that published research papers on climate change and offered an opinion on the cause agree our planet is warming and that the causes are man-made.  Only a fool would bet against those odds.

Glacier8X10
Glaciers, fewer and smaller – and those are the facts.

Risk analysis is even easier. If governments go ahead and regulate pollutants that contribute most dramatically to warming and the three percent of climatologists that claim human caused climate change is a hoax are right, we’ve misallocated some economic resources and contributed short-term to slower economic growth. However, if we take no action and the 97 percent of climatologists are right, we risk a global Armageddon.

CC-Grad_248
No oceans in the Midwest, yet.

It isn’t always that Republican actions are illogical. Prior to Obamacare, relatively young and healthy people were foregoing health insurance because of the high cost.  As they dropped out of the insurance pool, health insurance rates went up and more healthy young people took a risk on staying healthy and dropped their insurance. If you weren’t aware of this happening (and didn’t care about the uninsured), it is perfectly logical to oppose the Affordable Care Act and its mandates for all citizens to buy it. What is illogical is the efforts Republicans took to ignore this vicious cycle of increasing health care costs and declining enrollment among the most desired customers.

Almost as a rite of passage, Republicans try to portray the Obama Administration as incompetent socialists that are spending the country into bankruptcy while jeopardizing our safety by decimating our armed forces.

The reality is much different. During the Obama Administration, the US has a higher level of income inequality with wealthier rich and poorer poor than at anytime since the 1920’s. Hardly the desired results of socialists.

As far as defense spending, the US spends more on defense than the next eight biggest defense spending countries combined.  The U.S.’s unemployment rate is at record low levels. And for good measure, health care premiums as well as overall health care costs after the enactment of Obamacare are running far behind the annual increase levels of the previous ten years.

The problem and an unpleasant solution

The problem of misinformed Republicans is a real threat to our country. According to researchers, “Recently, a few political scientists have begun to discover a human tendency deeply discouraging to anyone with faith in the power of information. It’s this: Facts don’t necessarily have the power to change our minds. In fact, quite the opposite. In a series of studies in 2005 and 2006, researchers at the University of Michigan found that when misinformed people, particularly political partisans, were exposed to corrected facts in news stories, they rarely changed their minds. In fact, they often became even more strongly set in their beliefs. Facts, they found, were not curing misinformation. Like an underpowered antibiotic, facts could actually make misinformation even stronger. – See more at: http://archive.boston.com/bostonglobe/ideas/articles/2010/07/11/how_facts_backfire/#sthash.ilPM3t9X.dpuf

Republicans cannot be expected to do independent research and to ever question party dogma. If they do, they are no longer Republicans.

What this means to those of us who want to see our country continue moving ahead is very profound and important. Republicans, although misguided, actually vote. The solution is for a far more active voting participation rate among people with common sense.

Frayed, but still flying.
Frayed, but still flying.

Although the tendency is to focus on the foibles of a Donald Trump or a Ted Cruz, the real danger are the people voting for them. If people of good character and intelligence continue sitting on the sidelines and our country’s voter participation rate continues declining, we have only ourselves to blame for the consequences.

 

 

 


Fighting Terrorism – Follow the Money

The United States’ War on Terrorism is a failure. A decade ago, Afghanistan’s Taliban consisted of a few thousand hit and run soldiers.  According to Matt Waldman, a Fellow at Harvard’s Kennedy School and an Associate Fellow at Chatham House, in 2014, the core Taliban force was estimated at over 60,000.

http://www.voanews.com/content/despite-massive-taliban-death-toll-no-drop-in-insurgency/1866009.html

Estimates of the number of Taliban killed since 2001 range from 20,000 to 35,000

But that’s not all, a decade ago, the Islāmic State (IS) didn’t exist. According to Yevgeny Sysoyev, deputy head of the Russian Federal Security (FSB), “The number of IS  militants stood at some 80,000 in mid-2015, including 50,000 in Syria and 30,000 in Iraq, which can be compared with armies of some countries,” Sysoyev said at a security conference in Sochi. “Among them about 30,000 are foreign terrorists. Most of them come from the Middle East and North Africa,” he added. About 7,000 people from ex-Soviet countries, including Russia, have joined the group,” Sysoyev said. (November 10, 2015)

More:
http://tass.ru/en/world/835147

The U.S. claims its airstrikes killed 20,000 ISIS fighters.

So, despite killing tens of thousands of our enemies, how have they managed to achieve such growth in their fighting forces? Every time in movies like “American Sniper” when we cheer another “score” we forget  these “kills” have mothers, fathers and extended families that love them.  For every terrorist we kill, we radicalize brothers, uncles, cousins, nephews and friends to their dead martyr’s cause of protecting their religion and country from us. Forget about crediting these groups’ great social media for their recruitment success. The real reason for their recruitment success is us.

Keys for a successful terrorist insurgency

Successful insurgencies require the following. In no particular order, they are:

  • Hatred
  • Lots of money
  • A cause to fight for

Approximately a quarter million Iraqis died because of President George W. Bush’s invasion of Iraq. Along with our efforts to wipe out the Taliban, we have provided all the hatred needed for generations.

Follow the money

Inquiring minds, or at least this mind, might ask how one of the poorest countries in the world can field an insurgency of 60,000 troops for over 13 years? Not only that, but the Taliban aren’t lacking for weaponry.  They seem to have no problem shooting down US helicopters.

All this takes money, lots of money. We can assume the 60,000 Taliban soldiers aren’t doing this for free. They also need food, supplies and munitions. Not to mention a supply system to get all these things where needed. Another major cost, typically, suicide bomber’s families receive large cash payouts.

Supposedly, the Taliban fund their activities by supplying Europe with opium. Yet even the Mexican drug cartels involved far more in the distribution channel of drugs than the Taliban can’t afford a 60,000 strong army capable of fighting the US to a draw.

In the case of the Islāmic State, equally puzzling is how some unemployed former Iraqi Republican Guard soldiers could get the weaponry and equipment needed to conquer a good chunk of Syria and Iraq?

So, where is the money coming from? According to a December 2009 US government secret memo  from then Secretary of State Hillary Clinton, “Terrorist Finance: Action Request for Senior Level engagement On Terrorism Finance” obtained by Wikileaks, “Still, donors in Saudi Arabia constitute the most significant source of funding to Sunni terrorist groups worldwide.”

https://wikileaks.org/plusd/cables/09STATE131801_a.html

One of the problems in tracking this money is that much of the Saudi terrorist funding comes from private sources. Further complicating this, in the Saudi kingdom, royal family and government spending are often intertwined.

Terrorism's lifeblood
Terrorism’s lifeblood

According to the Washington Institute, “Today, Saudi citizens continue to represent a significant funding source for Sunni groups operating in Syria. Arab Gulf donors as a whole — of which Saudis are believed to be the most charitable — have funneled hundreds of millions of dollars to Syria in recent years, including to ISIS and other groups. There is support for ISIS in Saudi Arabia, and the group directly targets Saudis with fundraising campaigns, so Riyadh could do much more to limit private funding.”

https://www.washingtoninstitute.org/policy-analysis/view/saudi-funding-of-isis

The Saudis are not the only middle east dictatorships funding terrorism. Other US “friends” funding terror groups targeting the US and our allies are Kuwait, United Arab Emirates and Qatar.

Besides money, the Saudis and their allies also export a cause for these groups. Their goal is to set up Sunni caliphates (separate countries) ruled by a fundamentalist interpretation of Islam called Wahhabism. This brutal form of 1,500 year old justice calls for beheadings, cutting off limbs, offers no rights for women and death to those who question their religion. Besides the Taliban and ISIS, Boko Haram in Nigeria and many Sunni groups in southeast Asia ascribe to this form of justice. We can assume they are all receiving financial aid from the Saudis and other gulf states.

Reality check

Before going further, it is important to acknowledge that while a great many Middle Easterners hate us with a passion, the United States’ involvement in the region is just a sideshow to the main event. The real war that has gone on for centuries and is now fought in Iraq, Syria and Yemen is between Shiites and Sunnis. There is no logical reason for us being involved in this unwinnable war.

None of the participants in this war poses a threat to the United States, including ISIS. The greatest threat we face are people sympathetic to their cause living in the US taking advantage of our weak gun laws and creating mass shootings with legally purchased assault weapons.

Defeating terrorism

While we aren’t the main source of conflict in the Middle East, we can dramatically improve the survival odds for governments we set up in Afghanistan and Iraq, allowing us to gracefully exit those quagmires. We can do this by removing one of the necessary pillars for an insurgency – the money. We have given the Saudi government and the Gulf Emirates over fourteen years to cut off their terrorism funding. It is time to take matters into our own hands.

The most effective way to do this is by working with our allies and jointly slashing Saudi and the Gulf States’ incomes with an embargo on their oil.

Obviously, this extreme solution ends the happy days of gas below $2.00 gallon. But, it is the right and only thing to do if we want to effectively decrease worldwide terrorism.

Cutting off the cash would be the end of a 60,000 man Taliban army. Odds are, it will also put a real crimp in the cause they are fighting for. Who really wants the Wahhabism form of  justice if they the Saudis aren’t paying for it?

For ISIS, combined with destroying or Iraqi government recapturing their oil fields, cutting off Saudi and Gulf Emirate cash would make them much more vulnerable to their Shiite enemies. Defunding would completely change the complexion of the fight against Boko Haram and terror groups in southeast Asia. These groups get funding either through ISIS or directly from the Gulf Emirates.

Summing up

After fourteen years, we’ve learned how not to fight terrorism. What doesn’t work…

  • Killing as many terrorists as possible
  • Politely asking the Saudi Arabian government and other gulf kingdoms to stop funding terrorist groups

What has a high success probability is cutting off terrorist cash by implementing an oil embargo on countries funding terrorists. The short-term hardship experienced by the rise in fuel costs has side benefits unrelated to terrorism. The expected reduction in oil use will be good for our planet.  Countries participating in the embargo will experience economic growth as entrepreneurs  develop substitute ways to cope with less oil.

We need to come to grips with who our real enemies are in the Middle East and end the fantasy that  Saudi Arabia, Kuwait and the others that fund terrorism are our friends. Selling arms and providing military protection to dictatorships that bankroll our enemies ie just plain stupid and needs to stop.


Barack Obama, the Number One Anti-abortionist

Barack Obama is combining good policy with a little bit of luck. The result is  he may have started the process of virtually eliminating abortions in the US within the next ten years.

In 2008, the year before Barack Obama took office, there were 1,210,000 abortions in the US. In 2013, this number dropped to 984,000, a 23 percent fall. This is something we all ought to celebrate. It would be easy to stop here and give Obama credit for lowering the US abortion rate, but that wouldn’t be accurate and ignores many of the other dynamics taking place.

President Obama
President Obama

Abortions in the US have been dropping for decades. Yet, the rate of decrease is unmistakably accelerating. Also, the reasons for the decline are not well defined. Republicans want to take credit for the drop due to the 231 abortion restrictions passed in states from 2010 through 2014.

If the hundreds of Republican abortion restrictions had an impact on abortions, there would be an increase in the US birthrate in 2012 and 2013. This never happened.  In fact the U.S. birthrate hit an all time low in 2013.

The most ultra-liberal intrusion in privacy and example of government interference in the doctor/patient relationship is in Wisconsin. Big government Republicans passed a bill requiring women wanting an abortion to sit through an ultrasound narration by their doctor pointing out body parts and such. Easily outsmarting the Republican legislators and their foolish governor, women come to their appointments with mp3 players, headphones and magazines. Although the law requires them to show up, it doesn’t require them to actually pay attention.

This Republican futility is even more evident  when looking at spikes in abortion numbers in states like Louisiana and Michigan that are adjacent to Texas and Ohio that enacted the most onerous restrictions. These  suggest that women are quite willing to travel to terminate an unwanted pregnancy. Data indicates that once a woman decides to get an abortion, it is a done deal. Travelling extra distances and incurring more costs are impediments that don’t affect women’s ultimate reproductive decision making. What all this means is that Republican efforts to make getting an abortion more difficult have little if any impact on the number of abortions.

What does make a difference in the number of abortions is reducing unintended pregnancies. The most practical way to do that is to make birth control more available and make sure women have access to the most effective birth control possible.

The most effective birth control are Long  Acting Reversible Contraceptives (LARCs). They are 20 times less likely to fail than birth control pills or other methods of birth control.   Unfortunately, they have a high upfront cost (often greater than $500) that prevents many women from using them. Solving this problem is the Affordable Care Act’s (ACA)  free contraceptive mandate.  The mandate is modelled after a Washington University in St. Louis study (Peipert JF, Madden T, Allsworth JE, Secura GM. Preventing unintended pregnancies by providing no-cost contraception. Obstetrics & Gynecology. Online Oct. 4, 2012) http://www.ncbi.nlm.nih.gov/pmc/articles/PMC4000282/ that predicted providing birth control to women at no cost would cut abortion rates by 62 to 78 percent compared to the national rate.

However, the Affordable Care Act did not take effect until August 2012, so we can’t give that much credit for the reduction in abortions measured in 2013. There are other possible explanations for the recent dramatic drop in abortions.

Affluent women (who have the financial capability to purchase LARCs)  have the largest percentage drop in the number of abortions (2000 to 2008). It may be that the Long Lasting Reversible Contraceptives are a factor in the 23 percent drop in abortions from  2008 to 2013.

If we take the Washington University study’s midpoint estimate of a 70 percent drop in abortions due to the free contraceptive mandate and bend some mathematical rules and add the 23 percent drop in abortions during the last six years, it becomes conceivable that in the next decade, abortion numbers could drop to the point where they are a political non issue. More important, we can dramatically reduce  the heart wrenching decisions many women have to make.

We have the technology to virtually eliminate abortions. Barack Obama had the political leadership  and courage to make this technology almost universally available to women in the US. The next president will need to make adjustments in Medicaid coverage so that low income women (who are the last segment of the population that still have rapidly increasing abortion numbers) have access to LARCs and knowledge of their advantages.

One shouldn’t expect immediate dramatic drops in abortion numbers as the ACA takes effect. With any new technology and government program, there is a learning curve. More realistic, if the annual number of abortions dropped from the 2008-2013 five percent range to 8 percent over the next nine years, total annual abortions at the end of the eight year period would be down about 90 percent from present levels. Obviously, a Democrat needs to win the next election for the ACA Birth Control Mandate to stay in place.

Summing up

President Obama’s policy of fighting to make the free birth control mandate part of Obamacare was an important victory for all of us. However, the impact is greater because of the lucky part of all this, the development of Long Acting Reversible Contraceptives. The combination of new technology and bold policy achieving a greater good is simply smart government.

 

 

 


Barack Obama – Leadership Excellence

President Barack Obama’s economic record is roundly criticized by Republicans. Considering he has outperformed any Republican president elected in the last 35 years, they should instead be learning as much as possible from him .

President Obama’s Economic Record 

Reducing Unemployment

While President Obama made giant strides in reducing unemployment rates, Bill Clinton’s Administration is the Gold Standard in this area and all others. Obama has a little over a year left to match Clinton’s modern-day record unemployment rate drop.

Table 1

Unemployment Rate Changes During Various Administrations
Unemployment Rate (%)
President First month in office Last month in office Change in Unemployment rate during term
Ronald Reagan 7.5 5.4 -28%
George Bush 5.4 7.3 35%
Bill Clinton 7.3 4.2 -42%
George W. Bush 4.2 7.8 86%
Barack Obama* 7.8 5.1* -35%
Source: Bureau of Labor Statistics, Labor Force Statistics from the Current Population Survey. Unemployment Rate, 16 years old and over. September 2015
* President Obama’s term is not finished.

Refusing to acknowledge the great progress Obama made putting our country back to work, Republicans claim huge numbers of discouraged workers quit looking for work and are not included in the unemployment rate data.  According to them, this makes the above data useless.

These folks could use some remedial math. The  U.S. Bureau of Labor Statistics provides a plethora of data, including the monthly number of “Discouraged Workers”. In January, 2009 when Barack Obama assumed the presidency, the Bureau of Labor Statistics reported that 154,210,000 people made up the Civilian Labor Force. This includes people with full or part-time jobs and people looking for work. The bureau also reported for the same month that 142,152,000 had jobs. Using the equation 1-(142,152,000/154,210,000), the Unemployment Rate is 7.8 percent.

Republicans are correct that Discouraged Workers are not included in the Civilian Labor Force and are not included in the Unemployment Rate calculation. To get an idea of the Discouraged Worker’s impact on the Unemployment Rate, we can fix this and add their total number to the Civilian Labor Force and get an Adjusted Unemployment Rate. In January, 2009 there were 734,000 Discouraged Workers. Adding them to the Civilian Labor Force gives us a total of 154,944,000 people who are employed, looking for work or who gave up looking for work. Using this adjusted labor force number 1-(142,152,000/154,944,000), we find this does increase the unemployment rate and we have an Adjusted Unemployment Rate of 8.3 percent at the start of Obama’s term.

In the most recent month data is available, the Bureau of Labor Statistics reported 156,715,000 people in the Civilian Labor Force and 148,800,000 people working. This works out to the 5.1 percent Unemployment Rate in Table 1. However, there are now 635,000 Discouraged Workers. Repeating the math above and including the Discouraged Workers, we have an adjusted Unemployment Rate of 5.4 percent instead of the 5.1 percent in Table 1. The equation is 1-(148,800,000/(156,715,000+635,000))

To calculate how much our adjusted Unemployment Rate has changed during Obama’s term with the new numbers that take the Discouraged Workers into consideration, we use the equation ((0.054-0.083)/0.083). This is the adjusted ending Unemployment rate minus the adjusted beginning Unemployment Rate divided by the adjusted beginning Unemployment Rate.

This works out to a -35 percent change in the Unemployment Rate (a 35 percent drop) during Obama’s term to date, exactly what we have in Table 1 using published unemployment rate data. The Discouraged Worker numbers are so small compared to the Civilian Labor Force that they are inconsequential. They are just a foolish Republican ploy to detract attention from Obama’s employment renaissance.

While Obama’s record in this area so far comes up short compared to Bill Clinton’s, he has outpaced any Republican elected in the last 35 years.

Stock market gains

Another metric for measuring economic policy is changes in stock market indices. A broad-based index such as the S&P 500 measures investor faith in a wide swath of the economy.

Table 2

S&P 500 Monthly Average
President Start of term End of term Percent change during term Annual percent change
Ronald Reagan 129.55 297.47 130% 16%
George Bush 297.47 438.78 48% 12%
Bill Clinton 438.78 1386.01 216% 27%
George W. Bush 1386.01 825.88 -40% -5%
Barack Obama* 825.88 1888.62 129% 19%
* Term has not ended. End of term calculations are based on S&P 500 monthly average for September 2015.
Source:YAHOO Finance

Bill Clinton’s policies resulted in the greatest investor confidence. However, Barack Obama’s 19% annual increase beats out any Republican president in the last 35 years.

Gross Domestic Product

Gross Domestic Product (GDP) measures overall output of goods and services.

Table 3

Annual Percent Real Gross Domestic Product Change
President Average annual % change
Ronald Reagan 2.6
George Bush 2.3
Bill Clinton 3.9
George W. Bush 2.1
Barack Obama 1.2
Source: Bureau of Economic Analysis, Table 1.1.1 Percent change from preceding period in real gross domestic product. October 14, 2015 http://www.bea.gov/iTable/iTable.cfm?ReqID=9&step=1#reqid=9&step=3&isuri=1&904=1980&903=1&906=a&905=2015&910=x&911=0

While Obama has not performed to a high level here, much is due to a disastrous first term. In this writer’s opinion, the bulk of the problems for slow economic growth were Obama’s horrible decision to keep the George W. Bush tax cuts in place as well as adding some of his own. After Obama’s re-election in 2012, the Budget Reconciliation Act eliminated many of Bush’s tax cuts (and all of Obama’s).  The deficit dropped by almost 40 percent and GDP output improved. The most recent quarter saw a 3.9 percent increase in Real Gross Domestic Product.

Obama’s secret formula – Frugality

Elect a Republican to the White House and watch spending go out of control. Elect a Democrat and watch annual spending stay close to the estimated inflation rate. Unfortunately, today’s liberal, big government Republicans have not learned that government spending does not build real wealth in an economy.

Table 4

Average Change In Federal Government Spending During Presidential Term
President Beginning Spending ($billions) Ending Spending ($billions) Total Spending Change (%) Average Annual Spending Change (%) **
Ronald Reagan 645.0 1,171.1 81.6% 7.8%
George Bush 1,171.1 1,524.8 30.2% 6.8%
Bill Clinton 1,524.8 1,944.0 27.5% 3.1%
George W. Bush 1,944.0 3,388.4 74.3% 7.2%
Barack Obama* 3,388.4 3,965.4 17.0% 2.7%
* Term to date

** Calculated by averaging each year’s spending change.

Source:Bureau of Economic Analysis,Table 3.2 Federal Government Total Receipts and Expenditures-Annual, Line 42, September 28, 2015, http://www.bea.gov/iTable/iTable.cfm?ReqID=9&step=1#reqid=9&step=3&isuri=1&904=1980&903=87&906=a&905=2015&910=x&911=0

For true conservatives, Table 4 is the holy grail for measuring presidential performance. Small spending increases show a commitment to smart government. While hypocritical Republicans predicted Obamacare would bust the federal budget, the reality is it has had virtually no impact.

Budget Deficits

Because of inflation, it is inaccurate to simply compare government ending spending balances over a 35 year period. Instead, we can get a more accurate picture measuring what the federal government’s annual ending balance is compared to the economy’s annual output of goods and services, or GDP. Therefore the ending balance is a percent of that year’s GDP.

For those of us true conservatives, a negative balance as a percent of GDP is a bad thing. A large negative number indicates the government uses up available domestic lending capacity and has to borrow from foreign interests to cover debt. For comparison, since 1981, the average government spending balance as a percent of GDP is -3.5 percent.

Table 5

Federal Government Spending Balance as a Percent of GDP per Presidential Term
President Annual budget balance as a % of GDP prior year before taking office Annual budget balance as a % of GDP last year in office Average budget balance as a % of GDP
Ronald Reagan -3.0% -3.0% -4.2%
George Bush -4.2% -5.1% -3.8%
Bill Clinton -5.1% 1.5% -1.5%
George W. Bush 1.5% -4.3% -2.4%
Barack Obama* -4.3% -3.6% -6.6%
* Term not completed
Source:Bureau of Economic Analysis,Table 3.2 Federal Government Total Receipts and Expenditures-Annual, Line 42, September 28, 2015, http://www.bea.gov/iTable/iTable.cfm?ReqID=9&step=1#reqid=9&step=3&isuri=1&904=1980&903=87&906=a&905=2015&910=x&911=0: Bureau of Economic Analysis, Table 1.1.5 Gross Domestic Product-Annual, Line 36 September 28, 2015 , http://www.bea.gov/iTable/iTableHtml.cfm?reqid=9&step=3&isuri=1&904=1980&903=5&906=a&905=2015&910=x&911=0

President Clinton lost his congressional majorities in the next election after Democrats passed the major tax increase he asked for. However, the economy flourished like nothing seen before,  for all income groups. In contrast, President Obama experienced huge $multi-trillion deficits during his first term due to continuing the George W. Bush tax cuts and adding his own. Thankfully, he eliminated many of the tax cuts and the budget deficit is heading back down to historical levels

Table 6

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Table 6 should give every Republican that believes budget deficits don’t matter something to consider. Notice how the Employment Rate (1- Unemployment Rate) is almost a mirror image of the government spending balance as a percent of GDP. In other words, if the federal government’s spending deficit rises compared to that year’s GDP, a lower percent of people are employed. Conversely, during the Clinton years when we had government surpluses instead of deficits, the percent of people employed went up to record high levels.

Using a two tailed t-test, the relationship between the two data lines in Table 6 are highly significant (p<0.01). Although these numbers are closely related, the data here doesn’t tell us if one causes the other. This is investigated more thoroughly in https://www.frugalron.com/frugal-ron/tax-cuts-employment-and-economic-growth/.

Summing up

Evaluating any president’s performance invites the question, “Compared to what?” When we compare President Obama’s economic record to Republicans, he shines. When we compare him to Bill Clinton, some of the luster is gone.

For true conservatives, Table 6 tells it all. When liberal, big spending Republicans are in office combining huge spending increases and insane tax cuts for the rich, we have large government spending deficits and lower employment. In other words, the economy tanks. When a President Obama combines low spending increases with insane tax cuts, the economy is better but never really gets its footing until many of the tax cuts are eliminated and the budget deficit drops. It took Obama four years to figure this out. Slow learning Republicans still haven’t figured this out after 35 years of failure.

When you have a President Clinton that combines small spending increases and budget balancing tax increases that eventually result in government surpluses, the economy flourishes. Clinton got the government out of the credit markets and his small spending increases lowered the government’s impact on the overall marketplace. His resulting record of success speaks for itself. Again it would be wonderful if Republicans paid attention.

Conservatism isn’t about shafting the poor, old or sick. In a macroeconomic sense, it is all about knowing where capitalism falls short and identifying where government can create a greater good for the majority of its citizens. After making these decisions, conservatism is about keeping out-of-the-way of citizens and the marketplace.

 

 

 

 


What We’ve Learned About Scott Walker

Wisconsin Republican Governor Scott Walker’s short-lived presidential campaign revealed four things about him:

  • Scott Walker is far more intellectually challenged than ever imagined. His Great Wall of Canada “legitimate issue” may well be the least rational idea ever proposed by a presidential candidate. Yet, not far behind is his statement that there are only a “handful of reasonable, moderate followers of Islam” among the world’s 1.6 billion Muslims. And, his assertion that dealing with the teacher’s union prepared him to handle ISIS is a classic.
  • Scott Walker makes stuff up. Most politicians embellish their records. However, Walker takes this a huge step further making up blatant lies. Throughout his presidential campaign, Walker told about the February 15, 2011 incident in LaCrosse, Wisconsin when hundreds of  union protestors rocked his car, beat on the windows and pulled a truck in front of Walker and his security detail car blocking their escape path. However, according to La Crosse law enforcement and reporters covering the event, it never happened. The most thorough investigation of the incident is at Politifact.com’s website http://www.politifact.com/wisconsin/statements/2013/dec/23/scott-walker/gov-scott-walker-says-protesters-surrounded-his-ca/. Walker’s penchant for telling people what they want to hear, regardless of the truth, came through in a meeting with Republican donors about President Obama’s leadership. Walker told the roomful of donors, “I heard that from David Cameron back in February earlier when we were over at 10 Downing, I heard it from other leaders around the world. They’re looking around realizing this lead from behind mentality just doesn’t work. It’s just not working.” British Prime Minister Cameron issued a statement saying he never said that and does not believe it.
Money, such a nuisance to Scott Walker.
Money, such a nuisance to Scott Walker.
  • Scott Walker is broke. According to the Boston Globe, Walker’s total net worth is minus $72,500.  http://www.newsmax.com/Politics/GovScott-Walker-debt-credit-cards-owes/2015/04/28/id/641333/ His personal financial statements show caviar tastes on a beer budget. Walker is a spendthrift with no respect for debt. He has between $100-250,000 of school loan debts for his two sons, owes more than $50,000 to Green Tree, a mortgage loan company, owes between $5-50,000 to Think Bank for an unspecified debt, owes between $10-15,000 on a Barclay’s credit card, $10-15,000 on a Bank of America card and up to $50,000 on a Sears card. He is paying 27.24% interest on the Barclay card and 11.99% on the Bank of America one. That’s a lot of $1.00 Kohl’s sweaters.
  • Scott Walker is a hypocrite. In suspending his presidential campaign, Walker stated, “Sadly, the debate taking place today in America is not focused on an optimistic view of America. Instead it has drifted into personal attacks.” Duh, excuse me? Is this the same Governor Scott Walker that launched countless attack ads against “Millionaire Mary” in 2014?  Then in the last few days before the gubernatorial election, his campaign dredged up some fired Trek employees to personally attack Mary Burke’s record at Trek.
You can’t cure stupid

What’s left of Scott Walker’s supporters are looking for him to bounce back on the national stage in a few years with a different campaign team. Unfortunately for them, Walker’s campaign team isn’t the problem. What these supporters must accept is that stupid is forever.

While Walker’s campaign revealed much about him, it also showed the strengths of our long, drawn-out presidential campaigns. Walker was annointed as the favorite of the Koch brothers and other billionaires, assuring him unlimited campaign funding. Yet, voters recognized Walker was intellectually incapable of keeping up with fast paced debates, continually said foolish things and changed positions depending on who he was talking to. Regardless of his financial backing,voters sent him packing.


Scott Walker & Ashley Madison

Betrayal, hurt, anger – just some of the emotions Wisconsin Governor Scott Walker and people finding their partners listed as Ashley Madison members are sharing. Walker’s presidential campaign targeted the most vulnerable Republican voters, holy roller, Bible thumpers that passionately believe the world was created 6,000 years ago.  Walker spent decades positioning himself as the devout Christian son of a preacher, an Eagle Scout, a faithful husband and humble servant of the people to appeal to this group. For heaven’s sake, he even prayed with these folks!

Forget about drug testing the unemployed. There are more obvious needs for this kind of test.
Governor Scott Walker – violated.

All was going well with Walker leading the Republican polls and looking like an easy winner in the Iowa caucuses. But, then along came Donald Trump.

Suddenly, Trump, a well-known philanderer best known prior to this presidential campaign for taking his wife and mistress on the same Colorado ski vacation, was surging ahead in polls. Talk about infidelity! Trump was making off with Walker’s core group of voters!

Like Ashley Madison victims, the at least outwardly devout Walker must wonder what he did wrong do lose his base to a three times married Donald Trump. What could he have done differently?

While Walker talked about his brown bag lunches and the $1.00 sweater he got at Kohl’s (conveniently neglecting to mention his penchant for private chartered jets), there was The Donald buzzing 30,000 people waiting to hear him speak in an Alabama stadium with his private 757 jet. And, the redneck Bible-belters went wild! These were Scott Walker’s people. These were Scott Walker’s voters!

The two-timing holy roller voter betrayal from Walker marginalized his campaign. From Republican leader to barely ranking in the top ten of presidential contenders, Walker is taking his campaign the next step to absurdity with his recent remarks categorizing almost all Muslims as terrorists and his Great Wall of Canada blunder.

What this all means

While supporters call for the “real” Scott Walker to reappear, those of us who’ve watched him for years know the blathering fool who just makes stuff up and continually says really stupid things is the “real” Scott Walker.  Former Texas Governor Rick Perry and former Alaska Governor Sarah Palin can vouch that once you let voters know you are clueless, there is no come-back. Your political career is finished.

Scott Walker is completely out of his league as governor. Yet, he probably could have continued in Wisconsin for as long as he wanted. His mistake was overestimating his ability and launching a presidential campaign. National press scrutiny and his budget fiascos made him a national laughing-stock. Abandonment by his core supporters punctuates the end of a forgettable political career.


Iran and Nuclear Weapons

Anyone looking at a map of the Middle East and understanding nuclear weapon capabilities might wonder if Iran’s nuclear agreement is much ado about nothing? It is one thing to worry about countries thousands of miles apart using nuclear weapons and a very different scenario for Middle East countries using nukes on each other.

Middle-east-mapIsrael is the very small and hard to find nation on the above map. It has the Mediterranean Sea on one side and shares borders with Syria, Jordan, Lebanon and Egypt. Israel is 424 km (263 miles) from north to south and at the widest point 114 km (71 miles) wide. When looking at this map, realize nukes are not precision weapons.

According to Nucleardarkness.org, a 15 kiloton nuclear explosion, which is a relatively small one unless you are within a kilometer of it, will cause 3rd degree burns on everyone within 2km. However, the bigger danger is when the fireball of the nuclear detonation touches earth’s surface. When this happens, large amounts of soil, water and whatever else is nearby vaporizes and is drawn up into a nuclear cloud. This cloud becomes radioactive and larger particles (fallout) settle to the earth within 24 hours. Lethal levels of fallout can extend hundreds of kilometers from the blast area. Contaminated areas may be uninhabitable for decades or even centuries.

While the initial blast from a well placed Iranian nuclear attack on Israel is limited to Israel, the fallout would almost certainly solve the Palestinian problem forever and likely cause huge numbers of deaths in Moslem countries bordering Israel. It is very possible the fallout could cause devastation in Iraq and might even reach Iran. However, fallout would be the least of Iran’s problems considering the massive nuclear retaliation Israel would launch.

Mutually Assured Destruction (MAD) has worked to prevent any country from using nuclear weapons since the end of World War II. Add in the holocaustic damage an Iranian nuclear attack on Israel would cause to Iran’s closest allies and it becomes even less likely such an attack would ever take place.

While listening to Republican diatribes against the Iranian nuclear agreement, recognize many Republicans won’t be satisfied with anything less than a full scale invasion of Iran. (Of course, you won’t find their sons or daughters in the body bags coming home.)  Balance this with knowing the nuclear agreement may lead to better US relations with Iran and make your own decision if the US rapprochement with Iran is worthwhile.

 


Employment Data

Wisconsin Governor Scott Walker (R) recently told President Obama he “should be looking to states like Wisconsin as an example.” If Walker had any sense, he should be looking for a rock to hide under.

The Bureau of Labor Statistics recently updated their Quarterly Census of Employment and Wages (QCEW). This is the Gold Standard of employment data.

The most recent month analyzed was September 2014. Compared to the same month a year earlier, the US increased private sector employment 2.31%.  Wisconsin increased private sector employment 1.16% in the same period or 50% of the national increase. This is not good since annual gains during  Walker’s governorship were running 60% of the national rate.  (This compare to 100% of the national rate over Governor Jim Doyle’s eight years in office). However, Mississippi, with supposedly the US’s worst schools and job prospects need not worry about the challenge to the bottom from Walker led Wisconsin. Their increase in private sector employment from the previous year was only 0.5%.

Forget about drug testing the unemployed. There are more obvious needs for this kind of test.
Forget about drug testing the unemployed. There are more obvious needs for this kind of test.

Wisconsin’s private sector weekly wage increases that were just below the national rate were a relative bright spot during Walker’s  governorship. This changed with the latest data release.  Average weekly pay in the US increased 2.8% from $914 to $940 from September 2013 to September 2014. In Wisconsin, average private sector pay went from $795 to $809 during the same period, or a 1.8% increase. Wisconsin’s wage gain is 65% of the national increase while average wages are 14% lower than the US level.

There is one area where Wisconsin’s employment picture is rosier than the nation . The number of state government employees in Wisconsin increased another 1% as Walker builds the largest government workforce in the state’s history. The federal government workforce dropped 1% in the same period.  (Military are not included in state or federal government workforce totals).

All leaders occasionally have things not go their way. The best re-evaluate what went wrong and make changes that fix the problems. Not so with Governor Walker. The latest job and wage numbers show the impact of Walker’s ultra-liberal, big spending, big government and anti-education policies in his first four years in office. Rather than make changes, he has taken on the destruction of the University of Wisconsin and continued hits of K-12 financing while planning on giving government even more power over women’s family planning.  The future looks bleak for Wisconsin’s job and wage prospects.

The only way Wisconsin can get back to matching national wage and job gains is to get Scott Walker elected president. Working his “Wisconsin magic” on the nation will result in an economic recession that makes George W. Bush’s look mild. Wisconsin will finally blend in with the rest of the country again.


The Supreme Court and Obamacare

Ever since President Barack Obama signed Obamacare into law, Republicans have tried to shut down. They may want to be more cautious about what they hope for in the future.

Republicans criticize the Affordable Care Act at every opportunity, yet they have never come up with any kind of alternative. This tactic will have run its course if Supreme Court rules in the King versus Burwell case that federal government insurance subsidies are illegal in the 27 states that do not have state insurance exchanges.

If this happens, Republicans seem under the illusion the Affordable Care Act will simply go away. We’ll go back to pre Obamacare and all will be well with the world. Unfortunately, this scenario is naïve at best and blatantly stupid at worst .

The Obamacare reality

Wisconsin does not have a state insurance marketplace. Eighty-nine percent of the 207,349 Wisconsinites enrolled in the Affordable Care Act’s online exchange in 2015 qualified for subsidies averaging $315 per month. This works out to over $58 million. The average subsidy for these folks is 76 percent. Add in the 24 percent paid in additional premiums and the total paid by this group is over $72 million per month.

Without the subsidies, most, if not almost all the people in this group couldn’t afford their insurance and would drop it. On an annual basis, this would take $865 million out of Wisconsin’s health care system. One doesn’t have to be an expert in health care economics to figure out that taking $865 million of income out of Wisconsin’s medical system will at least seriously cripple and in a worst case scenario, bankrupt the state’s health care establishment.

Governor Scott Walker would be inundated with protestors. These won’t be the kind of protesters he could have the state police shag out of the Capitol. These would be insurance and hospital executives with six and seven-figure salaries worried about their personal livelihood unless something is done to get the people subsidized by the federal health insurance marketplace back into the system.

Newly uninsured people with health problems and not enough income to pay for them will go back to expensive emergency room treatment. Doctors who swore an oath to treat the sick and injured will do so, causing even more problems for cash strapped hospitals and clinics.

Obamacare, will the song sound different if played by a Republican?
Obamacare, will the song sound different if played by a Republican?

To make matters worse, health insurance is more expensive in Wisconsin than states like Minnesota that have state health insurance exchanges. An online calculator at the Kaiser Family Foundation website (http://kff.org/interactive/subsidy-calculator/) quantifies the differences.

Entering in a family of four with non-smoking adults aged 42 and 43 making $55,000 annually and two non-smoking children using both St. Paul, Minnesota and Madison, Wisconsin zip codes, the Silver policy in Minnesota cost $639/month and in Wisconsin $789/month. After federal subsidies, they each cost $340/month.

Worse nationally

Multiply the $865 million income loss Wisconsin’s healthcare system potentially loses by 27 for an estimate of the national impact. Republicans in Congress will have to come up with a replacement for the Affordable Care Act very quickly. They won’t have time to do their usual pontificating.

Other articles on this website have argued that the Affordable Care Act was always more about rescuing the health insurance industry than providing universal health care insurance for all citizens.  If the Supreme Court rules against Obamacare, Congress must face this reality.  Health care represents about 18 percent of the US Gross Domestic Product. Letting that part of the economy become insolvent simply isn’t an option.

The insurance industry won’t allow efforts to re-engineer the Affordable Care Act without the insurance mandate. The insurance mandate is the requirement that everyone must have health insurance or they will have a penalty fee added to their taxes.  One Obamacare criticism is that not enough people have signed up to keep the system solvent. Take away or weaken the health insurance mandate and the problem is exasperated. Under intense time pressure from all directions, Republicans would be forced to re-write the Affordable Care Act to include the federal exchanges and with no other substantive changes.

Odds are, the Supreme Court won’t let this Doomsday scenario unfold. However, the thought of Republicans having to put their name on something they’ve fought for years would be poetic justice.


Why Hillary?

Democrats have all but anointed Hilary Clinton as their 2016 presidential nominee. This does not make a lot of sense. Clinton’s supporters should ask what she accomplished during her career and specifically her eight years as New York’s senator that would compel people to vote for her?

Right up front, let’s make clear this is not about Benghazi. Only nut-bags and half-wits consider the unfortunate U.S. Libyan embassy deaths a campaign issue.

Far more important is Clinton’s 2003  vote as New York’s senator authorizing then President George W. Bush’s war of aggression against Iraq.  At the time, the U.S. public was clamoring to atone  for the catastrophic 9-11 attacks that happened during Bush’s watch. Never mind that Iraq had no part in them.

Frugal Ron, and many others who live far from Washington D.C., figured out early Bush’s War was far more about George W. Bush’s personal vendetta against Saddam Hussein than national security. Yet Senator Clinton, who had easy access to her husband’s advisors that dealt with  an irreconcilable George W. Bush after the alleged 1993 assassination attempt on former President George Bush by supposed Iraqi agents, either didn’t do her research or ignored it.  George W. Bush called the alleged assassination attempt an “act of war” and demanded a major military response. President Bill Clinton didn’t give him the response he wanted. It didn’t take a genius to figure out a President George W. Bush was going to one way or another make a war against Saddam Hussein happen. Senator Clinton aided and abetted his efforts with her Senate vote.

After the invasion, we confirmed Iraq’s weapons of mass destruction were just a  Bush lie. Senator Clinton acted surprised. The rest of us were surprised she was so easily duped.  Perhaps Clinton’s supporters think her 2003 vote and lack of judgement is less important now or that we forgot her lack of courage and her joining the mob mentality Bush fostered.

The vision versus the reality

President  Bill Clinton’s economic miracle encompassed all social-economic groups.  Ms. Clinton’s supporters believe she will replicate the same results. This is more than likely wishful thinking.

Bill Clinton’s presidency was the most economically conservative in a generation. It was no coincidence that it was the most successful. The key was Clinton sacrificed his Congressional majorities for a tax increase that enabled him to balance the federal budget. Pushing through the Uruguay round of global trade agreements and giving China Most Favored Nation trading status  were almost equally important. And, for good measure, he passed the most comprehensive welfare reform bill in history.  Nothing in her labor union supporting history would lead us to believe the independent thinking Hillary Clinton would follow her husband’s path.

Alternatives

A Hillary Clinton presidential nomination is all the more puzzling when one looks at the many strong alternatives Democrats have. While Republicans toy with nominating one of the country’s worst governors in Wisconsin’s Scott Walker, Democrats have the complete antithesis in neighboring Minnesota’s Mark Dayton. Another alternative is Delaware’s Governor Jack Markell who is pioneering unbiased, databased ways to find superior teachers. Long after we bomb the the Islamic State into history, the U.S. will need the world’s strongest intellectual capital to keep up global economic leadership. Markell could supply that.

Democrats somehow believe Hillary Clinton is unbeatable in 2016. This overconfidence could be disastrous.  In 2012, Republicans cooperated by nominating an unelectable presidential ticket. In 2008 , they nominated an unelectable vice presidential candidate. Democrats can’t count on that generosity again. It could be a short election night for Democrats  if  a  viable Republican presidential candidate continually asks Democratic nominee Hillary Clinton, “What have you done for us lately?”