Defense Spending Trends

I bet most citizens would guess that US military spending is out of control and at historically high levels because of the wars in Afghanistan and Iraq, but the data don't seem to support that conclusion.  For the ten years 2000-2009, federal spending totaled about $23T of which $5.6T was for defense.  Less than 20% of that defense money or about $1T was for the two wars.  You can see a "Cost of War" total here.

I have no doubt there is lots of waste in US defense spending just as in any large and complex bureaucratic organization whether private or government.  Secretary Gates has announced a major effort at cost reduction as he leaves office including a statement that, "...the era of unlimited defense spending is over."  I thought that ended in 1945 after defense costs had peaked at 90% of federal government spending and 43% of GDP in 1944.

The charts below show a 60 year history of US national defense spending, both as a percent of GDP and as a percent of total federal spending, against which we can measure the effectiveness of Secretary Gates' efforts.  It will be interesting to see how much lower these curves can be driven while maintaining a satisfactory level of national security.  Data are from the BEA NIPA Tables.  Click on the charts for a better view.

The Residual Burdens of Slavery, Civil War, and Oppression

The saddest and heaviest and most persistent burdens borne by The United States are the residual effects of our deplorable practice of slavery, the devastating war that was fought over it, and the shameful oppression of freed Blacks for a hundred years thereafter.

I missed slavery and the Civil War, but the oppression was part of my youth and the Civil Rights movement of the 1960's was of my generation.  I was troubled by but not personally involved in it. I remember a small group of well-dressed Black students showing up at Maryville High School to register, in the fall of 1959 I think, and being politely turned away by our principal, who happened to be my uncle. I was a student at segregated Vanderbilt University from fall of 1960 through spring of 1964, a period of time that included Dr. King’s “I Have a Dream” speech which I am listening to as I type these words. There were civil rights marches going on in Nashville, and I remember being warned by university officials that such activities were being videotaped and that students were to remain on campus to avoid possible disciplinary actions. I remember warning my dad who ran a small business in our home town to just close the store and go home when there were rumors of civil rights rioters coming through the town and burning businesses. After college I got married and went to work at Eastman Chemical Company, a company with very few Black employees, in a small upper East Tennessee town with very few Black residents. I was busy getting started on a family and making a living and I didn’t understand the need for or have time for civil rights activities. I am truly sorry and humbly repent for my lack of understanding and compassion.

In 1986 at Governor Lamar Alexander’s Tennessee Homecoming celebration I watched a hometown performance by a talented African American woman who might have been a classmate of mine under different circumstances. OK, Linda Goss, then official Storyteller for the City of Philadelphia and contemporary of mine, went to the Black schools in Alcoa and I went to the White schools in Maryville, but I thought while watching her performance, “What a shame that we had been caught in a system of segregation that almost guaranteed we would never have known or talked to each other.”

In January, 2003, during a Lutheran Theological Southern Seminary cross cultural experience in the predominantly African American neighborhoods of South Atlanta (Report here) we visited a slavery museum and I stood beside a young Black man in our group looking at a photograph of a young Black man hanging by his neck from a tree and reached a new level of understanding of the impact of that legacy on today’s African American youth.

In 2010 I’m troubled by and involved to some extent in problems in African American communities through the volunteer work I do. I don’t know for sure but strongly suspect that many of the problems with single motherhood and absent fathers, crack cocaine, gangs and killing, and strong dependence on federal social programs are a residual effect of those years of slavery and oppression and the civil rights struggle that followed. I also suspect that those residual effects are perpetuated by some current leaders who keep telling the descendants of the original victims that they are victims as well. It may be true, but reminders of it are not helpful, and it is a condition that can be overcome.

One way out of such a bad situation for a young person who finds him or herself at a disadvantage and facing temptations is to just say, “I don’t have time for that. I have to get an education and get a good job.  I am going to get married and start a family. That is what I want to do, and that is what I am going to do. I am going to be a helper instead of a helpee.”  After all, there are millions of successful African Americans in The United States today who can serve as mentors and examples.

I guess different people hear different things when they listen to Dr. King’s “I Have a Dream” speech, but I think that if one listens carefully, one can hear inspiration in his words for just such a self-help approach to life.  You can hear the 17 minute speech on YouTube, and I highly recommend it.  The text can be found here.

And by the way, my family has its own Civil War story to tell.  I did a blog posting about it titled, Dillard L. Williams And The Confederate Flag.

Federal Income Tax Fading In Significance - Replaced by Borrowing

In an article in today's WSJ, Douglas E. Schoen, who served President Clinton as a pollster, writes that he went to the president in 1995 after the Republicans had taken over the House of Representatives (first time since 1954) and "warned him that he could not be re-elected in 1996 unless he turned around his administration's reputation from one of big spending liberalism...to one of fiscal discipline and economic growth." It was in Clinton's 1996 State of the Union address that he proclaimed that the "era of big government is over."  And of course he won re-election and left office with the US budget running a surplus, partly due of course to the booming dot com economy which boosted tax revenues for a few years but collapsed just in time for President Bush's arrival in office.  Schoen's point in today's article is that, to salvage his presidency, President Obama will have to make a similar philosophical about turn.  I never expected to have feelings of nostalgia for the Clinton administration!

Most Americans who pay income taxes, unfortunately only about half the population, probably have the impression that we have a big income tax burden.  The fact is that income taxes in this admittedly unusual year are only providing about 25% of the money being spent by the federal government while 36% of the spending is from borrowed funds.  Even before the recent economic crisis we were borrowing 10% of the money the federal government was spending. 

Below are three charts of data from the Bureau of Economic Affairs National Income and Product Accounts Tables.  First is a 60 year trend chart of the % of federal spending funded by personal income taxes.  Next is a 60 year trend chart of the % of federal spending funded by borrowing.  Finally, just to present a complete picture of federal government funding with some of the year-to-year variability dampened, the total source of funds for ten years, 2000-2009, is illustrated in a pie chart. 

During the health care debate many were asking why the wealthiest nation in the world cannot provide health care for all its citizens.  I would like to ask why the wealthiest nation in the world cannot pay its bills instead of building up unsustainable levels of debt.  The answer is that our leaders do not have the combination of knowledge of economic fundamentals and personal courage required to balance the federal budget by a combination of spending restraints and a focus on freeing up business to expand and hire and grow the economy and thereby increase tax revenues.  Tinkering with tax rates on the few with big incomes will not make a dent in the problem.

Look at these charts carefully.  They go all the way back to the glory pre-OPEC days of the US economy.  Click on them for a high-resolution view and then on "Back" to get back to the posting.

In a "More Perfect Union"

In the summer of 2009 during the debate on health care I submitted an op-ed to The State newspaper outlining my opinions on the subject. I received a rejection which included the following sentence:

But given the limited space we have to run local op-ed columns, we expect columnists to bring either demonstrable expertise or fresh new ideas or compelling personal experience or captivating writing (preferably all four, of course, although that rarely happens). In glancing through your submission, I don't detect any of those components.

Well, that was a humbling experience, but I admit I had not given it my best effort. The rejection was another motivator to start blogging and also has caused me to usually "glance through" the submissions that get accepted by The State to see if any of these four criteria are being met.

Today there are three excellent guest columnist pieces for which the editors have given up their normal space. Ms. Scoppe and Mr. Bolton must be on vacation. If you live in South Carolina, you probably have read these already. If not, they are worth your time because they pinpoint exactly the problems facing The United States today and together create a vision of how we could be a more perfect union. I have included a quote from each to inspire reading of the columns.

Dr. Vince Ward, Columbia, SC, psychotherapist, Have We Doomed Representative Democracy?

I fear that compromise — the core premise and process of democracy — cannot survive the combination of career politicians, Twitter, wisdom’s demise, and anxiety management by delusional certainty…It’s not Obama’s fault; it’s ours. We refuse to submit to civil debate and compromise, and we elect people with the same character flaw.

Dr. Stephen Gordin, Spartanburg, SC, radiologist, Perspective Please

We have become modern-day tribes, and our allegiance changes depending on what we do for a living, our socioeconomic class, our race, etc. Our political parties exploit our interests and fears for their own advantage, promoting a you’re-either-with-us-or against-us attitude. Such division creates polarization to the extremes. When extremism rules, the middle gives way, and a dangerous situation arises that threatens society’s existence….But discussing a situation and pointing out the pros and cons of various actions confuses the narrative that interested parties oftentimes want to promote, which is based on the universal story of good versus evil. And such an approach creates division amongst us.

Mr. Giles Whiting, Air Force Academy and Harvard, Private Investor, Charleston, SC, and Cambridge, MA, Democracy and the Interests of Man

America needs a set of leaders who will think beyond the next election. We need a set of leaders who, like our founding fathers, are visionaries. Men and women who are passionate about where this country is going and are intelligent and thoughtful enough to evaluate political issues in a way that is consistent with that vision. Men and women who are industrious toward this end, which will mean working together, not always having the correct answer on day one, and not always implementing what in too many cases is justified as the solution for today (we’ll leave its problems for someone else to solve later).

And, to top it off, on the opposing page there is an important word of wisdom from nationally syndicated columnist and author Thomas Friedman who concludes his column, Waiting For Leaders to Surprise Us, with this:

Indeed, the big problem is not those Muslims building mosques in America; it is those Muslims blowing up mosques in the Middle East. And the answer to them is not an interfaith dialogue in America. It is an intrafaith dialogue — so sorely missing — in the Muslim world. Our surge in Iraq will never bear fruit without a political surge by Arabs and Muslims to heal intracommunal divides. It would be great if President Barack Obama surprised everyone and gave another speech in Cairo — or Baghdad — saying that.

Pretty good day for The State with not a word from its own editorial staff!

A Promotion for the President?

Some very interesting points are raised about President Obama's talents and interests and skills in this article in The Telegraph posted on Drudge.  After careful consideration and as a reward for his exceptional and unique performance as POTUS, I would like to nominate him for the renamed position of President (formerly Secretary General) of the United Nations which would be a nice promotion to a less stressful job with objectives more aligned with his apparent personal philosophy.  It would enable us to continue to benefit from his wisdom without him having to suffer from the constant criticism and distractions he has been forced to endure as POTUS and would provide him a much broader focus and span of influence appropriate for his multi-cultural background. 

So far in the history of The United Nations, Norway, Sweden, Myanmar, Austria, Peru, Egypt, Ghana, and Korea have been represented in this important position, and now it is time for the United States to have a turn, especially since we have an excellent candidate with global recognition and popularity.  Probably such a move would have been impossible during the post WWII period of global economic and political dominance by the United States, but now that our weaknesses have been revealed, our economy is in tatters, and our third-world health care issues have been resolved, the rest of the world may well accept and even celebrate UN leadership by a former American president willing to position himself first as a citizen of the world. 

Is the floor open for nominations?

(Not) Growing Up In America

There is a very entertaining article in Monday’s NYT about parents having a hard time saying goodbye to their college-entering children after getting them moved into their dorm rooms. One mother even hung around and attended classes with her freshman for a few days and visited the registrar’s office to try to get his schedule changed. Some colleges are now having formal separation ceremonies to mark the official time of goodbye and encourage the parents to get into their cars and drive away. Morehouse College in Atlanta has a ceremony outside campus and then marches the students through the gates onto campus and swings the gates shut behind them, leaving the parents outside. At Grinnell College, the president addresses the students on one side of the gym, his back to the parents all seated on the other side. Wonder if they get the point.

I would say it is generally true that teens in middle class homes today have far more supervision and less freedom that was the case for my generation (Maryville High School Class of 1960) or even for our sons’ generation (Irmo High School Classes of 1984 and 1986). (I wish the same were true of teens in low income neighborhoods as well, but there seems to be some evidence to indicate that things have gone the other direction there.) My mother told me years later how it upset her when, after we lugged my stuff into Barnard Hall at Vanderbilt University in September, 1960, I just turned around and said, “Bye.” I really was anxious for that new life to get started but didn’t mean to hurt their feelings.

In our defense, I think we took that same approach with our sons. We were anxious for their new lives to get started as well. We got pretty involved with college visitation and selection and moving in activities at UVa, his selection, with our eldest, but then we got in the car and headed home until the official “Parents’ Weekend” a few weeks later. Come to think of it, I believe we missed it that first year. With our youngest, we even moved away after he graduated from high school and left him with his Toyota pickup in an apartment with friends on the USC campus in Columbia, SC, so he could keep a summer job at Sharp’s Formal Wear and get geared up for his freshman year at Auburn. That was probably crazy. Our only direct and active intervention in the summer was when he called and told us he had gone to Auburn for orientation and registration and signed up to major in psychology. I just couldn’t buy that. Nothing wrong with studying psychology, of course, but I thought we had a deal that he was going to sign up for engineering school. Now with three wonderful and interesting daughters, he is probably thinking he should have stuck with psychology.

Well, the pendulum has swung a long way from the early adulthood of a half century ago to many twenty something’s still hanging around rent free with their parents and riding their health and auto insurance policies and cell phone plans and raiding their refrigerators. Hopefully, the pendulum will start swinging back the other way now because we are going to need a lot more younger folks earning a living and paying Social Security taxes to give us old timers the government checks we have been promised and have come to expect. Otherwise we are really going to need a lot more legal tax-paying immigrants from south of the border to carry that burden.

Shrunken Kodak and Its Southern Offspring

In 1972 I was employed (since 1965) by the third largest company in the world, based on market capitalization. Now that company, Eastman Kodak, is one tenth the size of the 500th largest company. With a dominant share of the photographic film business and ability to tweek prices as needed to deliver the desired profit, Kodak thrived on the genius of George Eastman for 100 years from its 1880 founding. Then, in 1981, the Sony Mavica, the first consumer magnetic still video camera, was introduced offering an alternative to silver halide film. And beginning in the 1990’s as price of memory continued its downward march, digital photography shoved traditional film aside and assumed the dominant position. Today, once the camera is bought, amateur photography is essentially free so long as users stick to digital images and resist the temptation to hit the “print” button.

I have kept the table below from a 1993 issue of Fortune Magazine since its publication. It provides dramatic illustration of the fall of Kodak and also illustrates some other interesting trends. I couldn’t find the latest Fortune 500 list ranked based on market capitalization so used a recent Financial Times list to add the column on the right showing the top twenty in 2008.  Click on the chart for a readable version.  Then click on the back button to get back to this posting.

An interesting observation is the appearance of Japanese companies in the 1992 listing and the high visibility of China and complete absence of Japan in the most recent list. Also interesting is the names of companies common to all four lists: Exxon, AT&T, Royal Dutch Shell, and Procter and Gamble. IBM and Johnson & Johnson dropped off in the 1990’s but are back now. It is also interesting that there are no banks on the list in 1972 or in 1982.

I guess the lesson here is that there are no guarantees in the business world and that success in the face of competitive pressures and changing markets requires discipline, leadership, talent, hard work, and good strategy. Of course Kodak leaders could see that imaging was changing and that, if Kodak was to remain an imaging company, change would be required there as well. They made the shift to digital, even introducing the first very expensive professional digital camera in the 1970’s, but there has been no way for Kodak to hold a dominant position in digital as it did in silver halide. Probably a more successful strategy would have been to merge the digital stuff with a market leader and manage the remaining film business to maximize cash flow.  It’s too bad the decline of Kodak was so gradual. If digital had come on suddenly, maybe Kodak could have been judged too large to fail and given a government bailout. Maybe there could have been a federal subsidy for anybody who bought a roll of Kodak Gold(R). That wouldn’t have been any crazier than some of the subsidies being paid today.

In my 28 years under the Kodak umbrella, only two were at headquarters in Rochester, NY, in the consumer imaging business. All the rest were at fully owned Eastman Chemical Company, the poor Southern stepchild headquartered in Kingsport, TN. Kodak in Rochester and Eastman in Kingsport were as different as Franklin D. Roosevelt and Jimmy Carter. I was told once by a Kodak employee that when he showed up in Rochester for a job interview and was seated in the back of the plane and slow getting off to meet the people picking him up, he was told, “When you fly for The Eastman Kodak Company, you fly first class!” In Kingsport, on the other hand, we were discouraged from flying at all and were not allowed to go west of the Mississippi River without special approval. There was a “wall of separation” between Eastman and Kodak to prevent cross-cultural contamination. All company related communication between the tens of thousands of Kodak employees and the fifteen thousand or so Eastman employees was supposed to go through one senior executive at Eastman. I’m talking about thirty five years ago.

January, 1994, Kodak spun off Eastman Chemical Company as an independent publicly listed company listed on the NY Stock Exchange (EMN). The numbers of shares were set such that both companies started with share prices of $46, and Eastman took along $1.8B in debt. You can see from the 1992 listing on the table above why Kodak might have been under some pressure to get rid of peripheral businesses and focus on its core competencies. After the spin, Eastman toyed with growth and globalization through acquisitions for a few years and wasted a lot of money in the process. Eventually the culture of frugality and conservatism and an emphasis on profits took over and the company divested much and got back to basics. Here is a chart from Yahoo finance showing performance of EK and EMN since the date of the separation.

The Eastman Chemical chart is nothing to brag about, but someone who bought 1,000 shares of EMN on the date of spin paid $46,000 and has collected approximately $28,000 in dividends over 17 years and holds shares worth $61,000 today. It’s no Amazon and doesn’t even stack up too well against S&P 500 performance (Up ~ 120%), but it’s nothing to be ashamed of either.
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Click HERE for list of previous postings on this blog.

Long Term Trend for US GDP Growth

I used to spend some Eastman time leading workshops in Total Quality Management and Statistical Thinking. Part of the emphasis was in sorting out short term variability and noise in important variables from the longer term trends driven by systemic forces. The Wall Street Journal of the early 1990’s provided abundant examples of statistical hyperbole, using words such as “plunge,” “soar,” “tumble,” and “plummet” to describe short term daily variability in stock and bond prices. Here is a copy of the exhibit I used to make that point, contrasting the exaggeration of the WSJ with the nice presentation of longer term trend data by Barrons.

Looking at three WSJ’s published so far this week I find that they have changed their editorial practice, unless markets are just a lot calmer than they used to be. This week the primary action words and market descriptors in the Money and Investing section are “slump,” “opens up,” “solid gains,” “mixed,” “falls,” “giant leap” (oops),”tick down,” “declines,” “snaps streak,” “rallies on,” “keep tumbling,” and “drags.” Well, you have to have a little excitement I guess to keep the subscriptions paid up.  At least we have not experienced soaring, plummeting, or plunging so far this week.

In the US, quarterly GDP estimates always get a lot of attention. The media anxiously await and seize on the just released but later to be revised estimates of GDP growth or shrinkage and hasten to explain why whatever is indicated has happened. There is a lot of short term noise that inspires convincing but meaningless explanations.  An excellent way to separate noise from the long term trends is to take several years of data and do moving averages. The chart below is a three year moving average of percent change in US GDP from 1950 through 2009.  You can find the raw data in the BEA NIPA tables here.

In this chart I see an ominous long term trend which casts serious doubt on any projection of 2.5% annual GDP growth (Current Congressional Budget Office assumption) over future decades. Of course this is not surprising and is fairly easy to explain or at least rationalize as the function of other long term changes in the US and global economies. For example:

1. Globalization has diminished US ability to produce and export goods.
2. US outsourcing of manufacturing has reduced manufacturing in the US.
3. US sale and transfer of technology to non-US companies has reduced US business.
4. Excessive imports from developing nations have reduced US business.
5. US education is not well matched with the job opportunities available.
6. US citizens have lost some of their mid 20th century drive and competitiveness.
7. Increasing regulation and taxation have hurt American competitiveness.

I’m sure many readers can add their own unfavorable changes to this list. The question is whether we will make changes to become more competitive or just continue to gradually fade in economic significance. I guess its ok, either way, because other countries have dominated for a time and then faded. After all, poor little England, now trimming its National Health Service, was once the mighty British Empire.  Let’s just not fool ourselves that we can continue taxing and spending and meeting all needs our government identifies or our citizens demand without a revival of robust private sector economic growth to generate the necessary wealth.  And lets not fool ourselves that an entitlement mentality leading to excessive dependence on government is in any way consistent with robust economic growth.

Social Security Projections Mysterious and Controversial

When I read what Paul Krugman wrote about Social Security  in his most recent column I thought he must be working up a skit for Saturday Night Live. What could he be thinking? This guy is a PhD Economist. Has he completely abandoned math and logic in favor of his liberal ideology? Or am I just overlooking some important piece of data? I hate to be critical of such an important and intelligent man, but he has set the tone by accusing Alan Simpson, former US Senator from Colorado and Co-Chair of the president’s deficit commission of “peddling nonsense” about the financial soundness of Social Security and by titling a piece about Congressman Paul Ryan, “The Flim Flam Man,” so those personal attacks seem to make Krugman fair game.

Krugman says there is no problem with Social Security funding, and offers this argument against those who say it is in crisis:

So where do claims of crisis come from? To a large extent they rely on bad-faith accounting. In particular, they rely on an exercise in three-card monte in which the surpluses Social Security has been running for a quarter-century don’t count — because hey, the program doesn’t have any independent existence; it’s just part of the general federal budget — while future Social Security deficits are unacceptable — because hey, the program has to stand on its own.

Now he is accusing people of “bad-faith accounting!” I don’t get his point, but here’s a fact. The surpluses don’t count because they are not there. Social Security taxes exceeded payouts for about 25 years and that money and the interest earned on it, about $2.5T all together, was borrowed as received and spent on other government programs. Sure, there are government bonds in the Social Security Trust fund and they will be redeemed and the money will be made available for Social Security benefits but current tax revenues or other borrowing will have to be used to redeem the bonds so government spending will have to be cut elsewhere or taxes or debt increased. And that excess annual revenue from the Social Security taxes that was being freely spent over the past 25 years is not going to be there to borrow anymore so there will have to be an additional cutback in government spending or some tax increases. It’s not a big deal I guess in Krugman’s progressive view…just a little more each year should do it.

He writes that the worst news is that the cost of Social Security will rise over the next twenty years from the current 4.8% of GDP to 6% of GDP but that that small increase is no big problem. I am thinking that is based on a too-optimistic forecast for GDP growth, a huge unknown. The Congressional Budget Office does not even project beyond ten years and is now forecasting about 2.5% per year real (in addition to any inflation) growth for the next ten years. For the last ten years it averaged 1.8%. That may seem small, but it is actually a huge difference. At 1.8% annual growth it takes the economy ~40 years to double. At 2.5% it doubles in only ~30 years. Population is expected to grow about a half percent a hear so we need that much real GDP growth just to keep even.

It seems to me that the most practical way to look at the cost of Social Security is the percent of wages of working folks required to pay the benefits to the retired folks. Right now that is 13% of the wages of employed folks and 15% of the income of self employed folks and that is with about 140M people working and 40M over 65 and drawing Social Security. We can ignore the disabled younger folks receiving SSI and minor changes in retirement age for this simple illustration.

We know that given current population trends and assuming the absence of nuclear war, a resurgence of the black plague, an explosion of the practice of euthanasia or complete opening of the borders, by 2050 there will be about 200M employed and about 88M who are 65 or older. So, assuming GDP grows with population (We can hope.), approximately 20% of the wages of working folks will be required in Social Security (FICA) taxes to support those on Social Security at that time simply because there will be fewer working folks per retiree. That may work out fine. It’s only money, and working folks of that decade can just cut back somewhere else. Maybe Medicare will be cheaper by then after all the effects of the Patient Protection and Affordable Care Act are in effect.
And we can ignore the fact that excessive taxation dampens business investment thereby reducing the chance of real GDP growth.

You can check out the population distribution by age projections here.
Employment figures are available here.
Congressional Budget Office GDP projections are here.
Congressional Budget Office Social Security income and expense projections are here.

So much data and so little time!

Language, Culture, and Mosque Difficulties

I recall a conversation with my Japanese assistant during our tour of duty in Tokyo in the early 1990’s about some issue we disagreed on. I don’t remember what the issue was, but I remember that at one point during the discussion she declared that we were “parallel.” My first thought was that that was a good thing and that she was about to agree with me and that we could walk along side by side in the same direction. Her meaning, I soon learned, was quite different. It was that we, East Tennessee guy and Japanese lady, like two parallel lines stretching to infinity in both directions, would never meet. She was right, philosophically. We never got on the same wavelength on many issues, but still I enjoyed and appreciated her invaluable assistance during my three and a half years in Tokyo.

Cross cultural communications are always rife with such language and background difficulties. For example, there seems to be no reasonable way for Christians and Muslims to discuss the issues of religious freedom and separation of church and state in the 21st century. It would have been easy 500 years ago when neither Christians nor Muslims believed in such principles and when the “Christian” King of England and the “Christian” Princes of Europe of various Catholic and Protestant and New Age, for the time, persuasions prescribed the religions and religious practices of all under their reigns and sometimes killed or expelled those unwilling to go along. Even in early America, while interfaith killing was less common, there was little religious freedom until brave souls such as Roger Williams established a new way. There does seem to be some evidence that 21st century Muslims believe strongly in religious freedom when they are in the minority but less so when in the majority. That divergence of opinion does not help the discussion.

Given a shaky medieval start, the Western world has changed, after the shedding of a lot of blood, and we now have a culture steeped in the principles of religious freedom and separation of church and state while such practices are still completely foreign to many Middle Eastern Muslims and their leaders. We even mistakenly bend over backwards in America to make sure that people of minority faiths have rights and privileges that we are sometimes willing to withhold from Christians in public places such as the right to pray openly or to wear religious symbols or to teach the principles of their faiths.

This weekend’s primary news diversion about the proposed mosque near the WTC site offers ample discussion material on Western-Middle Eastern cultural gaps and the relationship of church and state. For example, it is a mystery to me why, after Press Secretary Gibbs correctly, and probably with President Obama’s approval, said during the week that the proposed mosque was “a matter for New York City and the local community to decide,” the President would weigh in with such a strong endorsement of the project as he did on Friday evening with a group of Muslim guests. Can you imagine him getting involved in whether a Christian church is to be built in a neighborhood over the objections of local residents, unhappy perhaps with the parking or traffic or building height, and declaring that it should be allowed because it is a matter of religious freedom? Saturday the President seemed to back pedal a bit saying that he did not mean to endorse that specific project on Friday but was making a statement on religious freedom in general. Then later the White House seemed to be saying that nothing he said on Saturday refudiated (Yeah, I like the word.) anything he had said on Friday. I don’t know.

The least important thing about the whole issue is that it is another example of the same mistake President Obama made a little over a year ago when he opined that the Cambridge, MA, police had “acted stupidly” in their encounter with Professor Henry Louis Gates. He must be thinking to himself, “I’ve got to learn to keep my mouth shut.”

And the most important issue is the obvious significant cultural gap between many Americans and many Muslims. If the president wanted to get involved, it would have been good for him to have taken the opportunity to contrast American freedom with the recent Taliban killing of Christian volunteers in Afghanistan and, by so doing, support Secretary of State Clinton’s strong condemnation of that barbaric act. I’m sure she cleared that condemnation with him before she issued it, so he must be in agreement. He could also have challenged the Muslim nations that have no interest at all in separation of church and state to open their minds and join the rest of the world in the 21st century. He could have suggested reciprocity with authorization and protection of Christian Churches and Jewish Synagogues in Muslim nations.  Without fundamental change in those nations, I fear not that we are parallel to them and will never meet or agree but that we are on a collision course with them. As a matter of fact, there have already been several collisions with thousands of deaths, have there not, with such continuing daily in Iraq and Afghanistan?

Social Security and Medicare Distrust Funds

I completely fail to understand why so much time is spent discussing and writing and reading about when the Social Security and Medicare Trust Funds are going to run out of money.  There has never been any money in them.  For the decades that Social Security and Medicare taxes have exceeded Social Security and Medicare expenses, the surplus has been spent and government IOU's, bonds, have been placed in the trust funds as a sort of placeholder or reminder of the misuse of funds that has occurred.

This has not been hidden from the public.  We have been constantly reminded but have chosen to blithely ignore the problem in return for government largess.  Here for example is a statement (http://news.yahoo.com/s/ap/us_social_security) in the news this week:

The combined trust funds have built up a $2.5 trillion surplus over the past 25 years. But the federal government has borrowed that money over the years to spend on other programs. The government must now start borrowing money from public debt markets — adding to the federal budget deficit — to repay Social Security.

So, here is the simple truth.  The only thing that matters about the financial health of Social Security and Medicare is current income and current expense.  (For total federal government old-age, survivors, disability, hospital, and supplementary medical insurance 2009 income was $843B and 2009 expense was $1.164T.  Spending was 38% higher than income.  See for yourself in the BEA NIPA Tables.)

If the $2.5 trillion surplus collected over the past 25 years had been invested in the stock market and corporate bonds instead of being spent on various government programs, it would now, even with recent stock market turmoil, be worth something north of $2.5 trillion instead of the zero dollars we currently have.  And, the additional capital invested in American business over that time would have made us economically stronger and would have resulted in increased tax revenues to pay for at least some and maybe all of the stuff that was paid for with the SS and Medicare taxes.

Well, with that gloomy background, we now, after some delay to make sure all the projected benefits of the Patient Protection and Affordable Care Bill have been included, have the 2010 Annual Reports of the Social Security and Medicare Boards of Trustees.  Their astounding conclusion is that the Trust Funds, assuming success of the provisions in the new bill, will last to somewhere between 2018 and 2040 without even a suggestion of acknowledgement that there is nothing in those Trust Funds.  Here is their statement.

But while it is projected that the Medicare HI Trust Fund is adequately financed until 2029, and the Social Security OASI and DI Trust Funds are adequately financed until 2040 and 2018, respectively, the significant longer term financial imbalances of the programs still need to be addressed.

But leave it to the stick-in-the-mud actuaries to try to cast a little light on the subject with a minority report included in an addendum to the main document.  (I remember when it was a joke to talk about “creative” accountants.  Over the last couple of decades, plenty of creative accountants have come forth.  I hope that problem has not invaded the ranks of actuaries yet.)  Anyway, here is what the actuaries responsible for the projections had to say in introducing their alternative scenario:

“…the financial projections shown in this report for Medicare do not represent a reasonable expectation for actual program operations in either the short range (as a result of the unsustainable reductions in physician payment rates) or the long range (because of the strong likelihood that the statutory reductions in price updates for most categories of Medicare provider services will not be viable).”

One news report said that the White House is “irked” by this statement.

And, as a final footnote, we today have a New York Times Op-ed  by two former Social Security and Medicare Public Trustees traditionally charged with development and presentation of an annual independent assessment of the health of SS and Medicare.  That function was discontinued beginning in 2008.  As a result, according to the authors, a Democrat and an Independent, “the Obama administration was able to put forward an unjustifiably positive outlook for the Medicare program and the impact of the health care legislation.”


You can get the annual reports including the actuaries' addendum here.

Investing or Speculating?

I am not a qualified investment advisor and do not pretend to suggest any investment strategy or specific investments.  I am willing to suggest that everybody back up and take a good look at the big picture before risking their hard-earned money.  It is easy to see what has happened beginning with the dot.com bust in 2000, and that may help a little bit in thinking what is likely to happen over the next few years under the current circumstances. So meditate on this ten year chart of the S&P 500! (Click on the chart for improved legibility.)

Luke 12:21 "So it is with those who store up treasures for themselves but are not rich toward God."

Doing Away With the Mortgage Interest Deduction?

I’m in the camp of those who think the government has done far too much to promote and subsidize home ownership. According to USA Today, even The Fed is rethinking the issue. Cheap sub-prime loans made with no evidence of ability to repay and used to buy homes of low quality that deteriorate rapidly without a generous maintenance and repair budget have done nothing more than create the slums of future decades. Even homes of high quality deteriorate rapidly without constant attention.

I do not, however, consider the mortgage interest deduction to be primarily a tool for promoting home ownership and don’t believe it originally was so intended. When I was a young man even interest on credit cards and car loans was deductible. I saw interest deductibility as simply a matter of logic and fairness: If interest a taxpayer collects on savings accounts or from loans made is taxable income, then surely all interest paid should be deductible. What a quaint and logical understanding of fairness that was! Logic and fairness are not commonly targeted goals in Washington, so tax authorities began eating away at the deductibility of interest until there was only a restricted mortgage interest deduction left even as interest received, except for certain municipal and government bonds, remained fully taxable.

So now, if there is to be elimination of the mortgage interest deduction, the most logical and fair step forward is to stop all taxation of interest received and all deduction of interest paid for individual taxpayers. Taxing interest severely penalizes savings, and most interest earned by consumers and small investors is just compensation for the inflation which government has traditionally sponsored anyway. Taxing interest on a 4% savings account when inflation is running 3% makes as little sense as taxing long term capital gains that match pretty well with the inflation rate.  Oh yeah, we need to stop that too.  Of course taxation of both interest and capital gains are pretty much moot points now with interest rates near zero and dropping, home prices down, and markets in the doldrums, but hopefully retirees will again be able to earn some income on their savings with an improving economy.

And, maybe if we do more to promote savings, more of the folks suffering the burdens of home ownership will have the money to make essential repairs and put new roofs on them when needed.

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Click here for comments since last email on immigration issue.

Free Them Up - Let Them Work

It is reported this morning  that one of every eight babies born in the USA in 2008 was born to an illegal or undocumented or unauthorized immigrant and that about seven percent of US residents under 18 are children of such persons.

My first encounter with hard-working folks from south of the border making real sacrifices to earn livings in the United States was in 2000 when we were building a new home in Blythewood, SC. The masons, employees of some sub-contractor, were all Spanish speaking and worked daylight till dark mixing mortar and carrying and laying bricks. I have no idea whether they were legal or not.  I tried to carry on a conversation with their foreman one day, but all my comments elicited nothing more than a string of well-pronounced English “Yes's.” Finally another guy on the crew said, “He doesn’t speak English and doesn’t know what you are saying.” A future neighbor told me that, in at least one case, they built a fire and camped overnight on our lot. They did a very nice job with the brick laying.

I know there are some smugglers and thieves and murderers and drug runners and human traffickers and other scum crossing the border, but most illegal immigrants are hard-working, disciplined, desperate, ambitious, and willing to take risks to provide for their families. Bottom line is that they are good stock from which future generations of Americans will come, regardless of what we do, and that we need to get the immigration under control and make sure we sort out the crooks from the workers and put all the workers on the tax rolls and teach them, or at least their children, to speak English.

Conventional wisdom is that the Democrats see immigrants from south of the border as the next big wave of government dependents and Democratic candidate supporters. That is clear from the racist comment  Senator Harry Reid made this week ("I don't know how anyone of Hispanic heritage could be a Republican, okay. Do I need to say more?"). We need to try to make sure that does not happen and that these ambitious risk-taking Hispanics and their voting descendents are allowed to work and earn livings and pay their share of taxes and are not herded together and encouraged to line up for government handouts. 

A perfect example of what we do not want and what is terrible for The United States is the spectacle created this week in Atlanta  when the doors were opened, after a long dry spell, for people to apply for government subsidized housing, and a mob of 30,000 showed up. There is no good reason people should not be able to apply for such assistance anytime the office doors are open, in privacy and with some semblance of personal dignity, so announcing an opening-day hysteria-generating opportunity such as this is nothing more than a highly visible, completely dehumanizing, government-sponsored ritual, insulting to Americans who are being systematically trained to line up for a wide range of government handouts.  The local government housing folks, after this debacle, are promising future process improvements.

Let’s do better for the new immigrants. The first generations will never be fluent in English, but their children will and they will be a significant part of our future.  Take their names, DNA, and fingerprints, put them on the tax rolls, free them up, and let them work. It’s what they want, and it is what we need. 

More On Evil Profits (And the Jobs They Make Possible)

Sunday’s State Newspaper (8/8/2010) had a long and interesting article about Lexington Medical Center  and how its annual budget has grown from $65M to $615M and its number of employees from 1,700 to 5,100 during CEO Mike Biediger’s 14-year administration. According to the article, 2009 profits totaled $57M, significantly more than those of Palmetto and Providence combined. I would say that is a stellar performance and that Mr. Biediger is to be admired and congratulated.

Here is a frustrating quote from the article in a section comparing Lexington Medical’s performance with that of Providence and Palmetto Health:

“None of the hospitals is a private business; each plows its “profits” back into health care.”

That is misleading and uninformed reporting.  Can we agree that what an enterprise does with its profits has nothing to do (should have said little to do) with whether it is a private or non-profit business? What do you think Apple Inc. does with its profits? It plows them back into the business. Of course the hospital has to make “profits” in order to expand its services and capacity just as Apple does. The biggest difference is that non-profits don’t have to pay taxes on profits while publicly listed corporations do.

There is one big thing the hospital was able to do with profits that Apple cannot. It was able to pay competitor Providence Hospital $15M to give up a planned new heart unit and let Lexington have the right to establish one. If Apple carved up markets like that with Microsoft or HP, somebody would be going to jail. I’m not blaming or criticizing anybody here except maybe the laws or regulators allowing such activity. Obviously Mr. Biediger is a great leader and is just following the rules. My point is simply to request that people quit demonizing “profits.” Without them, whether in a for-profit or a not-for-profit enterprise, growth and expansion of services and employment are impossible.

Of course some for-profit corporations that are no longer in growth mode pay dividends to shareholders in order to raise capital and keep investors interested, but those dividends come from after tax profits and are taxable to the recipients as well. IBM would fit this category. It was a growth company for decades, retaining all earnings to plow back into the business, but now is a more stable continuing enterprise reinvesting some of its profits and paying some out in dividends to shareholders including those mutual funds in our IRA’s and 401k’s. (Non-profits of course cannot pay dividends.)

Greed is not good, but profits are good! If we hope to see employment increase, we better hope for increasing profitability of our businesses and enterprises, whether those profits are taxable or not. Government may hire just to create jobs, but enterprises with wise leaders do not hire when their futures look dim and the rules of the game are in flux and uncertain.

An earlier posting on the same general subject: To Profit or not to Profit

And this one on the Lexington Hospital – Providence Hospital deal:  Government Sponsored Corruption

And here is one from yesterday on The Blue State Tax Relief Bill currently being proposed in congress. They Just Can't Help It (Tax Code Tinkering)

They Just Can’t Help It (Tax Code Tinkering)

Three members of the United States House of Representatives have introduced “The Tax Equity Act” that would adjust income tax brackets such that residents of high cost of living/high income districts would pay less income tax on the same income than residents of lower cost of living areas. Some have dubbed it the Blue State Tax Relief Bill.  How strange that politicians from districts generally favoring higher taxes and higher government spending would seek any kind of tax relief!  Is it surprising that these three representatives are from high cost of living districts? Part of their rationale explained on Representative Jerrold Nadler’s (Democrat – New York City) website is that “a dollar in New York isn’t worth nearly as much as a dollar in Spokane or Knoxville or Topeka.” If that is the case, it seems they should be paying more tax dollars for a given income in New York than in Spokane or Knoxville or Topeka.

They probably found out that companies moving employees around to various locations often make cost of living adjustments to the compensation levels of such employees when they move them to expensive cities. They thought, “Wow, that’s a good idea. We should do something like that with the tax code.”

Of course the cost of living is high in New York largely because of high local taxes which eventually affect the prices of everything. So, if the federal taxes are reduced to compensate for that, it amounts to nothing more than a federal subsidy of the wealthiest states with money extracted from the poorer states. I’m sorry, but that just doesn’t make sense to me.

Further complications to our unbelievable tax code are not what we need. At one extreme we have the Fair Tax advocates trying for major simplification and reduction of the costs of paying and collecting taxes and on the other side we have folks like Representative Nadler making their case for them. Is anybody paying attention? If we could get the simplification in the tax code, maybe our representatives could find something to do that would be more productive than self-serving tinkering with the tax code to manipulate the people and extract votes from them.  And maybe we the people would quit demanding concessions from them.

Second Thoughts on the Electric Car

At first I was fascinated by the idea of an electric car and figured I might buy one as soon as they become available. That was before rational thought kicked in stimulated by an August 6, 2010, Jonah Goldberg column  pointing out the economic nonsense underlying the current electric car strategy.

Here is the fundamental problem as I see it. Electric cars cannot be used economically in a system and infrastructure that has evolved assuming almost universal availability of gasoline powered vehicles. It would be quite easy to design a community with shopping, work, and living all in close proximity consistent with electric car capabilities and with gasoline powered vehicles not allowed except for deliveries from the outside world. But that is not what we have.

Speaking of designed communities, here is the craziest idea I have seen lately. There is an idea being promoted for a bicycle only community 15 miles out in the country from Columbia, SC.  The idea is that people will have cars to drive to jobs and shopping, etc., but will leave them in parking lots outside the new development and walk or pedal bikes into their homes. Can you visualize a family returning from a week of vacation at the beach and trying to get all their paraphernalia back into the house using bicycles, with bike trailers I suppose? Or even trying to get the weekly grocery supply into the house. I suspect the homeowners, if there are any, will soon be voting to change the rules.

Back to the electric cars, one figure advocates like to quote is the $1.50 per day that charging will cost. OK, but, assuming daily use of the car, that amounts to $547.50 per year of electricity, probably generated by burning of coal. At $3.00 per gallon and 40 MPG, that would buy enough gasoline to travel 7,300 miles. And 40 MPG (highway) is what the gasoline powered version of the Volt, the Chevrolet Cruze, is projected to get at a price of $16,995, only 40% of the price of the Volt. And I’m guessing that the Cruze will be easier on the environment. If I could just run that Cruze on natural gas, I’d really want one of those!  I may even relent and lease one of the Volts just to stimulate the economy.  Since we are among a small minority of in-town dwellers, it would meet quite a large percentage of our transportation needs at a very high price.

                     (Photos courtesy of Chevrolet web site)


As Goldberg points out, electric cars being brought to market now will be nothing more than expensive playthings for the wealthy subsidized by taxes on the less wealthy. But, we have to start somewhere, I suppose.

Read the Goldberg column.  He is a much better writer than I and makes some additional points as well.

And here is a previous posting on this blog on electric cars.

Sheltering Women - Making New Ways

Women’s shelters are an unfortunate necessity in the United States because of all too frequent abuse and mistreatment of women by spouses and boyfriends. Exact locations are not publicized, and residents are sometimes from other towns or even states. Google “find battered women’s shelters” and the first thing that pops up is an eHow page with a list of instructions beginning with “Dial 911.”

In the volunteer work I do, I sometimes interview residents of such shelters who have been referred to us for food or clothing or housing assistance. They often come with small children and no income but with some hope of starting over in a new location and with less fear. I have never talked to anyone in such a circumstance with visible disfiguration such as missing ears or a missing nose.

Mistreatment of women by spouses, while far too common in the US, is almost universally condemned by society, and shelters receive broad support from a wide spectrum of citizenry, both secular and faith-based. According to a recent WSJ article by Maria Abi-Habib, that is not the case in Afghanistan. There a backlash against shelters is being stirred up by a popular TV show host and candidate for parliament who is conducting a campaign against women’s shelters with the argument that the objective of many shelters is to, “make another way for our country” and to reverse the Islamization of Afghanistan. Of course we Westerners would like to make another way for a country that imprisons and allows disfiguring or killing of women who commit adultery or run away to avoid forced marriage or continual abuse. Afghanistan has a constitution now that guarantees the rights of women, but it also has a phrase that seems to give Shari 'a Islamic law precedence in case of conflict with the constitution.

Let me hasten to say that, having institutionalized slavery in the United States from 1776 until 1863, we have no claim to the high moral ground here. It took a bloody civil war for us to “make another way” and we are still suffering from the residuals of that abominable practice which seemed, at the time, quite normal and natural to millions of folks. I know some want to argue that the Civil War had nothing to do with slavery and that it was all about “State’s Rights.” I don’t know of any other “State Right” that would have stirred enough anger and emotion to result in deaths of 600,000 people on United States battlefields. I don’t believe whacking off noses and ears was a common practice during slavery in the US, but certainly many slaves were disfigured by disciplinary actions and all were deprived of their freedom.

I probably would not have noticed the WSJ article if it had not followed on the heels of the August 9 Time Magazine cover story about eighteen year old Aisha who was occupying a shelter in Afghanistan, minus ears and nose, awaiting reconstructive surgery in the United States. In a dramatic bid to increase circulation or, perhaps, to support the freedom of women in Afghanistan, the magazine graced their cover with a head-shot of Aisha, a beautiful young woman, minus nose. It is difficult to look at.  According to the article, she was held down by her brother-in-law while her husband sliced off her ears and nose. The Taliban had tracked her down and demanded she be punished for running away from her husband. She claims her in-laws had been abusive and that she had to escape. Is it possible that such disciplinary action seems quite normal and natural even to some Afghans who would never personally do such a thing?

There is a follow-up story  in today’s New York Times reporting on Aisha’s trip to the United States for surgery and the unsurprising controversy surrounding the Time Magazine cover photo and article. Many say we went to Afghanistan to fight Al Qaeda, not the Taliban, and that Al Qaeda is gone from there and we need to get out also. They say we are not there for nation building or for civil rights…that their treatment of women is not our business. They say that the disfigurement of Aisha happened while we are there so we are obviously not the solution to the problem. They say that human rights abuses are going on all around the world and that it is not the responsibility of the United States to correct them.  You can find all these arguments by Googling “Aisha Afghanistan.”

It seems to me that we have invaded and changed Afghanistan and have therefore become an important factor and bear some responsibility for how we leave the country.  It seems to me that elimination of this slavery of and threat to half the population of Afghanistan is reason enough for us to remain engaged until the Taliban are driven into submission and insignificance, thereby helping the Afghan people institutionalize “another way.” Even with success from such an intervention, the people of Afghanistan are sure to still be suffering the residual effects of this slavery and abuse even 147 years from now just as we still suffer from our own.

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Here is a collection of outrageous statements from this blog and links to context which may render them more reasonable sounding.

Outrageous Statements from this Blog and Links to the Context

One of the things our government pays for is single motherhood. We should not be surprised that one of the results is more single motherhood.

I wouldn’t be surprised if Norwegians who have moved to the US live longer than the ones who have stayed in Norway.

Our jobs have gone to Asia and India and Latin America because the people there have been living in the back of the store and working their buns off while we have been taking it easy, retiring early, jacking up the minimum wage, expanding government, buying overpriced homes with sub-prime mortgages or living on food stamps in Section 8 Housing, enjoying our bounty and worrying about our rights.

Make a big pile of money available for college loans and it is guaranteed that people will line up to borrow the money and schools will line up to get them admitted and prices will increase.

The Food Stamp program, like Medicare, which currently covers about 45M people, is well tested and works and could easily be extended to the rest of the population.

So now we know why health care costs keep rising while costs of computers and MP3 players and cell phones and big screen TV’s and video cameras and LASIK surgery keep coming down. It’s the (lack of) competition, “stupid!”

Severance agreements should be like prenuptial agreements: designed to prevent loss of what the CEO brought to the table initially rather than to reward early departure.

We have been fighting a “war on poverty” since Lyndon Johnson was president in the 1960’s. We have not made any progress.

So, as we have given up manufacturing in America, we have spawned millions of new non-productive jobs including “medical coders,” “grant writers,” and “bloggers,” and have borrowed billions from China to pay the salaries.

Will the United States go bankrupt or be acquired by some other wealthier nation? Or will we just shut down and go out of business? Maybe hire an outplacement company to help people find new countries.

And why is it ok for Providence (Hospital) to agree to close one of its heart surgery units for a payment from Lexington Medical Center of $15M, thereby paving the way for approval by state regulators of a new heart unit at Lexington Medical Center.

One hundred and forty years later, Biltmore Estate, a working farm and resort, employs 1700 people and hosts a million visitors annually from all over the world. Now that was a real jobs program!

Theologically, there is no more reason for the state to be involved in the sacrament of marriage than in the sacrament of baptism.

If current trends continue, we will end up just doing each others’ laundry and lawn maintenance, selling each other useless junk, and serving each other fast food as we text and twitter and blog.

A fundamental problem is that government has an insatiable and growing appetite for spending, fueled by citizens' demands.

So, when the history of the United States is written two or three hundred years from now, perhaps the list of reasons for its decline as a land of freedom, a beacon of hope, and a source of assistance for the rest of the world will include, “Making Bad Choices.”

Profits of the seven big health insurance companies in the Value Line® Investment Survey total only 0.54% of the total health care bill.

But let’s not be discouraged. Physical life is terminal, you know, regardless of the health care we receive. Rumors are that the death rate is approaching 100%. We just need to stay busy serving each other and enjoying life to the fullest and trying to stay as healthy as we can as this unbelievable drama unfolds in the nation’s capital. You couldn’t make up stuff that strange.

Not to be judgmental, but maybe golf didn’t leave enough time for catechism class and the Boy Scouts during Tiger’s youth.

I’d like to see a wall of separation between government and industry and between government and doctors like the one between government and church.

Life is terminal, and the death rate is 100%.

Who is deciding what is and is not public service? It seems to me that a fast food employee would be the epitome of public service…slaving away all day in that greasy atmosphere cooking and preparing food for hungry people. And what about physicians who relieve suffering and prolong life? Would that not be considered public service?

As I have written previously, we have plenty of money to help the poor if we wouldn’t insist on “helping” everybody.

It is no coincidence that the two large segments of the economy that have seen the most rapidly escalating prices, higher education and health care, are the two with the most significant injections of government funding.

I like the sound of Race To The Top (RTTT). It sounds so much more positive and ambitious and competitive than No Child Left Behind (NCLB) which I always thought could just as well have been stated as No Child Gets Ahead (NCGA).

My Daddy Drove Fords

My daddy drove Fords. He bought new ones in 1947, 1953, and 1962. Mother’s daddy drove Chevrolets. He bought a new one every other year because he used them in his job as a rural mail carrier driving gravel roads and smoking cigars in Sevier County, TN. Daddy’s daddy was a trader and drove whatever he thought looked like a good deal he could drive for a while and make money on. He was an independent thinker and maybe the original “skeptical observer.” In the fifties and sixties, the choice between Ford, General Motors, and Chrysler brands was as serious as the choice between Eisenhower and Stevenson or Baptist, Methodist, and Presbyterian. The annual September parade of the new models down Broadway in Maryville, TN, gave all the citizens their first glimpse of the new offerings and a chance to reconsider or defend their allegiances. It was a simpler time.

But then we suffered the first big oil crunch in 1974, and the second Japanese assault on America came in the form of small, high quality automobiles. It’s not that the US manufacturers didn’t have an economical car. I remember my uncle bragging about getting 25 miles to the gallon in his early sixties Ford Falcon. And the new Rambler American my granddaddy allowed to wreck his long term positive automotive balance of payments when Grandmother learned to drive about 1960 and wanted a new car was reputed to get 30 mpg. But the cars were generally poor quality, offering one-year warranties and, according to conventional wisdom, only 50,000 miles of reliable operation while demanding an oil change every couple of thousand and new tires and front end alignments every ten thousand or so. Ball joint replacement was a cash cow for auto shops, and a smooth shimmy-free ride at 70 mph was a lofty goal. By the 1980’s American-made cars had completely lost their mystique and had all begun to look alike.

In spite of the example Granddaddy set, I’ve never made a dime on a car. But I have been frugal and totally lacking in brand loyalty and held out until age 35 for my first new car, a 1977 Chevy Impala. After that I bought new Oldsmobiles in 1982 and maybe 1986 and new Ford Explorers in 1992 and 1996. They all had quirks and problems and issues. Then in 2002 and 2006 I bought new Lexus cars (don’t know the plural of Lexus) and they have both been incredible in terms of quality and reliability as well as in dealer service and support. So, I have become part of the problem with loss of American manufacturing jobs. Lexus doesn’t even assemble in America.

But I’m going to do better next time. I am going to do my best to award my business to Ford for turning down the government bailout money (Senator Harry Reid thinks they took some.), winning quality and customer satisfaction accolades, and making a big profit in the most recent quarter. The stuff I am reading about the all-new 2011 Explorer make it sound like it might be the next car for me…if I can just survive that painful negotiation and buying process dealers keep putting us through…and if I can get a decent deal.

By the way, here is the first car I ever owned, bought used for $1200 in 1963. Nice look and very exciting but a piece of junk. Third time the transmission started slipping, I traded it for a 1961 VW Beetle in spite of the fact that my wife said she didn’t drive straight shifts. I was in graduate school and feeling very frugal. It didn’t take her long to learn.

Click here for chronological listing of previous postings.