This is What’s Wrong With America’s Leaders

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There’s an article in Time about House Democratic leader Nancy Pelosi which I think perfectly highlights what’s wrong with America’s leadership.  From the article:

The 66-year-old San Francisco lawmaker is an aggressive, hyperpartisan
liberal pol who is the Democrats’ version of Tom DeLay, minus the
ethical and legal problems of the former Republican House leader. To
condition Democrats for this fall’s midterm elections, she has employed
tactics straight out of DeLay’s playbook: insisting other House
Democrats vote the party line on everything, avoiding compromise with
Republicans at all cost and mandating that members spend much of their
time raising money for colleagues in close races. And she has been
effective. House Democrats have been more unified in their voting than
at any other time in the past quarter-century, with members on average
voting the party line 88% of the time in 2005, according to
Congressional Quarterly. That cohesion enabled Democrats to hasten
President Bush’s slide in the polls when they blocked his plan to
reform Social Security by allowing retirees to eschew guaranteed
benefits in favor of private accounts. Bush’s approval rating remains
depressed–38% in a TIME poll last week–and the Democrats are in their
best position to win the House since Republicans took control of it in
1994.

I don’t know about you but I don’t vote for anybody to go to Congress and vote the party line.  I vote for them with the expectation that they will go to Congress and vote their conscience, for what they think is best for the country.  Hell, I don’t even expect to agree with them all the time, but I do expect them to do what they think is in the best interest of the country and there’s no way they can do that if they vote the party line. 

Is there anyone in our country’s leadership who isn’t serving a political party, PAC or donor interest before they’re serving the country?  I swear at this point I’d trust a room full of convicted felons before I’d trust this bunch.  Why?  Because the felon’s aren’t smart enough to get away with robbing me blind (they did get caught after all) while members of Congress, with the exception of folks like Duke and Delay, are smart enough to get away with it and somehow get re-elected.  I’d rather deal with people who try to stab me in the front than those who keep nicking me in the back.

Now you know why I continue to proudly proclaim myself an independent with a capital "I".

Debunking Internal Myths and Others’ Perceptions of Me

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Every once in a while I think to myself, "You know you can be pretty smart" and then something or some one comes along to knock me down a peg or twelve.  More often than every once in a while my family and friends think to themselves, "Jon/Husband/Dad/Son sure is a blogging dork.  Look what he's reading/doing/watching."  Well I offer the following as evidence that I'm not that smart and not nearly as dorky as some:
Cardmachine
"Menger’s Sponge – named for its inventor Karl Menger and sometimes
wrongly called Sierpinski’s Sponge – was the first three dimensional
fractal that mathematicians became aware of. In 1995 Dr Jeannine
Mosely, a software engineer, set out to build a level 3 Menger Sponge
from business cards. After 9 years of effort, involving hundreds of
folders all over America, the Business Card Menger Sponge was
completed. The resulting object is comprised of 66,048 cards folded
into 8000 interlinked sub-cubes, with the entire surface paneled to
reveal the Level 2 and Level 3 fractal iterations."

I rest my case.

Bibliophile’s El Dorado

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If you’re into books and you like free things then here are some sites just for you.  And if you’re like my wife Celeste and like nothing more than a good audio book then you’ll really love some of these:

  • Project Gutenberg – This granddaddy of online public domain book repositories now brags over 19,000 titles and all downloads are free.
  • Librivox.org – This site offers public domain audio books, but even better they’ve embraced "Web 2.0" technologies so you can sign up for podcasts.  That’s cool, but even better is that they also offer short fiction, poetry and children’s literature.  They’re looking for volunteer readers so if you’d like to read aloud to a wider audience than your children, or yourself, give ’em a go.
  • TellTaleWeekly.org – Not all the titles on this site are free, but the reason is understandable: they hire professionals to do the readings and emphasize quality.  Once the books have been out a while they are moved to the Spoken Alexandria Project  and are available for free.  Both are housed at Alex Wilson Studios LLC in the great state of NC.
  • University of Pennsylvania’s Free Book Library – Claims to have over 25,000 titles.  Good indexing and updated very regularly.
  • UVa’s E-Text Center – Wow!  Just check it out as there’s too much there for me to describe.  Here’s a link to a page listing bestsellers from 1900-1930.

That ought to keep you busy a while.

Follow the Money

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One thing I’ve learned in all the years I’ve done marketing is that you base your decisions on your customers’ actions rather than their words.  I can’t tell you how many survey’s I’ve done asking customers if they are interested in a product at a certain price, had the vast majority say "Heck yeah!" and then when I launched it had about 10% actually buy it.  They weren’t lying, it’s just that when it came time to actually pony up some money they decided they didn’t really need that product after all.

The lesson I took out of this is that if you really want to know what people value just look at how and where they spend their money. I think the same can be said of society in general, and that’s what makes looking at how our government spends our money so interesting.  After doing a little research I was able to find the following numbers (source: http://nationalpriorities.org), and I’m using all the zeroes to make sure we all understand that this is a buttload of money:

Overall Federal Spending FY06: $2,470,000,000,000

Mandatory (i.e. entitlement) Spending: $1,500,000,000,000
Here’s how the mandatory spending breaks down:

  • Social Security: $510,000,000,000
  • Income Security: $285,000,000,000
  • Medicare: $285,000,000,000
  • Health: $195,000,000,000
  • Net interest payments on national debt: $180,000,000,000
  • Veteran Benefits & Services: $45,000,000,000

Discretionary (what Congress allocates each year) Spending: $960,000,000,000
Here’s how the discretionary spending breaks down:

  • National Defense: $518,000,000,000
  • Education, Training, Employment & Social Services: $86,400,000,000
  • Health: $57,600,000,000
  • Other*: $57,600,000,000
  • Income Security: $48,000,000,000
  • International Affairs: $38,400,000,000
  • Administration of Justice: $38,400,000,000
  • Veterans Benefits & Services: $28,800,000,000
  • Transportation: $28,800,000,000
  • National Resources & Environment: $28,800,000,000
  • General Science Space & Technology: $28,800,000,000

*Other is defined as energy, agriculture, commerce and housing credit, community and regional development, general government and the administration of Medicare and Social Security.

I’m still kind of sifting through all this and trying to figure out what it means, but I can tell you that I’m pretty surprised that our spending on science and technology is only  1.17% of federal spending, or that one discretionary category, national defense, is the largest segment at 20.99%.  I had assumed that Social Security would be the largest but it is a little less at 20.65%.

I understand that some of these numbers are generalizations; for instance there is definitely quite a bit of money spent on science and technology (R&D) that is probably under the national defense umbrella, and it does lead to some technological breakthroughs that are then licensed to businesses, but it is a relatively paltry sum.  Still, these broad numbers give us a sense of where our tax dollars are going, and it’s important to keep them in mind as we debate the future priorities of our country.

We also need to keep in mind where all this money comes from.  Here’s a breakdown:

Total FY06 Revenue: $2,000,000,000,000
Here’s how it breaks down:

  • Individual Income Taxes: $894,000,000,000
  • Social Insurance: $774,000,000,000
  • Corporate Income Taxes: $227,000,000,000
  • Other: $159,000,000,000

So 44% of the country’s revenue comes from the individual income tax, 39% from social insurance taxes and a little over 11% from corporate income taxes.  Keep in mind that the social insurance taxes are mostly funded by payroll deductions on individuals (6.2% for Social Security and 1.45% for Medicare) with an equal amount paid by their employers.  So if you take half of the social insurance and apply it to individual taxpayers they are contributing just over 64% of the revenue and if you apply the other half to corporate taxpayers they are contributing just over 30%. (These are definitely not specific numbers since social insurance also includes things like unemployment and general retirement, but I think it’s close enough).

What’s interesting to me is that the percentage of revenue from individual income taxes has remained steady over the last fifty years at 44% while the percentage from corporate income taxes has decreased from 27% to 11%.  I have a sneaking suspicion that the reduction in corporate income taxes is probably directly correlated with the growth of business PACs and their influence on K Street. 

It’s also interesting to note that the Social Security and Medicare taxes are only applied to the first $84,900 of income so higher salary earners actually pay a lower tax rate than those under the $89,400 line.  And 75% of taxpayers pay more in Social Security and Medicare taxes than they do in income taxes, which highlights how many are near or below that $84,900 line.

After looking at these numbers, and keeping in mind that we’re coming up on a rather important mid-term election, I think we, as a society, need to decide what our priorities are.  We need to figure out if we want to continue electing people who are spending our money as highlighted above, or if we want to change our spending habits.  Do we pick on the silly pork barrel projects like the "bridge to nowhere" or do we concentrate on the big fish like defense, medicare and social security? Of course we should do both, but I suspect that if we took care of any one of the big three we would do as much as we would if we tackled every single pork barrel project.

We also need to decide how we’re going to pay the bills.  Do we continue to with our current tax policies or do we restructure them to relieve some of the stress on individual taxpayers?  Do we phase out income tax in favor of a federal sales tax?  Or do we keep the income tax but simplify it and go to a "flat" tax? Many people call these regressive taxes because the disproportionally impact the poor, but is this true?  And if it is do we as a people believe that the wealthy should contribute more since our society has allowed them to prosper? Do we continue to levy Social Security and Medicare taxes at the current level or do we raise them or lower them?

Questions like that last can’t be answered in a vacuum, but rather are contingent on answering questions related to spending, i.e. should we even continue with Social Security?  Much like losing weight is about diet AND exercise, setting the course for our country is about taxing AND spending and I think it’s high time we got serious about both.

Winston-Salem Bike Chase

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Can someone take a look at this video on Glumbert and tell me if it’s real?  The audio indicates it happened in Winston-Salem on I-40 between Silas Creek Parkway and Stratford Road, but it’s shot from a traffic helicopter and I don’t know that I’ve seen a traffic helicopter in the two years I’ve lived here.  I also don’t recognize the TV station symbol in the lower right hand corner.

Anyway, it’s video of a guy on a bike running from the police and it’s fuzzy enough that I can’t tell if it’s been Photoshop’d or whatever the video version of Photoshop is.  I’d love to know if it’s a real video.

Names, Names

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Every once in a while you come across a name that just kind of stops you in your tracks.  From the Orlando Sentinel comes this article about a family that has the following names:

  • Yourhighness Vlair Takair Morgan (Hiney to his friends)
  • Handsome Morgan
  • Prince Morgan
  • Gorgeous Morgan

Then there’s the recent story about a kid who was killed in California and who’s name was Dom Perignon Champagne.

I wish Celeste and I had thought of naming our kids with adjectives.  Following is a list of some of the most common adjectives used in advertising; imagine them being preceded by common parental statements like "Come here…" or "Stop doing that…"

  • New
  • Free
  • Fresh
  • Delicious
  • Wonderful
  • Special
  • Crisp
  • Fine
  • Big
  • Great
  • Real
  • Easy
  • Bright
  • Extra
  • Safe
  • Rich

Of course with a last name like Lowder (sounds like "louder") some verbs would have worked nicely as well:

  • Pontificate (also has the advantage of a kind of subliminal pope reference)
  • Flatulate (Fart for short)
  • Whisper
  • Tinkle
  • Puke
  • Slurp
  • Gulp
  • Screech

I really wish we’d been more imaginative.

I’ve Been Thinking About Taxes

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Before I get started I want to say one thing: when I write about taxes I reserve the right to change my mind, just as I do when I write about other topics.  Okay.

I’m in the middle of a little self-education campaign re. America’s tax system.  The reason I’m doing it is that it occurred to me that while I’ve always complained about paying taxes, I’ve never really understood them.  I mean when I entered the work force I had no idea what Social Security, Medicare/Medicaid or FICA was.  I just knew there was a chunk of change being pulled out of every paycheck to be held by the government for when I was an old geezer, and what 16-25 year old cares about that?

Then a few years ago I started reading that Social Security probably wouldn’t be there when I retired, or that the government was dipping into social security to pay for stuff.  My little English-Lit brain kind of went, "Huh?" and then moved on because I had things like kids and work to worry about.

Now, though, I want to take the time to understand.  I want to know what income taxes are, why we have them and why our tax system is so complicated.  So I went on-line and bought a bunch of used books and I also went to the library to check out one book in particular, David Cay Johnston’s "Perfectly Legal."  It’s been a real eye opening experience.

Side note: I don’t agree with some of Johnston’s recommendations but I
found a lot of his background information fascinating and some of his
arguments compelling.  Definitely a worthwhile read, as is his coverage
of the IRS for the New York Times.

I still consider myself on the front end of the learning curve on income taxes, but after reading Perfectly Legal and starting in on a history of taxes in America (Federal Taxation in America: A Short History, by W. Elliott Brownlee) I can say that I think the following:

  • Income taxes are absolutely necessary.  While we can all argue about how much we should pay in taxes and about how much government we should fund (i.e. what the government should do with the money) I think we can all agree that part of being in our society is contributing to the common well-being of the nation and income taxes are an effective means to that end.
  • Income taxes can be fair, but currently aren’t.  I’ve read a lot of arguments for flat taxes and federal sales taxes, but I have to say that if the income tax system is fixed properly I think it has the most potential to be the most equitable.
  • Republicans and Democrats are both responsible for the current state of the income tax system. 
  • Our income tax system is unnecessarily complex, and that complexity hurts the middle class most and helps the upper class most.
  • The system is complex because the various loopholes and incentives that create the complexity benefit Congress’ most influential constituency, what Johnston calls the political-donor class.
  • The reason that the middle class is hurt the most by this system is that most people within the middle class have what I’d call normal income; wages and salaries.  They also have a higher share of their income taxed for Social Security.  The wealthy, especially the extremely wealthy, get most of their income via interest on their equities, stock options, etc.  Also, the average middle class person is taxed before they get their money while the wealthy are taxed after they’ve had their money in their pockets for a while.
  • The debate about taxes needs to start with a debate about defining income. We need to define income before we can get serious about tax reform.
  • We also need to debate the goals of the country, the fiscal priorities of the country, while we debate tax reform.  We may discover that we can reduce all of our taxes if we get serious about cutting back on what we expect the government to do.
  • The average American is woefully ignorant of the tax system, how it works and its history.  I’m willing to bet that the vast majority of Americans don’t know that income taxes didn’t exist until 1913 or that the top income tax rate during WWII was 90%.  Puts the current top tax rate in a different perspective doesn’t it?
  • Finally, there is no one in power that has an interest that would be served by fixing the system.  I wouldn’t count on anyone in power today to fix this thing.  It will have to be a remarkable grassroots effort.

Here’s the biggest thing I’m struggling with: should the wealthy pay a higher percentage of their income in taxes?  The rationale for this "progressive" taxation is that the wealthiest have accrued the greatest gains from our society and thus should pay a requisite share.  On the other hand if I make $100,000 and you make $1,000,000 and we both pay 20% then I’m paying $20,000 and you’re paying $200,000.  It looks to me like you’re already paying more.

Of course the reality is that in today’s system my $100,000 is actually less because I’ve had Social Security taken out of a huge chunk of it.  In fact you paid the same amount of Social Security on your one million as I did on my 100k, so right there I’m playing catch up.  And you’re much more likely to have loopholes to exploit and to have paid a tax lawyer to find them for you.  So in today’s system maybe we need you to pay 35% to make it equitable.

But if we redefine income to include all money we gain in the year no matter how we gain it, and do away with the loopholes and then come up with a tax rate that will serve the country’s needs, do we need to have a progressive tax?  One point here is that we’d probably want to have a lower rate (or  no tax) for the truly poor, but above that line we might be able to have one fair rate.

I’ve also read the argument that if we went this route we’d kill the incentives for investing in public companies, which is a key driver of economic growth.  I don’t know if I buy that though, since you’re still basically making money for doing nothing other than gambling on a company’s success, and that’s pretty easy money.  Can’t see the possibility of paying income taxes on easy money reducing its allure.  (I’m thinking that Greensboro blogger David Boyd might be prepared to debate/educate me on this point).

But, here we come to another sticking point for me: how do we tax someone who hasn’t realized the gain yet?  In other words if I’ve invested in Microsoft and the company gains 10% on the year, should I get taxed on the capital gains now or should I get taxed when I actually sell the stock and get the cold, hard cash?  I guess I could pay the capital gains now and then if I lose money the next year claim a deduction, but then we start getting back into complexity don’t we?

So like I said, I’m on the front end of this process and I have a long way to go, and I’m sure my thoughts will evolve on these matters.  But one thing I’m pretty certain will not change is my feeling that the system is broken, it’s not fair and we need to fix it for the good of our country.

Accountants, Lawyers & Congress

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Venture capitalist Brad Feld has a blog post called The Accountants Strike Back in which he has a series of observations that begin with "Accounting is the only profession where…" Let’s just say he’s not high on the accounting profession.

I’ll give you some samples below and you tell me if you agree that for most of them you could substitute "law" or "being a member of congress" for "accounting" and still be completely accurate.  To me these "industries" might be the true Axis of Evil:

Accounting is the only profession where you can completely screw
everything up (see Enron, WorldCom, Kmart, etc..) and your “punishment”
(so long as you aren’t Arthur Andersen) is that the “powers that be”
enact all sorts of legislation (SOX, Option Expensing, 409A, FASB 123,
etc.), that create a full employment act for your profession, radically
increase your fee structures, and make everyone in your profession
better off than when everyone thought you were doing a good job and
maintaining the public trust.

Accounting is the only profession that actively tries to get rid of
most of its clients, but at the same time tries to bleed every last
cent out of them on their way to being fired.

Accounting is the only profession that doesn’t care if their processes
negatively impact your business, what your opinion of them is, or
whether or not you are a happy customer.

Accounting in the only profession whereby a new regulation comes down,
a client alert is sent out and not a single client can understand
anything that is on the printed page.

Poo Cleaning Day

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Until we moved to North Carolina I’d never had a septic system.  In other words all of our waste (i.e. poo) was sent through pipes to somewhere far away to be taken care of.  Now we have a big tank (1,000 gallons) buried in our front yard that stores it until someone comes along to pump it out.

We’ve lived here for two years and figured it was time we had that someone come by.  The way things have gone with this house we didn’t want to take any chances and good thing we called when we did because our septic tank was all "full up" and the last thing I want is poo in my yard unless it’s the dog’s.

I asked the guy we called if he ever watched Dirty Jobs and he said yes, and that the episode where the host tags along with a septic crew (pilot episode that first aired in ’03) was pretty much dead on.  He said our 1,000 gallons of poo was nothing; that the real nasty job is cleaning out the grease traps at places like the local school.  All I can tell you is that 1,000 gallons of poo is plenty nasty for me, and I’m not sure I’d ever want to find something nastier.

Below is a little video of the poo-sucking process I took with my camera phone.  I wasn’t originally going to shoot it, but just before I got my camera going our cat was sniffing around the hole and almost fell in.  I’d have paid some good money to see that!

Finally, if you’re looking for a good septic company in the Triad I can highly recommend Celestial Septic.   

DC Real Estate Going Kaboom?

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P1010212
When Celeste and I sold our last house in Northern Virginia (that’s it on the left) in July, 2004 and relocated to North Carolina a big part of our thinking was that the real estate in NoVA had to be peaking and we knew that the market in Winston-Salem was hitting a near low.  While this wasn’t the only factor we considered in the move it definitely prodded us to move quickly.

Well, the NoVA market continued to skyrocket after we left but I think we got out close enough to the peak and close enough to Winston-Salem’s bottoming out that we can have no complaints.  Now I’m starting to see items like this about the DC market and I worry for anyone who bought at the peak, made themselves "house poor" and used adjustable rate financing. 

I don’t think we have any friends or family who are in that boat, but if they are I hope they’re able to get out of it relatively unscathed.  And for anyone who’s looking for real estate as an investment I’d say they should hold on another year or two and then start buying up all the foreclosed or panic sale properties in Fairfax, Prince William, Loudon and Stafford counties.  Forget Arlington and Alexandria; due to their location and infrastructure they typically don’t get hurt as much in downturns as do the outer counties.

BTW, my personal barometer of how out of whack the NoVA market became is this: we bought our first single family home in ’96 for about $137,990 and sold it in ’01 for $185,000.  The people that bought it from us in ’01 sold it this year for $405,000.  That’s $405,000 for three bedrooms, two baths,  1,750 square feet of finished living space if you include the finished part of the basement, and a location 30 miles from DC along the I-95 corridor which happens to have some of the worst traffic you’ll ever find.  That’s just nuts.

Of course my hat’s off to the folks that bought the house from us.  Nothing like a 120% gain in a little under five years.