2009-02-26
Air, Water, Food, Shelter, and.....
Back in the fall of 1980 I was a senior in high school. I was excited about Ronald Reagan being elected and taking over the White House in the January to come. I thought that Jimmy Carter was a nice man, but not an effective president. (For more about what I thought of Jimmy Carter read: "Letter to the next President of the United States," from August 24, 2007.) After Reagan was sworn in, I would read U.S. News & World Report (it was a weekly then) each week to learn about his policies and administration. I was very excited.
My dad owned a small businesses when I was a child and then during high school, sold the first one and bought another one. I had to start working at the first one when I was nine years old. (My dad was born in 1916, so there was no way around not going to work at an early age.) Every child in America should have to spend some time growing up in a small business and then spend time on a farm. The world would be a better and more understanding place.
I was in my senior English class when the news came that "Reagan had been shot," and my heart just sank. 'No!' I thought, there is just too much to do right now, this can't happen.
Inflation was at a high point; the yield on the U.S. 30-year Treasury Bond was around 20% (the last time long-term interest rates got close to hitting 20% was to finance the Civil War in the 1860s, somebody has to pay for wars, and not just with lives, but with money. Big money.). Smart people where selling their stocks, buying the 30-year and retiring. But, companies could not really "retire," they had to keep on trying, even with super high borrowing cost. The cost of capital almost killed this country in the late 1970s and early 1980s. Many a small businessperson or the average working joe does not take into account what capital will cost.
There is only three times that the 10-year treasury note yield went to 6.5% or higher in the past two hundred years: 1) after the war of 1812, 2) during the American Civil War, and 3) during the height of the Vietnam War (this took twenty years to unwind).
I was big Republican back then and thought Reagan could lead us out of the mess. Many people blamed Carter solely for the problem, but real students of fiscal history know that it started years before that. These things don't happen overnight, it takes time to head the economic super-tanker into new waters. Just like thinking that Bill Clinton had everything to do with the boom of the 1990s, or George W. Bush (#43) the problem with the late 2000s, they don't, things started long ago, in an administration far-far-away.
The problems that Carter, and later Reagan, faced started with Franklin D. Roosevelt and the New Deal. After being masked by the economic boom of the Baby Boomers of the 1950s, the problems were added too and taken to new heights by John F. Kennedy and then Lyndon B. Johnson. The spending that the pair unleashed began the upward trend in interest rates that would nearly run the tanker aground twenty-years later. But, their spending alone might have been easily corrected had it not been for that little sliver of a country on the west side of the South China Sea.
Vietnam would derail the Great Society and two presidents. (Johnson and Richard M. Nixon). But just like economic booms and busts, people forget that it was Harry S. Truman (who is just about my favorite president) and then Dwight D. Eisenhower who started Vietnam. Truman was the first to send advisers (back when that was really what they were) to Vietnam in 1950, and then Eisenhower sent even more.
On May 8, 1950 (Truman's 66th birthday), Give'em money and troops Harry sent $15 million and some advisers, then he sent another 35 advisers on September 1st. But really $15 million and a few officers, big deal. Then Eisenhower sent even more, see "Role of the United States in the Vietnam War." Of course (once again) these seeds were sown years before.
As World War II was drawing to a close, Truman and Winston Churchill (meeting at Potsdam at the end of July and the first two days of August 1945) decided to split the county called Indochina at the 16th parallel, with China taking control of the northern half and the British taking control of the southern half. Sound familiar?
But, back from history class to economics. The point was, to understand what is happening today, we need to look at history and also look for the root causes and not think that things happened overnight.
If they were, they would always help the person in need, and they would not ignore their fellowman for their own gain.
I have often said, and for some time now, that "Pure Communism" and "Pure Capitalism" are both great theories sans one thing. In a perfect world, they would both work fine. But, in this world the one thing is: "Human Nature." As long as humans run things (and why would they give up control?), no matter how smart they become, the fallacies of human nature will always be ever present.
Since you will never be able to eliminate "greed," "love," "sex," "power," "pride," "lust," and the other feelings and emotions that us humans let into our lives "Pure Communism" and "Pure Capitalism" will never work. For both to work it requires that emotions be left out and everybody play on a fair and equal playing field.
But, there will always be the Joseph Stalin's, Fidel Castro's, Hugo Chávez's, Kenneth Lay's, Bernie Ebbers', Bernard Madoff's of the world. There is no getting around that a certain percentage of the population will never play by the rules, no matter what you do. They can not check themselves from trying to circumvent the norms for their own personal human nature. Men (and women) are not now, nor will ever be angels.
So, if "Pure Communism" and "Pure Capitalism" won't work, what should we do? Maybe there is a happy medium, a common ground somewhere in the middle? Now one of the best things about this country and United States Constitution is that two parties fight it out, but in the end reach a consensus, a spot near the middle that both sides can agree on. Neither side getting all that they wanted, but neither side getting nothing, and letting the other side get all.
I hear complaints everyday from hard line Republicans and staunch Democrats that the other side is "wrong," and should step aside and go away. 'Why can't we have all seats in the senate and house be 100% one party?' But, it is just the fact that we can have two sides come to a compromise that make it such a beautiful political system. Then add to the fact that three different branches (legislative, executive, and judicial) can pull against each other and the model is even more ideal.
Maybe it is time to take that same model and apply it to business and economics? I am about to propose something I thought back in 1980 that I would never have dreamed of. I have always been a big proponent of the small business and the people who run them (for more of my thoughts on that, again see: "Letter to the next President of the United States"). If you go back to 1776, and the people who signed the Declaration of Independence, there were no John D. Rockefellers, Andrew Carnegies, or Bill Gates. There were no ExxonMobils, General Motors, or Wal-Marts. Those people, and those "big" companies, where in England, and part of what we wanted to get away from.
Companies like the Dutch East India Company, the British East India Company, the Hudson's Bay Company, the Virginia Company, the Plymouth Company, etc. Those where the Fortune 100 of their day. Those were the companies that we wanted to get away from. Little guys like Paul Revere, a small independent silversmith, just wanted run his business on an even playing field and have his local taxes stay local.
Another side effect of these very large companies is that when one of them gets into trouble, they hurt the country as whole. When Enron, WorldCom, Lehman Brothers, and companies of this size finally collapse it ripples through the entire economy. I have a dumb question: If we took all the money spent on litigation and unemployment compensation for a company like Enron and spent it on regulation and/or policing before hand...?
So, here is my thought (sacrilegious?):
Nationalization
There, I said it. A 15-letter dirty word to Western Economics and American Republicans. Now, I don't mean for everything. But, maybe there are some industries that we should think about nationalizing? There are certain factors like global competition and changing U.S. demographics that are forcing us to take a long hard look at certain industries and change our attitudes toward.
For one, I have become convinced that the Health Care Insurance Industry should be nationalized. And maybe, just maybe, government intervention (or should I say RE-intervention) should be looked at for the Domestic Transportation Industry (the airline industry, the trucking industry, the railroads, hence all internal-domestic-transportation), and for the Power Industry (or a portion of it). (The nations newspaper industry and the 10-largest banks might have to be nationalized too?)
The basic elements that mankind has required to survive, and more importantly thrive, are 1) air, 2) water, 3) food, and 4) shelter. Our government thought to add basic education (#5) some time back. Now, going forward, what if we added: 6) health care, and 7) low energy costs to the mix? And I have no problem with Barack Obama wanting to add higher education to the list of basic rights for all-Americans.
Adding basic higher education for all is an investment in the future. An investment that should pay dividends down the line.
But, lets look at my other two new ones:
What if we could take health care and basic energy costs off of the table for both employers and employees?
What if a small businessperson didn't have to worry about providing health care for their employees? What if General Motors for that matter didn't have to provide health care for their employees? There is good chance that if GM had not had to worry about health care costs for the -say the past five years- they wouldn't be about disappear from this world to the history pages.
Also, what if the average person's dwelling was net-grid positive (that is it had solar panels and wind turbines on the roof and added to the grid instead of drew off of it)? If you took the average workers basic power needs off the table, this would 1) ease pressure on their employers (as far as increasing pay to meet those needs), and 2) free up that capital to go to other needs.
If you break down the basic needs of the American worker, and the needs that are putting the greatest pressure on American businesses (both small and large), they are the same factors:
So, my idea, nationalize health care insurance for all, and invest in making the average dwelling net-grid positive.
Now, I only want to give the average person their "basic" energy needs, lets say the government paid for the first $50.00 (individual) or $100.00 (family) a month. After that, the energy pigs would pay dearly. Those people, like the ones who have acres of grass to water in the desert, should be punished. The energy hogs can pay for the other people who are living by the rules.
So, the government installs enough solar and wind devices to give the average house $100.00 worth of electricity generation (or so) a month, and then it is up to the occupant to live with it. Some people, especially in the low-income and really green groups, will stay in net-grid positives. The money that they now pay for basic energy needs will then shift to food, over-the-counter medical needs, and other basics. If there is any money left over they might just put it in their IRA or other retirement accounts. A large group of other people will simply use more power, what they are using now and what they get from the program, and the their power suppliers will be out little to no revenue from retail consumers.
I also wouldn't object if the program required that the government installed the panels and turbines, and then half the savings (say $50 of a $100 in savings) were to be paid back to the government to pay for the purchase and installation of said equipment.
If health care insurance and basic energy costs were taken care of by the government, then several benefits would occur:
By nationalizing the health care insurance industry, you also go a long way to solving the problem with Medicare and Medicaid. Eventually these all get folded in together, one program.
Now I am sorry for you health care insurance industry investors, but you must be a lamb sacrificed for the good of the entire herd. You can try and invest your capital in Brazil, Russia, India, and China. But, your loss will be an honest answer for the greater benefit of the greater good.
Ronald Reagan was my hero in 1980, but maybe, just maybe he sacrificed a generation far down the road to correct the ship from sinking. Before you judge him too harshly, there was a chance that the country would have gone done the tubes with 25% borrowing costs that were peering on the horizon. There is a critical flash point near that 25% mark that would have meant utter devastation for the United States. All you have to do is look at Argentina for that model.
There are no easy answers, Reagan got the short term right to avoid the iceberg then. It is time we turned the ship from the path of next iceberg. But, while we are doing it, we could change both the short-term and long-term paths at the same time. And if we are going to do this right, we need an "INVESTMENT PLAN," not a "STIMULUS PLAN."
Investing in the smart power grid is a good idea. Investing in education is a good idea. I want to see long term investments, not short term simulations. Long term investments, if done right, can both stimulate the short term, and fix some long term problems.
The average joe-schmoes on the street never understood the Superconducting Super Collider, and what it might have done to energy costs down the road. It should have been marketed as "The Program that Will Cut Your Electric Bill in Half Collider." Then maybe it would still be here. But, if we could invest in, and achieve the holy grail of ZERO (or almost immeasurable/indistinguishable amounts) energy loss during transmission, oh what a benefit it would be. People didn't understand how if that one thing happened it would have reverberated around the world.
The butterfly effect that it would have (or could have) on world GDP was enormous. Like the effects of the 1960s space program, it would pay dividends for mankind for as long as we are here. The benefit to the green cause of global warming would have also been tremendous. But people saw none of that, they only saw the short term tax dollars headed to the program.
If we just spend or stimulate, and don't invest instead, this country will be over by 2056. We can not have another "New Deal" unless it invests in the future and takes out some of the largest factors of fixed costs facing businesses and individuals today. The reason it will not work this time: No massive baby boom to spur the largest economic boom ever. This is not going to happen.
So, maybe for the good of this nation (and side-benefit to the planet) we should nationalize the health care insurance industry and also provide basic energy to it's citizens. Just byte the bullet and get it over with. A little pain now for a healthy country down the road.
I am not really advocating nationalizing the power industry, just tweaking it a little to benefit of 1) the average American, 2) American companies, and 3) the nation as a whole in the future.
Now I need to talk about the Domestic Transportation Industry (the airline industry, the trucking industry, the railroads). We have some major things to think about: 1) the price of oil will no doubt go back up when the economy does, 2) the demographics of truck drivers and pilots.
I felt that when the price got over $100.00 price per-barrel (PPB) in 2008, and was certain that when it got over $117.00 that this was emotional speculation. So, every dollar from $117.00 to $143.00 was done by the traders. But, this does not change the fact that it went from $50.00 to $100.00 in a hurry. This was due to supply-and-demand factors, mainly from Brazil, Russia, India, and China (BRIC).
So, when the economy does recover, and then these BRIC and other countries raise their standard of living the price will return to $100.00. China alone could take the price to $100.00 and the rest of the world (excluding the 13 Western developed countries) could easily take the price to $200.00, and it will.
By 2020, I see $200.00 oil (PPB). Now couple this fact with problem facing the trucking industry in finding drivers going forward, you have a major problem (two actually). If you don't know by now, the experts are certain that there will be a major shortage of truck drivers in this country as the baby boomers retire.
So, what can we do? 1) We could hire people from third-world counties to come in and drive trucks and pay $10.00 a gallon for fuel. Or, we could take another approach that would also have the side benefit of lowering carbon emissions.
Now I grew up in the trucking business. My father had driven a truck during World War II, and benefited from the Eisenhower program of wanting better roads to move the military around this nation. The side effect of this was near-death to the railroad industry. I spent at least one-quarter of my childhood at my father's truck parts, sales, and repair business. I enjoy the smell of diesel in the morning.
But, as I see it, we need to try and kill the long-haul trucking business in favor of a huge modernizing program for the nations railroads. (Isn't there something more romantic about railroads anyway?) This would be a major investment to take the nations railroads into this century.
Sorry, dad, but there it is. Fuel costs will be to high, carbon emissions to high, and the benefit of allowing all those foreign drivers in, will not help offset the costs (and other problems) to the people here now. I am all for allowing foreigners in, but if I have to choose between an electrical engineer or a mathematician and a cab or truck driver, sorry I am going with the former.
There is also a problem with too many airlines in the United States; and because they can't make enough money, a side effect of attracting good qualified and competent pilots going forward. Pilots are taking pay cuts to stay at the controls. What kind of business model is this for employees? Down the road this will spill over into air safety.
So, here is what I want:
1) De-coupling the companies who move rail freight from the companies who own the track.
You break off BNSF and Union Pacific into four companies, two that own engines and cars, and two that own track, and charge like a toll road per-car traveled. Imagine if the railroads could just take their trains on any tracks they liked, and just paid a fee to do so. Kind of like trucking companies and their trucks on the highway now.
A side benefit to this would be that other companies like CSX and Norfolk Southern, as well as potential smaller players and new companies, would be able to use the same tracks, thus driving down costs for both, the amount rail companies paid to the track company per-car, and for goods transported in those cars. This would also allow UP and BNSF to run on tracks in the east, more competition for all.
2) A major infrastructure program to take four of the major east-west routes and three north-south routes in the western two-thirds of this country and level grades, straighten curves, make it four lanes for the entire route.
The routes:
Next you change the trains themselves:
As these high-speed trains start operate in the western two-thirds of the U.S., the legacy equipment could be shifted to the eastern one-third and for short line use.
What would we accomplish?
Now for all of you out there who say, "boo-hoo, but what about the auto industry?" Stick it somewhere else. I am tired of hearing it.
It no longer matter if man caused global warming or it is just a cyclical occurrence that happens every 10,000 years. If we don't try to change things 80% of crop production could be wiped out, which in turn would wipe out 80% of the population. Is that what you want?
I am tired of hearing about the short-term, shortsighted ideas of "I need my pickup."
Listen, in 1910 there was no auto industry. There were no production lines, no chain of filling stations with cigarettes and beer. No auto-body shops and dishonest mechanics to take your hard-earned money. From 1850 until 1950 the railroads ruled the nation. They did the heavy lifting for freight and passenger transport.
Maybe it is time to move forward by moving back?
Japan, Germany, and France have been kicking our butts in railroad technology for forty years. South Korea now has a high-speed train. We need to have massive government program to build cutting edge rail cars and locomotives and then sell those products to the BRIC counties. Why let the Chinese sells the newest technology rail-tech to Russia and Brazil?
And what if the low-income and low-middle-income person in this country didn't have a car? How much money would they save in auto-insurance, repairs, and payments and interest on car loans each year? It should be a LUXURY to own and drive a car, not a necessity. If you don't want one you should not be made to feel by both Madison Avenue and by the current infrastructure of this nation that you must own one just to get to work, the store, and the doctor.
There was no auto industry 100 years ago, there doesn't have to be as big of one going forward. Pickups should be used by commercial companies, not every billy-bob with a .38 and chrome rims. You should have a pickup because you want to not because you need to.
I don't want to see all of the workers in the auto industry to lost their jobs, but maybe they can just change jobs? Maybe they go from the factory line, repair shop, and fuel station to a new job in the railroad or some other moving-forward technology?
We need a big, broad, stroke here. We need another man-to-the-moon or Louisiana Purchase. Something so big it shakes jobs up short-term and our nation long-term. It is time to look forward and not cater to the Big-3 in Detroit and existing automotive-centric society and their court jesters.
Just as Truman did at Potsdam with Vietnam, Eisenhower did to the rail and auto industries with the signing of the Federal Aid Highway Act of 1956. One stoke of the pen having lasting impacts to this day. The economic effects of both events (as well as the other effects, like emotional or environmental) are still coming back to us in waves.
A paper signed in 1950 helped shape the federal budget in 1970 and helped push things to the Reagan Administration, which, a portion of we are dealing with now in 2009. Another paper signed in 1956 almost killed one industry and spring-boarded another to the point it effected diplomatic policy in sending young men and women to die in a country half-a-world away fifty years later. Paying for the Vietnam War and the Great Society pushed interest rates to 20%. The interstate highway system helped send people to Iraq (twice).
There were other side effects to these policies. They also altered the personality and societal fabric of this nation. They reinforced a separating a mobility and distance between citizens. You could jump in your car and drive to the suburbs and not talk to anyone. While this was seen as a benefit for the self, it damaged long term ideas of family and community. Just like television, the promotion of the auto industry has changed the way people think, act, and interact. Other countries have a better sense of community, family, and cooperation than does the U.S. Part of that is because of how old this country is, how it was formed, and who came here to settle it.
In 1700, or 1800, or even 1900 there was land and more land. People came here to get away from somewhere else, make a better life. The people had to have great courage to break off from what they knew to put themselves in motion and at risk. So, moving once you where here was no big deal, motion and individuality was part of what made America and Americans.
But, news flash: They don't make land anymore! Because we have already moved from sea to shinning sea, and filled in the spaces in between, we need to re-think are mobilization policies.
Things that we do now, will have an effect in 2056, I guarantee it.
President Obama can have his administration draft and then he can sign the "Federal Transportation Act of 2009."
The waves of such an act would be felt soon with jobs, and later with carbon emissions and savings in Americans GDP later. 50 years, or more like 25 years, from now the average American will not spend as much of his tax dollars to maintain roads, for fuel-taxes, and other costs in the federal, state, and local governments to maintain this huge automobile supporting program. Additionally, about 10 to 20% of each American's take home pay could go else where than to car payments, auto insurance premiums, repair bills, parking fees, etc.
We could actually lower taxes and raise both disposable income and savings rates in this country if we were to follow the ideas that I have laid out in this essay.
It would take some major political fortitude to pass my programs, the lobbyist of both health insurance and auto industry would have to be ignored. I have had these ideas for some time now, but with the economy is decent shape, I knew they would be easily rejected. But, now with environmental concerns and the economy both reaching crisis points, maybe somebody will 1) listen, and 2) act.
Bottom line:
Can you imagine going to a company and telling them that their health costs will be gone, that their employees will need less money going forward for basic energy and transportation costs, that commercial road and fuel taxes will be less? (I can.)
Capital is not destroyed or created, just moves from one place to another. Do we really need to move more of it to Palm Islands? If so, we need to have a choice of wanting to do it, not having to do it.
My ideas give us that choice, not force us to live with ones that we might not want. My ideas are the strength of the future, not trying to fix the broken policies of the past. It is not that big government can't spend big money, but they need to "INVEST" it, not just stimulate or spend it. Know the difference.
(NEW RULE: No companies in the Fortune 200 company can pay for direct or indirect lobbyists.)
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A few more thoughts about CHARACTER.
1) Louisiana Purchase - (1803)
2) Erie Canal - (1817 to 1825)
3) Land-grant universities - (Morrill Acts of 1862 and 1890)
4) Homestead Act - (May 20, 1862)
5) Purchase of Alaska - (1867)
6) Transcontinental Railroad - (1860s; 1869)
7) Panama Canal - (1904-1914)
8) Reconstruction Finance Act - (REA/WPA/CCC/etc.; 1932-1940s)
9) Servicemen's Readjustment Act of 1944 - (aka: G.I. Bill)
10) Federal Aid Highway Act of 1956 - (1950s & 1960s)
11) Apollo Program - (1960s)
My dad owned a small businesses when I was a child and then during high school, sold the first one and bought another one. I had to start working at the first one when I was nine years old. (My dad was born in 1916, so there was no way around not going to work at an early age.) Every child in America should have to spend some time growing up in a small business and then spend time on a farm. The world would be a better and more understanding place.
I was in my senior English class when the news came that "Reagan had been shot," and my heart just sank. 'No!' I thought, there is just too much to do right now, this can't happen.
Inflation was at a high point; the yield on the U.S. 30-year Treasury Bond was around 20% (the last time long-term interest rates got close to hitting 20% was to finance the Civil War in the 1860s, somebody has to pay for wars, and not just with lives, but with money. Big money.). Smart people where selling their stocks, buying the 30-year and retiring. But, companies could not really "retire," they had to keep on trying, even with super high borrowing cost. The cost of capital almost killed this country in the late 1970s and early 1980s. Many a small businessperson or the average working joe does not take into account what capital will cost.
There is only three times that the 10-year treasury note yield went to 6.5% or higher in the past two hundred years: 1) after the war of 1812, 2) during the American Civil War, and 3) during the height of the Vietnam War (this took twenty years to unwind).
I was big Republican back then and thought Reagan could lead us out of the mess. Many people blamed Carter solely for the problem, but real students of fiscal history know that it started years before that. These things don't happen overnight, it takes time to head the economic super-tanker into new waters. Just like thinking that Bill Clinton had everything to do with the boom of the 1990s, or George W. Bush (#43) the problem with the late 2000s, they don't, things started long ago, in an administration far-far-away.
The problems that Carter, and later Reagan, faced started with Franklin D. Roosevelt and the New Deal. After being masked by the economic boom of the Baby Boomers of the 1950s, the problems were added too and taken to new heights by John F. Kennedy and then Lyndon B. Johnson. The spending that the pair unleashed began the upward trend in interest rates that would nearly run the tanker aground twenty-years later. But, their spending alone might have been easily corrected had it not been for that little sliver of a country on the west side of the South China Sea.
Vietnam would derail the Great Society and two presidents. (Johnson and Richard M. Nixon). But just like economic booms and busts, people forget that it was Harry S. Truman (who is just about my favorite president) and then Dwight D. Eisenhower who started Vietnam. Truman was the first to send advisers (back when that was really what they were) to Vietnam in 1950, and then Eisenhower sent even more.
On May 8, 1950 (Truman's 66th birthday), Give'em money and troops Harry sent $15 million and some advisers, then he sent another 35 advisers on September 1st. But really $15 million and a few officers, big deal. Then Eisenhower sent even more, see "Role of the United States in the Vietnam War." Of course (once again) these seeds were sown years before.
As World War II was drawing to a close, Truman and Winston Churchill (meeting at Potsdam at the end of July and the first two days of August 1945) decided to split the county called Indochina at the 16th parallel, with China taking control of the northern half and the British taking control of the southern half. Sound familiar?
But, back from history class to economics. The point was, to understand what is happening today, we need to look at history and also look for the root causes and not think that things happened overnight.
- "If men were angels, no government would be necessary. If angels were to govern men, neither external nor internal controls on government would be necessary. In framing a government which is to be administered by men over men, the great difficulty lies in this: you must first enable the government to control the governed; and in the next place oblige it to control itself."
- ~ James Madison - February 2, 1788
I have often said, and for some time now, that "Pure Communism" and "Pure Capitalism" are both great theories sans one thing. In a perfect world, they would both work fine. But, in this world the one thing is: "Human Nature." As long as humans run things (and why would they give up control?), no matter how smart they become, the fallacies of human nature will always be ever present.
Since you will never be able to eliminate "greed," "love," "sex," "power," "pride," "lust," and the other feelings and emotions that us humans let into our lives "Pure Communism" and "Pure Capitalism" will never work. For both to work it requires that emotions be left out and everybody play on a fair and equal playing field.
But, there will always be the Joseph Stalin's, Fidel Castro's, Hugo Chávez's, Kenneth Lay's, Bernie Ebbers', Bernard Madoff's of the world. There is no getting around that a certain percentage of the population will never play by the rules, no matter what you do. They can not check themselves from trying to circumvent the norms for their own personal human nature. Men (and women) are not now, nor will ever be angels.
So, if "Pure Communism" and "Pure Capitalism" won't work, what should we do? Maybe there is a happy medium, a common ground somewhere in the middle? Now one of the best things about this country and United States Constitution is that two parties fight it out, but in the end reach a consensus, a spot near the middle that both sides can agree on. Neither side getting all that they wanted, but neither side getting nothing, and letting the other side get all.
I hear complaints everyday from hard line Republicans and staunch Democrats that the other side is "wrong," and should step aside and go away. 'Why can't we have all seats in the senate and house be 100% one party?' But, it is just the fact that we can have two sides come to a compromise that make it such a beautiful political system. Then add to the fact that three different branches (legislative, executive, and judicial) can pull against each other and the model is even more ideal.
Maybe it is time to take that same model and apply it to business and economics? I am about to propose something I thought back in 1980 that I would never have dreamed of. I have always been a big proponent of the small business and the people who run them (for more of my thoughts on that, again see: "Letter to the next President of the United States"). If you go back to 1776, and the people who signed the Declaration of Independence, there were no John D. Rockefellers, Andrew Carnegies, or Bill Gates. There were no ExxonMobils, General Motors, or Wal-Marts. Those people, and those "big" companies, where in England, and part of what we wanted to get away from.
Companies like the Dutch East India Company, the British East India Company, the Hudson's Bay Company, the Virginia Company, the Plymouth Company, etc. Those where the Fortune 100 of their day. Those were the companies that we wanted to get away from. Little guys like Paul Revere, a small independent silversmith, just wanted run his business on an even playing field and have his local taxes stay local.
Another side effect of these very large companies is that when one of them gets into trouble, they hurt the country as whole. When Enron, WorldCom, Lehman Brothers, and companies of this size finally collapse it ripples through the entire economy. I have a dumb question: If we took all the money spent on litigation and unemployment compensation for a company like Enron and spent it on regulation and/or policing before hand...?
So, here is my thought (sacrilegious?):
Nationalization
There, I said it. A 15-letter dirty word to Western Economics and American Republicans. Now, I don't mean for everything. But, maybe there are some industries that we should think about nationalizing? There are certain factors like global competition and changing U.S. demographics that are forcing us to take a long hard look at certain industries and change our attitudes toward.
For one, I have become convinced that the Health Care Insurance Industry should be nationalized. And maybe, just maybe, government intervention (or should I say RE-intervention) should be looked at for the Domestic Transportation Industry (the airline industry, the trucking industry, the railroads, hence all internal-domestic-transportation), and for the Power Industry (or a portion of it). (The nations newspaper industry and the 10-largest banks might have to be nationalized too?)
The basic elements that mankind has required to survive, and more importantly thrive, are 1) air, 2) water, 3) food, and 4) shelter. Our government thought to add basic education (#5) some time back. Now, going forward, what if we added: 6) health care, and 7) low energy costs to the mix? And I have no problem with Barack Obama wanting to add higher education to the list of basic rights for all-Americans.
Adding basic higher education for all is an investment in the future. An investment that should pay dividends down the line.
But, lets look at my other two new ones:
What if we could take health care and basic energy costs off of the table for both employers and employees?
What if a small businessperson didn't have to worry about providing health care for their employees? What if General Motors for that matter didn't have to provide health care for their employees? There is good chance that if GM had not had to worry about health care costs for the -say the past five years- they wouldn't be about disappear from this world to the history pages.
Also, what if the average person's dwelling was net-grid positive (that is it had solar panels and wind turbines on the roof and added to the grid instead of drew off of it)? If you took the average workers basic power needs off the table, this would 1) ease pressure on their employers (as far as increasing pay to meet those needs), and 2) free up that capital to go to other needs.
If you break down the basic needs of the American worker, and the needs that are putting the greatest pressure on American businesses (both small and large), they are the same factors:
- 1) Health care
- 2) Energy
- 3) Retirement Funds (and/or pension funds; and later on Social Security [my ideas from 2005])
So, my idea, nationalize health care insurance for all, and invest in making the average dwelling net-grid positive.
Now, I only want to give the average person their "basic" energy needs, lets say the government paid for the first $50.00 (individual) or $100.00 (family) a month. After that, the energy pigs would pay dearly. Those people, like the ones who have acres of grass to water in the desert, should be punished. The energy hogs can pay for the other people who are living by the rules.
So, the government installs enough solar and wind devices to give the average house $100.00 worth of electricity generation (or so) a month, and then it is up to the occupant to live with it. Some people, especially in the low-income and really green groups, will stay in net-grid positives. The money that they now pay for basic energy needs will then shift to food, over-the-counter medical needs, and other basics. If there is any money left over they might just put it in their IRA or other retirement accounts. A large group of other people will simply use more power, what they are using now and what they get from the program, and the their power suppliers will be out little to no revenue from retail consumers.
I also wouldn't object if the program required that the government installed the panels and turbines, and then half the savings (say $50 of a $100 in savings) were to be paid back to the government to pay for the purchase and installation of said equipment.
If health care insurance and basic energy costs were taken care of by the government, then several benefits would occur:
- 1) It would spur the economy in the manufacture and installation of net-grid positive industries
- 2) It would relieve a massive burden on both employer and employee
- 3) It would help with global warming, greenhouse gases, and the like
- 4) It would bring American's basic needs into the Twenty-First Century
- 5) It would promote a huge amount of goodwill with this administration and the government as a whole
- 6) It would make America more competitive in the global economy
- And, get this folks;
- 7) It would take pressure off the American tax payer in such a manner that you would not need to lower taxes to help the Americans in need. The amount of savings to the economy and gross domestic product (GDP) could be recycled into some taxes to pay for said benefits. (Basically you are raising taxes by lower costs, imagine that.)
By nationalizing the health care insurance industry, you also go a long way to solving the problem with Medicare and Medicaid. Eventually these all get folded in together, one program.
Now I am sorry for you health care insurance industry investors, but you must be a lamb sacrificed for the good of the entire herd. You can try and invest your capital in Brazil, Russia, India, and China. But, your loss will be an honest answer for the greater benefit of the greater good.
Ronald Reagan was my hero in 1980, but maybe, just maybe he sacrificed a generation far down the road to correct the ship from sinking. Before you judge him too harshly, there was a chance that the country would have gone done the tubes with 25% borrowing costs that were peering on the horizon. There is a critical flash point near that 25% mark that would have meant utter devastation for the United States. All you have to do is look at Argentina for that model.
There are no easy answers, Reagan got the short term right to avoid the iceberg then. It is time we turned the ship from the path of next iceberg. But, while we are doing it, we could change both the short-term and long-term paths at the same time. And if we are going to do this right, we need an "INVESTMENT PLAN," not a "STIMULUS PLAN."
Investing in the smart power grid is a good idea. Investing in education is a good idea. I want to see long term investments, not short term simulations. Long term investments, if done right, can both stimulate the short term, and fix some long term problems.
The average joe-schmoes on the street never understood the Superconducting Super Collider, and what it might have done to energy costs down the road. It should have been marketed as "The Program that Will Cut Your Electric Bill in Half Collider." Then maybe it would still be here. But, if we could invest in, and achieve the holy grail of ZERO (or almost immeasurable/indistinguishable amounts) energy loss during transmission, oh what a benefit it would be. People didn't understand how if that one thing happened it would have reverberated around the world.
The butterfly effect that it would have (or could have) on world GDP was enormous. Like the effects of the 1960s space program, it would pay dividends for mankind for as long as we are here. The benefit to the green cause of global warming would have also been tremendous. But people saw none of that, they only saw the short term tax dollars headed to the program.
If we just spend or stimulate, and don't invest instead, this country will be over by 2056. We can not have another "New Deal" unless it invests in the future and takes out some of the largest factors of fixed costs facing businesses and individuals today. The reason it will not work this time: No massive baby boom to spur the largest economic boom ever. This is not going to happen.
So, maybe for the good of this nation (and side-benefit to the planet) we should nationalize the health care insurance industry and also provide basic energy to it's citizens. Just byte the bullet and get it over with. A little pain now for a healthy country down the road.
I am not really advocating nationalizing the power industry, just tweaking it a little to benefit of 1) the average American, 2) American companies, and 3) the nation as a whole in the future.
Now I need to talk about the Domestic Transportation Industry (the airline industry, the trucking industry, the railroads). We have some major things to think about: 1) the price of oil will no doubt go back up when the economy does, 2) the demographics of truck drivers and pilots.
I felt that when the price got over $100.00 price per-barrel (PPB) in 2008, and was certain that when it got over $117.00 that this was emotional speculation. So, every dollar from $117.00 to $143.00 was done by the traders. But, this does not change the fact that it went from $50.00 to $100.00 in a hurry. This was due to supply-and-demand factors, mainly from Brazil, Russia, India, and China (BRIC).
So, when the economy does recover, and then these BRIC and other countries raise their standard of living the price will return to $100.00. China alone could take the price to $100.00 and the rest of the world (excluding the 13 Western developed countries) could easily take the price to $200.00, and it will.
By 2020, I see $200.00 oil (PPB). Now couple this fact with problem facing the trucking industry in finding drivers going forward, you have a major problem (two actually). If you don't know by now, the experts are certain that there will be a major shortage of truck drivers in this country as the baby boomers retire.
So, what can we do? 1) We could hire people from third-world counties to come in and drive trucks and pay $10.00 a gallon for fuel. Or, we could take another approach that would also have the side benefit of lowering carbon emissions.
Now I grew up in the trucking business. My father had driven a truck during World War II, and benefited from the Eisenhower program of wanting better roads to move the military around this nation. The side effect of this was near-death to the railroad industry. I spent at least one-quarter of my childhood at my father's truck parts, sales, and repair business. I enjoy the smell of diesel in the morning.
But, as I see it, we need to try and kill the long-haul trucking business in favor of a huge modernizing program for the nations railroads. (Isn't there something more romantic about railroads anyway?) This would be a major investment to take the nations railroads into this century.
Sorry, dad, but there it is. Fuel costs will be to high, carbon emissions to high, and the benefit of allowing all those foreign drivers in, will not help offset the costs (and other problems) to the people here now. I am all for allowing foreigners in, but if I have to choose between an electrical engineer or a mathematician and a cab or truck driver, sorry I am going with the former.
There is also a problem with too many airlines in the United States; and because they can't make enough money, a side effect of attracting good qualified and competent pilots going forward. Pilots are taking pay cuts to stay at the controls. What kind of business model is this for employees? Down the road this will spill over into air safety.
So, here is what I want:
1) De-coupling the companies who move rail freight from the companies who own the track.
You break off BNSF and Union Pacific into four companies, two that own engines and cars, and two that own track, and charge like a toll road per-car traveled. Imagine if the railroads could just take their trains on any tracks they liked, and just paid a fee to do so. Kind of like trucking companies and their trucks on the highway now.
A side benefit to this would be that other companies like CSX and Norfolk Southern, as well as potential smaller players and new companies, would be able to use the same tracks, thus driving down costs for both, the amount rail companies paid to the track company per-car, and for goods transported in those cars. This would also allow UP and BNSF to run on tracks in the east, more competition for all.
2) A major infrastructure program to take four of the major east-west routes and three north-south routes in the western two-thirds of this country and level grades, straighten curves, make it four lanes for the entire route.
The routes:
- 1) San Diego to San Antonio to New Orleans to the East Coast
- 2) Los Angeles to Albuquerque to a) Memphis and b) Kansas City to Saint Louis
- 3) Bay Area to Omaha to a) Chicago and b) Indianapolis
- 4) Seattle (and/or Portland) to Minneapolis to Chicago
- 5) San Diego to Seattle
- 6) Brownsville to Minneapolis
- 7) New Orleans to Milwaukee via Chicago
Next you change the trains themselves:
- PHASE 1: 100 mile per hour (MPH) minimum for freight and 200-MPH for passenger and high-speed freight. You make them energy efficient state-of-the-art energy efficient. (What about filling the roofs of rail cars with solar panels and small wind turbines in tubes on each side? We have nuclear submarines; can we get a nuclear locomotive?)
- PHASE 2: 150-MPH minimum for freight and 300-MPH for passenger and high-speed freight.
- PHASE 3: 200-MPH minimum for some freight hauling certain products and 400-MPH for passenger and high-speed freight.
As these high-speed trains start operate in the western two-thirds of the U.S., the legacy equipment could be shifted to the eastern one-third and for short line use.
What would we accomplish?
- 1) A massive work program to create jobs NOW (and would last a decade, most likely two, and maybe even three)
- 2) Lower freight costs and passenger travel from 2020 until 3020 at least
- 3) Lower carbon emissions (all those long-haul trucks off the road)
- 4) Fix problem of lack of truck drivers
- 5) Safer highways with less trucks?
- 6) Investing in the future with something that will pay dividends for years, not endorse the failed policies of the past
- 7) Oil and gas and diesel being used for other things like short-haul trucking at lower costs
- 8) Help alter our Middle-East policy by lowering the oil component
- 9) Take a good number of passenger vehicles off the road
- 10) Sort to medium trips are now done by rail and not airlines, changing the dynamics with pilots and safety
- 11) Switch carbon unfriendly jobs to "green" jobs
Now for all of you out there who say, "boo-hoo, but what about the auto industry?" Stick it somewhere else. I am tired of hearing it.
It no longer matter if man caused global warming or it is just a cyclical occurrence that happens every 10,000 years. If we don't try to change things 80% of crop production could be wiped out, which in turn would wipe out 80% of the population. Is that what you want?
I am tired of hearing about the short-term, shortsighted ideas of "I need my pickup."
Listen, in 1910 there was no auto industry. There were no production lines, no chain of filling stations with cigarettes and beer. No auto-body shops and dishonest mechanics to take your hard-earned money. From 1850 until 1950 the railroads ruled the nation. They did the heavy lifting for freight and passenger transport.
Maybe it is time to move forward by moving back?
Japan, Germany, and France have been kicking our butts in railroad technology for forty years. South Korea now has a high-speed train. We need to have massive government program to build cutting edge rail cars and locomotives and then sell those products to the BRIC counties. Why let the Chinese sells the newest technology rail-tech to Russia and Brazil?
And what if the low-income and low-middle-income person in this country didn't have a car? How much money would they save in auto-insurance, repairs, and payments and interest on car loans each year? It should be a LUXURY to own and drive a car, not a necessity. If you don't want one you should not be made to feel by both Madison Avenue and by the current infrastructure of this nation that you must own one just to get to work, the store, and the doctor.
There was no auto industry 100 years ago, there doesn't have to be as big of one going forward. Pickups should be used by commercial companies, not every billy-bob with a .38 and chrome rims. You should have a pickup because you want to not because you need to.
I don't want to see all of the workers in the auto industry to lost their jobs, but maybe they can just change jobs? Maybe they go from the factory line, repair shop, and fuel station to a new job in the railroad or some other moving-forward technology?
We need a big, broad, stroke here. We need another man-to-the-moon or Louisiana Purchase. Something so big it shakes jobs up short-term and our nation long-term. It is time to look forward and not cater to the Big-3 in Detroit and existing automotive-centric society and their court jesters.
Just as Truman did at Potsdam with Vietnam, Eisenhower did to the rail and auto industries with the signing of the Federal Aid Highway Act of 1956. One stoke of the pen having lasting impacts to this day. The economic effects of both events (as well as the other effects, like emotional or environmental) are still coming back to us in waves.
A paper signed in 1950 helped shape the federal budget in 1970 and helped push things to the Reagan Administration, which, a portion of we are dealing with now in 2009. Another paper signed in 1956 almost killed one industry and spring-boarded another to the point it effected diplomatic policy in sending young men and women to die in a country half-a-world away fifty years later. Paying for the Vietnam War and the Great Society pushed interest rates to 20%. The interstate highway system helped send people to Iraq (twice).
There were other side effects to these policies. They also altered the personality and societal fabric of this nation. They reinforced a separating a mobility and distance between citizens. You could jump in your car and drive to the suburbs and not talk to anyone. While this was seen as a benefit for the self, it damaged long term ideas of family and community. Just like television, the promotion of the auto industry has changed the way people think, act, and interact. Other countries have a better sense of community, family, and cooperation than does the U.S. Part of that is because of how old this country is, how it was formed, and who came here to settle it.
In 1700, or 1800, or even 1900 there was land and more land. People came here to get away from somewhere else, make a better life. The people had to have great courage to break off from what they knew to put themselves in motion and at risk. So, moving once you where here was no big deal, motion and individuality was part of what made America and Americans.
But, news flash: They don't make land anymore! Because we have already moved from sea to shinning sea, and filled in the spaces in between, we need to re-think are mobilization policies.
Things that we do now, will have an effect in 2056, I guarantee it.
President Obama can have his administration draft and then he can sign the "Federal Transportation Act of 2009."
The waves of such an act would be felt soon with jobs, and later with carbon emissions and savings in Americans GDP later. 50 years, or more like 25 years, from now the average American will not spend as much of his tax dollars to maintain roads, for fuel-taxes, and other costs in the federal, state, and local governments to maintain this huge automobile supporting program. Additionally, about 10 to 20% of each American's take home pay could go else where than to car payments, auto insurance premiums, repair bills, parking fees, etc.
We could actually lower taxes and raise both disposable income and savings rates in this country if we were to follow the ideas that I have laid out in this essay.
It would take some major political fortitude to pass my programs, the lobbyist of both health insurance and auto industry would have to be ignored. I have had these ideas for some time now, but with the economy is decent shape, I knew they would be easily rejected. But, now with environmental concerns and the economy both reaching crisis points, maybe somebody will 1) listen, and 2) act.
Bottom line:
- 1) Pass the "Nationalization of Health Care Insurance Act of 2009"
- 2) Pass the "Net-Grid Positive Energy Act of 2009"
- 3) Pass the "Federal Transportation Act of 2009"
- &
- 4) 30, 40, 50 years from now reap the INVESTMENT of the average American having very-low health care, energy, and transportation costs.
Can you imagine going to a company and telling them that their health costs will be gone, that their employees will need less money going forward for basic energy and transportation costs, that commercial road and fuel taxes will be less? (I can.)
Capital is not destroyed or created, just moves from one place to another. Do we really need to move more of it to Palm Islands? If so, we need to have a choice of wanting to do it, not having to do it.
My ideas give us that choice, not force us to live with ones that we might not want. My ideas are the strength of the future, not trying to fix the broken policies of the past. It is not that big government can't spend big money, but they need to "INVEST" it, not just stimulate or spend it. Know the difference.
(NEW RULE: No companies in the Fortune 200 company can pay for direct or indirect lobbyists.)
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A few more thoughts about CHARACTER.
1) Louisiana Purchase - (1803)
2) Erie Canal - (1817 to 1825)
3) Land-grant universities - (Morrill Acts of 1862 and 1890)
4) Homestead Act - (May 20, 1862)
5) Purchase of Alaska - (1867)
6) Transcontinental Railroad - (1860s; 1869)
7) Panama Canal - (1904-1914)
8) Reconstruction Finance Act - (REA/WPA/CCC/etc.; 1932-1940s)
9) Servicemen's Readjustment Act of 1944 - (aka: G.I. Bill)
10) Federal Aid Highway Act of 1956 - (1950s & 1960s)
11) Apollo Program - (1960s)
Labels: Big Government, Business, National Engery Plan, Renewables, Small Businesses
# posted by Don-n-ABQ @ 3:22 PM 
