Diary

Fruit From the Poison Tree

Conservatism lost when Republicans nominated John McCain. Republicans lost when they abandoned Conservatism. Now, we are being told to do it again. Republicans let the media and Democrats set the agenda for the 2008 election. We ran away from our principles because the media convinced party leaders it was the only way to win. We chose John McCain, a non-conservative, because the media told us that a conservative could not win. Remember how John McCain got all the positive media attention in the primaries? We lost. Enter the armchair quarterbacks, including myself. Some say do nothing. Just sit back and wait until the honeymoon is over. Let Obama make his mistakes. Media and some Republican pundits advocate more running to the center. They want distance between themselves and the religious right, more policies that appeal to minorities and college students, a kinder, gentler foreign policy (appeasement), more pandering to other countries so that we will be loved more, a softening stance on social and moral issues, and more government regulation and interference in free markets. Doesn’t that describe the campaign we just ran? How did it work for us? Or maybe they are saying we did not go far enough toward the center. Maybe they want us to cross the line to the left.

I used to be responsible for holding semi-annual training conferences for a financial services firm. We asked participants to evaluate the quality of their experiences and we reviewed their evaluations closely. Our first conference drew a 95% approval rating. However, we agonized over a few strong criticisms from three people out of 250. We changed our next conference to accommodate those three people. Our approval rating dropped to 70% and guess what, the same three people complained. By changing to accommodate people who were never going to give us a high rating, we alienated many more. A valuable lesson was learned.

It is about time that conservatives stopped listening to and pandering to people who do not want us to win—ever. How much more distortion does it take before we discover that fruit from the media tree is poisoned? They steer us away from the policies they fear the most. What do they fear? Religion, loyalty, patriotism, guns, the military, free markets, free enterprise, capitalism, and family values. In short, they fear virtually everything that made this country the greatest in the world. They have consistently attacked our basic beliefs and values and tried to make them look backward and rigid. Does “bitterly clinging to guns and religion” ring a bell? Remember the out-of-control, irrational, untrue and unfair attacks on Sarah Palin? They attack most what they fear most. Tired of hearing your thoughts and beliefs described as mere distractions from the real issues, as divisive, partisan, desperate, and of course, racist? I am.

Most polls show that America is a center-right country. Yet, we just voted far left. Why? Because conservatives tucked tail and ran from our own positions and because we did a terrible job of communicating our values. If we are truly a center-right country, then voters could not have known what they were voting for. That is our fault. We must give voters something to vote for as well as against.

Because we in the middle of an economic crisis, we must begin now. We must get out in front with our positions. Fight back. Give them more of what they fear most.

The Economy

Taxes

Explain the inverse relationship between tax rates and tax revenue. I am sick of hearing politicians say they are going to pay for huge increases in spending by raising taxes on the few. Lower tax rates=higher revenue. Higher tax rates=lower revenue. Liberals don’t understand this, and apparently, neither do most Republicans. Yet it is a fairly simple concept and research bears it out. When you discourage productivity by taxing it, productivity decreases. When you tax rich people, they manage their affairs in such a way as to avoid taxes. Sometimes they just do financial and tax planning and sometimes they sit back and wait for a more hospitable economic climate (lower taxes). Jobs are lost. Tax what you want less of, not what you want more of. Joe Voter can understand this if properly explained.

Embrace the fair tax and abolish the IRS. Millions have been spent studying the fair tax and it will work. Joe Voter will get behind it if it is properly explained.

Obama’s plan to cut taxes on 95% of working Americans is mathematically impossible since only 60% pay any income taxes. Republicans let this distortion slide. His consistent support of letting the Bush tax cuts expire will, however, increase taxes on roughly 95% of working Americans. The Republicans let that go virtually unmentioned. Why?

Jobs

Give up the silly notion that presidents create private sector jobs. It is confusing to voters and it is misleading. Ok, it is a downright lie told by both parties. It is a preposterous notion when you think about it. The government has no money of its own and no substantive income stream other than from the taxes we pay. Taxpayers must pay for any jobs the government creates. Such jobs do not increase the size of the economic pie. Private sector jobs increase the size of the pie and pay for themselves. The government’s job is to get out of the way of the private sector (less regulation) and keep taxes low so that there will be more of these jobs.

Regulation, Greed and Corruption

The current financial meltdown was primarily caused by the government’s interference in private markets. Congress forced banks to make bad loans. Banks, not knowing what to do with these bad loans, found investment banks and brokerages who would take these loans at a discount and bundle into bad securities to be resold. Fannie Mae and Freddie Mac called (GSE’s) government-sponsored enterprises soon controlled over half of the mortgages in the country. These GSE’s were run by inept political appointees who cooked the books, hid the bad assets, and got very, very rich—a perfect example of what happens when the government runs anything. Republicans were the only ones who cried wolf (including John McCain and George Bush). The Democrats rebuffed them. When the house of cards collapsed, Democrats, with campaign coffers full of GSE money, blamed lack of regulation and Republicans. And the Republicans let them get away with it. We need to make the primary perpetrators of this fiasco famous. Too late? Not on your life. The damage is going to go on for a long time. Don’t let Joe Voter forget.

What about Wall Street greed? Sure, there was plenty of greed to go around. There always is. What to do about such greed? Punish it (if it is illegal) with jail, fines, suspension of licenses, publicity. Allow companies to fail, management to lose their jobs. What did we do instead? Our candidate suspended his campaign to get behind a bill to give our Treasury Secretary authority to spend 700 billion taxpayer dollars without knowing how it will be spent or why it will be spent. We still do not know. Some of the bailout money (our tax money) will inevitably find its way into the hands of lawyers defending corrupt and or inept CEO’s.

Do we need more regulation? No. We have so many rules now that they cannot possibly be enforced. An alphabet soup of agencies. We need streamlined regulations that are strictly enforced. More rules mean more bureaucrats.

Deficit vs. Debt

I am willing to bet that 90% of Americans do not know the difference. These people vote. They need to know. We need to tell them. Deficit is the financial hole we dig annually. Debt is the accumulation of all the holes we have dug. The big hole (debt) is around 34 trillion. The annual hole (deficit) is around 500 billion. Voters can’t get their arms around those numbers and they are considered too depressing for an upbeat politico to talk about. 34 trillion is about $112, 000 for every family in America. We add about two grand to that every year. Pretty soon most American families will be really, really broke. When you tell Joe Voter that every American child born comes into the world about thirty-five grand in debt, he can get his arms around that.

Republicans helped to dig the holes and they must get out front with a clear message of how to start filling them in. So how do we cure this? The old-fashioned way (and the only way)—we cut expenses and increase revenue. Not by increasing taxes (remember what happens when we increase taxes). We encourage free enterprise and investment by low capital gains and corporate taxes, preferably with the fair tax. This will encourage growth and increase tax revenue. Cutting expenses will draw immediate media ire. There will be tales of woe and suffering and many will be true. However, most experts say that government wastes as much as thirty percent of everything it spends. Find the waste, shine a light on it, and stop it.

Stop using the “tax and spend” talking point without explanation or examples. We lost the right to use that when we had control of Congress.

Shame those who say, “It’s only __% of the budget. Not enough to make a difference.” Nonsense. Everything counts.

Shine that light on earmarks. Joe Voter will not appreciate that earmarks are never really voted on, that they just hitch a ride.

Free Enterprise and Rescue Packages

Capitalism and free enterprise are based on the simple truth that people want to succeed, to better themselves, and that they will work hard to do that if they are rewarded. Socialism thwarts that very basic emotion, has never worked, and yet we move closer to it every year. Obama gave the Republicans a perfect opening with his peanut butter sandwich analogy, but the Republicans did not capitalize. “We are not worried about your sharing your sandwich, Senator, we are worried about your taking our sandwich and deciding how and to whom to distribute it. By the way, all polls show that conservatives are much more likely to share their sandwiches than liberals. Your paltry record of charitable giving indicates you ate the whole damn thing.”

Recognize that the economy runs in cycles. Always has, always will. There will be recessions and there will be periods of growth and prosperity. There have been eleven recessions since WWII. Government should not try to stop or alter the business cycle and should interfere only to prevent a depression or in the event of a national emergency. Recessions cure some ills such as excess and often punish greed and unwarranted risk.

What about bailouts/rescues? Bulletin to government: Please stop helping and please stop shouting disaster. Conservatives must be the voice of reason. Joe Voter understands that authorizing the expenditure of 700 billion taxpayer dollars without knowing how it will be spent or what effect it will have is well, … stupid. Weeks later, we still don’t have answers. We do know that recipients are not using the money for intended purposes. Capitalism does not work that way. Now come the automakers and the states and cities for their share of taxpayer largesse. No red-blooded American wants our beloved car manufacturers to go under, but when you screw up this badly for this long, there should be consequences. Did Congress ask the CEO’s the size of the pay cuts they took when they saw things heading south? Have they renegotiated union contracts so they can build competitively priced cars? (Memo to Republicans—you are not going to get the support of the UAW, but you can win union members). What are the reasons your business model failed and what have you done to change it? Why can foreign companies build autos in America profitably while GM, Ford and Chrysler cannot? If these questions are answered properly and all other options for credit are exhausted, then, and only then, should conservatives support a bridge loan that is secured by collateral and a plan for payback.

Too big to fail? We may need to think like Teddy Roosevelt if giant companies keep swallowing up little ones, then coming to taxpayers with this excuse. Mergers and acquisitions may have to be discouraged.

How do we explain the virtue of free enterprise and the dangers of socialism and big government to Joe Voter? Ask liberals to name a country where socialism has succeeded. I once asked a mentor to explain the difference between free enterprise, capitalism, socialism, and communism. He said, “Under communism, jack-booted thugs with guns come to take your money and property. Under socialism, they come in suits and ties and carry briefcases.” To conservatives, it comes down to who gets to decide what we will share. I don’t think Joe Voter wants Nancy Pelosi to decide.

Foreign Policy, National Security and Energy

Keeping us safe is government’s primary role. Security comes from a strong economy and a strong military. Fight wars only for protection and fight them to win. No nation building and no more attempts to fight politically correct and polite wars. The only exit strategy is to win and end the killing as quickly as possible.

Stop all foreign aid to unfriendly countries.

Cut off all funding for the UN and kick it off American soil. It was a good idea that failed miserably. Too radical? Then slash funding for this corrupt organization.

Recognize that we will need oil for at least three more decades. Drill here, drill now while exploring and encouraging alternatives. This is a national security issue as well as an economic one. Democrats looked abysmally stupid saying that drilling here will not affect the price of oil for more than ten years. Republicans let them get away with it. Learn to explain commodities markets so that Joe Voter can understand how prices often turn in an instant on a rumor, but supply and demand win in the long term.

Environment, Health Care, Education, Minorities, Immigration

Environment—Conservatives have always been environmentalists. We conserve; we cut waste. Concentrate on smog and pollution and things we know we can control. Saying that the science is over on global warming, as John McCain did, is ridiculous. Joe Voter knows this.

Health care—A complicated issue that must be reduced to basic components. We need enhanced competition among insurance companies and health care providers and a shift of responsibility to consumers. Competition brings costs down, efficiency up. Health-care providers are behind on technology, file-sharing, and bill collection. We must encourage a gradual move away from employer-provided health coverage and toward control by the actual consumer so that he will be more responsible with health care dollars. When someone else pays, abuses occur and waste is rampant. McCain’s plan was a partial solution that he allowed Democrats to portray (incorrectly) as a tax increase. Liberals, name a country where national health care has worked.

Education—think freedom again. Freedom of choice, merit pay, tougher standards.

Immigration and Minorities—Nobody did more to champion the cause of illegal immigrants than John McCain. Hispanics rewarded him by voting for Obama. Make English the official language. Joe Voter understands that this will save millions. What is racist about asking immigrants to assimilate? Children born in America to illegal immigrants should not be entitled to automatic citizenship. Illegal is illegal. Stop providing taxpayer-funded benefits to illegals. Make obtaining citizenship more efficient. An immigrant who wants to enter the country legally should not be at a disadvantage to one who wants to enter illegally. Race—We have now elected a black as president. Whites and blacks voted for him because of his skin color. Can we just stop talking about it now? Just stop, really.

Politics and Politicians

We have minimal chance of getting our national debt under control as long as we have hogs at the trough. Let Americans vote on term limits on a national ballot referendum. Power corrupts and if it does not corrupt, it intoxicates. Everybody says, “Throw the bums out … just not our bum. He brings home the pork.” One Congressman was re-elected after calling his constituents racists and rednecks. Another state is on the verge of electing a convicted felon. Why? Because they are champion porkers. One nonagenarian (90+) senator just stepped down as chair of an important committee. Who took his place? An octogenarian (80+). I have the utmost respect for age and wisdom, but disdain those who cannot give up power. When people never step down, it is almost impossible for a good candidate to launch a viable campaign. Our founding fathers never intended for public servants to become permanent feeders at the public trough. Elected officials need to go back home and live under the laws they make.

Shine that light on the seniority system in Congress. Joe Voter won’t like what he sees.

Strategy

Rebuff loaded questions from the media. Point out inaccurate assumptions included in the question and ask for rephrase. Embarrass biased reporters.

Learn to think beyond the next election cycle. Sell long-term solutions to Joe Voter and disdain short-term thinking. Point out the law of unintended consequences.

Select articulate, energetic, experienced, and charismatic candidates. In today’s visual world, a viable candidate must be an effective communicator. Sounds like a no-brainer but we have not had such a candidate since Ronald Reagan. I would like a candidate who has “made a payroll”, i.e. had experience in the private sector. He or she must be bold.

Stop pandering and tell the truth. Never surrender our principles. Trust but educate Joe Voter.

Review the old Contract With America. We need a new one that embraces these principles.

The Ten Cannots. 1. You cannot bring about prosperity by discouraging thrift.2. You cannot strengthen the weak by weakening the strong3. You cannot help the poor man by destroying the rich4. You cannot further the brotherhood of man by inciting class hatred5. You cannot build character and courage by taking away men’s initiative and independence.6. You cannot help small men by tearing down big men7. You cannot lift the wage earner by pulling down the wage payer8. You cannot keep out of trouble by spending more than your income9. You cannot establish security on borrowed money10. You cannot help men permanently by doing for them what they will not do for themselvesFrom the 1916 pamphlet published by William J. H. Boetcker

Jim H. Ainsworth—former CPA, CFP, CLU, Registered Investment Advisor, Licensed Securities Principal, was twice named one of the most influential accountants in America by Accounting Today magazine. He welcomes comments at www.jimainsworth.com