Telling It Like It Is

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THE ENTERPRISE--HOPES & FEARS & THE FUTURE OF AMERICA

THE ENTERPRISE--HOPES & FEARS & THE FUTURE OF AMERICA

FIRST OF ALL, MY BEST WISHES FOR A HAPPY THANKSGIVING WEEKEND. 
As much as we might be critical of the plight of our country, its economy and so many other things (some of which follow), America is still the best country in the world.  If you don't believe me, take a moment and think of one where you'd rather live.  I did, and I can't.  Let's all pull together to make America even better, and be thankful for the freedom and opportunities we enjoy.

READ MY LATEST FORBES BLOG POST: ECONOMIC RECOVERY:  A CRISIS OF CONFIDENCE
http://blogs.forbes.com/prospernow/2010/11/13/economic-recovery-a-crisis-of-confidence/

YOU KNOW I LIKE PEGGY NOONAN--HERE'S WHAT SHE HAD TO SAY
In a column entitled  Americans Vote for Maturity she reflects on the recent elections and what they meant.  Commenting on President Obama's Wednesday morning news conference on the aftermath of the election, she had (wrote) these observations:
--"The president is speaking, in effect, to an empty room.  From my notes, five minutes in: 'This wet blanket, this occupier of the least interesting corner of the faculty lounge, this joy free zone, this inert gas.' "
Pretty strong, critical words, but she didn't stop there. 
--"By the end I was certain he will never produce a successful stimulus because he is a human depression.  Actually I thought the worst thing you can say about a president: He won't even make a good former president.  His detachment is so great, it is even from himself."
These are the words of a woman who was a leading speech-writer for the most admired president in modern decades, Ronald Reagan (aka "The great communicator"--hint, someone-- wrote those speeches for him to edit and deliver!)  That somebody was Noonan and a few others.  She has observed the Washington scene from an insider's perspective, and for her to honestly report such a bleak picture of Barack Obama is a noteworthy observation.
==============

-WHERE HAVE ALL THE HEROES GONE?

SUMMER'S GONE, FALL IS WINDING DOWN; SPORT SEASONS ARE SHIFTING & STRUGGLING--YET THAT'S WHERE MANY "HEROES" OF AMERICAN YOUTH COME FROM

EXCELLENCE: THE RUNNER TO SURPASS ALL OTHERS--GALE SAYERS OF THE BEARS
In his short 68 game career--shortened by knee injuries doctors could repair now, but couldn't fix back then--this man was undoubtedly the most elusive runner ever seen in American football. This video says he was number two--but that is wrong--as can be attested to by so many of his contemporaries.  He was voted into the football hall of fame within 5 years.  That's amazing and so was his ability to stop, change directions, and accelerate to out run the fastest players of his era.  Ultimately the man exceeded the runner for his devotion to his running mate Brian Piccolo who died from cancer. Sayers is now in his late 60s but he still supports the foundation he created in Brian's name, and is CEO of his own successful $100mm company.  I was in the stands, soaked with rain when he scored 6TDs in one game--and could have had 7 except George Halas held him out.
Watch the best runner you will ever see. http://www.youtube.com/watch?v=k0DTIuT4Hfs

BUT WE HAVE SO FEW HEROES TO ADMIRE
NY'S Derek Jeter is getting old.  Tim Duncan is so low key. Peyton Manning is someone to look up to.  But the list gets shorter and shorter.  Brett Favre's star has gone out.  Too many big time baseball players to list are tainted by steroid scandals--who's drug assisted and who's not?  Football players are tainted by meaningless and mindless violent acts or stupidity.  Basketball is tainted by star level mercenaries, who shift franchises as fast as they change socks. 

Boxing has moved to Eastern Europe and Latin American countries.  Hockey belongs to Canada--and maybe Russia.  Tennis is becoming dominated by big strong women whose name ends in -ova, and by 140mph servers.  Women's golf is owned by young Korean women.  Men's golf is talent laden, but Tiger is shot and Phil is ailing.  College football is dominated by "star coaches," making $2.5-5 million. 

My two favorites for authenticity are also being threatened: Little League World Series (threatened by its commercial success and arm damage done to young arms by a steady stream of curve-balls); Women's College Basketball (threatened by UConn, now maybe Baylor, and a handful of perennial powers, and it is still the province of real basketball skills--not overwhelmed by mega-athleticism.

OUR YOUNGER GENERATION IS IN TROUBLE--TOO FEW ROLE MODELS AND "HEROES" (other than CELEBRITIES!)
When our youth must turn to drug using musicians and actors (actresses) to find role models, they are in trouble.  When our young athletes seek "heroes" and find Tiger Woods misadventures, numerous other pro athletes in various kinds of trouble (drugs, guns, etc.) where do they look for role models.  When young women look for "idols," I hope they don't look to Lindsay Lohan, or Paris HIlton, et. al.

OUR NATION HAS MISTAKENLY LINKED ATHLETIC SUCCESS WITH CHARACTER--THERE IS OBVIOUSLY NO RELATIONSHIP. 

  1. Chicago Cubs  outfielder Andre  Dawson on being a role model: "I wan' all  dem kids to do what  I do, to look up to me. I wan' all the kids to copulate   me."
 
  2.  New Orleans Saint RB George  Rogers when asked about the  upcoming season: "I want to  rush for 1,000 or 1,500 yards,  whichever comes first."
 
  3.  And, upon hearing Joe Jacobi  of the 'Skin's say: "I'd  run  over my own mother to win the Super Bowl," Matt Millen of  the Raiders  said: "To win, I'd run over Joe's Mom,   too."
 
  4.  Torrin Polk, University of Houston receiver, on his  coach, John Jenkins: "He treats  us like men. He lets us wear  earrings.."
 
  5.  Football commentator and  former player Joe Theismann: "Nobody  in  football should be called a genius. A genius is a guy like  Norman  Einstein."
 
  6.  Senior basketball  player at the University of Pittsburgh :  "I'm going  to graduate on time, no matter how long it  takes."
(Now  that is  beautiful)
 
  7.  Bill Peterson, a Florida  State football coach: "You  guys  line up alphabetically by height.." And, "You  guys  pair up in groups of three, and then line up in a  circle."
 
  8.  Boxing promoter Dan Duva  on Mike Tyson going to prison: "Why  would  anyone expect him to come out smarter? He went to prison for three years, not Princeton ."
 
  9.  Stu Grimson, Chicago Blackhawks left wing, explaining why he  keeps a color photo of himself above his locker: "That's so  when I forget how to spell my name, I can still find my  clothes."
 
  10.  Lou Duva, veteran boxing  trainer, on the Spartan training  regimen of heavyweight Andrew  Golota: "He's a guy who gets up at six o'clock in the morning, regardless of what time  it  is."
 
  11.  In the words of NC State  great Charles Shackelford: “I can go to my left or right, I am  amphibious.”
 
  12.  Frank  Layden , Utah Jazz president, on a former player: "I  asked him, 'Son, what is  it with you? Is it ignorance or  apathy?' He said, 'Coach, I don't know and I don't  care.'"
 
  13.  Shelby Metcalf,  a basketball coach at Texas A&M, recounting what he told a player who  received four F's and one D: "Son,  looks to me like you're spending too much time on one   subject."

NOW WE CAN'T BLAME THESE POOR JOCKS--BUT MAYBE THE COACHES SHOULD BE A BIT SHARPER
A large percentage of Americans can't name the leaders of our government--such as Vice President Biden, and surely have no idea who the Supreme Court Chief Justice might be.  Yet these are voters!  Our schools have been dumbed down day care centers for youth, where they are fed (on the taxpayers money) their meals, kept approximately "in line" and if they are lucky or attend a good school with some good teachers, they learn somethings that are valuable and important. 

WHERE SHOULD SOME HEROES BE FOUND?  IN FRONT OF A CLASSROOM
A few of mine sure were.  My math teacher, Jim Madole, my basketball coach Chuck Rolinski, my office studies teacher Betty Cusack--those are heroes to me for things they taught me.  Their lessons and examples remain, 50 years later.

THE DUMBING DOWN, MEDIOCRITY OF AMERICAN SCHOOLS--THANKS TO APATHETIC PARENTS AND TEACHER'S UNIONS
American kids go to school shorter hours, and fewer days of the year than most countries.  Why is that?  Perhaps teachers (or their Unions) want more free time for what they are paid.  Some teachers live in fear--of either students or parents.  Others live to loaf and just collect their pay.  The best ones make a huge difference--thank God for them.  Unfortunately, the teachers' Unions (like Unions in so many walks of American life) don't just negotiate for them, they keep the weak ones employed and force out administrators who want to reward good teachers and dump the loser.

THIS ABOUT SUMS UP WHY SO MANY AMERICANS ARE DEPRESSED (humor?)
    Over five thousand years ago, Moses said to the children of Israel,"Pick up your shovels, mount your asses and camels, and I will lead you to the Promised Land."
    Nearly 75 years ago (when Welfare was introduced), Roosevelt said, "Lay down your shovels, sit on your asses, and light up a Camel, this is the Promised Land."
    Today, Obama has stolen your shovel, taxed your asses, raised the price of Camels and mortgaged the Promised Land!
     I was so depressed last night thinking about Health Care Plans, the economy, the wars, lost jobs, savings, Social Security, retirement funds, etc .   I called a Suicide Hotline.   I had to press 1 for English.  I was connected to a call center in Pakistan.  I told them I was suicidal.
    They got excited and asked if I could drive a truck......

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All the best, John

THE ENTERPRISE--ON DENIAL AND DEFIANCE

THE ENTERPRISE--ON DENIAL AND DEFIANCE

FILTERED INFORMATION--A DEADLY THREAT
I have told many corporate executives that IF there are more than a few layers of people in their organization between them and the employees doing the work, then the execs do not have a clue what really happens at the plant floor or the call center desk.  Why?  It's not because the execs are stupid.  They are not; they are bright and motivated.  It is not because they cannot understand what goes on.  It is because their entire world is constructed to isolate them, and feed them filtered, "cleaned up" information. 

ISOLATED, INSULATED, AND MANAGED FROM THE HARSH, BRUTAL TRUTH
Executives spend much of their time in meetings among other executives.  The best and brightest execs actually get outside and meet with customers (and once in a while, suppliers, too).  Unfortunately, every encounter with "workers" is orchestrated too tightly, and the environment is too threatening for honest feedback to come from workers skipping over 4, 5, 6, 7 layers of middle management to the ears of the CEO.  What does reach the C-suite is "filtered" information.  Thus the best and brightest in the C-suite are making decisions based on flawed information at best, incorrect information at worst.  What kind of decisions result from this process?  Not the best, and sometimes, downright goofy ones.

IS THE PRESIDENT OF THE COUNTRY ANY DIFFERENT?
I doubt it.  His schedule is crammed full.  His staff is made up largely of career politicians--people who made their way by telling others what was "politically expedient and correct."  Perhaps the President's inner circle, his Chief of Staff, etc. tells it to him straight.  But very few others do.  George W. Bush suffered mightily when Karen Hughes left his senior staff.  He no longer had his "truth teller," his "barometer of reality." Who does this for Barack Obama?  Rahm Emmanuel is gone. Maybe his golfing and basketball buddies tell him the truth. One can only hope so. Michelle moves in her own rarified circle. The kids attend private schools.  Obama has no religious leaders--not since Rev. Wright was publicly exposed as a radical and a bigot. In fact, (Obama may not be a Muslim, but IF he is a dedicated Christian--as he claims), it is ODD that he has attended Church so few times in his nearly two years in office.)  Many would say he is missing out on a Voice of Wisdom from a Higher Authority.  

DENIAL, THE FIRST STEP OF GRIEF--OR THE ROADBLOCK TO PROGRESS
In business and in life, being in denial is a frequent trap. In the book Death & Dying, Kubler-Ross lists Denial as the first step.  "This can't be happening to me."  In business, failed programs whether strategic or tactical are often blamed on everything but the real reasons.  Why?  Denial.  To admit the real reasons for failure is to admit that someone (maybe you) did something wrong.  Human nature resists this in every way possible.  You hear it from Nancy Pelosi; you hear it and see it from Barack Obama.  He is "blind and deaf" to what the American voters are telling him. 

WILL SOMEBODY PLEASE EXPLAIN THIS TO THE PRESIDENT?
He worries that the people don't understand; that perhaps he didn't explain clearly enough. I wince every time I hear his proud comment on how much the stock market has come back.  First, it's not because of him; it's in spite of him, and because corporate America got down to serious cost cutting--something he needs to learn how to do.  And he's only partly right about the stock market, since the Dow was over 14,000 and dropped to under 7,000--a 50% plunge.  It's only up to the 11,000 range, still down about 25% from its peak.  To get back where it was, it had to gain 100%, and it hasn't.  If it only dropped 50% why does it have to gain 100%?  See the chart below. Investors everywhere need to understand this!

(from Gary D. Halbert's newsletter Forecasts & Trends).
=====================
Legendary investor, Warren Buffett, has said, “The first rule of investment is don’t lose.  And the second rule of investment is don’t forget the first rule.”  In my investment management practice, one of our main goals is to avoid large portfolio losses.  I publish the following table often, but it can’t be repeated too frequently, in my opinion.  The breakeven table below illustrates just how devastating large losses are, and how difficult it is to recover from them:

Amount of Loss Incurred    Return Required to Break Even
10%    11.1%
15%    17.7%
20%    25.0%
25%    33.3%
30%    42.9%
35%    53.9%
40%    66.7%
45%    81.8%
50%    100.0%
60%    150.0%
70%    233.3%
Note that if you lose 30%, you have to make almost 43%  Unfortunately, millions of investors bailed out during the severe bear market of 2008 and early 2009, and never got back in.  That’s because most investors are simply not emotionally built to lose half of their investments and remain invested.  They have not enjoyed the stock market rally since the bear market low in March of last year, and this same fear emotion won’t let them get back into the market.

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THERE IS THE PROBLEM!  INVESTORS WHO "BAILED OUT" HAVE NOT "ENJOYED" THE MARKET'S CLIMB
Many investors became fearful and took their money out of the equity markets and put it in fixed income investments.  Those have NOT grown anything like the stock market.  Thus, they are still stuck somewhere much lower than where they were.  Add to that the collapse of the housing market, and the pressure of no more money from second mortgages and huge risk of foreclosures--and Americans DO NOT FEEL BETTER OFF! 

BUSINESSES DO NOT TRUST OBAMA--AND FOR GOOD REASON--HE SAID ONE THING & DID ANOTHER--MORE THAN ONCE
Businesses hate investing in a period of uncertainty.  Obama and the Democrats in Congress have been publicly and vocally critical of business (greedy Wall Street, etc.), and their policies and politics have reflected that.  Worse yet, most of the Obama administration has been busy passing punitive regulations, making life more difficult for businesses.  It's little wonder that the $2 Trillion on businesses balance sheets is sitting there waiting for a more favorable investment climate. 

As long as Obama is in the White House--that day will not truly come.  That's why 2012 is so important.  Further, the very "rich folks" that Obama would like to tax and tax and tax are the very investors who either put their money to work in new businesses--or NOT!  And until the TAX & REGULATE frenzy is over, do not expect a vigorous recovery.  AND OBAMA IS NOT GOING TO CHANGE MUCH!  He will say he is, but he won't.  It is against his nature and his entire belief system.  He is into DENIAL AND DEFIANCE! The "dumb America voters just don't understand!"    (YES, WE DO, MR. PRESIDENT--AND THAT'S HOW WE VOTED.)

MORE EVIDENCE OF HIS DECLINE? OF AMERICA'S DECLINE UNDER HIS LEADERSHIP?
    November 11, 2010 -- 5:30 p.m. EST

China's Hu Rebuffs Weakened Obama
SEOUL—President Barack Obama limped toward the close of the Group of 20 summit, weakened by an anemic economic recovery and an election drubbing that has left world leaders questioning U.S. authority. In private meetings with Mr. Obama Thursday, Chinese President Hu Jintao resisted his pressure on currency revaluation. Mr. Obama also failed to secure a free-trade agreement with South Korea by his imposed Thursday deadline, a blow to a U.S. president who has pledged to double U.S. exports over the next five years.


WHY 2012 IS CRITICAL--ALREADY:
While the Democrats still in control of the White House and Senate talk about "working with the new Republican majority in the House," they must have their fingers crossed behind their backs.  They lie.  If forced to "work with the House" (by whom?) they might act like it.  But make no mistake.  They believe the American voters are the ones who erred.  They are in denial.  Americans just didn't understand them and their tax and spend, big government policies that were being crammed down American's throats.  Perhaps Americans understand quite well!

BY THE WAY--WILL SOMEBODY TELL SARAH PALIN?  PLEASE, BEFORE SHE WASTES HER TIME & EFFORT & LOTS OF MONEY
Us serious adults think she is cute, perky and entertaining.  But there is no way I'd want her as my President any more than I wanted Obama.  One ROOKIE in a row is plenty.  She needs to campaigN for candidates on a serious note, and not play the cutesy stuff.  Then in maybe 10-15 years, she will develop enough knowledge, maturity and "gravitas" to actually run for something again.  Try Senator from Alaska--that seems to be a mess right now.  But NO THANKS, SARAH. I have a long list of people ahead of you.  We want to WIN in 2012!  No matter how narcisstic, detached, untruthful, deceptive and misgjuided Barack Obama is, he is one hell of a campaigner and will still get a huge share of the minority vote (Blacks, Hispanics) and a lot of the uninformed youth vote--those who haven't grown up enough yet to really think it through.

ON PUBLIC EMPLOYEE UNIONS--A POX ON OUR COUNTRY:
"The process of collective bargaining, as usually understood, cannot be transplanted into the public service." Said Franklin D. Roosevelt in 1933.  A public employee strike, he said, "looking toward the paralysis of government by those who have sworn to support it, is unthinkable and intolerable."  I will add, it is also incestuous.  Public employee unions contribute heavily to elect officials who will then feel beholden to them, and increase their wages and benefits, while not demanding more work or productivity. This is in direct conflict with the interests of taxpayer--citizens.  Public employee unions are one of the greatest threats to the American government and way of life that exists today.  (The includes teachers' unions!) Something must be done to limit them, their growth and power/influence.

OK, YOU ALL GET IT BY NOW
The GOP controlled House can't change America or the government policies by itself. It's just a great start!   Democrats control the Senate and "the anointed one" Obama is still in the White House.  All the House can do is slow the spending, force realistic budget cuts, and pressure Obama and the Democratic liberals in Congress to either go along--or be recognized and the cause of the problem.  In states like OH, where a new Governor and the GOP controls both houses of the legislature, much more can be done. The states can show the way for the Federal government.  I think John Kasich and the people we elected in OH will do that.    I sure hope they do.

Best, John


John L. Mariotti, President & CEO, The Enterprise Group, Phone 614-840-0959  http://www.mariotti.net   http://mariotti.blogs.com/my_weblog/
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THE ENTERPRISE--VICTORY MEANS A LONG HARD ROAD

THE ENTERPRISE--VICTORY MEANS A LONG HARD ROAD

A BIT OF FUN BEFORE THE SERIOUS STUFF:  CHRISTMAS IS COMING, WHICH MEANS FAMILY FUN AND GAMES
Go see this site to read about a brand new game suitable for all ages, and easily portable too: "Square Shooters" is a game based on 9 dice that contain a "full deck of cards"--on the dice,  A card is on each of the 54 faces of the dice (6 faces x 9 dice = 52 cards + 2 Jokers).  The number and variety of games you can play is remarkable--and this can be easily taken on family trips (no big bulky package), and played almost anywhere.  Really unique new games only come along once in a great while.  Pass on this link to others hoping to find fun Christmas gifts that the whole family can play with--adults and kids alike.
http://www.freshwatercleveland.com/innovationnews/heartland110410.aspx 

To buy, or for more info www.squareshooters.com

THE ELECTION IS OVER--WELL, MOSTLY!  "We the people" have spoken loud and clear! The question is, IS OBAMA DEAF TO THE MESSAGE AND BLIND TO HOW SO MANY AMERICANS FEEL?  I am betting that President Obama and Harry Reid didn't hear us yet. The hole they have dug us into is enormous (See Chart Below). 

Only after another entire election cycle, can we re-populate our Congress and White House with responsible Americans.

SOMEONE FROM THE U. K. ASKED ME YESTERDAY HOW I'D GO ABOUT BALANCING THE FEDERAL BUDGET
Unless someone is interested, I won't go into the detailed response I gave him.  I will, however, reprint the Federal Budget here, so everyone can see the difficulty of trimming it down to size without taking large bites out of the big items.  $2.5 Trillion of the $3.8 Trillion is concentrated in the top 5 items.  THERE IS NO WAY TO BALANCE THE BUDGET WITHOUT CUTTING THEM.
Defense spending (which is loaded with waste and redundancies--even according to what Defense Secretary Gates says), and "Entitlements": Social Security, Medicare and Medicaid must be cut.  e.g., Start with a new law opening up secret/sealed Medicare accounts to reveal where much of the fraud and waste is located.  We know what to do about Social Security.  It's not easy, but it is mandatory. Who has the guts to do it?

LOOK AT THE ITEMS THAT WERE ZERO PERCENT OF THE BUDGET IN 1968
Add them up!  Almost $200 Billion of "welfare" under various names, not including the $100 Billion in Unemployment benefits.
 We have become a nation that rewards people for NOT WORKING.  That is just wrong in so many ways!





HOWEVER, SIMPLY ELECTING NEW PEOPLE NOW DOESN'T SOLVE THE PROBLEMS--IT JUST GIVES US A CHANCE TO IDENTIFY THEM AND START WORKING ON THEM...
The article and charts below reveals the lies and deception practiced by our President and Democratic Congressional leaders (both of which will still be in Congress, I am sad to say, with Harry Reid still in his influential position).  There is absolutely no doubt who caused most of our problems (not all the deficit problems however, George W. Bush owns some of them for failing to veto the Republican Congress's spending during the Iraq war!) 

But here, you can see where the problems started to get much, much worse.




In a nutshell, what Obama is saying is "I inherited a deficit that I voted for and then I voted to expand that deficit four-fold since January 20th.?
Budgets do not come from the White House. They come from Congress, and the party that controlled Congress since January 2007 is the Democrat Party. They controlled the budget process for FY 2008 and FY 2009, as well as FY 2010 and FY 2011. In that first year, they had to contend with George Bush, which caused them to compromise on spending, when Bush somewhat belatedly got tough on spending increases.

For FY 2009 though, Nancy Pelosi and Harry Reid bypassed George Bush entirely, passing continuing resolutions to keep government running until Barack Obama could take office. At that time, they passed a massive omnibus spending bill to complete the FY 2009 budgets.

And where was Barack Obama during this time? He was a member of that very Congress that passed all of these massive spending bills, and he signed the omnibus bill as President to complete FY 2009.  Let's remember what the deficits looked like during that period:    (below) 
If the Democrats inherited any deficit, it was the FY 2007 deficit, the last of the Republican budgets.  That deficit was the lowest in five years, and the fourth straight decline in deficit spending. After that, Democrats in Congress took control of spending, and that includes Barack Obama, who voted for the budgets. If Obama inherited anything, he inherited it from himself.
 


      

Voters Noticed What Obama Failed To See By MICHAEL BARONE

That's one way of looking at it. Another way is to say that the Obama administration and the Democratic Congress have increased government's share of gross domestic product from 21%, where it's hovered for the last several decades, to about 25% and have put the national debt on a trajectory to increase from 40% to 90% of GDP.Heading into what appears to be a disastrous midterm election, the Obama Democrats profess to be puzzled. The president's record, they insist, is moderate, accommodating — if anything, overcautious. So why do most American voters seem to be angrily rejecting it?
Voters have noticed — and don't like it.

But, say the Obama Democrats, shouldn't ordinary people — in particular, shouldn't the blue-collar working class — be grateful to a government that tries to "spread the wealth" (Obama's words to Joe the Plumber) in difficult economic times?  They used to be, the argument would go. In post-World War II America, voters regularly moved toward the Democrats in recession years.

There's a difference, however, that has escaped Obama Democrats but perhaps not ordinary voters. In recessions caused by oscillations in the business cycle from the 1940s to 1970s, voters were confident that the private-sector economy could support the burden of countercyclical spending on things like unemployment insurance and public works projects.

That spending would stimulate consumer demand, the thinking went, and once inventories were drawn down, manufacturers would call workers back to the assembly line. The recession would be over. But it's been a long time since we've had a major business cycle recession. The recession from which we've technically emerged, but which seems to most voters to be lingering on, is something different, the result of a financial crisis.

And financial crisis recessions tend to be a lot deeper and more prolonged than business cycle recessions, as economists Carmen Reinhart and Kenneth Rogoff argue in their 2009 book, "This Time is Different: Eight Centuries of Financial Folly." "The aftermath of systemic banking crises," they write, "involves a protracted and pronounced contraction in economic activity and puts significant strains on government resources."

Tax Threat

The very able economists in the incoming Obama administration seem to have ignored the difference between these two kinds of recessions. Council of Economic Advisers head Christina Romer was surely sincere when she promised that passage of the stimulus package would hold unemployment under 8%. Similarly, administration economists evidently thought the private-sector economy could bear the burden of a national debt that doubled over a decade. It would bounce back like it usually does in a business cycle recession. [WRONG!]

Tea Partyers took a different view — and before long, so did most voters. They seem to believe that permanent increases in government's share of GDP will inflict permanent damage on the private-sector economy — and won't do much, if anything, to move us out of this prolonged financial crisis recession. The evidence so far seems to support them.  In addition, they seem to have understood that the threat of higher tax rates and more onerous and intrusive regulation from this administration would deter business executives from expanding, entrepreneurs from creating jobs, investors from taking risks and consumers from buying things.

Smart Voters

Larry Summers could tell business leaders that they had nothing significant to fear from a sophisticated economic adviser like himself. But he was working for a president who told ABC's Charlie Gibson that he would favor higher capital-gains tax rates even if they brought in less revenue to the government. This is a president who likes taking "rich people's" money away from them. The business leaders know that Summers has gone, while the voters know that Obama remains and will be in office two more years — but without a Democratic majority in the House of Representatives and, perhaps, a Democratic majority in the Senate, if the polls are right.

The line from the Obama camp is that voters are confused, ignorant, misled or even racist; they can't be rejecting the president's party on the merits. But voters, in rejecting the Obama Democrats' vast expansion of government, may be more sophisticated than their supposed betters.  Leave the private sector alone, they seem to be saying, so it can recover from the financial crisis recession and once again create the bounteous and unscripted growth that has been the norm in American history.

© 2010 Investor's Business Daily

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JOHN MAULDIN'S NEWLETTER DESCRIBES WHY THE TASK AHEAD IS SO DIFFICULT

Digging a huge hole is easier than "un-digging it."  Or as children learn in the fairy tale rhyme, "Humpty Dumpty sat on a wall; Humpty Dumpty had a great fall. All the King's horses ... Couldn't put Humpty together again!"  Time changes circumstances, and it alters people's perceptions.  Undoing the harm Obama and the Democratic Congress have done will take time--because they will resist and impede efforts to "undo it."  John Mauldin lays out how hard it will be...

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Be Careful What You Wish For

An excerpt from John Mauldin's Frontline Weekly Newsletter.  © www.JohnMauldin.com
Let's look down the road. I think we will at best be in a Muddle Through Economy for the next two years. Unemployment is going to be above 8%, best-case, in 2012. If the Bush tax cuts are not extended, in my opinion it is almost a lock that we go into recession next year, unemployment goes to 12%, and underemployment gets even worse. That is not a good climate for Obama and the Democrats in 2012. It is especially bad when you look at the number of Democratic Senate seats up for re-election that are in conservative states. The Republicans could take a serious majority in the Senate.

And then what? Right now Republicans are running on promises that they will not cut Medicare and Social Security, but are going to reduce spending and get us closer to a balanced budget. But everyone knows that the only way to get the budget into some reasonable semblance of balance will be to either cut Medicare benefits or increase taxes.

There are only the two options. Yes, you can reform medical care, and I think much of Obamacare should certainly be repealed, but that does not get us anywhere close to dealing with the real issue, and that's a fact. There are tens of trillions of unfunded liabilities in our future, which must be dealt with.

Let me be very clear on this. I am not really worried about the supposed $75 trillion in unfunded Medicare liabilities in our future. That is an impossible number. If something can't happen it won't happen. Long before we get to that apocalypse, we find a bond market that simply refuses to fund US debt at anywhere near an affordable cost. Crisis and chaos will ensue. Remember the quote that led this letter?

People only accept change when they are faced with necessity, and only recognize necessity when a crisis is upon them.  - Jean Monnet

The simple reality is that if We the People of the US want Medicare, in even a reformed and more efficient manner, we must find a way to pay for it. It will not be cheap. Raising income taxes on the "rich" is not enough. You have to go back and raise income taxes on the middle class, too. Oh, wait, that will be a drag on the economy and consumer spending. And in any event it will not be enough.

The only real way to pay for those benefits will be a value-added tax, or VAT. And while it could be introduced gradually, let there be no mistake that it will be a drag on economic growth. Government spending does not have a multiplier effect on the economy. It is at best neutral. What creates growth is private investment, increases in productivity, and increases in population. That's it. Tax increases have a negative multiplier.

A significant VAT along with our current income taxes will give us an economy that looks more like the slow-growth, high-unemployment world of Europe. Can we figure out how to deal with that? Sure. But it is not growth-neutral.

Republicans in 2013 will be like the dog that caught the car. What do you do with it? The last time they (embarrassingly, we) really screwed it up. The defining political question of this decade will not be Iraq or Afghanistan, or the environment or any of a host of other problems. The single most important question will be what do you do with Medicare? Cut it or fund it? Reform it for sure, but reform is not enough to pay for the cost increases that will come from an increasingly aging Boomer generation.

There is no free lunch. At some point, you cannot run on "no cuts in Medicare" and "no new taxes" and be honest. At least not this decade. Maybe when we have cured cancer and Alzheimer's and heart disease and the common cold at some future point, medical costs will go down, but in the meantime we have to deal with reality.

You may be able to fool the voters, but you will not be able to fool the bond market. Not dealing with reality will create a very vicious response. Ask Greece.

And that is the national conversation we must have with ourselves. There is a cost to government. There is a cost to extended Medicare benefits. (I am blithely assuming we deal with all the "easy" stuff like Social Security, and make real cuts in other areas.)

And for my international readers, this is an issue that the entire developed world must deal with. We all have our problems created from years of very poor choices, overleveraging, and deficits. It will not be easy. I must admit to smiling when I see the protests in France over raising the retirement age from 60 to 62. Really? Amazing.

And while France causes me to smile and shake my head, the refusal on the part of the US leadership to give more than lip service to solutions that might disrupt their slim majority of voters is maddening.

This election... will change very little in real terms, the things that matter, like whether the US economy can grow or will face a very real crisis and a true depression. That potential is in our future, and it is coming at us faster than you think.

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MORE GOVERNMENT "FREEBIES" --WASTED $$$

I DIDN'T WRITE THIS FOLLOWING UPDATE, BUT I WOULDN'T HAVE WRITTEN IT MUCH DIFFERENTLY--OUTRAGEOUS? YOU BET!

Just when you think you’ve heard it all, Congress quietly comes up with a new zinger to put their hands in your pockets, and pick them while you aren’t watching.  Isn't this just wonderful! Here is the account I received from one of my correspondents:

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"I was standing in line at the checkout counter at Wal Mart and as I looked at the line behind me, I saw a couple of people talking about what looked like identical new cell phones, bragging about the fact that their phones were free and so was the airtime.

The woman in line behind me had heard the same exchange and turned to the young man behind her and asked, “Is that a new type of cell phone?”  The young man replied, “Yes, this is my new ‘Obama phone’”.

She asked him what an “Obama phone” was, and he went on to say that, “Welfare recipients are now eligible to receive” what he described as (1) a FREE new cell phone, and (2) approximately 70 FREE minutes of air time every month..

Needless to say, I was a little skeptical about his answer, so when I got back home, I ‘Googled’ it, and lo and behold, he was telling the truth.  This was what I discovered:  SafeLink Wireless is a government supported program that provides a free cell phone and airtime each month for income-eligible customers.

In other words, your tax dollars are being distributed to a wireless phone provider to provide welfare recipients with free cell phones and airtime. We are $14 Trillion in debt, Congress is balking at continuing unemployment payments to those who want to work, and Congress is increasing the dole to dead beats. The ship of State is sinking, and it’s sinking fast. The old concept of getting ahead through hard work has flown out the window. It has been replaced by Obama’s and Congress’ idea of 'Hope and Change.' The country has changed all right, changed to 'Why should I work for it, when I can get it for free?'

You can load the link below in your browser to confirm for yourself that the “Obama Phone” is real.  Just have a barf bag ready."

https://www.safelinkwireless.com/EnrollmentPublic/Home.aspx

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THAT'S ENOUGH FOR THIS WEEK.  STAY TUNED FOR SOME NEW AND DIFFERENT CONTENT IN COMING WEEKS.

BEST, JOHN

John L. Mariotti, President & CEO, The Enterprise Group, Phone 614-840-0959  http://www.mariotti.net   http://mariotti.blogs.com/my_weblog/
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