A Solution to (some of) our Economic Woes

At the risk of being hated, we have brought much of our problems on ourselves. Too much spending and not enough saving would be the theme for many, if not most, Americans. We could use a few lessons from the WWII generation and “waste not, want not”. I am not casting dispersions upon others but place myself firmly in the middle of this group of people who have spent first and worried about how to pay for it later. Now is the time to get it together. If the government wants to help us, I have a (responsible) plan. If not, we got ourselves into this mess. It is up to us to get ourselves out.

First, the way that government could help. Rather than spend hundreds of billions of dollars on special-interest spending, maybe relief targeted directly at homeowners could alleviate some of the problems we are facing. Interest rates are very low by historical standards, but so many people are upside-down or have too little equity in their homes to take advantage of this.

I would suggest that the government provide a way for homeowners to refinance at the lower rates for either a 30- or 40-year loan. By lowering the rate and extending the loan period, many homeowners could avoid foreclosure. To sweeten the deal for mortgage lenders, the government may offer a subsidy to qualifying borrowers that would pay fees to the lender ($2,000 per refi perhaps??). Even if a million homes were refinanced under the plan, the government would be on the hook for about $2 billion, which is way less than what we are facing right now. Maybe half of the people facing foreclosure, or more, could afford to stay in their homes. This would have the derivative effect of stabilizing home prices. Other industries (construction, home retail, etc.) would benefit as well. The plan may pay for itself. That is up to the real economists to determine.

Second, the way we can help ourselves. Nobody wants to hear it, but we need to show some personal responsibility. That means saving more and spending less. It means making decisions about what we really need versus what we want. Buying a car that is less expensive or gets better mileage, putting off the vacation this year – everyone has their own list, but we need to get realistic about what we can afford.

The bottom line is that I didn’t ask for the government to bail me out. If they are going to do it anyway, please let it be with a well-thought plan. Either way, the real bailout comes at home by making the right decisions.

At What Cost

I am a Republican, but I haven’t been too happy lately. This has more to do with the legislative than the executive branch because that is really where financial policy is made for this country.

The reason I am a Republican in the first place is because I consider myself fiscally conservative. I am not necessarily socially conservative; in fact, I probably lean a little to the left in the social balance. I was a huge fan of Newt Gingrich because, in my opinion, he was the last person to do the Speaker’s job responsibly. He balanced the budget with his “Contract with America”. I would like to see someone step up and do this now.

If I consider myself a fiscally conservative Republican and the Republican Party is not fiscally conservative, than where does that leave me? I think many people are in the same boat. In the latest legislation, 40 percent of the proposed pork in the bill is from Republicans. This is hugely frustrating because I don’t know where to turn for fiscal sanity. The Democrats are even worse and are spending us straight into Socialism. It shouldn’t be up to me to pay for a train from Disney to Las Vegas in the same way that people in Nevada shouldn’t have to pay to save the Everglades. And none of us should have to pay for someone else’s health insurance or mortgage.

There are really only two possible alternatives to what we are dealing with now. First, we can try to find new people who will step up and do the right thing, regardless of party affiliation. This is tough because where do you find the new people? And how do you know that they won’t fall victim to the same backroom dealing as the rest of our representatives?

Alternatively, we can pressure those already in office to do the right thing. The more likely of those being Republicans because they stand to gain politically by doing what is right. The conservatives want our representatives to be responsible with our money (important distinction – not the government’s money). Hopefully, on the heels of the Conservative Political Action Conference www.cpac.org, we can influence those in power to curtail this out of control spending. The Senate still has the power of the filibuster if all of the Republicans are on board, and I believe the conservative movement is picking up momentum. The next Congressional elections will say a lot about whether conservatives have any real juice to make change.

The bottom line is that we, as Americans, are left holding the debt for the decisions that our elected officials are making with or without our blessing. Let’s let them know that we care and that we don’t want them continuing as if they have a blank check. Until elections, we can at least do that much.

A Legend Passes

I am definitely not the right person to summarize the lifetime of accomplishments that can be credited to Alvah H. Chapman Jr., but I can speak for many who benefited from his existence without knowing him well.

Alvah Chapman has been “the” civic leader in Miami for many years. His many civic accomplishments include the fight against crime, rebuilding after the worst natural disaster to hit the U.S. and assisting the homeless. I am omitting many of his works, not to mention his professional life, which included being CEO of Knight-Ridder.

I believe, however, that he would like people to remember the kind of man he was, even more than this tremendous list of accomplishments. He obviously had a very deep belief in God and felt that it was his responsibility to help those less fortunate – a lesson that we could all attempt to emulate.

My debt to Mr. Chapman is personal, although he probably wouldn’t even know that I felt indebted to him. He approved my first contract with Community Partnership for Homeless (CPH) as the Board Chairman. As a result, I was able to start my consulting business. I get the feeling that this was very typical of him. I’m sure he didn’t know the impact he had on others and their livelihood on a daily basis.

His legacy is one that has continued to grow even as his health began to fail. Community Partnership, considered a national model for the fight against homelessness, was founded by Alvah Chapman. Another program has been born as a result – National Homeless Programs, which is designed to assist other metropolitan areas in the U.S. deal with their homeless populations in a similar way to CPH.

The Miami community has lost a treasure in Alvah Chapman. The true credit to the man is that he set things in motion that will continue to help the least, the last and the lost well after his passing. It is our responsibility, as he felt it was his, to take the abundance of gifts that we have been given and use them to help others. It will take many people working together to approach his success, but the foundation is laid.

I have asked my father, many times, how I can repay him for all he has done for me. He always says to take care of my family the way that he has taken care of me. That is the best way to repay him, and it is the best way to repay Alvah Chapman. We all should strive to live up to his example by taking care of those most in need. In fact, we owe it to him.

It’s Getting Hot in Here

I think we should reopen the discussion.  Al Gore said the debate is over, but I’m not so sure. 

I woke up this morning and 37 out of our 50 states were experiencing extreme cold weather conditions.  There has been snow in Houston and New Orleans, and it is only December 17th!  Many years, growing up in Michigan, we didn’t know if we were going to have a white Christmas.  It sure looks likely this year.

So where does global warming fit in here?  First of all, I have never been a proponent of the theory that global warming is man-made.  Could the earth be getting warmer?  Sure, but there are too many naturally-occuring factors that may contribute to put the blame squarely on our shoulders.  The earth has a history of temperature cycles that were not caused by us.

One of the myths associated with global warming is that we are producing excessive levels of carbon dioxide, which is resulting in higher temperatures.  Carbon dioxide, in fact, is a RESULT of higher temperatures and not the cause.  The oceans are the largest contributor to carbon dioxide, and there is much data that supports CO2 output goes up after it gets warmer (released through evaporation).

Another myth that is completely illogical is that we are going to be underwater because of the melting ice caps.  One of the scientists in the article I was reading compared this to adding water to a glass full of ice.  When the ice melts, does the glass overflow?  No.  My daughter was recently studying this in her Science class.  It is called the Archimedes Principle.

While we may be seeing temperatures rise slightly, we also may not.  The jury is still out on whether we have seen a real increase in temperature.  The mean temperature for the globe is the same as it was in 1980, and so is the amount of sea ice.  Historically, there have been much higher temperatures.  Greenland was given its name because it was, hmm, green.  I may be mistaken, but I believe that was before the industrial revolution (think Vikings).

I’m all for having a debate, but let’s have it.  Saying the discussion is over only alienates those who are just looking for the truth.  I say we talk about it over a hot toddy.

It’s All About the Cycle

I listen to a lot of talk radio, most of it conservative.  To tell the truth, it has been a real downer lately.  I am not hearing much optimistic talk.  Most of these pundits think that things are going to get much worse before they get better.  (Glenn Beck was talking about a run on rope from Home Depot this morning by his listeners, if that gives you any idea).  I think much of this is politically biased.  There is an assumption that the wrong thing is going to be done, and that has yet to be proven out in any way.

If the government can keep their involvement in private business to doling out low-interest loans (popularly regarded as “bailouts”), than we should be able to weather this storm.  On the other hand, if they attempt to take equity positions in companies or attempt to tell private businesses how they should operate, that will result in very long-term problems.  Ensuring that businesses have some kind of plan (as the automakers are being asked to do) is not dictating the business but, rather, is sound judgment when making loans to troubled institutions.  I hope that this will be their approach.  So far, it appears that it will be.

The reason I am less cynical than so many experts is that our economy runs in cycles.  We have runups in value in different sectors (e.g. gold and silver, technology, housing).  These aberrations in traditional valuation always correct themselves.  That is what we are experiencing now.  The housing market has created this recession.  If the market is left to its own devices, than borrowers will lose their homes.  This is a horrible and painful lesson to learn, but it will result in a corrected valuation of real estate and a return to balance in the economy.

In the meantime, people with good credit and equity in their homes will be able to borrow money.  Others will too (although fewer than before), with less attractive rates.  The banks will be more careful this time around because they don’t want to get burned again, but they have the money to lend.  Some people will still be able to take advantage of this (rates are still low by historical standards), and the economy will begin to recover as a result.

In addition, I have heard rumors that tax cuts could be on the horizon for businesses, which would stimulate employment.  There is also discussion regarding extending tax cuts another year for all Americans.  This would encourage spending, which has slowed considerably while people wait to see what happens.  So much about our markets is pychological.  The stock market is a perfect example.  Right now, most people have a negative outlook, but history tells us that the market will recover.  Smart but distanced government intervention and lower taxes could be the answer.

 

Energy Revolution!

During the recent run-up to the election, we heard a lot about the importance of energy from both of the candidates.  They both touched on renewable resources, while McCain added offshore drilling as part of his platform.  I was disappointed that neither of them took the conversation any further.

One of the things that distinguishes the U.S. from the rest of the world is the opportunity that is available here.  People literally risk their lives to come to our shores with the hope that they can make their dreams come true if they work hard enough.  In many cases they do.  So what does this have to do with energy you ask?

Our country is in the midst of a financial crisis like I have never seen, and energy is the answer.  Energy is the most obvious way out.  I hope that we don’t fall victim to the cheap gas prices, because the prices will rise when the economy recovers.  I also hope that we don’t fall victim to political correctness.  We should be generating as much energy as we can with ALL of the resources available to us.  If we did this, we would be the ones in a position to export energy.

This country led the world with its industrial revolution, and again with the technology revolution.  I say we do it again with an Energy Revolution.  We have some of the richest reserves of coal, oil and natural gas on the planet.  We also are uniquely situated as the most wind-rich country in the world (which happens to lie right in the middle of our country).  France is 85% powered by nuclear energy, and it is a safe source of energy.  If you add solar, hydroelectric and bio-sources of fuel, there is no reason for us to be so dependent on others for our energy needs.  There is also no reason for us to have to pay so much.

I say it is time for American Ingenuity to do it again.  Do it all, and let the best and cheapest technologies win.  It will be best for our economy, our national security and ultimately, our children.  Our government needs to get out of the way, take down the restrictions and let us do what we do best, innovate!

Auto Industry (Bailout?)

I’ve really been waffling lately on how I feel about government assisting the auto industry.  On the one hand, private industry should be able to stand on its own, without government intervention.  On the other hand, we cannot afford any of, much less all of the big three going into bankruptcy.  This is not your standard mom & pop operation.  If they reorganize, which is what many legislators believe should happen, than many of their creditors will lose money that is owed to them.  This is just fundamentally wrong.  Of course, the alternative is for us (you and me) to lend them the money, which is also wrong.

I’m not a fan of Detroit playing the victim card either.  I’m from the area and will always consider it home.  I have friends who work for Ford and GM, and I want those companies to be the best in the world.  It would be great for Detroit and great for this country.  The problem is that we have put ourselves at a competitive disadvantage.  If our union employees are making $75/hr after benefits, and the Toyota workers are making $45/hr, than we will never be competitive.

I don’t buy the argument that we need more environmentally friendly cars, either.  GM makes 18 cars that get 30mpg highway.  The problem is not the product, it is the cost associated with the product.  In order to compete in this world economy, Detroit is going to have to go back to the bargaining table with the unions and cut themselves a more realistic deal.

Unfortunately, our Congress, in their infinite wisdom, will most likely require more eco-friendly cars in order for the big three to get the money they need to move forward.  If they can’t see the real problems, than we are just delaying the inevitable.  Detroit’s once lustrous past will be just that, in the past.

Welcome

Welcome to my new blog!  I expect this to focus on current events, some technology (I’m a computer guy) and maybe some personal stuff as well.  I hope you enjoy it and come back to see what’s new.