Friday, October 26, 2012


A piece of advice my father once gave me was never talk about religion and politics. Later, after I was married he added, "Don't talk about ex-girlfriends in front of your wife." I guess this time I am not going to take my father’s advice.  Maybe I should write a book and call it ‘Advice and Dreams of My Father.’

In my opinion, this is a very important presidential election.  It is a clear choice between government and private enterprise.  My reasons have nothing to do with all those emails I have received about Obama's religion; Reverend Wright, birth certificate, college grades, Chicago politics and on and on and on.  My vote is based on who can run the country best.

Here is my rational

To correct the economy and for Government to work there must be a compromise between Republicans and Democrats. It appears to me that Romney wins this point.  He has demonstrated his ability as Governor of Massachusetts and he said in the debates that he realizes the importance of compromise.

Obama on the other hand does not seem to be able to bring the parties and Congress together.  He has had four years and we can see the divide. Recently, I was in Washington D.C. and a lobbyist that had been a democratic senator during Bush senior’s presidency said that while he was a senator the Republicans and Democrats would pose in front of the cameras to appease their constituents but the compromise would go on behind the scenes.  If the parties did not get together then the president would work the phones.  He then said "President Obama’s phone has cobwebs." 

My final decision on this point is based on the comments of the famous Washington columnist Bob Woodward in his book The Power of Politics.  Mr. Woodward, who is famous for his reporting of Nixon and Watergate, said that early in Obama's presidency when he was working on this health proposal and then later, and more importantly, when we came close to closing on the government because of reaching the debt maximum, Obama completely shutout any compromise.  It had to be done his way.

Winner - Romney

This is an area of my expertise.  There is no question that our tax system is way too complicated and that much needs to be done to simplify and also make the system fair.  When 47% of the citizens do not pay tax they don't pay attention to what the government spends money on.  That is wrong.  Also, and just as important, we need the tax system to be stable.  This year we have to look at three different options for our clients due to the uncertainty of the 2013 tax rates and the Obamacare taxes.  We need a stable tax code that people can count on.

I also know that high taxes stifle growth.  Every week I talk with several clients that are concerned about how potential taxes will impact them.  I have heard clients say that they are not hiring to keep under the 50 employee Obamacare number.

High tax rates definitely serve as a deterrent to economic growth and employment.  Let me give you an example.  Lets first assume that I am making $250,000 per year so I am in a 58.15% bracket (40% federal, .9% and 3.8% Obama Care Tax, 2.45% Medicare tax and 8% state tax plus another 3% because my income is at a level that I lose some of my personal exemptions and itemized deductions).  Let’s say I have the opportunity to speak at a conference on a Sunday and Monday.  I have to leave on Saturday and return on Tuesday.  For this effort I would receive $2,000 net after expenses.  But wait... I would have to give the government $1,163 which would leave me with $837.  Here is the kicker.  If I am making $250,000 I don't really need $837.  It certainly is not worth it to give up a weekend, be away from my family and have to put up with the stress of travel.  But… speaking at conferences is where we attract new business.  If I am giving over 50% to the government, I am not really interested in working harder for 41.85%.  So if I am not interested in growing my business, I don't need to hire more people.

I was around in the late 1970's when Carter was president and you could be in a bracket as high as 84%!  I saw people and businesses cut back because the after tax reward was a disincentive.

Winner - Romney

The above was a popular quote when Clinton was campaigning against then President Bush.  I think it is more important today then back then.  Every day for the past two years our federal government has borrowed over $3.5 billion dollars. Every day!   Let me put that in perspective.  To count that far would take you over 111 years nonstop.  Or to put it another way, if you made $1,000,000 per day, after taxes it would take you close to 10 years to have $3.5 billing dollars. We are borrowing every day and there seems to be no end in sight under Obama.

Romney is a businessman and he has experience turning around a business and the Olympics.  He has a much better resume to fix the problem than Obama. 

Winner - Romney

I cannot say it any better than the Creighton University economics professor Dr. Earnie Gross. 

U.S. economic competitiveness is in decline. Since 2009, the U.S. ranking has dropped from number 15 to 19 of the 144 nations evaluated by the Fraser Institute. The primary factor damaging the U.S. ranking was the escalating size of the federal government with U.S. federal spending as a percent of the nation's gross domestic product (GDP) climbing from 21.8 percent in 2008 to 24.1 percent in 2012. 

Moreover, between 2008 and 2012, overall private employment declined by 2.5 percent while federal employment increased by 1.2 percent. As the size of the federal government rose, the national debt soared from $9.4 trillion in 2008 to $15.9 trillion in 2012, advancing by about 70 percent as the overall economy expanded by only 9 percent. 

As a result of the massive U.S. debt, Standard and Poor's downgraded U.S. bonds in 2011. But the U.S. Federal Reserve has delayed the "debtageddon" by buying U.S. debt and effectively turning on the dollar printing presses and risking rampant inflation in the years ahead. Moreover, global investors, afraid to invest in stocks, have put their funds in U.S. bonds driving rates lower even with downgrades and the cheaper dollar. 

However, with 300,000 baby boomers retiring each month pushing social security spending and Medicare outlays higher, there will be a day of reckoning for the U.S. taxpayer and bond investor, but no economist knows when that is. However, the sure signal is when bond investors begin abandoning (selling) U.S. debt. This action will send the yield on the 10-year U.S. Treasury bonds skyrocketing. How high could they go? Today's rate of 1.7 percent will surely bounce to something approaching Spain's current 6-7 percent. This will mean more and more federal tax collections will be devoted to the payment of interest.

This has to turn around.  This has happened under the Bush Obama presidencies and Obama has not only NOT fixed the problem, he has made it worse.

Winner – Romney

In summary, without a strong economy eventually everything will suffer.  Changes need to be made now to fix the problem.  If not, we may be looking for Ann Rand’s John Galt.