Today begins the unofficial summer season --- Memorial Day weekend.
And that means summer vacations are or soon will be on the schedule for each and all of us.
In that vein, and just because I feel like doing so, I'm going to take a break from blog postings for at least a week or two. As is the case with Memorial Day, it's a time for reflection and relaxation.
In the interim, I intend to read and think about all that's going on in this sometimes crazy, often wacky but always wonderful world of ours, and I hope and expect that you will do the same.
Have a great Memorial Day weekend. I intend to do the same.
Thanks. Bob.
Friday, May 24, 2013
Thursday, May 23, 2013
Government Run Amok, aka "Government Gone Wild" ... The Practical Limits of the President's "SPAN OF CONTROL"
We have three branches of government as set forth in the U.S. Constitution. They are the executive, legislative, and judicial branches.
The executive branch is headed by the president and is charged with enforcing the laws as written by the legislative branch. Those laws as well as the provisions of the U.S. Constitution are interpreted by the judicial branch. The president is also Commander-in-Chief of our armed forces.
The Declaration of Independence says that "We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness."
Our system of limited government as set forth in the Constitution separates the powers of those governing into three parts in order to control those in power and restrict them from limiting the rights of We the People.
At least those are the basic ideas underpinning our system of self-governance.
However, after two centuries, government administrative departments and agencies have grown to possess virtually unchecked and arbitrary powers, even though they are formally and theoretically under the express direction and control of the U.S. president.
The Founding Founders in no way anticipated the growth of the executive branch into what has become a huge, powerful and essentially unmanageable bureaucracy. But that's what has happened.
My guess is that President Obama, Attorney General Holder and others in the current administration came to their offices unfamiliar with, and totally unprepared to properly exercise, the profound issues and problems associated with "span of control" management associated with the government's administrative machinery. To surmise that they underestimated the challenges of management and "span of control" would be to make an accurate and enormous understatement. At least that's my admittedly uninformed but experienced based assessment of the current situation.
Here's the deal. An administrative agency or department often runs amok when uncontrolled. And a huge group of administrative agencies can't be properly managed, directed and controlled. It's simply not practical.
As a result, we have a government gone wild where individuals within the various agencies within the administrative branch (such as the IRS, FTC, SEC, DOE, DOT, FDA, Commerce, Labor, State and so forth) may decide to arbitrarily coerce and intimidate citizens to whom they are allegedly accountable. These agencies are out-of-control.
This simply means that as individual citizens we often come face to face with an administrative bureaucrat representing a government which is too big and without a practical sense of accountability to its duly designated "owners," We the People.
Exactly what we tried so hard to prevent at our Founding --- a government of men and not of laws --- is the practical result.
And that's in evidence most recently by the IRS targeting of conservatives, AP freedom of the press and Benghazi issues. At least that's my take.
Government Gone Wild is subtitled 'How Obama's "smart" government became abusive government' and fills in some of the details for us:
"Of all the excuses, explanations and alibis pouring forth in the saga of the IRS kneecapping of conservative groups during the victorious Obama 2012 campaign, the one that deserves attention is this from David Axelrod:
"Part of being president is that there's so much beneath you that you can't know, because the government is so vast.". . .
The Cincinnati-did-it defense degraded this week when the IRS's Washington-based Lois Lerner lawyered up and invoked the Fifth Amendment before Rep. Darrell Issa's House committee. . . . Public officials don't hire lawyers to protect their jobs. They hire lawyers to stay out of the slammer.
But back to David Axelrod. It behooves us to focus on the implication in his assertion that the government has become too vast for a mere U.S. president to bear responsibility. This may be the most significant Freudian slip in 50 years.
Barack Obama was the president who on entering the White House promised an era of "smart government." It was Barack Obama who told graduates at Ohio State that the government is good. In that light, the Axelrod admission is historic. Historic because it was during Franklin Roosevelt's presidency that liberal policy makers and intellectuals promised good government forever via something called the administrative state—in which dedicated bureaucrats would carry out benevolent public policies designed by smart social scientists.
This belief is in a state of collapse, largely for the reason Mr. Axelrod described. In the first Obama term, the Obama Democrats enacted the Affordable Care Act and Dodd-Frank. Both were supposed to represent the promise of a benign administrative state. Both these new laws are—in an awful but apt word—un-implementable. After decades of nonstop legislating, we've arrived at laws so "vast" and so complex that the bureaucracies cannot figure out how to implement them. . . .
In an article this week in the Hill newspaper, a reporter put to an official in the Obama administration the argument that the IRS scandal and the Justice Department's penetrations of the Associated Press and Fox News suggest the federal government has too much power. "I don't buy that," the official replied. "These things are totally newsworthy and valid points for conversation. But they don't string together to make a compelling philosophical argument."
Yes they do.
It isn't just these scandals. Rather than delivering good, smart or transparent government, the Obama policy squads are doing what happens after they realize the "good" model isn't working as they planned. Then we get what's coming to light now—government that coerces people or pushes past the law's limits. This is government gone wild. . . .
Then there is ObamaCare's Independent Payment Advisory Board. This 15-member panel will order change in the health-care industry. . . . a level of coercion—call it command-and-obey—that is alien to the American experience. . . .
The IRS audit scandal is this government's most famous break through the boundaries of the law. But arguably the greater grab for extralegal power was the president's 2012 "recess" appointments—overturned by an appellate court—to the National Labor Relations Board and Consumer Financial Protection Bureau. Mr. Obama's goal was to get two potent bureaucracies in motion producing command-and-obey rules. The recess appointments and Cincinnati audits spring from the same well.
The idea that banks can grow too big to fail is seen by many as a danger to the system. The proposition forcing itself into public discussion in the second Obama term is that the government in Washington can become too big to be good."
Summing Up
As do many others, I have a philosophical problem with big government.
That said, those supporting big government have an even bigger practical problem. It's unmanageable and uncontrollable in its present form and size.
The concept of span of control is real, and pretending otherwise doesn't change that simple fact.
Not even a little bit.
And finally, politics sucks.
That's my take.
Thanks. Bob.
The executive branch is headed by the president and is charged with enforcing the laws as written by the legislative branch. Those laws as well as the provisions of the U.S. Constitution are interpreted by the judicial branch. The president is also Commander-in-Chief of our armed forces.
The Declaration of Independence says that "We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness."
Our system of limited government as set forth in the Constitution separates the powers of those governing into three parts in order to control those in power and restrict them from limiting the rights of We the People.
At least those are the basic ideas underpinning our system of self-governance.
However, after two centuries, government administrative departments and agencies have grown to possess virtually unchecked and arbitrary powers, even though they are formally and theoretically under the express direction and control of the U.S. president.
The Founding Founders in no way anticipated the growth of the executive branch into what has become a huge, powerful and essentially unmanageable bureaucracy. But that's what has happened.
My guess is that President Obama, Attorney General Holder and others in the current administration came to their offices unfamiliar with, and totally unprepared to properly exercise, the profound issues and problems associated with "span of control" management associated with the government's administrative machinery. To surmise that they underestimated the challenges of management and "span of control" would be to make an accurate and enormous understatement. At least that's my admittedly uninformed but experienced based assessment of the current situation.
Here's the deal. An administrative agency or department often runs amok when uncontrolled. And a huge group of administrative agencies can't be properly managed, directed and controlled. It's simply not practical.
As a result, we have a government gone wild where individuals within the various agencies within the administrative branch (such as the IRS, FTC, SEC, DOE, DOT, FDA, Commerce, Labor, State and so forth) may decide to arbitrarily coerce and intimidate citizens to whom they are allegedly accountable. These agencies are out-of-control.
This simply means that as individual citizens we often come face to face with an administrative bureaucrat representing a government which is too big and without a practical sense of accountability to its duly designated "owners," We the People.
Exactly what we tried so hard to prevent at our Founding --- a government of men and not of laws --- is the practical result.
And that's in evidence most recently by the IRS targeting of conservatives, AP freedom of the press and Benghazi issues. At least that's my take.
Government Gone Wild is subtitled 'How Obama's "smart" government became abusive government' and fills in some of the details for us:
"Of all the excuses, explanations and alibis pouring forth in the saga of the IRS kneecapping of conservative groups during the victorious Obama 2012 campaign, the one that deserves attention is this from David Axelrod:
"Part of being president is that there's so much beneath you that you can't know, because the government is so vast.". . .
The Cincinnati-did-it defense degraded this week when the IRS's Washington-based Lois Lerner lawyered up and invoked the Fifth Amendment before Rep. Darrell Issa's House committee. . . . Public officials don't hire lawyers to protect their jobs. They hire lawyers to stay out of the slammer.
But back to David Axelrod. It behooves us to focus on the implication in his assertion that the government has become too vast for a mere U.S. president to bear responsibility. This may be the most significant Freudian slip in 50 years.
Barack Obama was the president who on entering the White House promised an era of "smart government." It was Barack Obama who told graduates at Ohio State that the government is good. In that light, the Axelrod admission is historic. Historic because it was during Franklin Roosevelt's presidency that liberal policy makers and intellectuals promised good government forever via something called the administrative state—in which dedicated bureaucrats would carry out benevolent public policies designed by smart social scientists.
This belief is in a state of collapse, largely for the reason Mr. Axelrod described. In the first Obama term, the Obama Democrats enacted the Affordable Care Act and Dodd-Frank. Both were supposed to represent the promise of a benign administrative state. Both these new laws are—in an awful but apt word—un-implementable. After decades of nonstop legislating, we've arrived at laws so "vast" and so complex that the bureaucracies cannot figure out how to implement them. . . .
In an article this week in the Hill newspaper, a reporter put to an official in the Obama administration the argument that the IRS scandal and the Justice Department's penetrations of the Associated Press and Fox News suggest the federal government has too much power. "I don't buy that," the official replied. "These things are totally newsworthy and valid points for conversation. But they don't string together to make a compelling philosophical argument."
Yes they do.
It isn't just these scandals. Rather than delivering good, smart or transparent government, the Obama policy squads are doing what happens after they realize the "good" model isn't working as they planned. Then we get what's coming to light now—government that coerces people or pushes past the law's limits. This is government gone wild. . . .
Then there is ObamaCare's Independent Payment Advisory Board. This 15-member panel will order change in the health-care industry. . . . a level of coercion—call it command-and-obey—that is alien to the American experience. . . .
The IRS audit scandal is this government's most famous break through the boundaries of the law. But arguably the greater grab for extralegal power was the president's 2012 "recess" appointments—overturned by an appellate court—to the National Labor Relations Board and Consumer Financial Protection Bureau. Mr. Obama's goal was to get two potent bureaucracies in motion producing command-and-obey rules. The recess appointments and Cincinnati audits spring from the same well.
The idea that banks can grow too big to fail is seen by many as a danger to the system. The proposition forcing itself into public discussion in the second Obama term is that the government in Washington can become too big to be good."
Summing Up
As do many others, I have a philosophical problem with big government.
That said, those supporting big government have an even bigger practical problem. It's unmanageable and uncontrollable in its present form and size.
The concept of span of control is real, and pretending otherwise doesn't change that simple fact.
Not even a little bit.
And finally, politics sucks.
That's my take.
Thanks. Bob.
Government Priorities ... Doing the Wrong Things Poorly ... All Talk and No Action on the Important Stuff
A familiar expression is that if we're doing the wrong thing, we're probably doing it poorly. That reminds me of government and its focus today.
In addition to the dysfunctional aspects of governing as evidenced by the aftermath of Benghazi, the IRS overreach and the AP spying matters, government is debating about gun laws and immigration currently, and my guess is that it's performing poorly in each and every case. Even worse, it's doing the wrong things.
The three things that really matter most --- (1) how to create more and better jobs, (2) how to grow the economy and reduce our budget deficits, and (3) how to improve the way our dysfunctional government operates are receiving lots of conversation, of course, but little if any positive action.
Thus, the government knows best gang is focusing on doing the wrong things and therefore doing those things poorly. That said, it's all talk and no action when it comes to the important business that needs our nation's attention.
While We the People know precisely what needs doing, getting our "public servants" on board and past the talking stage is proving to be the difficult part.
The contents of Guns, Immigrants and Priorities are worth considering:
"Politicians and the media are currently obsessed with two issues: gun control and illegal immigration. But according to a new Gallup poll, many people have other priorities. And rightly so.
"Americans put reforming immigration and reducing gun violence—the focus of much of the attention on Capitol Hill in recent weeks—at the bottom of a list of 12 priorities for Congress and the president to address," according to Gallup....
"Many factors come into play in determining the priority Congress and the president give to specific legislation and other policy actions, particularly including pressure from interest groups and lobbyists," said Gallup. Which is another way of saying that evidence and hard data often don't drive policy making in Washington, where politicians think nothing of manufacturing a crisis to advance an agenda.
For example, illegal border crossings peaked in 2000 are down by more than 70% since then. Net migration from Mexico, the source of a majority of illegal aliens, is currently zero. You might never know that given the alarmist tone of the debate in recent years.
Or take gun violence, another area where propaganda so often substitutes for facts. Gun homicides in the U.S. peaked in 1993. "Since then, firearm homicides have declined, dramatically through the 1990s and then more slowly since 2000," reports the Atlantic magazine, citing Justice Department figures. "Non-fatal firearm crimes have declined. And violent crime in general has gone down, too. By 2010, the firearm homicide rate in America was 49 percent lower than it was in 1993." Compare how often you hear about that trend to how often you hear about the percentage of people who favor "background checks" for gun purchases.
So, what do people want lawmakers to prioritize? According to Gallup, job creation (86%), economic growth (86%) and "making government work more efficiently" (81%) top the list. Instead of attempting to scare voters with faux crises, lawmakers might try focusing on the common sense priorities of the folks who elected them."
Summing Up
We the People know what's needed -- job creation, economic growth and a more efficient and effective government --- one that takes seriously the vow of public service on behalf of our beloved country.
Not partisan bickering and an elitist government knows best attitude and set of behaviors.
Perhaps someday we'll insist on having a government that is worthy of serving the people and that is interested in doing just and not merely intent on serving itself.
Let's hope so.
Thanks. Bob.
In addition to the dysfunctional aspects of governing as evidenced by the aftermath of Benghazi, the IRS overreach and the AP spying matters, government is debating about gun laws and immigration currently, and my guess is that it's performing poorly in each and every case. Even worse, it's doing the wrong things.
The three things that really matter most --- (1) how to create more and better jobs, (2) how to grow the economy and reduce our budget deficits, and (3) how to improve the way our dysfunctional government operates are receiving lots of conversation, of course, but little if any positive action.
Thus, the government knows best gang is focusing on doing the wrong things and therefore doing those things poorly. That said, it's all talk and no action when it comes to the important business that needs our nation's attention.
While We the People know precisely what needs doing, getting our "public servants" on board and past the talking stage is proving to be the difficult part.
The contents of Guns, Immigrants and Priorities are worth considering:
"Politicians and the media are currently obsessed with two issues: gun control and illegal immigration. But according to a new Gallup poll, many people have other priorities. And rightly so.
"Americans put reforming immigration and reducing gun violence—the focus of much of the attention on Capitol Hill in recent weeks—at the bottom of a list of 12 priorities for Congress and the president to address," according to Gallup....
"Many factors come into play in determining the priority Congress and the president give to specific legislation and other policy actions, particularly including pressure from interest groups and lobbyists," said Gallup. Which is another way of saying that evidence and hard data often don't drive policy making in Washington, where politicians think nothing of manufacturing a crisis to advance an agenda.
For example, illegal border crossings peaked in 2000 are down by more than 70% since then. Net migration from Mexico, the source of a majority of illegal aliens, is currently zero. You might never know that given the alarmist tone of the debate in recent years.
Or take gun violence, another area where propaganda so often substitutes for facts. Gun homicides in the U.S. peaked in 1993. "Since then, firearm homicides have declined, dramatically through the 1990s and then more slowly since 2000," reports the Atlantic magazine, citing Justice Department figures. "Non-fatal firearm crimes have declined. And violent crime in general has gone down, too. By 2010, the firearm homicide rate in America was 49 percent lower than it was in 1993." Compare how often you hear about that trend to how often you hear about the percentage of people who favor "background checks" for gun purchases.
So, what do people want lawmakers to prioritize? According to Gallup, job creation (86%), economic growth (86%) and "making government work more efficiently" (81%) top the list. Instead of attempting to scare voters with faux crises, lawmakers might try focusing on the common sense priorities of the folks who elected them."
Summing Up
We the People know what's needed -- job creation, economic growth and a more efficient and effective government --- one that takes seriously the vow of public service on behalf of our beloved country.
Not partisan bickering and an elitist government knows best attitude and set of behaviors.
Perhaps someday we'll insist on having a government that is worthy of serving the people and that is interested in doing just and not merely intent on serving itself.
Let's hope so.
Thanks. Bob.
Wednesday, May 22, 2013
The Problem With Conservatives, Progressives and the 'If It Ain't Broke, Don't Fix It' Model ... CHANGE IS GOOD
My personal bias in politics is to be apolitical. I really don't think much of either the progressives or conservatives and the ways they behave in America today. I genuinely believe that American politics sucks.
In America the progressives believe that an elitist set of government officials has the knowledge to fix everything and "do-good" OPM style, while the conservatives fight hard to maintain the status quo and keep things just as they are, even though our American society has fundamentally changed since the Great Depression of the 1930s and New Deal days. The "Great Society" programs of the 1960s made things even worse.
In my view, the problem with conservatives is that they're always playing defense. Trying to keep things from changing and then when things change, trying to keep them from changing even more. Maybe the best defense really is a good offense, but the conservatives don't have the guts to find out if We the People will go along with such a "radical" program of change.
As a result, conservatives pay lip service to the ideals of individualism, self reliance and limited government, but in reality they stand ever ready to defend Social Security, Medicare, Medicaid nursing home subsidies, K-12 'government' schools, the loss ridden postal service and countless other unaffordable government "goodies." And they don't want to raise taxes to pay for all this "free stuff."
The problem with "progressives" is that they see more government as the answer to all our financial woes and the only way to save the middle class from the greedy capitalists, while the plain truth is otherwise. And when the "do-good" government programs fail to produce the intended results, the "progressives" advocate even more government interference with the private sector and additional public spending programs, thus perpetuating the current weak economy's vicious cycle and its harmful effects on We the People, and especially the lower income and poor among us.
So the progressives push for more government and the conservatives simply try to defend the status quo as it exists from time to time. As a result, we get more government, more government debt, slower economic growth, less individual prosperity and a weaker and more government dependent society.
In other words, all too often conservatives attempt to defend the status quo rather than undo the many things that definitely need to be undone today. And examples abound.
In fact, virtually anything that has been done the same way for a very long time would benefit from change. Change is good.
Put another way, I'm definitely in the 'if we don't fix it, it will break' instead of the 'if it ain't broke, don't fix it' camp. To repeat, change is good and tomorrow is never today just 24 hours later.
Let's look at just a few examples that need changing.
Recently we drove past a hundred or so card carrying protesters at the local post office who were making public their stance against the postal service's decision to stop Saturday mail deliveries later this year.
I wonder if any of these protesters have ever asked themselves why taxpayers should continue to subsidize the post office's operating losses with billions of dollars each year. Or why taxpayers should be satisfied even if Saturday mail deliveries are stopped but the post office thereafter continues to require billions of dollars in annual subsidies to fund its operations, which it will.
In other words, stopping Saturday deliveries is pure show biz, and it's not going to help taxpayers even if Saturday deliveries cease. Why do conservatives choose to allow the post office to continue as a perennial money losing monopoly after all these years?
Or why do we keep Social Security or Medicare as they are, or the nursing home subsidies of Medicaid? Since they're currently underfunded by approximately $100 trillion, isn't it time for radical change?.
Or why do we keep the K-12 public education government run monopoly as is despite its miserable track record?
Or what about the student loans outstanding for college students which total over $1 trillion now? Or the record level of food stamps?
You see, once a law is enacted, it never gets "un-enacted." It just grows in terms of cost and shrinks in terms of quality. That's what monopolies yield --- high costs and low quality. Yet the law, once enacted, then becomes a sacred cow. It's only a question of how big the cow will grow.
For instance, why not deliver mail three days a week instead of six and double the price to customers of sending that mail? And why not allow private sector competitors to compete with the post office for the customers' business?
And why not restrict Social Security, Medicare and Medicaid payments to those can demonstrate need instead of making their benefits an entitlement for everybody regardless of need? And why not allow young people entering the work force to opt out of Social Security and handle their own retirement investments?
And why not allow people to do the same with Medicare? Or why not give vouchers to all and let parents and students choose for themselves which schools the children will attend?
None of the above is being seriously advocated by conservatives. In fact, it never has been. And of course, it's absolutely forbidden to even be mentioned in the progressive political playbook.
The fact is that government programs, both good and bad as well as old and new, need to be changed continuously and many need to be eliminated or radically modified.
Let's hear what Friedrich Hayek said about all this decades ago in "The Road to Serfdom:"
Notable & Quotable is short and sweet:
"The important point is that the political ideals of a people and its attitude toward authority are as much the effect as the cause of the political institutions under which it lives. This means, among other things, that even a strong tradition of political liberty is no safeguard if the danger is precisely that the new institutions and policies will gradually undermine and destroy that spirit."
Summing Up
As Forrest Gump said so eloquently, "That's all I have to say about that."
And now you know why I'm neither a fan of conservatives or 'progressives.'
So let's all beware of advocating the status quo and accepting what are the traditional views of one mainstream political party just because it may represent the lesser of two bad policies being proposed.
Creeping socialism and both new and old laws will always represent a threat to We the People, and far too many of the policies that are instituted by our government have a tendency to become "just the ways things are" and then get worse over time.
Change is good for us. Conservatives and 'progressives' aren't.
At least that's my view.
Thanks. Bob.
In America the progressives believe that an elitist set of government officials has the knowledge to fix everything and "do-good" OPM style, while the conservatives fight hard to maintain the status quo and keep things just as they are, even though our American society has fundamentally changed since the Great Depression of the 1930s and New Deal days. The "Great Society" programs of the 1960s made things even worse.
In my view, the problem with conservatives is that they're always playing defense. Trying to keep things from changing and then when things change, trying to keep them from changing even more. Maybe the best defense really is a good offense, but the conservatives don't have the guts to find out if We the People will go along with such a "radical" program of change.
As a result, conservatives pay lip service to the ideals of individualism, self reliance and limited government, but in reality they stand ever ready to defend Social Security, Medicare, Medicaid nursing home subsidies, K-12 'government' schools, the loss ridden postal service and countless other unaffordable government "goodies." And they don't want to raise taxes to pay for all this "free stuff."
The problem with "progressives" is that they see more government as the answer to all our financial woes and the only way to save the middle class from the greedy capitalists, while the plain truth is otherwise. And when the "do-good" government programs fail to produce the intended results, the "progressives" advocate even more government interference with the private sector and additional public spending programs, thus perpetuating the current weak economy's vicious cycle and its harmful effects on We the People, and especially the lower income and poor among us.
So the progressives push for more government and the conservatives simply try to defend the status quo as it exists from time to time. As a result, we get more government, more government debt, slower economic growth, less individual prosperity and a weaker and more government dependent society.
In other words, all too often conservatives attempt to defend the status quo rather than undo the many things that definitely need to be undone today. And examples abound.
In fact, virtually anything that has been done the same way for a very long time would benefit from change. Change is good.
Put another way, I'm definitely in the 'if we don't fix it, it will break' instead of the 'if it ain't broke, don't fix it' camp. To repeat, change is good and tomorrow is never today just 24 hours later.
Let's look at just a few examples that need changing.
Recently we drove past a hundred or so card carrying protesters at the local post office who were making public their stance against the postal service's decision to stop Saturday mail deliveries later this year.
I wonder if any of these protesters have ever asked themselves why taxpayers should continue to subsidize the post office's operating losses with billions of dollars each year. Or why taxpayers should be satisfied even if Saturday mail deliveries are stopped but the post office thereafter continues to require billions of dollars in annual subsidies to fund its operations, which it will.
In other words, stopping Saturday deliveries is pure show biz, and it's not going to help taxpayers even if Saturday deliveries cease. Why do conservatives choose to allow the post office to continue as a perennial money losing monopoly after all these years?
Or why do we keep Social Security or Medicare as they are, or the nursing home subsidies of Medicaid? Since they're currently underfunded by approximately $100 trillion, isn't it time for radical change?.
Or why do we keep the K-12 public education government run monopoly as is despite its miserable track record?
Or what about the student loans outstanding for college students which total over $1 trillion now? Or the record level of food stamps?
You see, once a law is enacted, it never gets "un-enacted." It just grows in terms of cost and shrinks in terms of quality. That's what monopolies yield --- high costs and low quality. Yet the law, once enacted, then becomes a sacred cow. It's only a question of how big the cow will grow.
For instance, why not deliver mail three days a week instead of six and double the price to customers of sending that mail? And why not allow private sector competitors to compete with the post office for the customers' business?
And why not restrict Social Security, Medicare and Medicaid payments to those can demonstrate need instead of making their benefits an entitlement for everybody regardless of need? And why not allow young people entering the work force to opt out of Social Security and handle their own retirement investments?
And why not allow people to do the same with Medicare? Or why not give vouchers to all and let parents and students choose for themselves which schools the children will attend?
None of the above is being seriously advocated by conservatives. In fact, it never has been. And of course, it's absolutely forbidden to even be mentioned in the progressive political playbook.
The fact is that government programs, both good and bad as well as old and new, need to be changed continuously and many need to be eliminated or radically modified.
Let's hear what Friedrich Hayek said about all this decades ago in "The Road to Serfdom:"
Notable & Quotable is short and sweet:
"The important point is that the political ideals of a people and its attitude toward authority are as much the effect as the cause of the political institutions under which it lives. This means, among other things, that even a strong tradition of political liberty is no safeguard if the danger is precisely that the new institutions and policies will gradually undermine and destroy that spirit."
Summing Up
As Forrest Gump said so eloquently, "That's all I have to say about that."
And now you know why I'm neither a fan of conservatives or 'progressives.'
So let's all beware of advocating the status quo and accepting what are the traditional views of one mainstream political party just because it may represent the lesser of two bad policies being proposed.
Creeping socialism and both new and old laws will always represent a threat to We the People, and far too many of the policies that are instituted by our government have a tendency to become "just the ways things are" and then get worse over time.
Change is good for us. Conservatives and 'progressives' aren't.
At least that's my view.
Thanks. Bob.
Market Headed Higher ... Much Higher
How high is up? Pretty high, as a matter of fact.
Over the next several years, most people are going to be surprised at the stock market's gains. At least that's my view. And it's also becoming the view of many of the so-called market "experts" as well.
Goldman raises S&P 500 targets through 2015 is an optimistic but realistic forecast of market conditions through 2015. At least that's how I see things:
"Improving economic growth, rising dividends and potentially low interest rates. It’s all good for Wall Street and the stock market.
That’s according to Goldman Sachs, which is taking an ever increasingly bullish view on the S&P 500 with some target lifting in a note dated May 20. As they’ve previously said, their upbeat S&P 500 outlook for this year has played out faster than they expected:
That S&P 500 forward p/e multiple has risen by 30% in 12 months to 14.6 times from 11.4 times, an increase that’s been bigger and faster than Goldman’s baseline forecasts assumed (Goldman recently cautioned that the S&P wasn’t cheap), but it’s still in line with what happened in the post-1990s, so they aren’t overly concerned. The S&P 500 forward p/e multiple has averaged 12.9 times since 1978 and 15.3 times since 1990, Goldman notes.
As for S&P 500 dividends, they expect those to rise by roughly 30% between 2013 and 2015, with growth of close to 11% for 2013 and 2014 and 9% in 2015. Goldman has been pushing dividend stocks, and in a note from May 17, Goldman pointed out that dividend-paying stocks are among the few income-generating investments in the U.S. . . .
Changes to the S&P 500 forecasts reflect a one price/earning multiple point premium to fair-value estimates. And that, they say, is due to increased confidence over a medium-term outlook for the U.S., improved investor risk appetite and the wide gap between equity and bonds that they expect will be closed more by stocks than bonds.
And if the Fed can stay committed to monetary easing and the Bank of Japan keeps up its aggressive stance and Europe growth stays weak, U.S. Treasury yields may remain low. And even if U.S. Treasury yields rise, the S&P 500 will still continue to perform as long as those higher rates stem from an improved economic growth view. If interest rates remain low despite better growth, then upside to the S&P 500 could be even bigger.
Speaking on CNBC earlier on Tuesday, Sheila Patel, head of international at Goldman and tipped to replace Jim O’Neill, said they expect a “gradual rotation” from bonds to stocks, and money will move back into equities eventually."
Summing Up
Things look good due to such things as historically low interest rates, the genuine prospects of North American energy independence, falling commodity prices worldwide, an improving U.S. economy and jobs market, the possibility of a smaller and less intrusive government (because of the current IRS and related spotlights on government) and an increasingly confident private sector, all of which contribute to my optimistic assessment of the investment and economic scenario for the next several years.
For savers and individual investors, it's time to take notice and enjoy the ride.
Thanks. Bob.
Over the next several years, most people are going to be surprised at the stock market's gains. At least that's my view. And it's also becoming the view of many of the so-called market "experts" as well.
Goldman raises S&P 500 targets through 2015 is an optimistic but realistic forecast of market conditions through 2015. At least that's how I see things:
"Improving economic growth, rising dividends and potentially low interest rates. It’s all good for Wall Street and the stock market.
That’s according to Goldman Sachs, which is taking an ever increasingly bullish view on the S&P 500 with some target lifting in a note dated May 20. As they’ve previously said, their upbeat S&P 500 outlook for this year has played out faster than they expected:
“We are raising our S&P 500 dividend estimates and index return forecasts for 2013 through 2015. We expect S&P 500 index will rise by 5% from the current level to 1,750 by year-end 2013, advance by 9% to 1,900 in 2,014, and climb by 10% to 2100 in 2015.”A team led by David Kostin, chief U.S. equity strategist at Goldman Sachs, says a big reason for the target lifts is due to expectations the U.S. economy will achieve above-trend real GDP growth in 2014, ending a six-year period of economic “stagnation.” And in developed economies, the final year of economic stagnation before GDP growth has been linked to price/earnings multiple expansions averaging 15%, note the strategists. They expect the S&P 500 p/e multiple will continue to rise, reaching 15 times at year-end 2013 and 16 times by the end of 2014.
That S&P 500 forward p/e multiple has risen by 30% in 12 months to 14.6 times from 11.4 times, an increase that’s been bigger and faster than Goldman’s baseline forecasts assumed (Goldman recently cautioned that the S&P wasn’t cheap), but it’s still in line with what happened in the post-1990s, so they aren’t overly concerned. The S&P 500 forward p/e multiple has averaged 12.9 times since 1978 and 15.3 times since 1990, Goldman notes.
As for S&P 500 dividends, they expect those to rise by roughly 30% between 2013 and 2015, with growth of close to 11% for 2013 and 2014 and 9% in 2015. Goldman has been pushing dividend stocks, and in a note from May 17, Goldman pointed out that dividend-paying stocks are among the few income-generating investments in the U.S. . . .
Changes to the S&P 500 forecasts reflect a one price/earning multiple point premium to fair-value estimates. And that, they say, is due to increased confidence over a medium-term outlook for the U.S., improved investor risk appetite and the wide gap between equity and bonds that they expect will be closed more by stocks than bonds.
And if the Fed can stay committed to monetary easing and the Bank of Japan keeps up its aggressive stance and Europe growth stays weak, U.S. Treasury yields may remain low. And even if U.S. Treasury yields rise, the S&P 500 will still continue to perform as long as those higher rates stem from an improved economic growth view. If interest rates remain low despite better growth, then upside to the S&P 500 could be even bigger.
Speaking on CNBC earlier on Tuesday, Sheila Patel, head of international at Goldman and tipped to replace Jim O’Neill, said they expect a “gradual rotation” from bonds to stocks, and money will move back into equities eventually."
Summing Up
Things look good due to such things as historically low interest rates, the genuine prospects of North American energy independence, falling commodity prices worldwide, an improving U.S. economy and jobs market, the possibility of a smaller and less intrusive government (because of the current IRS and related spotlights on government) and an increasingly confident private sector, all of which contribute to my optimistic assessment of the investment and economic scenario for the next several years.
For savers and individual investors, it's time to take notice and enjoy the ride.
Thanks. Bob.
Measuring the More Meaningful Thing ... The Employment-to Population Ratio
The "official" unemployment rate as narrowly defined is 7.5%. The more broadly defined U-6 rate stands at 13.9%.
Yes, unemployment remains a big problem in America today and perhaps more troubling, the U.S. employment situation will continue to be below normal for a long time to come. But broken down into parts, the employment condition among working age Americans is at historic lows.
The sad fact is that we have far fewer Americans employed today as a percentage of the total population than we did at the turn of the century.
So let's look closer at the employment-to-population ratio, which is more informative than the unemployment number and measures the percentage of working age people employed in relation to the total.
Put simply, our nation's output is largely determined by the number of people actively engaged in the work force, combined with how productive that work force is. {NOTE: We'll skip the productivity component of the nation's work force herein, although it's also a most important part of the total equation.}
The biggest factor by far which contributes to the nation's economic growth is how many people are actually working, so let's concentrate on that one for now.
From 64% in 2000, the employment-to-population ratio in the U.S. today stands at only 58%. This six percentage point drop in the percentage of people employed from 2000 to today amounts to more than ten million fewer people working now than "normal." It also means that our economy is not producing anywhere close to its capability.
Among other things, that reduction in people working is a confidence killer. In turn, that results in lower confidence in government officials (as if it's not already at rock bottom levels), less consumer spending, a smaller economy, higher debt levels and many other negatives that contribute to a confused and concerned citizenry. And we definitely are that.
To repeat, the number of people working as a percentage of the working age population today is at a 30 year low. What it means is that getting back to what we used to call normal employment will take another decade or longer at the current rate of jobs being created each month on average. Stated another way, what it also means is that we need 300,000 monthly jobs created in order to get back to the "good old days."
It's neither a healthy situation nor does the low employment situation serve as a positive backdrop for our economy's future growth. But facts are facts, so let's look closer.
Look at the doughnut, not at the hole is subtitled 'Looking behind the unemployment headlines:'
"The health of the labor market is best measured by employment, not by unemployment....
Employers have more job openings than at any time in the past five years, yet they are in no hurry to fill them.
Does this mean that the labor market has finally returned to a pink-cheeked state of health? I don’t think so.
The drop in the unemployment rate from over 10% just after the recession ended to 7.5% today is more a reflection of people dropping out of the labor force than of people finding jobs.
At one point, the percentage of the labor force that had been out of work longer than 15 weeks was at a postwar high of nearly 6% of the labor force (it was 1.5% before the recession began). It is down to about 4% today, mainly because lots of people have simply given up, and are no longer looking for work. And if one does not seek a job, one is not considered as part of the unemployment statistics.
We can deduce this from another key figure, the share of Americans holding a job. Known as the employment/population ratio, this share today is just over 58%.
To put this ratio in perspective, it has not changed since the end of the recession, is well below the 64% reached in 2000 — and is the lowest in 30 years. And rather than rising after a recession ends, the way it did in the past, the employment/population ratio has remained flat.
As a consequence, earnings actually fell last month, gains in jobs notwithstanding.
Not surprisingly, stagnant incomes are cutting into consumer spending.
What is more, when people do spend, they tend to buy less, and only those items that are on sale. This is why there is little or no inflation, even though money growth is rapid and interest rates are at record lows."
Summing Up
We need to be doing everything possible to create private sector jobs, and that can only result from private sector investment. Not government knows best spending.
After several years of trying the government knows best formula, we currently have the lowest employment to population ratio in 30 years.
It will be at least another decade before it returns to what we used to call normal. Put another way, we need another ten to fifteen million jobs, and a fair share of those jobs need to be "good paying" jobs. That can only happen with the private sector leading the way.
America has energy, America has food, America has a competitive economy, America has a stable currency and a strong system ruled by law.
What America doesn't have right now is a functional government that understands the gravity of the situation and the importance of encouraging entrepreneurial investment and private sector led innovation.
That's my take.
Thanks. Bob.
Yes, unemployment remains a big problem in America today and perhaps more troubling, the U.S. employment situation will continue to be below normal for a long time to come. But broken down into parts, the employment condition among working age Americans is at historic lows.
The sad fact is that we have far fewer Americans employed today as a percentage of the total population than we did at the turn of the century.
So let's look closer at the employment-to-population ratio, which is more informative than the unemployment number and measures the percentage of working age people employed in relation to the total.
Put simply, our nation's output is largely determined by the number of people actively engaged in the work force, combined with how productive that work force is. {NOTE: We'll skip the productivity component of the nation's work force herein, although it's also a most important part of the total equation.}
The biggest factor by far which contributes to the nation's economic growth is how many people are actually working, so let's concentrate on that one for now.
From 64% in 2000, the employment-to-population ratio in the U.S. today stands at only 58%. This six percentage point drop in the percentage of people employed from 2000 to today amounts to more than ten million fewer people working now than "normal." It also means that our economy is not producing anywhere close to its capability.
Among other things, that reduction in people working is a confidence killer. In turn, that results in lower confidence in government officials (as if it's not already at rock bottom levels), less consumer spending, a smaller economy, higher debt levels and many other negatives that contribute to a confused and concerned citizenry. And we definitely are that.
To repeat, the number of people working as a percentage of the working age population today is at a 30 year low. What it means is that getting back to what we used to call normal employment will take another decade or longer at the current rate of jobs being created each month on average. Stated another way, what it also means is that we need 300,000 monthly jobs created in order to get back to the "good old days."
It's neither a healthy situation nor does the low employment situation serve as a positive backdrop for our economy's future growth. But facts are facts, so let's look closer.
Look at the doughnut, not at the hole is subtitled 'Looking behind the unemployment headlines:'
"The health of the labor market is best measured by employment, not by unemployment....
Employers have more job openings than at any time in the past five years, yet they are in no hurry to fill them.
On the other hand, those who do have jobs are unlikely to lose them.
First-time claims for jobless benefits last week were the lowest in more than
five years. As a result, the jobless rate last month stood at its lowest level
since 2009.
Does this mean that the labor market has finally returned to a pink-cheeked state of health? I don’t think so.
The drop in the unemployment rate from over 10% just after the recession ended to 7.5% today is more a reflection of people dropping out of the labor force than of people finding jobs.
At one point, the percentage of the labor force that had been out of work longer than 15 weeks was at a postwar high of nearly 6% of the labor force (it was 1.5% before the recession began). It is down to about 4% today, mainly because lots of people have simply given up, and are no longer looking for work. And if one does not seek a job, one is not considered as part of the unemployment statistics.
We can deduce this from another key figure, the share of Americans holding a job. Known as the employment/population ratio, this share today is just over 58%.
To put this ratio in perspective, it has not changed since the end of the recession, is well below the 64% reached in 2000 — and is the lowest in 30 years. And rather than rising after a recession ends, the way it did in the past, the employment/population ratio has remained flat.
To make matters worse, most of the jobs that are being created these days
tend to be low paid and without such benefits as health care and sick pay. . . .
As a consequence, earnings actually fell last month, gains in jobs notwithstanding.
Not surprisingly, stagnant incomes are cutting into consumer spending.
What is more, when people do spend, they tend to buy less, and only those items that are on sale. This is why there is little or no inflation, even though money growth is rapid and interest rates are at record lows."
Summing Up
We need to be doing everything possible to create private sector jobs, and that can only result from private sector investment. Not government knows best spending.
After several years of trying the government knows best formula, we currently have the lowest employment to population ratio in 30 years.
It will be at least another decade before it returns to what we used to call normal. Put another way, we need another ten to fifteen million jobs, and a fair share of those jobs need to be "good paying" jobs. That can only happen with the private sector leading the way.
America has energy, America has food, America has a competitive economy, America has a stable currency and a strong system ruled by law.
What America doesn't have right now is a functional government that understands the gravity of the situation and the importance of encouraging entrepreneurial investment and private sector led innovation.
That's my take.
Thanks. Bob.
Tuesday, May 21, 2013
Self Incrimination and Taking the 5th ... IRS Debacle Is Getting More Interesting Each Day
Lois Lerner, the IRS official who last week was the first to admit that the IRS was targeting conservative groups, won't be answering any questions from Congress at the hearings Wednesday.
She doesn't want to incriminate herself.
Lerner to Decline to Answer Questions says this:
"Lois Lerner, the head of the Internal Revenue Service office that targeted conservative groups, intends to invoke her constitutional right against self-incrimination and decline to answer questions about the matter when questioned by a congressional committee Wednesday.
Ms. Lerner, director of the tax-exempt-organizations division at the IRS, notified the House Committee on Oversight and Government Reform through her attorney that she wouldn't answer questions on the matter, according to a committee spokesman.
"Chairman Issa remains hopeful that she will ultimately decide to testify tomorrow about her knowledge of outrageous IRS targeting of Americans for their political beliefs," said the spokesman, Ali Ahmad.
The announcement underscores the potential seriousness of the legal situation facing some officials in the IRS controversy. The Justice Department has launched a criminal probe of the targeting and its aftermath. That investigation likely will look into possible civil-rights violations and questions about whether top IRS officials misled lawmakers who raised questions about tea-party complaints of alleged IRS harassment. .. .
New details also emerged (Tuesday) about how Ms. Lerner, director of the tax-exempt division at the IRS, came to disclose the results of the inspector general's report at a bar-association event. Mr. Miller testified last week that Ms. Lerner's decision to reveal what had happened was cooked up beforehand. On Tuesday, he said that he took responsibility for the idea. Mr. Miller also said discussions were ongoing about disciplining Ms. Lerner. Mr. Miller has already agreed to resign.
Other details remained unclear, including who overruled a 2011 decision by Ms. Lerner to put an end to the practice of targeting groups based on their names or whether they focused on subjects—like government debt and spending—that are popular in conservative circles. The Treasury inspector general for tax administration, J. Russell George, who was also testifying Tuesday, said he didn't know who decided to resume the practice of singling out conservative groups. . . .
Separately, Treasury Secretary Jacob Lew told Senators Tuesday that he first learned of the audit into the IRS in mid-March but didn't see specific details of an inspector general's report into the targeting of conservative groups until last week....
The timing of when Obama administration officials found out about the inspector general's report has become central to the burgeoning probe into the allegations. Mr. Lew, who previously served as White House chief of staff, said he first became aware there was an audit regarding the targeting issue during a routine meeting with the inspector general in March. Pressed by lawmakers as to what actions he took after being told of the audit, Mr. Lew said he waited to see the final report."
Summing Up
This is getting more interesting each day.
It looks like government is not only much too big but that the government knows best gang of do-gooders has been behaving quite badly, too.
That's my take.
Thanks. Bob.
She doesn't want to incriminate herself.
Lerner to Decline to Answer Questions says this:
"Lois Lerner, the head of the Internal Revenue Service office that targeted conservative groups, intends to invoke her constitutional right against self-incrimination and decline to answer questions about the matter when questioned by a congressional committee Wednesday.
Ms. Lerner, director of the tax-exempt-organizations division at the IRS, notified the House Committee on Oversight and Government Reform through her attorney that she wouldn't answer questions on the matter, according to a committee spokesman.
Committee Chairman Darrell Issa (R., Calif.) will require her to appear at the hearing anyway, a spokesman said Tuesday.
"Chairman Issa remains hopeful that she will ultimately decide to testify tomorrow about her knowledge of outrageous IRS targeting of Americans for their political beliefs," said the spokesman, Ali Ahmad.
The announcement underscores the potential seriousness of the legal situation facing some officials in the IRS controversy. The Justice Department has launched a criminal probe of the targeting and its aftermath. That investigation likely will look into possible civil-rights violations and questions about whether top IRS officials misled lawmakers who raised questions about tea-party complaints of alleged IRS harassment. .. .
New details also emerged (Tuesday) about how Ms. Lerner, director of the tax-exempt division at the IRS, came to disclose the results of the inspector general's report at a bar-association event. Mr. Miller testified last week that Ms. Lerner's decision to reveal what had happened was cooked up beforehand. On Tuesday, he said that he took responsibility for the idea. Mr. Miller also said discussions were ongoing about disciplining Ms. Lerner. Mr. Miller has already agreed to resign.
Other details remained unclear, including who overruled a 2011 decision by Ms. Lerner to put an end to the practice of targeting groups based on their names or whether they focused on subjects—like government debt and spending—that are popular in conservative circles. The Treasury inspector general for tax administration, J. Russell George, who was also testifying Tuesday, said he didn't know who decided to resume the practice of singling out conservative groups. . . .
Separately, Treasury Secretary Jacob Lew told Senators Tuesday that he first learned of the audit into the IRS in mid-March but didn't see specific details of an inspector general's report into the targeting of conservative groups until last week....
The timing of when Obama administration officials found out about the inspector general's report has become central to the burgeoning probe into the allegations. Mr. Lew, who previously served as White House chief of staff, said he first became aware there was an audit regarding the targeting issue during a routine meeting with the inspector general in March. Pressed by lawmakers as to what actions he took after being told of the audit, Mr. Lew said he waited to see the final report."
Summing Up
This is getting more interesting each day.
It looks like government is not only much too big but that the government knows best gang of do-gooders has been behaving quite badly, too.
That's my take.
Thanks. Bob.
Dividend Payers ... The "New" Substitute for Owning Bonds ...
Investing in bonds has long been recommended as an important part of a diversified investment approach for both individuals and institutions.
That's changing now and properly so. I expect that safe dividend paying stocks will become the "new" bonds in more investment portfolios and here's why.
It's a simple matter of comparing the interest rate levels on bonds to the cash dividend yields on stocks. Throw in the fact that dividends on 'defensive' stocks will increase over time, as will share prices, and the decision to replace bonds with dividend paying stocks becomes a no-brainer. At least that's my view.
In Stocks, Payouts Trump Potential has this to say:
"Analysts expect paper-towel, toothpaste and soap maker Procter & Gamble to churn out per-share earnings growth of about 6% this year. Google's profits will jump 18%, other analysts predict.
So which stock is hotter?
The answer: P&G, trading at 18 times projected per-share earnings and far above its five-year average of 15.4, according to data provider FactSet. In contrast, Google has a P/E ratio of 16.6, below its five-year average of 17.2.
Investors are attracted by P&G's sturdy dividend yield of 3.1%, assuring them at least a modest return on a stock known for its reliable performance. Google pays no dividend. {NOTE: For 'Gretzky' types who skate to where the puck is going to be, Google looks good to me as a "future dividend payer," too.}
Demand for dividend payers has led to the unusual sight of stodgy, slow-growing companies commanding higher valuations than stocks with fast-growing profit streams. That is especially unusual in a bull market . . . .
"You have these tech companies that have double-digit earnings growth, no debt, huge cash balances and they're trading at 12 times forward earnings, while you have a utility in Ohio at 16 times earnings," he says. "If you don't think there's a recession coming, how far do you go with this game?"
Pretty far, says Donald Taylor, a portfolio manager at Franklin Templeton Investments, who argues there are powerful forces driving up long-term valuations for dividend payers.
"We could be in this world for quite some time," says Mr. Taylor, who manages the $10 billion Franklin Rising Dividends Fund. "The macro environment that has caused utilities and telecoms, as well as consumer staples, to be expensive relative to history…is not at all likely to change anytime soon.". . .
Dividends, say those bullish on the sector, are only beginning to reclaim the role they have historically played in generating profits for investors. Dividends account for more than half of total returns since 1928, according to Strategas Research Partners. During the 1930s and the first decade of this century, when the Standard & Poor's 500-stock index lost ground, dividends accounted for all the gains.
That the market's most conservative stocks now command a higher valuation than companies generating faster earnings growth is another ripple from the Fed's easy-money policies.
As the Fed has pushed down yields on U.S. government bonds, and pledged to keep rates low for years, investors have gravitated into riskier investments in search of yield. . . .
"This is not a product of equity investors buying defensive stocks and hiding out," sayid Chris Wallis, chief investment officer of Vaughan Nelson Investment Management, which manages about $8 billion in assets in Houston.
"What we have is money that had typically gone to fixed income now coming into equities," Mr. Wallis said. "They're looking for bond substitutes and it doesn't mean that the money is going to exit and go either to cyclical stocks or go to cash. I think it's going to stay where it is."
Barry Knapp, chief U.S. equity strategist for Barclays, points to Fed policy in recommending clients stick to high-dividend payers despite "richness" in these stocks' valuations. "If you're in this for a long period of time, we suggest you stick with these stocks, as long as the Fed sticks to its current policy," a scenario he says could persist for years.
Another reason dividend bulls think demand for the stocks will remain strong is that many U.S. companies, particularly in the technology and financial sectors, are deploying growing cash hoards by paying dividends for the first time, or ramping up existing payouts. And there is more to go, they argue. S&P 500 companies pay out about a third of their profits in dividends, below the long-term average of about 50%, Strategas said.
"There's definitely been a call from shareholders for capital to be returned, because people are so desperate for yield," said Emily Jones, vice president of investment strategy at Strategas.
Another rationale for higher valuations: baby boomers. As the wave of boomers heads into retirement, demand for the income generated by dividend stocks will only increase.
"The average person in the U.S. would prefer more of an income orientation, for life-cycle reasons," said Franklin Templeton's Mr. Taylor. . . .
Ms. Jones (argues) that as any eventual Fed tightening inflicts losses on bond investors, some of that money will gravitate toward dividend stocks.
"We definitely think there's more room to go in the dividend trade," she says."
Summing Up
Dividend paying stocks such as consumer staples, utilities, telecommunications and health care companies are all good substitutes for bonds and will likely continue to be for years to come. Of the four sectors, I like health care best for potential share price appreciation over the next several years.
Meanwhile, technology, industrials, energy and financial stocks look poised to be strong contributors to solid market returns over the long haul as well. All four sectors look good to me.
Materials and consumer discretionary stocks are my least favorites, although they should do OK, too.
So as long as the government knows best gang doesn't do anything too terribly wrong to ruin the outlook, things look good for equity investors in the years ahead, both with respect to current income and long term share price appreciation.
At least that's my view.
Thanks. Bob.
That's changing now and properly so. I expect that safe dividend paying stocks will become the "new" bonds in more investment portfolios and here's why.
It's a simple matter of comparing the interest rate levels on bonds to the cash dividend yields on stocks. Throw in the fact that dividends on 'defensive' stocks will increase over time, as will share prices, and the decision to replace bonds with dividend paying stocks becomes a no-brainer. At least that's my view.
In Stocks, Payouts Trump Potential has this to say:
"Analysts expect paper-towel, toothpaste and soap maker Procter & Gamble to churn out per-share earnings growth of about 6% this year. Google's profits will jump 18%, other analysts predict.
So which stock is hotter?
The answer: P&G, trading at 18 times projected per-share earnings and far above its five-year average of 15.4, according to data provider FactSet. In contrast, Google has a P/E ratio of 16.6, below its five-year average of 17.2.
Investors are attracted by P&G's sturdy dividend yield of 3.1%, assuring them at least a modest return on a stock known for its reliable performance. Google pays no dividend. {NOTE: For 'Gretzky' types who skate to where the puck is going to be, Google looks good to me as a "future dividend payer," too.}
Demand for dividend payers has led to the unusual sight of stodgy, slow-growing companies commanding higher valuations than stocks with fast-growing profit streams. That is especially unusual in a bull market . . . .
"You have these tech companies that have double-digit earnings growth, no debt, huge cash balances and they're trading at 12 times forward earnings, while you have a utility in Ohio at 16 times earnings," he says. "If you don't think there's a recession coming, how far do you go with this game?"
Pretty far, says Donald Taylor, a portfolio manager at Franklin Templeton Investments, who argues there are powerful forces driving up long-term valuations for dividend payers.
"We could be in this world for quite some time," says Mr. Taylor, who manages the $10 billion Franklin Rising Dividends Fund. "The macro environment that has caused utilities and telecoms, as well as consumer staples, to be expensive relative to history…is not at all likely to change anytime soon.". . .
Dividends, say those bullish on the sector, are only beginning to reclaim the role they have historically played in generating profits for investors. Dividends account for more than half of total returns since 1928, according to Strategas Research Partners. During the 1930s and the first decade of this century, when the Standard & Poor's 500-stock index lost ground, dividends accounted for all the gains.
That the market's most conservative stocks now command a higher valuation than companies generating faster earnings growth is another ripple from the Fed's easy-money policies.
As the Fed has pushed down yields on U.S. government bonds, and pledged to keep rates low for years, investors have gravitated into riskier investments in search of yield. . . .
"This is not a product of equity investors buying defensive stocks and hiding out," sayid Chris Wallis, chief investment officer of Vaughan Nelson Investment Management, which manages about $8 billion in assets in Houston.
"What we have is money that had typically gone to fixed income now coming into equities," Mr. Wallis said. "They're looking for bond substitutes and it doesn't mean that the money is going to exit and go either to cyclical stocks or go to cash. I think it's going to stay where it is."
Barry Knapp, chief U.S. equity strategist for Barclays, points to Fed policy in recommending clients stick to high-dividend payers despite "richness" in these stocks' valuations. "If you're in this for a long period of time, we suggest you stick with these stocks, as long as the Fed sticks to its current policy," a scenario he says could persist for years.
Another reason dividend bulls think demand for the stocks will remain strong is that many U.S. companies, particularly in the technology and financial sectors, are deploying growing cash hoards by paying dividends for the first time, or ramping up existing payouts. And there is more to go, they argue. S&P 500 companies pay out about a third of their profits in dividends, below the long-term average of about 50%, Strategas said.
"There's definitely been a call from shareholders for capital to be returned, because people are so desperate for yield," said Emily Jones, vice president of investment strategy at Strategas.
Another rationale for higher valuations: baby boomers. As the wave of boomers heads into retirement, demand for the income generated by dividend stocks will only increase.
"The average person in the U.S. would prefer more of an income orientation, for life-cycle reasons," said Franklin Templeton's Mr. Taylor. . . .
Ms. Jones (argues) that as any eventual Fed tightening inflicts losses on bond investors, some of that money will gravitate toward dividend stocks.
"We definitely think there's more room to go in the dividend trade," she says."
Summing Up
Dividend paying stocks such as consumer staples, utilities, telecommunications and health care companies are all good substitutes for bonds and will likely continue to be for years to come. Of the four sectors, I like health care best for potential share price appreciation over the next several years.
Meanwhile, technology, industrials, energy and financial stocks look poised to be strong contributors to solid market returns over the long haul as well. All four sectors look good to me.
Materials and consumer discretionary stocks are my least favorites, although they should do OK, too.
So as long as the government knows best gang doesn't do anything too terribly wrong to ruin the outlook, things look good for equity investors in the years ahead, both with respect to current income and long term share price appreciation.
At least that's my view.
Thanks. Bob.
The Idled Young Americans ... We're the World's Worst ... Let's At Least Give Our Young People a Fighting Chance
There are lots of sad news stories these days about the struggles of the young Europeans in finding suitable or often even any employment. We're worse.
Yes, that's right; the bad news doesn't stop in Europe. There are an enormous number of the idled young right here in America's backyard. More than 1 in 4, in fact. And many of these American youngsters are loaded with student debt, too, but that's another story.
The Idled Young Americans has the gruesome details on the nonemployed young in the U.S. and around the world:
Yes, that's right; the bad news doesn't stop in Europe. There are an enormous number of the idled young right here in America's backyard. More than 1 in 4, in fact. And many of these American youngsters are loaded with student debt, too, but that's another story.
The Idled Young Americans has the gruesome details on the nonemployed young in the U.S. and around the world:
"THE idle young European, stranded without work by the Continent’s dysfunction, is one of the global economy’s stock characters. Yet it might be time to add another, even more common protagonist: the idle young American.
For all of Europe’s troubles — a left-right combination of sclerotic labor markets and austerity — the United States has quietly surpassed much of Europe in the percentage of young adults without jobs. It’s not just Europe, either. Over the last 12 years, the United States has gone from having the highest share of employed 25- to 34-year-olds among large, wealthy economies to having among the lowest. . . .
Layoffs have been subdued, with the exception of the worst months of the financial crisis, but so has the creation of jobs, and no one depends on new jobs as much as younger workers do. For them, the Great Recession grinds on.
For many people with jobs and nest eggs, the economy is finally moving in the right direction, albeit a long way from booming. . . . But little of that helps younger adults trying to get a foothold in the economy. Many of them are on the outside of the recovery looking in.
The net worth of households headed by people 44 and younger has dropped more over the past decade than the net worth of middle-aged and elderly households, according to the Federal Reserve.
According to the Labor Department, workers 25 to 34 years old are the only age group with lower average wages in early 2013 than in 2000.
The problems start with a lack of jobs. In 2011, the most recent year for which international comparisons exist, 26.2 percent of Americans between ages 25 and 34 were not working. That includes those for whom unemployment is a choice (those in graduate school, for example, or taking care of children) and those for whom it is not (the officially unemployed or those who are out of work and no longer looking). The share was 20.2 percent in Canada, 20.5 percent in Germany, 21 percent in Japan, 21.6 percent in Britain and 22 percent in France.
The European economy has deteriorated over the last two years, and the American economy has strengthened modestly. But the job growth here has been fast enough merely to keep pace with population growth, which suggests that this country still lags in the employment of young adults. In 2000, by contrast, the United States led Germany, Britain, France, Canada and Japan — as well as Australia, Russia and Sweden — in such employment rates. The nation now trails them all. Older American workers have also lost relative ground, but not as much. . . .
The United States, for example, has lost its once-large lead in producing college graduates, and education remains the most successful jobs strategy in a globalized, technology-heavy economy. It is no accident that the most educated places in the country, like Boston, Minneapolis, Washington and Austin, Tex., have high employment rates while the least educated, including many in the South and inland California, have low ones. The official unemployment rate for 25- to 34-year-old college graduates remains just 3.3 percent.
Beyond education, the nation has also been less aggressive than some others in using counseling and retraining to help the jobless find work. . . . and, perhaps relatedly, employment rates among women here have slipped.
Whatever role these trends are playing, they do not appear to fully explain the employment decline. It is too big and too widespread. Existing companies are not adding jobs at the same rate they once did, and new companies are not forming as quickly.
What might help? . . . Long term, nothing is likely to matter more than improving educational attainment, from preschool through college (which may have started already). . . .
Perhaps the most remarkable aspect of the jobs slump is that the Americans in their 20s and 30s who have been most affected by it remain decidedly upbeat. They are much more hopeful than older generations, polls show, that the country’s future will be better than its past.
Based on what younger adults have been through, that resilience is impressive. It’s probably necessary, too. The jobs slump will not end without a large dose of optimism."
Summing Up
Despite all the bad news on the employment situation among the young, there is still optimism in the air.
That's quite a testament to the belief in America as the land of opportunity.
My hope is that we oldsters are able to help the young among us to have the same opportunities that we had long ago.
But to do that, we'll need a vastly improved and more affordable educational system involving school choice to help our youngsters prepare for the competitive global marketplace for good jobs.
And beyond education, we'll also need a vibrant private sector and a smaller and less intrusive public sector. That's the only way forward.
And beyond education, we'll also need a vibrant private sector and a smaller and less intrusive public sector. That's the only way forward.
Thanks. Bob.
Monday, May 20, 2013
Big Government, We the People and Technology
We the People are more informed than ever about the affairs of our government, and we are able to access that information and opinions from various sources in quasi-real time, too.
And it's due in large part to technology and the internet. As a result, technology is preventing the well oiled spin machines of government officials and their allies in the media from keeping the truth from public view. At least they can't keep it from us for long.
We the People can now access the news anytime and anyplace, including the various blogs. In that regard, technology is a great enabler for free discussion and truth seeking, and it's also posing a serious threat to politics as usual and the often cheerleading media on both sides of the argument.
Yes, the times they are changing, and that's a good thing --- a very good thing, in fact.
Big Government Loses Control tells a great story about our system of self governance and the use of technology to improve how our government functions:
"What to make of the political scandals that are dominating the headlines and forcing the Obama administration into Nixonian damage control? Technology is finally doing to big government what it has done to big business, big media and other institutions that once could operate with nearly full control over information. The government is losing the ability to manipulate information to avoid accountability.
Consider how the news broke that the Internal Revenue Service has been targeting conservative groups. The admission by IRS official Lois Lerner came in response to a question from the audience at a low-profile meeting of the tax section of the American Bar Association. For a week, perplexed reporters quoted her supporters saying she was apolitical and must not have meant to make news this way.
Then reports online cited lawyers who had been at the ABA event saying they saw her consult prepared remarks as she answered the supposedly impromptu question. On Friday, the acting IRS commissioner confessed to Congress that the question was planted. Its purpose was to give Ms. Lerner a chance to minimize IRS wrongdoing before the release of the Treasury inspector general's report early last week.
The attempt to spin the story worked for a time. Ms. Lerner blamed everything on low-level IRS employees in the Cincinnati office and said that the targeting of conservative groups ended when higher-ups learned about it. But as targeted groups went online to reveal the communications they had received from numerous IRS offices, it became clear that abuses were widespread, including at headquarters, and that the targeting went on for years.
There is a long history of presidents using the IRS against political enemies. FDR went after newspapers that opposed the New Deal. JFK had his Ideological Organizations Audit Project target conservative groups like the American Enterprise Institute. Richard Nixon used the IRS to harass people on his enemies list.
Most of these abuses came to light only after the presidents left office. President Obama has to deal with the issue now because tea party and other groups used social media to share information about their experiences with the IRS.
Details also emerged this month about the Obama administration's efforts to
spin last year's Benghazi attack. The White House was forced to release 100
pages of emails showing how "talking points" about the attack were edited to
exclude references to al Qaeda. That set the stage for Mr. Obama and
then-Secretary of State Hillary Clinton to spend two weeks falsely blaming an
anti-Muslim video.
The emails detailed a dozen changes to the talking points, including eliminating a key CIA observation from the original draft: "We do know that Islamic extremists with ties to al Qaeda participated in this attack." The emails disclosed how Mrs. Clinton's spokesman Victoria Nuland successfully lobbied to excise earlier CIA warnings of terrorism in Benghazi. She emailed that this "could be used by Members [of Congress] to beat the State Department for not paying attention to Agency warnings so why do we want to feed that? Concerned."
Just as old media learned it is no longer the only voice heard in a new-media world, government spinners now must reckon that the truth will eventually come out—sometimes because the government is pressured to disclose damning internal emails.
The third scandal dogging the Obama administration also has its roots in trying to downplay terrorist threats. The Associated Press reported in May 2012 that the CIA had stopped another attempt by an al Qaeda group in Yemen to have an underwear bomber blow up a U.S. passenger airplane. That contradicted administration claims that there were no known terror threats. A federal prosecutor trying to find the source of the leak seized phone records of dozens of AP editors and reporters from a two-month period last year, ignoring Justice Department guidelines that the AP at least be told in advance that the government is trolling its records.
As the nation's chief executive, President Obama is accountable for the IRS, State Department and Justice Department. His longtime adviser David Axelrod last week blamed a too-big government for the scandals: "Part of being president is that there's so much beneath you that you can't know because the government is so vast."
Messrs. Obama and Axelrod helped create that problem, but the argument against big government rings especially true in an era when not even the government can control information."
Summing Up
Freedom of speech and technology make for a powerful force in "real time" democracy.
Maybe limited government will get another chance in America. Let's hope so.
Now all we need for that to happen is a properly informed and skeptical citizenry willing to look objectively at the facts and opinions presented as the "truth" by the political spin masters of both parties.
Then perhaps many more of us, if not all, will come to the realization that it's up to each of us to see through the fiction of a self serving set of government officials and bureaucrats in our search to find the truth.
In other words, the truth will set us free but only if we first take the time and opportunity to pursue it on its own merits, wherever that may lead. Technology is making that search for the truth both easier and faster, too.
But first we have to decide it's worth making the effort.
That's my apolitical take.
Thanks. Bob.
And it's due in large part to technology and the internet. As a result, technology is preventing the well oiled spin machines of government officials and their allies in the media from keeping the truth from public view. At least they can't keep it from us for long.
We the People can now access the news anytime and anyplace, including the various blogs. In that regard, technology is a great enabler for free discussion and truth seeking, and it's also posing a serious threat to politics as usual and the often cheerleading media on both sides of the argument.
Yes, the times they are changing, and that's a good thing --- a very good thing, in fact.
Big Government Loses Control tells a great story about our system of self governance and the use of technology to improve how our government functions:
"What to make of the political scandals that are dominating the headlines and forcing the Obama administration into Nixonian damage control? Technology is finally doing to big government what it has done to big business, big media and other institutions that once could operate with nearly full control over information. The government is losing the ability to manipulate information to avoid accountability.
Consider how the news broke that the Internal Revenue Service has been targeting conservative groups. The admission by IRS official Lois Lerner came in response to a question from the audience at a low-profile meeting of the tax section of the American Bar Association. For a week, perplexed reporters quoted her supporters saying she was apolitical and must not have meant to make news this way.
Then reports online cited lawyers who had been at the ABA event saying they saw her consult prepared remarks as she answered the supposedly impromptu question. On Friday, the acting IRS commissioner confessed to Congress that the question was planted. Its purpose was to give Ms. Lerner a chance to minimize IRS wrongdoing before the release of the Treasury inspector general's report early last week.
The attempt to spin the story worked for a time. Ms. Lerner blamed everything on low-level IRS employees in the Cincinnati office and said that the targeting of conservative groups ended when higher-ups learned about it. But as targeted groups went online to reveal the communications they had received from numerous IRS offices, it became clear that abuses were widespread, including at headquarters, and that the targeting went on for years.
There is a long history of presidents using the IRS against political enemies. FDR went after newspapers that opposed the New Deal. JFK had his Ideological Organizations Audit Project target conservative groups like the American Enterprise Institute. Richard Nixon used the IRS to harass people on his enemies list.
Most of these abuses came to light only after the presidents left office. President Obama has to deal with the issue now because tea party and other groups used social media to share information about their experiences with the IRS.
Steven Miller
The emails detailed a dozen changes to the talking points, including eliminating a key CIA observation from the original draft: "We do know that Islamic extremists with ties to al Qaeda participated in this attack." The emails disclosed how Mrs. Clinton's spokesman Victoria Nuland successfully lobbied to excise earlier CIA warnings of terrorism in Benghazi. She emailed that this "could be used by Members [of Congress] to beat the State Department for not paying attention to Agency warnings so why do we want to feed that? Concerned."
Just as old media learned it is no longer the only voice heard in a new-media world, government spinners now must reckon that the truth will eventually come out—sometimes because the government is pressured to disclose damning internal emails.
The third scandal dogging the Obama administration also has its roots in trying to downplay terrorist threats. The Associated Press reported in May 2012 that the CIA had stopped another attempt by an al Qaeda group in Yemen to have an underwear bomber blow up a U.S. passenger airplane. That contradicted administration claims that there were no known terror threats. A federal prosecutor trying to find the source of the leak seized phone records of dozens of AP editors and reporters from a two-month period last year, ignoring Justice Department guidelines that the AP at least be told in advance that the government is trolling its records.
As the nation's chief executive, President Obama is accountable for the IRS, State Department and Justice Department. His longtime adviser David Axelrod last week blamed a too-big government for the scandals: "Part of being president is that there's so much beneath you that you can't know because the government is so vast."
Messrs. Obama and Axelrod helped create that problem, but the argument against big government rings especially true in an era when not even the government can control information."
Summing Up
Freedom of speech and technology make for a powerful force in "real time" democracy.
Maybe limited government will get another chance in America. Let's hope so.
Now all we need for that to happen is a properly informed and skeptical citizenry willing to look objectively at the facts and opinions presented as the "truth" by the political spin masters of both parties.
Then perhaps many more of us, if not all, will come to the realization that it's up to each of us to see through the fiction of a self serving set of government officials and bureaucrats in our search to find the truth.
In other words, the truth will set us free but only if we first take the time and opportunity to pursue it on its own merits, wherever that may lead. Technology is making that search for the truth both easier and faster, too.
But first we have to decide it's worth making the effort.
That's my apolitical take.
Thanks. Bob.
Is College Worth It? ... Government Doing Harm ... Third Party Payers and Student Loans
College is expensive. It's also the way to acquiring the "credentials" to get a good paying job. At least that's why most of us attend college.
However, today it's also a way to get into debt and unable to get out of debt anytime soon, even after getting "credentialed."
In plain words, it's become a rigged game in a monopolistic government subsidized phony environment where the value proposition, aka the combination of cost and quality, is largely ignored.
As a result, college costs are out-of-control and its administrators have no vested interest or need to keep costs in line and the quality of the college education high. Meanwhile, the government knows best gang keeps on upping the ante and throwing more and more taxpayer money at the problem. As a result, a vicious cycle has developed in which the cost of college attendance rises rapidly and the quality of the product suffers rapidly.
It's the Hippocratic Oath being honored in the breach once again as government in fact does great and lasting harm to those it's trying to help. And it starts in K-12 government controlled and subsidized schools where graduates learn how to enter college unprepared.
The book review A Refuge for Charlatans is subtitled 'The median pay for public-college presidents is now $441,392, with four presidents being paid more than $1 million per year:'
"Despite the growing evidence that colleges and universities cost too much, deliver too little and push too many young people into a lifetime of debt, the idea of going to college remains a key part of the American Dream. Now William Bennett, a former secretary of education . . . takes on a question that parents and teens are starting to ask: Is college worth the ever-increasing price tag? The authors' answer is a hesitant "yes," but with plenty of provisos and warnings about bigger problems ahead.
Since 1990 the cost of attending a four-year college or university has risen four times the rate of inflation. . . . the average price of attending an American public college—to judge by current trends—will have doubled, by 2016, in just 15 years.
At the same time, the average pay for college grads in America has fallen 5% since 2007-08. Almost half of all four-year college graduates now work at jobs that don't require a college degree . . . . never have so many charged so much for so little.
What's gone wrong? In the authors' view, the chief culprit has been the federal government. . . . College tuitions will rise as long as federal subsidies do. To those who like to point out that both federal and state aid to higher education has fallen in the past decade, Messrs. Bennett and Wilezol answer that the real driver of debt has been federal student loans. Those have ballooned by 60% in the past five years alone to more than $900 million, while grants-in-aid, like Pell grants, have tripled in value over the past decade. It's a classic example of the perils of a third-party payer system, with students, parents and institutions caught in a vicious cycle of rising costs and declining quality.
Knowing that Washington is going to pump in money to make college more "affordable" only encourages colleges and universities to raise their tuitions and fees and ignore cost inefficiencies, including administrative and bureaucratic bloat. (From 1993 to 2007, per-student administrative costs leapt more than 61%. Last week, the Chronicle of Higher Education reported that the median pay for public-college presidents is now $441,392, with four presidents being paid more than $1 million a year.) The search for loan-subsidized customers encourages schools to lower academic standards, inflate grades (today A grades account on average for 43% of all college letter grades), and offer more "pop" courses and trendy majors so that students can glide along and earn an easy degree.
Meanwhile, those who have dined on such lighter-than-air academic fare wind up saddled with debt and increasingly unable to find a job that can pay it off.
The second harmed group, Messrs. Bennett and Wilezol note, are those at the bottom of the economic scale, for whom college used to be a ticket out of poverty but who increasingly can't afford it even with the explosion of federal help. In 1970, 12% of recent college graduates came from the bottom quarter of the income distribution; today it's barely 7%. Then there are taxpayers who have to pay for defaulting loans (more than one in four in 2012) and get a poor return on the nation's investment in higher education. Last but not least, there are the institutions of higher learning themselves, whose value and prestige in the public's eye have steadily moved downward as costs move upward. In 2008, 81% of Americans thought college education was worth it; today it's 57%.
The authors propose various solutions to the problem: reforming K-12 education to make it better at equipping students who decide not to go to college and might more profitably attend a vocational school . . . and, most important, shifting more of the higher-education curriculum over to online courses, which will lower costs both to schools and to students.
Still, no one should expect sweeping changes any time soon—not with the federal government still supplying the dollars and millions of families still signing on to the myth that "everyone should go to college." Like the Roman Catholic Church on the eve of the Reformation, the American university, one of this country's great institutions, has become a refuge for timeservers and charlatans and lost sight of its core principles."
Summing Up
The problems associated with a third party payer system don't just apply to America's broken health care industry.
The government controlled system is alive and doing great harm to students and colleges all across America as well.
And as with government programs generally, the most harm is being done to those who can least afford it --- low income families and the students who come from those families.
And in the classroom, the fact that 43% of the grades will be an "A" shouldn't be cause for celebration either. An "A" means average today.
But at least the student will get loaded with lots of debt that will follow him throughout adulthood, or into bankruptcy, as the case may be.
This crap has to change. We have to stop screwing our young people and start helping them instead.
And we can best do that by getting We the People more involved and the government knows best gang of do-gooders less involved.
That's my take.
Thanks. Bob.
However, today it's also a way to get into debt and unable to get out of debt anytime soon, even after getting "credentialed."
In plain words, it's become a rigged game in a monopolistic government subsidized phony environment where the value proposition, aka the combination of cost and quality, is largely ignored.
As a result, college costs are out-of-control and its administrators have no vested interest or need to keep costs in line and the quality of the college education high. Meanwhile, the government knows best gang keeps on upping the ante and throwing more and more taxpayer money at the problem. As a result, a vicious cycle has developed in which the cost of college attendance rises rapidly and the quality of the product suffers rapidly.
It's the Hippocratic Oath being honored in the breach once again as government in fact does great and lasting harm to those it's trying to help. And it starts in K-12 government controlled and subsidized schools where graduates learn how to enter college unprepared.
The book review A Refuge for Charlatans is subtitled 'The median pay for public-college presidents is now $441,392, with four presidents being paid more than $1 million per year:'
"Despite the growing evidence that colleges and universities cost too much, deliver too little and push too many young people into a lifetime of debt, the idea of going to college remains a key part of the American Dream. Now William Bennett, a former secretary of education . . . takes on a question that parents and teens are starting to ask: Is college worth the ever-increasing price tag? The authors' answer is a hesitant "yes," but with plenty of provisos and warnings about bigger problems ahead.
Since 1990 the cost of attending a four-year college or university has risen four times the rate of inflation. . . . the average price of attending an American public college—to judge by current trends—will have doubled, by 2016, in just 15 years.
At the same time, the average pay for college grads in America has fallen 5% since 2007-08. Almost half of all four-year college graduates now work at jobs that don't require a college degree . . . . never have so many charged so much for so little.
What's gone wrong? In the authors' view, the chief culprit has been the federal government. . . . College tuitions will rise as long as federal subsidies do. To those who like to point out that both federal and state aid to higher education has fallen in the past decade, Messrs. Bennett and Wilezol answer that the real driver of debt has been federal student loans. Those have ballooned by 60% in the past five years alone to more than $900 million, while grants-in-aid, like Pell grants, have tripled in value over the past decade. It's a classic example of the perils of a third-party payer system, with students, parents and institutions caught in a vicious cycle of rising costs and declining quality.
Knowing that Washington is going to pump in money to make college more "affordable" only encourages colleges and universities to raise their tuitions and fees and ignore cost inefficiencies, including administrative and bureaucratic bloat. (From 1993 to 2007, per-student administrative costs leapt more than 61%. Last week, the Chronicle of Higher Education reported that the median pay for public-college presidents is now $441,392, with four presidents being paid more than $1 million a year.) The search for loan-subsidized customers encourages schools to lower academic standards, inflate grades (today A grades account on average for 43% of all college letter grades), and offer more "pop" courses and trendy majors so that students can glide along and earn an easy degree.
Meanwhile, those who have dined on such lighter-than-air academic fare wind up saddled with debt and increasingly unable to find a job that can pay it off.
Who gets hurt most in this unsustainable cycle? First, young people who find that the "college experience" has turned them into debt peons. In 2011, two-thirds of the students getting bachelor degrees needed some kind of loan to finish college. In 1991, one in 10 American households owed some form of student-loan debt; today it's one in five, with a bigger proportion than ever owing $100,000 or more.
The second harmed group, Messrs. Bennett and Wilezol note, are those at the bottom of the economic scale, for whom college used to be a ticket out of poverty but who increasingly can't afford it even with the explosion of federal help. In 1970, 12% of recent college graduates came from the bottom quarter of the income distribution; today it's barely 7%. Then there are taxpayers who have to pay for defaulting loans (more than one in four in 2012) and get a poor return on the nation's investment in higher education. Last but not least, there are the institutions of higher learning themselves, whose value and prestige in the public's eye have steadily moved downward as costs move upward. In 2008, 81% of Americans thought college education was worth it; today it's 57%.
The authors propose various solutions to the problem: reforming K-12 education to make it better at equipping students who decide not to go to college and might more profitably attend a vocational school . . . and, most important, shifting more of the higher-education curriculum over to online courses, which will lower costs both to schools and to students.
Still, no one should expect sweeping changes any time soon—not with the federal government still supplying the dollars and millions of families still signing on to the myth that "everyone should go to college." Like the Roman Catholic Church on the eve of the Reformation, the American university, one of this country's great institutions, has become a refuge for timeservers and charlatans and lost sight of its core principles."
Summing Up
The problems associated with a third party payer system don't just apply to America's broken health care industry.
The government controlled system is alive and doing great harm to students and colleges all across America as well.
And as with government programs generally, the most harm is being done to those who can least afford it --- low income families and the students who come from those families.
And in the classroom, the fact that 43% of the grades will be an "A" shouldn't be cause for celebration either. An "A" means average today.
But at least the student will get loaded with lots of debt that will follow him throughout adulthood, or into bankruptcy, as the case may be.
This crap has to change. We have to stop screwing our young people and start helping them instead.
And we can best do that by getting We the People more involved and the government knows best gang of do-gooders less involved.
That's my take.
Thanks. Bob.
Colleges Play Games with Pricing ... Informed Consumers Get the Best "Deals"
College is important. It's also expensive.
Students need to adopt the smart buyer approach to higher education. That means being an informed buyer in addition to being a serious student. Time spent in college is short, and its effects are enormous as well as lifelong.
So let's discuss the importance of understanding and applying the "value proposition" when entering the market to purchase a "valuable" college education.
Simply put, the value proposition represents the combination of the cost outlay in terms of both time and money in relation to the quality of what we purchase, which in the case of a college education is a college degree. The cost of getting "credentialed," in other words.
Let's use an everyday analogy to get started. Retailers establish "regular" prices and then discount prices to get to the "cash register" pricing. Consumers are theoretically attracted to the deal, and retailers get the business. That's the basic idea behind a weekend sale. During the week, the regular price is in place, but then the weekend arrives (Thursday through Sunday for retailers) and 90% or more of the out-the-door transaction business is done at the sale price. This high-low approach allows the retailer to convince the uninformed buyer that's he's getting a great deal, so he'd better buy now.
In order to enroll students, numerous colleges, and especially private colleges, are playing the same "price off" game as retailers but with one big exception. They are trying to get as much as possible from each separate "buyer" and will offer price discounts selectively. Not everybody gets the same price and to take just one example of quasi-individual pricing, airlines do it all the time. Accordingly, prospective "buyers" are well advised to understand the economics of the college decision.
Tuition price discounting is not off some legitimate average price but is deducted from the "regular" price offered by the institution. Varying pricing "discounts" are made available to almost everybody on an individual and selective basis (other than those very few individuals foolish enough to pay the list price, of course). The amount of the "discount" is impacted in large part by the sophistication of the buyer. If there aren't going to be enough "butts in the seats" (just like the airline example), the opportunity for the informed buyer to get a big discount increases. Thus, late entrants have the financial advantage when making college decisions and should use it.
Colleges Cut Prices by Providing More Financial Aid has the college tuition "on sale" story:
"Private U.S. colleges, worried they could be pricing themselves out of the market after years of relentless tuition increases, are offering record financial assistance to keep classrooms full.
The average "tuition discount rate"—the reduction off list price afforded by grants and scholarships given by these schools—hit an all-time high of 45% last fall for incoming freshmen, according to a survey being released Monday by the National Association of College and University Business Officers.
"It's a buyer's market" for all but the most select private colleges and flagship public universities, said Jim Scannell, president of Scannell & Kurz, a consulting firm in Pittsford, N.Y., that works with colleges on pricing and financial-aid strategies.
It is likely that some private colleges will be forced to be even more generous with discounts this fall. As of the May 1 deadline for many high-school seniors to commit for their freshman year of college, early reports suggest some non-top-tier schools fell 10% to 20% short of enrollment targets, said Mr. Scannell.
The jump in aid shows that many colleges are losing pricing power as more families focus on cost and value, with about 65% increasing their discount rate in the fall of 2012. Except for the most exclusive schools, private colleges increasingly are vulnerable to the stagnant wages of many families, deepening student debt, the uncertain job market, growing questions about the value of costly four-year degrees and unfavorable demographics.
About one of every eight U.S. undergraduates is enrolled at a private nonprofit college. Such schools provided 70% of all grant aid to undergraduate students in 2009, the most recent year for which data are available, Nacubo says.
The average discount rate at private colleges has climbed for seven years in a row, and the latest increase was smaller than the jump in 2011, said Natalie Pullaro Davis, the study's author. But colleges also are having a tougher time boosting their sticker prices. That makes it harder for colleges to generate enough new revenue to offset the impact of higher aid and their own rising costs.
Tuition increases for the 2013-14 year at these schools are likely to be about the same or slightly smaller, Mr. Nelson said.
Meantime, at four-year public colleges and universities, tuition and fees for in-state students rose 4.8% in the 2012-13 academic year, the smallest increase since 2000-01, according to the College Board. Tuition at these schools for out-of-state students rose 4.2%.
The discount rate for public universities fell modestly in 2012, said Mr. Nelson of Moody's, after rising from 2007 to 2011.
Last fall, enrollment fell at 46% of the 383 private colleges in the new Nacubo survey as the pool of high-school seniors declined. John Walda, the group's president, said the financial squeeze from fewer students is forcing such colleges to find ways to boost revenue, control costs and seek a way to stand out from the crowd. Some of those that can't eventually will shrink, merge or fold, he predicted.
Bill Hall, president of Applied Policy Research Inc., said about 10 of the 20 undergraduate colleges he advises on pricing and aid strategies still are scrambling to fill seats for this fall's freshman class. Officials at some schools are asking accepted applicants who haven't said yes or no if "there are financial issues within reason where we can make an adjustment," he said.
Some private colleges are seeing just 20% of the students they accepted actually enrolling, down from about one-third of accepted students five years ago, Mr. Scannell said. . . .
![[image]](http://si.wsj.net/public/resources/images/P1-BL402_DISCOU_NS_20130505171203.jpg)
Summing Up
College administrators understand the concept of variable costs compared to fixed costs. They apply it to tuition in an effort to fully utilize their capacity. Get "butts in the seats," in airline pricing jargon.
Thus, college admissions and pricing are similar to an airline flying half empty versus 100% full of paying passengers, even though all passengers don't pay the full price. Since the plane is flying anyway, those otherwise empty seats can be sold at rock bottom prices and it's still profitable for the airline to do so.
When the decision to fly the trip is made, the costs of fuel, pilots and support staff, takeoff and landing fees and so forth are all "sunk." The only thing left to determine is how many paying passengers will be on board and how much each passenger will pay to make the trip.
Colleges work the same way. It's all about "butts in the seat."
The message to students and their parents is simple --- bargain hard, and consider starting late in order to get the best deal possible.
That said, always focus on the "cash register" price rather than the phony list price of "regular" tuition that the college knows it won't collect anyway. You'll be glad you did.
That's my take.
Thanks. Bob.
Students need to adopt the smart buyer approach to higher education. That means being an informed buyer in addition to being a serious student. Time spent in college is short, and its effects are enormous as well as lifelong.
So let's discuss the importance of understanding and applying the "value proposition" when entering the market to purchase a "valuable" college education.
Simply put, the value proposition represents the combination of the cost outlay in terms of both time and money in relation to the quality of what we purchase, which in the case of a college education is a college degree. The cost of getting "credentialed," in other words.
Let's use an everyday analogy to get started. Retailers establish "regular" prices and then discount prices to get to the "cash register" pricing. Consumers are theoretically attracted to the deal, and retailers get the business. That's the basic idea behind a weekend sale. During the week, the regular price is in place, but then the weekend arrives (Thursday through Sunday for retailers) and 90% or more of the out-the-door transaction business is done at the sale price. This high-low approach allows the retailer to convince the uninformed buyer that's he's getting a great deal, so he'd better buy now.
In order to enroll students, numerous colleges, and especially private colleges, are playing the same "price off" game as retailers but with one big exception. They are trying to get as much as possible from each separate "buyer" and will offer price discounts selectively. Not everybody gets the same price and to take just one example of quasi-individual pricing, airlines do it all the time. Accordingly, prospective "buyers" are well advised to understand the economics of the college decision.
Tuition price discounting is not off some legitimate average price but is deducted from the "regular" price offered by the institution. Varying pricing "discounts" are made available to almost everybody on an individual and selective basis (other than those very few individuals foolish enough to pay the list price, of course). The amount of the "discount" is impacted in large part by the sophistication of the buyer. If there aren't going to be enough "butts in the seats" (just like the airline example), the opportunity for the informed buyer to get a big discount increases. Thus, late entrants have the financial advantage when making college decisions and should use it.
Colleges Cut Prices by Providing More Financial Aid has the college tuition "on sale" story:
"Private U.S. colleges, worried they could be pricing themselves out of the market after years of relentless tuition increases, are offering record financial assistance to keep classrooms full.
The average "tuition discount rate"—the reduction off list price afforded by grants and scholarships given by these schools—hit an all-time high of 45% last fall for incoming freshmen, according to a survey being released Monday by the National Association of College and University Business Officers.
Students graduated from Ohio State University over the
weekend.
"It's a buyer's market" for all but the most select private colleges and flagship public universities, said Jim Scannell, president of Scannell & Kurz, a consulting firm in Pittsford, N.Y., that works with colleges on pricing and financial-aid strategies.
It is likely that some private colleges will be forced to be even more generous with discounts this fall. As of the May 1 deadline for many high-school seniors to commit for their freshman year of college, early reports suggest some non-top-tier schools fell 10% to 20% short of enrollment targets, said Mr. Scannell.
The jump in aid shows that many colleges are losing pricing power as more families focus on cost and value, with about 65% increasing their discount rate in the fall of 2012. Except for the most exclusive schools, private colleges increasingly are vulnerable to the stagnant wages of many families, deepening student debt, the uncertain job market, growing questions about the value of costly four-year degrees and unfavorable demographics.
About one of every eight U.S. undergraduates is enrolled at a private nonprofit college. Such schools provided 70% of all grant aid to undergraduate students in 2009, the most recent year for which data are available, Nacubo says.
The average discount rate at private colleges has climbed for seven years in a row, and the latest increase was smaller than the jump in 2011, said Natalie Pullaro Davis, the study's author. But colleges also are having a tougher time boosting their sticker prices. That makes it harder for colleges to generate enough new revenue to offset the impact of higher aid and their own rising costs.
Because of economic factors and political pressure on colleges to hold the line on tuition, "we have hit a tipping point on price," said John Nelson, managing director at Moody's Investors Service. Last year, the median sticker price at about 280 private colleges and universities tracked by the debt-rating firm rose 3.9%, the smallest increase in at least 12 years.
Tuition increases for the 2013-14 year at these schools are likely to be about the same or slightly smaller, Mr. Nelson said.
Meantime, at four-year public colleges and universities, tuition and fees for in-state students rose 4.8% in the 2012-13 academic year, the smallest increase since 2000-01, according to the College Board. Tuition at these schools for out-of-state students rose 4.2%.
The discount rate for public universities fell modestly in 2012, said Mr. Nelson of Moody's, after rising from 2007 to 2011.
Last fall, enrollment fell at 46% of the 383 private colleges in the new Nacubo survey as the pool of high-school seniors declined. John Walda, the group's president, said the financial squeeze from fewer students is forcing such colleges to find ways to boost revenue, control costs and seek a way to stand out from the crowd. Some of those that can't eventually will shrink, merge or fold, he predicted.
Bill Hall, president of Applied Policy Research Inc., said about 10 of the 20 undergraduate colleges he advises on pricing and aid strategies still are scrambling to fill seats for this fall's freshman class. Officials at some schools are asking accepted applicants who haven't said yes or no if "there are financial issues within reason where we can make an adjustment," he said.
Some private colleges are seeing just 20% of the students they accepted actually enrolling, down from about one-third of accepted students five years ago, Mr. Scannell said. . . .
Summing Up
College administrators understand the concept of variable costs compared to fixed costs. They apply it to tuition in an effort to fully utilize their capacity. Get "butts in the seats," in airline pricing jargon.
Thus, college admissions and pricing are similar to an airline flying half empty versus 100% full of paying passengers, even though all passengers don't pay the full price. Since the plane is flying anyway, those otherwise empty seats can be sold at rock bottom prices and it's still profitable for the airline to do so.
When the decision to fly the trip is made, the costs of fuel, pilots and support staff, takeoff and landing fees and so forth are all "sunk." The only thing left to determine is how many paying passengers will be on board and how much each passenger will pay to make the trip.
Colleges work the same way. It's all about "butts in the seat."
The message to students and their parents is simple --- bargain hard, and consider starting late in order to get the best deal possible.
That said, always focus on the "cash register" price rather than the phony list price of "regular" tuition that the college knows it won't collect anyway. You'll be glad you did.
That's my take.
Thanks. Bob.
Sunday, May 19, 2013
Stats on Student Loans and How They've Grown
Spring has sprung and college graduation ceremonies are here.
Also, the graduates will be going into a lousy job market with one additional burden compared to prior graduates. A negative net worth as evidenced by record high student loans outstanding. Another year, another record.
Class of 2013, Most Indebted Ever has the stats on this year's graduating class:
"$30,000: The average student-loan debt for a borrower who received a bachelor’s degree in 2013.
The class of 2013 entered college just as the economic recovery was beginning in June 2009, but while their job prospects are better than other recent graduates, their debt burden is heavier.
The average debt load for each borrower receiving a bachelor’s degree this year is about $30,000, . . . . That number has doubled over the course of a recent graduate’s lifetime. Even adjusting for inflation, the average debt burden was half that size 20 years ago.
There is one piece of good news for the class of 2013: they aren’t likely to hold the title of “Most Indebted Ever” for long. Amid continued growth in both tuition costs and student lending, they are likely to pass the mantle to the class of 2014 next May just as they assumed it from the class of 2012."
Summing Up
Each year we set another record. The college graduates have more debt upon graduation than any preceding class. So do the non-graduates.
Yet we're still looking to government to ease our burdens. Hasn't government provided our young people with enough "help" already?
And haven't our government do-gooders done more than enough harm in trying to win votes and popularity by trying to 'save the middle class,' whatever that means?
I think so.
Thanks. Bob.
Also, the graduates will be going into a lousy job market with one additional burden compared to prior graduates. A negative net worth as evidenced by record high student loans outstanding. Another year, another record.
Class of 2013, Most Indebted Ever has the stats on this year's graduating class:
"$30,000: The average student-loan debt for a borrower who received a bachelor’s degree in 2013.
The class of 2013 entered college just as the economic recovery was beginning in June 2009, but while their job prospects are better than other recent graduates, their debt burden is heavier.
Total outstanding student-loan debt stood at $986 billion at the
end of the first quarter of this year, according
to the Federal Reserve Bank of New York. That’s up 2.1%
from the previous quarter and nearly 50% from the same quarter in 2009.
The average debt load for each borrower receiving a bachelor’s degree this year is about $30,000, . . . . That number has doubled over the course of a recent graduate’s lifetime. Even adjusting for inflation, the average debt burden was half that size 20 years ago.
Other groups put the average debt figure even higher. A
poll from Fidelity Investments earlier this week found 70%
of graduates had at least some debt, and the average was $35,200. That figure is
higher in part because it includes debt owed to family and credit-card
balances.
No matter how you slice it, that’s a pretty sizable burden to
begin your working life. Of course, in general, a college degree is a worthwhile
investment. The unemployment rate for graduates was 3.9% in April. Recent
college grads aren’t doing quite as well, as the jobless rate for 16-24 year
olds with a degree was 7.1% in 2012, and many are
stuck in low-paid jobs. But they’re better off than those without a diploma.
The unemployment rate for all 16-24 year olds not enrolled in school was 17%
last year.
The worst
situation is faced by those who don’t complete college. They get the burden
of student debt without the benefit of a degree. The median annual income of a
noncompleter from a private nonprofit four-year school was $25,000 in 2009
compared to $33,900 for a degree holder, even though both accumulated similar
levels of debt per year enrolled.
There is one piece of good news for the class of 2013: they aren’t likely to hold the title of “Most Indebted Ever” for long. Amid continued growth in both tuition costs and student lending, they are likely to pass the mantle to the class of 2014 next May just as they assumed it from the class of 2012."
Summing Up
Each year we set another record. The college graduates have more debt upon graduation than any preceding class. So do the non-graduates.
Yet we're still looking to government to ease our burdens. Hasn't government provided our young people with enough "help" already?
And haven't our government do-gooders done more than enough harm in trying to win votes and popularity by trying to 'save the middle class,' whatever that means?
I think so.
Thanks. Bob.
Exporting Natural Gas ... When Allowed To, The Free Market Works
Government spending represents a tax on the people.
Additional private sector revenues generated by private sector investment provide jobs and income for the people and tax revenues for the government.
While perfectly obvious, the foregoing is often ignored. But not always.
Finally, there's a bit of free market light at the end of the Obama energy tunnel. While one move doesn't save the day, of course, it does indicate that perhaps we still aren't entirely a socialistic society, and one led by politicians who look to government and not the the global market as the cure to our nation's many financial ills.
U.S. Approves Expanded Gas Exports says this:
"The Obama administration on Friday cleared the way for broader natural-gas exports by approving a $10 billion facility in Texas, a milestone in the U.S. transition into a major supplier of energy for world markets.
The decision reflects a turnaround in the U.S. energy trade. Five years ago, many companies built natural-gas import terminals, anticipating greater U.S. demand for imported fuel. Now, a group of private investors that includes ConocoPhillips plans to turn one of those terminals—in Quintana Island, Texas—into an export facility to ship natural gas to Japan and other nations.
In giving the project, known as Freeport LNG, the green light, the Department of Energy signaled that it found the prospective benefits from exporting energy outweighed concerns about possible downsides for the U.S. economy.
Proponents of greater exports, including the oil and gas industry, say that exporting inexpensive natural gas will help the U.S. trade balance, help advance the adoption of clean-burning fuels around the world and shore up energy-poor U.S. allies.
Opponents counter that exports may cause domestic prices to rise, hurting consumers and some industries such as chemicals that have benefited from cheap natural gas. Some environmentalists oppose exports for a different reason, saying the U.S. shouldn't encourage more fossil-fuel production.
"I hope this means that more facilities will get approval in due time, sooner rather than later," said Freeport LNG Chief Executive Michael Smith in an interview. "The country needs these exports for jobs, for balance of trade and for geopolitical reasons—our allies are asking for them.". . .
![[image]](http://si.wsj.net/public/resources/images/NA-BW444A_GasEx_NS_20130517180906.jpg)
The combination of hydraulic fracturing and horizontal drilling has unleashed a natural-gas bonanza that has made the U.S. the world's largest natural-gas producer.
President Barack Obama has welcomed the boom, and his administration showed in Friday's decision it was ready to buck environmental groups in order to spur further production. Deb Nardone of the Sierra Club called the move a "bad deal all around" and a "giveaway to the dirty-fuel industry."
The Department of Energy said it had given conditional authorization to the Freeport project to export up to 1.4 billion cubic feet a day of liquefied natural gas. The approval is needed for exports to countries with which the U.S. doesn't have a free-trade agreement, a category including major trading partners in Europe and Asia. The project, which is expected to begin exports in 2017, still needs approval from the Federal Energy Regulatory Commission.
The Freeport terminal is the second export facility approved by the Obama administration. Cheniere Energy Inc.'s Sabine Pass facility in Louisiana won approval in May 2011 to export LNG to the countries without free-trade agreements. It expects to begin exporting in 2015.
The first approval got relatively little notice, but the issue gained prominence as export applications piled up and leading companies on both sides of the issue began to clash over the merits of exports. The Department of Energy spent much of 2012 waiting for a report it commissioned on the issue, which was released in December 2012 and concluded that exports would benefit the U.S. economy overall.
Friday's decision is an important harbinger for the remaining 19 applications to export gas to non-FTA countries. That's because, by law, gas exports are presumed to be in the public interest unless shown otherwise. . . .
The Department of Energy said it conducted an "extensive, careful review" that considered "the economic, energy security, and environmental impacts," and found that the project was "not inconsistent with the public interest."
The department said that in considering future export applications, it will consider market conditions, including projections about natural-gas prices, supply and demand. All remaining permit applications will be considered on a case-by-case basis, the department said, keeping in mind the cumulative amount of authorized gas exports."
Summing Up
It's tempting to call this non-action by the government good news. On reflection, however, why should it be considered good news when the government merely allows private sector investment which will add to the strength of our economy and the world's as well?
In other words, maybe it's really bad news when we take it as good news when the government doesn't do something to inhibit private sector investment and economic growth. Aren't We the People supposed to be the ones in charge?
In any event, I know this to be true. Government is too big and far too intrusive in our personal lives and the economic affairs of our nation. From K-12 public education to college loans to underwriting 90% of home mortgages, to Social Security, Medicare and Medicaid, and now ObamaCare, we have become more like socialistic Europe than I would have ever thought possible.
And although Europe is presented to us as a role model by many of our government officials, the European road is in fact a road to nowhere.
But with this approval, the energy resources of America will now be better used, albeit only marginally so, to the benefit of the world at large and Americans at home, so I guess that alone makes it good news.
Maybe it's even the beginning of a much needed change in government policies and their discouragement and restraint of more and much needed job creating, fiscally responsible, economy enhancing, private sector initiatives. Let's hope so.
That's my take.
Thanks. Bob.
Additional private sector revenues generated by private sector investment provide jobs and income for the people and tax revenues for the government.
While perfectly obvious, the foregoing is often ignored. But not always.
Finally, there's a bit of free market light at the end of the Obama energy tunnel. While one move doesn't save the day, of course, it does indicate that perhaps we still aren't entirely a socialistic society, and one led by politicians who look to government and not the the global market as the cure to our nation's many financial ills.
U.S. Approves Expanded Gas Exports says this:
"The Obama administration on Friday cleared the way for broader natural-gas exports by approving a $10 billion facility in Texas, a milestone in the U.S. transition into a major supplier of energy for world markets.
The decision reflects a turnaround in the U.S. energy trade. Five years ago, many companies built natural-gas import terminals, anticipating greater U.S. demand for imported fuel. Now, a group of private investors that includes ConocoPhillips plans to turn one of those terminals—in Quintana Island, Texas—into an export facility to ship natural gas to Japan and other nations.
Cheniere Energy Inc.'s Sabine Pass facility in Louisiana won approval in May 2011 to export LNG to the countries without free-trade agreements. It expects to begin exporting in 2015.
Proponents of greater exports, including the oil and gas industry, say that exporting inexpensive natural gas will help the U.S. trade balance, help advance the adoption of clean-burning fuels around the world and shore up energy-poor U.S. allies.
Opponents counter that exports may cause domestic prices to rise, hurting consumers and some industries such as chemicals that have benefited from cheap natural gas. Some environmentalists oppose exports for a different reason, saying the U.S. shouldn't encourage more fossil-fuel production.
"I hope this means that more facilities will get approval in due time, sooner rather than later," said Freeport LNG Chief Executive Michael Smith in an interview. "The country needs these exports for jobs, for balance of trade and for geopolitical reasons—our allies are asking for them.". . .
The combination of hydraulic fracturing and horizontal drilling has unleashed a natural-gas bonanza that has made the U.S. the world's largest natural-gas producer.
President Barack Obama has welcomed the boom, and his administration showed in Friday's decision it was ready to buck environmental groups in order to spur further production. Deb Nardone of the Sierra Club called the move a "bad deal all around" and a "giveaway to the dirty-fuel industry."
The Department of Energy said it had given conditional authorization to the Freeport project to export up to 1.4 billion cubic feet a day of liquefied natural gas. The approval is needed for exports to countries with which the U.S. doesn't have a free-trade agreement, a category including major trading partners in Europe and Asia. The project, which is expected to begin exports in 2017, still needs approval from the Federal Energy Regulatory Commission.
The Freeport terminal is the second export facility approved by the Obama administration. Cheniere Energy Inc.'s Sabine Pass facility in Louisiana won approval in May 2011 to export LNG to the countries without free-trade agreements. It expects to begin exporting in 2015.
The first approval got relatively little notice, but the issue gained prominence as export applications piled up and leading companies on both sides of the issue began to clash over the merits of exports. The Department of Energy spent much of 2012 waiting for a report it commissioned on the issue, which was released in December 2012 and concluded that exports would benefit the U.S. economy overall.
Friday's decision is an important harbinger for the remaining 19 applications to export gas to non-FTA countries. That's because, by law, gas exports are presumed to be in the public interest unless shown otherwise. . . .
The Department of Energy said it conducted an "extensive, careful review" that considered "the economic, energy security, and environmental impacts," and found that the project was "not inconsistent with the public interest."
The department said that in considering future export applications, it will consider market conditions, including projections about natural-gas prices, supply and demand. All remaining permit applications will be considered on a case-by-case basis, the department said, keeping in mind the cumulative amount of authorized gas exports."
Summing Up
It's tempting to call this non-action by the government good news. On reflection, however, why should it be considered good news when the government merely allows private sector investment which will add to the strength of our economy and the world's as well?
In other words, maybe it's really bad news when we take it as good news when the government doesn't do something to inhibit private sector investment and economic growth. Aren't We the People supposed to be the ones in charge?
In any event, I know this to be true. Government is too big and far too intrusive in our personal lives and the economic affairs of our nation. From K-12 public education to college loans to underwriting 90% of home mortgages, to Social Security, Medicare and Medicaid, and now ObamaCare, we have become more like socialistic Europe than I would have ever thought possible.
And although Europe is presented to us as a role model by many of our government officials, the European road is in fact a road to nowhere.
But with this approval, the energy resources of America will now be better used, albeit only marginally so, to the benefit of the world at large and Americans at home, so I guess that alone makes it good news.
Maybe it's even the beginning of a much needed change in government policies and their discouragement and restraint of more and much needed job creating, fiscally responsible, economy enhancing, private sector initiatives. Let's hope so.
That's my take.
Thanks. Bob.
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