Just when you thought the arrogance of Congressmen couldn’t get any worse, Alan Grayson (D-FL) is going to introduce a bill to require that employers with more than 100 employees give their employees 1 week of paid vacation time.

According to Erika Lovely of Politico (http://www.politico.com/news/stories/0509/22794.html), Rep. Grayson had this revelation that the government should mandate vacation pay while he, himself, was on vacation at Disney World. I understand that he thinks this would be stimulative. His line of thinking probably went like this: “Look at this sea of people. You know how we could really stimulate the economy – especially here in Florida – we should just pay all these people for the time they’re spending here.” OK, it probably didn’t go quite like that, but I just can’t resist poking fun at someone who is arrogant enough to think he should tell all companies how to run their businesses.

The argument actually is something more like this: Rep. Grayson reportedly claims that people would be more productive if they had more time off. Apparently, companies are too stupid to figure this out for themselves, and need the likes of Rep. Grayson to force them to make their employees more productive. Now, I’m going to grant Rep. Grayson credit where credit is due: He started IDT Corp. and has been a successful businessman in the private sector. So, at least he’s actually held a job that didn’t involve telling other people how to live their lives. However, that doesn’t make his bill any less arrogant.

Why does the government need to tell companies to offer vacation pay? If Rep. Grayson, or anyone else, truly believes that companies offering paid vacation time have more productive employees, here’s a few ideas: 1) start a company and offer paid vacation; 2) start a fund and invest in only companies that offer broad-based paid vacation plans to employees; 3) invest privately in public companies that offer broad-based paid vacation plans to employees; 4) give what is known as “angel money” to start-up companies offering paid vacation; 5) start a private equity fund investing in start-up companies offering paid vacation.

If paid vacation really makes employees more productive, then the market has ways to ensure that paid vacation finds its way into more companies. After all, if paid vacation really makes employees more productive, then companies with paid vacation will sweep the floor with companies that don’t offer paid vacation, and those companies will have to adapt in order to compete and stay in business.

Rep. Grayson would do far more good taking his profits from starting IDT (with annual revenue in excess of $2 billion) and investing in companies offering paid vacation, or using his influence in the numerous companies in which he has significant ownership to force them to offer paid vacation. That way, if he’s right, he’ll make even more money, but, if he’s wrong, he’ll lose his own money instead of forcing all investors to try his experiment with their money.

That’s the American way to do things: go out into the world and kick everyone else’s butt by being better, and change the world when your competitors try to imitate you. Did the government have to tell car companies to use a production line? No! Henry Ford went out into the world and just obliterated his competitors by making cars available to more people using a production line. Henry Ford made cars faster and cheaper, and he built a company that traditional car makers of the day simply couldn’t keep up with – Ford dominated the car market by making cheap cars. His competitors (and soon companies in other industries) copied his mass production process using an assembly line – something that is, today, used around the world. This is how Americans change the world: not through legislation.

Unlike Chrysler and General Motors, Ford Motor Company did not accept billions of dollars in bailout money from the Federal Government.  As a result, Ford has maintained a far better perception in the market than its domestic competitors.  People seem more willing to purchase a vehicle from a company that did not take the consumer’s hard-earned tax dollars than they are to essentially pay twice for a vehicle from Chrysler or GM.  Furthermore, by not accepting Federal aid, Ford has shown the market that the vehicles it produces are viable and worth their sticker price.  Most importantly, Ford has shown a commitment to the people of this nation and shown that it will not bow down and essentially steal out of the pockets of American citizens.  Concern for the welfare of customers and the nation always bodes well for a company.

Despite all the good that has come from Ford being a responsible corporation and not accepting bailout money, the fact that the United States Government has bailed out and essentially nationalized Chrysler and GM has put Ford into a precarious position.  In the past Ford only had to worry about competing with private companies with private balance sheets (I use private here to denote that governments have no involvement).  However, now that Chrysler and GM are owned by the United States, Ford has to compete with the financial abilities of a nation that can print money at its own leisure.  This is a problem for Ford because their financing arm, Ford Credit, will have a tough time competing with the United States Treasury.  As such, Chrysler and GM will be able to offer financing for their vehicles at ridiculously low rates that will be subsidized by the American people.  Ford, on the other hand, will have to raise money in the markets and will be unable to compete with the rates offered by the United States because Ford cannot print money.  Naturally, Ford has seen this as a serious disadvantage and has been forced to plead with the Federal Government to play by the rules and not create a government monopoly.

This is a perfect example of how monopolies are formed and how monopolies are only possible with government intervention.  Prior to the bailouts of Chrysler and GM nobody worried about a monopoly in the automobile manufacturing industry.  There was plenty of competition both domestically and from abroad.  However, the new Executive and Legislative representatives are going down a path that will likely lead to monopoly.  They have not been shy about supporting domestic automobile manufacturers and an increase on tariffs on imported vehicles seems likely if Chrysler and GM continue to falter.  Furthermore, now that they own pieces of both companies and are responsible for employing hundreds of thousands of people they will likely go to long measures to ensure each company’s survival.  This will likely include benefiting the companies through means which only the government can manage.  Ford has seen the stark reality that a monopoly is looming that would wreak havoc on the automobile industries and the American people should be aware of it as well.

“WASHINGTON — The Obama administration has begun serious talks about how it can change compensation practices across the financial-services industry, including at companies that did not receive federal bailout money, according to people familiar with the matter.”

“At the same time, House Financial Services Committee Chairman Barney Frank (D., Mass.) is working on legislation that could strengthen the government’s ability both to monitor compensation and to curb incentives that threaten a company’s viability or pose a systemic risk to the economy.”

-Wall Street Journal 05/13/09

The United States has nationalized investment banks, traditional banks, the nation’s largest insurance company, and automotive companies.  The United States has fired executives and decided who shall and shall not receive bonuses at these companies.  Now, the United States is trying to decide how and how much people in companies that have not been nationalized deserve to be paid.

President Obama and Congressman Frank would have you believe that they know which pay structure is best.  They would have you believe that they are more informed than these financial firms or the numerous compensation consulting groups they hire to determine which means of compensation will return the greatest production.  The members of our government would have you believe that they simply know more than you, and that you should, therefore, yield all decision making to them.

Well, I say that they are wrong.  I say that few things could do more to “threaten a company’s viability or pose a systematic risk to the economy” than the United States Government deciding how much and through which means people are to be paid.

Chrysler decided to declare bankruptcy last week but the Obama Administration decided that would not be allowed so they intervened.  In doing so they decided that they would give over half the company to the United Autoworkers Union, keep a chunk for the U.S. Government, give a sliver to the Canadian Government, and sell the rest to Fiat, an Italian auto-manufacturer.  In the process, the Obama Administration has told Chrysler’s bond-holders that they will be forced to write down 2/3 of the value of the debt they hold and will not have the opportunity to sell off Chrysler’s assets, as would be not only customary but the legal steps in a bankruptcy.

The most serious problem with this is the blatant disregard for contract law and the general rule of law that has been exhibited by our Government.

However, just a little anecdotal piece is how ironically absurd it is that the Obama Administration has been trying to save the American auto industry while attempting to convince Americans to “buy American” only to then sell a large chunk of a large American auto-manufacturer to an Italian company!

Once again, I have underestimated the absurdities that the people of this nation will allow from their Government.

Barack Obama recently released his budget for 2010. The budget results in an estimated $1.75 trillion deficit for 2010 – the largest deficit ever.  This, just a couple days after President Obama had announced that he will cut the deficit from his predecessor in half by the end of his first term in 2013 (source).  Not only that, but the budget of $3.6 trillion with the $1.75 trillion deficit does not include extraneous trillions upon trillions in spending on such projects as the stimulus, bailouts,  etc.  Do not be fooled by these politician tricks.  The “deficit” as announced in the news is only on the actual budget, but the budget is separate from the other projects put into place in the last few months.  Realistically spending and the deficit are trillions more than the $1.75 trillion deficit that is commonly reported.  In his budget, President Obama outlines a number of programs.  I won’t get into these programs, despite their being completely absurd.

What frustrates me even more than these programs, though, are the taxes in his new budget.  The simplest expansion of taxation is his increasing the top two marginal tax rates from 33% and 35% to 36% and 39.6%, respectively.  Increasing the taxes in the top marginal tax brackets serves to do one very important thing: it dramatically decreases the incentive for the rich to earn more money!  This means that it makes less sense for your boss to keep you in your job than it did before.  Your boss stands to make only sixty cents on every dollar you produce instead of sixty-five cents.  That means that you have immediately become 7.7% less valuable to your boss than you once were.  Additionally, a new worker that is hoping to get hired to a job is 7.7% less valuable to the person he is interviewing with, making that worker less likely to be hired.  This from a President and Congress that has been pushing hard to “create or save 4 million jobs.”

In addition to raising the top marginal tax rates, President Obama also increased the capital gains tax from 15% to 20%.  To clear things up, capital gains taxes are levied whenever an asset is purchased, held for at least one full year, and then sold for more than the initial purchase price.  The amount that is taxed is the difference between the purchase price and the sale price and is not adjusted for inflation.  So, if you purchase a house for $100,000, rent it out for five years, and then sell it for $150,000, you will owe taxes equal to 20% of that $50,000 gain, or $10,000.  The same is true for any investment you make (stocks, bonds, companies, real estate).  Most people in this nation pay less than 20% taxes on their income.  As such, any one of those people has absolutely zero incentive to invest their money.  In fact, they have an incentive to not invest their money because they will be taxed more if they do invest it.  People that pay more than 20% in income taxes also have far less incentive to invest their money because they are paying 33% more taxes on that investment than they were a year ago.  What does this mean?  Well, among a slew of other disastrous consequences, it means that fewer people will purchase houses.  With the capital gains tax incentive of home ownership decreased, home ownership becomes less appealing.  As fewer people have an incentive to buy a home the demand for homes decreases.  As the demand decreases the price will also decrease because there is no sound way to decrease the supply.  So, higher capital gains taxes will almost certainly contribute to falling home prices as well as falling prices for virtually every other asset.  Not what you would expect from a President and Congress that have been preaching the importance of stopping the fall of home prices.

A sad thing is this: the capital gains increase was not the only step the President took to ensure that people would buy fewer houses.  As part of his budget, the President decided it would be a good idea to not allow people in the top two tax brackets to write off as much of the interest they pay on their mortgages.  Home owners are able to deduct the interest they pay on their mortgages from their incomes each year to decrease their tax liabilities.  This effort helps incentivize home ownership.  The President, however, does not think it is right that people with more money should be able to write off the full amount of the interest they pay and has told them that they must limit their deductions and thus pay more taxes.  What does this do?  Simple, it even further decreases the incentives for a portion of the population to purchase houses.  Not only that, but that portion of the population that it disincentivizes is the portion that would be the most likely to go around buying up multiple homes and, as a result, increasing the value of all homes.  Once again, the government’s efforts essentially guarantee a softer housing market in this nation.

This has nothing to say for all of the other ludicrous ideas the government has come up with to improve the housing market and it also has nothing to say for all the other problems that higher taxation will bring.  What should be taken away from this, however, is that we must read between the lines.  In one ear we have big brother telling us that they want to help us out by increasing the value of our homes; they want to keep us in our homes.  However, in the other ear we have them telling us that if we want to stay in those homes we are going to have to pay them dearly for it.  It does not make any sense.  The government once again has proven to be an animal with no rhyme or reason.  We have the same people that are telling us one thing doing the exact opposite.  We have to all open our eyes and see things as they are, not as they are presented.

Source: Wall Street Journal 2-27-2009 front page

Today the office of Hillary Clinton, the Secretary of State, announced that the United States would be issuing a donation of over $900 million to Gaza for rebuilding after being devastated by Israel in ongoing conflicts.  On the other side of the fence, the United States gives Israel $3 billion per year in “aid.”  Approximately 94% of this “aid” is directly in the form of weapons (guns, missiles, planes, helicopters, etc.) and other military assistance.

So, let us all get this straight.  This is essentially a conversation that must go on in the Secretary of State’s head (note that this is not just Hillary Clinton, but the last few Secretaries of State, Presidents, and other officials):

Here you go, Israel.  Here are a ton of weapons with which you can blow up your neighbors as you have been doing so consistently over the last few decades.

How atrocious!  Palestinians are living in ruble after these Israeli bombardments! Oh the humanity!  This can’t go on!  Here, Gaza.  Here is $900 million to rebuild.

That is, without much exaggeration, exactly what transpired in the U.S. involvement in the conflict.

How can this possibly happen?  I am trying to say nothing of the conflict between Israel and its neighbors.  That would require far more than this small blurb.  I am, however, trying to point out the absurdities that come along with too big a government.

Here’s an idea, let them squabble and give the American tax payers a $4 billion tax break.