Why I Like Rich People

Some people envy the wealthy, and some even despise them.  For me, I like rich people, and I have always wished there were more of them.   Unfortunately, there are a lot fewer rich people today than there were just a few weeks ago.   Massive amounts of wealth have been destroyed as a result of the current crisis in the financial markets.    Everyone who has money invested, whether in a retirement plan or otherwise, has lost money.  Those who are not wealthy have suffered the most painful losses because they do not have the safety net enjoyed by the rich, some of whom can lose millions of dollars and still have a few million left over for pocket change.   The wealthy, however, have lost the most in terms of absolute dollars, and their losses will affect all of us.  

Why do I like rich people?    I like them because, in my view, they keep the economy rolling.    They invest the money necessary to start new businesses and to enable existing businesses to grow.    In other words, they create jobs.    They also purchase, sometimes extravagantly, goods and services.  By doing so, they are providing jobs for those who provide the goods and services to them.  Rich people also pay the lion’s share of the taxes that fund all levels of government.   In 2006, for example, the top 1% of taxpayers paid 40% of all federal income taxes (the highest share in the last 40 years), and the top 10% paid 71% of all federal income taxes.   Finally, many rich people are very generous with their wealth.    Many churches would cease to exist without a handful of wealthy members whose contributions represent a large percentage of the church budgets.   Rich people, either directly or through their foundations, also contribute massive amounts of money to worthy causes such as the United Way and Children’s Healthcare of Atlanta.  

I have never envied rich people or wanted to be one of them.  But I have always admired rich people for two reasons.   First, I recognize the contributions they make to society as outlined above.   Second, most of the rich people I have known during my career earned their wealth by being incredibly smart, by working hard, and by taking huge risks.  

Of course, rich people are like everyone else.   Some are nice, and some are not.   Some are greedy, and some are not.  Some are caring and compassionate, and some are mean and ruthless.   But all of them make a significant contribution to the overall economy through their investments and their spending and, in most cases, through their charitable contributions. 

We are already learning a lesson in what life is like with many fewer rich people with money to invest and spend.  We are experiencing rising unemployment, slower growth in new businesses, contraction of many existing business, less availability of credit, reduced sales of goods and merchandise, lower tax revenues with the result that government entities are looking for ways to reduce the services they provide to their constituents, and charitable organizations that have less money at a time of increased need for their services. 

The current economic environment is painful to everyone, including the poor, the middle class, and the rich.    All of us are suffering because of our own losses.   Whether or not we recognize it, we are also going to suffer in many different ways because of the huge fortunes that have been lost by the rich.  

 

 

 

 

The Current Financial Crisis

HEADLINES:    Venezuela Moves to Nationalize its Oil Industry.   Chavez Orders Nationalization of Banco de Venezuela.      Venezuela Nationalizes Telecommunications Company. 

HEADLINES:    Government Bails Out Bear Stearns.    Federal Government Assumes Control of Fannie Mae and Freddie Mac.   U.S. to Take Over AIG in $85 Billion Bailout.  

HEADLINES:    Obama Blames Bush for Financial Crisis.    McCain and Obama Both Call for More Regulation. 

Are you nervous yet?    If not, you should be.    For me, I am tempted to cancel all of my newspaper and magazine subscriptions, give away my radios and television sets, quit answering the phone, and try to live out my remaining days in peace and tranquility.   If I thought I could, I would.   But I don’t know how I could watch Kentucky basketball games without a television set. 

There are major differences between what is going on in Venezuela and what is going on in the United States, but the end result is the same.   Both governments are taking on major roles in running what used to be private businesses. 

Although I am not smart enough to understand and analyze the current financial crisis, I will provide you with a few observations and predictions.   My first observation is that politicians are doing what they always do—looking for someone else to blame, preferably a member of the opposite political party.    I have seen no indication that we have statesmen who are coming together in an effort to find a bipartisan solution to the problems facing the country.   Instead, our politicians are using a crisis in an effort to grab more power for themselves. 

Even though I hate to admit it, I think the federal government is doing what it needs to do at this time to keep the current financial crisis from getting worse.   I have a great deal of confidence in Treasury Secretary Hank Paulson.   We are very fortunate to have a Treasury Secretary who understands the financial markets.   Secretary Paulson is not a politician.   I believe he is doing what he thinks is best for the country.   I also think the Republicans would be screaming bloody murder if the federal government was doing the same thing with a Democrat in the White House. 

It will take years for economists and financial experts to analyze the causes of the current financial crisis.   When the final books are written, I think most of the blame will be directed to the Federal Reserve Board, the Congress, and greed on the part of Wall Street and individuals like you and me.   In hindsight, I believe the Federal Reserve Board, which is not controlled by the President, kept interest rates too low for too long in an effort to stimulate the economy and keep the economy from falling into a recession after 9/11.   The result was easy money.   Financial firms were able to borrow money at a low cost and lend it to others at a higher rate.   They took on too much debt in order to make more loans, and the result was a feeding frenzy that resulted in an unhealthy acceleration in the prices of assets, especially real estate.    Lenders and individuals assumed there was little risk because prices would always go up. 

Congress also will get a large share of the blame.   Congress propped up Fannie Mae and Freddie Mac for years.    Congress also put pressure on financial institutions to make more mortgage loans so that everyone could own his or her own home.    This may have been good politics, but financial institutions were pressured to make mortgage loans to people who could not afford them, and they succumbed to the pressure and for a while made money doing so.    Finally, Wall Street could not resist the temptation to make as much money as possible, and individuals could not resist the temptation to buy things they could not afford as long as they were able to do so with other people’s money. 

Where do we go from here?    It is inevitable that the next President and the next Congress, regardless of who is in control, will do what they always do.   They will overreact and over-regulate, and the end result will be that the government will be involved in controlling even more aspects of the economy.   If you like having the government involved in all aspects of the economy, then you should be very happy now. 

 

 

The Palin Phenomenon

Since John McCain selected Sarah Palin as his running mate, I have been trying to understand why she is so popular with so many people and why she has been so effective in bringing energy to the McCain campaign.    Ron Hart, a Southern libertarian who writes a column on politics and culture, may have the answer.   Hart’s columns are always humorous.   I think you will enjoy this one regardless of who you are supporting in the current Presidential campaign.   Here is the link: 

http://www.newsherald.com/articles/palin_68114___article.html/obama_mccain.html

 

The Importance of Personalities and Charisma

Personalities play an important role in every election.    We all want to support a candidate who is charismatic and inspiring, and we all want a leader who can relate to us and to whom we can relate.   Today, I want to take a look at the personalities of the candidates and provide you with my views on the importance of their personalities. 

Let’s start with Obama.   He is smooth, articulate, polished, charismatic, inspiring, and good looking.  He has a nice-looking family.  He is an excellent communicator who has great speech writers and superb delivery when speaking from a prepared text.  He creates excitement.   He reminds me of a charismatic evangelical preacher who fills the pews with thousands of eager people every Sunday.   He sounds good, and he makes you feel good by appealing to your emotions.   Obama has very effective slogans, such as “change you can believe in” and “this is our moment,” but these slogans are low on substance and high on emotion.   Obama’s goal is to ride into the White House on a wave of emotion with as little attention as possible to his experience (or lack thereof), his voting record, and his position on the issues.  

McCain has an inspiring life story, but he does not have an inspiring personality.  He clearly is no match for Obama when it comes to charisma or his ability to excite a crowd.   I have not heard any instances of people fainting with excitement at the sight of McCain entering the room.  McCain is unimpressive when speaking from a prepared text but is much more impressive in an informal setting where, because of his extensive experience, he can respond quickly and directly to questions on almost any subject. 

Obama’s running mate, Joe Biden, is extremely knowledgeable and experienced but is about as uninspiring as McCain.   McCain’s running mate, Sarah Palin, reminds me of Obama.   Like Obama, Palin has limited experience, but she has inspired a large number of people based on her charisma and the force of her personality.  To my amazement, McCain’s selection of Palin as his running mate has energized his campaign and given him a huge boost in the polls, at least temporarily.   Millions of people have fallen in love with Palin just as others fell in love with Obama. 

In a recent column, Charles Krauthammer, a columnist for The Washington Post, wrote, “Before Palin, Obama was the ultimate celebrity candidate.   For no presidential nominee in living memory had the gap between adulation and achievement been so great. ….Obama’s meteoric rise was not based on issues—there was not a dime’s worth of difference between him and Hillary on issues—but on narrative, on eloquence, on charisma.”    Krauthammer further wrote that Obama, as he campaigned, “began believing in his own magical powers—the chants, the swoons, the ‘we are the ones’ self-infatuation.  Like Ronald Reagan, he was leading a movement, but one entirely driven by personality.   Reagan’s revolution was rooted in concrete political ideas (supply-side economics, welfare-state regulation, national strength) that transcended one man.  For Obama’s movement, the man is the transcendence.” 

The President of the United States needs to be a strong leader, and many strong leaders are inspiring and charismatic.  But a charismatic leader can be a good thing or a bad thing.  Adolph Hitler was a strong leader.  He was a powerful speaker who was charismatic and inspiring and who could excite a crowd.    He inspired hundreds of thousands of German citizens to follow policies that resulted in the murder of millions of Jews and led to World War II.    Likewise, in the corporate world, there have been many examples of chief executive officers who were charismatic and inspiring leaders and who, through the force of their personalities, convinced their boards of directors and subordinates to adopt strategies that resulted in bankruptcy.  

Although charisma is important, it is not essential to good leadership.   I have known many outstanding leaders who did not have charismatic personalities and were not inspiring speakers.  They were great leaders because they were well respected for their experience and their superior knowledge of the business or organization they were leading, they treated their employees and customers well, they were fair to everyone, they worked harder than anyone else, they inspired confidence because of their past achievements, and they were modest rather than arrogant.   I think McCain, despite his lack of charisma, can be and would be a good leader because he possesses many of the other qualities necessary for leadership. 

The ideal candidate for President would be charismatic and inspiring, would have great leadership skills, would have extensive experience and a record of achievement, would have a demonstrated history of independence and bipartisanship, and would have a voting record that is consistent with his or her position on the issues.  We do not have such a candidate in this race.  Even though charisma and leadership skills are important, I am more interested in evaluating the candidates based on their experience, their records, and their positions on the issues.   This is the best way I know to determine how a candidate would lead the country if elected.   

Some commentators have compared the Presidential campaign to an American Idol contest.   Unfortunately, I believe the comparison has some validity, and this worries me.   This should not be a contest to determine the most likeable or most charismatic person to serve as President.   It should be a contest to determine who will be the most effective President of the United States and who will best protect the country and lead the country in the right direction.