A Bi-Partisan Solution to Our Economic Woes

Thank you for reading taking the time to read my editorial as part of your reading ritual. You will have to read to the end to see the solution, though.

I know that it’s often repeated, but we are at a crossroads this year as we consider whom to hire as the CEO of our country. I am writing to offer you a perspective from one who was born and lived in another country for many years.

My name is Michael Shafron and I am a resident of Atlanta and a citizen of the United States of America. I emigrated to America the only way I knew how: legally. I married an American citizen. It was easier than waiting in line! We made the decision to leave Canada because we believed that there was more opportunity for advancement, more consumer choices and because the cost of living was lower in most American cities than in the major cities in Canada. I should not forget to mention that the tax rates were significantly higher in the “old country.”

Personally, I arrived with an open mind regarding politics since I did not come from a family with deep ties to either political party like many of you might have.

How I made a decision to support candidates in the Republican party came as the result of the progressives in Hollywood no less.

In the 1980’s I began watching a sitcom called “Growing Pains.” This is the show that launched Michael J. Fox’s career. Fox is a fellow Canadian, a fellow Vancouverite and we were born six months apart in 1961. Also, we both married talented Jewish women). You’ll remember that Fox played the role of Alex P. Keaton, the young conservative high school senior that idolized Ronald Reagan. His parents were baby boomer 1960’s former hippies who worked at the local PBS station with Big Bird, no doubt. Alex was the odd one out in a family of liberals.

As I watched the show each week I became curious about who this guy Ronald Reagan was and why a fictional 17 year old sitcom character was constantly speaking of him. So, I did what every other college kid had to do in the age before the internet; I went to my university’s library in search of information. After two hours of reading I came to understand why Alex P. Keaton was enthralled by Reagan. It was Reagan’s sunny optimism, his can-do spirit, his rugged individualism and his desire to keep America as a strong, free and prosperous nation. That day I, too, became a Ronald Reagan fan and am so to this day. In fact, I would refer to myself more as a Reagan conservative than as a Republican.

I know that some of you, at this point, will be banging your “left” shoe against your computer monitor at this point. That’s okay; banging your shoe is free speech and it’s not my monitor you are damaging!

In 2008, I cast my vote for John McCain. I was worried about the vision for the country, and policies of Barack Obama, especially in light of oft repeated “fair share” slogan. In truth, candidate Obama was not properly vetted by a large portion of the American media, which I now find was a disservice to the American news consumer. Also, I found his personal attacks on his predecessor un-presidential precisely because they were so personal. When you call your predecessor unpatriotic because of the increase in the country’s national, that’s going a bit too far. The funny thing was that George W. Bush wasn’t even running!

That November night, when I realized John McCain had lost, I turned my attention to the video of Barack Obama, his wife and his children in Grant Park greeting and being received by throngs of supporters and well wishers. I felt that, after the stain of segregation evaporated in America, this proved that Americans could step up to the plate and elect a black man as CEO of America.

I knew that Jews would overwhelmingly vote for Obama. A vote for the Obama/Biden ticket, for many Jews, was the culmination of Jewish involvement in the Civil Rights Movement.

After the inauguration, reality set in. I paid careful attention to how President Obama would “fix” the economy. His government managed bankruptcy of General Motors cost the tax payers billions of dollars. We the people own stock in General Motors but the break-even price is significantly higher than the stock’s market price. It may take a decade to reach break-even. As part of the bankruptcy proceedings, I believe that the bondholders were pretty much wiped out offering them nothing in the newly reconstituted GM. The unions made out well, though. I recall that the unions were given an equity stake in GM.

First , was it legal to wipe out a class of investors (bondholders) with a stroke of the President’s pen? Second, why were unions given stock? That new stock should have, at minimum, been given to bondholders as a partial repayment of the lost value of their bond holdings. Why was it that no one was screaming and yelling about the use of taxpayer funds?

Then, news broke about taxpayer funds (likely borrowings from China) being used to make investments in green technology companies, some of which were owned by Obama election donation bundlers. Talk about a conflict of interest. No President, whether Republican or Democrat, should be allowed to cross that ethics line.

Next, these companies, not properly vetted by venture capitalists, started to go bankrupt. At this point, we knew that there was more than one company that accepted tax payer funds. I asked myself: is this the proper role of the our management team in Washington? Did we consent to the use of our money to make bets in the marketplace? Are there experts on our management team that could read business plans, analyze the projections and the market for solar panels?

I found this shocking. Not unpatriotic, but shocking. The Obama team had constantly berated the Bush team and now they were doing the same thing. Since 2009, our management team has embarked on a spending and debt binge that made the Bush team look like cheapskates! The country’s balance sheet swelled with trillions of dollars in new debt and the management team was running such enormous yearly budget deficits, that red ink was staining fingers all over Washington. To this day, I still wonder what all this additional debt bought us shareholders. Maybe someone could enlighten me before election day.

While all this was going on, our management team was working on a 2,400 page health care document that, when brought to a vote, attracted no Republican votes. Furthermore, no one we hired to manage the country had likely read the document before signing it. Would you sign a document in your business that you had never read? In the meantime, the economy, which should have been issue number one for the team we hired, was really issue number two.

Again, the shareholders said nothing, maybe for fear of being labeled a racist if you disagreed with the policies of the Obama management team.

Fast forward almost four years. We have a country bitterly divided along class and race. It is now fashionable in America to disparage success. We have an economy that, at best, has reached break-even as it relates to the national unemployment rate. We have such hate and invective that neighbors are threatening to kill each other. On FaceBook, I am stunned by the invective people launch at each other and at the candidates. If I had a nickel for every time the President was referred to as a lier and a socialist, I could retire in a foreign country!

Supporters of the Obama management team use language that I’m not certain I can repeat in this publication. This is what America has come to? For this, I should have stayed in Canada!

It is now almost the end of 2012 and the economy is still not improving. We are still millions of jobs short of the 5% natural rate of unemployment that economists tout. I ask you this question: If people are unable to feed their families and people are preparing to riot based on the outcome of the election of the CEO they do not support, how can we proudly state that we are an exceptional country? How can we be that shining city on the hill? The truth is we can not; it would be a gigantic lie.

With eight until election day, I am afraid, truly afraid, that the renewal of Barack Obama’s contract as CEO might very well be the most financially risky decision the shareholders of this country will have ever made.

I have presented a realistic summary of the economic record of the current management and I assume you see what I see. Our current management team has not executed a business plan that has grown the economic pie.

The economic plan executed by the current management team was not really an economic plan at all; it was a social justice plan. The strategy  emphasized the division of the economic pie among all us shareholders. That does nothing but redistribute the entire pie by giving less pie to “fat” people and more pie to “hungry” people. How about the concept of growing the pie? A growing pie = a growing economy. Any baker can tell you that!

Our management team constantly reports that we have a revenue problem. I disagree in part. What we actually have is a spending problem. At home, most of us don’t spend more money that we have. Those that do acquire a few credit cards in order to spread the risk. At some point one of your bankers will call you and tell you that your credit rating has fallen and that you must begin retiring your debt. Add a dozen zeroes and you have the current American financial position.

Those that present the revenue argument tell us that if the wealthy pay their “fair share” we will have a better economy. With this argument, I would expect that copies of “Economics for Dummies” would be flying off the shelves! When has this strategy ever been successful? I know what JFK knew, what Ronald Reagan knew and what George W. Bush knew: lower tax rates, especially for job creators (many of us included) will super charge the economy, create more jobs, put more money in the pockets of the middle class and create substantially more revenue for the Federal Treasury. This is the way to balance the budget each year and pay off the debt we have left for our children and grandchildren. If you don’t believe that this strategy works, you are negating the massive job creation that occurred in the early 1960’s, the 1980’s, the 1990’s and into the 21st century. As my late mother would say, “go look it up!”

In the Reagan years, the economy was growing at rates much higher than what we are experiencing today. People were back to work after the dismal Carter years. The hotels were full, the restaurants were packed and the department stores were ringing up millions in sales. We don’t have that now.

Many of us are afraid to part with cash because we may need it in case the economy tanks. Consumer expectations have a real affect on economic activity. I trust that you can agree, with me, that many of us in the Jewish Community are talented business people. We understand how a business/economy should be run, and we can analyze almost any income statement or balance sheet tossed our way.

So, where am I going with this? I’ll give it to ya straight up. We need a CEO and management team that knows how to execute a turnaround and return our country to the level of prosperity that we are used to. We need a CEO with the required financial and management expertise to return our balance to the proper level of leverage (for the size of the country) – on the way to zero, I hope, and a team that can stop the flow of red ink on our income statement. The country’s Platinum AMEX is almost maxed out and I doubt lenders will give us another one with a higher credit limit.

You see, without economic strength at home, America will be unable to provide a safety net for our shareholders in need. Without economic strength, our CEO will be unable to negotiate free trade agreements from a position of strength. Without economic strength at home, it will be impossible to successfully defeat those that have declared war on us.

As I understand it, the Obama management team’s economic strategy for the next four years is to do the following: Allow the Bush tax rate reductions (there is no such thing as tax cuts for the rich) to expire on December 31, 2012. His plan also calls for raising the dividend tax rate and the capital gains tax rate in 2013. Again, this is not prudent economic policy; this is social policy that uses financial redistribution to divide up the pie. This will not grow the pie, it will shrink the pie.

Here’s why. Should Obama’s contract be renewed, investors will dump stocks, before December 31, 2011, in order to take advantage of the lower capital gain tax rates available until the end of this year. When there is more supply of stock than demand for stock, stock prices will fall, thereby hurting investors of all ages and economic classes. This is a tax on the middle class who keep stock and see the value of their portfolio drop. When dividend tax rates rise, prices of preferred stocks will fall because the value of those stocks must adjust downward in order to reflect the lower yield that will be paid to the investor. Those investors, stuck with higher tax rates, have the realistic option to invest in a country like Canada, where taxes are lower and returns could be higher. Taxes are a cost to a businesses. When taxes rise, the company has the option of either absorbing the tax increase, thereby lower the company’s profit, or the company can pass the tax increase on to the consumer thereby making the price of the good or service higher. What do you think a company CEO will do? He will pass the increase costs to the consumer in order to keep his profit margin from plummeting.

The tax policy has hurt  consumers, including middle class consumers. With higher consumer prices comes inflation. Inflation will cause interest rates to rise making the country’s debt service payments higher than they are at the present time. Higher interest rates will increase mortgage payments on mortgages, which will kill any chance of recovery in the housing market. So, in my opinion, the Obama policies will not toss, but throw America back into a recession early in 2013. Expect the unemployment rate to increase, thereby increasing the federal budget deficit. If enough job creators move money to a lower tax jurisdiction, revenues to the Treasury will dry up.

All this just to make sure that the wealthy pay their “fair share.” If your goal is to create  jobs in Canada, the Obama team’s policies are the ones you should support.

No rational person should renew the management contract for a team that does not understand how tax policy affects the wealth of our nation.

What I propose is that we work together to elect Mitt Romney the next CEO of our country. I know that some of you by now have completely destroyed your iPads and might not be able to read this last paragraph! Suck it up; we must return the country to prosperity or the American experiment will no longer be.

I would be happy to speak to the Romney team to secure a pledge that there will be no change in social policy during the four year term. This would go a long way to alleviate your concerns about a return to the dark ages!

If Romney and Ryan turn in results that increase employment levels, add more revenues to the treasury, move toward a balanced yearly budget and pay off a portion of the federal debt, then you have contributed to the return to prosperity without social risk.

As we close in on 2016, we will have a track record for our team that can be measured. If you are unhappy with the results of the Romney/Ryan team, you can fire them in 2016. Let’s work together to get our country on the road to financial security and prosperity.

I am more than happy to lead this effort on your behalf. Find me on Facebook and let me know your thoughts.