During the past few days the Washington political establishment and the media have been wringing their hands over a potential "shutdown" of the US government at midnight tonight.  The "shutdown" is not really a true shutdown because the majority of federal employees are critical or essential to the operation of the country and they will continue to report to work.  The big issue being debated that may cause the shutdown is the implementation of the individual mandate of Obamacare beginning October 1.

The Republicans and Democrats keep shouting at each other while achieving nothing.  Both sides have some degree of merit to their arguments and both sides appear unwilling to really discuss the compromises needed to move forward.  The dysfunctional US government is on display for the entire world to observe.

Obamacare was enacted into law by a Democrat controlled government (Senate, House of Representatives and President) that was in power for only two years.  The Democrats were smashed by the Republican's in the Congressional elections of 2010.  It was very clear that US voters didn't buy in to the Democratic agenda at the Congressional House seat level. It is reasonable that the current Congress should be able to fine tune or replace Obamacare and other entitlement programs as part of its overall objectives to get government spending and long term government debt growth under control.

Obamacare was President Obama's signature legislation from his first term.  Democrats control the majority of seats in the Senate.  Clearly, the majority of voters wanted the political agenda of the Senate and the President  to continue.

The voters have delivered a very mixed message with their political choices.  I believe the overall message from the voters is pretty clear.  The voters want the entitlement programs, including some form of Obamacare, but the programs must be provided in a cost effective, low tax environment.  The budget needs to be balanced so that debt growth stops or at least slows down dramatically over the long term.  This is an objective that can be accomplished but all of the Federal entitlement programs including Obamacare would need to be restructured.  Obamacare would just be one of the entitlement programs and its cost would have to fit within the overall balanced federal budget.

We will see what happens in this debate.  Both sides must appreciate that they don't have a mandate for their point of view.  The voters haven't given them a blank check.  We live in a time where presidential leadership is critical since we have divided government.  Unfortunately, President Obama is not an effective leader or executive, he is simply a politician.  It may take a government "shutdown" to force our elected officials to find the necessary common ground.  The clock is ticking.  Don't hold your breath.  It is very likely the US government will be "shutdown" tomorrow

TPM

I watch and listen to CNBC, and a bit of Fox Business, for many hours nearly every day when I am home and not traveling or consulting.  I also read financial and economic commentary from a variety of on-line sources.  There are many people complaining, protesting and analyzing the increasing disparity between the haves and the havenots in the US.  Many studies have shown that over many years the rich are getting richer and the middle class is losing ground (a reduced standard of living) compared to lifestyles of decades ago.  Politicians are wringing their hands about the problem and searching for the next government program that will provide a solution.  There is no debating the fact that income and wealth disparity continues to worsen, creating a major economic gulf between those at the top and those at the bottom at the US economic ladder.

My issue with the participants in this debate is their inability to understand the fundamental underlying cause of the problem.  When China and other Asian nations decided to fully enter the global market during the past 30 years there was a massive expansion of the global labor market.  The supply of workers increased dramatically, particularly at the low end (unskilled and semiskilled) of the labor market.  We all know that millions of manufacturing jobs moved from the US to Asia.  In later years many service jobs moved as well.  The excess of supply over demand reduced the value of labor particularly unskilled and semiskilled labor.  All labor markets all over the world, including the US, lost value due to the influx of Asian labor.  This should not have been a surprise to anyone.

During the same time global communications, transportation and information technology improved dramatically which facilitated the massive increase in global trade.  There is no place on earth that is too far away or can't be reached if the people living there have a competitive edge in the global economy.  The global economy is becoming more and more integrated every day.  Further investments in the physical plant and technology needed to enable expansion of global trade are being made every day.  Do Americans understand that the China funded expansion of the Panama Canal is happening concurrently with port expansions in China so that goods can be delivered more cost effectively to markets?  Do Americans understand that the combination of wireless, wireline and satellite communications with the internet allows critical information to be transferred from any spot on the globe to another in an instant at low cost?

The only path for the average US citizen to gain ground in the global economy is to improve their competitiveness in the global labor market.  They must increase their education, training and skills in areas that have real market value in the world economy.  Those that are unwilling or unable to compete will fall behind those people that have the ability and willingness to compete.  The strong will thrive and survive.  This is the natural course of events.  The world economy has changed dramatically in recent years and many Americans have lost ground compared to their foreign competitors.

Many people will argue that US government policies and other factors are driving income inequality.  I believe that in its efforts to help solve the labor competitiveness problem the US government has made the problem worse.  In its efforts to help those on the bottom of the economic ladder the US government has made it easier for those at the top to gain ground.  The issue of income inequality is complex but the imbalance (or rebalancing) of global labor supply and demand is the core issue.  I just don't understand why the commentators don't get it.  Maybe they just don't want to get it?  Do they really want to tell millions of Americans that the global economy has fundamentally changed and they will have to work and compete much harder to maintain their standard of living? 

TPM

My wife and I have visited all four corners of the continental United States, Alaska, Hawaii and Puerto Rico during the past 12 months.  We recently spent 10 days traveling in 11 mid-Atlantic and New England states plus the District of Columbia.  Earlier this year we traveled in California, Arizona, Nevada and Florida.  Late last year we visited the state of Washington for the second time in the past two years.  Since we live in the Washington DC area national politics and government and all of its associated activity is our primary local business.  We fully appreciate how large and complex our federal government has become.

We have visited or traveled through large cities and metropolitan areas like Boston, New York, Miami, Seattle, Las Vegas, Phoenix, Washington DC, Honolulu, Silicon Valley and San Juan, Puerto Rico.  We have observed some of the rural and farming areas of the country in Vermont, New Hampshire, Maine, Connecticut, New York, Pennsylvania, California, Arizona, Nevada, Alaska and Florida.  We have seen some of the newest, most modern buildings in our major cities and the oldest continually operating US restaurant located in Boston and many generations of national infrastructure in-between.

In Washington, DC we have a federal government that is supposed to represent all of the people of the United States.  When you travel the country and look at the incredible diversity of people, local economies, lifestyles and environments it becomes very clear that no central government has the capability to provide laws, regulations and programs that make sense for everyone.  The US is simply far too large and too diverse for a central government to mange effectively.  Many programs needed for large cities are largely irrelevant or counterproductive in many small towns and rural areas and vice versa. 

The bottom line is that the US is not one nation.  We are a group of many nations.  Many of our states are so diverse that they also have an incredibly difficult task to manage their diversity at a state level.  Major cities and metropolitan areas have more in common with similar areas in other states than the rural areas and small towns of their own states.

Beginning after World War I, accelerating after World War II and further accelerating during the Great Society era of the 1960s through the current time, our federal government has become larger and larger with massively increased numbers and complexity of laws, regulations and programs.  But is our central government really helping our nation and its people become more productive and competitive in the world that exists today?  Are the efforts of the federal government making a positive difference in the lives of most Americans?

I believe the answer to my questions is no.  A massive central government can't be productive and responsive because it can't relate effectively to the level of diversity discussed previously.  Our current President, Barrack Obama, can't get anything productive done with the Legislative Branch of our government because he doesn't relate effectively to those that fully appreciate that a massive federal government is the wrong approach to governing our nation.  The US needs to return more decision making to state and local governments.  We need to significantly reduce the huge national bureaucracy that has evolved over the decades and reduce the taxes paid at a national level.  We need to return as much decision making and taxing authority to the states as we possibly can, if we are to make our overall government structure more effective.  We need to drive government decision making to a level that is as close as possible to the people being governed.

It doesn't take a lot of analysis to determine that this is the path the US must take.  All one has to do is drive around the country and observe what is happening in our nation.  All one has to do is talk to the people that live all over the country.  While we are one nation, we are in fact many nations.  The time has come for the US to make fundamental changes in how we govern ourselves if we truly want to move forward constructively as a country.

TPM

 

In late May my wife and I spent a day touring Hearst Castle in San Simeon, California.  I first visited Hearst Castle about 50 years ago with my parents.  During our travels of the past few years we tried to work Hearst Castle into our itinerary without success.  This year we decided to make it one of the focal points of our late spring trip out west.  After our tour we visited the gift shop and I purchased David Nasaw's The Chief - The Life of William Randolph Hearst which was published in 2001.  I thought it would be interesting to find out more about a man that I thought I knew a little bit about.  Nasaw's book is extremely interesting and informative and covers so many details of Hearst's life that it will be impossible for me to do it justice in a few paragraphs.

It is almost impossible to describe or summarize Hearst's life in a few words.  He created the world's first major multinational media company beginning with the San Francisco Examiner newspaper, expanding into a number of US newspaper markets, magazines, film and more.  He was an extremely complex man whose professional and personal life were completely intertwined.  He impacted the world through his actions for over 50 years.  Some people loved him.  Some people hated him.  Many people feared him.

The foundation of Hearst's wealth was created by his father George Hearst, who made a fortune in developing of some of the most famous silver and gold mines in US history.  George Hearst bought the San Francisco Examiner and William Randolph Hearst, a Harvard dropout, took control of the paper in the spring of 1887 at the age of 24 and began his media career.  In 1895 William Randolph Hearst moved to New York and purchased the Morning Journal, the next step in building his media empire.  He purchased some of the most famous names in the magazine industry such as Cosmopolitan and Good Housekeeping, early in the development of his media empire.

Some of the most interesting aspects of Hearst's life include the relationship with his mother, Phoebe Hearst, who effectively served as his banker and lender of last resort until her death in 1919, when Hearst was 53 years old and inherited his mothers estate which she had inherited from her husband. Hearst's ten year relationship with Tessie Powers, his live-in lover during his time in Harvard and in San Francisco while running the Examiner, who effectively disappeared from history after Hearst gave her up to get the money from his mother to buy the Mourning Journal.  His relationships with his wife, Millicent Hearst, a show girl turned society icon, and his five sons.  His long term relationship with his mistress, Marion Davies, a show girl 34 years younger than Hearst, that became a silent film star and Hollywood legend. Davies was Hearst's "west coast wife" during the hey day of Hearst's social life at San Simeon and Hollywood.  Davies cared for Hearst during last years.

What other man in our history was a Congressman for two terms, ran for other offices, tried to become President of the United States and was a major political force for decades while using his newspaper and magazine empire as political weapons.  I was shocked to find out that Hearst paid Adolph Hitler and Benito Mussolini to write articles for his newspapers in the 1930s.  Hearst was very insightful in many ways but very wrong on others.  He was an extremely wealthy and powerful human being with great strengths and flaws.

Hearst overspent his income his entire life until 1937, when he lost control of his business empire because of his massive debts, due to a combination of the business impact of the Great Depression, negative business impact of his political activity and his continued excessive spending.  After the sale of many of his assets, massively reduced expenses, and improved business conditions created by the economic impact of World War II, Hearst regained control of his smaller empire in early 1945 and was actively involved in the daily activity of his business until his death in 1951.

To say that Hearst was controversial is an understatement.  It is hard to describe a man that treated some people horribly and others with tremendous care and tenderness.  His changing politics and willingness to use his media empire for advocacy of his personal views is unlike anything that we have seen since his time.  It is hard to imagine what it was like to experience the impact of his actions.  There are mysteries in his personal life that remain unclear to this day.

Hearst Castle is the physical monument to the man, his life and the legend of William Randolph Hearst.  His architect, Julia Morgan, worked on the project with Hearst from 1919 through 1947, when Hearst left San Simeon for the last time.  Hearst Castle is a monument to Ms. Morgan as well.  I hope to visit Hearst Castle again, hopefully it won't take 50 years!

The legacy of William Randolph Hearst continues today through the operations of Hearst Corporation, a multibillion dollar revenue global media company, the owners of newspapers, magazines, cable TV properties (ESPN, A&E) and many other media businesses.  The trust that was established at the time his death continues to operate today and will likely be in place until about 2040.

From George Hearst's gold and sliver mine investments through William Randolph Hearst's creation of a media empire to the evolution of the Hearst Corporation businesses that exist today, the story continues.

TPM