On Monday I served as a juror in an interesting drug case. In this case the defendants, a man and his girlfriend, were accused of selling five ounces of marijuana to a confidential informant in a sting operation. It sounded like a straight forward case. The prosecutor said they had pictures, audio recordings, and the defense did not contest that the drug was marijuana. So my first thought was why did the defense opt for a jury trial. What am I missing?
During the jury selection process the attorney’s asked the prospective jurors many questions about drugs and especially the personal impact any of us might have felt from drug related crimes. A surprisingly large group of people said that they had been items stolen from them that was attributed to heroin addicts. It seemed that everyone had been affected by a drug crime or a relative with a drug problem. Only one person mentioned that marijuana usage had caused a major family problem. These admissions confirmed a suspicion I had that heroin was a major problem in this county. So why did the police conduct a sting operation for marijuana? It seemed like a whole lot of drug enforcement effort when heroin is the big problem in the community. Then it got interesting. During the juror questioning the prosecutor admitted that the confidential informant was the man’s step-brother and that he decided to cooperate with the police if the police would help him with his arrest problem. So the police went after these two drug dealers because they were the low hanging fruit in the drug dealing world. I was willing to accept this explanation until the prosecutor described the confidential informant’s crime, he stole someone’s credit card number and used it to buy $22 of pizza. Wow! He turned on his brother for $22 of pizza! Now I was real curious about what the brother did to elicit this type of response. I wondered want mom had to say about both of her son’s problem with the law?
Fortunately I did not have to wait too long. After the opening statements the prosecutor called the first witness, the step-brother. That is when I noticed that that the confidential informant was not in the court. Hmm…that is unusual. The prosecutor explained to the court that he was seated outside and asked permission from the judge to go fetch him. The prosecutor returned almost immediately and asked for a fifteen minute recess. Hmm… not a good start for the prosecution. About ten minutes later the court resumed and we got our first look at the step-brother. His body language screamed I do not want to be here but there he was. He took the oath, sat down in the witness chair, and the prosecutor started his questioning. The prosecutor’s questions were simple but almost almost immediately the step-brother started pleading the fifth. That was not in the plan! The prosecutor’s face was a mixture of astonishment and embarrassment. The judge recessed the court again and the jurors went to the waiting room. About five minutes later the judge enters the waiting room and says that he dismissed the case. Without testimony from the key witness the prosecutor’s case was doomed. Several of the jurors expressed surprise that the police went to the effort of setting up a sting for a relatively small amount of marijuana considering that legalizing marijuana was a likely ballot issue in the Fall. The judge explained that there was no minimum amount for a drug trafficking charge and that this was the lowest felony, a fifth degree felony. He went on to say that although he has a favorable opinion of medical marijuana use he was conflicted on how legalization would work out. From his experience as a prosecutor he saw marijuana as a gateway drug and heroin users have to start somewhere. The justice system worked and the drug dealers got off. It was an odd, unsettling ending to the day.
Politico makes a good argument that Mr. Stephanopoulos has earned a reputation as a smart and savvy journalist. When I go to the Clinton Foundation web site I found it difficult to figure out what they have done for treating or preventing AIDS. Surprisingly AIDS is not one of the Clinton Foundation #trendlines for Africa. So you have to ask the question why did he choose the Clinton Foundation over one of Charity Navigator’s top rated AIDS charities for his $75,000 donation. If Mr. Stephanopoulus really cares about AIDS then any one of those 27 top rated charities would have been the smarter, savvier choice. If Mr. Stephanopoulus is as smart and savvy as we think he is, then what could motivate him to be so disingenuous to his concern for AIDS? It is a question of character. If I was a AIDS fund raiser I would be reminding Mr. Stephanopoulos at every opportunity that a very large contribution to a “real” AIDS charity will go a long way to overcoming his misguided donation to the Clinton Foundation.
Socialist governments traditionally do make a financial mess. They always run out of other people’s money.
While reading a Yahoo interview with Mr. Stiglitz in which he describes three steps to solve income inequality, I was struck with the thought that he remembers the 1980s much differently than I do. Here is a quote from the interview.
In his new book, “The Great Divide: Unequal Societies and What We Can Do About Them,” Stiglitz traces the modern divide of inequality back to the Reagan era. Though inequality was a huge problem at the turn of the last century and in the lead up to the Great Depression, Stiglitz says the income divide in the U.S. was reduced after World War II and that the country “grew at its fastest pace” and “grew together.” He says the turning point was the Reagan Administration and its rolling out of supply-side economics, deregulation, and lower tax rates. The goal of these policies was to spur economic growth overall and make everyone wealthier. Stiglitz says it caused a divide instead.
To refresh my memory about the Reagan years I went back and listened to the American Heritage podcast, “The Reagan Revolution”, by Professor Moore of Hillsdale College. I think there is a much stronger argument that the income divide was reduced after World War II because we won and they lost. There was very little foreign competition for our businesses until the mid 1960s. When the competiton heated up in the 1970s we were constantly reminded that the Japanese and Germans were making products that were not only better but cheaper and the cost for our social experiments with defined benefits and free health insurance were a burden our companies could no longer afford. I remember the early 1980s as a time filled with fear and despair. People in both the United States and Britain were concerned that the socialistic policies and practices of the past had failed to live up to their promise and were now viewed as the primary obstacle to improving competitiveness, employment, and wage growth. Desperate times call for desperate measures and the first idea to die was the idea of the paternalistic company in the United States and the state-owned company in Britain. The second idea to die was the cavalier attitude toward the importance foreign competition. The business sector needed to restructure with an emphasis on efficiency. It was a “we win, they lose” situation and America and Britain did remarkably well under pressure. The auto and steel industries in both countries started the long process of re-inventing their businesses for the new environment. Reganomics reversed the stagnant productivity during the Carter years with solid productivity gains. The Reagan Revolution is fondly remembered as the tide that lifted all ships and President Reagan was easily re-elected. Probably more amazing was the transformation of the British economy under Prime Minister Thatcher as it emphasized deregulation (particularly of the financial sector), flexible labor markets, the privatization of state-owned companies, and reducing the power and influence of trade unions. It was arguably the more difficult political task but the reforms has allowed Britain to be in a competitive position this century that is more like Germany than Italy.
When I look at the 2015 economic landscape I keep wondering whether we have become too financially efficient and complacent to innovate and grow sales. Our GDP growth is limping along primarily on gains in health care spending so is anyone surprised that wage growth has been stagnant? We need to get back to making things bigger, better, faster, or cheaper to get customers to keep coming back and arguably small and mid-size companies is the optimum organization structure to achieve it. The interesting part of this solution is that we probably fix both our middle class wage growth, income inequality, and GDP growth issues. The economic solution for today is the similar to the solution advocated by Reagan and Thatcher in the 1980s. What did the TARP bailout do besides protect bank executive paychecks? It sure looks like once again we are seeing that cronyism is the primary beneficiary of government fiddling. The most important question has always been how do you grow the economy after a liquidity crisis so how did quantitative easing become our best policy option for growth? We need to get smaller, agile, and more competitive if we want to compete in a world economy where it is likely that our the most feared world competitor is based next door in Indiana, Kentucky, or some other state with a similar attitude. It is time to unleash the animal spirits of entrepreneurs.
Early last week I was planning on emailing my son a Clinton cartoon when it struck me that he was a good example of how the millennials are getting their political news. So if Ms. Clinton keeps up her trend of being the butt of every joke and cartoon she is going to lose the millennial vote. I doubt millennials will give her any slack for deleting emails and you really cannot blame Republicans for this problem.
Millennials are not the only voter segment who have problems with Ms. Clinton. An Ohio congressman recently asserted that Ohio was Hillary territory because of her performance in the primary in 2008. As a person who seriously considered voting for Ms. Clinton in the 2008 Democratic primary, I see the story differently. In 2008 I assumed that with Bill Clinton on her team, she would make better decisions than Mr. Obama. I continued to believe that she was the better presidential candidate up until the Benghazi disaster. When I tried to understand the logic behind Benghazi I came to the conclusion that she was the manager in charge of a broad policy failure and Benghazi was just the beginning. Shortly thereafter my analysis was confirmed when the Administration bungled the problems in Syria, Ukraine, and Iraq. I do not know how much blame to put on the Obama Administration versus Ms. Clinton but I can say with certainty that my hope that Bill Clinton would stop help her making dumb decisions was ill-founded.
Back in February I took a look at Form 990 for the Clinton Foundation when the allegations of corruption first started to swirl. As a former treasurer for a Habitat for Humanity affiliate I know my way around the Form 990. Since the Clinton Foundation is a 503c3 charity there are pretty strict rules against participating in politics and they seemed to be abiding by those rules. What annoyed me the most about the Foundation’s tax return was that it was pretty difficult to see who besides the employees benefited from the Foundation. Unlike notable charities like Samaritan’s Purse or the Salvation Army, there was very little direct aid and a large part of donations went into the bank account or for overhead. If I was a board member my first question would be what are they saving the cash for? If you are a serious charity then you should spend it like you are serious about making a difference in the world. Another thing that caught my attention is that unlike Habitat for Humanity who frequently does promotions as a way of both thanking their major contributors and highlighting their cause, the contributors to the Clinton Foundation were invisible. When you compare the Clinton Foundation to the standards set by Samaritan’s Purse, Salvation Army, or Habit for Humanity, the foundation looks more incompetent than corrupt but it could be both.
Then the Clinton Cash book story was released by the New York Times and the Democratic leadership has been playing defense all week. The problem reached a peak last Sunday on This Week With George Stephanopoulos. Newt Gingrich laid out the case for criminal charges and the normally cheerful Donna Brazile was visibly dismayed defending the Clinton’s actions. Both Donna and George know that when it comes to political corruption, many politicians have fallen from grace with less circumstantial evidence then is in this book. Much to the chagrin of the Democratic Party when the New York Times and the Washington Post are leading the investigation, it looks like a legitimate political corruption story that is not going away anytime soon. So far the Clinton campaign has acted more like a never ending reality show than a presidential campaign. I am curious how this ends.
I stopped wearing a watch about ten years ago. I don’t even remember whether it was because the battery on my watch failed or because I forgot how to adjust the watch for Daylight Savings time. I moved on. The only task I needed a watch for was recording my runs and it did not take to long for me to enjoy running with my smartphone. So if I am a happy camper with my smartphone, why do I need an Apple or Google watch that does the same things as my smartphone but on even smaller screen?
My friends at Hillsdale College are celebrating “National Churchill Day” with a special three day offer in which you can download the eight volumes of the Kindle eBooks of the Official Biography of Winston S. Churchill, by Randolph Churchill and Martin Gilbert for free. I am probably most fascinated with Churchill in the time before World War II since there are a lot of similarities to the problems we face today. There offer expires on the 11th so if you are interested in the life of Winston Churchill now is the time to get your copy.
In the land of Apple, Facebook, Google, and Tesla the idea that Gov. Jerry Brown on Wednesday ordered mandatory water use reductions for the first time in California’s history is kind of embarrassing. It begs the question what have these socially responsible firms been doing over the last ten years. Physician, heal yourself! When did space travel and electric cars become more socially responsible than running water? If the Romans successfully implemented running water in every major Roman city 2,000 year ago then California should be able to do it today without rationing! It is a sign of insanity to use the equivalent of band-aids on water usage and expect the problem to fix itself. Time to grow up, California!
In honor of National Beer Day, April 7th, I drank one of my home brews, Winter Ale, I brewed last November and promptly followed that with another home brew I had in the closet, Holiday Ale. Ah, life is good!
If the Administration’s goal is to prevent Iran from developing or getting a nuclear weapon then you have to wonder why the countries with the most to lose are not at the table with the Iran. If the United States is abandoning their traditional role as the world’s cop then who cares what the United States thinks anymore? The omission of Israel and Saudi Arabia is intriguing. Even though Israel maintains that they “would not be the first country to “introduce” nuclear weapons to the Middle East”, there are plenty of rumors about how close Israel was to using nuclear weapons when they thought their forces were about to be over-run. So you would have to think that a “limited nuclear war” is still part of their war plans today. Saudi Arabia is concerned if not panic stricken over Iran’s desire for nuclear weapons. Once upon a time they could afford to sit idly on the sidelines while the victims of terrorism was Israel or the United States but with Sunni-Shiite wars to the North and South of them. The idea that Iran might either attack them or black mail them is now a real threat. If we use the Camp David Accords as the model, then Israel, Iran, and Saudi Arabia have to be the major players in reducing nuclear proliferation negotiations.
I was looking at the third estimate for the fourth quarter 2014 GDP by BEA when I decided to take a gander at the GDPNow forecast for this quarter. Yuck! It reminds me of the first quarter of 2014 which started out modestly positive and quickly went negative when the BEA estimates for health care spending were too high. Here is the 2015 GDPNow chart.
It should be interesting to see what the health care spending contribution is for the first quarter in 2015. In the fourth quarter of 2014 the percent change in Personal consumption expenditures(PCE) was 2.98% and health care spending contributed 29% to that gain(.88%). Historically PCE is strongly correlated(.90) to the consumption of Goods and you could model PCE gains with a linear equation based solely on Goods consumption. From 2000 until the beginning of 2014, we can reasonably say that where Goods consumption goes, PCE will follow. Over this same period we find that health care is loosely correlated(.29) to PCE. In 2014 things changed and health care spending became the driving force of PCE. Here is a graph from the BEA site and you cannot help but notice that in 2014 the gains in PCE looks to be strongly correlated to health care spending and goods consumption is now loosely correlated. Considering how important health care spending has become to PCE and GDP gains and the weak Goods numbers reflected in the GDPNow forecast, if health care spending comes in weak or negative like it did in 2014 then we are going to see some really ugly GDP and PCE first quarter numbers.