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Yearning for a “Buck Stops Here” President

Ever since I was in business school at the University of Houston I have been fascinated with the different management and leadership styles. While in school I learned that different groups of people responded differently to the management styles. A management style that works successfully with software developers in Silicon Valley will probably be unsuccessful with workers on the assembly line in Detroit. From Jim Peters with his book, In Search of Excellence: Lessons from America’s Best-Run Companies, to Jim Collins book, Good to Great, there has been a steady stream of authors highlighting the essential characteristics of successful organizations that transcends their particular industry. Many successful management characteristics from the private sector have been successfully transferred to the public sector. With this wealth of management knowledge, what is the Obama management style and is it successful?

The most common description for the Obama management style is “lead from behind”. I am not sure what this really means since the statement is nonsensical. I cannot think of a management style  being used in the private sector version that compares to the administration management style. What I do know is that based on the recent scandals, their management style is not only uniquely different but it is not working. The proof is how the administration reacts to a crisis. Of the many explanations I have read about the administration’s response to the Benghazi attack, we have this comment by an Obama administration official to CBS News.

We’re portrayed by Republicans as either being lying or idiots," said one Obama administration official who was part of the Benghazi response. "It’s actually closer to us being idiots.

The administration’s choices appear to be between labeled a liar or an idiot. It is not much of a choice but the administration apparently decided that being labeled an idiot is preferable than a liar.

On Friday I had the opportunity to listen to the live testimony of outgoing acting Internal Revenue Service Commissioner Steve Miller who said "I did not mislead Congress or the American people" to the House Ways and Means Committee. He explained the IRS actions as a simple, innocent mistake. He also mentioned several times how “truthful” he was to the Committee. At almost the same time we find out that IRS’s Lois Lerner planted a question at the ABA conference in order to leak the Inspector General’s report that raised serious questions whether the IRS deliberately mislead Congress. If Mr. Miller was being “truthful”  to Congress then why did his subordinate orchestrate this misleading response to a simple mistake?

Are the four active scandals a natural result of this administration’s management style? Are we looking at a random event in which the administration made a few simple, innocent mistakes that is best handled by being selectively “truthful” about? Is plausible deniability a plan or a coffin? We have already seen how this selective “truthfulness” easily transformed itself into a situation where being considered an idiot is preferable to being a liar.  Bad luck finds bad managers. There are probably a slew of aspiring leadership author getting ready to write the next best seller on this administration but it is safe to say that this management style plan seems to be dependent on “fooling all of the people all of the time”. The author of this quote, President Lincoln, was skeptical that this could ever be a successful political strategy. Yet the number and severity of the scandals has Americans yearning for a simpler, honest time that both President Lincoln and Truman understood. A time in which Presidents did not try to fool all of the people all of the time and President Truman proudly posed with a sign that said, “The buck stops here”. Honesty and accountability worked for many Presidents. It works for businesses and is a theme of Dave Ramsey’s best seller book, EntreLeadership: 20 Years of Practical Business Wisdom from the Trenches. We can learn from the past. This new fangled management style is not working.

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Maybe It Is Time to Restrict Anonymous Donations but Who Can You Trust?

The Washington Post has a nice post on the subject aptly titled, What is a 501(c)(4), anyway? I wanted some examples of 501(c)4 corporations so I investigated the typical organization classifications a little bit further. Most churches and charitable organizations like Habitat for Humanity get their tax exemption under section 501(c)3. Labor unions get their their tax exemption under section 501(c)5 and Chambers of Commerce get their their tax exemption under section 501(c)6. I thought the section 501(c)4 might cover the Knights of Columbus but they are covered under section 501(c)10. The most prominent group besides a few political groups to register under section 501(c)4 appears to be volunteer fire departments.

The crux of the problem is that according to OpenSecrets.org is that the 501(c)4 nonprofits outspent super PACs in 2010 and three conservative nonprofits accounted for over half of those expenditures. If this money was spent on valid political speech, I am not sure what the problem is other than the Democratic party is irked with the three conservative nonprofits who accepted large, anonymous donations. I have mixed feelings on the anonymous donations issue. In theory I agree with Democrats who want to restrict anonymous donations. However in the real world I understand that some big donors who are expressing their right to free speech are concerned that elected officials will use their position in the government to illegally harass and intimidate them. Their concerns sounded like paranoia until the IRS admitted that they targeted organizations with “Tea Party” and “patriot” in their applications to additional scrutiny that violated IRS policies. To make things even worse, the Administration denials over the IRS actions are sounding just like they did during the Watergate years. With people starting to compare the IRS actions to Nixon’s enemies list, who can we trust in government to do the right thing with hot button political issues like campaign finance reform and anonymous donations? The trust is gone. It is not surprising that several lawyers on MotherJones think that this debacle has seriously hurt the IRS efforts to restrict anonymous donations to 501(c)4 corporations.  Both campaign finance reform and the war against “dark money” contributions have been severely impaired by these actions and the Democratic party has no one to blame but themselves. With great power comes great irresponsibility.

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Separated at Birth, Watergate and the IRS Scandal

The IRS scandal in which they targeted 501(c)4 applications with Tea Party or Patriot on them for further investigation is the most bone headed political maneuver since Watergate. Every time I think about Watergate I am amazed someone thought this was both necessary and that they could get away with it. I read Ezra Klein’s article expressing his concern that “the IRS has permitted 501(c)4s to grow into something monstrous”. When I tried to figure out how dangerous 501(c)4s had become, I was not impressed. If there is a problem with money in politics, it is represented primarily by 527 corporations like Moveon.org for the progressive side and Crossroads for the conservative side and not 501(c)4s. You would think the IRS had enough problems with the public’s perception of the organization without adding partisan politics to the mix. Talk about an organization that took its eye off of the ball. That leaves me with the unenviable comparison to the abuse of political power demonstrated in the Watergate scandal. I was hoping we had learned our lesson in Watergate.

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Are We Safer Now Than Five Years Ago?

I think what I learned from the Benghazi hearings is that our foreign policy goes stupid around election time. The Administration admits that mistakes were made and they are working at fixing the “problems” but I am still struck with the sentiment that the Administration’s concern for how things would look to voters in the upcoming US election killed Ambassador Stevens and three other people. Maybe the State Department should take the month of September off every year as a holiday commemorating the victims. It sure seems they won’t be missed.  As Forrest Gump might say, “Stupid is stupid does”.

I understand that the American people and this Administration wanted to scale back our involvements in foreign countries. The question is whether the rest of the world will allow America to shirk their foreign policy responsibilities. We are looking for an adult in the room and the UN has proven they are not up to the task. It is inevitable that this Administration will be compared to both the Bush and Carter administrations as it tries to find the happy middle ground between interventionism and isolationism. An Administration that is perceived as weak as the Carter administration has a different set of problems than the administration during the Bush years. Our foreign policy may have changed but I am not convinced we are safer. We replaced one set of problems with a different set of problems and called it progress.

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Planet Money’s Kickstarter Project: How to make a T-shirt

My wife and I’s favorite podcast is Planet Money. When Planet Money announced that they had formed a Kickstarter project to not only make a T shirt but to tell the whole story of how it was created, we had to participate. We are now officially one of the over 11,000 backers. They went over their $50,000 goal several days ago so the big question is whether they can get over $400,000 with only six days left.

[iframe src=”http://www.kickstarter.com/projects/planetmoney/planet-money-t-shirt/widget/video.html” height=”360″ width=”480″ frameborder=”0″]

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Church of the Latter Day Health Care Advocates

I must admit that this post, “Are your employees ready for consumer-driven health care?”, made me chuckle. Any post on health care changes that fails to talk about the cost of health care sounds preachy rather than informative to me.  Now the health care pundits are pounding on my door and yelling you are going to hell unless you change your ways!

So here is their solution.

Aflac recommends that employees sit down with their employers’ human resource professionals to obtain explanations of key health plan terms, deductible limits, and copay and coinsurance requirements. Employees should also estimate their health care budgets and learn about all policies offered by their employers and on their state exchanges.

Yea, like that is going to help. I can’t wait to tell our part time human resource professional who is out on maternity leave about her new responsibility. As an employee of a small business my number one issue is hoping that the company will continue to keep our HRA funded in a difficult economy. Educating new employees is not issue. We have not hired anyone in four years.

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Has Obamacare Started to Channel Jerry Macguire?

This week we found out four in ten Americans are unaware that Obamacare is still the law of the land. It is obvious that the “low information” people failed to get the message on Obamacare’s “free benefits”. Without the “low information” health consumers providing cover for Obamacare it is not surprising that Senator Reid is agreeing with Senator Baucus that health care is a ”˜train wreck’ if not implemented properly.

My problem with Obamacare is that it costs me too much. My health insurance premiums for this year are going to cost me about $4,692 and I am happy with my plan. Without Obamacare my health insurance premiums should be going up at the health care inflation rate. As a healthy family that has consistently poured more money into the health care system then we ever expect to get out, I feel we have done our job and our health insurance premiums should reflect our actual health care risk and our risk of associated with health care costs. For our family we have six more years playing this game before Medicare kicks in and we start playing a new game with a completely different set of rules. Most estimates for my health insurance premiums for 2014 have predicted a 55% to 85% increase based solely on community rating and pushing the people with pre-existing conditions into the individual health insurance market. So at the end of April I was not surprised when I went to Kaiser’s Subsidy Calculator and got this estimate for  2014.

 

Health Reform Subsidy Calculator - Kaiser Health Reform_2013-04-26_07-18-43

This is 73% increase with a large increase in the out of pocket expenses even though I told the estimator that I had a single adult family. When I went back to the calculator to change the calculation to two adults, I got the number below. Wow, it is amazing what a week can do for your premiums! Obviously Kaiser has made a change in their calculator. This is probably the only situation in which you can say a 28% annual increase in health insurance premiums is good! I felt like I have been yelling for months, “Show me the money” and Obamacare has finally had a Jerry Macguire moment. This is the part of the movie where Rod has told Jerry that he will keep him as his agent but Jerry has has to do one thing for him, “Show me the money!” I have the same feeling toward Obamacare. My health insurance premiums are too high and Obamacare who is playing the Jerry Macguire part as my health care agent has finally started to recognize that healthy people are demanding either a much better deal or a new agent. As a “high information” health consumer I would love to hear how Kaiser arrived at this number since it is well below the amount I saw in the Massachusetts exchange two years ago.

Subsidy Calculator_20130506

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Sorry, The Stock Market Is Still Divorced From Reality

The New Deal Democrat aka Hale Stewart from The Bonddad Blog posted this graph on the Business Insider as part of his post, Sorry, Doomers: The Stock Market Isn’t Divorced From Reality and I immediately realized that I had created a similar graph in the Why There is Wealth Inequality post that included a few more lines.

cp-sp500

So I went back to my old graph , added a line for corporate profits, adjusted it for inflation using the GDP deflator, and got the graph below. Since the Real GDP uses the GDP deflator(GDPDEF) as the inflation adjustment, I adjusted the other lines using the GDP deflator as the inflation adjustment. Maybe its just me but it sure looks like the blue line for corporate profits is following the green line for Federal Debt: Total Public Debt (GFDEBTN) since 2000. 

When you look at my graph it sure looks like the current profitability is the result of the willingness of the federal government to issue debt. If businesses profits were primarily due to increases in sales then the corporate profits would be following the red line for the S&P 500. In this case it is above both the S&P 500 and the black line for the GDP. If we focus on the last 13 years we can see that corporate profitability trend line is more closely aligned with the debt line. Oops, there goes the narrative that the corporate profits are up because wages just hit an all time low! The corporate profit increase over the last 13 years was debt driven! Since several economists have described this recovery as a balance sheet recovery, it is no surprise that wage growth has been stagnant. Corporate profit increases without wage growth are inevitably fake profits and that explains the lack luster enthusiasm in the S&P 500 stocks. When your accountant is generating more earnings than the guy or gal working down on the floor, you have a troubled business. This is not complicated. Debt fueled corporate profits were fun but now we have the same tough job ahead of us. If we want higher wages and a growing S&P 500, then we must have real sales growth coupled with productivity increases. This quest is as American as baseball and apple pie. If higher wages and an increasing S&P 500 price is our goal, then our reliance on debt is a distraction and a hindrance. When we fail to create real corporate profits and rising wages it is because we took our eyes off of the ball.

A couple days after writing this post I was pondering the question of where did the corporate profits go and why the rising corporate profits were not lifting all ships. Rising corporate profits usually result in high factory utilization rates and labor shortages. This situation typically resolves itself with rising wages, strikes, and sometimes both. Without seeing rising wages in this recovery it seems like the rise in corporate profits was the result of a shell game rather than real economic gain. Then I saw the article written by Jeffrey Tucker on the Daily Reckoning, This Car Won’t Move. The cartoon I included below from his post explains both the corporate profitability and why we have not see rising wages problems quite well. It may be hard to see but if you look closely you will see the wage earners are out there swimming with the sharks.

050313_lft

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The Irony of Gun Control and the Stock Market is …

The irony of gun control and the stock market is that they are both divorced from reality. At one time our professors taught us that the stock market was a leading indicator for the economy. I doubt Mike O’Rourke is alone in his sentiment that “ The Market Has Dropped Any Pretense Of Being Connected To Economic Reality”. The stock market is not relevant to the average man and woman and its tenuous relationship to the economy is severed. Now we have Senator Manchin saying he is going to bring up failed gun control legislation that adds additional regulations on honest people and does very little to restrict access to guns by criminals or the mentally insane. This bill failed because the average man and woman were not fooled with the political rhetoric and the shelf life for this dumb law has passed. Somebody should tell Senator Manchin that it is a sign of insanity to keep doing the same thing and expect different results. Stupid is as stupid does. Eventually common sense wins, our stock market starts responding to real economic gains and failures, and our legislators start spending their time focused on how to make the average person’s life easier and better. Someday the decisions we make will matter.

“Alice came to a fork in the road. ‘Which road do I take?’ she asked.
‘Where do you want to go?’ responded the Cheshire Cat.
‘I don’t know,’ Alice answered.
‘Then,’ said the Cat, ‘it doesn’t matter.”
”• Lewis Carroll, Alice in Wonderland

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Can a Business Pay for Employees’ Individual Insurance Plans?

George asked me a bunch of questions last weekend about my HRA. One of the areas I had to do some research on was Section 105 HRAs. I was trying to be helpful but I am not a benefit professional. Fortunately Christina Merhar at Zane Benefits wrote a nice article today on the subject, Can a Business Pay for Employees’ Individual Insurance Plans?.

Yes. Done correctly, a business is allowed to use a Health Reimbursement Arrangement, also called a Health Reimbursement Account or HRA, to contribute tax-free to employees’ individual health insurance plans. This type of medical reimbursement is similar to the way a business can contribute to group health insurance premiums on a tax-free basis.

HRA for Premium Reimbursement

With a Section 105 HRA, any business can contribute to employees’ individual health insurance plans tax-free. An HRA is a tax-advantaged plan that employees can use to receive reimbursement for qualified medical expenses, including individual health insurance plans. HRAs are 100% funded by employers. This type of arrangement, where the HRA is not linked to a group plan, is often called a Stand-Alone HRA.