Thursday, April 24, 2014

Outsourcing outrage

I worked as a third party consultant for nearly two decades – providing a variety of organizations support on strategic, financial and operational goals. Part of my “pitch” was that I was “your CEO/CFO/COO/CIO/C… for hire without the costs or obligations of having an in-house C level executive.” For entrepreneurial and start-up ventures, I was able to provide a range of services, earn a living at a cost that helped the organization. I, therefore, am predisposed to supporting the concept of outsourcing. The outsourcing happening in law enforcement is something that is quite worrisome.

Ordinarily, when an individual breaks a law, police investigate, district attorneys indict and the justice system goes through a long process of determining innocence or guilt and then punishment. It’s no longer ordinary times as 24 D.A.’s (nearly half the country) are trying to short-circuit this process. According to the Washington Post “State attorneys general are pressing Google to make it harder for its users to find counter­feit prescription medicine and illegal drugs online.” The D.A.’s claim that Google allows ads for products that are not legal in their states to populate in search results and in direct advertising. Forcing the company to censor the ads and results will, in theory, make the illegal activity stop, or at least slow.

Google is a huge company, and it got that way from its core business of being a search engine. Wikipedia’s definition: “A web search engine is a software system that is designed to search for information on the World Wide Web. … Search engines also mine data available in databases or open directories. Unlike web directories, which are maintained only by human editors, search engines also maintain real-time information by running an algorithm on a web crawler.” In other words – the computer is doing the analysis to find certain words that the searcher is looking for --- it’s not like a human is flipping through a bunch of yellow pages and reporting on it.

The wonder and magic of the internet is that it’s libertarian: everything’s available. There isn’t a government or an oversight organization that says what can or cannot be on the web. The fundamental principal is that information doesn’t hurt or damage. If you use that information in the real world to hurt somebody, that’s a whole different story. Want to learn how to build a bomb? Shoot a gun? Get a gun? You can learn all about that online – and there’s nothing wrong with it. Only when action is taken are laws broken or harm done.

Americans react with appropriate outrage when countries like China, Syria or Turkey censor the internet or restrict connectivity to social media. Those governments are making a decision about what the people can have access to and how they communicate thoughts and ideas. It’s no different than half of the states asking a private company to exclude data. Today the argument is about illegal drugs, what about tomorrow? Alcohol is illegal to those under a certain age – should everything about booze be prohibited? How to make a martini should not be available in search results for people under 21 in some states under this set of reasoning. What do you do in those states when the age is 18? Altar the results? Absurd? You’d think so…but the U.S. Government set the precedent for the states already.

Two years ago the Justice Department went after Google and forced them to only accept advertising from licensed pharmacists. If anybody who isn’t a licensed pharmacist has anything on their website the Google bots now exclude them from the search results in the U.S.. The company paid $500 million in fines to the Government according to the Post article. Some states require cosmetologists to be licensed – so should they be the only ones allowed to advertise or promote hair salons?

Google is a for-profit business with a fiduciary responsibility to their shareholders and the Government is actively choosing what businesses it can cannot accept advertising from. The slippery slope has begun, and the Obama administration has been leading the charge. It’s yet another small example of how this administration continues to whittle away at free speech. In this case it’s dictating what content is permissible. What’s next? Having the Government tell people what they can and can't say and who they can say it to? (Ridiculous idea? James Clapper, Director of National Intelligence, has just issued a direcive dictating that to talk to certain people employees of 17 government agencies need pre-approval.) It’s outrageous…don’t you agree?

Thursday, April 17, 2014

A Necessary Evil?

Like millions of other Americans I filed my tax return by the April 15th deadline. According to the IRS, 85% of the population file on time, with 6% of small business owners and 9% of non-business owner individuals filing extensions. For anti-tax folks like myself the process is nearly as frustrating as the tax bill itself. Longtime readers may recall last year’s post A Taxing Situation sharing my journey as a victim of identity theft for tax purposes. The IRS had 770,000 people who were in the same situation as me. The delay in finalizing the return and issuing the refund (which is really an interest fee loan we give to the government) is already at six weeks. The 2011 delay was 14 months, the 2012 wait 8 months. Frustrating as it all is, and as much as I philosophically am anti-tax, it is the law and I may rant and blog, but I don’t violate. Not everybody has that same response.

People have been resisting paying taxes as long as there have been taxes. In Biblical times the tax collectors may have been unpopular, but Jesus paid his taxes according to several liturgical quotes.

Donald Rumsfeld, former Defense Secretary under Presents Bush and Ford, four-term congressman and former Director of the Office Economic Opportunity sends a letter each year to the IRS "stating he has “absolutely no idea” whether he has filed his forms correctly."
History Commons tells the story of Arthur Porth, a Wichita, Kansas, building contractor who filed a claim in a Kansas court to recover his income tax payment of $151 in 1951. “Porth argued that the 16th Amendment is unconstitutional because it places the taxpayer in a position of involuntary servitude contrary to the 13th Amendment. The court rules against Porth, but the defeat does not stop him. For 16 years Porth continues battling the income tax requirement, finding new and inventive challenges to the practice. He claims that the 16th Amendment ‘put[s] Americans into economic bondage to the international bankers.’ He also argues that because paper money is not backed by gold or silver, taxpayers are not obligated to pay their taxes because ‘Federal Reserve notes are not dollars.’ In 1961, Porth files an income tax return that is blank except for a statement declaring that he is pleading the Fifth Amendment, essentially claiming that filling out a tax return violates his right of protection from self-incrimination, a scheme that quickly becomes popular among anti-tax protesters. Porth becomes an activist and garners something of a following among right-wing audiences, traveling around the country distributing tax protest literature.” After many years of fighting and losing in court, with a propensity of anti-sematic and racist statements along the way, Porth exhausts his appeals and goes to jail. “Though sentenced to five years’ imprisonment, he only serves 77 days.” Port was certainly creative!

Responses to being over taxed vary. According to Mediaite this week “a Chicago man was arrested yesterday for pulling out a sub-machine gun after learning that he had to pay a 22-cent tax for his Diet Pepsi. “ The soda cost $1.79 and the tax is high – 12%. “Court records allege that Shelton got mad at the store clerk, saying that since he was a resident of that neighborhood, he was ‘tax-exempt.’ … He returned to the store carrying a Gucci satchel, from which he pulled out a loaded gun, He began waving the gun around ‘while yelling that he was going to shoot and kill everyone in the store.’”

“Taxes are a necessary evil” is an idiom that means that most people recognize the value of being taxed while disliking paying for them. TheAtlantic has a series of charts that demystify how much American’s pay, and who pays them...a great baseline for a factual discussion, uncommon in most discussion of taxes.

For 137 years America survived and thrived without an Income Tax. Government and the military were funded by excise taxes and tariffs. In 1913 the Income Tax act went into effect – charging “a 1% fee on the rich and a 6% fee on the super-rich.” By World War II that changed and in post-war America the tax code became the social safety net – with the support of the public and the politicians.

Democrats and Republicans are cut from the same cloth. They both have political platforms that redistribute wealth – taxing the public and spending it. Each party has different priorities, but the underlying philosophy is identical. As long as Americans continue to elect politicians from the major parties, taxes will continue to be a necessary evil.

Thursday, April 10, 2014

The cost of free speech

In college I wrote a weekly column for my alma-matter’s Daily Newspaper. (Yes, there was newsprint back then...and yes, my opinion writing is now marked by decades!) I learned in pretty quick order that there's a cost to "free" speech. The University’s longtime Chancellor released, to great fanfare, a list of his 10 priorities and goals for the University. He and the Board trumpeted the breadth, innovation and vision of these ambitions. They came with pretty pictures and graphs. The local television and newspapers parroted the press release. After carefully reviewing the list and all the various supplemental materials, I was left with a question. I used my column to opine on why the University didn’t have anything about academics in their list of goals. Suffice to say my column had a few weeks hiatus. Free Speech – whether it be actual talking, or writing or funding of those who write or talk is one of the most precious rights bestowed on Americans under the Constitution. In fact, it was the first thing to be granted. Recently the Supreme Court weighed in on the cost of speech, and many are wound up about it.

On April 2 the Supreme Court lifted the cap on what an individual can give overall to political candidates. The $2,600 limit to what one person can give to a particular campaign remains in place. What was rescinded is the $123,200 overall ceiling on contributions. Individuals can now give to an unlimited number of campaigns. According to Open Secrets, a well known and well-respected non-profit specializing in aggregating contribution information 591 people contributed close to the ceiling in the 2012 election cycle. It’s not a ruling that will impact a lot of individuals. It will more than likely just change how money flows into campaigns – not the total dollars.

In January 2010 the Supreme Court ruled that “the First Amendment prohibits the government from restricting political independent expenditures by corporations, associations, or labor unions.”  The Wikipedia summary goes on: “The case did not involve the federal ban on direct contributions from corporations or unions to candidate campaigns or political parties, which remain illegal in races for federal office.” 

The Citizens United case changed the funding of elections far more dramatically than the McCutcheon case will. It fundamentally redefined speech so that non-persons won the same protections as humans. The lifting of the cap may result in more candidates receiving funding, and overall spending going up, but with the $2,300 cap in place, it’s unlikely to have the same breadth that Citizen’s had.

The two rulings move further away from how I’ve long advocated campaigns should be funded. To summarize prior posts:  Let anybody give as much as they want to any campaign. The giving would have to be in proportion to the person’s earnings:  somebody giving $123,200 would have to earning more than that as a wage basis. Disclosure would be immediate and transparent. Donors have to be registered to vote in the area that the race is. Anybody under 18, corporations, unions, etc. couldn’t donate money because they can’t vote. Donors would have to be able to vote on the race/issue: eliminating out of state, out of community influence. The people impacted by the election/issue are the ones who should vote on and fund the campaign.  How radical!

Writing a newspaper column that pointed out a glaring omission embarrassed my University’s chancellor resulting not only in my column's hiatus, but in a revised list of priorities a few months later. There was a cost to that speech, and it was worth it. Having a few hundred individuals give $2,300 to every possible candidate doesn’t seem to as calamitous as others indicate. There's a better way to fund political campaigns. In all instances, though, there's a cost to Free Speech.

Thursday, April 3, 2014

Double Tailed Coin

The “heads or tails” game of flipping a coin is generally fair – there’s an equal probability of one side of the coin coming up versus the other. Only when the game is fixed – say with the double-headed-coin, does it become unfair. The idiom “two sides of the same coin” is applied to things that are essentially the same. In the case of American wages – a couple of recent news events from what seem like opposite ends of the economic spectrum are, in fact, more closely aligned than they are different.

Silicon Valley CEO’s of tech giants like Apple, Microsoft, Facebook and others allegedly had agreements amongst themselves not to recruit, hire or lure engineers away from each other based on a class action lawsuit that is currently being tried, according to the New York Times.  “The case involves 64,000 programmers and seeks billions of dollars in damages.”  The companies previously settled with the Justice Department and agreed to stop the no-poaching practice. Individual engineers, however, have formed a class claiming that the companies undervalued their services by taking away the element of competition that would have impacted their wages. According to average salaries in the area – the base starting wage for this position is in the $115 to $125,000 range.

On the other side of the spectrum President Obama has made increasing the minimum wage a signature issue for 2014.  According to the Huffington Post  he wants the minimum to be $10.10 an hour, well above the current $7.25. In fact he issued an Executive Order requiring Federal Contractors to pay the $10.10 an hour to their employees.

In August 2013 I wrote back-to-back blogs about the issue – Minimum Fairness and The Union Label.  The posts addressed how a minimum wage can’t address the essential inequalities that exist geographically and culturally. What a family needs to earn in a rural town will be quite different than what a family need needs to earn in a large metropolitan city. Eliminating the minimum wage should be a boon to Unions as they would then step into the role of protecting workers rights and negotiating wages – increasing their rolls, dues, and influence. 

The President’s unilateral action put Federal Contractors at a competitive disadvantage. If a company does business both in the private sector and in the government sector – they now carry a higher cost burden that other businesses in their industry. To be able to offer goods and services to the same customer base the company will either have to eliminate jobs or reduce costs and quality elsewhere. Passing the additional cost to its customers with higher prices will result in the competition winning more business.

In Silicon Valley Steve Jobs in death continues to wield influence. He apparently came up with the no-poaching scheme, ensuring that no other tech company could just pay more for the best engineers. That kept turnover low, base wages steady and the companies colluding to manage costs. It also likely lowered innovation. While the wages earned by highly skilled engineers are eight to ten times higher than workers on the President’s minimum wage – they weren’t in control of their earning ability.

Capitalism thrives and economies blossom when the market is able to determine wages, benefits and employee value. The minimum wage issue and the engineering collusion lawsuit seem to be quite different because of the people impacted and the vast gulf between $10.10 and hour and $60 an hour engineers make –but it really is two sides of the same coin. Somebody other than the worker and their employer are determining their value individually and in the marketplace.  In one case it’s companies colluding, in another its Government.  It’s just not what America’s supposed to be about…it’s unnatural, like a double-tailed coin.