Friday, December 26, 2003

How Martha Stewart Almost Stole Christmas

With Martha Stewart’s trial set to begin next month, I thought you should know that her misdeeds are far more serious than mere insider trading. At the outset, let me caution you: Hide this expose’ from your children during the Christmas holidays.

This time two years ago, the Martha Stewart story was taking shape. It was December 27th , 2001. The Queen of Style was jetting down to Mexico when she made an unscheduled stop in Texas to phone her stockbroker. "Dump the ImClone stock immediately!" were her frantic words to Merrill Lynch.

The mainstream press frenzied itself when it learned of the stock trade and reported that Martha had dumped her shares based on insider info about FDA test results for ImClone’s experimental cancer drug. So frenzied was Dan Rather that he gave up night classes studying El Niňo to come back ON AIR. The ImClone story was hot, hotter than even El Niňo.

It all smelled fishy to me from the get-go. This story smelled of a grand conspiracy.

I have since hacked into the Homeland Security website and this is what I learned. The cockpit voice recording from the Mexico flight of Air Stewart One is on file. During the playback, all appears normal until the co-pilot shouts, "We have a blue light on the collision avoidance panel!"

He sounds utterly shocked-"Never", he remarks, "have I seen the blue light come on!" Then the pilot commands, "Pull Up! Pull Up!" But it’s too late. The next sound we hear is, "Thud."

I dug further into the story, and I am shocked to say this, but ImClone’s drug trials were nothing more than a front for the real, horrid truth--Martha Stewart’s scientists had cloned Santa Claus! The "Thud" we hear on the voice recorder is that of the Santa clone being hit by Air Stewart One.

Had this accident not happened, Martha Stewart might just have pulled off the biggest coup in marketing history. Think of the impact on Wal-Mart. All of the nation’s illiterates, those unfortunates who comprise one-third of all Wal-Mart shoppers would have been so confused when Santa clones started showing up at K-Mart, and only K-Mart, during the summer months.

Think about this as well: Would Gov. Bob Wise fall victim to granting state workers another paid holiday every time one of these clones showed up at the Capitol on a Thursday?

"Alas!" you say. "No one would fall for that trick in the heat of summer!" But who can say for sure, what with all of Dan Rather’s blather about global warming and El Niňo!

Who knows? Maybe Martha pulled it off anyway. Maybe other Santa clones have already been produced and released into the atmosphere.

Now that we’re in the midst of the Christmas cycle, you need to ask yourself this: Is the Santa at the mall the real Santa or is he a Santa clone? See what I mean? About this conspiracy and cover-up? These Santa clones? It just makes you wonder.

I can only be sure of one thing. When her trial begins, the government will prosecute Martha Stewart for insider trading and nothing more. The government will never let the truth about cloning come out. The cloning cover-up will be buried in the X Files.

At least, that’s what the real Dick Cheney told me.

Friday, October 24, 2003

Peter Robbed Again! Capitol Cops Clueless.

I know that you have an opinion of the coal industry. Please put it aside for a moment.

The Coal Workers’ Pneumoconiosis Fund, commonly called the Black Lung Fund, has been around for thirty years. During that period, politicians have changed eligibility requirements. Initially, a claimant needed only to prove employment in coal mining and then have a doctor certify that black lung was present. In the program’s second decade, eligibility rules were tightened considerably by the Reagan administration and afterwards the claims approval rate dropped to about 7% of claims filed. Then, on his way out the door, Bill Clinton loosened the cuffs with a last minute order. It is now projected that 12 claims per hundred will be approved-an increase of 71%.

Regardless of how you vote, you need to realize that the black lung benefit program has always been about political expediency. It is not a humanitarian effort to aid and comfort miners who will die from this horrible occupational illness. It’s just a government program that is periodically massaged to curry favor.

Coal companies that are participating members in the Black Lung Fund (BLF) fund the plan by paying a percentage tax on gross payroll. While eligibility requirements for black lung benefits have ebbed and flowed, the payroll tax rates have remained constant. This anomaly allowed the BLF to grow substantially beyond its initial payout projections.

In 1990, the WV Legislature smelled the giant truffle growing in the BLF. They rooted out $210 million of overfunding and transferred it to the Workers’ Compensation Division. Yes, Workers’ Comp needed a slug of money even back then. There was a proviso in that legislation that Workers’ Comp could only invest the $210M and spend only the income that it earned.

This year, the legislature faced the ignominy of placing Workers’ Comp in receivership and was once again in crisis mode. As expected, they went sniffing for truffles. They found that the BLF was again overfunded and ordered a transfer of $170 million to Workers’ Comp.

But the 2003 Workers’ Comp bill took a different turn when it came to spending the BLF money. Not only does the law allow the new and improved Workers’ Compensation Commission to spend this current transfer of $170M but it also frees the restriction on the 1990 transfer of $210M. Thus, $380,000,000 of coal industry payroll taxes are being spent to stem the growing Workers’ Comp unfunded liability which is $7 billion.[1]

The black lung tax is a specific tax levied on a specific group of taxpayers to redress a specific problem. By rights, the money should either be paid out to black lung claimants or else be refunded to the companies that overpaid the tax.

Failing that, let’s be practical. You might argue that the BLF surplus be used to build new coal-hauling highways or to repair existing roads damaged by overweight coal trucks. You might argue that the surplus be used to reclaim abandoned coal mines. You also might argue that the surplus be used to abate acid water drainage. These damages are, at the least, coal-related.

However, to argue that the BLF surplus be used to subsidize the Workers’ Comp deficit is very wrong.

The WV Legislature created the Coal Workers’ Pneumoconiosis Fund in 1973 to allow coal companies to comply with federally mandated requirements. The Fund is required by law to be, and has always been, separate and distinct from the Workers’ Comp fund, not an adjunct to it. This distinction needs maintained for either plan to have legitimacy.

Whether you call this a "commingling" or a "confiscation" makes little difference. The safe has been cracked, the money is gone. If the taking of BLF surplus is deemed acceptable for this purpose by the citizenry, then what is to prevent the legislature from seizing other trust funds and spending them on the Comp debt?

We are just one step away from making Workers’ Comp a general obligation of the taxpayer. If that step is taken, then the ultimate trust fund is tapped-your individual savings. The road to serfdom is shorter than you had hoped.

There is a great political irony playing out on our mountain stage. Ronald Reagan’s policy changes created the giant BLF surplus. But now that the money has been spent, Bill Clinton’s reversal of fortunes might actually cause the BLF to develop an unfunded liability in future years.

Wouldn’t that just be West Virginia’s luck?

You may now return to your previously-held opinion of the coal industry.

[1]  From interview with WV Worker Compensation Commission Director Greg Burton in the State Journal, October 3, 2003

Friday, September 12, 2003

The 'Bread Standard' Provides Economic Gauge

Comparison of Bread  1957-2003

Sunbeam Bread    '57 Fresh (3)    '57 Day Old          2003    

Price per loaf             0.16                0.08            1.59 (5) 
Sales tax (1)               .01                  .00              .10     
Mileage (2)                 .00                  .00              .73     
Totals                      0.17                 0.08            2.42     

Footnotes to table:
   1. 1957 rate equals 3¢ per $1.00, beginning at 14¢.  2003 rate equals 6¢ per $1.00. 
   2. IRS Mileage allowance of $0.365 per mile
   3. Sunbeam bread baked in Clarksburg
   4. Sunbeam bread baked by Flowers Baking Co., North Carolina
   5. Kroger, Clarksburg.  Sept. 2, 2003

Once when I was a lad of eight, my mother sent me down the street to Ridenour’s Grocery with a quarter in hand to buy a loaf of bread. I returned with a loaf of Sunbeam bread and eight cents. Andy Ridenour was our closest neighborhood grocer. Allman Brothers Grocery was slightly farther away but still within walking distance. Sunbeam bread was baked daily here in Clarksburg.

Fresh bread was delivered within a few hours after the bread came out of the oven. Sunbeam bread is now baked out of state but I use it for comparison because, except for preservatives, the loaf hasn’t changed much in 46 years. Even the wrapper is nearly identical. Today’s fresh bread is comparable to day-old bread in 1957.

Neighborhood grocers are long gone from the landscape and the closest market is Kroger’s in the west end of town, one mile from my parents’ house. Even in 1957, I wasn’t allowed to take my bike to the west end where the A&P supermarket was then located.

Based on these few facts, I have developed a bread standard to value our money. Even if you challenge the cost of driving to Kroger’s at 73¢ per loaf as being superfluous, the cost of bread has still risen twenty-fold which is about twice the rate at which WV median household income has increased during the same period. Your family needs to earn in the mid 5-figures this year just to stay even on day-old bread. And to stay even, you would have had to have lost something along the way-your value system.

Day-old bread was discounted by half because homemakers wouldn’t buy it for anything other than making stuffing. Families demanded fresh bread despite the steep discount. And 8¢ was not a trifling amount in 1957; you could mail 2 letters and 2 postcards for that sum.

After food stamps were introduced in 1961, the custom of discounting day-old bread faded. This is just a coincidence because, as we all know, government spending makes everything better. But a point does need made for our comparison of costs. You buy your bread at the register but you buy other peoples bread through the payroll deduction plan. Thus, the next time you buy bread, remember that you’ll be a few slices short of a 1957 loaf as well as a day late in eating it.

You can argue all you want that you are better off than folks were 46 years ago. You aren’t. But to walk the point home, let’s re-visit Mr. Ridenour’s store.

In 1957, you would have bought chicken from Andy at the butcher’s meat cooler. It was fresh, not pre-packed, and it certainly wasn’t frozen or laced with preservatives. I always remember how homemakers demanded to see if there was any blood in a bone joint. If there was so much as a speck of blood, then the chicken was refused. Nobody would buy chicken with any amount of taint.

Years later, when I bought packaged chicken at a supermarket, I noticed that the bird was swimming in blood. I asked a clerk in the meat department if there would be any problems with the poultry. I will never forget his answer: No, sir! Our cashiers double-bag chicken packs so they won’t leak on your groceries!

And he said it with so much pride that I dared not interrogate him further!

In 1957, we had two neighborhood groceries nearby and the A&P supermarket was less than a mile from home. There was competition. There was variety. There was service with a smile from people we knew. Home delivery was available. And both Ridenour’s and Allman Brothers let creditworthy customers run a tab.

Compare bread. Compare stamps-both food and postal. Compare chicken. Compare Ozzie Nelson to Ozzie Osbourne. The results are all the same-devaluation, big time.

The Bread Standard, updated for 2008

Friday, July 18, 2003

Grants, Central Planning No Cure For Economic Woes

If you suffer from the delusion that central planning and grants are the recipes for economic development, then do as you have done in the past and ignore the following sentiments.

The statesman who should attempt to direct private people in what manner they ought to employ their capitals, would not only load himself with a most unnecessary attention, but assume an authority which could safely be trusted to no council and senate whatever, and which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it.


Friedrich Hayek chose Adam Smith’s words to introduce "Planning and Democracy", the fifth chapter of his 1944 book, The Road to Serfdom. Hayek won the Nobel Prize in Economics in 1974, a long overdue recognition of his philosophy.

I first read The Road to Serfdom in 1970 while majoring in Economics. Hayek’s treatise was offered as the opposing argument when Congress broadened the Hill-Burton Act to make direct loans and loan subsidies for hospital construction. At that time, the new sutures being sewn by Hill-Burton’s surgeons were so tight that they brought screams of agony from the medical industry.

My, how times have changed.

The Road to Serfdom accurately tells us why West Virginia’s economy has foundered. Ours is an economy that is anchored by central planning. So well anchored, in fact, that even a rising tide cannot raise our boat. And as Hayek predicted in detail, central planners keep making the problems worse. Yes, it is all there-the ailment and the cure-all written in one book should anyone care to read it.

Lech Walesa did. (He borrowed Margaret Thatcher’s copy.) Thus, a question: If a Polish trade unionist can see the writing on the wall, then why can’t West Virginians?

This state’s modern problems began fifty years ago when the ‘pop tax’ was levied to build WVU’s hospital. A noble social cause is the pavement on the road to serfdom and the paltry, dedicated tax paints the white lines. Sad to say, but the original hospital, its annual budget controlled by state government, closed after some 25 years of operation. Furnace vents blew soot into the operating rooms and patient staph infections had become commonplace.

The pop tax, however, lives on. As does the Staff infection it engendered!

Even with this clear example of failure, the state has marched on, redoubling its efforts in central planning. And as we fast-forward to today, we learn that fixing the Capitol’s roof leaks has been anointed as an economic development project and worthy of a grant. Another noble social cause, this gold-plated monument is. And what better tax to dedicate than the one that a paltry bettor voluntarily pays?

Government management cannot even budget roof repairs out of current revenue. In the long term, we owe $4 billion to the pension plan. The Comp debt, by law a debt of employers, but in reality a social welfare program, still mushrooms, perhaps at a slower rate now that "reforms have been enacted." Yet the state wants to grow its other insurance business. And enlarge Tamarack, build a ballpark, and so on.

There will be more icebergs beyond the horizon. A clipper ship in full sail could navigate the coming ice floe. But what chance does an anchored boat have?

Which brings me to this. Whether West Virginia borrows the money or levies new taxes to pay its considerable debts, more aptly classified as the costs of central planning, the result will be the same. See Chapter 16, "Conclusion." Yes, The Road to Serfdom does have an ending.

The 20th Century will be recalled as the battleground of economic theories. The East opted for Marx. The West opted for Keynes. In the end, it was Hayek who triumphed, for he understood that central planning always fails.