Imagine a corporation that had 8.8 billion dollars worth of expenses and made a profit of 88.9 billion dollars in 2012. The previous year, it had made a profit of 79.3 billion dollars. If it were publicly traded, the market would price it at around 1-1.2 trillion dollars, making it the most valuable non-state owned entity in the world.
Well stop imagining. It's called the Federal Reserve. And last year, it made a profit of 89 billion dollars, all of which it sent to the US Treasury. The money it earned was primarily from its vast investment portfolio of 2.9 trillion dollars, made up of its Treasury holdings and mortgage backed securities that it bought from the banks during the financial crisis.
It represents approximately 2.1 trillion dollars of money conjured out of thin air to support the Fed's open market operations and quantitative easing and roughly tripled the country's monetary base.
These are all impressive figures. And in normal times, you would see inflation spiking as people realize that the money created doesn't have a commensurate increase in the size of the real economy. Various economists have predicted that a massive bout of inflation would occur, but it hasn't happened yet. People are a lot more fearful now, and a vast amount of money remains on the sidelines, not being used for anything.
The ball has been placed in the Federal government's court. Despite the Fed's stated reasons for its unlimited QE, it also has the secondary effect of making the cost of financing debt extremely cheap for the Federal government. The massive portfolio it has acquired in the intervening years has also boosted the Fed's profits, which by law must be handed over to the Treasury every year.
With one hand, we're enabling the Federal government's spending addiction. On the other hand, we're giving them more money to buy more stuff. I'm eager for the government to OD and we can finally sort through the aftermath. Because I'm tired of this permanent fiscal and monetary crisis that we find ourselves in. And it's time we finally unfroze the natural state of affairs and just deal with whatever we have to deal with. For the past 3 years, we've been stalling. And that's incredibly boring.
Friday, January 11, 2013
Thursday, January 10, 2013
The Death of Male Privilege
Taylor, Kelly, Lindsay, Leslie, Ashley, Jamie. What do these names have in common? They used to be guy's names. If you go to the Baby Names website operated by the Social Security Administration, you can see the relative popularity of all these names, for both genders, for over 100 years. And those former guy names used to be more popular, but their popularity declined after a subsequent surge in popularity where parents would appropriate these "guy names" for their female offspring.
If enough people start naming their daughters with traditionally guy names, it'll eventually prompt other people to stop naming their sons with those names. The reason is obvious: there is no male counterpart to a tomboy. Because every major society has males at the top of the social structure, it has been advantageous for females to mimic and adopt male traits, activities, and even names. The same cannot be said for males who want to be more feminine. Society shuns and mocks them. That type of behavior is actively discouraged.
That means that traditionally male pursuits have more and more female participants. A major portion of the growth in NFL viewership has come from women. And there's still room for more growth. Which is why the league has recently forced its players to wear pink shoes and gloves during October. The league wants to be seen as more women friendly to grow its viewership even more.
What separates football from other male activities is that it is considered at or near the pinnacle of masculinity. You would be laughed out of any room if you suggested women have a place alongside men on the gridiron or if they should play by the same rules with the same equipment. But other activities, once they become co-opted by the fairer sex, lose their "masculinity". For example, in the US, soccer isn't considered masculine. Decades of soccer moms and female soccer players (not to mention the perennial powerhouse that is the US women's soccer team) have turned soccer into a near punchline in American adult culture.
This is the first mover disadvantage that men find themselves in. With the growing feminization of the workplace, many men feel escalating threats to their masculinity. Because they can't co-opt a female thing, they're left with two options: football or outlandish and in your face things that reek of insecurity. Hence the rise of the bacon craze, the man cave, the extreme and growing popularity of the NFL and college football despite the controversy around chronic traumatic encephalopathy.
The recession was the final blow to the traditional American male. There is a seemingly irreparable gulf between the men at the top and everybody else. And in between that gulf is a swelling rank of women. If you look at the gender gap in graduation, employment, average starting salaries, everything is starting to move in a much more feminine direction. A majority of all management positions are now occupied by women. 3 out of 5 college degrees awarded are to women. This is the foundation of a new, more female oriented power structure.
The world's changing. And male privilege is dying a relatively quick death. Instead of trying to play on an even field, most men would rather watch football in their man cave eating a BLT.
If enough people start naming their daughters with traditionally guy names, it'll eventually prompt other people to stop naming their sons with those names. The reason is obvious: there is no male counterpart to a tomboy. Because every major society has males at the top of the social structure, it has been advantageous for females to mimic and adopt male traits, activities, and even names. The same cannot be said for males who want to be more feminine. Society shuns and mocks them. That type of behavior is actively discouraged.
That means that traditionally male pursuits have more and more female participants. A major portion of the growth in NFL viewership has come from women. And there's still room for more growth. Which is why the league has recently forced its players to wear pink shoes and gloves during October. The league wants to be seen as more women friendly to grow its viewership even more.
What separates football from other male activities is that it is considered at or near the pinnacle of masculinity. You would be laughed out of any room if you suggested women have a place alongside men on the gridiron or if they should play by the same rules with the same equipment. But other activities, once they become co-opted by the fairer sex, lose their "masculinity". For example, in the US, soccer isn't considered masculine. Decades of soccer moms and female soccer players (not to mention the perennial powerhouse that is the US women's soccer team) have turned soccer into a near punchline in American adult culture.
This is the first mover disadvantage that men find themselves in. With the growing feminization of the workplace, many men feel escalating threats to their masculinity. Because they can't co-opt a female thing, they're left with two options: football or outlandish and in your face things that reek of insecurity. Hence the rise of the bacon craze, the man cave, the extreme and growing popularity of the NFL and college football despite the controversy around chronic traumatic encephalopathy.
The recession was the final blow to the traditional American male. There is a seemingly irreparable gulf between the men at the top and everybody else. And in between that gulf is a swelling rank of women. If you look at the gender gap in graduation, employment, average starting salaries, everything is starting to move in a much more feminine direction. A majority of all management positions are now occupied by women. 3 out of 5 college degrees awarded are to women. This is the foundation of a new, more female oriented power structure.
The world's changing. And male privilege is dying a relatively quick death. Instead of trying to play on an even field, most men would rather watch football in their man cave eating a BLT.
Wednesday, January 9, 2013
The Troubles of the Peasantry
Megan McArdle, my favorite writer, had a conversation with a law school professor about the economic viability of a law degree. The exchange has a decent bit of wit in it and some instances of impressive wordsmithing. But what I find most fascinating about the conversation is what the conversation is: a publicly available transcript between two elites speaking in earnest with no filter.
On why the law school crisis was only just recently being discussed:
On why law schools get away with doing what they're doing:
And, finally, the kicker:
The key difference between Pre-Revolutionary France and today is that the Second Estate (aka the upper middle class) is not a heritable title or privilege in the United States. The right education is all that's necessary for access. Anybody with internet access has the ability to see the strings that control the system. And anybody with the right credentials can start pulling on those strings. But most Americans, for whatever reason, don't leverage their incredible advantage into valuable, actionable information.
I've referenced Game of Thrones in the past and there's a very appropriate quote for this phenomenon: "The common people pray for rain, health, and a summer that never ends. They don't care what games the high lords play." In the US, the common people are essentially everybody who doesn't care about government, which is probably over 95% of the country.
Hang on, you might say. Over a hundred million people voted last election. You can't tell me that they don't care about government. To that, I reply that voting in elections doesn't mean you care about government. The people who care about government follow government during the "off season". They read about Supreme Court rulings, Presidential appointee battles, regulatory decisions, and the latest economic trends. And then they talk about them constantly to anyone who will listen.
Because the game that the American nobility plays is public policy. And while the peasants go about their day and their mundane little lives, the nobility will be fiddling with the levers of power. And that affects all of us whether we know it or not.
There are plenty of idiots who say something along the lines of "you can't complain if you don't vote". Let me offer something else. If you don't follow what happens between elections and then you start complaining about the blunders of government, you're a modern day peasant.
On why the law school crisis was only just recently being discussed:
The main thing to take away from that is the last bit. When the elites are suffering, that's when it starts appearing in the pages of the Wall Street Journal and the New York Times. And that's when the rest of the upper middle class takes notice. Any time before that, and you've got no shot at getting the public's attention.Megan: So let's start with the contraction of the market for lawyers: do we know what's causing it? And why did it take people so long to notice?Paul: It's being caused by technology and outsourcing. Machines can now do many things that lawyers did formerly, such as e-discovery. In addition, corporations have found that much work which used to be performed by lawyers can be performed quite adequately by much cheaper sources of labor -- paralegals, compliance officers, and even people in India.As for why it took so long to notice, law is a very hierarchical profession, and there's a great deal of stigma that attaches to failure. So as long as the contraction wasn't evident to people in the highest reaches of the profession, such as law professors at prestigious schools and partners at top firms, it remained largely invisible at the level of public discourse.Megan: There's a bit divide between the graduates of Harvard, and the graduates of, say, Thomas CooleyPaul: Yes indeed, but the waterline has now risen so high that large portions of the classes at top ten law schools are struggling, so now there's a "crisis."
On why law schools get away with doing what they're doing:
Paul: Yes, and because the cost is borne by graduates (who are prone to cognitive errors, ie optimism and confirmation bias) and by taxpayers, who are a diffuse group. The benefits, on the other hand, are reaped by a very discrete group -- law schools in particular and universities in general. It's Poli Sci and Econ 101 respectively really.On the hopeless market that JDs find themselves in:
Megan: There's always been some of that, of course--John Grisham has dramatized it quite vividly. But now you're saying that we're basically putting the ambulance chasers out of business?
What is he really saying? The graduates are idiots and the taxpayers don't care.Paul: Well there's always going to be room for some personal injury lawyers, but the reality is that we're graduating 45,000 people per year for 20,000 jobs, and two thirds of those jobs don't pay enough to justify the cost of law school, so that's some pretty dire math. Of course people go to law school because they can't do math, hence here we are.
And, finally, the kicker:
Megan: I take it you've gotten some flak from your fellow law professors for pointing all this out?
The dude is absolutely correct in his assessment, but what's astounding to me is that this conversation is doing something very similar. They're both part of the upper middle class talking very candidly about real problems and yet the vast majority of the US does not understand what is happening in the legal market or law school. The extended metaphor is that Megan and and Paul are also part of the Second Estate discussing affairs of state while the peasantry (about 90% of the US population) toil in the fields complaining about the growing scarcity of bread.Paul: Oh yes of course. Basically legal academia right now is France in 1780, and my lord doesn't care to hear about the supposed troubles of the peasantry.
The key difference between Pre-Revolutionary France and today is that the Second Estate (aka the upper middle class) is not a heritable title or privilege in the United States. The right education is all that's necessary for access. Anybody with internet access has the ability to see the strings that control the system. And anybody with the right credentials can start pulling on those strings. But most Americans, for whatever reason, don't leverage their incredible advantage into valuable, actionable information.
I've referenced Game of Thrones in the past and there's a very appropriate quote for this phenomenon: "The common people pray for rain, health, and a summer that never ends. They don't care what games the high lords play." In the US, the common people are essentially everybody who doesn't care about government, which is probably over 95% of the country.
Hang on, you might say. Over a hundred million people voted last election. You can't tell me that they don't care about government. To that, I reply that voting in elections doesn't mean you care about government. The people who care about government follow government during the "off season". They read about Supreme Court rulings, Presidential appointee battles, regulatory decisions, and the latest economic trends. And then they talk about them constantly to anyone who will listen.
Because the game that the American nobility plays is public policy. And while the peasants go about their day and their mundane little lives, the nobility will be fiddling with the levers of power. And that affects all of us whether we know it or not.
There are plenty of idiots who say something along the lines of "you can't complain if you don't vote". Let me offer something else. If you don't follow what happens between elections and then you start complaining about the blunders of government, you're a modern day peasant.
Monday, January 7, 2013
The New College Failure
Much has been written about the precipitously declining value of a Juris Doctor. As some people have put it, law school is the last resort for college undergrads who desperately want to be rich but also desperately bad at math and science.
Well now the college graduates who want to be rich and are good at math don't seem to be shaking out so well either. A pair of articles from the Wall Street Journal cast doubt on the utility of MBAs. You can read them here and here. The basic premise is that, increasingly, business schools are basing their admission decisions on the applicant's employability and that newly minted MBAs are finding that their offer sheets are not nearly as generous as they were in previous years.
This is coming on top of the mounting consensus that, in many cases, even undergraduate education isn't worth it. Tales of students with anywhere from 80-200k in student loan debt struggling to acquire gainful employment that's "commensurate" with their status as undergraduate degree holders are legion and their numbers are increasing. It seems that a growing portion of the intelligentsia are saying college isn't worth it.
I happen to agree with them. Most colleges have devolved into something barely more than an extended stay hotel that bestows a credential of dubious value after you've proved that you can occasionally show up to class and exhibit various bouts of sentience. I have a lot of friends who are either graduates or current students of Georgia State University. And based on what I've learned from them, GSU is trying to shed its identity of a "commuter school" and turn into a full fledged university offering the traditional "college experience".
So what is that exactly? Well, look at what the university is trying to do. It recently added a football program. It's acquiring more on-campus housing and trying to form a contiguous campus. The intent is obvious. It has nothing to do with improving the education their students receive (unless some administrator wants to spin an argument that a more integrated campus fosters "creative spirit" and "innovation"). It's about getting young students together and letting them drink, party, have sex, and occasionally show up to class hungover.
This problem is exacerbated by the truism pounded into the non-college educated populace that college is important and will guarantee you a bright future. Throw in the fact that the Federal government will bankroll just about any student with loans with below market interest rates, and you have a market that is remarkably insulated from cost control or quality control.
You don't need to plagiarize an essay about the regressive feminism of Pride and Prejudice in order to become a junior copywriter. Or a Starbucks barista for that matter. Increasingly, our workplace is rapidly reducing to a single question: can you produce? A college degree used to signal to employers that, for this particular applicant, the answer is "yes". That's not the case anymore.
We've shed millions of jobs during the Great Recession. And our labor utilization rate is still well below what it was in 2007. Despite that, real GDP has grown. And there is a staggering implication to be realized from that: we've essentially ejected millions of people from the workforce and suffered no productivity loss from it.
It'll still take a few more years (or even a decade) for people to realize that most colleges should be considered part of the hospitality industry. But until then, you gotta be smart. Go to a college, major in a field that "makes things", go to class, get good grades, fight like hell to get internships, and then graduate with a job offer in hand.
Well now the college graduates who want to be rich and are good at math don't seem to be shaking out so well either. A pair of articles from the Wall Street Journal cast doubt on the utility of MBAs. You can read them here and here. The basic premise is that, increasingly, business schools are basing their admission decisions on the applicant's employability and that newly minted MBAs are finding that their offer sheets are not nearly as generous as they were in previous years.
This is coming on top of the mounting consensus that, in many cases, even undergraduate education isn't worth it. Tales of students with anywhere from 80-200k in student loan debt struggling to acquire gainful employment that's "commensurate" with their status as undergraduate degree holders are legion and their numbers are increasing. It seems that a growing portion of the intelligentsia are saying college isn't worth it.
I happen to agree with them. Most colleges have devolved into something barely more than an extended stay hotel that bestows a credential of dubious value after you've proved that you can occasionally show up to class and exhibit various bouts of sentience. I have a lot of friends who are either graduates or current students of Georgia State University. And based on what I've learned from them, GSU is trying to shed its identity of a "commuter school" and turn into a full fledged university offering the traditional "college experience".
So what is that exactly? Well, look at what the university is trying to do. It recently added a football program. It's acquiring more on-campus housing and trying to form a contiguous campus. The intent is obvious. It has nothing to do with improving the education their students receive (unless some administrator wants to spin an argument that a more integrated campus fosters "creative spirit" and "innovation"). It's about getting young students together and letting them drink, party, have sex, and occasionally show up to class hungover.
This problem is exacerbated by the truism pounded into the non-college educated populace that college is important and will guarantee you a bright future. Throw in the fact that the Federal government will bankroll just about any student with loans with below market interest rates, and you have a market that is remarkably insulated from cost control or quality control.
You don't need to plagiarize an essay about the regressive feminism of Pride and Prejudice in order to become a junior copywriter. Or a Starbucks barista for that matter. Increasingly, our workplace is rapidly reducing to a single question: can you produce? A college degree used to signal to employers that, for this particular applicant, the answer is "yes". That's not the case anymore.
We've shed millions of jobs during the Great Recession. And our labor utilization rate is still well below what it was in 2007. Despite that, real GDP has grown. And there is a staggering implication to be realized from that: we've essentially ejected millions of people from the workforce and suffered no productivity loss from it.
It'll still take a few more years (or even a decade) for people to realize that most colleges should be considered part of the hospitality industry. But until then, you gotta be smart. Go to a college, major in a field that "makes things", go to class, get good grades, fight like hell to get internships, and then graduate with a job offer in hand.
Friday, January 4, 2013
The Future of Beating the Market
A few years ago, I got into a spirited debate with a fellow college student about efficient market theory. This particular student was a finance major and wanted to become a hedge fund manager. Needless to say, he didn't believe in EMT. Our conversation ended with something like this:
This theory is anathema to just about everybody in the wealth management industry. Because if everybody believed in it, the lucrative fees and commissions that the finance industry generates would be eliminated. But that won't happen. There will always be smart people in sharp suits trying to tell other people that they have the intelligence, pluck, and savvy to make more money than the other guy. And there will always be people with money who are all to eager to believe them.
But it seems like the tide is slowly turning. More and more investors are pulling money out of actively managed funds and putting them in passive funds. This is mainly driven by the low fees that index funds are known for. Because following an index requires no human thought (and therefore very little human labor), the fund manager's role is minimal and therefore cheap.
But perhaps investors still don't believe in EMH. Because index funds can track any kind of index, investors could be purchasing index funds that track more exotic indices rather than vanilla indexes like the S&P 500. So if the goal is to consistently outperform the broader market (with the S&P 500 index as an approximation), investors might be pouring money into funds that only tracks a particular segment of the market and then shifting preferences as market conditions change.
It's conceivable that the future of actively managed funds would be nothing more than fund managers trying to buy and sell the right ETFs to capture outperforming market sectors at the best possible time, instead of picking individual companies. Although everybody always advises other people that "you can never time the market consistently", it seems like that rule doesn't apply for themselves.
Benjamin Graham is now taken for granted, and everybody else is searching for the extra edge on top of fundamental analysis. Because knowing the fundamentals won't deliver outsized returns anymore since everybody else already knows the fundamentals. It could be that everybody builds on top of fundamental investing, long the bedrock of modern investment theory, and incorporates macroeconomic principles and game theory into investment strategy.
Or maybe that's already happened and academia hasn't incorporated it into a named theory yet. One thing's for sure. As long as people don't believe in efficient markets, it makes markets more efficient.
Me: Ultimately, if you want to be a hedge fund manager, then you have to believe that markets aren't efficient. It's either that, or you want to scam rich people for a living.
Him: Pretty much, yeah.Efficient market theory states that all relevant information has already been considered and priced accordingly by the market. If this is true, then any individual investor can't consistently outperform the market because rational investors cannot come to a conclusion that is radically different from what market has concluded (because two rational actors can't look at the same information and behave differently) and irrational investors by definition can't consistently outperform anything.
This theory is anathema to just about everybody in the wealth management industry. Because if everybody believed in it, the lucrative fees and commissions that the finance industry generates would be eliminated. But that won't happen. There will always be smart people in sharp suits trying to tell other people that they have the intelligence, pluck, and savvy to make more money than the other guy. And there will always be people with money who are all to eager to believe them.
But it seems like the tide is slowly turning. More and more investors are pulling money out of actively managed funds and putting them in passive funds. This is mainly driven by the low fees that index funds are known for. Because following an index requires no human thought (and therefore very little human labor), the fund manager's role is minimal and therefore cheap.
But perhaps investors still don't believe in EMH. Because index funds can track any kind of index, investors could be purchasing index funds that track more exotic indices rather than vanilla indexes like the S&P 500. So if the goal is to consistently outperform the broader market (with the S&P 500 index as an approximation), investors might be pouring money into funds that only tracks a particular segment of the market and then shifting preferences as market conditions change.
It's conceivable that the future of actively managed funds would be nothing more than fund managers trying to buy and sell the right ETFs to capture outperforming market sectors at the best possible time, instead of picking individual companies. Although everybody always advises other people that "you can never time the market consistently", it seems like that rule doesn't apply for themselves.
Benjamin Graham is now taken for granted, and everybody else is searching for the extra edge on top of fundamental analysis. Because knowing the fundamentals won't deliver outsized returns anymore since everybody else already knows the fundamentals. It could be that everybody builds on top of fundamental investing, long the bedrock of modern investment theory, and incorporates macroeconomic principles and game theory into investment strategy.
Or maybe that's already happened and academia hasn't incorporated it into a named theory yet. One thing's for sure. As long as people don't believe in efficient markets, it makes markets more efficient.
Thursday, January 3, 2013
I Will Never Understand Markets
End of business today:
To be honest, I think this is an example of (temporary) market irrationality. Just about everybody (who counts) understood that Congress was going to resolve the fiscal cliff before it did any actual damage. A jump of 2.54% is very large for one day of trading and it is entirely attributable to the deal that Congress struck.
Now, in an alternate reality in which both the Democrats and Republicans dug in and jumped off the fiscal cliff together without changing anything for at least a year (a black swan event in and of itself, there is an extremely low probability of it occurring), it's conceivable that the broader market would plunge maybe 20-30% over the course of a few months. So perhaps investors were pricing something like an 8% chance that Congress wouldn't resolve the fiscal cliff before Treasury would be completely unable to forestall its effects.
I think the "correct" price should have been closer to 1%. Time and again we've seen Congress threaten to do something stupid. Like the Democratic House threatening to cut off funding for the Iraq war or for the Republican House and their "refusal" to extend the debt ceiling unless the Democrats agreed to politically impossible spending cuts. It's always a bluff. And it always gets resolved at the last possible moment before things start to go south.
As I've said before. The Republicans and the Democrats essentially agree on 98-99% of current Federal policy. These bitter political clashes are purely entertainment fodder for the masses. The politicians will posture as much as possible until they actually have to do the simple things needed to keep the government operational.
I guess most investors skew risk averse, but in a more perfect market, the continuing resolution and the tax hikes that Congress agreed to would have been greeted with a yawn from Wall Street.
To be honest, I think this is an example of (temporary) market irrationality. Just about everybody (who counts) understood that Congress was going to resolve the fiscal cliff before it did any actual damage. A jump of 2.54% is very large for one day of trading and it is entirely attributable to the deal that Congress struck.
Now, in an alternate reality in which both the Democrats and Republicans dug in and jumped off the fiscal cliff together without changing anything for at least a year (a black swan event in and of itself, there is an extremely low probability of it occurring), it's conceivable that the broader market would plunge maybe 20-30% over the course of a few months. So perhaps investors were pricing something like an 8% chance that Congress wouldn't resolve the fiscal cliff before Treasury would be completely unable to forestall its effects.
I think the "correct" price should have been closer to 1%. Time and again we've seen Congress threaten to do something stupid. Like the Democratic House threatening to cut off funding for the Iraq war or for the Republican House and their "refusal" to extend the debt ceiling unless the Democrats agreed to politically impossible spending cuts. It's always a bluff. And it always gets resolved at the last possible moment before things start to go south.
As I've said before. The Republicans and the Democrats essentially agree on 98-99% of current Federal policy. These bitter political clashes are purely entertainment fodder for the masses. The politicians will posture as much as possible until they actually have to do the simple things needed to keep the government operational.
I guess most investors skew risk averse, but in a more perfect market, the continuing resolution and the tax hikes that Congress agreed to would have been greeted with a yawn from Wall Street.
Tuesday, January 1, 2013
The Tyranny of Small Margins
As I type this, the fiscal cliff compromise that passed the Senate has since been stalled in the House as Representative Eric Cantor, the Republican Majority Leader, announced his opposition. If a deal can't be reached today, the stock market is going to tumble tomorrow. But a "tumble" is usually defined as a drop of more than 1%. That doesn't seem particularly impressive.
And the two big issues that the Republicans and Democrats can't get to a deal on will affect less than 2% of taxpayers and 3% of the Federal government's budget. This is the paradox of politics. The issues we are arguing about are all on the margin. And they are very small margins. Once a final deal is reached, the Democrats and the Republicans will have agreed on essentially 99% of the Bush tax cuts and 98% of the Federal budget.
This is the primary reason why cynics, burnt out on politics and the interminable news cycle, say it doesn't matter which party is in charge or who's in the White House. Because it doesn't. The vast majority of the electorate agrees on the vast majority of issues. Because everybody wants Social Security and Medicare. And everybody wants strong national defense. And everybody wants a government that provides this, that, and the other thing.
But since humans are still hardwired to view things in black and white, that means we have to make mountains out of molehills and turn these marginal disagreements into huge, ideological divides. The inability for Americans to get the 98-99% of stuff that we all agree that we want because we disagree on the 1-2% is why the public says Washington is broken.
Let me be clear. I do not mean to say that it's the Republicans' fault for "holding the 99% hostage to tax cuts for the 1%". Because it's equally valid (from an argumentative standpoint) to say that Democrats are "holding the 99% hostage to tax hikes for the 1%". But our government is structured to a point where 1-2% of the issues can set back every other issue. It's no way for the country to operate.
Imagine if your significant other breaks up with you and says something along the lines of, "don't get me wrong. You're a great person. I think you're really good looking and have a killer smile. You make a lot of money at your awesome job and I really like hanging out with your friends. But I've decided that I just can't be with a person who doesn't have green eyes." It would never happen.
And because the private sector and the American people are so resilient, the government continues to get away with their irresponsibility and childishness. This will continue until we reach the breaking point. Because the only time you can get Congress, the President, and the American people to all agree to do something is if a war breaks out or if there's a real domestic crisis currently raging.
That's where we are now on Capitol Hill. And it's why the Presidency has grown increasingly powerful with each successive election cycle. Because Congress is constantly gridlocked, only the President, with his unquestioned power over the Federal bureaucracy, can act unilaterally and with complete impunity. We will essentially be electing a king every 4 years until people realize that they aren't that different from each other. This is the tyranny of small margins.
And the two big issues that the Republicans and Democrats can't get to a deal on will affect less than 2% of taxpayers and 3% of the Federal government's budget. This is the paradox of politics. The issues we are arguing about are all on the margin. And they are very small margins. Once a final deal is reached, the Democrats and the Republicans will have agreed on essentially 99% of the Bush tax cuts and 98% of the Federal budget.
This is the primary reason why cynics, burnt out on politics and the interminable news cycle, say it doesn't matter which party is in charge or who's in the White House. Because it doesn't. The vast majority of the electorate agrees on the vast majority of issues. Because everybody wants Social Security and Medicare. And everybody wants strong national defense. And everybody wants a government that provides this, that, and the other thing.
But since humans are still hardwired to view things in black and white, that means we have to make mountains out of molehills and turn these marginal disagreements into huge, ideological divides. The inability for Americans to get the 98-99% of stuff that we all agree that we want because we disagree on the 1-2% is why the public says Washington is broken.
Let me be clear. I do not mean to say that it's the Republicans' fault for "holding the 99% hostage to tax cuts for the 1%". Because it's equally valid (from an argumentative standpoint) to say that Democrats are "holding the 99% hostage to tax hikes for the 1%". But our government is structured to a point where 1-2% of the issues can set back every other issue. It's no way for the country to operate.
Imagine if your significant other breaks up with you and says something along the lines of, "don't get me wrong. You're a great person. I think you're really good looking and have a killer smile. You make a lot of money at your awesome job and I really like hanging out with your friends. But I've decided that I just can't be with a person who doesn't have green eyes." It would never happen.
And because the private sector and the American people are so resilient, the government continues to get away with their irresponsibility and childishness. This will continue until we reach the breaking point. Because the only time you can get Congress, the President, and the American people to all agree to do something is if a war breaks out or if there's a real domestic crisis currently raging.
That's where we are now on Capitol Hill. And it's why the Presidency has grown increasingly powerful with each successive election cycle. Because Congress is constantly gridlocked, only the President, with his unquestioned power over the Federal bureaucracy, can act unilaterally and with complete impunity. We will essentially be electing a king every 4 years until people realize that they aren't that different from each other. This is the tyranny of small margins.
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