The New Paradigm, or a tale of the “Turd Blossom”, lesbian bondage, a Death Star and “Citizens United”

It appears that Karl Rove is always a man to watch (but perhaps not so much to read, as his op-ed pieces in the WSJ tend to be un-insightful and one reads them primarily because of their author rather than to gain any real perspective, but I digress). Mr. Rove (who George W. referred to as “Turd Blossom”) clearly continues to be the country’s greatest political strategist and is the perfect model of a modern major Machiavellian (pardons to Gilbert & Sullivan). Much has been written about him and Ed Gillespie’s recent work thru the new political organizations American Crossroads & the American Action Network (National Journal & Rolling Stone.) The CEO of American Crossroads is former Chamber of Commerce executive Steven Law. American Crossroads was developed as a (essentially) shadow organization of the RNC, weakened by the leadership of Michael Steele (whom you might have run into if you have visited any Hollywood lesbian bondage clubs recently), it has received over $30 million in secured commitments from big money Republican donors that have been shunning Steels’ RNC. Rove is moving quickly to take full advantage of the recent “Citizens United vs. the Federal Election Commission” case in the Supreme Court that will allow corporations and non-profits to actively & directly participate in the election process. American Crossroads will apparently unite with fellow dark star The Chamber of Commerce by funneling money into the Chamber to be spent on key House and Senate races. Rove & Gillespie, “advisors” to American Crossroads, will be, according to operative Mary Matalin “making sure that everybody is expending themselves properly, as opposed to duplicating efforts or working at cross-purposes. That’s something that the committees and the campaigns really don’t do – legally cannot do.”


I have never been one for conspiracies, they always seen to me to be complex explanations of simple events, but the use of the word “agenda” in Justice Stevens’s dissenting opinion in the “Citizens United” case has haunted me. Does Chief Justice Roberts have an agenda to inexorably seal the landscape of American politics? There seems to be little doubt that Mr. Rove clearly sees that he is now able to set up an independent financial powerhouse fueled by corporate money and channel it directly into the election process, what heroin addicts’ call “mainlining.” He is no longer bound by those pesky 527 groups that, while useful, were not allowed to directly support a specific candidate. In setting up American Crossroads Rove and Gillespie (operating in “unofficial” capacities) simply side-step the RNC completely and move directly to support candidates that work for their wealthy corporate donors. I fear that even now as major corporations control so much of the public policy in our nation, the” Citizens United” case essentially seals our fate and becomes the final nail in America’s coffin. The amount of cash amassed at the boarder will crush any attempt to overcome this dreaded combination of power, influence and money. I am afraid this is not Star Wars where the small band of rebels can destroy the Death Star! To quote Republican strategist Ed Rollin’s: “Independent expenditures will play a very, very significant role. There are no rules anymore.”

Two big questions remain:
• Was this the type of legislation Chief Justice John Roberts was expected to accomplish when he was nominated to the court? Remember Justice Roberts, the architect of the “Citizen’s United” case, vowed to Senator John McCain to respect judicial precedence at his confirmation hearings and “Citizen’s United” is clearly not a case of respecting judicial precedence.
• And finally, where is the American public in all this? Where are all those ANGRY folks in the Tea Party movement who “want their country back?”

What is the New Right?

You start to see patterns emerge as talking points come into focus, a phrase I have heard about 3 times in just the last week on various shows and op-ed pieces is (I paraphrase) “ the more you ask government to do the less well it will do everything.” This is a handy little phrase, it seems the intellectual level of America is such that (like in advertising) you need something short, bite sized and having some vague sense of veracity. Certainly the size of an organization can lead to inherent inefficiencies but there are innumerable large business entities, and indeed other countries that seem to accomplish a level of effectiveness that belies the above aphorism.


Our political leaders primary concern is the money needed to succeed in the next election cycle. The common good of our country and its people is ground under in this pursuit of cash. Any sense of what is best for our country as a whole has been lost as America’s overbearing sense of individualism has morphed into a narcissistic and selfish quest to satisfy our personal needs and desires. This political lust is fueled by right and left wing television & radio opinion that is presented as news and the fact that in today’s digital environment one can easily make sure that no contrary opinions, facts or thoughts ever cross our path. Lost is any sense of intellectual compromise as our political dialogue is debased to name calling and short term one-upmanship. The fact that the horrible tragedy of the oil spill in the gulf can become a political football of sorts is a perfect testament to this environment.

I have always felt that Ronald Regan’s thought that you “do not want the Government doing any more then it has to do” was spot on. Of course, the devil is in the details as to whether that cut off point is on the libertarian end of the spectrum or the progressive, but one thing is certain; if our government was focused more on the general public welfare instead of serving the interests of contributors it would be a more efficient entity.

One can clearly see the hand of moneyed interests in the recent twin travesties of the health care bill and the upcoming financial reform bill. In both cases the astonishing level of lobbing by the healthcare and financial services industries has made sure that (as Matt Taibbi put it in Rolling Stone when discussing the financial reform) there are “freeway-wide loopholes that screw any chance of meaningful change.” The public cries for more regulation are pathetic as any regulation passed is simply a sad dog and pony show that is designed at the outset to be ineffective.

So we are left with a government that is a perfect case of failure by design. In that light; Hurricane Katrina, the Gulf Oil spill, Wall Street bailouts, the mortgage debacle and the suffering of untold American citizens at the hands of a government whose goal should be their best interested make all too much sense.

The GREAT Corporate Tax Rate Debate

There has been a steady drumbeat over the past year or so on the pages of the WSJ and other business journals concerning the (comparatively) high corporate tax rate in the US. This rate is seen as strangling American business interests and putting us at a disadvantage.


As I always do when I read these opinion pieces (especially when they are published in media controlled by Mr. Murdoch) I ask; “what issue they not addressing?” In this case these articles rarely address the preponderance of pass-through entities in the U.S. tax system. The extensive use of the pass-through entities makes the U.S. tax landscape very different from many other major countries. Pass-through entities such as LLC’s, S corporations and partnerships allow the business to “flow through” the company profits directly onto the tax returns of the members, shareholders and partners (respectively). This is critical because US personal income tax rates are some of the lowest in the world; to quote Eric Toder, a senior fellow at the Urban Institute in Washington, D.C., and former director of the office of research for the Internal Revenue Service: “When you look at the overall (personal) tax burden, the U.S. is quite low." This lower personal tax rate, of course, has driven the use of pass-through entities in the American business community as well as the institutionalizing of large bonus payouts seen in US corporations, and not typically seen to such an extent in the European business community (when a business pays bonuses to officers they effectively remove the funds from the corporate taxation and transfer it to the lower personal tax rates).

It is hard to know what to really make of all this propaganda as many European countries also have a VAT tax that further muddies the business tax waters. I think a real side by side comparison is, and the end of the day, very difficult. During periods of great prosperity in the US, such as the postwar period of the 1950’s thru the 1960’s personal tax rates topped 91% (this was the top personal tax rate from 1951 through 1963, when it took a precipitous drop to 77% in 1964!) and top corporate rates were in the 48% to 52% range (according to an IRS data sheet).

The bottom line is that while tax rates certainly affect the business environment, it is hardly the primary controlling factor (which often seems to be the take-away when reading these overheated op-ed pieces). We have a saying in the tax planning world; “don’t let the tax tail wag the dog” meaning that you make decisions based on what is best for you and your business and then you factor in tax considerations NOT the other way around. Might tax considerations change your plans?, absolutely, but you cannot operate any business based on the eccentricities of any tax code.

Tea & Capitalism

One of my favorite comedians Patton Oswald was on the Bill Maher show (HBO) this week and, during a discussion of the Tea Party (who Maher always calls the “Tea Baggers”) stated that Tea Party adherents mistook large corporations and big business in general as being synonymous with free market capitalism. This very important point harks back to one of my favorite comments on business from Ralph Nader during the first (Republican sponsored) “bail-out.” Nader stated that the only real capitalist in American were the small business owners, because they were the only business owners “allowed to fail.”


The hideous marriage of government and their corporate handlers has created a perfect storm in our country, with government propping up failed business with taxpayer money. It is on this axis that the focal point of the Tea Party anger should rest but it does not, corporate Republican extraordinaire Dick Army (I suspect) is making sure of that. An essential ingredient of REAL free market capitalism is the ability to fail. I live and breathe free market capitalism every day and so do the bulk of my clients and one thing is for sure – if myself or any one of my clients go out of business I can assure the Government will not give a shit – THAT is an indispensable tenant of the free market and it needs to extend from Riley and Associates to Goldman Sachs and General Motors!