PATHWAY TO PROSPERITY

Ten policy issues we must pursue if we value liberty

1) Embrace, enable and defend the free enterprise system. Provide businesses with a fair and predictable regulatory environment to encourage risk-taking and competition.
2) Establish a simple tax system with a flat rate that only taxes income one time. Watch as entrepreneurs put capital to work and our federal treasury revenues grow.
3) Reduce spending at all levels of government. Address the structural issues in our entitlement programs, which are draining more and more of our government budgets. Shrink the number of employees at all levels of government. Remember, governments don’t produce; they consume.
4) Ensure our defense of liberty by making our military strong. Make our foreign policy clear and unmistakable to our enemies.
5) Recognize that America must lead in the world so that liberty, security and prosperity are secured at home.
6) Enforce the existing immigration laws. We are all from somewhere else but we are united by our common, shared ideals and language. A bedrock principle of our system is the rule of law.
7) Empower parents to makes choices for their children’s education. Encourage competition and accountability in the public education system. Return the power to the states and the local communities for education.
8) Listen to the people. America remains a republic of “We The People.” We reject a centralized, top-down approach in Washington…no matter what party is in power.
9) Pass “Term Limit” legislation. Our representative republic was not designed with the intention of creating career politicians. Elected officials should be “reluctant servants” who return to their personal careers after a robust but short term of service.
10) Encourage and respect the vital role that family and religion play in our society. These civil institutions can provide better “welfare” for individuals more efficiently than government can – or ever has.

PUBLIC EDUCATION, FEDERALISM & THE FREE MARKET

Protecting Our Prosperity by Embracing Competition

Our Founding Fathers believed in a civic education for our children, preparing them for the requirements of self-government. The founders thought this public education was fundamental to the future prosperity of America. They were right. Jefferson wrote that his aim for a public education system was to ensure that all children could become “worthy and able to guard the sacred deposit of the rights and liberties of their fellow citizens.” In advocating for a civic education, Noah Webster wrote that its purpose was to “promote unity and create a sense of national spirit.” Madison, perhaps most succinctly espousing the crucial purpose of public education, wrote “the diffusion of knowledge is the only guardian of true liberty.” How disappointed these men would be to see how poorly and unfaithfully we have performed our duty to safeguard liberty in the area of public education. Over the past 40 years, we’ve simply failed.

If the education of a society is determined by how well it transmits true and time-honored values from generation to generation as the former US Secretary of Education, William J. Bennett has suggested, we have some serious character flaws to address. A lot of public school testing data has shown us just how little students know about our collective past. Without an understanding of the unifying ideals of freedom and equality that unite us as Americans, how can the next generation comprehend our nation’s greatness? We, as Americans, are at our greatest when we celebrate our common (shared) principles. Peoples from all over the globe have been attracted to America because they saw a country bound together not by a common ethnicity, but by loyalty to a principle. Our founding fathers understood that the education of our children is one of our civilization’s most critical tasks. We are failing and liberty is in jeopardy as a result. We must not allow a failing system to remain insitu. We must reclaim the public institution of education. It is our civic obligation. What’s more, from a purely pragmatic perspective, successful public schools are an economic necessity. Any growing and prospering community, whether local, regional or national, requires excellent public schools.

The current K-12 system is not an American one. It has become an autocratic, anti-competitive bureaucracy of the highest order. In a country founded uniquely upon the simple yet powerful ideal of “We the People,” we must return the power of education back to the people. The current business model must change. It is the only way we can remain competitive in the world. Every liberal, every public education lobbyist, every education union leader and incumbent education apologist will claim our problem is simply a matter of funding. This is not only a ridiculous and fatigued hypothesis; it is patently false based on decades of empirical data. The scientific evidence is overwhelming. There is no correlation between spending and educational achievement. In fact, the US spends more on education than any other nation in the world. Since 1960, federal spending on education has more than tripled while our aptitude has remained constant (using standard test scores).

Perhaps our biggest failure has been allowing the public education system to become a de facto function of the federal government. Since when does education power rest with the feds? The US Constitution does not authorize the federal government to control, manage or finance education. It wasn’t until the Carter Administration that we even had a Department of Education. The current White House Administration is encouraging (actually bribing) states to adopt a national education standard. In my view, nothing could be more counter productive than states, counties, communities, teachers and parents ceding their control and responsibilities to a centralized, bureaucratic, “standardized” department in Washington, DC. By the way, what happened to federalism? How did the constitution get completely ignored while the feds usurped the states’ rights to establish standards, tests and curriculum? There has been no public debate. There has been no vote in Congress. Not only is the process an assault on our founding principle of federalism, it is destined to fail because it ignores the customer in the equation. In a free market system, the schools would answer to the parents for the quality of the product. In the present scenario, the states have to answer to the federal government - devoting time and resources to fill out federal grant applications versus providing a better education to our children.

When public education works well, and it does in many places in our country, there are some important common denominators. The best and most productive schools are a result of local people, local leadership, community commitment and parental values. These “high performance” schools are not a result of federal tutelage. What makes an effective school? According to Ron Edmonds, formerly the Director of Urban Studies at Harvard, there are seven attributes:

1) Clear School Mission
2) High Expectation for Success
3) Instructional Leadership
4) Frequent Monitoring of Student Progress
5) Student Time On-Task
6) Safe and Orderly Environment
7) Home – School Relations

So, if we really want our public schools to work well, what should we do? The answer is simple. Take a look at what works in our business economy. Centralized, top-down, multi-layered management is not the answer. High performance companies move fast, are responsive to their customers and continually improve efficiency. Successful businesses empower their employees to solve customer problems at the local level because they understand that customers are the reason the company exists. If we want to dramatically improve our public education system, we must being the forces of competition to work in the education industry. Schools and school districts need to assure local control, empower parents, invite new and different people into school management and let good old fashioned competition drive out the weak, poorly performing and/or failing schools. We need to let all schools compete for tax-payer dollars. We need to de-construct the government-run monopoly. In a free market system, those who produce goods and services are ultimately answerable to the consumer. So it must be in our education system. No one cares more about the future of a child than his/her parent. We must give parents the power to choose and teachers the power to teach.

The Bill of Rights, specifically in the Tenth Amendment, limits the powers of the federal government by ensuring that states retain all powers not specifically delegated to the feds. This protects our liberties. It ensures the most vital and personal issues remain close to home. As citizens of the republic, we have an obligation to restrict federal power and to preserve a system of “We the People.” If we want to reverse the steady slide in our public education of the past 40 years, we need to heed the words of Madison, Jefferson and Webster. We need to take responsibility for the character of our society and for our competiveness in the world. We must adopt a system of accountability to measure the results of students, teachers and principals. Parents must be given the choice to send their children to schools they know will provide the best value. Our future prosperity and our liberty are at stake…and they are inextricably linked.

TOP TEN THINGS ABOUT BEING A SOUTHERN GENTLEMAN

Of all the things I’ve written about, this one is likely to generate the most discussion and disagreement. So, here are my ten most favorite things about being born and bred in the South:

1) College Football is a recognized form of religion. (see
www.southernfriedfootball.com)
2) Golf can, and should, be played in every month. (see www.masters.com)
3) All of our Grandmamas can cook. (see www.southernliving.com)
4) We haven’t forgotten how to dress. (see www.southernproper.com)
5) G.R.I.T.S (Girls Raised In The South). (need I say more?)
6) Our slowness of speech is a result of our fullness of thought. (see
www.twainquotes.com) As my daddy is fond of saying, “Son, make sure your
brain is engaged before you put your mouth in gear.”
7) Sweet tea with freshly cut lemons.
8) The “War Between the States” (there was nothing Civil about it) was really a war between a centralized government and the rights of states…and it continues.
9) Fresh tomato sandwiches (from your garden) are like manna from Heaven.
10) Pickup Trucks, Dogs and Shotguns go together like a glass, sweet tea and ice…it’s just natural. (see www.browning.com)

Unsustainable, Un-nerving and Un-American…a book review

America is under attack. But, I’m not speaking of the Islamists and other external forces who want to see an end to our western ways and capitalist system. We’re under attack from within and the means and methods of the war will surprise you…maybe even infuriate you.

Jim MacDougald has just written a terrific book for anyone who wants to fully comprehend the massive “bait and switch” the public sector has been pulling on the private sector over the past decade. While we (private sector employees and employers) worked harder and longer, paid more in taxes and saw our retirement savings funds whittled, the public sector employees (federal, state & municipal) saw increases in salaries, medical benefits, retirement program and pension plans. Is it any wonder that during the past decade the private sector lost three million jobs while the public sector increased its employees by two million? It all sounds lovely. The government created lots of steady jobs with outstanding benefits. What’s to complain about? Well, the complaint is that this massive shift of jobs from the private sector to the public sector is simply not sustainable. Aptly, the name of MacDougald’s immensely eye-opening book is, "Unsustainable."

In the book, the author provides massive detail, thanks to a team of researchers who has been collecting and analyzing this pay disparity data for a couple of years. I warn you, some of the public pay shenanigans, especially the “triple dipping” and “end of career spiking,” will get your blood pressure up. Whatever you do, don’t read this book after reviewing your latest retirement savings statements. At the crux of MacDougald’s thesis is simple mathematics. If the public sector keeps taking more from the taxpayers and small& medium businesses that make up the majority of our economy and uses it it pay itself total compensation (salary, pension, medical, vacation, etc.) at significantly higher rates than the private sector can afford, we will eventually crater our economy under the weight of an unsustainable economic system. The public sector doesn’t produce any revenues itself. It is reliant on the revenues derived from taxpayers and businesses. By adding more employees with greater pay, benefits and guaranteed pension plans, the public sector is adding unfunded liabilities to its future budgets. Because these liabilities are not required to be recorded as long-term debts on the Balance Sheets of our public entities, the massive obligations are hidden from us. Rather than tell us that a state’s budget is woefully inadequate because of the growing unfunded liabilities of out sized pension obligations, governors will trot out the school children and tell us that if we don’t pony up more taxes, then Johnny and Jennifer will suffer a lack of funding for adequate education. Journalists snap the pictures, capture the video and publish the sad stories and the extortion cycle works again.

MacDougald, who is the son of an Army Sergeant, created a highly successful business in the 80’s and 90’s, with thousands of employees. He doesn’t think he could replicate that success again in the present environment. He wrote this book because he felt compelled to share the information with as many people as possible in the hope of educating people and motivating them to take action. It’s the same reason he founded The Free Enterprise Nation, for which he serves as Chairman & CEO. www.thefreeenterprisenation.org

Read the book. See the facts about how government forces unionization. Learn how egregious the tactics are for making sure “civil servants” receive pension plans and lump sum payouts that you can’t get in the private sector. See how seniority trumps performance in our public education system. Arm yourself with the data so you and your family are not fooled again by the budget crisis extortion game. It’s a powerful, well-written book with lots of fresh data, but it is written in a very clear and non-technical manner. MacDougald is not an economist, (though he probably could be and his son is one) so the style and voice he employs is direct and easy to understand. It’s the author’s first book. I hope it’s not his last.

Debt, Valuations and the Death Spiral of Unsustainable Wage Growth in English Soccer

It is currently very fashionable for fans and media to question the sustainability of debt at certain high profile football (soccer) clubs in England. In fact, it is practically a sport unto itself at Manchester United, one of a handful of clubs owned by Americans. While it is always wise to use debt with an abundance of caution, the drama at ManU has frankly far exceeded the data. Personally, I think the hysteria is fueled as much about Yanks owning the English sport as it is about debt to equity ratios.

If one examines the situation at ManU purely from the perspective of the metrics and not as an impassioned fan or patriotic protector of the beautiful game, it is clear that the club is far from distressed. Since acquiring the club in 2005, the Glazers have grown the revenues, profits and valuation at an annual rate that outpaces the rate of interest on the debt. This acts to de-lever the club from a debt perspective. While the amount of debt is large (roughly $950 million), it is approximately half of the value of the club, which Forbes put at $1.83 billion earlier this year. The club has annual revenue of $460 million and profits of $150 million. A 33% profit margin is something every sports team owner would celebrate. This makes ManU the world’s most valuable and most profitable sports team. On top of those astonishing numbers, the team continues to win (three consecutive league titles) while making prudent, long-term decisions about its player development and wage bill. In our view, the Glazer management team has done an excellent job of growing the business and has proven it has the correct business model to manage its current debt levels. If you take a purely financial view, the fans of Manchester United should be quite happy about the current and future health of their club. And if the owners were English, they would be…at least for a while.

Now, let me tell you where there is real danger in English football. If you want to see where owners, boards and management are doing a poor job and jeopardizing the health of football clubs, look no further than the Coca-Cola Championship League. In the false belief that wage bill alone determines wins, too many clubs are spending their hard-earned money on players in an undisciplined manner. With pressure from fans and the desire to get a piece of the ever-growing media rights share from the EPL, clubs are spending beyond their means. If you examine the wage to revenue ratio of the last three seasons, you’ll see an alarming trend. The wage bill average has gone up as a percentage each year from 72% to 79% to 87%. Because media rights have far out-paced other revenue streams (attendance for example), there is an even stronger pull for Championship clubs to use debt to fund operations as a high risk gamble to buy their way into the EPL. The theory goes that once promotion to the EPL is gained, debts will be paid and all will be well. It’s a sucker’s bet. Deloitte’s Sports Business Group has issued a warning about the rising wage bills. We think it should not be ignored. If you study the past 15 years of English football, you’ll see that the path to insolvency is well worn. If you look at the NFL and the NBA today, you’ll see that the ability of management to control its single largest operational cost (wages/benefits), in the context of unprecedented economic weakness, is at the core of CBA negotiations and may jeopardize a 2011 season for both sports. http://www.forbes.com/business/sportsmoney/

So, what’s the point here? Our view is that English football clubs can actually gain from owners who are driven by the profit motive. The profit motive aligns shareholders, management and fans in regards to building a strong, healthy valuable organization. There are lots of opportunities today to find distressed football clubs at great values, but the key is management. The value of the clubs is in the ability of management to repair the broken balance sheets, improve the income statements, provide financial discipline and operate the organizations with a view towards long-term, sustainable success.

Soccer, SEC Football and ESPN

Thanks mostly to ESPN, Soccer (Football in the rest of the world) may finally take its place as a “major” sport in the US.

I’ve never thought soccer was going to gain traction here in the states. After all, we have a truly unique sporting nation – three professional team sports (NFL, MLB, NBA) with the best players in the world and a collegiate system that not only feeds the pro leagues with annual talent but also generates tremendous fan interest. But the demise of Setanta in 2009 created the opportunity for ESPN to accelerate its move into the British market with EPL rights. With ESPN, the worldwide leader, putting a serious focus on soccer, expect the sport to slowly become a part of the US mainstream. No global sports media company has the resources, talent or culture of ESPN. No US media company has the global integration capabilities. However, even ESPN can’t just “manufacture” another major sport. Everyone has tried and failed over the past 30 years to put soccer on par with our other pro team sports.

There are two other factors that will help create the confluence necessary to catapult soccer to the mainstream in the US. The first factor is our shrinking world. We are more mobile, more communicative and more aware of other cultures today. Technology allows us to live, work and share… any thing with anyone at any time. The second factor is the game itself. I’m not talking about the beauty of the “on pitch” action mind you. I’ve never played the game and I’m not a serious fan. What I’m talking about is an unmatched intensity of affinity that football (soccer, I mean) fans possess. It is bigger than Red Sox Nation, Da Bears and LeBron’s Cavs. These fans are truly stakeholders – invested emotionally, mentally and fiscally to their team in a way that is hard to describe. I’ve witnessed it over the past three months first hand in my dealings with the Brits. The only example I can think of to compare the fan intensity of English Soccer is SEC Football. With SEC football fans, there are simply times when families, jobs and friendships take a back seat. I know that sounds strange, but spend a week in Alabama during the Auburn vs. Bama game and you’ll know what I mean. That’s the way it is for English Soccer fans. The results of their team’s match define, in large measure, their own individual worth – at least for a time. That sort of intense support transcends players, coaches and owners. The affinity is often passed from generation to generation – in some cases for a century and a half. The team brand is stronger than any individual. That’s the sort of brand loyalty that corporations yearn to possess. And that’s one of the reasons why soccer is going to make it in the US. ESPN knows that the US soccer market now includes fans of pro teams in England, Germany, Italy, France, South Africa, Mexico, Brazil and other countries where soccer is king, in addition to fans of the MLS and NCAA teams

The way soccer becomes mainstream here is going to be a little different than our other sports. It’s not our game. It’s the game of the world. Soccer will not become mainstream through the success of MLS – though I do think the league is starting to make significant progress with smart decisions to build soccer-specific stadia, embrace key immigration cities and showcase worldwide talent. Soccer will become mainstream through a combination of ESPN’s coverage of English Soccer (Saturday mornings in the US are now dedicated to the sport on the worldwide leader) and our American desire to eventually become the best at everything. It may take a very, very long time, but that’s where our nation will expect us to go… once we truly embrace the sport. We may never be the best in the world at soccer, but the thought of a global battle for supremacy in the sport means huge potential in the business of soccer – something ESPN will have had no small part in creating.