Author Archives: Dan

The Rule of Collision

The Rule of Collision is a philosophy based on the idea that the world is full of individuals and forces (natural and manmade) travelling on their own paths and colliding with each other at various intervals. It is a realist philosophy that refutes the Law of Attraction, a popular philosophical concept which posits supernatural forces connecting human thoughts with the external world.

The Law of Attraction
Many self-help gurus have made an excellent living touting the so-called law of attraction. This “law” stipulates that by focusing thoughts towards certain goals or objects, the individual will attract those goals or objects towards him or herself via supernatural forces that connect thoughts with the external world. For example, under the law, by thinking about success, and fixating on thoughts that will lead towards success, the individual will actually attract success towards him or herself. By thinking about bad thoughts and fixating on failure, the individual will inevitably fail.

Any realist is aware that such a law does not exist. There are plenty of people who may focus on success, make a plan, stick to it, and still fail in life. There are also people who seemingly just come in to luck, despite the fact that he or she may be preoccupied with negative thoughts. Some are just born in the wrong place at the wrong time, and really have no ability to alter their living situation, despite their best efforts. And, some have their plans cut short by unexpected bad luck, like getting a disease or in to a bad accident.

There is no immutable law that connects thoughts with reality. Simply thinking of something cannot bring it towards someone. However, that does not mean that people are not capable of guiding their lives in the direction that they choose.

The Rule of Collisions
All people are individual actors, navigating their way through their lives like cars through streets. A driver must navigate his or her car around other cars, random objects, and various things that may come in to his or her path. Throw in enough traffic (and some wild driving), and the driver will inevitably collide with other objects. These collisions will alter the car’s course, and force the driver to re-chart his or her path. The driver may have a destination in mind, but that destination will change as the collisions continue to occur. Some of these intervening objects may slow the car’s course, but some will speed things up, getting the driver ever closer to his or her destination.

The roadways of life are full of other people who are navigating along the same pathways. There are also non-human actors, or forces, that will affect one’s journey. Each person or force represents another potential collision that will alter one’s path. These forces are beyond the individual’s control, but every individual will inevitably collide with them as he or she goes through life. The Rule of Collisions is that the individual can only steer him or herself in the direction of positive forces, and away from negative ones, but that one’s destiny is shaped by the paths of the forces that he or she collides with as much as it is shaped by the paths that he or she chooses. One can only hope that his or her collisions will be beneficial, and that he or she will continue to get to desired destinations.

Someone who gets a cold only gets sick because the path of the virus collided with that individual. The path of the virus collided with the individual because the path of someone already infected with the virus collided with that individual. The person already infected with the virus got sick because he had his own collision with another sick person. If it were not for this preceding series of collisions, the person with the cold would not have gotten sick. The only collision that he or she was in control of was his or her collision with the last sick person, but he or she still got sick because of all of the preceding collisions.

One can do all that he or she can to avoid colliding with sick people, but in the end, every person must come to grips with the fact that in the ordinary course of life, there will inevitably be collisions that change our lives for better or worse. An entrepreneur who creates a new product can only succeed because another individual collides with the product and decides to purchase it. A runner who wins a race will only win because his abilities were greater than those of the athletes that he raced against. No matter what happens in life, we are affected by people and forces around us as much as we are by our own thoughts, decisions and actions.

Karma
Karma is the concept that doing kind acts and treating others well will inevitably lead to kindness and good luck in return (and that doing bad acts will lead to bad luck). Of course, there is no magical balance sheet that exists which will ensure good luck to those who do well to others. In fact, there is no guaranty that someone who performs acts that are altruistic will have good luck at all. But, doing good acts will at least make more positive collisions possible than there would be if no good acts were done at all.

Someone who has received a favor will likely remember that favor for a long time. To a person who is raising money for a cause, a simple donation of $10 or $20 will make a serious impact, especially if only a few have donated. An act like this should not be done with an expectation of the good act that will be returned. But, enough good acts in the aggregate will inevitably lead to return favors for the altruist.

A good act will represent a positive collision on the path for the person that has been helped, which will send him or her in a more positive direction in life. This collision will lead to further collisions that may never have been possible without the good act that had originally been done. Once on a positive path, this person will likely have more positive collisions, and eventually, he or she may collide with the person that helped him or her in the past, and be able to return the favor.

The Rule and life decisions
Many self-help books instruct individuals to write down their goals, starting with a vision of where they would like to be in 10 years, and then constructing the steps that will get them there. As things change in the individual’s life, he or she can reassess his or her goals, and write down new action plans. Techniques like this will likely be beneficial to many, as focusing on the direction of a positive life path will often lead towards desired destinations.

However, there is nothing necessarily wrong with a “go with the flow” attitude in life. Every person is able to define his or her own path, and for many, a traditional definition of success may not be what he or she desires. For some, the journey is more important than the destination, and it is the uncertainty over what collisions may occur next that will lead to joy in life. Sometimes, individuals may achieve greater success by taking paths that would not involve traditional routes towards societal definitions of success.

Many business people find success in non-traditional paths. Take the example of J, a person who has achieved great financial success. J had a rough childhood and very little formal education. He was only able to get a job unlocking doors for a living (for people who had locked themselves out of their homes and cars). After a couple years of working for someone else, he bought his own tool kit and put ads in the Yellow Pages. He got responses to his ads, built a steady business, and was able to support himself from door unlocking. He then trained a friend to unlock doors, and hired him to do the work that he once did. He replicated the process in another city, and began managing several locksmiths in multiple cities. He now makes an excellent living from his business. He didn’t start out thinking that he would have a successful business in 15 cities. He simply followed the path that he was on and made decisions that would lead to greater success.

The Rule and the job market
Spending too much time self-analyzing and trying to discover goals can in fact impede an individual’s progress in life. A lot of people may have a dream job or school in mind, and will continually keep working towards that goal, despite the fact that there is no reality of that goal being achieved along their current path.
The job application process is an interesting example of the Rule of Collision in motion. For every job listing, there are the people doing the hiring, the person who gets hired, and several candidates who will not get hired. In today’s job market, a hundred applicants may apply for a position, but only one’s path will collide with the path of the hirer. The winning applicant will likely have a stellar educational background, lots of relevant experience, and a winning personality. All of the other applicants, through no fault of their own, will likely have a deficiency in one of these aspects that the winning candidate does not. The winning candidate chose the path and experienced the collisions that made him or her right for the job.

Sometimes, an alternate path may be required to get an individual to the goals which he or she desires. In a job market with more employers than applicants, any individual will eventually find a job if enough applications are sent out. But, if there is a dearth of employers and an abundance of applicants, many applicants will never achieve their desired positions.

In this sort of environment, many will find success by forcing the collisions that would otherwise not be likely to occur. Rather than sitting at home and applying for jobs that will likely have more qualified applicants applying as well, many will find success by seeking out the person that he or she wants to be in 10 or 20 years directly, and arranging a meeting with that person. Most successful individuals love to talk about how they became successful. Rather than asking for a job upfront, asking for advice on getting a job may be a better strategy. After the meeting, the prospect should stay in touch with the mentor, and volunteer his or her services to assist that person while he or she is looking for a job. The mentor may not immediately have something for the prospect to do, but at some point down the road, if work needs to be done, the mentor will remember the offer. If a prospect forces enough collisions with enough successful people, he or she will eventually find employment.

The Rule and failure
Every individual will inevitably fail at something in his or her life. There is no way to avoid all of the negative forces in the world. There will be people who seek to hurt others for their own personal gain. There will be times when there are no possible positive collisions. And, there will be times when a negative collision occurs which ruins an opportunity. In these situations, the only option is to remain optimistic and to keep trying.

As hard as it is to stay optimistic in these situations, people must always realize that life could be worse. When out of a job and low on cash, there will likely be a family member or friend who can provide a place to stay and some food or cash. For those who have no family or friends to help, there will likely be a government entity or charity that will help. And, even in the worst possible scenario, there is always the option to beg on the street and live off of the kindness of others. Obviously no one wants to be in this situation, but, it is a real situation that many are faced with in their lives.

Whenever things are bad, there is always the possibility that life could be worse. And even if they were worse, there is always a path to success. The person living on the street had a series of collisions in his or her life that led him or her to this unfortunate place. It is important to give to the homeless, even on rare occasions, as anyone could end up in such a situation. Without the charity of others, there would be no hope for the least lucky people in life.

Those who are fortunate enough to have a job or a successful company must always be prepared for the fact that it could all disappear one day.  It is important to be thankful for the good things and life, and to continue to try to progress in life, as there is no telling what collision is around the corner. At the same time, there is no need to settle in life. Everyone lives only one life, and for those who are not happy with their situation, there are always more options out there. Sometimes, the next collision around the corner will be the one that leads to a better path.

The Rule and fate
For many, the thought of a life with random collisions is scary. It would be nice to have predictability in life, to know that just by focusing on something; fate will attract it. However, the reality is that there is no way to predict the future, and life will bring whatever it does.

That being said, when looking back at the past, there is one series of interconnected collisions that make up the lives of all individuals. This interconnectivity is set in stone, and cannot be undone once time has passed. Looking forward; there will also be one interconnected infrastructure that is formed based on the collisions that people will encounter in the future. The collision of paths in the future will be guided by the collisions that have already occurred, together with new collisions that will arise.

To a certain extent, the future is already set in stone; it is just unclear how the pathways will connect. All that is known are the connections that have already been formed via prior collisions. These connections can be used to guide the direction that the individual will head in.

Conclusion
The future may be a scary thing, and there may be good or bad luck in store for each individual. One can only take control over that which he or she has power, which is the direction that he or she is heading. One can focus his or her thoughts and decisions on a certain goal, but it will inevitably be other individuals and other forces that one cannot control that will affect the actual destination. All one can do is remain optimistic, keep moving forward and keep focusing on that which he or she desires. This will not guaranty that one will reach his or her destination, but it will guaranty that he or she enjoys the ride.

On Money, Wealth and Taxes

At the time of the writing of this article, there are several major protests being held in cities throughout the world under the “Occupy Wall Street” banner. In the midst of one of the greatest economic downturns in the past hundred years, citizens are taking to the streets to protest the gross disparity in wealth between the wealthiest Americans and the large majority who are struggling to get by. This movement has brought the issue of economic disparity to the  forefront of the mainstream media. As the Obama administration proposes a special tax on annual income over a million dollars, it is pertinent to discuss what money really is, how it is accumulated, and the effects of taxation on individuals, corporations, and the economy as a whole.

Money
I remember first gaining an understanding of the existence of money as a child while shopping at a toy store. Learning that I could not have a toy that I wanted because it was too expensive was a harsh reality to take in. This was clearly a problem. There are all these amazing toys out there, but for some reason I can only have the cheap ones? Something was clearly wrong.

I thought that I had solved the problem of money not too long after my discovery of its existence. “Why doesn’t the country just give everyone a million dollars so that we can all be rich and have all the toys we want?” It seemed like a great idea.

Of course, we all know why this doesn’t work. If the country gives me a million dollars, then it must give the guy who works at the store a million dollars and the guy who makes the toy a million dollars. The worker will quit his job, and the toy maker will stop making toys. The price of the toy will have to go way up to make it worth it for the toymaker to produce the toy and the worker will demand more money to sell the toy. All of the sudden I’m paying 100,000 dollars for the toy that once cost 100 dollars, and before you know it, my million will be gone.

The principle that I learned is that the value of money is only related to the fact that there is a disparity in how it is distributed. The fact that only a select few have a lot of money gives money its value. This principle goes back to the first monetary economies.

Before money, economies were based on a system of barter. The hunter would give meat to the berry gatherer, who would provide the hunter with berries in return. Once additional products were demanded, the barter system broke down. If the hunter needs shoes, the clothier needs meat and the shoemaker needs clothes, the hunter will have to trade his meat for clothes from the clothier, then trade the clothes to the shoemaker for shoes. Every individual would have to carry a variety of goods to trade, depending on what was to be demanded by a trading partner. With the introduction of money, the hunter can sell his meat for money, and then purchase what he wants with that money.

The money that the hunter receives in exchange for his meat is the value of the hunter’s contribution to the economy. If one chicken’s worth of meat is worth one pair of shoes, then both will be worth the same amount of money. When the hunter makes a purchase with money, it is as if he is using a chicken, or a pair of shoes to make the purchase.

Even in a modern economy, this truth still holds. The value of all money is still based on the product of the individual producer at the bottom of the chain. The worker in a factory in China, the farmer on a mega farm in Nebraska, and the homebuilder in Orange County create the wealth that gets distributed up the economic chain. When I make a purchase at 7/11, it is as if I am exchanging the work that produced that money for what I am purchasing.

With modern technology, of course, it takes fewer and fewer workers to produce base goods. The worker at the bottom of the chain actually contributes a huge amount of wealth to the economy. In America, only 2% of individuals work on farms, but those individuals provide enough food for more than the entire population of the country. Fortunately, a new level of the economy arises once our basic needs are accounted for; the service economy. New products and services are demanded which go beyond the basic needs of the individual. Attorneys are required to settle disputes, doctors fix the sick and graphic designers create images. This new level of service providers takes the wealth that has been created at the bottom and redistributes it again at the next level of the economy. Individuals in the service economy only have this luxury, however, because of the money creators at the bottom of the chain.

Wealth
Going back to our primitive economy, another phenomenon exists which affects the distribution of money. With the introduction of money, the rise of a middle man will likely occur. The shopkeeper collects goods from those who produce them, and provides the producers with money that they can then exchange for other goods. The  shopkeeper will sell goods for more money than he pays for them, thus making a profit. Once the shopkeeper has paid for all of his needs, he will likely still have money, which leads to savings, and the accumulation of wealth.

On his own, the hunter is limited in the amount of wealth that he can accumulate. He is limited by the amount of food that he can produce in a given day minus his expenses for himself and his family. The hunter can only increase his wealth by becoming a middleman. He can train several other hunters to hunt, then collect their spoils, give them money, and sell their meat to the shopkeeper at a profit. The hunter now has a hunting business, and is essentially operating like the shopkeeper.

The shopkeeper’s accumulation of wealth is only limited by the number of customers purchasing goods and suppliers providing him with goods. In the modern economy, the shopkeeper’s limitation has grown to an enormous extent. The shopkeeper can sell goods to billions of customers. Bill Gates became the richest man in the world by selling billions of copies of Windows at $100 a copy. Gates produced a product that was useful. Individuals purchasing a computer with Windows purchase that product with money that they have earned. The money they have earned has a value based on the initial creation of wealth by the producers in the economy. Bill Gates was able to accumulate his billions in profits because the producers at the base of the economy pushed their wealth up the chain, with billions eventually landing in his pocket.

Wealth is created based on a pyramid. The producers at the bottom of the pyramid push wealth up the chain, and the business owners at the top are the eventual benefactors. In essence, the rich can only become rich because of the contributions of the poor. In an economy with 10 individuals, the wealthiest individual can only accumulate a fraction of the money that can be produced by the other nine individuals. In an economy of 7 billion individuals, the wealthiest individual can accumulate a fraction of the wealth that can be produced by the other 6,999,999,999 individuals. The wealthiest 1% in America could only become wealthy because of the other 99%. Anyone who is wealthy got that way because other individuals gave them money in some way shape or form.

Many wealthy individuals would say that they became wealthy because of their own hard work, ingenuity, and perseverance. This is true, and the wealthy need to be commended for what they have done. Becoming wealthy is not easy, especially in a world with so many people who want to be wealthy, and so few who actually are. Even those who have inherited their wealth only did so because someone in their family line figured out how to accumulate wealth so that his or her heirs would not have to worry about doing so. This point, however, does not detract from the fact that the wealth was created because of the contributions of the poor and middle class, and this principle must be remembered when determining how wealth should be redistributed.

Taxes
Going back to our primitive economy, there is another factor which arises that affects how money is distributed. The early shopkeeper accumulates his wealth, and stores it in his home. The jealous hunter breaks into the shopkeeper’s home, kills the shopkeeper and takes his wealth. The hard work of the shopkeeper has now been destroyed by one criminal act. Enter the King.

The King, or the Government in modern times, organizes society so as to allow individuals to keep their wealth. For the early shopkeeper, it is worth it to dedicate a portion of his wealth to the king, who will maintain order. If the hunter kills the shopkeeper, the king will punish the hunter with death. The hunter is thus detracted from committing a crime. If a neighboring village invades, the king assembles an army to fight them off. The king is the absolute protector, and is in charge of the general welfare of all in the kingdom.

Of course, the king is also responsible for wealth redistribution. If the shopkeeper loses his wealth, the king will provide him with food, so that he has the opportunity to rebuild his shop, and accumulate wealth once again. By providing for the poor, the king redistributes wealth from those who have accumulated it back to those who produced it, or will produce it in the future.

The issue then arises over how much in taxation can be appropriated by the king. If the king takes too much, the shopkeeper will lose his incentive to maintain the shop. If he can no longer accumulate wealth, then there is no purpose in continuing the process of shop keeping. He will simply resort to working. However, if the king takes too little, the shopkeeper won’t receive adequate protection, and the society will fall apart.

In modern society, the role of the government has expanded greatly. With more and more money being created by producers, citizens come to expect that more and more money will be spent by their governments on maintaining a good society. Economic downturns lead to situations in which society demands high sums from its government to maintain a decent existence. Government expenditures are needed to put money into the pockets of the producers, who will make purchases that allow the shopkeepers to accumulate more wealth. All of the workers who produced the wealth when times were good now require that the wealth be redistributed to them when times are bad.

There is no ideal rate of taxation. The rate should be high enough for the state to acquire the revenues required to provide the services that its citizens demand. Of course, there is also no ideal level of services that the state must offer to its citizens. The role of the government is to find this equilibrium. The state must redistribute money from those who have accumulated it to those who produced it in order to create more spending and producing. The government should not be afraid to raise taxes to meet the tax revenue equilibrium.

United States Taxation
A country that taxes 90% of the income of its wealthiest citizens would likely not experience a great increase in revenues by taxing 95%. At a certain point, incentives are lost, and the producers can no longer accumulate wealth because of the unnecessarily high tax burden. However, the tax burden in the United States is quite low for the extremely wealthy.

An individual earning over a million dollars a year should pay an additional tax on his or her income in order to pay for programs that will boost the economy and bring back jobs to the wealth producers. Of course no one wants to pay more taxes than they already do. The wealthiest currently pay 35% in Federal Government taxes on income above $357,701. On capital gains income, the wealthiest only pay 15%, no matter how much they make. Of course, there are also state taxes and payroll taxes that the wealthiest pay, but in the end those with high incomes take home a lot of what they make after taxes.

Total government revenues actually went up when the Bush administration lowered the tax rates that Americans pay. This phenomenon, however, coincided with a massive asset bubble in the real estate industry. Tax revenues increased because wealth was being created artificially. Rather than wealth being created based on production, it was being created based on an artificial increase in the value of real estate. Banks essentially used an increase in property values as an excuse to print money, which was then redistributed through the economy. As soon as the real estate bubble crashed, tax revenues began to fall again.

Increasing tax rates on the extremely wealthy would only lead to a decrease in tax revenues if it caused a significant slowdown in an economy. The argument goes that small business owners won’t make investments if their tax burden is too high, since they will have less disposable income to reinvest in their companies. I find this logic to be unsound.

Take an individual with a successful small business that gets $5 million in annual revenues. After expenses, the company makes a profit of $1 million. If the business owner takes out all $1 million as personal income, he or she will pay about $300,000 to the IRS and another $100,000 in state taxes. This individual now has $600,000 in disposable income. If the Federal tax rate was higher and the individual had to contribute another $50,000 to the IRS, he would now have $550,000 in disposable income.Will this 8% decrease in spending money really make any difference in whether the business owner decides to hire more workers for his company?

Now assume that the owner reinvests $500,000 in to the company to open another office and hire more workers. The owner now earns only $500,000 in pre-tax income. He takes home $300,000 at a lower tax rate or $275,000 at a higher tax rate. The 8% difference is not the factor that will guide the owner’s investment decision. Regardless of the tax rate, the investment decision is going to significantly lower his after tax income in the short run.

The owner is only going to make the investment decision if he thinks that it will lead to more revenues for his company in the future, which will give him more profits before taxes. If he anticipates $6 million in revenues in the following year due to his $500,000 investment, then he will make the investment. His after tax income will only affect the spending

decisions he makes with his personal money, not the spending decisions he makes for his company. If anything, a higher tax rate will encourage the owner to spend more on the company so that he makes more profits in future years and takes home more money after taxes.

The thing that is going to determine the business person’s investment is anticipated revenue. This revenue will be determined by the amount of customers that demand her product. The amount of customers who will demand her product will depend on the amount of people who have disposable income, and the amount of disposable income that they have. If the economy is bad and people do not have disposable income, then there will not be anyone to purchase the business owner’s products.

The government’s role in a recession is to create more purchasers of products so that businesses can expand. The government cannot create more purchasers without additional money to invest in creating those purchasers. The government cannot raise more money without taking more money in the form of taxes.

Conclusion
A minor increase on taxes for the wealthy should not be looked at as the government punishing the wealthy for accumulating wealth. Rather, it should be looked at as the government returning to the masses a small portion of the wealth that the wealthy have accumulated so that the wealthy can have more opportunities to sell their products and services to the masses and accumulate more wealth in the future. The wealthy can only become wealthy if the masses are producing money. The masses can only produce money if they have jobs and security. The masses can only have more jobs and security if the Government makes investments that give them more opportunities and gives businesses incentives to expand. The Government needs money to make these investments, and the wealthy have the money available. Increasing taxes is the right thing to do, and the government should not be afraid to do it.

Generation Connect

The story that the media has not been telling about the great recession is the effect of massive population shifts on the economy. A large reason that the unemployment rate has been increasing is that the number of people seeking employment is increasing without more jobs being created to accommodate all the new workers. The generation born in the 1980s has been steadily entering the workforce, only to find a barren landscape. Who is this generation, and what lies in their future?

The Generations
The Traditionalist generation (also called the Greatest Generation) was made up of those who were alive and fought in World War II. This generation was characterized by the nuclear family living a wholesome life in the suburbs. Traditionalists worked one job for their entire careers, lived frugally, and saved wisely. They received pensions and social security, and paid off their mortgages. They retired nicely and lived long lives, many surviving into their 80s and 90s to this day.

When World War II ended, the Traditionalists had babies en masse, producing what would be called the Baby Boom generation. The Baby Boom generation was defined by the sexual revolution of the 1960s, the Vietnam War, and the boom periods of the 80s, 90s and 2000s. The “Baby Boomers” created much of the new technologies in the world today, including the personal computer.

The Baby Boomers were also defined by a shift in attitudes towards work and jobs, with the average worker working 8 different jobs during his or her career. The Baby Boomers lived day to day, spending when times were good and going broke when times were bad. Many won’t receive pensions because they didn’t work for one company for long enough. Baby Boomers didn’t pay down their Mortgages, and used their home equity to finance their lives and their children’s lives. The Great Recession has wiped out much of the retirement savings of the Baby Boomers.  Many aren’t able to retire, and won’t be able to in the foreseeable future. It is likely that many baby boomers will work well into their 60s and 70s.

Generation X is the term used to describe the generation born after the Baby Boom, in the late 60s and 70s. This middle generation faced difficulty entering a workforce already saturated with baby boomers. Generation X was defined by Cassette Tapes, VCRs, and the Internet boom of the late 90s. Generation X had trouble entering the workforce in the 80s and early 90s, but eventually settled in.

The Helicopter Generation?
The next major generation consisted of the children of the baby boomers, born in the late 70s, 80s and early 90s. This massive generation grew up with video games, the Internet, and a globalized world.

The children of the Baby Boomers have gone by many names. My least favorite are “The Echo Boom”, “The Helicopter Generation”, and “Generation Y”. The term echo boom was the term given to this generation by David K. Foot, a Baby Boomer, in Boom, Bust and Echo, which was a bestseller in 1997. The book discusses the major generations in recent history.  Echo Boom defines the generation by the generation of its parents, seeing the ripple created by baby boomers as the defining element of this generation. The term Helicopter Generation comes from the fact that many baby boomers had only one or two children, which led them to be much more involved in the lives of their children, hovering over them like helicopters. The term Generation Y derives from the fact that this is the generation after Generation X (how creative). All of these names define this generation by previous generations, and not by the characteristics of the generation itself.

The names “Millennial Generation” and “9/11 Generation” are slightly better, defining the generation by watershed events that occurred in the lives of individuals in the generation. I don’t think that either of these events truly define or explain the generation though. They are just events that happened to occur during the maturation of people in the generation.

My favorite names currently used are the “Internet Generation”, the “Dot Com Generation” or the “Net Generation”. These terms define the generation by the internet, the major technological advancement that has affected how this generation lives, works and connects. My only qualm with these terms is that it is not just the Internet itself that has affected how this generation lives. Other technologies that are ancillary to the Internet have also had a great impact. The internet may have made Facebook, instant messaging and texting possible, but these items transcend the internet to create a new way of life that defines the generation.

Generation Connect
An alternative that I like is “Generation Connect” or “Gen Con” for short (I know it sounds like some evil corporation out of a Terminator movie). This term encompasses what gives this generation its identity; the interconnectivity of the individuals who make up the generation. Whether connecting through the Internet, Facebook or text messaging, or connecting at bars or social gatherings in the real world, this generation is more interconnected than any previous generation.

Technologies have allowed this generation to maintain contacts for longer periods of time and create more connections. In previous generations, someone with a Rolodex filled with a hundred contacts would be considered a very well connected person. Today, the most connected people have several thousand friends on Facebook that they can connect with instantaneously.

This generation is also connected on a global scale, with borders and nationalities being replaced by a single world culture. It is not uncommon for individuals in this generation to have connections in several countries and cities throughout the world. People move and travel, but maintain connections over long distances.

The Plight of Gen Con
Generation Connect is currently facing a very difficult transition into the global economy. The Baby Boom generation is leaving the workforce at a much slower rate than they should, which means that existing jobs are not becoming available. The Great Recession has meant that no new jobs are being created, since companies are not expanding. Global competition has meant that certain jobs are unavailable in first world countries, such as work in manufacturing or telephone support.

Another major factor is that the productivity of workers has greatly increased due to new technology. In the past, an experienced attorney with a good book of business would require an associate to do his or her research, a secretary to type out briefs, and a runner to submit documents. Today, that same attorney will do his or her own research on-line, type briefs on his or her computer, and submit documents on-line in half the time. Modern technology has created a breed of superhuman workers who can do the work of several individuals.

Back to Basics
In order to survive, many members of Generation Connect are having to revert back to the basics of a primitive economy. Even with all of the new technologies of the 21st century, the economy still consists of buyers and sellers transferring money in exchange for goods and services. Those who are succeeding despite the state of the economy are those who can sell, effectively market, or create things for others to sell. Even those with intellectual jobs are increasingly being asked to bring in business for their companies.

The baby boomers will eventually retire, and jobs will start to open up. However, the transition will likely take several years, and every year new workers are entering the workforce. This generation will adapt like previous generations did. The Baby Boomers faced a similar crisis when they entered the workforce in the 70s, as did Gen X in the 80s.

Like Bill Gates and Steve Jobs proved themselves in the Baby Boom generation, Generation Connect will also have its individuals who achieve great success and change the generation. So far, Mark Zuckerberg has been the first to truly change the world, but more will follow.

Generation Connect is more educated, knowledgeable and connected than any previous generation. This generation will do great things as it takes the reins from the Baby Boom. New technologies will better our way of life and create new industries and opportunities. Only time will tell what lengths will be achieved, but the sky is the limit.

Understanding the Debt Ceiling Debate

Anyone who has watched cable TV in America over the last few weeks has probably seen ads attacking the Obama administration and calling for an end to an increase in the debt ceiling. The ads point out several truths about the economy since Obama took over in 2009. The unemployment level has gone up and the federal debt level has increased by a large margin. The problem with these ads is they use true facts to lead to a false conclusion and an even worse policy prescription for America.

 

The Debt Ceiling

Regardless of who should be blamed for America’s economic woes, not raising the debt ceiling would probably be the stupidest thing that the government could do. The fact is that the United States government has not had a balanced budget since 2001. It has been running a deficit for the last decade, and with a deficit, the total amount of debt will inevitably increase.

The United States Congress has to approve of any increase in the total amount of debt that the American government takes on. This is the debt ceiling, which must be adjusted to reflect deficits. The ceiling currently sits at $14.3 trillion, but must be increased to reflect new deficits that the government needs to take on to function.

Obviously the size of America’s deficits is a problem that needs to be addressed. However, the fact is that there is currently a deficit and the debt ceiling needs to be increased to pay for the American government to run. If the debt ceiling is not increased, the government will not have the money to pay its obligations to employees, debtors and federal programs.

Imagine a guy who owns a house worth $500,000.00 and a home business. He has borrowed $200,000.00 and is making payments on the $200,000.00 debt. The bank is offering to give him another $50,000.00 in debt to finance his home business and make the payments on the debt. He refuses and decides that $200,000.00 in debt is too high, and that rather than taking the loan, he will leave the debt as is. However, his income is not enough to make the monthly payments on the loan and pay his business’s employees. So, he doesn’t make his interest payments or pay his employees. What will happen? The bank will foreclose and the employees will be out of work. The person will lose his home and business. Game over.

Rather than a home, the American Government has its economy as collateral for its debts. Investors have lots of confidence in the strength of the economy, and are therefore willing to lend money to the government. By not increasing the debt ceiling, the government is refusing to take on the debt that it needs to survive.

If the American government doesn’t increase the debt ceiling, we will see a financial crisis like the world has never seen. It will be even worse than the one that happened in 2008.  Investors and foreign countries will lose confidence in the US government. There will be a massive sell off of government bonds and treasury bills, which are normally considered the most secure instruments. Total Armageddon could ensue, especially with the world economy already in a fragile state. The Federal Reserve would likely use its reserves to delay the problem a little longer, but eventually the ceiling will have to budge for the economy to survive.

 

The Republican Strategy

Fortunately, the Republican Party is mostly filled with rational actors who are aware of the necessity of raising the debt ceiling. The Republicans, however, have used this opportunity for their own political purposes. They realize the power that they hold with respect to approving of the increase in the debt ceiling through their control the House of Representatives.

The Republicans are using the opportunity to starve the government, fire government workers, take health care away from senior citizens, and take away regulatory agencies that protect the environment and the general public. Federal government programs that help the poor and underprivileged are being cut.

The Paul Ryan plan for Medicare reform will certainly be a step in the wrong direction. This plan intends to pass off the costs of the deficit to the senior citizens of the future (i.e. people currently under 55). The Plan will take away insurance coverage for seniors and instead provide seniors with a voucher to purchase insurance from private companies. Of course, eventually the laws of economics will send prices for health coverage higher than the vouchers, and seniors will have to dig into their savings to purchase health insurance. Seniors without savings will end up with inferior healthcare plans, which will lead to deaths from treatable illnesses.

Of course, the Republicans would say that this is an opportunity to get deficits under control for the long term future of America. This comes after several studies have shown that at its current rate, the government’s deficits will keep on expanding, and eventually the country will no longer be able to afford to pay for government programs or make interest payments on government debt. This is scheduled to occur in the 2020s without any changes under the status quo. This obviously is a serious concern, which can’t be passed off to future generations.

The problem with the Republican solution to this issue is that they refuse to budge on the revenue side of the equation. With an increase in revenues, the government could afford to pay for its obligations like Medicare, Medicaid and Social Security, although these programs do need some minor reforms to save on costs.

Think about the U.S. government as a company. The company is operating at a loss. Revenues coming in are less than expenses. The company has to take on debt to pay its expenses. To balance its budget, there are two options: cut expenses or increase revenues. Of course, the company could do both and return to profitability.

 

Taxes

So, how does the U.S. Government increase its revenue? Taxes! The government should be paying its expenses with tax dollars from its Citizens, not from money that is borrowed, right? Not necessarily. Debts can be good for governments, allowing them to expand at a quicker rate and increase ownership of the country by its citizens, who buy government debt. It can help relationships with other countries, allowing countries to invest in each other and become interconnected. Of course, debts do need to be manageable to prevent a default on interest payments.

So if the Republicans are really so concerned about the deficit, why don’t they just increase taxes? The answer is that there is a pervasive dogma that has infiltrated the Republican Party. This dogma states that any increase in taxes will actually lead to a decrease in total revenue. The logic goes that lower taxes allow the economy to expand, which will actually increase total government revenues.

A company or person that pays 40% in taxes with profits or income of $100,000.00 will pay $40,000 to the federal government. A company or person that pays 25% in taxes with profits or income of $200,000.00 will pay $50,000 to the federal government. Therefore, if cutting the tax rate from 40% to 25% will allow the company to double its total profits, then the tax cut will actually lead to more government revenue!

Of course, the major caveat with this theory is that lower taxes must lead to increased profits or income to compensate for the decrease in government revenue per dollar earned. The Republican theory has basically become that any decrease in taxes will lead to an increase in total profitability that will more than compensate for the decrease.  If the theory were really valid, then taxes should just be decreased to 1%, because with taxes this low, the economy would expand exponentially.

What is to say that the company’s profits will double if its taxes are cut in half? The truth is that with any economic principle, the results are inevitably parabolic. At a certain rate, you can cut taxes, but the effect will not increase the company’s profit to account for the decrease in revenue. There is going to be a tax rate at which total revenues are maximized.

The Republicans would make the argument that this rate is lower than the current rate, and that taxes must continually be slashed until the perfect rate is found. However, this would assume that the “incredibly high” taxes that companies and individuals are currently paying are keeping them from making money. The thing is, companies are making tons of money, even after taxes. Many individuals are also making lots of money, and even after taxes, are still walking home with a lot. Yet, the economy is still stagnant.

The federal government does need to make spending cuts as part of its deficit reduction plans, but the Republicans want to turn America in to a third world country to do this. Any nation that punishes its poor, elderly and unfortunate is not going to be successful in the long run. These are long term problems, and the government needs to come up with long term solutions, which must include increasing revenue by raising taxes.

 

The U.S. Economy

The U.S. economy is not stagnating because taxes are too high. Companies are making huge after tax profits, and individuals who do have jobs have lots of disposable income after taxes. The problem is that after a decade of insane consumption and borrowing, followed by an economic meltdown, businesses and individuals are still in a state of shock. Companies are reluctant to hire new employees, and people are more likely to save than to spend. Companies have become more efficient, and can make the same revenue with fewer employees. This problem will only be solved by an increase in confidence, technological innovation, and government investment.

The compromise made at the end of 2010 shows that keeping taxes low did not have a serious stimulating effect on the economy, at least not enough to compensate for the loss in revenue associated with the cuts. The compromise prevented taxes on the rich from going up to pre-Bush levels of 39.6% (from 35%). It also changed the estate tax so that heirs to multi-million dollar fortunes would no longer have to pay taxes on the first $5,000,000 of their inheritance (or $10,000,000 for estates of couples), and would pay a tax rate of 35% on any inheritance above that amount. There may have been a small effect from this cut, but it has not had the stimulating powers that the Republicans promised.

The US economy is getting better, but it is happening very slowly. The biggest lie being spread by Republicans is that the stimulus package failed. The U.S. has had 7 consecutive quarters of positive GDP growth. Employment has been trending upwards since March, 2010, and there hasn’t been a month with net job losses since September, 2010.

The Republican Party is trying to take advantage of the short term memory that people have and blame the US economic problems on the person who has been fixing them, not on the people who caused them. The bad economy that we are experiencing is still the result of the horrible catastrophe that was caused by the Republican Party’s deregulation of the financial sector. This is still Bush’s recession, even though Obama has been trying to make it better.

Many parts of the stimulus package kept the economy from getting worse than it did. For example, the extension of unemployment benefits in the package kept money in the pockets of the millions of unemployed. They were able to use that money to buy food, rent apartments, and generally remain consumers in the economy. Each expenditure within the stimulus package can be directly related to an infiltration of dollars into the U.S. economy.

When Obama took over, the economy was in a horrible downward spiral. Hundreds of thousands of jobs were being lost every week. After the bailouts and the stimulus package, the economy stabilized and things began going in the right direction. The stimulus worked. It will take a long time to dig out of this whole, but at least we are no longer in the bottom and are on our way out. Obama did all that could possibly be done. He’s a politician, not a God.

Of course, if the debt ceiling isn’t raised, we could go right back in to the hole. Hopefully an agreement will be reached that solves some long-term problems, doesn’t punish the poor too much, and increases revenues. Until then, we can only watch the farce go on and hope for the best.

Finding Meaning, Purpose and Morality in a Godless World

In this latest instalment of my series of articles on fundamental philosophical issues, I go beyond discussing the issue of whether there is a supernatural being, and move on to the next logical step, formulating a paradigm for how we can find meaning, purpose, and morality in a world without such a being.

What is the Meaning of Life?
The meaning of life is simply life itself. There is no meaning beyond our existence and our life experience. There is no greater meaning to it all that can somehow transcend our world. This is it.

So now what?
The all too unfortunate side of this realization is the potential for nihilism or hedonism. Nihilism is the idea that because there is no greater meaning to it all, we should live with the attitude that life is hopeless and pointless. The nihilist would spend life sitting around, moping, and waiting for the inevitable end.

The opposite of the nihilist is the hedonist. The hedonist believes that since there is no greater meaning to it all, he is free to do as he pleases, when he pleases, without any regard for others, and with the only goal of seeking maximum personal pleasure. The hedonist would spend life committing crimes, doing drugs to excess, and walking over others for his or her own benefit.

There is nothing intrinsically wrong with either of these attitudes. There is nothing universal that would preclude someone from living a life as such and feeling perfectly content. However, most people would probably be more content not living with either of these attitudes. We do live in a real world with real consequences, and living without regards to others will subject a person to the consequences that individuals in our society have created to deter such attitudes (i.e. laws, social isolation, etc.).
These are not the only options available for living a life in a godless world. There is a “light at the end of the tunnel” for the rational person, and it’s not in the form of a supernatural being.

Purpose
The amazing thing about there being no greater meaning to life beyond life itself is that we have the power to create meaning. Everyone has a blank slate to work with to craft a story that will please himself or herself. We craft a meaning by choosing a purpose. We have the power to decide our purpose, or even several purposes that we will work to fulfill. By fulfilling a purpose, and working to do so, we can live our lives in such a way as to become content with our own existence and the world around us. After one purpose has been fulfilled, we can choose a new one. The meaning of life can be to find and fulfill life purposes.

A purpose can really be anything. It can be to do works of art, start a business, help the poor, enforce the law, help the sick, or create scientific developments. It can even be to start a family, travel, or to spend time with friends or a significant other. Whatever makes us content with our lives. Although this paradigm is very simple, it is also very empowering. Life is ours for the taking. We are in control of our own destiny.

One of my purposes is to create a legacy that will live on after my death. Why would this matter if I don’t believe that I will have the ability to experience that legacy? It is for the same reason that someone would send a check to a charity to help a group of people that he will never see or never meet. Or, from a more selfish perspective, why a celebrity would want to be considered famous to a person that he will never encounter. We as humans share the common experience of life, regardless of the time or place we live in. If there is one way we can transcend our own existence, it is through the life of another. Although their life experiences may have ended long ago, historical figures constantly remind future generations of the experience they had by cementing their names in the history books.

The hedonist or the nihilist lives a life without purpose, and will likely never find spiritual fulfillment. The hedonist could say that his purpose is to do whatever he feels like. If he can truly find meaning in fulfilling that purpose, then perhaps that will create content. But there are very few people who would find such a meaning.

The Religious Paradigm
Under most religions, the meaning of life is simply that each individual life amounts to some minor part of a greater plan by some invisible being or beings. Many questions remain unanswered. What is the meaning of the greater plan? What is my meaning within the greater plan? Why would such a greater plan include suffering? What is the meaning of the creator, and where did he come form? These questions create more confusion and despair than the theories pacify.

The purpose of life in most religions is to follow a list of rules (many of which are ridiculous and inconsistent with contemporary life) that an invisible being wants us to follow in order to gain access to a better afterlife. What is the purpose of the afterlife? What is the purpose of each particular rule? What if the purpose I would like to fulfill conflicts with one of the rules?
The religious paradigm is incomplete. It simply makes up a story and calls it a meaning. An existentialist paradigm may not be as fantastic or magical, but it is rational and complete. The meaning of your life is whatever you want it to be.

Morality
An obvious argument against the concept of choosing your own purpose in life is that someone could choose the purpose of hurting or killing other people. What would make this purpose wrong if it made that person content? Would there not be something universally wrong with hurting others?
There is nothing universally wrong with hurting others. But, a world in which people hurt others would be worse than a world in which people did not. Although there is no ultimate arbiter of right and wrong, or universal moral code that we should adhere to, the fact remains that there are several independent beings in the world whose interests will inevitably collide. Morality is simply a set of rules that we create to organize human interactions. There is no hard and fast set of rules, but we as a species have been very successful at crafting rules that provide all individuals with the opportunity to fulfill their purposes.

If there is one thing I learned in law school, it’s that there is a solution in law to almost any possible problem resulting from human interaction. The law is constantly evolving as new problems are solved, and old solutions are replaced with better ones. Of course, laws can be bad. For example, a law permitting the killing of someone for having the wrong religious belief. Why would we say that such a law is immoral? It is because such a law is a bad solution to a problem, and there are better solutions that will create more opportunity for happiness.

Many philosophers have searched for a unifying theory of morality. For example, the utilitarian theory states that morality is simply the solution that provides the greatest good for the greatest number of people. The theory attempts to measure levels of good and compare them. This theory fails when you start trying to measure levels of good. Is the value of a great scientist’s life more important than a bum’s? How about two bums? What of a law that provides a huge benefit to a large group, but a serious detriment to one or two people? The world is simply too complex to determine values for every possible interest and measure those values against the values of others.

Another theory is Kant’s categorical imperative, which basically states that an action taken by an individual in any situation should be such an action that should be Universally taken by any person in such a situation. If I see another person’s house, it should be a Universal maxim that I should not break in and steal that person’s TV. The problem with this theory is that it only works for simple human problems. What if there are several competing good things to do. Should I take a good job in a far away city, or stay home to help my ailing mother? There is no universal maxim to solve this problem. A similar situation arises if there are two bad choices.

We as a society have made rules to guide people to make better choices, and to punish choices that we think are bad. We create morality to try and shape the best possible world, but there is no perfect world.

Of course politics is an inevitable factor in discussing morality. Is the United States moral code the best for regulating human interactions? Or is a more socialist European nation like Sweden’s better? Who should determine what is the best moral code for the people of all nations? There is no easy way to make such determinations. Settling who has the best moral code and what it should be is a great goal of humanity that will involve inevitable conflicts in opinion. However, there is no room for moral relativism in this theory. That is to say, there are certain moral codes that are vastly inferior and should not be considered acceptable forms of organizing a society simply because they are accepted by the individuals in that society. For example a society that permits ritual human sacrifice would be vastly inferior to one that did not. It may be for the good of humanity for a more powerful society to enforce its superior moral code on the society committing ritual sacrifice in order to provide a better life for the individuals in that society.

In any discussion of morality and atheism, Hitler and Stalin will inevitably be discussed as examples of what happens when atheists are given the power to enforce their moral views. These individuals led their nations based on what they believed were moral principles. Under skewed forms of utilitarianism, both believed that they were acting for the greater good by killing political dissidents, the mentally ill, Jews and other ethnic minorities. These dictators had inferior moral codes by which they organized their societies. It was not their atheism that led to their horrible deeds, but rather their skewed versions of morality. We have realized that these moral codes were absolutely abhorrent, and should never be allowed to exist again.

These examples of immoral atheists should also be compared with the hundreds of immoral actions by dictators and societies acting around religious foundations of morality. The problem with religious morality is that religions set a moral code based on the prevailing views of morality at the time and in the society that the writers of the religion were living. The Jewish moral code is based on the sections of law in the of the old testament, which were written approximately 2600 years ago (read up on the documentary hypothesis for more information on the origins of the old testament). The Christian moral code is based around morality from 2000 years ago. Islam 1500 years ago. Of course religions generally have their own case law, or religious scholarly writings, interpreting the primary sources and allowing some change. However, these writings are bound by rigid books written by ancient people. The books cannot be amended or changed to reflect changes in prevailing views of what is right or wrong.

Contrast with the US constitution. The US constitution provides a moral code from approximately 250 years ago. However, the constitution permits amendments, meaning that the primary source of law can change as morals change. This flexibility permits change and evolution.

Conclusion
Realizing that there is no god and that our existence is simply a great fluke may be a scary experience, but it does not mean that life cannot persist without spiritual enlightenment. There is opportunity to find meaning in life, fulfill a purpose, and act in a moral way. We have the power to shape our world and our own destiny. We must take control of the power while we are here, for it will not last forever.

The Post-Recession World

The world has changed. Many ideologies that were previously thought to be correct by many have now been debunked. We are attaining a new level of understanding of how our society should work, and when governments should intervene in private actions. However, the greatest change is yet to come.

The Profit Incentive
Many conservatives thought that corporations should be in charge of everything, and that the private sector will always operate more efficiently than the public one. They really felt that taking away the autonomy of the health insurance companies was akin to crushing the free market and leading America down a slippery slope to socialism. After all, if the government is controlling your health insurance, what says that they can’t tell you what work you can do or what business you can operate.

The reality is that there has to be a balance in society between private enterprise and public organizations. Our society has decided that fire protection, crime prevention, justice, delivery of mail, national defense, record keeping, education of our children, and several other services are best placed in the hands of the government. Meanwhile, the private sector is in charge of distributing consumer goods, food, professional services and real property, among others. Why is this?

There are certain services for which the profit incentive is fundamentally misaligned with the good of society, whereas there are other services for which that incentive allows more goods and services to be produced, allows society to progress, and gives us the sense of freedom that drives the democratic system.

Policing is a perfect example of this misalignment. Imagine if police would only protect you if you purchased crime insurance. The poor would be subject to murder and violence without any repercussion. Vigilante justice would prevail, and total anarchy would result.

Computers, on the other hand, are best controlled by the profit incentive. Computer companies are incentivised by profits to make newer and greater computers so consumers will buy them. Some individuals may be priced out of the computer market, but that can be considered acceptable by society. Not having a computer may be a disadvantage, but it would not cause pain and suffering like not having healthcare does.

The fundamental difference is whether society decides that something should be a right or a privilege. The privilege of owning a house, getting a computer or hiring an attorney puts those items in the private category. But the right of being protected from fire or crime, or of getting decent medical treatment if sick necessitates government intervention.

The Exchange System
Although I did not get my public option, the Obama health care exchange system will serve to realign the health care system in a positive way. With the public option, the government insurer would be able to bargain with health providers to lower expenses.

The exchange system simply keeps the insurer as a middle man. However, customers are able to collectively bargain with the insurance companies by making individual choices on a grand scale (by simply purchasing the cheapest and best health insurance). The insurance companies will be forced to bargain with the healthcare providers to maintain lower costs. If an insurer does not bargain, a different insurer who does bargain will get their customers. The government will subsidize insurance costs for the middle class, and therefore will be able to dictate which plans get subsidies.

The inevitable result of this exchange will be the emergence of a select group of extremely large insurance providers, possibly just one. The government will either control this one insurer, or break it up into two that would compete. Health care costs will be lower, and insurance will be available to more individuals.

The Regulated Private Sector
There are some categories in society that do not neatly fit into the public or private sectors. Hence, the regulated private sector becomes necessary.

The illicit drug market is a great example of the consequences of a completely unregulated, lawless market. When I say lawless, I realize that there are laws banning drugs. But there are no laws governing the sale, transportation, cultivation, or delivery of drugs, which means that any disputes in the industry must be settled through vigilante justice. Hence the large crime wave that emerged along with the drug wars of the eighties and early nineties. Gangs were fighting for drug selling territory, and since there was no legitimate mechanism for settling disputes, they resorted to violence and murder to do so.

The war on drugs demonstrates that even though society may have an extreme animosity towards certain goods or services, the fact that there is a demand for those goods will inevitably create a market. It is therefore the prerogative of government to provide a mechanism by which that demand can be satisfied through legal means. Otherwise, anarchy results. The government needs to legalize, regulate, and create disincentives for the use of drugs, not simply throw every drug user or dealer into jail or prison.

The Financial Sector
The financial sector is another example of a market that needs government regulation to succeed. The recent crisis has shown us that if left to their own devises, really smart individuals will make poor decisions if their incentives are misaligned. Why would banks take such risky bets on mortgage backed securities when it should have been obvious that the system would be crushed if housing prices fell. The answer is that banks, as public corporations, are incentivised by short term profits, not long term sustainability. Mortgage backed securities provided such great returns that bankers did not think about the risks that they were taking. It is for this same reason that Enron continued its fraudulent accounting practices until it became insolvent, or that Madoff kept taking new money into his Ponzi scheme even though he knew that it would collapse if new money stopped coming in.

The government has to step in to protect investors’ money from people who are investing it unwisely for current gains. The libertarian mantra of less government is always better is now a fallacy. Sometimes, government intervention is necessary. Monopoly busting was an early form of positive government intervention. Post-depression financial reforms kept the financial system relatively stable. It was when those reforms were reversed that this crisis occurred.

The Fed
I recently had a conversation with an individual who claimed to be part of the end the fed movement. He concluded that the Federal Reserve caused the great recession by keeping interest rates too low for too long, thereby encouraging too much borrowing, which led to the mortgage meltdown.

Although keeping rates low may have been a small factor in causing certain individuals to get mortgages who should not have, low rates did really not matter that much. Many sub-prime borrowers were given mortgages regardless of whether they could afford the interest payments. Banks gave out variable rate mortgages knowing that rates would eventually go up and that the borrower would not be able to afford his or her house. It was the banks, who were not properly regulated by the federal government, that caused the recession; not the Fed.

The Federal Reserve, led by Bernanke, has had just as much of an impact, if not more, than the federal government, led by Paulson, Geithner and Obama, in ending the recession and leading to the current turnaround. While the government was managing $350 billion in bailouts to artificially prop up the economy, the Fed was managing trillions. The Fed is like the great counterbalance in our society. It is independent from the government, so as to ensure that economically sound decisions are not affected by politicians judgment. It has to be, and needs to remain independent.

Evolution
I have been thinking a lot about what this all means in the grand scheme of things. The truth is, the economy, law and politics are all insignificant when compared to the revolution that we are currently experiencing. Humanity is at the end of its 60,000 year reign as the most advanced species on earth, and is about to be the first species to be replaced by its own creation.

Humanity
Recently, a 2,000,000 year old fossil was discovered showing an intermediary species between humans and apes. Although this species may not necessarily be a direct ancestor of modern humans, it provides even greater proof of our natural origins, providing evidence of an intermediary species between early hominids and Homo Erectus, the most successful hominid in the history of the world. Homo Erectus roamed the earth from over a million years ago to the time of early humans . The new species is just one species discovered among many that have already been unearthed. We lived alongside one of our inferior relatives, the Neanderthal, for almost 10,000 years in Europe, a period ending approximately 20,000 years ago. That is a period of time longer than human civilization has existed as we know it.

Humans have been continually evolving, even though from a physiological standpoint, we are probably not very different from our ancestors who lived alongside those Neanderthals. Through civilization and technology, we have been able to maximize the productivity of our earthly forms, providing ourselves with extreme amounts of knowledge and using technology to allow us to interact with the world in a more efficient way. We have created numerous ways to express ourselves, and have made the world smaller by creating efficient methods of transportation.

The Singularity
Unfortunately, we have reached the limits of our earthly forms. Futurists predict that within the next 50 years, computers will have matched and surpassed our level of intelligence. They call this the singularity principle, as the distinction between humans and computers will no longer exist, making us one singular being.

The logical conclusion is that humans will have to become one with computers in order to compete. Those of us that survive to that period of time will have to augment ourselves, becoming cyborgs. Those who cannot afford this augmentation will become an inferior species that will likely eventually die out, as the Neanderthals and dinosaurs did.

The only thing that will prevent this from happening is literally a global catastrophe like one never seen by humanity. Technology as we know it would have to be destroyed. Even the greatest catastrophes, the great world wars or global epidemics, could only delay the progress of technology, not halt it. In many cases, those catastrophes actually increased progress. Although an earth shattering event could happen, I would give it an extremely low likelihood, since economics, technology, diplomacy and science have allowed us to progress to a point where such threats are diminished. A great technological roadblock (such as the end of Moores law, which will happen within the next 20 years) may present itself, but it will be overcome eventually, as all technological roadblocks are.

We Become God

After thousands of years of looking to the skies thinking that there were invisible creatures out there more advanced than ourselves that crafted us into being, it is time to realize that we are in fact the creator creature. We will create life forms much more advanced and complex than our naturally occurring selves, and those life forms will create even more advanced life forms. The only thing we can be certain of is that we do not travel to the past to visit our ancestors, at least not in such a way as to make our presences known.

And So It Goes
We stand at the foot of the great turning point in humanity. We are about to experience the greatest global economic and technological boom that the world has ever seen. We have braved the storm of the great recession, and now will be passengers on this great ride to the end of humanity as we know it. Hopefully, we will maintain our health and life so that we can be a part of it. Otherwise, c’est la vie.

Re-examining tax exemptions for religious organizations in the aftermath of proposition 8

CWSL Scholarly Writing Paper
By Dan Revich

March 23, 2009

INTRODUCTION

On November 4, 2008, the Proposition 8 ballot initiative was passed in California with a vote of 52.1% for and 47.9% against. The Proposition added to the California Constitution the statement “only marriage between a man and a woman is valid or recognized in California.” Approximately $39 million was raised by the campaign to support Proposition 8.

This paper will discuss how religious organizations influenced the movement to ban gay marriage, and more specifically how those organizations receive their funding. Federal tax law gives religious organizations tax-exempt status, and allows individuals donating to religious organizations to deduct large portions of those donations from their income taxes. The 1970 Supreme Court holding in Walz v. Tax Commission of City of New York found that tax exemptions for religious organizations are not in violation of the Establishment Clause of the 1st amendment to the United States Constitution , and gave taxing authorities the right to grant tax exemptions to religious organizations.

This paper will analyze the constitutionality of those tax exemptions, and re-examine whether they violate the Establishment Clause of the 1st amendment, using the test applied in Lemon v. Kurtzman as a framework for analysis.

Part I of this paper will provide a background to relevant issues, cases and laws relating to Proposition 8 and tax exemptions for religious organizations. Part II will analyze the legality of the religious involvement in Proposition 8. Part III will examine whether tax exemptions are in violation of the Establishment Clause of the 1st amendment using a Lemon Test framework as a basis for analysis.

I  BACKGROUND

Part A of the Background section will outline the federal laws governing tax exemptions for religious organizations. Part B will provide a background to the Walz case. Part C will provide a background to the Lemon test that will be used as a basis for analysis in Section III of this paper. Part D will outline the involvement that religious organizations played in the passage of Proposition 8.

A. Tax Exemptions for Religious Organizations

Section 170(c)(2)(b) of the Internal Revenue Code allows tax deductions for donations to “A corporation, trust, or community chest, fund, or foundation organized and operated exclusively for religious charitable, scientific, literary, or educational purposes…” Section 501(c)(3) of the code gives religious organizations tax exempt status, so long as “no part of the net earnings of [the organization] inures to the benefit of any private shareholder or individual, no substantial part of the activities of which is carrying on propaganda, or otherwise attempting, to influence legislation… and [the organization] does not participate in, or intervene in… any political campaign….”

Under the current system, an individual in the 35% tax bracket receives 35% of any donation he or she makes to a charity as a tax deduction. For example, an individual who pays taxes at a 35% rate will receive $35 in tax deductions from the government for every $100 donated to charity. In the proposed federal budget submitted by the Obama administration, the maximum amount deducted would be reduced to 28% in order to raise money for health care reform. Once the law is in effect, an individual would only receive $28 in tax deductions for every $100 donated to charity.

B. The Walz case

In Walz v. Tax Commission of City of New York, the Supreme Court, under the opinion of Chief Justice Burger, upheld a New York state property tax exemption for property used exclusively for religious purposes. Walz, the owner of real estate in New York, sought an injunction to prevent the New York City Tax Commission from granting property tax exemptions to religious organizations for properties used solely for religious worship. Walz argued that the tax exemption indirectly required taxpayers to make a financial contribution to religious bodies in violation of the Establishment Clause of the 1st amendment, which states that “Congress shall make no law respecting an establishment of religion.”

The majority noted that to the framers of the United States Constitution, the “establishment of a religion connoted sponsorship, financial support, and active involvement of the sovereign in religious activity.” It discussed how the court had struggled to find a neutral course between the Establishment Clause and the Free Exercise Clause of the First Amendment, concluding that any judgment would turn on whether the “particular acts in question are intended to establish or interfere with religious beliefs and practices, or have the effect of doing so.” The court’s opinion will be discussed later in this paper.

C. The Lemon Test

One year after the decision in Walz, the Supreme Court decided the case of Lemon v. Kurzman. In Lemon, Rhode Island and Pennsylvania statutes providing state aid to church-related elementary and secondary schools were challenged as being in violation of the first amendment. The Court found that the subsidies were unconstitutional, in that they presented excessive government entanglement with religious institutions.

The significant aspect of this case is the three part test that the court created to determine whether government entanglement with religion is excessive. The court writes “we must determine the character and purposes of the institutions that are benefitted, the nature of the aid that the State provides and the resulting relationship between the government and religious authority.” I will use the Lemon test as a guideline to discuss the constitutionality of tax subsidies for religious organizations in section III of this paper.

D. Religious Support for Proposition 8

The full extent of religious support for Proposition 8 became public after the 2008 election. It is estimated that approximately half of the financial support in the Yes on 8 campaign came from Mormons. The Latter Day Saints (LDS) Church itself donated $55,000 in monetary and $134,774 in nonmonetary expenditures (mostly staff time by church employees) to support the Yes on 8 cause. Two weeks prior to the election, the Yes on 8 campaign issued an urgent appeal for donations. The campaign sent an e-mail to the 92,000 individuals who registered on the Yes on 8 website www.protectmarriage.com with an urgent plea for funds. It raised $5 million shortly after that appeal, including a $1 million dollar donation from Alan C. Ashton, a computer executive and grandson of a former LDS president.

It was not just the LDS church that gave money to the Yes on 8 campaign. The LDS church was actually the last major church to join the Yes on 8 campaign, according to the New York Times. The campaign was supported by the Catholic Church, Evangelical Christians, and a myriad of ethnic church groups. The full list of contributors to the Proposition 8 campaign is listed on a searchable website hosted by the San Francisco Chronicle newspaper. Entering a search of “Church” in the Contributor Name field for financial supporters of Proposition 8 yields a list of 75 supporters who made various financial contributions. The San Diego Rock Church, for example, which states “The Rock will be a global and highly trusted model of relevant and innovative evangelism” as its vision statement, donated $25,679.16 to the Yes on 8 campaign. The Grace International Church, based out of Texas, donated $6,301.63 to the campaign. These churches, funded by donations from their members, who in turn received tax breaks for those donations, funneled money into the campaign to end gay marriage.
Religious support extended beyond financial contributions.

It is estimated that 80-90% of the volunteers who canvassed door to door for the Yes on 8 campaign were Mormons. Canvassers were instructed to first determine if the voter believed that God created marriage, and then to emphasize that Proposition 8 was in conformity with God’s will if the voter did. If the voter believed that marriage was a creation of man, then canvassers were to emphasize that Proposition 8 was merely about restoring marriage law. The LDS Church announced its support of Proposition 8 in a letter that was read in every Mormon congregation, in which the church encouraged members to donate time and money to the Yes on 8 cause.

The impact that church sermons and rhetoric had on voters also likely contributed to the success of the ballot initiative. An acquaintance who attended the aforementioned San Diego Rock Church shortly after the vote claimed that the pastor gave a sermon about the importance of the passage of the law. The impact of numerous pastors, priests, and rabbis throughout California instructing their congregations to vote Yes was likely significant.

Finally, religious organizations have also played a role in the fight to prevent Proposition 8 from being overturned. The day after the passage of Proposition 8, a group of gay couples initiated a Petition for Writ of Mandate enjoining state officials from “enforcing, taking any steps to enforce, or directing any persons or entities to enforce” Proposition 8. The Petitioners argue that Proposition 8 is invalid, as it is not an amendment to the California constitution, but a revision.

Briefs in support of respondent (and intervener siding with respondent) were filed with the California Supreme Court by several religious organizations, including Kingdom of Heaven, California Catholic Conference, The United States Conference of Catholic Bishops, The Union of Orthodox Jewish Congregations of America and The Church of the Messiah.

II  LEGALITY OF RELIGIOUS INVOLVEMENT IN PROPOSITION 8

A primary issue is whether the religious involvement discussed in the background section is in violation of current laws regulating political activities of religious organizations. Section 501(c)(3) of the Internal Revenue Code prohibits charitable organizations from undertaking in any political campaign activity, and requires that they only engage in minimal lobbying. There are three requirements that charitable organizations must meet in order to receive tax-exempt status: No part of the net earnings may benefit a private shareholder or individual; No substantial part of the organization’s activities may consist of lobbying or attempting to otherwise influence legislation, and; the entity may not participate in or intervene in a political campaign for any political office.

IRS regulations state that “the publication or distribution of written or printed statements or the making of oral statements on behalf of or in opposition to… a candidate” is prohibited. Organizations may participate in voter education, voter registration and voter encouragement, so long as they do not favor one candidate over another. Political candidates may speak to religious organizations, so long as the organization provides an equal opportunity for competing candidates to participate, does not indicate whether it supports or opposes the candidate, and does not use the event to fundraise. 501(c)(3) organizations can take positions on issues, so long as they do not favor one candidate over the other.

In Branch Ministries v. Rossotti , Branch Ministries Church challenged the IRS’s revocation of its tax-exempt status, which occurred after the church published an ad in USA Today and the Washington Times four days before the 1992 election. The ad urged Christians not to vote for presidential candidate Bill Clinton because of his views on social issues. The court of appeals for the District of Columbia found that the IRS’s revocation of the Church’s tax-exempt status did not violate the U.S. Constitution or exceed the IRS’s statutory authority. The court noted that withdrawal of tax exempt status only violates the first amendment if it is “…denie[d] … because of conduct mandated by religious belief, thereby putting substantial pressure on an adherent to modify his behavior and to violate his beliefs.” The Court stated that: “Although its advertisements reflected its religious convictions on certain questions of morality, the Church does not maintain that a withdrawal from electoral politics would violate its beliefs.” The court found that the burden of losing tax-exempt status was not constitutionally significant. It is clear that losing tax exempt status would place a burden on churches, as most of a church’s income is derived from donations.

A complaint was filed against the LDS church by Fred Karger, founder of the group Californians Against Hate, for violations of the California election law in supporting Proposition 8. California law requires that Churches disclose all contributions to political campaigns made by religious organizations. The complaint launched an investigation by the California Fair Political Practices Commission. The Church subsequently disclosed all contributions to California authorities, but claimed that “the filing is in no way prompted by an investigation by the California Fair Political Practices Commission.” Proposition 8 supporters also attempted to get an injunction to prevent donor lists from being made public, but U.S. District Judge Morrison England Jr. ordered that the names be released, arguing that disclosure laws are in place to protect the public.

Recent internet campaigns seek to file complaints with the IRS to remove the LDS church’s tax exempt status because of its support for the Yes on 8 campaign. However, as Barry Lynn, president of Americans United for Separation of Church and State asserts, “while the tax code has a zero tolerance for endorsements of candidates, the tax code gives wide latitude for churches to engage in discussions of policy matters and moral questions, including when posed as initiatives.” The LDS Church would only lose its tax-exempt status if a substantial part of the Church’s funds went towards political activities. Generally, charitable organizations that spend less than 10% of total revenues on non-charitable activities will not lose their tax-exempt status. The LDS church is so large that the amount spent on the Proposition 8 campaign would not meet the 10% threshold.

Thus, under current tax law, it appears that the involvement of religious organizations in the passage of Proposition 8 was within the confines of acceptable political activity, and was therefore not in violation the law. Supporting the Yes on 8 campaign did not amount to actually supporting a particular candidate, but simply supporting a political cause. I would argue that religious organizations are inherently political, and therefore attempting to stifle their political activities is inevitably futile. The free reign of religious organizations in their political activities would not be a problem but for the fact that religious organizations receive tax-exempt status. The alternative to attempting to control what religious organizations do in order to receive tax-exempt statues would be to simply remove that status completely.

III THE CONSTITUTIONALITY OF TAX EXEMPTIONS FOR RELIGIOUS ORGANIZATIONS

This section will discuss whether tax exemptions for religious organizations satisfy the three prongs of the lemon test. Part A will discuss the nature of the aid that the state provides, examining whether tax exemptions for donations to religious organizations are equivalent to government subsidies. Part B will examine the resulting relationship between the government and religious authority, discussing whether tax exemptions for religious organizations serve to establish a state religion. Part C will examine the character and purposes of the institutions that are benefitted, discussing whether religious organizations are beneficial to society.

A. Are Tax Exemptions for Religious Organizations Equivalent to Government Subsidies?
“The nature of the aid that the state provides”

In the Walz case, the majority argued that “The grant of a tax exemption is not sponsorship since the government does not transfer part of its revenue to churches but simply abstains from demanding that the church support the state.” The court used the analogy of libraries, art galleries and hospitals to show that other organizations receive tax exempt status, but are not considered arms of the state.
In his dissent to Walz, Justice Douglas argues against the claim that a tax exemption is not a subsidy. He makes the analogy of giving a federal grant to a church to construct an edifice, and claims that a tax exemptions would serve the same purpose. Douglas refutes the majority’s argument that many other private institutions receive government subsidies, arguing that these organizations represent “social welfare programs within the reach of the police power.”

In Mueller v. Allen, taxpayers fought a tax deduction that was available for parents of children attending sectarian schools. In a 5-4 ruling, the majority, led by Justice Rehnquist, argued that “…financial assistance provided to parents ultimately has an economic effect comparable to that of aid given directly to the schools attended by their children. It is also true, however, that under Minnesota’s arrangement, public funds become available only as a result of numerous, private choices of individual parents of school-age children” . He continues “Where, as here, aid to parochial schools is available only as a result of decisions of individual parents, no ‘imprimatur of State approval’… can be deemed to have been conferred on any particular religion, or on religion generally.”

In his dissent to Mueller, Justice Marshall argues that “By ensuring that parents will be reimbursed for tuition payments they make, the Minnesota statute requires that taxpayers in general pay for the cost of parochial education and extends a financial ‘incentive to parents to send their children to sectarian schools’.” He continues that “it makes no difference whether the qualifying ‘parent receives an actual cash payment or is allowed to reduce … the sum he would otherwise be obliged to pay over to the State.”

When applying Marshall’s arguments to tax exemptions for donations to religious organizations, it is clear that the same logic applies. Taxpayers in general pay for the operating costs of religious organizations because of deductions, and individuals are given a financial incentive to donate to and support religious organizations.

The true private choice doctrine discussed in Mueller has been upheld by the U.S. Supreme Court as recently as 2002, in Zelman v. Simmons-Harris. In Zelman, The court stated that “…our jurisprudence with respect to true private choice programs has remained consistent and unbroken. Three times we have confronted Establishment Clause challenges to neutral government programs that provide aid directly to a broad class of individuals, who, in turn, direct the aid to religious schools or institutions of their own choosing. Three times we have rejected such challenges.”

In his dissent to Zelman, Justice Stevens argues that “the voluntary character of the private choice to prefer a parochial education over an education in the public school system seems to me quite irrelevant to the question whether the government’s choice to pay for religious indoctrination is constitutionally permissible.”

The private choice doctrine attempts to distinguish tax exemptions from government expenditures. However, even Justice Rehnquist admitted that those tax exemptions lead to the same effect that would arise if a direct government subsidy were provided. The only difference is that individuals are given the ability to dictate state expenditures based on their private decisions.

The government’s provision of a tax deduction for a donation to a religious organizations is financially equivalent to a government’s provision of a direct financial subsidy to that same organization. By refunding $35 for every $100 that an individual gives to his church, the government is essentially contributing $35 to that church for every $65 donated by the individual. By refusing to collect $10,000 in property taxes from a church that the it would otherwise collect from another tenant, the government is giving $10,000 to the Church to spend that the Church would not otherwise have. It is thus clear that the aid that the government is providing to religious organizations through tax incentives is economic in nature, and is functionally equivalent to the provision of direct subsidies.

B. Do tax exemptions for religious organizations establish a state religion?
“the resulting relationship between the government and religious authority”

In the Walz opinion, Justice Burger argued that “nothing in this national attitude toward religious tolerance and two centuries of uninterrupted freedom has given the remotest sign of leading to an established church or religion…”. The Court reasoned that the state law challenged in Walz did not single out any particular religion, and therefore the “federal or state grants of tax exemptions to churches were not a violation of the Religion Clauses of the first amendment.”

I submit that the majority in Walz is incorrect in arguing that the United States does not have an established religion because of tax subsidies. The United States government is subsidizing religious organizations with billions of dollars of taxpayer money. The government is giving far greater amounts of funds to certain religions because those religions already have greater numbers of practicing members who donate more money.

The court in Zelman affirmed the reasoning that “We would be loath to adopt a rule grounding the constitutionality of a facially neutral law on annual reports reciting the extent to which various classes of private citizens claimed benefits under the law.” To me, it would not be loath, but diligent to determine where money that would otherwise be in State coffers is being distributed to.

Donations to religious organizations accounted for approximately 35% of total donations in 2004 (down from 53% in 1985) . They account for between 45% and 53% of total household giving. It is estimated that households alone gave $83 billion to religious organizations in 2002 . If those households deducted those donations at a 35% deduction rate, it could amount to approximately $29 billion dollars in personal income tax deductions. That’s $29 billion dollars of funds going to religious organizations that would otherwise be in the hands of the government, or in the hands of other charitable organizations. Of the estimated $83 Billion, approximately $60 billion went to Protestant organizations (72%), $9 billion to Catholic organizations (11%), $3 billion to Jewish organizations (3.5%), $3 billion to non-denominational religious organizations (3.5%), $2 billion to LDS organizations (2.4%), and $600 million to Islamic organizations (0.7%).

The government has established Christianity as the religion in America via these exemptions. The figures above show that 72% of household donations are given to Protestant churches and 11% to Catholic churches. Billions of tax dollars that would be in government coffers if these tax deductions did not exist are being funneled to Christianity, allowing it to claim its role as the dominant religion in America.
The major exception to this is in Utah, where the Latter Day Saints Church is the established religion. Much of the hundreds of millions of dollars that the LDS church receives in government subsidies through tax exemptions are being funneled in to it in Utah, where the church is headquartered. This allows the church to maintain its power in that State, and have an abundance of control over state law.

In his dissent, Justice Douglas reframes the question presented in the Walz case. “The question in this case is whether believers organized in church groups can be made exempt from real estate taxes, merely because they are believers, while non-believers, whether organized or not, must pay the real estate taxes.” He argued that one of the best ways to establish one or more religions is to subsidize them with a tax exemption. He stated “government may not provide or finance worship because of the Establishment Clause any more than it may single out ‘atheistic’ or ‘agnostic’ centers or groups and create or finance them.” He concluded that the New York state-property-tax exemption treated believers and nonbelievers differently because of the articles of their faith. Since the Establishment Clause was intended to keep the government neutral not only between sects, but between believers and nonbelievers as well, he found the exemption to be unconstitutional.

The majority in Walz argued that by removing tax exemptions, the role of government’s involvement in religion would be expanded, because it would give rise to tax valuation of church property, tax liens, tax foreclosures and the conflicts that would follow. It argued that there is less involvement between church and state in foregoing taxation than there would be if the state collected taxes.

I would argue that if the government treated churches as any other private, mutual benefit non-profit, such as a country club, which does not receive tax exempt status, the involvement would be similar to what it is currently. There is no movement arguing that the government has too much involvement in taxing country clubs, and similarly there would not be too much involvement if the government taxed religious organizations, or collected taxes from donations thereto. Although the right of free exercise to join country clubs is not protected under the religion clauses, that right is protected under freedom of association. Yet there is no movement arguing that individuals’ right to freedom of association is hampered by the fact that their country club must pay taxes.

If a church cannot pay its taxes and faces a foreclosure, then that church does not have enough financial support from its members, and should be allowed to fail like any organization that is unable to raise revenue. Enforcing tax subsidies requires a lot of government involvement, including monitoring and registering religious organizations so that they maintain their tax exempt status, and distributing tax refunds to individuals who make donations to religious organizations. The amount of government entanglement necessary to tax religious organizations would not be significantly different from the amount of entanglement under the current system.

Under the current state of tax exemptions, the state is supporting one religion with billions of dollars, and prioritizing its financial subsidies to other religions based on the relative wealth of individuals who belong to those religions and how much money those individuals contribute. Through these tax exemptions, the law has established Christianity as the American religion, and has propped up religion in America.

C. Are religious organizations beneficial to society?
“the character and purposes of the institutions that are benefitted”

In Walz, the majority justified tax exemptions for religious organizations because the State considers religious organizations to be “beneficial and stabilizing influences in community life”. In his concurrence, Justice Brennan argued that tax exemptions for religious organizations served to carry out secular purposes and not “essentially religious purposes.” He claimed that the state encourages religious activities because religious organizations contribute to the diversity of the Nation, and that there is no non-religious substitute for religion. Essentially, he believed that religion is a good thing, and therefore that it is justifiable for the state to support it.

In his dissent, Douglas refutes Justice Brennan’s argument that religious organizations perform many secular purposes by arguing that a ‘church qua nonprofit charitable organization’ is so intertwined with the ‘church qua church’ that the welfare activities it undertakes may in fact “merely be a phase of sectarian activity.” “Its sectarian faith sets it apart from all others and makes it difficult to equate its constituency with the general public. The extent that its facilities are open to all may only indicate the nature of its proselytism.” In other words, religious organizations may undertake in beneficial secular activities, but the root of those activities is entrenched in the perpetuation of the religion and its religious dogma. He writes: “…Subsidies either through direct grant or tax exemption for sectarian causes, whether carried on by a church qua church or by church qua welfare agency, must be treated differently” from subsidies for secular public welfare institutions.

The majority and concurring writers in Walz tended to operate under the assumption that religion is in fact good for society. However, It is the same religious organizations that claim to be authorities on morality that made extreme efforts, and succeeded, in supporting the cause to convince a majority of Californians to vote for a law that limits the rights of a minority of individuals in Californian society. Based on religion’s effect on Proposition 8, it is apparent that religion may not in fact be good for society. Although some religious organizations may have actually been against Proposition 8, the facts indicate that the majority of religious activity attempted to support the Proposition.

Proposition 8 exposes some of the negative influences that religion has on society, but it only represents the tip of the iceberg. Many religious organizations make efforts to subvert science, enforce outdated and unrealistic moral viewpoints, and in extreme cases provide refuge for sexual deviants or even terrorists.

Although many religions may perform altruistic secular services, Justice Douglas makes a strong argument that many of those services are simply used as a method of proselytizing. Religions have self-preservation as their foremost goal, which is why they have been able to flourish for thousands of years. Part of maintaining their power involves gaining public support, which they do by performing altruistic acts. These same altruistic acts could be performed by secular organizations, or even by organizations like the Red Cross, which are affiliated with religious organizations, but are not formed for religious purposes. Non-religious services performed by religious organizations could be performed by these secular, religiously affiliated organizations.

Religion is becoming more and more irrelevant as science progresses, and the tenets of religious dogma are continuously being attacked for their lack of a basis in reality. Richard Dawkins’s 2006 best seller The God Delusion makes a strong case against the primary tenet held by most religions, that of the existence of an invisible, all-powerful god. Religions may have represented a stepping stone in the advancement of human civilization, but science has advanced to a point in which humans no longer need to resort to the supernatural to explain earthly phenomena. The existence of tax exemptions allows religious organizations to flourish, and prevents the advancement of viewpoints that can be legitimately supported by scientific knowledge.

The government should not be directly or indirectly supporting religious organizations with taxpayer dollars under the guise that they are promoting the public welfare. By subsidizing religion via tax exemptions, the government is prioritizing religious belief over atheistic or agnostic belief. Although atheists and agnostics could organize atheistic religions that also receive tax exemptions, this is antithetical to the beliefs of many atheists, who would not want to equate themselves with religious organizations. Atheist organizations do not have the ability that religious organizations do to convince members to donate to them in return for receiving advantages in the afterlife. They have less ability than religious organizations do to proselytize and gain more donations, as most religious doctrines are designed to recruit non-believers under a theory of future salvation, whereas the precepts of atheistic beliefs are much more difficult to use as a recruitment tool. It is thus apparent that atheist and agnostic beliefs are disadvantaged by the organizational structure that federal law demands in order to receive tax breaks.

Attitudes towards religion are increasingly swaying in favor of anti-religious sentiment. A recent study found that only 75% of Americans call themselves Christian, compared to 86% in 1990. The only remaining stronghold is in the evangelical religious sector, which has actually risen in popularity from 200,000 individuals claiming to be evangelicals in 1999 to 8,000,000 in 2009. This is probably attributable to the fact that religion is increasingly having to resort to fundamentalism in order to survive, as fundamentalist religions are better able to fight against secular, external influences. It is still likely that religion will continue to flourish, however, so long as the government is supporting it with tax exemptions.

III SUMMARY AND CONCLUSION

Although it is important that individuals have the right to choose their religion, it is also important that individuals have the right to not choose any religion. The government prioritizes religious beliefs by giving religious organizations tax exemptions, dispensing a disproportionate amount of funds to Christian organizations, and funding other religions based on the number and relative wealth of their members. These actions have led establishment of a state religion in violation of the Establishment Clause of the first amendment.

The influence of religious institutions in the passage of Proposition 8 should give America a wakeup call. Religious organizations do not benefit the public, but rather serve their own interests, impede civil rights, and stifle scientific advancement. They should be treated as mutual benefit organizations that serve only their members, not as public benefit ones that serve society as a whole.

Accordingly, the law should not allow religious organizations to receive tax exempt status. Charitable organizations should be distinct from religious ones, and should be monitored to ensure that their actions are charitable and not religious in nature. Individuals and corporations should not be able to receive tax deductions for their donations to religious organizations. Finally, churches should be forced to pay property taxes like any other owner of property, and should face the same consequences for nonpayment.

Why America Needs The Public Option

The health care reform debate has been at the forefront of the national media spotlight since Americans got tired of talking about the economy. What amazes me is how few economic discussions are involved in assessing what should be done to fix America’s broken health care system. Instead, the discussions focus on hyperboles, emotions, and a whole lot of fear mongering. This is my analysis of the situation.

Part I: The Problem

Profit Maximization
Insurance companies are corporations. Corporations have one underlying goal: to maximize profits for their shareholders. This is not necessarily a bad thing, but it is a fact. Insurance companies are not in business to make sure everyone is insured, they are in business to sell policies and make money.

Think about insurance policies like TVs. If it costs you $50 to make a TV, but you can sell just as many for $100 as you would for $50, it would be stupid not to sell the TVs for $100. Let’s say you can sell ten TVs for $100. That’s $1000 in TV revenues and $500 in costs, with a profit of $500. What if you could sell eight TVs for $200, with two fewer people buying TVs because they’re too expensive? That’s $1600 in revenues and $400 in costs, with a profit of $1200. It would be stupid not to raise the price to $200. But what about those two poor suckers who don’t have TVs anymore? Well, they’re just TVs so it’s no problem.

Health insurance operates in the same manner. Insurance companies are incentivised to charge higher and higher rates, up to the point where profit is maximized and any increase in price will cause companies or individuals purchasing the insurance to drop coverage at a loss to the insurer. But, unlike with TVs, not having an insurance policy means risking sickness, death or bankruptcy. This makes health insurance highly inelastic, in that a large increase in price will cause only a few people to drop coverage. Letting people die by forcing them to drop coverage because costs are too high is thus built into the private system.

Market Power
In a purely competitive economy, insurance companies would not be able to charge rates as high as that which would maximize profits, because other companies would charge cheaper rates. Going back to the TV example, imagine if your competitor sold similar TVs for $100. Lets say that if you charged $200, you could only sell 2 TVs with a profit of $300, which is less than the $500 you would make if you sold them for $100. It would make sense to buy your competitor out so that you can jack up the price to $200 and sell just as many TVs. Or, you could talk to your competitor, and agree to both sell the TVs for $200. Or, even better, you could buy the factory that sells the TVs to your competitor, make that company stop selling to the competitor, then jack up the prices and watch your competitor fizzle out. This is called gaining market power, (monopoly power if you are the only seller).

Most of the health industry is not competitive. There are a limited number of health providers, and they collude on prices. Healthcare companies gain market power in a way that is similar to the third example in the previous paragraph. The factory producing TVs is like a hospital providing health services. Insurance companies often own hospitals, or have exclusive agreements with hospital operators. They make sure no other insurance companies have access to those hospitals, or make agreements with other companies to charge the same prices for access to those hospitals.

Insurance companies will charge rates that are as high as they possibly can, and squeeze people out of coverage. In a recession, more people and businesses are forced to drop coverage because they don’t have jobs. Insurance companies raise rates to compensate for having fewer customers, because they know that the remaining customers will fork over more money for an essential service like health care.

Pre-existing conditions
Insurance companies are also disincentivised from providing coverage to people with pre-existing health conditions, the people who need health insurance the most. Think about it like a life insurance policy. Would you sell a policy for $100 a month that paid out $100,000 to someone who was likely going to die in 2 months? That would be stupid, since you know you would lose almost $100,000 on the deal. Similarly, health insurance companies would not provide coverage to someone who has suffered from cancer, since that person is likely to rack up a lot of medical bills if their cancer comes back. Health insurers are in the business of risk, and sick people present too high of a risk.

Society loses
The result of all of these issues is that society loses. Health care should not be a scarce commodity like TVs. It should be a universal commodity available to all. Anyone who disagrees with this thinks that people should die because they are poor. This is a viable argument that can be made: if you can’t afford health insurance, then you should die if you are sick. We live in a capitalist system, and people who haven’t figured out how to manipulate the system to maximize their financial gain should die. This argument is completely inhumane, and I can’t understand the thought process of those who make it.

Many would argue that under the current system, hospitals are forced to provide emergency coverage, and therefore the poor do get care. But, many are forced to go into bankruptcy because of this situation, which prevents them from having an equal opportunity to participate in the capitalist system. Further, there is more than emergency coverage necessary to have proper health care. What about diseases or operations? What about checkups that can prevent or catch sickness early? What about insane deductibles and denials of coverage for those who do have healthcare? Everyone should have a right to a basic level of health care. Lack of money should not be grounds for receiving the death penalty.

Corruption
Why has nothing changed? A problem that has persisted due to the current system is widespread involvement of insurance companies in spending money to sway people to support their companies and the current system. Again, this is just a part of the system. If your company is making $1 billion a year in profit, it’s worth $100 million to pay someone to make sure that you keep making that profit if you only will make $500 million a year in profit if you don’t make the payment. It’s worth $400 million in savings to spend that $100 million.

There’s no point in blaming insurance companies for spending hundreds of billions of dollars to fight the public option by giving money to lawmakers and spending money on expensive advertisements to sway public opinion in their favour. They are private companies, and those funds are a worthwhile investment. After all, it works. As of the writing of this article, the insurance companies have almost completely squashed the public option as a legislative solution to the health care problem. But, in reality, the public option is the only solution.

Part II: The solution

The Band-Aid
Any solution without a public option is essentially a band-aid. The current solution being sent through the senate serves to force insurance companies to take losses on people with pre-existing conditions and the poor who can’t afford insurance. The government would have to subsidize those losses in some way shape or form. Prices will keep going up, and inevitably the taxpayer will have to pay. These band-aid solutions are just another way of funnelling taxpayer money to shareholders of insurance companies. The poor will likely receive inferior and inadequate coverage.

Medicare and Medicaid are essentially band-aid solutions. Health insurance is provided to seniors or the poor with billions of dollars of government handouts. Medicare costs continually increase because basic health care costs continually increase. These costs put a greater and greater burden on the taxpayer, and lead to trillions of dollars in government debt.

The Public Option
A public health insurance provider would have a different incentive system from a private corporation. Rather than maximizing profits to shareholders, a public insurer would want to minimize profits, or even take losses, so as to make sure the maximum number of people are able to get the best possible coverage. A public organization’s incentives are directed towards pleasing voters. Thus, the more happy voters, the more support for the organization. The more people that have coverage, the more happy voters.

The public option is like a competitor selling TVs for $50, or even $40. What are you going to do if your competitor is selling TVs for $40 that cost you $50 to produce? Well, you either go out of business or build a better TV that you can make money off of.

The public option would force insurance companies to sell better and cheaper plans that would compete with the public plan. The public plan would slowly swallow up the cheap and inefficient side of the health coverage market. Many employers would switch their coverage to the public option to cut costs. Private options would be a premium service offered by certain employers. They would be forced to compete with public providers.

This scenario would be better for America. Employers would be able to see more profits because they can save money on giving health care to their employees. All Americans would be covered, and not be forced into bankruptcy to survive sickness. Medical costs would go down because the government insurer would be able to bargain with medical providers to lower medical costs. Doctors will still be rich, just not as rich.

Many people are afraid of this scenario unfolding because they think it represents socialism. Perhaps a complete government takeover of healthcare, hospitals, and the destruction of private competition as exists in Canada and other countries would be socialistic. But just providing a government option that competes with the private options is no different from a public school system, or a public parcel delivery system. Private schools have to offer an education that is better than the public system can offer. The public system thus encourages better education for all.

Some things are best done by governments, who serve the best interests of society, not their shareholders. Coming from Canada, it is astounding for me to hear the hell that Americans go through just to get health care. When I needed health care in Canada, I went to the hospital or doctor, filled some paperwork out, and showed my government insurance card. That was it. No bills, no questions, no deductible. Nothing. Just health care. Which is not to say that the Canadian system is perfect, but it is much better than a system where poverty is a death sentence.

Health care should be a right ensured by the government, not a purchased commodity like TVs. Americans need to stop listening to the rhetoric presented by the insurance companies. These companies are fighting for their lives. Fortunately for them, the people in charge of making the decision to put a public option in place are corrupt and ignorant, and will shift their position in return for kickbacks that will get them re-elected.

The only way things will change is if American support for the public option increases, and the only way that will happen is if Americans get educated about the issue, and realize that the public option will make life better for everyone except the shareholders of insurance companies.

How The Recession Happened

1. The Olden Days
Dave needed a place to live, had a job with a steady income, a good history of paying back any money he borrowed, and a little bit of money saved up. Unfortunately, he didn’t have enough money to buy a piece of property outright. So, Dave went to his bank and said “let’s make a deal. You lend me the rest of the money to buy this property, and I’ll pay you back in monthly instalments over the next 20 years, plus some extra money every month (interest). If I don’t pay you back, you can take my property and sell it, pay yourself whatever I still owe you and I’ll get the rest” The bank agreed, knowing that Dave was a good guy and would pay them back. Plus, if he didn’t, they could just take the property, sell it, and get their money back. The bank got their money from cash they were holding on to, and borrowed the rest from a bigger bank or the country’s central bank. Dave got his house, and was happy. The bank was paid back over 20 years, and made a nice profit.

Alice had no money saved up, a crappy job, and didn’t pay back money she borrowed. Alice wanted her own place too. She went to the bank, but was denied because they didn’t think she would pay them back.

2. Mortgage Backed Securities
One day, a bunch of investment bankers had a great idea. Instead of getting the money to give Dave to buy his property from money already in the bank’s hands, they would get a bunch of Investors together to put money into a pot. Dave would get his loan from the pot of investor money. Then, whenever Dave made his payments, the bank would take a chunk for themselves, and the investors would get the rest. These investments would be called “mortgage backed securities” because the investments were backed by mortgages.

This worked great for a while, except eventually the investors started to get angry because they weren’t making enough money. The bank had a great idea. They would give a loan to Alice so she could buy her property too. Because they were worried that Alice wouldn’t pay them back, they charged her a lot of extra money in interest on top of what she owed. If Alice couldn’t pay the full amount, they would just add what she couldn’t pay to the total amount she owed. If she stopped paying, they would sell the house, and hopefully it would be worth more. The bank then bundled a whole bunch of loans to people like Alice and made the bundles into an investment that investors could invest in.

The bank took their investments to a rating agency, and asked the agency to tell them how risky the investments were. The rating agency looked at the bundles of mortgages to people like Dave, and said they were not risky, and gave them a good rating. They looked at the investments to people like Alice and said they were very, very risky, and gave them a bad rating.

The banks needed more money. They decided to take a bundle of loans to people like Dave, and a bundle of loans to people like Alice, and put them together into an even bigger bundle. They then went back to the rating agency, and asked how risky these loans were. The rating agency thought that this big bundle would really spread out the risk, since there were so many little bundles in it, and gave the bundles a good rating.

The rating companies screwed up, because the risky investments were still risky, they were just in a bigger bundle. Investors flocked to these big bundles, thinking they were not risky, when they really were, and bought them in large quantities.

3. Credit Default Swaps
The investors were worried though. What if they lost money on their bundles? Insurers like AIG came along and had a great idea. The investors would pay money to AIG. In return, if the investors lost any money on their bundles, AIG would pay them back whatever they lost. This was called a credit default swap. AIG was confident that people could only lose a little bit of money on these investments, since they were all backed by hard, tangible, real estate. Historically, real estate prices had never gone down very much, and had a steady increasing price trend.

Banks all over the world bought billions of dollars of these big bundles of mortgages. They invested all of their money in them, and were so happy that they were getting so rich. Plus, if they lost money, they had insurance.

4. The Beginning of the Collapse
Dave started making more money, and decided that he was going to buy a nicer house. He sold his house and went to buy a bigger one. He found a house he really liked, and put an offer on it. But, it turned out that Alice made an offer on the same house that was $100,000 higher, and got the house. The investors gave the bank money to give to Alice so that she could buy the house.

One month later, Alice didn’t make her payment on the house, and the bank took it back. They put it up for sale again at the amount that Alice had bought it for to get their money back. But, no one would pay that amount. Dave came back in with his offer that was $100,000 lower. The bank did not get any other offers and had to give Dave the house.

Now, the bank had lost $100,000 that it owed to investors!

All of the sudden, the prices of houses everywhere started going down. Alices all over America stopped paying, and banks lost billions of investor dollars. Real estate prices started tanking. In the past prices had never gone down much because they never got too high. They never got too high because loans were always made to low-risk people like Dave. But prices got too high because anyone, including people like Alice, could get a loan for however much they wanted.

The investors asked for their money back from the banks, but the banks didn’t have it. The investors then went to AIG and said “I want my insurance money”. AIG started paying out insurance money.

By the end of 2007, this caused the American economy to stop growing. It slowly started to decline, but the problem got worse. Eventually AIG had no more money to compensate investors and banks, and the banks were losing billions of dollars.

5. Lehman Brothers
One of these banks was Lehman Brothers. Lehman had been in business for a long time, and lots of people put their money in Lehman thinking it was safe. Lehman realized that they had no more money because they had too many investors trying to get money back. Lehman owed billions of dollars to these investors, but didn’t have it . Lehman asked the government for help, but the government at the time (Republican) did not want to interfere with the free market, and decided to let Lehman fend for itself. Lehman realized that it couldn’t pay money back, and went bankrupt.

6. The Catastrophe
Banks and investors all over the world were terrified. If investments in a secure bank like Lehman were unsafe, then any investment could be unsafe. Investors decided that they wanted all their money in cash, and really safe investments, because they didn’t want to lose it. So they all started selling all their shares and bundles of mortgages. But, no one wanted to buy their investments at a regular price, so they had to sell them at a really low price.

These lower prices caused the stock market to start crashing. People started selling stocks in regular companies that had nothing to do with investments because they were worried about their money. This sent share prices crashing. People who were just regular investors saw their share prices crashing, and decided to sell before prices got too low. This sent prices even lower.

This could have spiralled into another great depression. If more banks went bankrupt, and more investors lost more and more money, then all sorts of companies would go bankrupt. Banks owed hundreds of billions of dollars and had no way to get that money. It appeared that civilization as we know it could come to an end.

7. How the world was saved
The federal government saw this problem happening and realized that something had to be done. They knew that if the banks kept making loans like they did in the olden days they would surely make money again. So, Treasury Secretary Paulson decided to loan money to all the big banks and to AIG to compensate them for all the money they lost in the crisis. Paulson convinced president Bush, and a majority of congress that this was a good idea. The media called this a bailout, but it was really necessary to prevent another great depression.

With the billions of government dollars in hand, the banks could pay their investors back, and pay for all the losses that were occurring. Countries all over the world undertook similar bailout plans to keep their banks from going out of business.

8. Why there was still a recession
Unfortunately, the damage done was already severe. The banks had lost so much money that they didn’t want to make loans to companies and lose more money. Companies were losing money, and realized that the only way they could save money would be to cut costs. They started laying off workers and shutting down operations.

People who lost their jobs stopped spending money, and lived off of unemployment insurance. People who did have jobs got paranoid, especially after losing so much of their investments when the market crashed, and started putting away any last penny they could. This meant that stores and companies were selling less stuff and making less money. Stores had to shut down and lay off more workers.

9. The Aftermath
Although the recession is/was the worst since the great depression, the new Obama government and the Federal Reserve have fought to end it. The reserve made it very easy for banks to borrow money to lend out to good customers like Dave, charging really low rates of interest to banks, and making lots of money available.

The federal government’s stimulus package was designed to give the economy a boost at the other end, by creating actual jobs, extending unemployment benefits, and spending money on government programs.

In the end, this recession will be looked at as a wakeup call in the history of modern human civilization. The free market works brilliantly when it is monitored and regulated. But, it has the capacity to spiral out of control when people make the wrong decisions. If it was not for secretary Paulson and the TARP bailout, the free market would have self destructed, and would have taken years to correct itself.

This recession has been horrible, and has negatively affected the lives of millions. However, it would have been much worse if it were not for the bold and swift actions of the responsible bodies, guided by hundreds of years of economic thought. Hopefully, we can learn from these mistakes, and try to make sure something like this never happens again.