Confessions of a “rich” businessman

Howard Blake is the pen name of a small businessman from the Midwest, who has written this AEI Online article that is brilliant in its simplicity. By Democratic Party standards, Mr. Blake and his wife are wealthy and should be taxed more. However, Mr. Blakes points out that appearances can be deceiving, particularly in economic matters:

From that $71,000 of actual cash flow, subtract our federal tax payments of $24,539 and our state income taxes of around $4,000, and you find that our cash available for living expenses is actually around $43,000. Sufficient for our needs. But clearly a good deal short of true wealth.
I suppose my wife and I do what we do because we like to. We must, because if you divide our $43,000 of spendable income last year by the 6,000 hours of labor, much of it manual, that the two of us put into our business (we kept track), our time works out to be compensated at around $7.50 an hour. Just the same, incentives do matter. And it is a concrete fact that cash alone fuels our growth. With more cash, our business will grow faster; we’re a small player in a big industry, and the market is there for additional growth. We’re constrained only by the availability of investment capital, and that has to be generated by our business.
My wife and I have a passion for our little enterprise. It’s been our life for 20 years, demanding whatever creative abilities we have, consuming most of our waking moments, focusing our energies on producing the best products we can, and beckoning us to work seven days a week to ensure good service for our customers.
Then every four years the Democratic nominee for President informs us we don’t pay enough taxes. We are called greedy and self-serving special interests. We’re told that we are “rich,” and that we have wealth only because we are lucky.
I have described my financial situation in some detail in the hope that this snapshot will help people understand who most of the top 5 percent of taxpayers really are, and how taxes affect the folks who make America work. I know I’m fortunate, but I certainly don’t feel rich. I have fond hopes of some day becoming wealthy (a goal I share with most of my fellow citizens), and a tax policy that encourages my efforts toward that end would not only benefit me, but the rest of society as well. But the reality is that my wife and I have to work extremely hard every day just to hold our current position.
We’ve been managing our finances with care, investing in our business with the kind of concentration that comes from spending our own money, and providing jobs for dozens of our neighbors. I dare say that the country benefits from our stewardship–and that of hundreds of thousands of other “rich” people just like us–more than it would from any of John Kerry’s plans for our money.

In representing business people over the past 25 years, I have learned that non-business people often grossly underestimate how hard it is to run a business profitably and well. Also overlooked or underappreciated is the great benefit that communities derive from the employment that is generated through small businesspeople’s willingness to undertake the risk of their enterprise. Mr. Blake’s article explains a big part of the reason why running a business is such a formidable task, made even more so in this current climate in which many normal business practices are being criminalized. Hat tip to Newmark’s Door for the link to Mr. Blake’s piece.

The Selling of the Expos

In the first of a three part series, this Washington Post article by Steve Fainaru examines the tactics that Major League Baseball Commissioner Bud Selig is using in auctioning the Montreal Expos off to the highest bidder among several investor groups and American cities. The article provides an excellent background on how Selig and Major League Baseball owners have used baseball’s anti-trust exemption and public financing of stadiums to increase the value immensely of MLB franchises, an approach that several expert commentators — particularly Professor Sauer over at the Sports Economist — have criticized on economic and political grounds.
The entire article is well worth reading, and includes nuggets of information such as the following about Jeffrey Loria, the former majority owner of the Expos who ended up owning the Florida Marlins after Selig engineered a swap of franchises when MLB bought the Expos several years ago. Loria’s handling of the Expos is the subject of litigation brought by Loria’s limited partners, who were pursuing that litigation even as New Yorker Loria’s new team was playing in last season’s World Series. You certainly did not hear about the following on the MLB broadcast as the World Series Trophy was being handed to Loria and the Marlins:

On their way out of Montreal, Loria and Samson stripped the franchise. With them went computers containing scouting reports on every Expos player, dozens of signed home run balls, even life-size cutouts of the team’s former superstar right fielder, Vladimir Guerrero. The Expos’ limited partners, meantime, became unwitting owners of 6 percent of the Marlins. In July 2002, they filed a racketeering suit in U.S. District Court in Miami. It charged Loria, Samson, Selig, DuPuy and the Office of the Commissioner of Baseball of illegally conspiring in what the suit called an “Expos Elimination Enterprise.”
The ongoing suit could complicate baseball’s plans for the Expos. The limited partners have 90 days to seek an injunction if baseball tries to move the team.
Last October, Loria’s Marlins miraculously found themselves in the World Series against the New York Yankees. “Can you imagine?” anguished one of the limited partners. “I’m sitting here. I’m an owner of the Florida Marlins. I’m rooting for the Yankees!”
And then, of course, the Marlins won.
This spring, nearly all the limited partners received World Series rings, even as they continued to sue Loria and Major League Baseball for racketeering in U.S. District Court.

Read the entire article.

Roy O and Beltran step up

Roy O pitched eight innings of shut out ball and Carlos Beltran scored the only run and made a spectacular catch to take away another as the Stros salvaged the third game of their weekend series with the Rangers, 1-0. Even when they win, this Stros team is tough to watch, as the Astro In Exile attests.
Oswalt was spectacular, giving up four hits in eight innings, walking none (he hit one batter), and fanning nine. Lidge looked good again in closing, and Beltran’s over the wall catch in the first immediately goes on ESPN’s ten best catches of the season.
As they leave Arlington for Chicago, the Stros are 39-36 and six and a half games back of the NL Central leading Cards. Apart from the great acquisition of Beltran, nothing has changed much for the club since my last analysis of the Stros’ season two weeks ago. Apart from Berkman and now Beltran, the hitters are a bunch of slap single hitters with little power. The pitchers have continued a trend of generally improving performances, but Redding‘s performance has been among the worst in the league and, thus, pulls the staff’s overall improved performance down.
Here are the Stros’ hitters’ runs created against average (“RCAA,” explained here) through Saturday’s games, courtesy of Lee Sinins:
Lance Berkman 40
Jeff Bagwell 13
Craig Biggio 9
Mike Lamb 8
Jeff Kent 4
Carlos Beltran 1
Eric Bruntlett 1
Jason Lane 0
Morgan Ensberg -3
Orlando Palmeiro -3
Jose Vizcaino -3
Raul Chavez -5
Adam Everett -6
Richard Hidalgo -6
Brad Ausmus -14
The Stros’ team RCAA of 36 ranks fifth in the National League overall, which is behind division rivals Reds (64), Cubs (48) and just a bit in front of the Cards (30).
Even though he has cooled off over the past two weeks, Berkman remains one of the best hitters in baseball, and Beltran would have a solid 20 RCAA if you include his RCAA from his time with Kansas City this season.
Bags‘ 13 is deceptive because that is only the eighth or ninth best RCAA among first basemen in the National League (Jim Thome is leading NL first basemen with an RCAA of 41 and Sean Casey is second at 37). Biggio continues his fine season, but is not among the top NL producers in left field. With the exception of Lamb, the rest of the club continues to scruff. Note that JK‘s performance is barely above-average despite the propoganda of a great season that the Chronicle exudes about him, and Everett‘s negative six figure should place him at the bottom of the lineup, where Jimy Williams had him in the game today.
Finally, the veteran outmaker — Ausmus — now has the sixth worst RCAA figure among NL starters, and it is clear that Chavez makes the Stros a better team offensive and defensively (he threw another baserunner out today in a key situation) when he replaces Ausmus. Don’t hold your breath that Williams will notice, though. Ausmus is a veteran who “handles pitchers” well, whatever that means.
Here are the Stros’ pitchers’ runs saved against average (“RSAA,” explained here):
Roger Clemens 15
Wade Miller 8
Brad Lidge 7
Octavio Dotel 4
Mike Gallo 3
Dan Miceli 3
Pete Munro 3
Andy Pettitte 3
Kirk Bullinger 2
Roy Oswalt 2
David Weathers 0
Brandon Backe -3
Chad Harville -3
Ricky Stone -3
Jared Fernandez -6
Brandon Duckworth -10
Tim Redding -13
The Stros’ team RSAA of 12 ranks seventh in the National League overall, which is behind division rivals Cubs (33), Cards (28), and Brewers (44).
There is actually much good news here. With Pettitte‘s return and Roy O’s RSAA figure uncharacteristically low, both of their RSAA should improve over the next several weeks. The Stros would realize a big benefit from simply replacing Redding with Munro, which should happen unless the Stros’ management goes brain dead. If Pettitte, Oswalt, Miller, and Lidge all trend toward joining the Rocket at the double digit RSAA level, then that will reflect a strong pitching staff for the second half of the season.
Based on current team RCAA and RSAA figures, the Cubs actually should be leading the NL Central by a long shot, so they are actually underperforming more in the win-loss column than the Stros. If performances remain relatively steady (that assumption does not always hold), look for the Cubs to overtake the Cards after the All-Star break, and expect the Stros and Cards to battle it out for second place in the NL Central. I still expect the Reds and Brewers to tail off, the Reds because of abysmal pitching (their great first half hitting will likely tail off in the second half of the season) and the Brewers because of their poor hitting (but they are getting very good pitching, which could keep them in the race longer than the Reds).
The Stros close out the first half of the season with seven games over the next week, four against the Cubs at Wrigley and then a weekend series at the Juice Box next weekend against the Rangers. The club really needs to step it up during these games because losing most of those games against these two good teams could put the Stros so far down by the All-Star break that any hitch in their giddyup in the second half of the season will drop them quickly out of the race for a playoff spot.

Ken Lay gives an incredible interview on Enron

In an unusually bold move in connection with an incredibly difficult case to defend, former Enron chairman and CEO Kenneth Lay is the subject of a wide-ranging interview on the Enron criminal investigation that appears in this NY Times Sunday front page article.
Normally, a defense attorney would never allow a client under scrutiny from multiple grand juries to discuss the subject of those investigations on the front page of the NY Times. However, the Enron case is not normal, and Mr. Lay’s able defense attorneys likely figure that Lay will be indicted and has nothing to lose at this point in attempting to mount a public relations campaign in a probably futile attempt to counter the extraordinarily negative image that anyone related to Enron evokes throughout American society.

Mr. Lay said that he had remained silent on the advice of lawyers, but is coming forward now to explain his views of a story that he says has become infused with myths. While not saying so explicitly, he suggested that he was motivated by a desire to tell his side both to the prosecutors on the Justice Department?s Enron Task Force who have been investigating him and the citizens of Houston who may well sit in judgment on him.

That said, the article is simply astounding given Lay’s current situation:

“If anything, being friends with the Bush family, including the President, has made my situation more difficult,” Mr. Lay said in a recent interview, “because it’s probably a tougher decision not to indict me than to indict me.”

Now, on the eve of what may be the government’s final decision on whether to charge him with a crime, Mr. Lay is talking for the first time about the company’s collapse in 2001 and the scandal that enveloped it. In more than six hours of interviews with The New York Times, Mr. Lay remained steadfast in his expressions of innocence, even as he acknowledged, as head of the company, accountability for the debacle rests rightfully with him. “I take full responsibility for what happened at Enron,” said Mr. Lay, 62. “But saying that, I know in my mind that I did nothing criminal.”

And even though Mr. Lay takes full responsibility, that does not stop him from pointing the finger of fault against others, including his probable main accuser:

As Mr. Lay describes it, the Enron collapse was the outgrowth of the wrong-headed and criminal acts of the company’s finance organization, and specifically its chief financial officer, Andrew S. Fastow. He says that both he and the board were misled by Mr. Fastow about the activities and true nature of a series of off-the-books partnerships that played the decisive role in the company’s collapse.

In the end, Mr. Lay said, the Enron story is one of corrupt executives in a finance organization led by Mr. Fastow, the former chief financial officer, who took advantage of the company for their own personal benefit and ultimately destroyed it. Mr. Fastow has pleaded guilty to fraud and is cooperating with the government.
?At our core, regrettably, we had a chief financial officer and a few other people who in fact mismanaged the company?s balance sheet and finances and enriched themselves in a way that once we got into a stressful environment in the marketplace, the company collapsed,? he said. ?But by the same token, most and I mean 98 percent of the people who worked at Enron were good, honest, hardworking individuals. They were not crooks.?

And what about Mr. Lay’s former net worth of almost a half billion?:

The years since the Enron collapse have transformed Mr. Lay. The changes in his financial status are stunning. At the beginning of 2001, Mr. Lay said, he had a net worth in excess of $400 million ? almost all of it in Enron stock. Today, he says his worth is below $20 million, and his total available cash not earmarked for legal fees or repayment of debt is less than $1 million.

The article goes on to do a reasonably good job of explaining Lay’s Enron stock sales during the company’s demise in late 2001, most of which were forced sales to meet margin calls. Those stock sales are reportedly a big part of the current criminal investigation against Lay, who continues to maintain his innocence of any criminal wrongdoing:

Despite the rumblings that criminal charges against him could well be imminent, Mr. Lay says he is sanguine. ?I know in my mind I did nothing wrong and nothing criminal,? he said. ?But I?d say if it does happen, it?s a great miscarriage of justice.?
But, if faced with indictment, would Mr. Lay consider pleading guilty? ?Absolutely not.?

Read the entire article.

Stros lose to Rangers again

Hank Blalock cranked a tie-breaking eighth inning yak off of Dan Miceli to lead the Rangers to an 8-7 win over the Stros on Saturday afternoon in Arlington.
The Stros’ Tim Redding pitched batting practice for the Rangers, giving up ten hits and six runs over four innings. Hopefully, the only reason that Redding remains in the rotation is because Andy Pettitte has not yet returned to the rotation. However once Pettitte returns, there simply is no reason not to hand the ball every fifth day to Pete Munro rather than Redding, who now has among the worst statistics of any starting pitcher in the National League.
The Stros hitters still are not hitting on all cylinders, but Barry Bonds, Jr. did nail a bases loaded double to tie the game at seven during a four run uprising in seventh. However, a season long power drain continues to plague Bags (slugging percentage of .470 this season against a career .546) and Ensberg (.354 slugging percentage compared with .530 last season), while manager Jimy Williams inexplicably insists on maximizing at bats for Everett (slugging percentage of .361) by batting him second in the order and playing unproductive hitters such as Viz (slugging percentage of .357) and Bruntlett (last night, slugging percentage of .403 in 67 career AB’s) rather than arranging the lineup to make sure that better hitters such as Lamb (slugging percentage of .550) and Lane (lifetime slugging percentage .522) are playing as much as possible. It is becoming increasingly clear to me that the Stros’ margin for error in scoring runs is not large enough to compensate for Williams’ dubious personnel decisions.
Roy O attempts to bail the Stros out during the Sunday afternoon game against the Rangers, as the Stros prepare to go to Wrigley for four with the Cubs next week that may just determine whether this club will be able to contend for a playoff spot during the remainder of this once promising season.

VDH takes stock of the war and the home front

In his latest NRO column, Victor Davis Hanson is bullish on the prospects for a successful conclusion of the Iraqi front of the war against the radical Islamic fascists, but more bearish on American society’s capacity to sustain the effort necessary to achieve that successful conclusion:

As we neared three years of fighting in World War II, Patton was stalled near Germany for want of gas, V-2 rockets began raining down on England, and we were fighting to take the Marianas in preparation for future B-29 bases. In comparison, what exactly is our current status in this, our confusing third year of war against Islamic fascists and their autocratic sponsors?
Unlike the Cold War, when our tactical options were circumscribed by nuclear enemies, today the world’s true powers are decidedly unfriendly to radical Islam ? and growing more so daily.
Two-thirds of al Qaeda’s leadership are either dead or in jail. Their sanctuaries, sponsors, and kindred spirits in Afghanistan and Iraq are long gone. Detention is increasingly common for Islamicists in Europe and America. The Hamas intifada has failed. Its implosion serves as a warning for al Qaeda that Western democracies can still fight back. There is also a lesson for America that even in our postmodern world most people still admire principled success: No one is lamenting the recent targeted killings of Hamas bullies or the preemptive assassination of suicide bombers.
We are winning the military war in Iraq and Afghanistan. The terrorists are on the run. And slowly, even ineptly, we are achieving our political goals of democratic reform in once-awful places. Thirty years of genocide, vast forced transfers of whole peoples, the desecration of entire landscapes, a ruined infrastructure, and a brutalized and demoralized civilian psyche are being remedied, often under fire. All this and more has been achieved at the price of political turmoil, deep divisions in the West ? here and abroad ? and the emergence of a strong minority, led by mostly elites, who simply wish it all to fail.
Whether this influential, snarling minority ? so prominent in the media, on campuses, in government, and in the arts ? succeeds in turning victory into defeat is open to question. Right now the matter rests on the nerve of a half-dozen in Washington who are daily slandered (Bush, Rumsfeld, Cheney, Rice, Wolfowitz), and with brilliant and courageous soldiers in the field. They are fighting desperately against the always-ticking clock of American impatience, and are forced to confront an Orwellian world in which their battle sacrifice is ignored or deprecated while killing a vicious enemy is tantamount to murder.
No, we ? along with those brave Iraqis who have opted for freedom ? could very easily still lose this war that our brave troops are somehow now winning.

Read the whole column.

The doping scandal investigation

Sally Jenkins, fresh off of hammering Tiger Woods for his behavior during last weekend’s U.S. Open, goes after the United States Anti-Doping Agency and its investigative tactics in this Washington Post column. Ms. Jenkins observes:

Let’s see if we can sum up the conduct of this investigation so far:
Sprinter Marion Jones has been dragged through the accusatory mud without a formal charge. A purported, damning version of Tim Montgomery’s grand jury testimony, which was by law secret, has been illegally leaked and he now faces total ruin and a lifetime ban from his sport. The twenty-some other athletes who testified before the BALCO grand jury must also worry if their testimony will be aired and used against them, too.

I’ll say it straight out: I believe Marion Jones when she says she’s innocent, based on what is a persuasive piece of evidence in her favor. In the last four years, Jones has not gotten faster. She’s gotten slower. Whatever Jones may be taking, it isn’t performance enhancing.
Here is an example of the kind of job USADA is doing in its inquiry into Jones’s ties to BALCO. Several weeks ago, Jones met with a trio of USADA officials, including Madden. They presented her with a calendar that purported to be her BALCO doping schedule. It bore several notations and the initials MJ.
“That’s not my calendar,” she said.
“Then why does it have your sprint times on it?”
Jones replied evenly, “If those are my sprint times, then I just shattered the world record by a second.”
The sprint times on the calendar could not have been those of Jones, or of any woman. They were too fast. The USADA representatives didn’t even recognize the difference between the sprint times of a male and a female.
You get an uneasy feeling from watching USADA’s bumbling zealots. You get the feeling they’d waive the U.S. Constitution if they could — which is a pretty unsettling thing to feel about an organization that is funded by U.S. taxpayer dollars and a grant from the White House.

There is one good product of the USADA’s bumbling investigation — more work for defense attorneys!

Stros scruff against Rangers

Kenny Rogers kept the Stros off balance all Friday night as he led the Rangers to a 3-1 win in the opening game of the Long Star Series.
Rogers made it look like the Stros played 18 innings the night before rather than the Rangers. He gave up only two singles and a double, walked only one and threw less than 100 pitches in chalking up his 10th win of the season. Meanwhile, Stros starter Wade Miller was all over the place, walking six and throwing 116 pitches in five and a third. Miller is among the league leaders in walks, and that lack of command is keeping him from being anything other than a barely above-average pitcher.
I’ve been quiet on the Jimy Williams front lately, but tonight he fielded just a ridiculous lineup. He has a team that is struggling at the plate and he bats Everett second (sorry, Jimy, Everett is a below average hitter regardless of how many times he lays down a sacrifice bunt), he DH’s JK so that he can play the punchless Brumlett at second, and, of course, we always have the incredible out machine Ausmus. That’s a third of the lineup that cannot hit their weight. By playing Kent at second, Williams could have DH’ed either Lamb or Lane and there is absolutely no reason with Beltran around to be batting Everett second in the lineup.
Wake up, Jimy. Your team is struggling. Play as many of your good hitters that you can and bat them more than your below average hitters. This is not rocket science.
Things could get ugly on Saturday as Tim Redding tees it up for the Rangers’ potent lineup. My bet is that Redding’s RSAA (explained here) is well into negative double digits once the Rangers get through with him.

Stros win and close trade for Beltran

The Stros nipped the Pirates 3-2 at the Juice Box on Thursday night as the Rocket picked up his 10th win of the season and the struggling Stros won for the fourth time in five games.
However, the bigger news out of the Juice Box on Thursday night was that the Stros consummated a trade that will bring star Kansas City centerfielder Carlos Beltran to Houston for reliever Octavio Dotel and AAA catcher John Buck (the Royals then shipped Dotel to Oakland for a couple of minor league prospects).
First, the game. The Rocket was his usual dependable self, scattering four hits and two runs over seven innings. Miceli and new closer Brad Lidge closed out the victory as Morgan Ensberg had the game winning hit for the second time in three games.
Now, the trade. Beltran is one of the best young players in baseball, with a .368 on base average, a slugging percentage of .527, and an RCAA (explained here) of 17 this season. Dotel has been one of the best relievers in baseball over the past three seasons, but he was having a down season so far and Lidge is ready to handle the closer’s role. Buck was once the Stros’ best minor league prospect before his development was derailed a couple of years ago by injuries and the club’s failure to field a high A farm team until last year. However, Buck has rebounded nicely this season at AAA New Orleans and is likely ready for an opportunity to play in the bigs.
So, although far from a great deal (at least as of yet), the trade is a reasonable gamble for the Stros, who were probably going to finish third (at best) in the NL Central if they played a pat hand the rest of the season. Beltran is clearly the type of player who can elevate the Stros’ performance level to equal that of the Cubs and Cards. Of course, the downside is that Beltran is probably a three month rental for the Stros, as his uber-agent Scott Boras has already announced that he is going to auction Beltran’s talents to the highest bidder on the free agent market after this season. Don’t look for the Stros to win that horse race.
Hopefully, Beltran will be in the Stros’ lineup on Friday night as they send Wade Miller to the hill in the first game of the Lone Star Series with the hard-hitting Rangers at Arlington. Redding and Roy O will pitch the next two games of the series.