tMichaelB is the web site for Tom Bengtson, who writes about business, religion, family and politics.

Wednesday, October 11, 2006

Sen. Hagel offers comments on fiscal situation

U.S. Senator Chuck Hagel (R-Neb.) used sobering language to describe the country's fiscal situation during a speech he delivered in Omaha on Sept. 22. There is talk that he may run for president in 2008; I think his candor is necessary but he will have to frame his message in a more hopeful fashion to develop any kind of a nationwide following.

Sen. Hagel said runaway spending by Congress jeopardizes the future of the country. “Without economic power, we have nothing,” he said, stressing the importance of a sound national economy. He said the budget deficit for this year is running about $260 billion. Although that sum is lower than it was a year ago, and although many people are hailing the figure as a sign of fiscal restraint, Sen. Hagel said deficit spending is still dangerous. “This takes a toll on our currency, on our competitive ability,” Sen. Hagel said. “We are going to have to get control of our spending; when that happens it is going to get a little uncomfortable.”

Sen. Hagel said that politicians usually come home with news about all the money they have brought back to constituents. They then head back to Washington with promises about reigning in the budget. “We want to have it both ways,” Sen. Hagel said. With Congressional approval ratings coming in between 25 percent and 28 percent, Sen. Hagel commented that “the American people do not think we are doing a very good job. And they are right.”

Sen. Hagel said Congress needs to tackle the major entitlement programs if it hopes to make any progress on fiscal reform. “The entitlement issue alone hangs as heavy over this country as the threat of terrorism,” he said.

The second-term Senator cited a study by the Federal Reserve Bank of Cleveland which noted the country has $42 trillion in unfunded liabilities over the next 75 years related to Social Security, Medicare and Medicaid. He said in 2016-17, the Social Security Trust Fund will begin to pay out more money than it collects. The country currently spends $380 billion per year on Medicare and $190 billion per year on Medicaid. Three-quarters of the budget, he said, goes to pay these three entitlement programs, as well as other so-called “non-negotiables,” such as interest on the debt and pension obligations. Interest on the debt alone, he said, runs about $300 billion per year.

Even more troubling, he said, is our dependence upon foreign investors to finance that debt. “You know that $2 billion to $3 billion has to come in every day from off shore to cover our debt,” he explained. “We are at a record low for savings in this country, and individuals are at record high debt levels.

“If we do not get our house in order,” Sen. Hagel said, “if we don’t make some tough decisions one of these days, if we don’t prioritize our resources and where we want to go, then we are headed for a lot of trouble.”

Monday, October 09, 2006

Articles show why I’m skeptical of the things I read in the newspapers

I am skeptical of much of what I read in the newspapers because I am so often unable to determine the motives behind the publication of certain stories. The motivation to publish a page one story, for example, should be obvious to the reader. The story should describe an important, obviously newsworthy, event or issue. The gossip and speculation and hearsay should be reserved for columns appearing deep within the newspaper. But increasingly, I find that the front page is barely discernable from most poorly written editorial pages.

To provide examples, consider two front page stories that appeared over the weekend: one on Saturday in the Minneapolis Star Tribune and the other on Sunday in the New York Times.

The Start Tribune article was about domestic troubles Alan Fine had with an ex-wife 11 years ago. Fine is the Republican candidate for the Fifth District congressional seat in Minnesota. The Fifth District is overwhelming populated with Democrats and Fine has virtually no chance of winning the open seat against state legislator Keith Ellison, who is running with the DFL endorsement.

I cannot figure out why the Star Tribune ran this article. The article focuses on a 1995 domestic violence charge made by his wife at the time. She dropped the case against him, and two years ago, Fine had the record expunged. So why is an argument between a husband and wife who eventually divorce worthy of a front page story? No case was ever tried and all we have is a ‘he said, she said’ account from more than a decade ago. I would be happy to read articles about real political issues, but I don’t believe any of my fellow voters in the Fifth District care about Fine’s marital troubles.

I think, although I can’t be certain, that the Star Tribune’s reason for running the story appears in the last paragraph, where it says “Fine has repeatedly said ‘character matters’.” So I get the sense that the newspaper is calling Fine a hypocrite. But I really have to laugh at that. Of course character matters. Is the newspaper telling us that Ellison thinks character doesn’t matter? And if that’s really the point of the story, then why isn’t the lead something like: Congressional candidate Alan Fine’s comments about character mattering are hypocritical, unconfirmed events from 11 years ago suggest.

As for the New York Times, the Old Gray Lady ran a story about religious organizations getting exemptions from certain state and federal laws. It is an absolute non-story that was started above the fold on page one and jumped inside where the remainder of the copy took up two entire pages.

The article starts by describing two day care facilities in Alabama. One is subject to inspection and regulation, the other, which is affiliated with a church, is not. The tedious article goes on to note that churches get tax breaks unavailable to typical commercial businesses. There is absolutely no news here. Any commercial business that competes with a non-profit entity is well aware of the inequities.

One paragraph in the article: “These organizations and their leaders still rely on public services – police and fire protection, street lights and storm drains, highway and bridge maintenance, food and drug inspections, national defense. But their tax exemptions shift the cost of providing those benefits onto other citizens…”

Wow. Are they actually saying that it is wrong for Americans who don’t pay taxes to enjoy these services? There are thousands of low-income people in Minnesota who don’t pay income taxes who enjoy all of these things and no one has any problem with that. And if it is the fact that churches are specifically exempt from paying taxes rather than unable to because of their limited means, consider the many very profitable credit unions across the country that enjoy all these benefits and pay no income tax. Only a small group of citizens, mostly made up of bankers, complain about that.

The Times never comes out and says it, but I think they are implying that churches should not get these breaks. I think they see it as a violation of the constitution which guarantees the separation of church and state. I am not aware of anyone who sees it that way, except people who are openly hostile to organized religion. Remember, people came to North America in the first place to get away from oppressive government regimes that tried to interfere with the practice of religion.

So the New York Times story just doesn’t make any sense. Their motivation for running this story is very unclear and leaves me only to speculate. This piece just makes the newspaper look hostile to organized religion.

Friday, October 06, 2006

Economist sees slowing economy, maybe even recession

The next Federal Open Market Committee meeting is Oct. 24-25. If you have a mortgage with an adjustable rate, or if you have tapped into a home equity line of credit that charges a floating interest rate, you should pay attention every time the FOMC meets. This is the Federal Reserve board committee that sets interest rates, specifically a rate called the Federal Funds rate. All other interest rates fall or rise correspondingly.

The last two times the committee met, it decided to hold the rate at its current level (5.25 percent). This is important, because the 17 previous meetings in a row, it elected to raise the rate. Some people are now beginning to say the Fed will lower rates, and the process could start as soon as the meeting later this month. Most people who watch this stuff, however, expect the Fed to hold rates through the end of the year and perhaps begin to lower rates in the first quarter of 2007.

I had an opportunity to listen to Michael Gasior deliver a synopsis of the economy on Tuesday. Gasior is an economist who founded an institutional investment firm called American Financial Services. He thinks the Fed will lower rates early next year, but he doesn’t see that as necessarily good news. He is afraid the economy will need rejuvenation and the Fed will lower rates to stimulate an economy that he sees headed for recession.

Here are the points he made about why he believes the U.S. economy is headed for recession:

*) Foreigners are financing our debt. He noted that since 2000, the U.S. government has issued $1.3 trillion in new debt and foreign investors have bought virtually all of it. Plus, he notes, U.S. private domestic investors have reduced their holdings of U.S. Treasuries by $300 billion. That means foreign investors have actually bought $1.6 trillion in U.S. debt in the last six years. Gasior says it is not a good sign that Americans are unloading their Treasury bonds and that they are not buying the bonds being issued currently.

Gasior noted the uneasiness of the country’s growing dependence upon foreign investors. If the Japanese or Chinese stopped buying U.S. Treasury bonds, bond rates would have to increase, which would make everything in the United States more expensive. This kind of pressure really handcuffs the Federal Reserve. It may want to lower rates to stimulate the economy, but if it does, foreign investors may not be as willing to finance our debt.

*) He doesn’t like the inverted yield curve. When long term interest rates fall below short term interest rates, it almost always leads to recession, Gasior said.

*) Gasior said he does not like the fact that the U.S. dollar is weaker now than it was four years ago. Today, a dollar will buy you 0.78 euros or 117 yen; four years ago a dollar would have bought you a full euro or 134 yen. A weak dollar is a plus for American manufacturers selling abroad, but it makes it much more difficult for foreign companies that attempt to sell their products in the United States. We need those foreign companies to do well, so their economies do well, so they will continue to buy our debt.

*) Gasior said he also is concerned about the contracting real estate market. Particularly troubling is the fact that the contraction is taking place during a relatively good economic period. If interest rates were to rise one or two more times, it would really send real estate into a nosedive.

Gasior concluded: “We are already slowing down, but by the first, maybe second quarter of next year, it will be very evident the economy is slowing, perhaps to the level of recession. I don’t think the Fed is going to wait that long to begin cutting rates. It will have to do something in order to keep things stimulated, to keep things from melting down.”

Monday, October 02, 2006

Law set to beef up internet gambling prohibition

Rep. Jim Leach is getting his internet gambling law. (See Sept. 20 post.) The Unlawful Internet Gambling Enforcement Act was tacked onto the Port Security Improvement Act, which the Senate passed late Friday. The bill now goes to President Bush, who is expected to sign it into law this week.

Although I am not a gambler and I feel for people who struggle with gambling additions, I really wonder whether this is the right approach. Internet gambling is a problem worthy of congressional scrutiny, but does the answer really necessitate the involvement of the banking industry and the credit card companies? I don’t think so.

Internet gambling currently is illegal but since most of the gambling web sites operate in other countries, the prohibition is nearly impossible to enforce. The Federal Reserve and the U.S. Treasury already have a comprehensive regulatory enforcement mechanism in place for the banking industry, so Rep. Leach proposed to tap into that mechanism to mitigate internet gambling. Good intentions not withstanding, going after the credit card processors does not solve the problem. Private industry facilitating the payments system shouldn’t be saddled with the cost of Congress’s attempt to resolve yet another social problem.

It is true that many of the credit card companies and big banks favor the new gambling enforcement rules. Those companies, however, would be far better off implementing the bill’s provisions voluntarily rather than under the threat of fines and incarceration. In fact, banks and credit card companies build a world of good will when they take on serious social ills on their own.

The thing about money is there will always be people who choose to spend it foolishly, whether it be on gambling, pornography, recreational drugs or other nonsense. As people of goodwill, we have an obligation to help others make wise decisions about living well. That is a responsibility that falls on all of us, not just those who work in the credit card industry.

Friday, September 29, 2006

Pope Benedict XVI on Faith and Reason

One of the really good things to come out of the demands by radical Islamists that Pope Benedict XVI apologize for his September 12 speech at Regensburg, Germany is that the ensuing media brouhaha might actually incite some people to dig up the speech and read it. That’s exactly what I did and I hope you will too. Find the full text at Zenit.org.

Benedict delivered an absolutely brilliant speech about the inseparability of faith and reason. The great divide among God-fearing people in our world today is between those who believe God’s actions are completely random and indiscriminate, and those who believe God’s actions are in harmony with reason. Some people say God can do anything He wants, even evil. This doesn’t make any sense to me. We Catholics believe God cannot contradict Himself. God is pure love and evil does not come out of true love. Reason would require this consistency.

I am very grateful for the integration of faith and reason. If God’s actions correspond with reason, then I have some hope of knowing God and of understanding His ways. But if His ways are entirely separate from reason, then I have no way of discerning the meaning of God’s actions. I would have no way of knowing whether a particular action is godly or otherwise.

Benedict notes the Greek translation for “word” in the first verses of John’s Gospel. The Greek word is “logos,” which means both “reason” and “word.” Benedict said: “John thus spoke the final word on the biblical concept of God, and in this word all the often toilsome and tortuous threads of biblical faith find their culmination and synthesis. In the beginning was the logos, and the logos is God…”

Although faith and reason are necessarily integrated, Benedict notes three distinct efforts in Western culture to separate them over the last 500 years. He notes, first, the Reformation of the 16th century which reduced faith to one component of an over arching philosophical system, unduly influenced by the philosopher Immanuel Kant who stated that “he needed to set thinking aside in order to make room for faith.” The principle of sola scripture, a pillar of the Reformation, dramatically reduced the grandeur of God and His revelation to mankind.

The second effort to bifurcate faith and reason came out of liberal Christian thought developed in the 19th and 20th centuries which focused on the humanity of Jesus. The idea, Benedict said, “was to bring Christianity back into harmony with ‘modern’ reason, liberating it, that is to say, from seemingly philosophical and theological elements, such as faith in Christ’s divinity and the triune God.”

The third effort, which is currently underway in some theological circles, discounts the significance of Greek culture in the presentation of the scriptures. It dismisses the word “logos” and its significance as merely a cultural phenomenon that should not have meaning in a world-wide application of scripture and theology.

Benedict states that faith without reason prevents religion from creating community because faith ends up being entirely personal. On the other hand, reason without faith offers a very narrow view of science which reduces mankind to something much smaller than God intended. The fullness of God's creation can only be understood in a context that honors the inseparability of faith and reason.

God-fearing people should be willing to have the discussion that Pope Benedict initiates with his speech at Regensburg. The radicals who threatened the Pope with death and burned his image in effigy clearly don’t want to have that discussion. Their reaction to the speech validates the importance of Benedict’s message.


While the opportunity for dialogue with Muslims may be minimal now, my hope is the opportunity is far greater with non-Catholic Christian denominations. What is the role of reason in a “scripture alone” theology? Was Kant right? Do we really need to turn off our brains before considering our faith? Pope Benedict in his speech affirmed that the Catholic Church says no.

Tuesday, September 26, 2006

Author, speaker shed light on gender differences

I’m reading a book by Myrna Blyth, who edited Ladies Home Journal magazine from 1981 to 2002. In the publishing world, the magazine is referred to as one of the “seven sisters,” the others being Family Circle, Redbook, McCall’s, Good Housekeeping, Better Homes and Gardens and Woman’s Day. These magazines have absolutely nothing in common with the industry magazines I work with on a daily basis, but I always find it interesting to read the musings of other magazine editors.

The premise of Blyth’s Spin Sisters: How the women of the media sell unhappiness and liberalism to the women of America, is that the seven sisters exploit women by promoting unrealistic images of beauty. They also play on women’s anxieties by printing a preponderance of journalistically flimsy stories about health, stress and safety.

Blyth offers a glimpse into how major media works, but what fascinated me most was her take on the differences between men and women. It seems so politically incorrect today to acknowledge any differences between men and women. But Blyth is not worried about political correctness. She goes into quite a bit of detail about how the media (not just the major women’s magazines) prepare stories differently for men and women.

“Coverage of health topics, which provide the best fodder for frightening stories, dramatically increased during the past decade both on television and in women’s magazines,” she writes on page 125 of the hard-cover edition I’m reading. “On TV, the increase was part of the ‘feminization’ of the media, the realization by executives that more and more often it was women out there watching -– and watching everything -– including the news. Media analyst Andrew Tyndall, of the Tyndall Report, a network news monitor, who tracked CBS news broadcasts in 1968 and 1998, saw the broadcasts shift from foreign policy, military, economic, and business issues to lifestyle topics like health, education, and sexuality. In fact, measuring coverage on all three networks, he found that the news time devoted to what he calls ‘news you can use’ aimed at women quadrupled from 16 minutes to 71 minutes a month and helped transform TV news in the process.”

Blyth cites a University of Michigan psychology professor in her explanation of the different way news impacts women and men. According to Susan Nolen-Hoeksema, “women tend to ruminate, brood, and worry a lot more than men,” she writes on page 116. “Through an extensive 20-year study, she found that many women spend countless hours thinking about negative ideas, feelings, and experiences.” This finding is in apparent contrast to men.

“Gender plays a powerful role in the perception of hazards, was the conclusion of Professor John Graham, founding director of the Harvard Center for Risk Analysis, after the center polled more than a thousand Americans to find out whether they believe in widely reported but unproven ‘hazards’ like radon and pesticide residue on food. Graham found that women were more likely to believe such scares were true by a margin of 10 percentage points or more.”

Blyth got me to thinking about a speaker I heard who addressed a group of parents in Arkansas last June. Dr. Philip Mango, the president and co-founder of Saint Michael’s Institute for the Psychological Sciences in New York City, described distinct neurological differences between men and women in his presentation at the annual convention of the Couple to Couple League. Dr. Mango doesn’t have a lot in common with Myrna Blyth but he affirmed the hypothesis that there are concrete differences between men and women, including the way they approach problems, think about things and come to conclusions.

Testosterone and vasopressin, the two primary male hormones, flood a man’s mind, affirming characteristics such as assertiveness, Dr. Mango explained. For men, maturity is a matter of harnessing these hormones.

Dr. Mango took us back to the beginning, noting that when a girl is born, her first relationship is with someone like her –- her mother, a women. This is not true when a boy is born. Initially, a boy identifies with his mother, but as his self-awareness grows at about 18 months, he becomes aware that he is not like his mother. His search to find his identity can affect his outlook for the rest of his life, Dr. Mango said. The greatest responsibility of any father, Dr. Mango said, is to love his son. A father must help his son affirm his identity.

“Most boys today are not getting that from their fathers today. Most boys are walking around hungry for their father’s affirmation,” Dr. Mango said. In the same way that God the Father affirmed Jesus at His baptism, saying “this is my beloved son, with whom I am well pleased,” (Mt. 3:17) fathers should affirm their sons, Dr. Mango said. “God gives us affirmation; when we know that the King loves us, that gives us the power to go out and do anything. That is what fathers can give their sons.” Dr. Mango urged fathers to spend time with their children and show physical affection toward them.

I can read about the differences between men and women, and I can listen to speakers explain the differences, but I can learn the most just by watching my own two daughters and two sons. My girls have magnificent feminine characteristics and the boys have the classic masculine traits. Whatever this means for the way they will approach life as adults, I only know one thing for sure. My wife and I love those kids and that love is essential to their healthy self fulfillment.

Thursday, September 21, 2006

National security expert says we’re much safer

The United States is a safer place today than it was five years ago, retired Gen. Barry R. McCaffrey told a business audience in Des Moines, Iowa on Sept. 18. McCaffrey is a national security and terrorism analyst for NBC News and writes a national security column in the Armed Forces Journal. He is the president of a consulting practice based in Arlington, Va., and he is an adjunct professor of international affairs at the U.S. Military Academy at West Point, N.Y.

A year ago, I had a chance to interview McCaffrey when he was in Minneapolis. (See my November 4, 2005 blog entry.) Hearing him speak again earlier this week, McCaffrey largely re-iterated the message he delivered a year ago.

In Des Moines, McCaffrey urged his audience to review the web site maintained by the U.S. State Department, where 42 organizations are identified as terrorist groups that threaten U.S. national interests. He noted that the majority of these organizations are funded by criminal activity. One group is smuggling cigarettes out of North Carolina and selling them in New York, generating “tens of millions of dollars for a middle east terrorist organization,” he said.

The Taliban, which is operating in Afghanistan, is funded largely by its sale of opium and heroin. Last year, McCaffrey said, Afghanistan produced 582 metric tons of heroin, which is more than 90 percent of the world’s supply. “If you want serious resources as a terrorist organization, you have to get involved in the drug trade,” said McCaffrey, who noted the convergence of international crime, drug money and terrorism.

Many of the 42 identified terrorist groups, McCaffrey said, “are Islamic extremist groups who have hijacked Islam and have attempted to explain their terrible animosity and frustration with their own governments, which frequently they characterize as incompetent, corrupt and hypocritical toward Islam.” Americans are having a difficult time understanding the situation because “we don’t want to see it as a war of Islam against the West, nor do we believe that’s the case.”

The State Department web site also lists governments which it believes sponsor terrorism. Five years ago, seven countries were on the list –- North Korea, Syria, Iran, Iraq, Sudan, Libya and Cuba. At the time, the United States thought five of those countries had weapons of mass destruction, McCaffrey said.

“We should understand that WMD capability is still resident in many of these states,” McCaffrey said. “There are probably 30 nations that could rapidly develop a nuclear weapons capability. Our concern is, can any of these 42 terrorist organizations gain access to that technology?” McCaffrey called North Korea and Pakistan particularly harmful due to their potential for proliferating such technology.

McCaffrey called the threat to the United States “considerable,” but described a three-pillar approach the country is using to defend itself.

The first pillar is made up of the country’s law enforcement agencies and its intelligence services. He called the CIA and the FBI among the greatest agencies in the world. Despite widespread international displeasure with American foreign policy, McCaffrey said the CIA continues to enjoy tremendous access to sensitive information. The FBI, he said, which traditionally has responded to criminal activity, is in the process of transitioning into a pro-active agency which prevents terrorist actions before they occur.

The second pillar, McCaffrey said, is the United States’ armed forces. He called the American soldiers in Iraq today the “most courageous, competent force we have ever fielded.” American armed forces, he said, are tactically nimble and very powerful.

The third pillar is the country’s domestic counter-terrorism effort. The Department of Homeland Security brought together 22 government agencies into one department of 177,000 people. Although much more work needs to be done, McCaffrey said progress has been made in many areas. “The nation’s 104 nuclear power plants are immensely better defended, and the nation’s aviation system has gone from unprotected to being pretty well defended,” he said.

Border patrol, McCaffrey said, is one of the greatest homeland security challenges. He said there are currently 12,000 border patrol officers. “Why would you think you could defend America’s 304 ports of entry with a force that is a fraction of the size of the New York City police department?” he asked. He said the border patrol needs 45,000 people.

The Coast Guard also is understaffed at its current level of 32,000 people. “That force ought to be 75,000 people,” he said. And the National Guard, he said, is not equipped to keep up with the demands that are being made of it. He said the National Guard needs more military police brigades, light infantry, engineering and medical resources and fewer F-16 aircraft and M-1 tanks.

“At the end of the day, the great question asked every 9-11 is going to be: Are we any safer? It’s a silly question,” McCaffrey summarized. “Of course we are. We have made enormous strides internationally and at home to better set ourselves up to protect us from these new forms of terrorist threat. To a large extent it’s working.”

Wednesday, September 20, 2006

Congressman pushes bankers to help stop internet gambling

I had an opportunity to listen to Congressman Jim Leach earlier this week speak about the growing phenomenon of internet gambling. It is illegal to gamble over the internet in the United States, but internet gambling web sites are among the fastest growing category of web businesses. Rep. Leach has introduced legislation to improve the enforcement of laws prohibiting internet gambling.

I have had the chance to cover Rep. Leach for more than 15 years and I have a great deal of respect for this Republican from Iowa, who often is called the smartest man in Congress.

“The fastest growing financial industry in the world and in the United States today, probably by a quantum measure, is gambling,” said Rep. Leach. He said $6 billion per year is wagered over the internet. “In the last five years, it’s grown three-and-a-half fold; it could grow at least that in the next five years.

“In gambling, in general, there are about 2 percent who participate who become what are called ‘pathological’ gamblers, which means they absolutely cannot stop. There are about 5 percent who become ‘problem’ gamblers, which means they can hardly stop, and about 20 percent of bankruptcies relate to gambling,” said Rep. Leach.

Rep. Leach’s legislation, which was approved by the House of Representatives, would prohibit banks and credit card companies from settling internet wagers involving credit cards. “If it works it is clearly worth it. If it doesn’t work, we will all have to reconsider,” Rep. Leach said.

Rep. Leach said he hopes the Senate takes up the legislation this fall. It will be interesting to see what happens. If credit card companies stopped honoring wagers made over the internet, they could shut down the internet gaming business instantly. But most bankers don’t like the idea of being cops. Bankers already don’t like their role in the Patriot Act and other anti-terrorism measures which require them to take extra steps to look for money-laundering. While most bankers would agree that internet banking is a problem, it will be interesting to see whether any believe they should be required to do anything about it.

“I personally think bankers ought to be amazingly sympathetic to this kind of approach because of concern for your customers, and concern for other Americans in a society that wants to save rather than go for the big pot at the end of the rainbow,” Rep. Leach told a group of bankers in Des Moines on Monday.

Rep. Leach said internet gambling is a particularly serious problem among college students, citing one study that estimated 10 percent of college students gamble on line. “The number of college males who reported gambling on line once a week or more increased four fold last year alone,” Rep. Leach said. “Never has it been so easy to lose so much money so quickly at such a young age.

“Gambling through the internet has been brought to the home and to the bedroom. It’s been brought to the office, to the college dorm, and increasingly in the very near future, to cell phones and Blackberries so you can gamble to and from work or while waiting in a movie line,” Rep. Leach said. “This is a very serious phenomenon.”