Corporate earnings are improving, but unemployment remains high.  These are not unrelated. As the weak economy has held down wage increases, this alone will translate into lower costs and better profits. But this is true only if high competitive pressures have not squeezed margins, which has occurred and if volume remains healthy which varies based on industry.  Demands for technology are solid; demands for housing and construction and related banking services are not.

With tax increases on the horizon investors and business managers are using whatever tools are available to push earnings into 2010 and expenses into 2011.  This will make the current year look better, but it will make 2011 look worse. Business people know this and this is why they are reluctant to make long term investments. For example there is a growth in Rolph IRAs and 401k’s which allows investors to convert current retirement plans and pay taxes this year and get tax free distributions later.

The insistence on class warfare and only increasing taxes on the rich plays well to those seeking social justice, but the reality is that this class will change their behavior the most in response to higher taxes.  They will swap labor for leisure, which they can more easily afford to do, and they will swap tangible assets for financial assets.  They do not have pay tax on the enjoyment of a second home or a new boat. This will drain investable assets that are desperately needed to create new jobs.

Complicated laws measured in thousands of pages have two distressing effects.  They increase the need and function of lobbyists who seek to carve out special advantages for their representatives.  A president who campaigned on the malignancy of lobbyists will cause them to proliferate.

These laws put a burden on the smaller businesses who often lack the political power to influence the legislation that controls them or the counsel to advise them on minimizing their impact.  These small businesses are the backbone of the middle class, and the complex regulations will hurt the middle class and small business much more than the rich who are more adept at managing political risk.

The destruction of the middle class is more destructive to our social fabric than all of the excesses of Wall Street, both real and imagined.

Business is frozen from radical and uncertain legislation and clear anti-business jawboning from the presidential pulpit. Nobody wants to play a rigged game. As some retire early they will not likely re-enter the business world until confidence is restored and they just do not trust the administration as Neil Cavuto so appropriately put it. There is some cost to the loss of the most experienced business people; their wisdom is needed to avoid mistakes they learned from.

All of this keeps unemployment high.  Higher minimum wages and longer unemployment benefits make hiring both more expensive for businesses and less desirable for workers. I have never had a worker ask to be laid off… until this recession.

The only thing keeping unemployment as low as it is has been is the number of workers just exiting the workforce.  Those who are not actively looking are not counted. But at some point these people will return to the workforce. Perhaps they run out of money or their brother in law just tires of them sleeping on the couch.

Ironically the very thing that may push them to re-enter the workforce may be the renewed optimism that may accompany a sharp political reversal in November. We can thus expect an increase in unemployment if the Republicans make significant gains. This will be short lived if the Republicans can make the proper policy changes that we desperately need.

If the Republicans do not make the material political gains so many expect then this terrible business climate and the related unemployment will be with us for some time.

In the wake of the elections  of November 3, 2008 we noted the dramatic swing of the independent voter.  Who are these voters and why do they refuse to ally themselves with one of the two major parties?  I confess up front that this is my sense and perception and I do not propose to support this with any legitimate research.

The independent is fiscally conservative and socially tolerant. This would make them libertarian but they are not dogmatically so.  They do realize that there is a place in foreign affairs for the military whereas the more dogmatic of the libertarian would categorically condemn foreign military adventures.

The social tolerance explains their willingness to support a black man with a distinctly ethnic name.  They are tolerant of ethnic diversity and I guess they are probably about evenly split on the subjects of gay marriage and abortion rights.

The independent is a realist.  He realizes that there is a continuum of socialistic government policy and individual liberty and is only likely to become mobilized when he sees a move to an extreme, which he probably now sees. When 48% of the population received more in benefits that they pay in taxes it is extreme in any reasonable view. The independent recognizes that there is evil in the world and that there is a time when violence must be employed.

The independent is civil.  The demonization of one party by the other, the name calling, and the negative campaigning alienates the independent. In a display of uncivil discourse they hear only the emotion and not the message.

The independent is rational.  He does not blindly follow a party line if it does not make sense. He is skeptical of radical change, but willing to question policies that no longer work. He understands that taking money from one person and giving it to another does not create wealth. In fact it is more likely to destroy it. He understands that the economic laws that govern his household are not dramatically different than the economic laws that govern our nation. Wealth must be earned, and debt must be repaid- one way or another.

The independent understands the role of government and its limits. He understands that life is imperfect, often unfair, and frequently uncertain.   He understands that government policies that seek to solve all our problems and counter the laws of nature often end in tyranny.

The independent is not necessarily the same as a populist.  The independent is more likely to compromise than the populist, less likely to have a single issue litmus test, and less likely to campaign actively, put a bumper sticker on their car or attend a ‘Tea Party.’

The independent is less tied to a principled philosophy and thus is more likely to be swayed by appearances and charisma. By not being attached to a party he is more likely to change if his candidate disappoints.  This explains the voter swing in VA and NJ.

The independent is more likely to change priorities in crisis.  After 9/11 they became hawks. After the financial meltdown they became economics Keynesians. After the bailouts and nationalizations they became fiscal conservatives.

The independents are honest and expect the representatives to be honest as well.  Transparency and bipartisan efforts were promised by this administration and they are not keeping their promise. They are intolerant of the corruption that is plaguing the party in power. They are even more intolerant that the party leaders tolerate the blatant corruption of a Charles Rangel or Chris Dodd.

The Republican populists that challenged the party leaders in NY district 23 are probably correct that the Republicans cannot win by being a lighter version of Democrats. But they also cannot win by ignoring the wishes and motivation of the independents. The alliance between the independents and populists in matters of sound economics and limited government will not necessarily include a mandate on social issues the independents oppose.

The radical policies of the current administration have energized the Republican base more than the attractiveness of any specific candidate to represent them.  Centrist Democrats in the White House or in Congress may have rendered a figure like Sarah Palin irrelevant.  Combined with the flexibility (or fickleness) of the independents the Right has quickly regained a footing many recently thought was unrecoverable.

According to the July 26, 2010 print version of Newsweek:

There are 141 million active blogs, up from a mere 12,000 ten years ago.

Daily e-mails are up 20 fold from 12 to 247 billion in the same period.

Daily Google searches are up 20 fold to 2 billion.

Text messages are up from 400,000 to 4.5 billion.

We spend six times as much time online; from 2.7 hours a week to 18 hours per week.

The cost of hard-drive storage has dropped from $10 to 6 cents per gigabyte.

Yet daily letters mailed has dropped only a little 207.88 billion to 175.67 billion, the number of daily newspapers from 1,480 to 1,302.

What does all this mean?  I really don’t know, but the cynic in me doubts that we’re better informed as a result, but I could be wrong.  More data, more information, and more opinions do not automatically translate into more wisdom.  In fact the more we are overloaded with information the more we seemed starved for wisdom.

I do think that we are defining some new sense of community especially when the new social media are thrown in. It is distant enough to be less likely to be civil that personal contact, but the individualized nature lets everyone set rules of conduct.  It is so much easier to stay in touch with friends and family there may be some real positive impacts on family and community networks.

How this digital community affects communities that are geographically defined will be interesting to see.

“Capitalism is, among other things, the revitalization of the world thanks to the opportunity to be lucky.  Luck is the great equalizer because almost everyone can benefit from it. The socialist government protected their monsters and, by doing so, killed potential newcomers in the womb.”

“Luck is far more egalitarian than even intelligence. If people were rewarded strictly according to their abilities, things would still be unfair- people don’t choose their abilities. Randomness has the beneficial effect of reshuffling society’s cards, knocking down the big guy.”

From The Black Swan by Nassim Nicholas Nicholas Taleb

I have a default position to disbelieve conspiracy theories.  Secrets are just too hard to keep.

While I find individual reporters may be biased in their coverage, I expect the larger organization to balance bias, although the dominance of so many Democrats (or any single party for that matter)  in the MSM makes this difficult.

The release of the JournoList, a group of 400 journalists from some of the top new organizations should be far more disturbing that most will see it.  When top reporters exchange ideas to promote one candidate and disparage another, this betrays a fundamental trust in a free press.

It is one thing for an opinion columnists or pundit, whether it is Keith Olbermann or Glenn Beck, to espouse whatever bias they choose; but it is another for a reporter for a major outlet to conspire with others in a similar position to intentionally mislead the public about a candidate.

It highlights a chasm of morality in the profession that is only justified in their narrow little minds by their arrogance and delusions of moral supremacy.

They should be treated like a professional athlete who intentionally throws the game for money: they should be barred from the game for life.