Brave New World Arrives 500 Years Early

The Astonishing Role of IQ in 21st Century America

IQ – Intelligence Part 1
By: George Noga – June 15, 2012

     This is the first of two posts about the shocking role of intelligence (as in IQ) in contemporary life; this installment deals with its transformational effect on our private lives; the second part addresses a radioactive issue: IQ and public policy. A sea change, mostly over the past half century, has taken place off all radar screens. It already exerts a profound effect on our lives and, when it reaches its culmination later this century, will forever change life on Earth as we know it.

“O wonder! How many goodly creatures are there here!
How beauteous mankind is! O brave new world,
That has such people in’t.”

     Brave New World was taken from Shakespeare; in The Tempest when Miranda, who was raised on an isolated island, saw other people for the first time, she exclaimed the above words. Aldous Huxley’s dystopian novel is set in the year 2540; what he warned about is happening 500 years early. The difference is instead of the World State controlling children’s IQs in Hatcheries and Conditioning Centres, we are doing it voluntarily but every bit as thoroughly.

Six Fundamental Truths About IQ

     We have allowed myth and political correctness to creep into our views about IQ, mainly because the truth makes many uncomfortable. Liberals in particular get apoplectic whenever hereditary differences are highlighted, such as when they learn little girls really do like to play with dolls and little boys with guns. The following axioms are accepted virtually unanimously by professionals and academics who study such things, albeit a few won’t say so publicly.

  1. There is such a thing as general level of intelligence on which human beings differ;
  2. All academic and achievement standardized tests measure this factor to some extent; tests expressly designed to measure cognitive ability (IQ) do it most accurately;
  3. IQ scores match what people mean when they use terms like smart and intelligent;
  4. Scores that measure IQ are stable throughout life although not perfectly so;
  5. Properly designed and administered IQ tests are not biased against any group; and,
  6. Cognitive ability is substantially heritable, no less than 40% and no more than 80%.

Psychometrics in the Twenty-First Century

     Around the middle of the last century the sea change began to be wrought. In earlier times high intelligence was nearly randomly and broadly distributed throughout society. A laborer, farmer or plumber was just as likely to have high IQ as anyone. Moreover, IQ rarely entered into the calculus of marriage. Everything changed beginning circa 1950; to wit:

  • High IQ students attending college soared from a low percentage to about 90% today of those who are in the top quartile. Among the top few centiles, the share is nearly 100%.
  • Elite colleges were transformed. In 1950 Harvard was easy to get into; by 1960 the average 1952 freshman would be in the bottom 10%. Today they wouldn’t even apply.
  • Bright kids from every place and background were identified and sorted. Today, any high performing kid could go to college and, if needed, without having to pay.
  • The entire non college population has been drained of the brightest kids and now has a markedly lower IQ than mere decades ago.

“The market value of IQ is soaring and the income/wealth gap
between the elite and others is widening at an alarming rate.”

  • Educational partitioning has been followed by occupational selection. High performers are concentrated in certain occupations specifically screened for that purpose. High IQ professions now take 5 times more of the elite than 20 years ago.
  • Cognitive ability and job ability are conjoined. The market value of IQ is soaring and the income/wealth gap between high performers and others is widening at an alarming rate.
  • Now we see physical segregation in addition to that in academia and the workplace.
  • The final step, selective marriage based on IQ, already is well established. Marriage and breeding between elites and others is rare even today as with Huxley’s Alphas and others. To put it bluntly, people want smart kids who can thrive in the world of the future.
  • This is happening all over the world and the trend is accelerating rapidly.

What Does This Mean For Our Future?

     Brave New World is arriving 500 years early. What kind of dystopian world will our children and grandchildren inhabit? Cognitive elites already matriculate in different schools, work in different jobs and workplaces, earn vastly more income, worship differently, shop differently, live in different cities and neighborhoods and send their kids to different schools. They intermarry and have kids who are even more elite. Now we are getting third generation elites for whom even their grandparents can’t supply them with insights into the life of ordinary Americans. But wait; it gets even worse.

“The greatest source of inequality in America today
is not economic – it is cognitive and cultural.”

   Elites don’t go to the same movies, watch the same TV shows, eat at the same restaurants, buy the same automobiles and vacation in the same places. They don’t look the same due to different notions about diet, exercise, body fat, cosmetic surgery, tattoos and piercings. They even have longer life spans. They raise their children differently, are indifferent to professional sports teams, eschew the military, disdain hunting and fishing, have different politics and well, you get the idea. Most will go through their entire life without ever talking with an Evangelical Christian, having a friend without a college degree or even knowing someone with a below average IQ. For crying out loud, they even eat breakfast (yogurt and muesli) differently.

     I don’t pretend to know how all this will end, except that it cannot be good. We are nearing the point where today’s cognitive elite Alpha pluses and Alphas are about as different from today’s Gammas, Deltas and Epsilons as in Huxley’s Brave New World. The main take away point for readers is to understand the radically transformed role IQ plays in the modern world and that the trend will become more and more pronounced over time. It explains a great many things no one likes to talk about and should influence our future public policies.

Next up: The role of IQ in public policy. Danger: Radioactive!

Credits and source notes: Charles Murray’s books “The Bell Curve” and “Coming Apart” were the source of ideas and data about the role of intelligence as was “The Global Bell Curve” by Richard Lynn. In addition, I read numerous scholarly journal articles in 2008-09 in connection with writing a chapter about IQ for a family history.

$4 Million a Year Meter Readers

Today’s College Degrees are Worth Much Less Than Before

By: George Noga – March 10, 2012
       If you want an example that encapsulates the pervasive extortion by public sector unions, look no further than paying $4 million per year for a meter reader. That is just so much bushwa, you may be thinking; surely that could never happen in America. Think again. I take you step-by-step to demonstrate how it  costs local governments $4 million for only one active meter reader position.
“You don’t believe a $4 million per year meter reader is possible in your city; think again!”
        A ubiquitous feature of public pension plans is for employees to receive 3% of their final year’s pay for each year worked. In this case I assumed the final year salary was $78,000 –  not an unreasonable assumption for a public sector union employee after 30 years of government work including merit raises, promotions and cost-of-living adjustments. Of course, overtime is included in computing the pension.   If our unionized meter reader begins work immediately after high school and works for 30 years, he receives 90% (30 years at 3%) of his pay for his life and also, in many cases, for the life of his spouse.
       Moreover, his pension is indexed for inflation and often includes retiree medical benefits. Thus, our meter reader retires at age 48 and collects his public pension until age 91 inasmuch as the joint life expectancy of him and his spouse at age 48 is 43 more years. And then there is the disability. The system is rigged to permit a large number (in some cases, 90%) of workers to qualify for disability, which adds 30% to the cost of the pension.
       Okay – our enterprising meter reader graduated high school at age 18, got married and had a child at 20, retired at 48 and (jointly) lived to 91. His patriarchal family was traditional and they knew a good thing when they saw it. Therefore, the meter reader’s son, grandson, and great-grandson followed in his footsteps – doing everything he did at exactly the same ages.
       Each, in turn, maximized overtime during his final year on the job, a practice with which everyone was complicit; it even has a name – spiking. I assumed they spiked only 60% of their base salary although frequently spiking can be well over 100% with even 300% being possible. They also qualified for disability; like spiking, this is a fraud in which all are complicit. I assumed inflation was 3.75%, a reasonable long-term average. All the numbers used herein are on an Excel worksheet and I will email it upon request. The numbers are breathtaking.
“For each active employee, government must pay four people – three retirees and one on-the-job worker.” 
       There comes a time when the original meter reader and his son and grandson all are retired and collecting pensions; the great-grandson is still active reading meters. Therefore, for one active employee who is performing one job, the city must pay four people – three retirees and one worker. The total cost using the assumptions disclosed herein is $3 million. The number approaches $4 million if retiree (and, of course, spousal) medical benefits are included and/or the employees spike at a rate significantly higher than 60%.
       This bears repeating. The government’s cost for one active meter reader position is $3-$4 million per year depending on the level of spiking and whether or not there are medical benefits. In our story, four generation of the same family can make $4 million a year for doing one job. Now you know how corrupt unions (oxymoron) game the system at our expense.
“Instead of $4 million annually in the out years for unionized public sector employees, the comparable amount for a private sector company would under $300,000 – this is 93% less!”
     Let’s compare the $4 million government union price tag to comparable non-union private sector employees. There are humongous (highly technical economic term) differences.
  1. Private sector employees have defined contribution pension plans (which they mostly pay for) like 401(k)s rather than costly defined benefit plans.
  2. Once private sector employees retire, the employer has no ongoing pension obligation.
  3. Private sector employees retire at age 65 not 48.
  4. It is rare for private sector employees to qualify for disability.
  5. Defined contribution plans are not indexed for inflation nor based on joint lives.
  6. Seldom do private companies provide retiree health benefits.
     Instead of  $4 million for someone employed in a unionized government job, the comparable cost  for a private sector job is less than $300,000, or a staggering 93% less.
College Degrees Have Become Vastly Overvalued
     A basic college degree no longer conveys intellect or knowledge now that government has decreed everyone should have one. Since successful folks tend to have college degrees, the way to raise people up is for them to have a degree; right? But college degrees aren’t causes of success; they’re simply markers or societal totems for possessing the traits and skills needed for success, i.e. mental acuity, discipline and deferred gratification. Having the traits always must precede obtaining the markers. Getting the markers doesn’t produce the traits any more than a designer suit makes a gentleman of a Neanderthal.
“Having the traits must precede obtaining the markers.” 
     Note: Another common marker for middle class success is home ownership. Government therefore assumes that if people who can’t afford homes are given homes through government programs (Freddie, Fannie, etc.) they will rise into a higher economic class. Just as with college degrees, government confuses markers with traits and causes. Giving a home to someone who can’t save for a down payment, make the monthly payment, pay taxes, insurance and utilities or even maintain the home will not improve their economic position. Habitat for Humanity learned this lesson long ago. Despite Habitat’s generous terms, rigorous screening and education of putative homeowners and insistence on investment of considerable sweat equity, they still have failures. Again, the traits needed for home ownership must precede the marker.
“Getting markers doesn’t produce the traits any more than a designer suit makes a gentleman of a Neanderthal. . . . Most motivation comes from Bluto rather than Plato.” 
     Moreover, college frequently is a bad deal. Forty percent don’t graduate. Many that do, obtain degrees that are of no market value. Graduates are saddled with debt that lasts decades. Much of college is pursuit of a totem and results in no increase in human capital. Nor are graduates well-rounded. Instead of being inspired by Plato, most motivation comes from Bluto. College actually discourages freedom of thought; instead, it initiates young people for life into an emotional, unthinking tribe of liberal orthodoxy from which precious few ever escape.

Just Who is Debbie Bosanke – And Why Has She Become the Poster Lady for Obama?


Just Who is Debbie Bosanke – And Why Has She Become the Poster Lady for Obama?

By: George Noga – February 21, 2012

Dear Readers:


For only the second time ever, I eschew the standard format to write more personally and directly. I have invested many hours researching this posting; if you stick with me to the end, you will be rewarded with an inimitable analysis and perspective.


Debbie Bosanke, for those of you not exposed to the White House and media spin machine, is Warren Buffet’s secretary, she who putatively pays a lower tax rate than her famous boss. President Obama is using her as an unwitting shill in his neutron bomb class warfare strategy to raise taxes to fund his hell-on-earth social welfare state. Never have I seen any issue so grotesquely demagogued, distorted, dishonest and deceptive. Consider the naked facts.


Buffet asserts he paid 17.4% in federal income tax. Although that isolated datum may be true, it is meant to dupe and hoodwink. Following is a fair and accurate calculation of Buffet’s real tax rate computed using the lingua franca of taxes by tracing a tranche of Buffet’s income through a complete tax cycle involving the following five stages.

  1. Before Buffet can invest, he must earn income. At the start of the cycle he earns $1 million on which he pays federal income tax of 39.6%, social security of 6.2%, Medicare of 2.9% and Nebraska tax of 6.84%. He pays $483,000 in total tax which is an effective rate of 48.3% after allowing for the deductibility of state tax.
  2. Buffet now takes $500,000 after tax which he uses to buy stock in a corporation. His investment is successful and the company earns 16% pretax profit for each of the next ten years. His share of the company’s income is $80,000 per year on which he (through the company) pays 35% federal tax and 7.81% Nebraska tax. The effective rate is 40.1% and Buffet pays $320,800 over the ten years.
  3. The company pays a 5% dividend annually; on Buffet’s share, this is $4,000. The dividend is taxed at 15% federal and 6.68% state. Over 10 years he pays $8,280.
  4. A decade has passed and Buffet decides to sell. Based on the aforementioned earnings and taxes paid, he nets a gain of $340,000. This is subject to a capital gains tax of 15% federal and 6.68% Nebraska. His total tax bill is $70,380.
  5. When Warren dies, he will be subject to federal estate tax of 35% and Nebraska inheritance tax which ranges from 1% to 18% – I have assumed 9% herein; this amounts to $379,600 based solely on the data for this tranche of income.

    Buffet’s True Tax Rate is 70% in 2012 – Increasing to 80% in 2013

    Buffet’s true tax rate is over 70% on this tranche of income over the entire cycle of earning, investing and leaving an estate. During the 10-year period Buffet had $1 million in individual earnings and $800,000 via his share of corporate income resulting in total income of $1.8 million; on that amount, he paid taxes of $1,262,100 – or 70.1% and not the 17.4% alleged. His reported 17.4% tax rate was based solely on step 4 of the above 5 steps, i.e. only on a single part of the cycle. His real tax rate is over four times (400%) higher than he claimed.


All this is based on current tax law for 2012. I also computed Buffet’s tax rate based on current law for 2013 and it is over 80% due to the statutory rise in estate taxes and the new 3.8% ObamaCare tax. I excluded federal and state unemployment tax, property tax, sales tax and over 20 other taxes Buffet would have paid. Moreover, if Buffet would have lost money on his stock, it would have be deductible only up to $3,000 per year.


And let’s not forget Debbie Bosanke. She shamelessly is being used as a surrogate for  secretaries everywhere – the kind that works in your office and earns say $20,000 and pays little or no taxes. Bosanke hardly fits that bill. Based on the limited tax data she released, her income is at least $200,000 and could be as high as $500,000,  anywhere from 10 to 25 times the earnings of a typical secretary. Bosanke’s income is inferred based on published IRS data on tax rates by adjusted gross income. Neither Buffet nor Bosanke has released their tax returns.


An Ignoble, Sordid and Squalid Spectacle


I can’t recall anything in my lifetime approaching the sheer chutzpah of the Obama-Buffet-Bosanke spectacle. It transcends political spin and crosses into a netherworld of intentional lie and deception; it froths with contempt for the American people.

  • They assert Buffet’s tax rate is 17.4% when they know it is over 70% and rising to over 80% next year. They know Bosanke’s income is 10-25 times that of  a typical secretary. They extract datum from only one part of the five-part tax cycle. All this is done with malice aforethought and intended to deceive and divide America.
  • The President of the United States and one of the richest men on the planet jointly propagated this massive fraud and deception knowing they could count on the state sycophant media not to expose them.
  • And just when you thought they couldn’t get any more scumlike, the bottom-feeding state sycophant media are flogging this deceit for all it’s worth. Even if they wished, they couldn’t get this story right because they graduate in the bottom deciles and their IQs are at least one standard deviation to the left of the norm.
  • Was this hoax the price of Buffet’s recently awarded Presidential Medal of Freedom? Buffet should be shamed into returning the medal and his otherwise good reputation has been forever sullied. Also, shame on him for dragging Debbie Bosanke into this squalid affair and for using her as an unwitting political pawn.
  • Perhaps the most sordid part of all this is that Obama is cynically banking on the ignorance and class envy of the American people due in part to the complexity of the tax code and his incendiary class warfare rhetoric. He is a divider, not a uniter.

The only antidote I know is to shine the spotlight of truth on this ignoble affair. In that regard, please be assured the tax data presented herein are accurate and fair as is the entire analysis. Please help me by forwarding this to as many as possible. Thank you.


Labor Day – Remembering Forgotten Heroes

Ruminations about Labor, Unions, Capitalists and Entrepreneurs

By: George Noga – September 5, 2011

         It is not far fetched to assert entrepreneurs are responsible for the rise of humanity from isolated hunter-gatherers up to and including modern man. There is one dark side to this: seeing the prosperity created by early traders and entrepreneurs, politicians created taxation. The pattern was thus established: entrepreneurs create wealth; governments destroys it. 

“Entrepreneurs create wealth; governments destroy it.”

      Entrepreneurs, creators and innovators have spawned enormous wealth, reduced poverty and increased life expectancy more in the past 100 years than in the preceding 100,000 years. Are they forgotten heroes of the world? Who did the most to benefit the common man – Henry Ford, Thomas Edison, and Steve Jobs or John Kennedy, George W. Bush and Barack Obama?

      I once took a graduate course in the history of economic analysis based on the teaching of Joseph Schumpeter who wrote about entrepreneurs: “First, there is the dream and the will to found a private kingdom . . . then there is the will to conquer; the impulse to fight; to prove oneself superior to others; to succeed for the sake, not of the fruits of success but, of the success itself. . . Finally there is the joy of creating, of getting things done, or simply of exercising one’s energy and ingenuity.”

The Legacy of the Peddler

        America owes much to peddlers; in many ways they built America. A budding peddler (entrepreneur) began by taking all the modest money he had and buying all he could fit into his backpack. He ventured into the hinterlands, sold everything and then did it all over again. He lived frugally and saved for bigger backpacks and more merchandise. When he could afford a horse and wagon, he ventured deeper into sparsely settled areas with more goods. Eventually he found a place that could support a resident peddler; he built a shack, filled it with things people wanted and lived simply in the back. Later he took a wife and started a family; they helped in the business and shared his hardscrabble life.

“Luxuries a short time ago are selling at Wal-Mart and Costco for ridiculously low prices. Government created none of this.”

        As the town grew around him, he expanded his store and eventually moved into a separate house. Most department stores and industries in America began that way. The peddler was the backbone of the American economy and society. A peddler had to have initiative, self-reliance and, above all, integrity. He paid his debts and taxes, attended church, contributed to charity and participated in civic affairs. There were no written contracts; his word was his bond. His life was orderly and scandal free. He had the dream and the will as described by Schumpeter. Are peddlers forgotten heroes?

Heroes of the World

        Do you doubt entrepreneurs are the heroes of the world? Look around you; ponder with amazement the monuments they have bestowed on the world. Gape in awe at the medical breakthroughs, technology and the cornucopia of everyday marvels. Average folks live better today than monarchs mere decades ago. World poverty has been halved in the past generation. Luxuries a short time ago are now selling  at Wal-Mart or Costco for ridiculously low prices. None of this was created by government. Is government heroic?

        Not uncoincidentally, entrepreneurs are the antithesis of socialistic and collectivistic schemes; without them we would be just like the former Soviet Union, Cuba and all the other places that elevate the state over people. Indeed, the greatest measure of the progress of a civilization is the rate at which it creates new millionaires. Creation of new wealth means society is innovating, spawning jobs, efficiently allocating its resources and serving its people’s needs.

       Are entrepreneurs truly the heroes of the world? You make the call.

Labor Unions Today – Are They Heroic?

      Labor Day was established to honor all labor not just organized labor. As conceived by President Cleveland and Congress, Labor Day was intended to serve as a reminder that work was an ennobling experience. It was placed at the end of summer to symbolize the end of seasonal indulgence and a return to work. Labor unions however have long sought to co-opt the Labor Day holiday for the minuscule segment of private industry that is unionized.

“Only in the fetid parallel universe of government is unionization growing; it extracts uncompensated value through politics that it cannot obtain on the merits.”

        Today less than 7% of private-sector workers are unionized and that percentage continues to plummet. Unionization of private workers is in free-fall for one, and only one, reason: workers independently conclude that the costs of belonging to a union are not worth the putative benefits. Only in the fetid parallel universe of government is unionization growing; it extracts politically what it cannot win on the merits.

        In economic terms unions are “rent seekers”, i.e. they accrue economic benefits via manipulation and/or exploiting the political environment rather than through the production of added value. In short, they extort uncompensated value from others – you and me; is this heroic?

Labor Day should Honor Entrepreneurs and Capitalists along with Labor

    Labor Day should honor all work as a noble experience. Let’s expand it to honor entrepreneurs and capitalists. America is the planet’s quintessential capitalist country. Let’s therefore honor capitalists who make labor more productive via investment in plant, equipment, tools and – well, capital. Finally, let’s honor entrepreneurs, those with a dream and a will to create; they are the sine qua non that leverage labor and capital, create synergies and thereby produce unbounded prosperity for all.

   The veritable horn-of-plenty that is America results from entrepreneurs, capital and the virtue of work. Let’s honor them all!

All-Time Media Hall of Shame

Nonexistent Guns, Nonexistent Defeat and Nonexistent Scandal

By: George Noga – June 1, 2011
      Media Watch is one of our regular features. Only this time I explain why and how media bias occurs. This is followed by the three most egregious examples of media bias that MLLG has reported since we began in 2007. As a bonus, I throw in a current example of extreme media bias dealing with gas prices.
     If you are like most, you assume when news happens, the editor or producer impartially assigns the story to a reporter who (hopefully) has some knowledge of the subject matter. The reporter objectively covers the story and reports the facts. The editor, also objectively, questions the reporter, fact checks and edits. The end result, even if flawed, represents a good faith attempt to report the news.
“Media organizations have, inter alia, black, Latino, gay and women’s caucuses that solely determine how any issue affecting their caucus is reported.”
      That’s not how it happens. Every substantial media organization has internal groups they call caucuses, i.e. employees who band together to determine how anything affecting their caucus is reported. Caucuses always exist for blacks, Latinos, gays and women; there may be others. Most other issues such as those involving the military, environment, guns, poverty, corporations and religion don’t require caucuses as all reporters  have been in lockstep about them since at least journalism school. Should they forget the correct slant, that’s where editors come in.
      Let’s follow a typical news story involving say abortion. The editor/producer will try to assign the story to a reporter from the women’s caucus. The reporter will write the story using only criteria and terminology approved by her caucus. If perchance the story was assigned to a reporter not part of the women’s caucus, that reporter would not submit the story to the editor without first running it by the women’s caucus. If the story was significant and involved something not previously discussed by the caucus, the reporter and/or editor would not print it without first checking with the members of the affected caucus. Nothing ever gets printed that disrespects a caucus. Now that you understand the process, let’s go to the media hall of shame.
Appalachian State: Nonexistent Guns
      In 2002 an Appalachian State student went on  a shooting spree killing 3 and wounding several; 208 newspapers reported the story, of which 204 reported the killer was stopped, pounced on, tackled or overpowered by other students. All the networks reported the story this way. When I read the story I wondered how students pounce on or tackle a gunmen. There’s one major problem: the students didn’t tackle or pounce on the armed killer. Two of the three students went to their cars and retrieved legal handguns which they used to subdue the killer.
     The role guns played in stopping the killer was well known. Over 100 reporters interviewed the students and nearly every reporter knew the positive role handguns played in stopping the bloodshed. Yet, less than 2% of the newspapers mentioned the students’ handguns. This kind of reporting is de rigeur in Cuba, Zimbabwe, Iran and North Korea. American media will not report stories with a positive role for guns although they happen 2,500,000 times a year in the US.
Walter Cronkite and Tet: Nonexistent American Defeat
     Walter Cronkite was just another anile talking head until he endeared himself to progressives by his misreporting of the Tet Offensive – declaring Tet a great American defeat and the war irretrievably lost. That’s NOT the way it was. Tet was a desperation gamble by the enemy who suffered staggering losses – 60,000 of their best men. Both then and now the political and military leaders of North Vietnam declared Tet to be a total defeat and disaster for them. Tet was a massive American victory.
“If you don’t read the newspaper, you are uninformed; if you do read it, you are misinformed.” «TWAIN» 
     Tet was the biggest story of Cronkite’s career and he got it dead wrong. The media’s distrust of America  transmogrified Cronkite into a media hero – make that saint. Cronkite achieved legendary status due to an act of gross journalistic malpractice. The crowning achievement of the media darling of my lifetime was not only wrong, it caused America great harm.
Pedophile Priests: Nonexistent Scandal 
     There never was a pedophile priest scandal; less than 3% of incidents were pedophilia. What really happened was a homosexual priest scandal. Pedophilia is rare; it involves children before puberty whose age usually is a single digit; moreover, pedophilia is mostly heterosexual. Of all the misreporting and bias in the past few decades, this story tops the charts.
     As media began to report about the emerging scandal, the gay caucuses were mortified. Gay organizations are so sacrosanct, powerful and intimidating, no one opposes them. So the media protected the priests (and by extension gays) by concocting pedophilia, which is a bogeyman everyone opposes. The church gleefully went along because it knew pedophilia was a strawman and it couldn’t dare confront the church’s culture of homosexuality.
     The lengths the media went to protect gays is legion. In the 8-page U.S. News & World Report story, homosexual was mentioned once. Instead, the magazine used sex-abuse scandal, predatory sexual behavior, youth-sex scandaland sexual misconduct; they tried to blame celibacy. All of this was misdirection. Over 95% of incidents involved boys; this rules out priests not being able to marry and celibacy as causes. But the problem runs even deeper. Gay men are attracted to the priesthood because it provides an unending supply of young, impressionable and vulnerable boys. Despite the horrific scandal, nothing much has changed; the band plays on.
Media Watch 2011 – Obama and High Gas Prices 
     It is instructive to contrast media reporting of gas prices during the Bush and Obama presidencies. Bush was hounded by the media for 8 years. At press conferences he was asked the following: “What do you say to people who are losing patience with gas prices at $3 a  gallon? “How much of a political price are you paying for $3 gas?” “A majority of Americans disapprove of your handling of gas prices.”  He and Cheney were lambasted for their former connections to the oil industry. At the end of Bush’s presidency gas prices (inflation-adjusted) were 9% lower than when he took office.
     Since Obama took office gas prices have skyrocketed. Where are the media watchdogs? Virtually no questions have been asked Obama about: (1) the high price of gas and home heating; (2) Obama’s bungled response to the BP oil spill; (3) the moratorium on domestic oil exploration; (4) the lack of drilling permits in the gulf; and (5) the loss of tens of thousands of jobs in the energy sector. The statist media is dead; it finally expired in 2008 after being comatose for many years. There are only a few places for truth these days, mainly talk radio, Fox News, Drudge and the Internet.

Inflation and Taxes – A Primer

 Inflation and Taxes – A Primer
By: George Noga – September 20, 2010

         So – you think you understand inflation and taxes? Well, you are about to read analysis you haven’t seen anywhere else. There are counter-intuitive aspects to this twin-headed monster, both heads of which are brought to us exclusively by government. This exposé about taxes and inflation is part of our focus on the crisis of spending, debt and deficits. One possible outcome of the crisis is the government will monetize the debt by printing money and presto – we have high inflation. The last inflationary spiral under President Carter peaked at 15%. It likely will be worse next time.

“Inflation is an immediate and real cost; it affects not just your expenses but also your capital.” 
          Because we mistakenly believe we are familiar with inflation, it sometimes is necessary to look at it from an entirely different perspective to gain the needed insight. We will consider two examples. The first illustrates the impact of 7% inflation on a just-retired couple age 65 with $1 million of investable assets. Our retirees have no debts and own their home with no mortgage. They take 5% (actually far too much) from their investment portfolio and receive $24,000 social security; hence, their income is $74,000. Their living expenses are a modest $4,000 per month. They have it made; don’t they?
          From their $74,000 income we subtract living expenses of $48,000. Of course, they pay income taxes which at today’s rates would be $12,000; this makes their total cash outflow $60,000. Thus, they have a cash surplus of $14,000 after their first year of retirement. They can look forward to a carefree life of leisure; right? There is one niggling oversight, i.e. they failed to account for inflation. Unfortunately inflation is an immediate and real cost; furthermore, it batters and bloodies not just expenses but also capital.
Everyone understands that with 7% inflation something that formerly cost $100 now costs $107. What precious few people grasp is that inflation also savages capital. Hence 7% of the $1 million portfolio must be viewed as the cost of inflation during the first year of retirement. This $70,000 must be deducted from our retirees’ income and added to their capital; otherwise, they are devouring their principal and their capital loses purchasing power and rapidly is dissipated.

“After properly accounting for inflation, our retirees’ $14,000 surplus transmogrifies into a first year deficit of $56,000.”

          After properly accounting for inflation, our retirees’ putative $14,000 cash surplus transmogrifies into a first year deficit of $56,000. Our retirees’ story does not have a fairytale ending. Their principal increases for the first several years; but as inflation compounds (it is an exponential function) their capital inexorably begins to plummet and all too soon their once seemingly formidable capital base is totally gone – poof!

The Grotesque Mathematics of Retirement, Taxes and Inflation

          We now move on to an example of Mr. and Mrs. Ritz, fairly wealthy new retirees with a stash of $3 million in investments. The Ritzes have no debts and no home mortgage; they spend $10,000 per month for living along with income taxes of $30,000 in the first year of retirement. With the same 7% inflation, investments valued at $3 million must double to $6 million in 10 years just to maintain purchasing power parity. At 7% inflation for ten years, the value of the dollar is cut in half. This is akin to a tax on capital of $3 million.
           But whoa! The Ritzes haven’t yet factored income taxes into the equation. They would have to increase their assets not just to $6 million but to $8 million to allow for the ≈$2 million of taxes on the phantom, tax and inflation-induced investment gain of $5 million – from $3 million to $8 million. In the Ritzes’ first decade of retirement, $3 million of capital would have to grow to $8 million pretax – or by a compound rate of 17% – just for them to remain even with the ravenous tax and inflation monster. Even if the Ritzes made the $5 million ($500,000 per year), they would have gained nothing; this is the utter horror of taxes and inflation.

“Even if the Ritzes made $5 million in 10 years, they would have gained nothing; this is the utter horror of taxes and inflation.”

          Believe it or not, it gets even worse. The preceding data assume the Ritzes do not take any money out of their investments to pay for living expenses. If they take 5% a year out for expenses, they now need to earn about 21% – 22% per year just to break even – just to tread water. This is an impossibility; even Warren Buffet has averaged only between 15% and 18%.
          The preceding discussion focused only on the Ritzes’ first decade of retirement; imagine what fate would befall them in twenty or thirty years. They undoubtedly worked hard, saved money, lived within their means and had every expectation of a lengthy, happy and worry free retirement. Instead, they were brought to perdition by their own government via the train wreck of high taxes combined with the stealth tax of inflation.

Four Horsemen of the Apocalypse

            Prominent liberals and big government apologists writing in the blogosphere have opined with approbation that a decade of high inflation could be an acceptable solution to the debt crisis. One wonders if they comprehend the mortal damage to the fabric of our republic that 10 years of double digit inflation would wreak. If they, like you now should, comprehended the horrors of inflation, they wouldn’t write approvingly.
            As noted in The Crisis of Spending, Debt and Deficits (available on our website), inflation is but one of four major possibilities after the crisis reaches critical mass. I am reminded of the four horsemen of the apocalypse from the Book of Revelation. The four horsemen appear when the lamb (Jesus) opens the first of four seals of a scroll of seven seals. As each of the first four seals is opened, a different colored horse and its rider is seen by the apostle John.

“The four horsemen of the apocalypse today could auger inflation, deflation, repudiation and economic collapse.”

            When the first seal is opened a white horse appears; its rider is holding a bow symbolizing conquest. As the second seal is opened a red horse appears; its rider holds a sword for war. The third horse is black with its rider holding scales revealing famine. The fourth seal is opened and a pale horse appears; its rider is called death. Today, instead of conquest, war, famine and death, we may substitute inflation, deflation, repudiation and economic collapse.