The True Meaning of the Second Amendment

In the aftermath of the Aurora, Colorado shooting, there have been many commentators who posit that there is no reason for anyone to be able to purchase an assault weapon such as that which was used in the shooting.

In order to answer this question we have to ask ourselves, "What did the Framers intend when they included the Second Amendment in the Bill of Rights?"

First of all, the Framers were men who had lived through (and in many cases fought in) perhaps the most unlikely and auspicious victory in the history of wars -- the victory of agrarian colonists against the mighty British Empire. This David vs. Goliath battle left the Framers with a clear respect for, and confidence in, the power of a determined and armed populace as a bulwark against tyranny and abuse of power.

Secondly, the Framers recognized that the risk of tyranny did not necessarily have to come from a throne an ocean away, but could just as easily arise from within and so the citizens should be equipped with the resources needed to wage war against their own government if needed, just as they had against the British.

In other words, the Second Amendment is a license to armed insurrection since the threat of armed insurrection may be the only realistic obstacle preventing a leader from becoming a tyrant.

Under current law the rights of the citizenry to keep armaments is severely restricted. For example, average citizens cannot own fully automatic weapons such as machine guns, nor can they own grenades or rocket-propelled weapons, all of which are readily available to the military. So, does the implied "license to armed insurrection", subject to existing restrictions, still serve as a deterrent to tyrants, who control the military and ostensibly can used it as they fancy?

I think the answer is "yes" and "no". Clearly, no small group of rebels could ever hope to wage open war against the U.S. Army, and to that extent the answer must be "no". But, if the intent of these rebels is to martyr themselves to the cause of freedom and thereby inspire a wider rebellion, then even the greatly curtailed Second Amendment that we have today is a deterrent in that even the U.S. Army could not put down an insurrection by the majority of the citizens armed with the armaments that they are currently legally permitted to own. Whether the martyrdom of a small band of rebels waging war against tyranny would be sufficient to rally to arms the masses of people is doubtful, so I think that the answer to this open question is probably "no".

Therefore, it is clear to me that the Framers intended for the citizens to have at their disposal weaponry sufficient to oppose tyranny with a threat level that might give a tyrant pause, and so the citizenry must be entrusted to arm themselves with weapons that rival those of the regular army if we are to sufficiently respect the intent and purpose of the Second Amendment.

Gravity at Center of Black Hole is Zero

Obviously, Albert Einstein is sticking is tongue out at all the haters and doubters out there!

His General Theory of Relativity predicted that super-massive, incredibly dense objects, such as the core of a black hole, could create such deformation of the time-space continuum that the gravity created by these objects could be virtually infinite.

The further away from a super-massive black hole (SMBH) you are, the less you are affected by its gravity. However, if you venture too close and become entrained in its gravitational vortex you will begin to accelerate until your speed exceeds that of the speed of light, meaning that no one further away from the SMBH than you are will be able to see you! Eventually, your mass will unite with the mass at the core of the SMBH, but in a quantum state in which all that exists are the smallest of sub-atomic particles, all packed into a infinitesimally tiny space (at least, relative to the mass). I don't believe that anyone knows the diameter of the core of a SMBH, or exactly what state of matter exists there, but I would predict that the extreme forces  and energy involved (keep in mind a SMBH eats suns for lunch) would break down atoms way beyond electrons, protons and neutrons to subatomic particles that we've never detected and whose behaviour we can only imagine. I also predict that, in the SMHB core, the subatomic particles are as tiny as they can possibly be, are all the same and are arranged in a matrix or geometric pattern, very much like a crystal.

Eventually, all matter in the universe will be reduced in this manner until the black holes themselves begin to be drawn toward one another. Since the sub-atomic particles in the core of the SMBH want to repel one another, bringing two SMBH of similar mass into proximity to one another could destabilize one or the other core which I predict would result in a massive explosion, similar to the "Big Bang". This explosion could propagate throughout the universe, destroying all black holes and creating a great cloud of sub-atomic particles which will begin to arrange themselves to form the building blocks of all matter that we now know.

Getting back to my original point, Einstein's General Theory predicts that the force of gravity at the center of a SMBH is infinite, basically because the force is 1/r, and when r = 0, the result is mathematical infinity. However, it is a force we are talking about here, not some equation on a blackboard. Force is mass times acceleration (F = ma), and so when r = 0, a = 0 and F = 0. Therefore, the gravitational force of a SMBH is a limit approaching infinity, but can never be infinite. In fact, the gravity in the dead center is zero, which is the ultimate source of the instability of a black hole.

--Christian Antalics, May 15, 2012

Is Fracking the New F Word?

Interest in and concern about "fracking" -- the hydraulic fracturing of subterranean shale deposits which contain huge reserves of natural gas -- motivated me to rent and watch a very interesting documentary by fellow Pennsylvania native Josh Fox, entitled Gasland.

While the documentary makes is clear that a number of homeowners have had their groundwater contaminated by natural gas released in the fracking operations and that these people appear to be at their wits end, I don't view this as the biggest matter of concern, since many of these families sold leases to drill on their land and that natural gas percolating into their aquifer shouldn't come as any great surprise.

The biggest issue of concern, to me, is what is in the chemicals that are being used in the fracking operation and what the environmental impact studies, if any, show.

Therefore, I support the FRAC Act, which has stalled in Congress, and I urge you to contact your legislator and express your support in the hope that this legislation can come to a vote.

While I want us to continue to develop and recover shale gas, which I consider to be an important new part of our national security picture, the cost of the energy we consume must reflect the true cost of developing that energy, including environmental and health costs.

Developing a fossil fuel energy source at an artificially low cost because of select exemption from environmental regulation only serves to delay the adoption of energy saving innovations and renewable energy options.

Not to mention the millions of residents of Pennsylvania, New Jersey and New York who want to know exactly what is in their drinking water.

Income Schm-income

Currently, in the United States, income from different sources is treated very differently for tax purposes. For example, capital gains are taxed according to a different schedule than regular income. And, long term capital gains are taxed preferentially to short term gains. I believe that we are making a mistake by treating different types of income differently.

I believe  that we should treat ALL individual income equally, whether that income comes from punching the clock, earning a fixed salary, receiving bonuses, or as a return on investment. You may notice I said "individual" income --- I am specifically talking about the income earned by individual taxpayers (or married taxpayers filing jointly), but NOT corporations. I will address corporations later on in this piece.

An enterprising individual, in the effort to earn money and amass personal wealth, will put all available resources to work in that effort. For someone with little or no savings to invest, this probably means getting a job and earning an income, either by the sweat of his brow or the sweat of his neurons, but by sweat nonetheless. However, with some success and prudent spending habits, that same individual can quickly become an investor who can begin to earn  income by investing his savings. To my mind, there is no reason to distinguish these activities from one another -- both are crucial and central to the growth of the economy and I challenge anyone to demonstrate that one deserves favor over the other.  With a good deal of success, an individual may find that by investing his money he can earn more than he could by laboring in a traditional job, and may eventually earn most or all of his income in this way, which is perfectly good and fine.

However, all this income should be treated the same the for purposes of federal income taxation.  This means that Social Security and Medicare taxes (so-called payroll taxes) must be applied to this income, up to the limits provided by law.  Buy stock in IBM for $100 and sell it a year later for $120? You will owe $3 (15%) in payroll tax on that gain, plus your marginal tax rate times $18.50 (the $20 gain less half of the payroll tax paid).  This is how self-employment income is treated in this country, and someone who is investing his savings and earning a profit is effectively "self-employed" in this regard. Similarly, money spent researching stocks, hiring financial advisers, paying commissions, etc., can be used to increase the cost basis of the investment and reduce taxable income, subject to limits set by law.

Earlier, I mentioned that I would touch on the issue of corporate taxes.  Currently, when a corporation earns a profit it pays a corporate tax on that profit, then distributes its after-tax profit in the form of dividends to shareholders, who in turn pay a tax on that money.  Therefore, corporate profits are subject to double-taxation. It is my opinion that earnings from C-corporations should NOT be taxed until they are distributed in the form of individual income as dividends.  For example, if a U.S. corporation earns $1.00 per share and pays in dividends $0.25 per share (thereby retaining $0.75 in cash as working capital), the $0.75 per share that they earn will not incur a tax bill and can be applied to the expansion of the business.  However, the $0.25 must be subject to U.S. federal income tax, regardless of the tax jurisdiction in which the recipient resides.  Ultimately, all the income of a corporation flows to individuals, be it in the form of share price appreciation or dividends, and will ultimately be taxed. However, this money should not be taxed while it is still actively at work in the balance sheet of the corporation.

However, what is stopping a U.S. corporation from stockpiling cash, tax-free, then merging with an off-shore entity operating in a tax haven who can, in turn, pay the cash in the form of dividends to foreign shareholders, effectively avoiding U.S. taxation? U.S. tax law will need to take into account this possibility and should obligate the U.S. entity to file a tax return and declare this income prior to the merger, resulting in a tax bill. What about foreign shareholders of U.S. corporations who do not currently file a U.S. tax return? Dividends paid to foreign investors would have to be taxed at the highest individual marginal tax rate at the time that they are distributed, otherwise a huge loophole would exist permitting corporate profits to escape our borders tax-free.

Also, what is stopping a C-corporation NOT listed on the open market from conducting a stock sale below par value (below the value of assets and cash, less liabilities) to a foreign entity, effectively moving the corporation off-shore, profits in tow, and avoiding a tax bill? Currently, there is no legal obstacle to this practice, so the transfer of shares below par must be prevented. In the open market, corporations often trade below par value, especially if they are facing serious legal problems or if the market for their goods and services has moved against them. However, this loss of shareholder equity is related to a decrease in "goodwill" and this goodwill offsets the intrinsic value of the entity. As long as the shares are liquid and traded in the open market based on accurate public information, the share price will tend to reflect this calculus and no other public policy mechanism should be needed.

Finally, what is stopping a U.S. corporation, with subsidiaries around the globe, from banking profits in a tax haven and absorbing costs in the United States in order to avoid paying corporate income taxes? Well, that is what they do today and my proposal would eliminate the need for this practice, since U.S. corporations could amass profits tax-free right here at home, money that would be held in U.S. banks and which would provide valuable capital for domestic investment.

While there are clearly details to be worked out to avoid possible tax evasion, I believe that my proposals can both simplify and make more equitable the taxation of income.  Other parts of the tax code, such as the mortgage interest deduction, the marginal tax rates, the individual and family exemption, etc., are not addressed here. However, I think that by treating all income the same regardless of its source, and by allowing corporations to reinvest their earnings tax-free, the tax code will be fairer and more effective in stimulating economic growth.

In a future post I will explain why the U.S. tax system, which generates almost all revenue by taxing income, creates perverse incentives to consume and not save and why a national sales tax is a good idea.

Who Needs War?

Update 29-Jan-2012: German leaders are currently insisting that Greece surrender control over their fiscal budget allocation to a commissioner appointed by the euro zone finance ministers, a proposal that Greek leaders are calling, "the product of a sick imagination". Once again I ask, who honestly thinks that this power grab by Germany and France can possibly end well?

It has been the goal of a long series of European leaders to achieve absolute domination of the continent, and it finally looks as if Germany will achieve that goal, with the aid of France.

Germany's Angela Merkel and France's Nicolas Sarkozy are pushing for radical changes to the European Union treaty that would provide centralized oversight of individual state budgets.  Since Germans are the ones footing the bill for this foray, they will no doubt expect to be the ones managing these other country's affairs.

It is my expectation, however, that these efforts will fail if they come to a vote in the individual state Parliaments. And, if the changes are not ratified, the individual states will not feel obligated to heed them in any event.  Therefore, this is a risky move that could lead to serious tensions in Europe.

My advice is to let the chips fall where they may.  Greece should renegotiate their sovereign debt obligations for about fifteen cents on the dollar, which is a manageable level for them.  Italy and Spain should do the same, but for about thirty to thirty-five cents on the dollar.  The yields on any new sovereign bonds issued will obviously spike in response, but these higher borrowing costs will help these countries focus their minds on the task at hand, which is to manage their finances in a sustainable way or lose access to the global credit markets.

I see no reason for Germany to bail out the rest of Europe, nor do I see any reason that the Euro can not continue as the common currency, even for use by those states that have had to restructure their sovereign debt.

Radically altering the EU treaty to usurp sovereign parliamentary discretion will simply serve to offend regional sensibilities, and lacking the force of might, will risk an escalation in tensions.

Superfail

Who is surprised that the United States Congress Joint Select Committe on Deficit Reduction, or the so-called "Supercommittee", will fail to find consensus on mandated budget cuts of $1.5T over ten years?  What makes this failure all the more absurd is the fact that $1.5T over 10 years is WHOLLY INADEQUATE and wouldn't even begin to set upright the fiscal ship of state.

It will be interesting to hear the blame game on the national talk shows, but I think one observation is important here: on average, the members of this committee (and the ranking members of the House and Senate for that matter) have served for a LONG TIME.

For example, the Senate members of the committee have served for an average of 15.5 years (and, this average takes into account two freshman members who haven't even served a full year yet), while the House members have served and average of 13.3 years.

How could this degree of incumbency possibly contribute to Superfail, as people are starting to call this fiasco, you might ask?  Because anyone who has served in Congress for so many successive terms (an average of over three in the case of the Senators if you discount the freshman, and an average of nearly seven in the case of the House members) has obviously placed a higher premium on their own political survival than on making the courageous decisions that they are empowered and obligated by the U.S. Constitution to make.

What has been sadly lost in terms of an ethos in Congress is the notion of the elected official as a public servant who leaves a successful business, farm, medical practice, etc., for a short time in order to advance the public good and then returns to private life.  Because of the exponential degree by which Congress has amassed authority over the decades, our elected officials have become addicted to the power of their office and cannot abide to surrender the reigns, even when it is time for them to move on.  Instead, Congress has gradually become overwhelmed by career politicians who have mastered the art of survival at the expense of the political leadership and risk-taking that is sorely needed.

That is why I believe that the time is come to once again debate the idea of congressional term limits in order to inject fresh blood into the body politic.

If the members of the "Supercommittee" cared more about the future of this great nation than their own prospects for re-election, they would have reached an agreement and sent a message to the country that democracy DOES work.  Instead, they failed and we are all that much more cynical as a result.

S&P Flubs Another One

In an admitted "technical error", the international credit rating agency Standard & Poors downgraded French sovereign debt on Thursday, triggering extreme market volatility, before reversing the downgrade and restoring France's AAA rating.

This incident brings to mind S&P's downgrade of U.S. sovereign debt from AAA to AAa earlier this year.  At the time, S&P acknowledged that they had made significant mistakes in their longer-term fiscal projections, but that these errors did not substantively change the U.S. credit outlook, sparking outrage and cries of foul play from the Treasury Department.

Also, it is important to recall that S&P had maintained investment-class ratings on the mortgage-backed derivatives, called CDO's, literally up to the very moment that the market for these securities collapsed, leading to the demise of Bear Stearns and Lehman Brothers.  When challenged by a Senate panel as to their decision to grant CDO's an investment-class rating, when in reality they merited junk status, executives for S&P stated that their credit rating decisions are merely "opinions" that enjoy First Amendment protections. 

"Opinions shielded by the First Amendment"?  They have got to be kidding.  The posts on my blog, for which I receive no remuneration, are opinions shielded by the First Amendment.  Credit ratings are the result of professional analysis that the credit rating agencies are fee-contracted to perform, and these ratings are the basis on which important investment decisions are made.  If mistakes are made that result in money lost by investors who have paid a credit rating agency for their guidance, then the credit rating agency should be held be liable for civil damages.

I strongly urge Congress to enact legislation regulating the credit ratings agencies and providing for a mechanism by which they can be held legally accountable for their malfeasance.