Category: Economy

Do the wealthy pay their fair share in taxes?

I was rummaging through the local county paper yesterday, sent to me free as a subscription  enticement, when I came across a guest editorial arguing that the “wealthy deserve to keep more than a hunk of their profits.”  This, of course, goes against the grain for the Obama folks and the occupy movement, who feel that the 1.1 percent, as they put it, isn’t paying its fair share in taxes.
 
The columnist argued that the IRS’ own figures show that the top 10 percent actually paid $721 billion of  the more than $1 trillion the government collected in federal income taxes in 2008.  In short, the rich really do pay taxes, or about two dollars out of every three collected. More than $392 billion of this came from the top 1 percent.  In fact, just 0.2 percent of the population pays 21 percent of the taxes.  As for the rest of us, some 47 percent pay no tax, while collecting many social benefits.
 
Do the poor pay taxes?
 
Is there any truth to the writer’s claim?  If you’re talking about federal taxes, the answer is, yes.  But this doesn’t get to the bottom line.  Virtually everybody pays taxes.  For example, there’s the payroll tax of 6.1 percent on the initial $106, 800 of wages (temporally reduced) for Social Security and 1.45 percent on all wages for Medicare. Then there are state and local taxes, e. g., sales, income, property, gasoline, utilities, etc.  Everybody, including the poor, the disabled, and the retired pays taxes.  According to the Tax Foundation, the 2008 earnings average for the bottom 50 percent, was just $15,300.  In short, these wage earners didn’t earn enough to pay federal taxes, though they paid other taxes at the same tax rates.  Broken down proportionally,  the poor pay more per capita than the rich, with the one exception of Vermont.  At this point, I’d urge everybody to read Barbara Ehrenreich’s monumental expose,  Nickel and Dimed: On (not) Getting By in America.
 
Do the rich pay their fair share?
 
Initially it would appear they do.  One percent of  the top wage earners paid 38% of  the total income tax in 2008, the last year figures were available (published at the IRS online site).  Left out is the fact that federal tax revenues aren’t solely collected from income taxes.  Payroll taxes for Social Security, Medicare, and even unemployment insurance, are paid by the bottom 90 percent of taxpayers.  This is because the payroll tax for Social Security is restricted to a maximum $106,800, after which there’s no tax.  Bill Gates and Steve Forbes pay the same amount as you and I.  Although they’re subject to paying a means tax on their social security income when they retire, so are you and I.  Don’t even get me started!
 
Is there a growing tax gap between the top 10 percent and the bottom 90 percent?
 
Yes!  When Reagan took office in 1980, the marginal tax rate (the tax rate paid on the top earned income)  stood at 70%.  By 1987, he reduced it to 50 percent  Under George Bush, the rate was reduced to 35 percent.  Since 1980, the average income of the bottom 90%, adjusted for inflation, has increased to $303, or 1 percent.  In the meantime, the 1 percent did a considerably better, doubling their income to $1.1 million.
 
And how goes it for the corporate sector?
 

According to IRS figures, 2008, corporate profits rose 12 percent since 2000, even though corporate taxes show an 8 percent decline.  This discrepancy is occurring  because of increasing loopholes or transferring of profits to offshore hideaways such as the Cayman Islands.  Currently, corporations have stashed an estimated 2 trillion in cash holdings, unwilling to reinvest in a volatile economy.  I’m not saying this is wrong in itself.  The spending of the average American family is down as well and for the same reasons.  Spending is the key catalyst to market regeneration. 
The point is, many of the banks were bailed out in 2008 to a tune of nearly a trillion.  They seem to have a short memory, and it hasn’t decreased either their zeal to close on beleaguered mortgages or award themselves bonuses in the millions while enjoying unparalleled tax breaks.  At the moment, bonus outlays exceed pre-recession levels, this in a down economy that has produced incalculable suffering for many Americans unable to afford their homes, buy health care, or find meaningful work.  JP Morgan’s CEO Jamie Dimon recently took home a $19 million dollar bonus, enough to keep food on the table.  While not all CEOs receive this kind of payout, the vast majority of CEOs continue to enjoy perks with the consent of their shareholders.  Forbes reports that investors at only 36 companies out of 2250 voted against pay increases for their CEOs.  Meanwhile, new data shows that nearly 25% of us now lives in poverty. 
Have the occupiers got it wrong?  Not by a long shot!

Daryl Hannah and the sustainable life

Hollywood has its heroes in real life and not just on the screen. I think of celebrities who’ve used their fame and wealth to help others: Brad Pitt and Angelina Jolie, for example, founders of the Jolie-Pitt Foundation, dedicated to addressing rural poverty, the protection of natural resources, and wildlife conservation. Recently they donated $1 million to Doctors Without Borders.

And then there are those actors, 700 plus, active in promoting human rights, people like George Clooney, Ben Afleck, Matt Damon, Natalie Portman, Susan Sarandon and, of course, Brad and Angelina.

The animals aren’t left out either, with more than 100 actors devoting time and money to supporting PETA; among them, Alec Baldwin, Alicia Silverstone, Gillian Anderson, Keanu Reeves, Casey Affleck, Ricky Gervais, Kim Basinger, Paul McCartney, and Pam Anderson. Ellen Degeneres and Denzel Washington are among those supporting Farm Sanctuary.

Perhaps lesser known is Daryl Hannah, passionately committed to charity endeavor and social activism. I came upon her recently in reading her interview with S. Alison Charbonais, editor of Natural Awakenings. You probably saw her in Blade Runner, Steel Magnolias, or Crimes and Misdemeanors.

When not making a film, speaking, or traveling, she lives in this awesome, totally green house, salvaged from an old barn that was to be torn down for a new post office in her small Rocky Mountain community. She relocated the barn, berming it into a hillside offering maximum solar exposure. An ardent vegan, she keeps a garden for growing veggies on a property fed by a spring. With solar power, passive and active, she lives completely “off the grid.” Now here’s an environmentalist I can respect, modeling what she professes, unlike, say, Al Gore, with his five houses, one of them 12000 square feet, and all of them heavily dependent on public utilities.

In contrast, Hannah believes in simplicity, measuring out each action by its consequence: “The more I learn, the more I try to adapt to and adopt a simpler lifestyle.”

Co-founder of the U. S. Sustainable Biodiesel Alliance to help people distinguish between good and bad biodiesel fuels, she drives a car converted to run on alcohol only.

What I especially like is how she touches all the bases, including the emerging population crisis complicating the challenges of global warming. Exponential population has struck me as the forgotten issue, even among environmental organizations such as the Sierra Club, Greenpeace, and Natural Resources Defense Council, perhaps for political reasons:

I’m very concerned that global population has grown from about 3 billion people when I was born to nearly 7 billion now; we are also witnessing mass extinction of species worldwide; there are more enslaved human beings today than at any other time in human history.

Hannah has been arrested three times, on one occasion spending jail time, for protesting environmental degradation. Her most recent arrest occurred last August during a sit-in outside the White House, protesting the Keystone Project that calls for creating an oil pipeline from Canada to the Gulf coast.

Hannah has this really nifty website, modelling simplicity in its very design LoveLife that offers helpful green solutions.

Daryl Hannah is a femme extraordinaire!

–rj

Business as usual

And so, what else is new? My previous post touched on the Occupy Wall Street phenomenon, the people’s revolt against the wealthy and corporate interests, who don’t pay their fair share in taxes, yet harvest bundles in a listing economy even as millions suffer and others wait for the shoe to drop.

Currently, corporate cash holdings are at an all time high. Did you know, for example, that corporations comprising Standard & Poor’s 500 index have currently stacked up more than $1 trillion in cash and short-term investments?

Now mind you, the figures I gave you don’t even take-in the banks, whom I’ll get to in just a bit.

While our economy hasn’t recovered and there’s the very real possibility of a double-dip recession in your near future, corporations and banks are raking in the bucks. Wall Street jubilantly anticipates per share earnings for stocks in the S&P 500 will reach $100 per share by year’s end; in 2012, slower growth, but $104 per share. True, if the economy dips again–did it ever recover?–we could see these projections tumble. Still, don’t bet against the banks and corps. Like a nimble cat, they tend to land on their feet, come wind or rain.

And so what are the corporations doing with their wealth? Well, they’re doing what you and I would probably do were we in their shoes; namely, shoring up for future contingencies. One thing they’re not doing is hiring workers, given market insecurity. They’re also not desisting from awarding themselves egregious bonuses. Hey, we spent nearly a trillion bailing these guys out. Thanks for the memory!

As for the banks, they’ve proven themselves adept at getting around recent congressional moves to protect consumers by imposing caps on credit cards, overdrafts, and debit card merchant fees. That helps explain the sudden deluge you’re getting in bank mail, announcing new terms for checking accounts, reduced credit card awards, and higher ATM fees. Some banks, like Bank of America, are imposing a monthly charge for deposits or withdrawal using a teller ($8.95 at BOA). Banks like Chase now charge $25 for closing an account within 90 days of opening it. It gets worse at PNC and U. S. Bank, which charge $25 for closing an account within 180 days of opening it.

Want to get your statements in the mail? Think again. BOA again charges $8.95 monthly for the privilege, with other banks now lining up.

You prefer pay-as-you-go, using your debit card. Nice way of keeping your budget tidy and avoiding credit card charges, except that some banks are now charging a $3 fee for the privilege.

The gimmick that galls me above all others, since I was on the recipient list, was learning I’d be charged a monthly fee even if I had a 0 credit card balance. You can be sure I got out of Dodge.

You’d like to buy a home at today’s record interest lows? Fine, if you’ve got the minimal 20% down payment. That eliminates a good many first timers, especially young people.

Want to refinance? Not so fast. What’s your home really worth versus the mortgage presently owed? The banks are going to want to take a close look. And don’t forget the closing costs.

When banks and corporations bleed you and me and refuse to loan or invest in the body politic, they divest in stimulating recovery and should be held accountable.

Watch your step. Corporate and bank IEDs are everywhere.

Hats off to the Occupy movement. I adore you!

Reflections on the Occupy movement

Yesterday marks a month ago that the Occupy Wall Street movement began. Modeled after the protests of what’s become known as the Arab spring, it seems to have taken its start from a Twitter post on July13 that slowly gathered interest via other Twitter posts and with numbers, momentum, spreading to other large American cities and, lately, to other parts of the world, particularly Europe. It remains a social media-driven phenomenon. One of its oddities is that it was initially fueled by environmentalists and organic food enthusiasts, among them vegans rather than by the Left. I’m one of those, so from the beginning, I have liked this movement.

As I see it, it’s primarily kindled by resentment that the wealthy along with corporations don’t pay their fair share of taxes and that the banks continue in their public-be-damned parochialism. As such, the movement claims to represent the 99.1 of us denied a place at the table.

One of its oddities is the lack of defined goals amidst a motley of mindsets ranging from far Left to Libertarians, including Tea Party advocates who share an antipathy towards banks, though not corporations, per se. As a whole, however, the occupiers see government as needing reform rather than dismantling.

This movement reminds me of the protests concurrent with the Vietnam War back in the 60s and early 70s, composed largely of young people. This comes as a surprise, as the present generation has been vastly silent, though not so in Europe and North Africa. But “the times are a changing,” given our economic doldrums, the worst since the Great Depression, with a stagnant 9.1 percent unemployed, a figure much higher among young people and minorities. In supposedly one of the richest nations in the world, growing poverty now engulfs more than 20% of our population. In some of our cities, nearly 40% of Blacks and Hispanic under 24 can’t find jobs. This is social dynamite that could escalate into the race riots we saw in the 60s.

Meanwhile, it’s business as usual on Wall Street. The banks that perpetrated our economic downturn, bursting the bubble their speculative greed had created, were
bailed out with huge cash infusions by the government, beginning with Bush but vastly accelerated under Obama. Our national indebtedness consequently has swelled, threatening to turn America into a Greece, Italy, or Ireland, unable to pay its bills. In an effort to keep the steam engine from derailing, we now see austerity measures, both local and national, exacerbating the job crisis. Meanwhile, there’s the continuing rampage of globalization with its consequence of out-sourced-jobs.

Fighting two questionable wars doesn’t help either, diverting huge sources of capital that are vitally needed to rekindle confidence in the economy, leading to job growth through increased consumer spending. You don’t make things better by laying off teachers, police and fire fighters, curtailing libraries, and closing parks.

The banks, of course, haven’t mended their ways. To get around some scrutiny measures recently passed by Congress, the banks have cunningly found ways to circumvent, inventing new income sources through initiating higher interest, fees, and restricted borrowing. Few couples have the 20% down payment required for most mortgage loans, crippling the housing industry which along with car sales, provides key impetus in encouraging a robust economy. The obscenity of huge CEO bonuses continues. Concurrently, they’ve gotten their paper work together and are now foreclosing on delinquent mortgages at a blitzkrieg pace. In short, it’s business as usual, the public be screwed.

Actually, there’s been this gargantuan transfer of wealth going on for some time, with the middle class its victims. The rich don’t pay their fair share of taxes, yet some 37% of Americans don’t pay any tax whatsoever, buttressed by numerous exemptions. It’s a vast simplicity to put all the blame on the wealthy. In fact, this poses one of the dangers for the Occupy movement: that it simply becomes a self-pitying indulgence in envy, rather than meaningful effort to ameliorate; a dangerous wedge masquerading class warfare.

This, of course, may hint at two other dangers, the offshoot of opportunists:

1. That the movement will become politicized by a political party and/or trade unions. This would dilute the movement’s effectiveness as a voice for the people. If anything, we need a third party, say a Green Party. Appropriately, most interviewed participants are suspicious of both major parties. No party should have us in its hip pocket and commit identity theft to advance its own agenda.

2. That the anarchist and Marxist spectrums will infiltrate and nullify through calculated violence such as we saw in Rome last week as hooded, masked street toughs burned and looted. I still believe in a market economy, with safety nets in place.

I am for this protest, though I wish it had a third party corpus. Romanticism can be a beautiful thing, but it needs boots on the ground. As is, I fear that come winter’s icy wind and falling snow, the movement will lapse into memory.

Obama’s assault on Social Security

Although vociferously claiming entitlement programs aren’t on the table in securing deficit reductions, the President’s recent actions prove his rhetoric to be little more than political chicanery in upholding the integrity of Social Security, for an example. In an effort to stimulate the economy by putting more money into our pocketbooks, President Obama has proposed continuing the payroll tax reduction (now 4.1%) for Social Security. In fact, he wants to cut the Social Security payroll tax still further, or to 3.1% of earnings below the traditional maximum of 6.2% on $106,800 income. This amounts to a $240 billion dollar funding hit on Social Security, a program already in trouble due to changing age demographics. In 25-years, it will only be able to pay out $75.00 on every $100.00 owed in benefits.

More specifically, his proposal represents a direct raid on the Social Security Trust Fund, short-changing our young people. As is, his proposal cuts $175 million from the employment payroll contributions and $65 billion in employment contributions. The President’s new, massive stimulus package before Congress, $440 billion, draws 55% of its funding from Social Security funding. You do the math. It’s simply untenable, an indulgence in political opportunism, betraying American workers and their future.

Compounding the demographic and political pressures on Social Security, today’s massive unemployment has ignited a rush in applications for disability income (SSDI). According to the government’s own figures, applications showed a 21% increase just between 2008 and 2009. While the rising number of aging baby boomers may account for some of this increase, it seems more likely this sudden swell has is origin in our down economy. Frankly, one has to suspect Social Security is being used as a ruse for welfare in many instances. Obtaining benefits also qualifies one for Medicare, no matter one’s age.

In its defense, the Social Security administration argues it has strict monitoring procedures in place to assure legitimacy in the application process, with only 30% of applications approved. This is true, however, only at the initial application stage. While denied applications going through the appeal process can take up to 2-years, persistence pays and ultimately most applicants, or 67%, get their benefits approved before an Administrative Law Judge. Meanwhile, legal representation for applicants has turned into a lucrative specialty.

What’s mind-numbing is that this deluge in disability applications is leading some trustees of the Social Security disability program recommending Congress reallocate money from the Social Security Retirement program to offset deficits in disability funding!

As is, the present and proposed cuts in Social Security payroll taxes don’t offer assistance to the many unemployed, retired, disabled or those, like teachers, who are ineligible for SS. More substantially, short-changing Social Security exacerbates its perilous future.

Wise words from George Washington on government spending

Just moments ago I finished reading George Washington’s Farewell Address (1796), and I’m glad I did. While its language may be steeped in 18th century formality, it remains a sobering speech in its prescient wisdom. Had Congress over the years heeded our first president’s wise admonitions, we’d have avoided the divisive partisan rancor that imperils our financial solvency and our future. Make no mistake about it: We haven’t solved our financial dilemma in raising the debt ceiling. The truth is we spend too much while wanting more. If you spend, you must have revenue, today’s euphemism for taxes. To avoid raising taxes, you must cut your spending. Unfortunately, we’ve gotten ourselves into such a corner that we need to balance the equation, spending less and increasing revenue. The words below are Washington’s; the underlined passages, my own:

1. On political factions:

All obstructions to the execution of the laws, all combinations and associations, under whatever plausible character, with the real design to direct, control, counteract, or awe the regular deliberation and action of the constituted authorities, are destructive of this fundamental principle, and of fatal tendency. They serve to organize faction, to give it an artificial and extraordinary force; to put, in the place of the delegated will of the nation the will of a party, often a small but artful and enterprising minority of the community; and, according to the alternate triumphs of different parties, to make the public administration the mirror of the ill-concerted and incongruous projects of faction, rather than the organ of consistent and wholesome plans digested by common counsels and modified by mutual interests.

I have already intimated to you the danger of parties in the State, with particular reference to the founding of them on geographical discriminations. Let me now take a more comprehensive view, and warn you in the most solemn manner against the baneful effects of the spirit of party generally. Without looking forward to an extremity of this kind (which nevertheless ought not to be entirely out of sight), the common and continual mischiefs of the spirit of party are sufficient to make it the interest and duty of a wise people to discourage and restrain it.

It [party faction] serves always to distract the public councils and enfeeble the public administration. It agitates the community with ill-founded jealousies and false alarms, kindles the animosity of one part against another, foments occasionally riot and insurrection. It opens the door to foreign influence and corruption, which finds a facilitated access to the government itself through the channels of party passions.

2. On Federal deficits:

As a very important source of strength and security, cherish public credit. One method of preserving it is to use it as sparingly as possible, avoiding occasions of expense by cultivating peace, but remembering also that timely disbursements to prepare for danger frequently prevent much greater disbursements to repel it, avoiding likewise the accumulation of debt, not only by shunning occasions of expense, but by vigorous exertion in time of peace to discharge the debts which unavoidable wars may have occasioned, not ungenerously throwing upon posterity the burden which we ourselves ought to bear. The execution of these maxims belongs to your representatives, but it is necessary that public opinion should co-operate. To facilitate to them the performance of their duty, it is essential that you should practically bear in mind that towards the payment of debts there must be revenue; that to have revenue there must be taxes; that no taxes can be devised which are not more or less inconvenient and unpleasant; that the intrinsic embarrassment, inseparable from the selection of the proper objects (which is always a choice of difficulties), ought to be a decisive motive for a candid construction of the conduct of the government in making it, and for a spirit of acquiescence in the measures for obtaining revenue, which the public exigencies may at any time dictate.

Related articles

The Constitution option?

As I write, we face an unbelievable, yet possible deadlock scenario in reaching compromise on lifting the debt ceiling as both political parties hunker down, unable to reach compromise on spending cuts. At this point, you’re hearing a lot about the Constitution option by which the President would simply raise the debt ceiling on his own. Former President Clinton said this is what he’d do and let the courts sort it out later. Many Democrats now concur. At the moment, the President has said he doesn’t think it applicable. Nor do I. Besides, it’s a very bad idea.

1. What is the Constitution option?

We’re talking about the 14th Amendment, Article 4, adopted in 1868. It says,

The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned. But neither the United States nor any state shall assume or pay any debt or obligation incurred in aid of insurrection or rebellion against the United States, or any claim for the loss or emancipation of any slave; but all such debts, obligations and claims shall be held illegal and void.

2. Why it doesn’t apply to our present debt crisis:

The Article is part of the 14th Amendment pushed by radical Republicans in the post-Civil War era to extend their political power by ensuring the citizenship and voting rights of Negroes. One might think of the Amendment as the beginning of the Reconstruction era, since it sanctioned the dividing of the South into five military districts. Article 4 ironically disallows Southern, or Confederacy debt (e.g., reimbursement for the loss of slaves, etc.), while allowing for the legitimacy of the Federal debt. The Article became law in 1868 after its ratification by the States. At best, it recognizes the legitimacy of the national debt. The post-war government needed revenue sources after fighting an expensive conflict. It wanted to be paid. The Article doesn’t allot the right to increase that debt. I have yet to find any proponents of implementing this Article quoting beyond its first sentence. Reading the Article in its entirety clearly establishes its post-Civil War context and limitations.

3. Why it would be bad policy to invoke Article 4 of the 14th Amendment:

Resorting to this solution would set dangerous precedent, giving future presidents a blank check on spending without Congressional approval. The Constitution is clear on its mandate for a check-and-balance system of the Congressional, Judicial, and Executive branches of government. Besides, we want a solution to our overspending, and not its perpetuation.

In the short run, it would likely incite an impeachment attempt even though it would fail in the Senate, where Democrats hold a slight majority. At the very least, it would add to the fractiousness between the two parties and heat the political temperature still further as we head into an election year.

It’s sound policy, whether at the personal or government level, to always weigh the possible consequences of any decision. Decisions are like stones cast into the water. They make ripples.

A letter to Congress

The other night, President Obama asked Americans to contact their reps in Congress and urge them to pass a responsible deficit cutting bill. Many of you did that, resulting in a mammoth switchboard overload. My wife resorted to email, writing the following message:

Senator McConnell,

Please, please, please use your unparalleled power to limit cuts to Social Security, Medicare, Medicaid, etc., in the proposed budget. It is utter nonsense that we of the middle class get trampled on every time there is a financial crisis in this country.

My husband (retired) and I (close to retirement) have worked hard and, as millions of others in our tax bracket, deserve some consideration here. The GOP, mainly that damned Tea Party faction, is more than likely forcing us to look outside this once great nation for more comfortable living. Funny–I love my country; it’s getting so I just can’t afford it.

Please help put a stop to this foolishness. If our government fails in this crisis, we will have lost all hope.

More baloney

Last night, the President finally appealed to Americans to support deficit reduction, urging them to contact their representatives in Congress. Problem is that it’s not going to get the job done, as even Americans are divided as to the best approach.

Polls indicate that what Americans fear even more than the government defaulting on its loans are cuts in Medicare funding, and with good reason. It’s no secret Obama has been touting slicing some $600 billion dollars out of Medicare, largely by cutting back 30% on payments to doctors and hospitals. Finally, the AARP, usually in lock step with the Obama administration, is vociferously protesting and running spirited ads.

I just don’t see how it’s going to fly. Yesterday I had to visit my ophthalmologist. In the course of office banter, the deficit crisis came up, and I mentioned the proposal being kicked around in DC to cut back 30% on Medicare outlays. He shared that he didn’t know how he could absorb it. He might have to refuse Medicare clients. His current expenses were running so high it was possible that he couldn’t retire. This from a doctor!

Curiously, when I walked into the doctor’s office, virtually all of us were gray panthers, or getting there in a hurry. It’s reassuring that there are some 50 million of us and we do vote.

I’m not sure Americans remember that one of the President’s carrots for getting his Health Reform Bill passed was a promise to cut some $500 billion from Medicare by eliminating waste. Yeah some waste, but $500 billion’s worth? Hey, am I missing something here? Do the Dodgers still play in Brooklyn?

To play fair, I’m equally chagrined at the Republicans, intimidated by their purist Tea Party colleagues, resisting an increase in tax revenue. As I’ve pointed out in an earlier blog, it would solve our budget deficit problems in short order over a space of several years. You just can’t have your cake and eat it, too. We need a mix of cutting spending and raising revenue.

By the way, where are the cuts in benefit outlays for members of Congress? Oh, I forgot–they’re not under Medicare!

The psychology behind Obama’s decision making

It’s Monday and a new day begins for troubled markets as party chiefs once again try to resolve the deficit impasse that threatens a financial meltdown with global implications. Nevertheless, I remain optimistic that cooler heads will prevail and a deal will be struck, though perhaps to no one’s liking. Whatever we do, it’s probable our credit rating will drop from triple to double A, resulting in higher borrowing interest for everybody.

In this post, however, my focus is on the psychological dynamics at work in our President’s seeming inability to provide firm, creative, leadership across the board. Quite frankly, he lacks leadership spunk, the resourcefulness of occasionally putting up his dukes, or more bluntly, becoming a just plain son-of-a-bitch, Harry Truman style if you will. Mind you, we’re in a war, economically speaking, with high stakes. We can’t afford taking the wrong options. As on a real battlefield, leaders must develop a strategy and prove decisive in its execution. Our president, however, a kind man, lacks the killing instinct to get the job done. It’s never a straight path for him. He’d rather waddle. In my previous post, I spoke loud and clear on the President’s tendency to put up the white flag prematurely, undermining his promises, and in the process, giving strength to the opposition, who increasingly perceive him as vulnerable.

Why is he this way? With the increasing advances in neurobiology comes a possible answer. Medical researchers can now map and measure the brain’s capacity to respond to our emotions. Frankly, some of us are wired to be hot, or emotionally sensitive; conversely, there are the cold types, or those said to have “ice in their veins.” I suspect good relief pitchers in baseball belong to this tribe. The worst of the cold types, of course, are the sociopaths, who can shoot 76 teens in a Norwegian camp and argue afterwards how it was necessary. Neurology has grown so advanced that we can even detect who the sociopaths are.

In the realm of finance, an offshoot of neurology has been the development of neuroeconomics, or the study of the cognitive processes at work behind financial decision-making. Let’s take a case scenario: Investors in Wall Street who consistently earn little tend to be markedly conservative, with little appetite for risk. A few losses and they quickly panic. Often they’ll opt for investing in bonds rather than equities, even though over a sustained period, and despite market downturns, the latter out perform bonds. This conservatism, rampant among the hot types, has given rise to what’s known as “myopic loss aversion.” As British psychologist Kevin Dutton remarks, “Emotion, it would seem, is so oriented toward risk aversion that even when the benefits outweigh the losses it henpecks our brains into erring on the side of caution” (Split Second Persuasion, 20011, p. 208).

Our president, surely one of the more cautious and feeling presidents we’ve known, unfortunately mirrors the hot-wired grouping of those undermined by an excessive capacity for empathy. He can see, or better, feel both sides. The result: consensus or compromise, whittling down previous commitment.

In the business model, you may not like it, but the ruthless prove the most successful entrepreneurs, whether Bill Gates or Steve Jobs. In his now classic studies, Harvard’s Stanley Rachman studied bomb disposal experts with 10-years or more experience, specifically those decorated and undecorated. What separates the great ones from the merely good? Rachman made a startling find: the heart rate of the undecorated remained stable, even though subject to high stress. However, here’s the thumper, the heart rate of the decorated proved unstable. It went down!

Rachman discovered something else: not only did successful risk-taking have a physiological basis, but something additional was in the mix–confidence (Stanley Rachman, “Fear and Courage: A Psychological Perspective,” Social Research 71(1) (2004),14976).

Obama is fond of Abraham Lincoln, perhaps intuitively in seeking a mentor of what he would like in himself. While we obviously aren’t able to map Lincoln’s brain via an fMRI, we can presume he had the necessary prerequisite of confidence to make the crucial, hard decisions necessary to preserving the Union, whether in opposing the expansion of slavery, declaring war, changing generals, or issuing the Emancipation Proclamation. In the previous century, three presidents again demonstrated this confidence factor, the Roosevelts, and Ronald Reagan. Regardless of your politics, they inspired a nation with their own confidence and took us from the dark places into the light.

Unfortuately, Obama, a hot type, isn’t wired this way. In truth, he’s more Carteresque than vintage Lincoln. Compassion and equity surely have a place, but not when their offspring is paralysis.