There seems to be little doubt that we need a new constitution, or at least a new way of governing ourselves. The response to my post July 4 rant that we need a constitutional convention was mostly positive. There were several who worried that a convention could get hijacked by nutcases but almost everybody seems to agree that what we have got now is not working.
Upon reflection, I think that we most certainly will be having some sort of new constitutional convention in the future. There are two ways it will happen. The first is as a result of our paternalistic government going bust in trying to provide everything to everybody. In essence we will be forced to start over; and hopefully a convention will be peaceful.
Second, we could decide to hold a new constitutional convention before we go bust. Of course the powers that be, government workers, special interests and those who live on government checks say they will only allow a new constitutional convention over their dead bodies. Hopefully it will not have to be a literal dead body.
Alfred Hitchcock said that to enjoy his movies you had to believe in the McGuffin. The McGuffin was a plot device without which the movie does not work. Western economies all have a McGuffin that you have to believe in to play politics today. That McGuffin is that governments, whether led by Republicans or Democrats, can effectively provide goods and services. You have to believe in the McGuffin, particularly to vote for Obama. Last week Obama in essence said, government provided services are essential to business. What nonsense. Government activity is the problem not the solution.
Have you ever seen any analysis on government effectiveness? Do you think government officials would allow any analysis? We spend trillions fighting wars. How effective has that money been? I am not just talking about military wars. There is poverty war, the drug war, health care? Delivering the mail? What does government do that is at all effective? Before some of you go nuts finding exceptions, yes, many local governments do effectively provide utility type services. And yes where there is active community involvement, there might be local governments that actually are effective. But how many local governments effectively do provide services? Very, very few. State and local governments have been much more effective at padding their own pension benefits than educating, medicating or incarcerating.
So this is not the right time to call for a constitutional convention. The reason is that a constitutional convention will not be allowed to happen. What might make a difference is to keep highlighting government results to puncture the McGuffin of government competence.
Among my own contributions to puncture the myth of government competence is the videos I have done on why government data is inaccurate and misleading. I am not saying bad government data is due to a conspiracy. Rather, remember the McGuffin? Our government is just as ineffective at providing useful real time economic data as it is at everything else it does. Yet for some reason investors continue to believe in the accuracy of widely circulated initial monthly government data. The data is just another McGuffin!
The Bureau of Economic Analysis, the Department of Labor and Census Bureau continue to use surveys combined with historic data overlays. It makes no sense that those bureaus refuse to use newly available real time metrics, such as credit and check card activity and withheld income and employment tax payments. After many conversations in the past with government economists, my take is that as long as they get their pension benefits, what do they care if their data sucks?
President & CEO, TrimTabs Investment Research
Portfolio Manager, TrimTabs Float Shrink ETF (TTFS)
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