Conservative Musings

It is good every once in a while to read something that reminds you that conservative positions can have  a highly principled basis.  The country needs conservative principles if it is to prosper.  Today's WSJ had several well written articles reminding me of that.

An interview with the outgoing Head of the Heritage Foundation highlighted 37 years of what the think tank has been trying to accomplish.  The 1st thing is that the Heritage Foundation always starts one of its papers with the facts.  I repeat, THE FACTS.  Good policy must be based upon facts and principles.  You can debate the propriety of where do draw the line between competing principles but policies must be based upon and address the facts.  That is the 1st premise of what the Heritage Foundation has tried to accomplish.  We can only hope Mr. DeMint believes in this.

These sound thinking Conservatives developed Romney Care with the requirement that all people must be in the Health Insurance System because without them being there they become freeloaders on the system when they receive care they cannot pay for.  I also believe (but cannot quote chapter and verse) that they had a solution for controlling health care costs within the existing framework for Heath Insurance, not vouchers that push that off on the Insurance Companies that have so far not figured out a way to control health care costs.

Mr. Feulner, the outgoing head of the foundation, recalls when conservatives liked to work with Democrats to have government policy solve problems, not simply oppose any government policy.  He cites Jack Kemp working with Democrats to create urban enterprise zones to reduce poverty in inner cities.

Mr. Feulner also recalls his free trade argument with Roger Milliken, a big financial supporter of the foundation.  Mr. Millikan wanted the foundation to support a textile quota system.  I am a free trade supporter and I quote Mr. Feulner's response to Mr. Milliken.

"Sorry Roger, you know we are free traders.  When you had me down there to your plant, I asked why should you be able to buy a German spinning mill and a Japanese loom, but my wife can't buy a Malaysian short for our kids at Wal-Mart?  It doesn't make any sense.  And he ripped up his contribution check in front of me."

That is principled conservatism.  Not what we see in the Congress where GOP legislators refuse to tackle tax subsidies for energy and other industrial companies and farmers (Democrats have a problem with that one also).

I hope Mr. DeMint does not destroy the Heritage Foundations commitment to laying out the facts.

There was also an article on the SEC sending a Wells Notice to Netflix for allegedly releasing material information on Facebook and that being illegal.

I have mixed  emotions about the SEC.  They certainly have an important role to play as witness what happens when they are not effective:  Bernie Madoff (and how many others like him?), insufficient investor disclosure of risk management (Lehman, Bear, Merrill, AIG, Citi, JPM, Countrywide), and inadequate policing of processes laid out in prospectuses (how many untruths were there in RMBS securities before the Great Recession).  However, they can be overzealous as well.  A friend of a friend sits in jail half way through a 10 year sentence because he signed financial statement 3 months after becoming CFO and then the following month found and disclosed an accounting fraud in an Asian subsidiary.  He acted with the best knowledge that he possessed at each step of the way but because he signed financials before he uncovered the fraud, he was prosecuted, despite the fact that he corrected the financial statements as soon as he knew the truth.  This is hardly justice.

Now, the news the head of Netflix released on Facebook was not directly tied to anything in the financial statements and he has 200,000 Facebook friends.  More people saw this bit of information this way than they would have through a Press Release on the Investor Relations page.  Now such a Press Release should have probably been released in conjunction with the Facebook post, but is this really material enough to warrant a Wells Notice.  The SEC has tendency to run amok and I think the reason is that they are all lawyers.  They need financial analysts who understand materiality and proper process and can look at the world in a practical manner to protect investors.  Instead they just keep hiring lawyers who think law suits are the only measure of productivity.

By the way, I fail to see how fining companies for bad past behavior against shareholders helps shareholders.  This method of changing behavior only harms shareholders because the money paid in fines could otherwise have been used in one manner or another to help shareholder returns.   This SEC policy makes me livid.

I also detest the double taxation of dividends but that cow is so far out of the barn, it is not worthy of any further elucidation.