The marijuana industry is a fascinating one. I recently watched the episode “Marijuana Millions” on the CNBC show The Profit (Season 4, Episode 20, obviously) and I think it provided a pretty good rundown of the rapidly growing sector. (1) While I’m not a user of marijuana myself, I do find the new industry to be immensely fascinating. After all, how many other businesses involve a product that is still considered illegal by the federal government?
Yet, since Colorado legalized recreational marijuana in 2014, one state after another has followed in their footsteps. According to the Governing.com,
“Thirty states and the District of Columbia currently have laws broadly legalizing marijuana in some form.
This episode focused on the budding marijuana industry (pun intended) in California. The show took place in 2017, just before the broad legalization of marijuana was set to go through. So pretty much each company that was documented expected substantial growth in the coming years.
In 2017, the marijuana industry grossed $9 billion in revenue nationwide and the show noted that the industry was expected to grow to $20 billion by 2021. (2) That is an extremely fast growth curve. That being said, there are a lot of things that make this industry very unique and somewhat risky.
The host asked every entrepreneur he talked to about the risks of federal action. Some were nervous about it, as the federal government could do to the marijuana industry what it did to the alcohol industry in 1929 with Prohibition. Most thought that it wouldn’t be a problem, though. One even described this perception as a competitive advantage because it kept some competition out. He also noted that many of the large private equity firms had avoided the industry because of vice clauses and things of that nature. Such restrictions in supply create an “inefficient market” that can have higher margins than they otherwise would. But the risks of the government coming in and shutting these operations down did loom over some of the entrepreneurs.
Ironically, the opposite problem loomed over one individual who was interviewed. He ran an illegal marijuana business that catered to recreational users. With recreational use being legalized in 2018, he feared that in all likelihood (unless taxes kept legal companies’ prices high), he would have to find an alternative source of income.
Despite some restrictions and the fear of federal action, it still appeared that marijuana had been de facto legalized in California already. In many ways, at least in states with more liberal or libertarian cultures, politics was well behind the culture. This was definitely the case with California. The host even interviewed one woman named Bretta Carter who noted she was “a lifelong Republican” but that she had changed her mind on marijuana and was now building a 30,000 square foot facility to grow marijuana. Republicans tend to favor the free market, so I would expect this change of perception to continue among conservatives.
The first company the show highlighted was called Canndescent. The firm opened in Desert Hot Springs, which is nearby the far better-known and more prosperous Palm Springs in southern California. For the better part of the 2000’s, the city has struggled. In 2001, the town went bankrupt. In 2014, it almost did again, when as CBS Los Angeles reported,
“Desert Hot Springs, a modest bedroom community known for its boutique spas and hotels, expects to take in nearly $14 million in revenue during this fiscal year while spending $20 million. The city has already slashed its non-sworn workforce by 66 percent in the past eight years but has been overspending for several years.” (3)
Having a $6 million, or 42.8 percent, deficit is an enormous hole to climb out of. But by 2017, the city had made a dramatic turnaround. And that turnaround was almost entirely due to the marijuana industry.
Desert Hot Springs became the first city in California to allow for industrial-scale, indoor pot farming. Mayor Scott Mattis put it up for a vote and 70 percent of the town’s population voted yes. He credits this decision with the town’s revival and notes that taxes on marijuana growers and sellers could bring in as much as $50 million. This shouldn’t be that surprising since the town has issued permits to 30 growers for 3 million square feet of warehouse construction.
Indoor growing has some significant advantages over outdoor growing. With outdoor growing, there can only be two harvests each year. There can be six with indoor growing. Obviously, this means you can produce a lot more marijuana with a lot less space.
The host met with the founder of Canndescent named Adrian Sedland, who happened to be a Harvard MBA. Their brand focuses on the “high-end, luxury market.” A layman might not think that such a market exists in marijuana, but there are a lot of stereotypes about marijuana users that don’t fit well with the facts.
Sedland believes they can sell each pound of marijuana for $3000. As a comparison, the seller noted above who works in the black market sells his marijuana for $2000 a pound. The goal of each facility is to produce 65 pounds of flour each harvest, which happens every 10 days. That would equate to $195,000 of product for each facility every 10 days.
The question, of course, is can Canndescent break into the high-end market that may or may not exist. I believe they can. As the market develops, many niches and subniches will develop with it. It’s much better to own a particular niche than to be just a plain, old commodity. And some marijuana users will want (and have the money to afford) high quality marijuana and don’t want to be associated with the “stoner culture” that many marijuana users have been stereotyped with.
In order to create this perception, Canndescent has dropped all the “stoner lingo” and has simply offered five products that are each named after a type of emotion that each brand of marijuana is supposed to enhance:
And if you are going to go after the high-end market, you have to provide a high-end product, as this exchange emphasizes:
Sedland: “Smell the nose [of the marijuana], you’ll recognize that our nose doesn’t have any chemical burn. You’d recognize the cure on our product is perfect. That when you break it, it has a perfect snap, which means it’s going to be a perfect smoke.”
It may cost more to provide a high-end product, but you can also sell it for more and there is usually a larger margin.
The show also detailed several other producers. One was a small startup named Treat Yourself that was started by two friends who made low-THC, vegan and gluten free edibles (food that contains marijuana). If this doesn’t show that the broader marijuana market is becoming very niched, than nothing will. The two friends were just getting started, but at the end, the show noted they had signed a deal with a major distributor which should drastically increase the size of their business.
Another company highlighted was Kiva Connections. Kiva Connections is the biggest manufacturer of edibles in the state and focuses primarily on chocolate edibles. The company employs 85 people and produces 1000 pounds of edibles each day.
Another company named Medmem were buying up stores, distributors and growing warehouses alike to vertically integrate their company and cut out the middleman. As can be seen, there were a lot of different business models being employed in this industry.
Overall, what’s fascinating about the marijuana industry is the ability to watch a new industry rise out of almost nothing at an extraordinary pace. The profit potential is certainly there, although competition is becoming more and more stiff each day. And the ever-present threat of federal regulation is also there. That being said, it would appear that this industry is here to stay and should remain profitable for a long time to come.
So the roots of science's ever-growing reproducibility crisis probably lie in what's called the "file drawer problem" or "publication bias." As Wikipedia describes,
Publication bias is a type of bias that occurs in published academic research. It occurs when the outcome of an experiment or research study influences the decision whether to publish or otherwise distribute it. Publication bias matters because literature reviews regarding support for a hypothesis can be biased if the original literature is contaminated by publication bias. Publishing only results that show a significant finding disturbs the balance of findings.
And just how bad is the problem? Well according to a new study from The Royal Society; really, reall bad.
In this paper, we show how Bayes' theorem can be used to better understand the implications of the 36% reproducibility rate of published psychological findings reported by the Open Science Collaboration. We demonstrate a method to assess publication bias and show that the observed reproducibility rate was not consistent with an unbiased literature. We estimate a plausible range for the prior probability of this body of research, suggesting expected statistical power in the original studies of 48–75%, producing (positive) findings that were expected to be true 41–62% of the time. Publication bias was large, assuming a literature with 90% positive findings, indicating that negative evidence was expected to have been observed 55–98 times before one negative result was published. These findings imply that even when studied associations are truly NULL, we expect the literature to be dominated by statistically significant findings.
The underlined part is mine, of course. And I'm just going to repeat that again. "Publication bias was large, assuming a literature with 90% positive findings, indicating that negative evidence was expected to have been observed 55-98 times before one negative result was published."
Ouch! How long until we can conclude that every new science study--at least those in sociology and psychology--is completely bogus?
One of my few self-help articles from SwiftEconomics (which has served me pretty well since I published it 5 years ago)
There are all sorts of tips out there to wake up early and, what I think is more important, quickly. My entire family and I chronically get up late and often waste an hour or more pointlessly hitting the snooze button over and over again. Since this type of “rest” or “sleep” is useless and I don’t exactly accomplish anything in this time, I’m basically losing 5% of my life just trying to rouse myself.
I’ve read plenty of tips. Steve Pavlina recommends practicing waking up quickly to ingrain it in your subconscious mind, Mark Sisson recommends weaning yourself off the alarm clock, and some e-book I found on Amazon recommends repeating some odd chant while rubbing various body parts (like the arms and shoulders… jeez). And of course, everyone recommends getting enough sleep.
Well, I think I’ve finally found a way to do it. The key is to wake up to music, but instead of using music as an alternative alarm like most people do, use it as just the starting point. The thing I discovered was that for me at least, the problem with the alarm clock is that 1) it jolts you out of bed and 2) it gives you an either/or option. Either you get up, or you press snooze. When you’re groggy and tired and kinda want to murder your alarm clock, the getting up option will usually fail.
So the music starts and you no longer need to jump out of bed. You’ve taken the pressure off. You don’t have to get up right away! The alarm clock is no longer to be dreaded. And also, make sure, to use a playlist of music you really like that is not too heavy or too soft. That way you can almost sort of enjoy being woken up.
Once the music starts, all you need to do is two things: 1) leave the music on and 2) keep your eyes open. This is aided if you leave the blinds open so natural light gets in. One of the big things that keeps you tired is the fact your eyes are closed when you’re lying in bed. Light helps wake us up naturally, so just keep them open (easier said than done, but much easier than just hopping up right away).
After about five minutes you should be much more awake than before. At this point, turn on a reading lamp and then if you’re ready, sit up. If not, maybe shake your arms or roll your neck a bit to get the blood flowing. Or just stay there lying down for another couple more minutes with your eyes open. If your experience is anything like mine, you’ll be ready to get up soon enough. I should also note there are lights for sale that act as alarm clocks and gradually get brighter. Those would fit in with this plan perfectly.
Once you’re ready, get up and immediately take a shower. That will finish the trick, especially if you’re willing to make it a cold shower, although that’s not required.
So if I were to formulate this into a step by step plan, it would be this:
Each of these steps has come naturally to me. I don’t have to time them, I just start to wake up naturally and after about 5 to 15 minutes, I get out of bed. I set a backup alarm just in case I linger too long, but I have yet to need it. In the past, I have struggled to get out of bed with enough time to take a shower and inhale a quick breakfast before work. Now I have been consistently getting up at 6:00 am and getting my workouts in before work (which is a lot easier than afterwards when I’m tired and just want to relax).
Well that’s it. Let me know if it works for you as well.
I've become a big believer in focusing on systems over goals (see here and here). I became familiar with the concept by reading Scott Adams, the creator of the comic strip Dilbert, who puts it this way,
I talk about using systems instead of goals. For example, losing ten pounds is a goal (that most people can’t maintain), whereas learning to eat right is a system that substitutes knowledge for willpower.
It's a brilliant way to set your life on a path that will lead you to success. After all, there is no "there" to get to. So goals, even if accomplished, just put you back at square one. Once you're done with one goal, you're back in a state of "pre-success failure" as Scott Adams puts it.
Here's a good video where Scott Adams breaks down exactly how much more powerful systems are then goals. I highly recommend implementing this in your life.
Check out my latest livestream for BiggerPockets on due diligence for both houses and apartments. As you can tell from the screenshot, I bestow an enormous amount of knowledge upon thee:
So I submitted my latest article for American Thinker on Tuesday this week. It covered the massive and blatantly obvious bias going on in Silicon Valley. For example, regarding Google, I wrote,
Just type some political event or figure into Google and see what happens. I just typed in “Brett Kavanaugh” into Google and the first three results at the top bar were CNN, the NYT and The Hill; two leftwing, one center right. The three videos were MSNBC, the Guardian and Fox News; two left, one right. The articles on the first page other than Wikipedia were CNN, The Nation, Esquire, the Washington Post, Business Insider, CNN again, the NYT again and Slate. That’s seven leftwing sources, one center and one entertainment site. Very balanced.
While the article was published Thursday, I guess I should have waited one more day to submit it as on Wednesday, a leaked video all but proved Google is hopelessly biased:
What a joke! And those stupid hats make the whole group look like some weird cult. Maybe that's not far from the truth.
I attended the weekly meeting of One Million Cups this week. It’s an event I’ve actually been intending to go to for a while but have just never found the time. One Million Cups is a platform for entrepreneurs to share their business with like-minded individuals while getting feedback and questions. Its website describes itself as
“[One Million Cups is] Based on the notion that entrepreneurs discover solutions and engage with their communities over a million cups of coffee, the Ewing Marion Kauffman Foundation developed 1 Million Cups in 2012—a free program designed to educate, engage and inspire entrepreneurs around the country. Through the power of volunteers, 1 Million Cups has grown to more than 180 communities.” (1)
Each week, two entrepreneurs give a six-minute presentation on their business or idea. Then the hosts ask them a few questions before opening it up to the audience.
This week, Crystal Webster with Sharing Solace and Steven Coen with SaRA Health gave brief presentations of their companies.
Crystal Webster: Sharing Solace
Crystal started her story off with how she met her husband, got to travel the world and eventually had a child. It sounded like the beginning of a guru pitch you would get from someone selling you a get-rich-quick-scheme until it shifted course very quickly. Unfortunately, her daughter passed away only eight hours after she was born.
This was, quite obviously, an extremely traumatic event for Crystal to live through. And she had to endure a deep grief that lasted with her for well over a year. Even today, many years later, she still tears up when talking about it.
Eventually, she came up with the idea to create a business and a method of helping others grieve after tragedies. She started the company Sharing Solace which, as its website says, “is a community of grievers for grievers.” (2)
The idea behind it is that you buy either a keychain or necklace for yourself or for someone you know who has just had their heart broken. Inside the keychain is a “sharing solace token.” You then register the token on the website and keep it on you until you believe you have healed. You can then remove the token and send it back. The token is then put in a new locket and sent out to someone else who is grieving. At this point, you can go online to view the “token tree” to see where the token you once had is. The following chart from her website better illustrates the process:
The process is meant to bring people who are grieving together. And the site also has forums and online journals to facilitate this and build a community.
Her marketing technique also sounded strong. It’s mostly done through direct sales where she first “bribes people with candy” to get them to talk. Then she just says “Sharing Solace is a community of grievers for grievers.” At that point, if people either are grieving or know someone who is, they usually open up. This gives her an opportunity to talk about her business which is of interest to many such people.
That being said, I do see a few challenges. She currently has a patent pending, but this concept seems difficult to patent. The concept also takes a little time to understand, which is always a problem for new products. The chart she provides is great, but it should be on the front page of the website (instead its under the heading “Boutique”). Finally, I’m not sure that a token that gets passed along adds that much over the currently existing communities for people in grief. The community is the most important part in my judgement, and in that, her product is not very differentiated from other communities of grievers.
The business is, however, aimed at a very niche market. And those are the one’s most likely to succeed. She also has a very effective way of selling the product; empathizing with people in grief. I think she can be successful with this idea, but it probably has fairly limited potential.
Steven Coen: SaRA Health
This is actually the second company Steven has started; the first digitized university documents and was marginally successful. After that, he got a job before going to grad school at UCLA. There he met his two other partners, one in business and one in programming, and together they started SaRA Health.
SaRA stands for Simplify and Recovery Assistant. Their motto is “paper handouts suck.” The product provides patients a way to keep track of their physical rehabilitation exercises more effectively as well as for physical therapists to monitor and evaluate their patients’ progress.
This is all fairly personal to Steven. Many years back, he had a full ACL and meniscus reconstruction surgery. He didn’t follow the prescribed exercises on the paper handouts he was given very well. For that reason, he stayed on Vicodin longer than he would have otherwise needed to and ended up going through some pretty severe withdrawals.
According to the website, SaRA “simplifies recovery by eliminating inefficiencies, motivating patients, and keeping providers informed of progress.” (3) It does this with an app instead of paper handouts. The app reminds patients when to do the exercises and actually films them doing those exercises. It tracks sets, reps, pain and effort. Then it provides this information to the physical therapist for evaluation.
Steven noted that the product just seemed like something that should have already been invented. I think this is common amongst entrepreneurs. One great way to think of business ideas is to ask “why don’t I do it?” when you ask yourself “why hasn’t anyone come up with that.”
The marketing plan seemed a bit strange though. They were going to target employers so that they could get their staff who were on workers compensation to use it. This would make their staff recover quicker, which would save those employers money. That seems a bit of a roundabout way to go to me. They seemed to fear that it would work against the physical therapists’ interest because 1) why should the physical therapist have to pay for it and 2) it would shorten the recovery time and actually work against their economic interest.
I highly doubt that physical therapists, in general, would reduce the quality of their service to pinch a few pennies. I believe they should market to both as well as schools with athletic departments and other institutions like that.
While the product isn’t particularly “sexy,” it does serve a useful purpose and could very well be successful.
After perusing the various products and services looking for funding on Kickerstarter.com and Indiegogo.com, the listing on Indiegogo for “The Drift W1: Experience Segway’s New Age E-Skates” caught my eye. (1)
The spectacular failure of the original Segway has always interested me. Jennifer Valentino-DeVries writes a pithy but thorough timeline of its fall for The Wall Street Journal.
“2001: Incredible hype builds around a device known as ‘IT’ and ‘Ginger’ that is being built by inventor Dean Kamen. There's talk among tech insiders that it could be bigger than the PC. Kamen says it ‘will be to the car what the car was to the horse and buggy.’” (2)
The problem was that the car revolutionized vehicle transport. The Segway revolutionized walking. And as should have been a surprise to no one (but apparently was), there was virtually no market for a revolutionary way to walk.
Kamen had predicted he would sell 50,000 Segway’s in the first year, but by 2003 he had only sold 6000. And the company had to issue a recall on those because so many people were falling and getting hurt. One of whom was then President George W. Bush.
So for them to brazenly market the decrepit brand of “Segway” was a rather bold move right from the start. Indeed, it is the same company as the one that released the original Segway. I’m somewhat surprised they haven’t changed their name for this product. Indeed, these revolutionary roller skates sit front and center Segway’s website. (3)
Of course, in a crowded market such as the one we have today, having a name brand that is recognizable is a major advantage in and of itself. And while Segway’s brand is seen by some as a joke, it’s not seen in a ethically negative way in the way that Philip Morris, Monsanto, Perdue Pharma or other companies are with some. I know of no one who has accused Segway of any noteworthy ethical wrongdoing. So sticking with the original brand name was probably the right decision in my judgment.
That being said, this idea is far superior to the original. Most people don’t use rollerblades or roller skates as a way to get around. Instead, they are a product for sport and fun. Segway’s balancing technology―while close to worthless in its original design―is still impressive. As Valentino-DeVries notes, it used “a complicated system of gyroscopes and other technology to balance,” which has presumably advanced over the last 17 years
It shouldn’t be surprising that an effective technology would not work in its first product but (possibly) work in a future one. Many products were eventually adopted for a purpose they were not initially intended for. For example, Kleenex was supposed to be a sanitary pad and Listerine was supposed to be a surgical antiseptic. (4)
The Drift W1 markets itself as “Lightweight, portable with endless fun and numerous stylish ways to ride.” In other words, this is a product for people to have fun with, not get around with. It revolutionizes roller skating (which might have a market) not walking (which doesn’t).
The advertising highlights this aspect and is consistent with the theme they are going with. The print ad is the standard for this type of product with an attractive man and woman wearing “hip” clothing while looking “cool.”
The video ad is similar. It uses quick cuts of these same attractive people doing all sorts of cool tricks in their Drift W1’s with pulsating techno music in the background. While this type of advertising has become predictable and perhaps even stale for companies aiming at the same demographic, such as Nike and Under Armor. It has obviously proven to be successful though, as those companies continue to sell large numbers of shoes and other sporting goods predominantly to the younger Generation Z and Millennial demographic.
Indeed, given that this is the demographic their aiming at and it’s predominantly Boomers and Generation X that remember the pathetic launch of the original Segway, the company may not have to worry much about the brand’s maligned image. People have heard the name. The word “Segway” is familiar and that’s all that matters.
It’s also interesting that Segway would pursue an Indiegogo campaign instead of more traditional financing routes. This may have just been a corporate strategy, but it also may have been to take advantage of the youth-focused aspect of its product. Young people are, after all, more apt to use the Internet and modern crowdfunding platforms.
The Drift W1 is currently in the production stage, which means they “have a working version of their physical product, are currently producing this product for backers.” (5) Segway has raised $183,541 of its $200,000 flexible goal.
The page is loaded with pictures and descriptions of all its components and technical specifications, which is necessary but not particularly useful for marketing. What is helpful is that there are simple, picture-focused guides to how to use the product. The following is a still frame, but each “picture” is a GIF which briefly shows the process for operation:
This type of easy-to-see-and-understand how-to-guide is essential for any new product. A confused mind says “no.” And most people aren’t that interested in digging into something new that might be complicated or tricky to operate. They just have too much else to do. By having a simple diagram with moving pictures walk you through the process, the product seems less foreign and more easily adoptable.
Segway is also wisely offering several perks to its backers including a $130 discount on a pair. (The retail price is $499 with several quantity discounts for more.) They are also allowing people to buy it as an “early bird.” Those products will arrive in October of this year. I didn’t see an official launch date.
While this is typical, it’s always good to beta test a product with a small group in the public to work out any kinks before a wide launch. It’s also good to build some excitement about it and hopefully some word-of-mouth traffic. Segway needs to turn its brand into something “cool,” which won’t be an easy thing to do.
With products such as these, it’s a bit of an all or nothing affair. Humans are a social animal and want to be a part of the crowd. And there is no group of humans that has this desire more than young people. Everyone wants to fit in and not be the “odd man (or woman) out.” In order for this product to be truly successful, it has to become something that a lot of people use and not something that a few “weirdos” use.
I don’t believe this product can succeed as a niche product. It really needs fairly broad market acceptance.
This is especially true since what Segway is trying to revolutionize has become significantly less popular. According to HowStuffWorks.com,
“By the late '90s, more than 20 million Americans were skating at least once a year, making it the fastest-growing sport in the country… According to numbers from the Sports & Fitness Industry Association (SFIA), which conducts a massive annual sports participation survey, only 6 million Americans tried inline skating in 2015.” (6)
That being said, what better way to rejuvenate a product that to update it with modern technology?
The marketing wasn’t all good, though. I was surprised that the color scheme is pink to purple on the Indiegogo page and just pink on Segway’s own website. For better or worse, pink is typically associated with girl’s products whereas blue is associated with a boy’s. While this product would obviously appeal to both boys and girls, my general feeling is that it would appeal a bit more to boys than girls. Regardless, they should be trying to appeal to both.
That odd choice aside, I think Segway made the right decision to keep their name and has provided effective materials for how to use the product. The discounts and ad styles are similar to other products, but have proven effective for the market it is aiming at. Overall, I do think this product and its marketing plan has a chance to work. It is by no means a sure thing though.
Check out my latest Livestream for BiggerPockets on how to get a bank to lend to you, which is not as easy or obvious as it may seem:
With all the nostalgia some of the #NeverTrump Republicans are having for George W. Bush after John McCain's funeral, I thought I would republish this old article I wrote for SwiftEconomics.com. Yes, Trump has all sorts of problems, but this idea that Bush was a success, let alone conservative, is just stupid and needs to go away. (Although, I should note that Donald Trump has some of that "big government conservatism" as well.)
Now I’m well aware George W Bush’s presidency ended over a month ago. However, given this is my blog’s kickoff, I would feel remiss if I were completely left out of the Bush bashing parade. There just seems to be a vacuum now that he’s gone, which leaves me in an awful nostalgic mood. As a matter of fact, the extraordinary decline in consumer demand for anti-Bush merchandise since he gracelessly left office is one fascinating theory of how the financial crisis got so bad in the first place. So hey, I’m just doing my part to prime the proverbial pump.
I’m going to take a little different approach than most have and call Bush out for his distinctly free market hating policies. I think the idea that Bush was somehow fond of unregulated, dog eat dog, laizzez-faire capitalism in all of its creatively destructive glory is an extremely important myth to bust. Why? Well since our economy is crumbling all around us, people are desperate to run away from whatever we were just doing as fast as Keith Olbermann can decline a debate. Therefore, it’s critical to know just exactly what it is we were doing before we start running.
Unfortunately, the “Bush was a free marketer” myth is more or less ubiquitous these days. Barack Obama has repeatedly said in one form or another, the financial crisis “…is a verdict on the failed policies of the last eight years that said that we should strip away consumer protections, let the market run wild, and prosperity would rain down.” And many others have taken the baton and regurgitated that sentiment en masse (see here and here). But what were those horrible policies? Was the Bush administration really letting “the market run wild?” If they were, then maybe we should try big government again. However, if they were big government policies to begin with, maybe the free market deserves a first chance.
It is true that Bush has said some nice things about the free market, but since when do we believe what politicians say. If you really believe everything Bush says than you must think there are some WMD in Iraq and on another note I have some beach front property in the Mojave Desert you may be interested in. Oh but didn’t Bush cut taxes like three times? Well yes he totally did. He “slashed” the top income tax bracket from 39.6% to 35%. He also added a sixth bracket to our ridiculously complicated tax code. However that’s about where his free wheeling free marketing ends.
The media rarely blames the tax cuts for our financial mess though, instead it repeats ad nauseam that deregulation was the key to our current crisis. I’ll leave refuting this claim to another article, but the key here is Bush has not been a deregulator. The main piece of legislation proponents of the “deregulation theory of financial collapse” point to is the Gramm-Leach-Bliley Act that repealed much of the Glass-Steagall Act, effectively breaking down the barriers between commercial and investment banks. The problem is that this piece of partial deregulation was passed during Clinton’s presidency in 1998 (and voted for by Joe Biden by the way).
In reality, Bush’s presidency has been an eight year long string of red tape. The Bush administration added a staggering average of 76,526 pages to the federal registry each year. In 2002, he signed off on Sarbanes-Oxley, one of the most overbearing regulations since the New Deal. The SEC alone saw it’s budget triple over eight years, which of course wasn’t quite enough to catch a 50 billion dollar, decades long ponzi scheme. The Bush administration increased federal spending on regulatory agencies by 6.5% per year (adjusted for inflation) and staffing by 6.3%. That’s more than any president since Richard Nixon (another president bestowed with the “free market” myth).
Even more damning is the federal budget. Bush was the first president to ever push the federal budget over 2 trillion (yes trillion with a t) and then just to shatter the record Michael Phelps style, he was the first to push it over 3 trillion as well. In his first term Bush increased total budget expenditures by 25.3% and non-defense discretionary spending by 19.7%. Both were the largest increases since the Nixon/Ford presidency from 1972-76. Bush’s second term was no better.
In eight years, Bill Clinton only increased the budget from 1.41 trillion to 1.86 trillion, a 32.2% increase which is notably not adjusted for inflation. As a percentage of GDP the budget fell from 21.4% to 18.5%. Under eight years of Bush the budget increased from 1.86 trillion to 3.11 trillion, an uncanny 66.8% increase. However, that figure does not include either war or the 700 billion dollar bailout. If we include the wars and the multitude of bailouts, Bush’s budgetary madness parallels the eight years of New Frontierin’ in the Great Society under Kennedy and Johnson, which saw the budget increase 87.9%. As a percent of GDP, by 2009 the budget had jumped back up to 20.7%. In contrast, the highest percentage of GDP spending reached during either the Kennedy or Johnson administrations was 20.6% in 1968.
Fiscal conservatives should also hate budget deficits, but Bush sure doesn’t. The deficit may exceed a trillion dollars this year and the total debt has ballooned from 5.6 trillion dollars to 10.7 trillion dollars! Even more startling are the unfunded liabilities (what we would need to have invested in treasury bills to meet future entitlement obligations) which now stands at an incomprehensible 65.5 trillion dollars!
So how did he do get the budget so bent out of shape? Well with conservative things such as the biggest entitlement package since the Great Society in Medicare Part D. A piece of legislation David Walker, the former comptroller general of the GAO, called “a poster child for what not to do when considering new legislation.” Or perhaps it was doubling the size of the Department of Education, a department Reagan campaigned on abolishing. Or maybe it was two wars that the Congressional Budget Office estimates will cost the United States an absurd 2.4 trillion dollars (along with many lives) in economic output by the time they both end. Or just possibly it was his massive wealth redistributing, failure rewarding bailout of bankrupt financial firms. Or could it have been his end around Congress to bail out the auto industry. Hey, maybe it was his own 150 billion dollar stimulus package in 2007.
All this brings us to an obvious conclusion: Bush was not a free market president. This reality is confirmed by the The Fraser Institute, which releases country-by-country rankings for economic freedom every year with a 10 being completely free and a 0 being completely unfree. In 1990, the United States had a 7.8 ranking. After Clinton (albeit with a Republican congress most the time) the United States’ ranking went up to 8.6 in 2000. By 2006, Bush had let it fall back to an 8.0 and it will likely sink further after all this bailout mania. Canada, with all its universal health care, has an 8.1 ranking.
So how on Earth is Bush a fiscal conservative? How is he even conservative? Aren’t conservatives in favor of the free market and federalism while being weary of big government? Well empty suit, talking head, political hack Fred Barnes took up the issue in 2003. As he wrote in The Weekly Standard, Bush is “a big government conservative.” George Bush and his administration “simply believe in using what would normally be seen as liberal means–activist government–for conservative ends.”
Ahh, big government conservatism: a delightful oxymoron akin to centralized federalism, Darwinian Creationism and environmentally friendly nuclear explosions. One simply can’t be conservative in any simultaneously American and non-Orwellian sense with out being pro-free market and one simply can not be pro-free market while massively increasing the size of federal government. There are many, especially on the left, who accuse Bush of increasing the size of government to simply ally with big business and rip off the taxpayers, but that is aside the point. Corporatism is not capitalism! So if you want to blame corporatism for the mess we’re in, that’s fine. But perhaps, just perhaps, capitalism, real capitalism is a better way out of this mess than big government. Big government is after all what we were just doing.
"Every day is a new life to the wise man."
The Righteous Mind
Star Slate Codex
Consulting by RPM