Johnson...McNamara...Obama: the Convergence

Throughout history; nations, city states, and tribes which chose to fight a conflict by use of a defensive strategy (versus defensive tactics, which are used commonly) inevitably failed in their endeavor and often ceased to exist.

Only rarely has the US elected to try and break the historical deadlock. After early setbacks with the Continental Army, some members of the new Congress urged Washington to take a strictly defensive posture, pulling the army into the wilderness and spending what might have been decades waiting for the British to uproot him.

Washington was far too wise to consider this option, instead he learned from earlier tactical mistakes and doggedly built an army which could go head-to-head against British regulars. He understood far too well the historical precedent...the Brits would simply grow stronger while drying up Washington's base of supply, while his force would lose public support and personnel; eventually becoming little more than a band of renegades.

In the Korean conflict, US forces, after great initial successes and the near collapse of North Korea, were forced into a bloody stalemated war of attrition. Afraid to further provoke the Chinese or the Soviets, the US used enough force to hold the line, but not to bring abut decisive victory. That conflict has never been resolved and still destabilizes the region.

In the Vietnam war, the US administration in the persons of Lyndon Johnson and Robert McNamara made a decision to fight a protracted war of defense as a test of will against the Soviet Union's proxy state, North Vietnam. McNamara was a firm adherent of what is called War Management Theory. Most military professionals adhere to War Fighting Theory...the two are very different schools of thought.

I recall an analysis of the war that included two photos side-by-side. The first was a famous photo of President Lincoln during the Civil War. In the photo, Lincoln is seated at the rear of the room, his tophat on his lap, listening intently as his generals work over a large table covered with maps. He was the observer...doing the people's business by monitoring the experts in warfighting and being there to make final decisions based on their recommendations.

The other photo was of Johnson and McNamara with the chiefs of staff...the top generals in all the armed forces of the nation. In this photo, Johnson and McNamara were leaning over a large map table while the generals sat disgusted and ignored in the background. They had learned not to speak up, as one of the two politicians would normally fly into a rage and ignore what advice the officer wished to convey.

These men's egoes were more important to them than the lives of the men and women serving on the battlefields. Johnson often remarked that generals could not be trusted in issues of war and that he was smarter than the lot of them. McNamara was known to share those feelings...but in his own regard.

Lincoln was by far the more intelligent man. He was wise enough to know his limitations, and though he got testy with his generals from time to time, and replaced those who failed to produce, he bowed to their judgement on matters not political in nature.

Not only was Johnson very different than Lincoln, conceited and bull headed, but he disliked military people and he had bigger fish to fry. He was pushing his Great Society agenda to congress and the people and felt the war would simply get in the way. So McNamara's war management theories seemed to fit his needs at the moment.

Those theories called for a defensive strategy; whereby the goal was not to win the conflict, but to keep from losing. In other words, apply enough force to keep the Communists from completely overrunning the struggling democrary in the south, but not enough to dissuade them from trying. The key, McNamara assured Johnson, was that the Communists would get the hint and give up the idea of conquest after a few years.

This would also signal the Soviets that we were willing to slug it out in Europe as well if that became necessary. It actually convinced the Soviets of very different things of course, but that's another story.

McNamara's theories called for building an innaccessible wall of protection around the south...which to anyone who can read a map seemed like one of the most ludicrous ideas in history...one that the Communists would be unable to efficiently cross. This worked so badly, of course, that Johnson finally bowed to a minimal amount of "active defense" in the form of going after military production in the north through use of airpower.

It went no further than that however. Military leaders were already stretching the limit of McNamara's vision, and the war was getting way too much publicity for Johnson's taste. His big social agenda was going down the tubes thanks to anger over his handling of the war.

Of course we're all aware of how that conflict ended, and of the sacrifices made not only by US personnel but South Vietnamese troops by the millions as well as allied forces from all over the Pacific. Their courage could not save a democracy condemned to extermination by fools in Washington D.C.

Now there is a new photo being passed around. President Obama, VP Biden, and a dozen other civilians sitting around a large table procrastinating over how to proceed in Afghanistan. The media refers to this group as his "war council."

Note that the chiefs of staff are now completely missing; as are the generals on the ground who have been pushing for a decision for half a year. To make matters worse, the professionals in-country have delivered four carefully prepared strategic plans to carry on and eventually win the war...and all have now been rejected by the "war council."

Does Obama want the generals to revise their plans and come back? No...he has announced his council will write his strategic plan for the war.

Now...we'll take a moment to allow you to slam your fist through a wall...or simply sit in front of your computer in stunned silence. Some of you may want to beat your head against your desk or cry...it's up to you...all four might be called for at this point.

Try to look at the bright side...Obama and his people have finally, irrefutably, proven their egomania, their narcissim, and their lack of intelligence beyond any question. No one with the slightest semblance of sense could disagree this may be the most incredibly stupid single decision these people have made to date. Now there can be no doubt of their incompetence.

But there are other issues in play: recall Obama's speech on TV when he broke into regular programming to announce the mass shootings at Fort Hood. For two minutes he spoke about social issues, then inserted some lines about the murders on the base, then finished up with more social issues.

What does this short interlude tell us? One...like Johnson, he has a social agenda that overrides the lives of our men and women who serve in the military. This social agenda is so important that it will eclipse our national security and cut the very foundations of support for our troops before this administration is finished. They have a messianic need to complete this agenda despite what it does to our nation and our people.

We see the results of that agenda being played out in the dithering over strategy in Afghanistan. The war council is not concerned with winning...they are concerned with image and getting out if necessary to save their social plan. If this wasn't true, the President would have simply chosen one of the four options and told our generals to "make it so."

Two...like most failed leaders throughout history...Obama won't learn from history. He wants to take the reins of a general, but doesn't have any interest in knowing anything about the art, history, and science of leading men in battle. Like wanting to run giant corporations, running a war is simply beyond his grasp in the slightest degree...but that doesn't prevent an extreme narcissist from truly believing he will be successful.

Now one might suggest that I'm offbase...that Obama will simply reword one of the Generals' plans in order to take credit for it. That's unlikely...it's the move a publicity hungry, but dogmatic, politician might make. I believe Obama is such a narcissist that he truly believes he and his friends are able to come up with superior plans. This despite their total lack of training, knowledge, or experience in these complex matters...similar to their approach to the world of business.

Whatever move they now make, this administration has set the framework for failure and it will be difficult to break out of that model. Liberals will always find some consolation in such failure...the media can always label it success of course...and if that fails they can still go back to blaming Bush. The long arm of George Bush reaches out constantly, you know,...and it is the one strategy they can use with some level of actual understanding of what they're doing.

The Professor

Patriotic Resistance: A Letter by Thomas Sowell

We've all heard the screechings from the left that boil down to "we should all support the President...after all, he was elected, time to shut up...unite behind him and move forward blah, blah, blah." It's time to absorb his view of the world and abandon our own.

Kind of like the left united behind George Bush and our troops? You might notice we're still behind our troops...it doesn't matter to us who is in the presidency...we don't change our stripes according to what administration is in office.

The reality is: the day an election is over, the next cycle begins. The elected official is our employee, and it's our duty to review and critique everything our employee does. We are not only free to criticize and attempt to correct his course of action...we are honor bound to do so. I'm re-printing a recent letter by Thomas Sowell, well known and respected Economist and public figure, as he expresses his version of this reality.

I have noted that many elected officials, both Democrats and Republicans, called upon America to unite behind Obama.

Well, I want to make it clear to all who will listen that I "AM NOT" uniting behind Obama. However, I promise to give our country the devoted loyalty of a patriot.

I will respect the Office he holds, and I will acknowledge his abilities as an orator and wordsmith and pray for him, BUT that is it.

I have begun today to see what I can do to make sure he is a one-term President!

Why am I doing this? It is because I do not share Obama's vision or value system for America;

I do not share his Abortion beliefs;

I do not share his radical Marxist's concept of re-distributing wealth;

I do not share his stated views on raising taxes on those who make $150,000+ (the ceiling has been changed three times since August);

I do not share his view that America is arrogant;

I do not share his view that America is not a Christian Nation;

I do not share his view that the military should be reduced by 25%;

I do not share his view of amnesty and giving more to illegals than American Citizens who need help;

I do not share his views on homosexuality and his definition of marriage;

I do not share his views that Radical Islam is our friend and Israel is our enemy who should give up any land;

I do not share his spiritual beliefs (at least the ones he has made public);

I do not share his beliefs on how to re-work the healthcare system in America ;

I do not share his Strategic views of the Middle East, and certainly do not share his plan to sit down with terrorist regimes such as Iran .

Bottom line, my America is vastly different from Obama's, and I have a higher obligation to my Country and my God to do what is right!

For eight (8) years, the Liberals in our Society, led by numerous entertainers who would have no platform and no real credibility, but for their celebrity status, have attacked President Bush, his family, and his spiritual beliefs!

They have not moved toward the center in their beliefs and their philosophies, and they never came together nor compromised their personal beliefs for the betterment of our Country! They have portrayed my America as a land where everything is tolerated except being intolerant!

They have been a vocal and irreverent minority for years;

They have mocked and attacked the very core values so important to the founding and growth of our Country;

They have made every effort to remove the name of God or Jesus Christ from our Society;

They have challenged capital punishment, the right to bear firearms, and the most basic principles of our criminal code;

They have attacked one of the most fundamental of all Freedoms, the right of free speech!

Unite behind Obama? Never!

I am sure many of you who read this think that I am going overboard, but I refuse to retreat one more inch in favor of those whom I believe are the embodiment of Evil!

PRESIDENT BUSH made many mistakes during his Presidency, and I am not sure how history will judge him. However, I believe he weighed his decisions in light of the long established Judeo-Christian principles of our Founding Fathers!!!

Majority rules in America , and I will honor the concept; however, I will fight with all of my power to be a voice in opposition to Obama and "his goals for America ."

I am going to be a thorn in the side of those who, if left unchecked, will destroy our country! Any more compromise is more defeat!

I pray that the results of this election will wake up many who have sat on the sidelines and allowed the Socialist-Marxist anti-God crowd to slowly change so much of what has been good in America !

"Error of opinion may be tolerated where reason is left free to combat it." (Thomas Jefferson)

God bless you and God bless our Country!!!

Some Clarification on "Profits" Posting

A good friend and colleague suggested the post preceeding this one might be somewhat confusing to anyone who has not had to deal with cash flow in a business; versus cash flow at home or in one's personal life. He is right, of course...and I felt it necessary to explore the idea in more clarity.

To remind; I was explaining how a business's cash flow, in different stages of the operating cycle, could distort short-term tax returns in a way that would falsely indicate the business had benefitted from a sudden increase in profit. I brought up the issue due to a government agency that made a public announcement that profits were up across the business sector. They contended that the recession must be over as a result.

Quarterly tax returns tend to show the ups-and-downs of cash flow more dramatically than a yearly tax return, and most businesses have to file quarterly. The longer time period of a full year simply "smooths" out the fluctuations in cash flow and gives a more accurate picture of what the firm is doing. The agency was speaking about quarterly tax returns.

Here is a good visualization of the "operating cycle."

Imagine a circle graphic with a box at 12 o'clock labeled "Cash." There is another box at 3 o'clock labeled "Raw materials", a box at 6 o'clock labeled "Inventory", and one at 9 o'clock labeled "Accounts Receivables." We will go around this circle in a clock-wise direction.

What this graphic represents is the assets the company has at different points of the "operating cycle."
At the beginning of the cycle the company has cash, it might be their own or from a loan, or a combination of both. The company begins by paying out money in the first stage of the cycle to purchase materials. Money going out of the firm would also be for payroll costs and other needs.

A cash flow statement at this point shows the purchase funds coming in, from prior sales and/or as cash from a loan, and then going out, to purchase raw materials. On the tax return, however, we simply see the cost of raw materials as an expense. Loans are not income...anymore than the use of a personal credit card to purchase something for your home is a source of income.

(Admittedly some folks use their credit cards as "income" and that does get them into a whole world of hurt in the long run.)

At this point, we show no income as the company has nothing to sell. In the next stage we see the raw materials being worked into finished goods and the goods being stored as inventory. Again, our tax return will show no income, but will show expenses as we pay for labor. The assets are now all in inventory.

Now imagine this firm's operating cycle is one year in length...perhaps they make toys for the Christmas season. Our quarterly tax returns show large losses in quarters one and two: the first quarter mainly for materials, and the second mainly for labor. This corresponds to the first two stages of the operating cycle.

In the third quarter, or third stage of the cycle, the sales process takes place. We may well be receiving some income now, as some customers will pay cash up front to obtain price breaks, but most of our actual revenue will come back in the fourth stage, the collection cycle. Most of our assets have now been converted to Accounts Receivables...or money owed by purchasers to the firm. This takes place in the third stage of the cycle.

Hopefully, the firm receives its money in the fourth stage of the cycle. In our annual model, that is the fourth quarter.

In a strong economy, we might already be buying more materials and paying for labor in the third and fourth quarters, so the income coming in would be offset by those expenses. We would also have the expense, in the fourth quarter, of the company paying back the loan that began the process. Therefore, we might be showing a profit in those quarters, but it would be largely offset by the new expenses of replacing inventory and the repayment of the loan.

But in a recession, we would be laying off workers in the third and fourth quarters as demand for future product falls off. We would also be purchasing less materials for future production. As a result, expenses are suddenly less than they have been for years.

The result: almost all the annual income comes in during quarters three and four, yet expenses are now reduced. Income minus expenses equals profit...and the profit number will be higher than in the previous year, or operating cycle, as we have reduced expenses. The profit figure will also be far higher than in quarters one and two. To the uninitiated, the quarterly tax returns make it look like this business is suddenly "booming" with cash...so they must be "profitable."

Here's the rub: the firm is producing less product than the prior year...so what do you think will happen during the next sales and collection cycles? If you guessed that sales and profits would go way down...you are right. The "booming" profits in cycles three and four are simply a fluke...and actually foreshadow what will be a dramatic reduction in revenue and profit.

It's like a last, dying gasp. The patient raises his head...speaks one more time...then collapses and is gone.

Which is exactly what could happen to this company and others like it. Almost all companies have some sort of operating cycle...and many are keyed to the holiday season as being the sales and collection parts of the cycle. Even those that are not tied to end of the year sales will show sudden spurts of profit during a recession as they reach the third and fourth stages of their cycles.

So in one respect, the government folks are correct...the quarterly returns show profit. But when the year-end returns come in they will tell a very different story, because all four stages of the cycle will be reflected.

The truest measure of the end of a recession is when employment figures begin to go up...instead of down. There is a dark side to recovery however, that may well be the death knell of many firms. As an economy begins to recover, and demand is forecast for finished goods, firms need to begin buying raw materials and hiring people once again.

Some of them simply won't have the cash to do so without help from a lending institution. Unfortunately, with a tough year behind the borrower, lenders may well decline to offer funding. As other firms get product on the shelves, these less fortunate ones will end up losing their market share and will be forced to shut down...even as a recovery is well under way.

Of course not every business has a long operating cycle...a restaurant brings in fresh foodstuffs in the morning and by evening they convert this material into meals and have collected their money. But the greater part of our economy, and the part that supplies a significant portion of wages that translate to consumer spending, is made up of manufacturing, wholesaling, and distribution firms. All of these are subject to these long operating cycles.

I hope this makes it a bit clearer to those who have asked for such clarification. Though not as scintillating as some of our conversations, it is an eye opener to the true current situation and the lack of business expertise in Washington DC at this time.

Hopefully...they will seek out and find experience and advice before much longer. Heaven knows we need help in the business sector, where jobs are actually produced, a lot more than we need more excuses for even more taxation.

Now that you understand the operating cycle...you can understand how increased taxes simply drain money out of the operating cycle and require the business to make less product and lay off more workers. I don't think our elected officials have figure that one out yet...especially when taxes are so often levied against phantom profits.

The Professor