Monday, February 28, 2005

Yet Another Social Security Plan

The Author is again providing another Social Security Plan as previously promised. The background must be drawn first. The fiction of a Social Security Trust Fund is a fiction, as long as the General Revenue Budget spends the money; the Special Bonds become only I.O.U.s from Taxpayers to Taxpayers, if the money is spent. Future funds will have to be raised by taxation or borrowing to repay those Special Bonds. Only Politicians gain benefit from this fiction. Fund revenues must be separated from the General Revenue Budget, and invested; else, the funding of Senior retirement will remain at flat Zero. Private Accounts are supposed to generate a real residual amount of funds, with which a Retiree can pay retirement expenses; the problem here comes from Republican desire to fund Private Accounts with Deficit spending to replace lost revenues.

A previous Proposal suggested the Social Security Fund should purchase the Federal Reserve system with the outstanding Special Bonds plus all Unfunded Liabilities the General Revenue Budget is destined to incur from the Social Security system in the future. The least measure would be to deposit Social Security Fund revenues with Federal Reserve Banks, who must assure adequate investment of the Funds in something other than Treasuries. It cures nothing to cancel Taypayer liabilities with generation of further Taxpayer liabilities.

Private Accounts could work only in one manner, if and only if, certain conditions are set. The Conditions will not be liked:

1) a One-Size Fits All monthly Benefit is introduced, where Everyone draws the Same; no matter how much they pay in.
2) Private Accounts will be solely Medical Accounts which will pay Medicare Co-Payments.
3) Private Accounts are funded by a One percent increase in FICA taxation.
4) Medicare transforms into a Event Co-Payment system, with a $50 per Doctor/Clinic visit, $50 per Proscription fill, and $100 per Day Hospital Co-Pay. The Social Security Administration will establish it's own Bankruptcy Court for Seniors, who attest inability to Co-Pay, while all Co-Payments will be withdrawn from monthly SS benefits in full, unless there is sufficient funds within the Private Medical Account.

The One-Size monthly Benefit will be more expensive in the Short-term, but cheaper in the Long-term as Wages continue to increase. Taxpayers who pay more in FICA taxes will have their added Contributions eaten up with medical costs, but will have a larger Private Medical Account to defray Medicare Co-Payments. The One Percent FICA tax increase will stabilize the SS system, lengthen the Period of Time where taxation still covers Benefits, helps build the Surpluses on deposit with the Federal Reserve, and rapidly builds Private Medical Accounts. Deposit of Funds with the Federal Reserve for investment stops Politicians from spending all attempts to fund Pensions. lgl

Sunday, February 27, 2005

Sound Social Security Policy

There is a basic fallacy to the concept of Private Accounts for Social Security. This Post will try to explain what is wrong and why.

The Saver's Credit: Issues and Options
Tax Analysts Tax Break, May 3, 2004
William G. Gale, Senior Fellow, Economic Studies
J. Mark Iwry, Nonresident Senior Fellow, Economic Studies
Peter R. Orszag, Senior Fellow, Economic Studies

Only about 5 percent of 401(k) participants make the maximum contribution allowed by law, and only about 5 percent of those eligible for IRAs make the maximum allowable contribution.

Yet 60 percent of households at or below the poverty line indicate that they save at least something. Experience with a program that provides tax advantages and matching funds to encourage saving among participating low-income families suggests that poor families will save, at least to some degree, if presented with incentives to do so.

The President's Plan as suggested will allow Workers to designate up to a $1000 per year of FICA taxation to be placed in a Private Account. The actual Average Private Accounts Savings rate will be approximately an Author-estimated $457 per Worker, if the Subscription rate reached a realistic 70 million Workers, more if the Subscription rate reaches a hoped-for 100 million Workers. The more realistic estimate states there will be $31990 millions invested in Financial Paper per year; the more optimistic estimate states there will be $100,000 millions invested. The functional Savings rate in Financial Paper could differ markedly, the Author not being a Numbers Cruncher of any note.

Here lies the Problem:

Economists relatively unify in predicting the Economy will grow about 2% per year through this Century; the Author previously doubting in a Post that the Economy will grow at all after 2021. The above Paper states actual Subscription rates in 401(k) Plans and IRAs are relatively low, with full subscription utilized by less than 5% of the Labor force. Financial Paper P/E ratios have been increasing for years, the sole rationale being Financial Paper growth is more rapid than real economic growth. Otherwise put, Hard Capital Construction investment has not been growing as fast as Financial Paper investment because of real or perceived lack of economic opportunity. Actual Dollar Inflation has been most evident in the pricing of Financial Paper, due to lack of real economic growth. Private Accounts propose to vastly increase the flow of Cash into Financial Paper. Principal cannot grow to Infinity while Earnings become miniscule; Markets will not sustain Pricing floors for Financial Paper with insufficient Returns. The Author will propose an Alternative tomorrow. lgl

Saturday, February 26, 2005

Numbers Crunching

Actuarially Unsound
By Arnold Kling 02/24/2005

The Author remains a bit peeved, as he had a good Post on this Issue written, and the Computer ate it. The Above article should be read to understand the foolhardy practice of treating future estimates as Gospel. The Author agrees with Arnold this time, though he must point that the accrual real investment rate(interest rate or Dividend) must always be less than the real rate of economic growth. The Children should know the difference is composed of the Labor Costs and Profits of the Investment industry itself, plus a capsule of intermediate taxation. Arnold also misses or ignores the fact there is a 'floor' real accrual rate which must be met to validate transfer from the current Social Security system to Private Accounts by way of Public debt.

The Author asserts this 'floor' real accrual investment rate must be 1.647% earned on Private Accounts, simply to make a 'Profit' on funding Private Accounts by Public debt. This does not contest a previous Arnold argument that there is no real increase in Public debt(though this is also very contestable), but the inherent Cost of Public debt Service when in the form of salable Notes. Exterior redemption of debt necessitates re-issuance and financing of interim Interest payment. Many Economists would protest such a largesse assigned to such Debt Service, but they are equally mystified by the multiplicity factors of Public debt(that means they are surprised at the rate of Debt growth).

The final issue which must be raised comes in the form that the Above 'floor' real accrual investment rate will subtract from the real growth rate of Private Accounts--either through higher taxes or higher Interest rates. This realizes the nominal returns on Private Accounts investment must subtract not only Inflation rates, but the 'floor' accrual rate. Almost all Economists estimate that actual real economic growth will not exceed 2% per year over this current Century, so the real realizable rate on Private Accounts will be 2-1.647% after subtraction from the nominal growth of the Inflation rate.

This Author will introduce a real 'Spoiler' to the equation at this point by saying that economic size is a function based upon the variable of Population size. This is not nominal size, but the size of fully-employed Labor elements, both Capitalization and Production rates set for such full employment. It relates a complicated manner of stipulating that real economic size will begin to shrink after 2021, according to the Author's own estimates. lgl

Friday, February 25, 2005

Dodging the Bullet

Economic Posts Unfilled Despite Big Pushes Ahead, New York Times
Published: February 25, 2005

About one-third of the senior policy positions at the Treasury Department, which is central in both the tax and Social Security battles, are empty or about to be.

People close to the administration said that several potential candidates had said they were not interested in leading the tax policy team at the Treasury Department.

Meanwhile, people close to the administration said it had yet to recruit a chief of tax policy, who would be crucial in developing and defending a plan to overhaul the tax code.

At least one prominent tax expert, Michael Graetz of Yale, has turned down the post, two people familiar with the discussions said.

A former White House official said the administration was also rebuffed when it put out feelers to two well-known tax experts - Mark Prater, counsel to the Senate Finance Committee, and Lindy L. Paull, a former director of the Congressional Joint Committee on Taxation.

Meanwhile, people close to the administration said it had yet to recruit a chief of tax policy, who would be crucial in developing and defending a plan to overhaul the tax code.
Why the dearth of Economists and Tax Policy Specialists? The Article cites personal and financial reasons of those asked, but George W. Bush remains one of the first Presidents who cannot field a Team over any Initiative. The real reason stands unmentioned by All, though understood by Most in D.C. The reason lay in the fact that Bush Tax desires are unfeasible, and no Economist or Tax Specialist wants the hard task of defending anything Bush would accept. Continuance of the Bush Tax Cuts will lead to a financial crisis because of the created fiscal crisis. Bush Trade policy can be best described as allowing Corporations unlimited license without taxation. Bush's Social Security Plan for Privatization will incite a financial crisis in the Short-term, and destitution for Seniors in the Long-term. Then Economists will have to defend the Bush policy of backloading all expenses until after his term of Office. Economists simply don't want to ruin their reputations trying to defend Bush.

Thursday, February 24, 2005

Medicare and Medicaid

Americans, especially Liberals but including large segments of Conservatives, remain content with Social Security and somewhat fanatical about preservation of Medicare and Medicaid. This is likely due to the innate awareness of All that the later Programs are unsustainable. Costs of health care will continue to rise, and the reason lies in the fact Voters demand Government payment of health care costs. Economists will state that fully-funded Demand leads to higher Supply Prices (because of Demand Curve shift to the Right). Doctors and Health Care professionals have been enjoying higher than average Wage increases since the passage of Medicare and Medicaid, and will continue to do so as long as the Programs operate. Corporate and Business interests in the Health Care industry likewise enjoy above-average Profits.

These Programs exhibit a worse effect of the Health Care industry. The payment system of Medicare has led to promotion of Specializations in Health Care; to the point, General Practicioners(Family Doctors) have shifted from the Norm, to a short-supply Specialization in themselves. The rationale expresses simple economics: Medicare payments pay Specialists much higher Fees than GPs; a single Year of additional Specialist training can lead to a lifetime of Fees some 15-50% higher than GP remuneration. This drive to Specialization is heightened by the fact GPs endure higher rates of malpractice suits than do Specialists(the Author can find no effective Study in this area).

Uncertainty of Medical payments in the higher range of Specialist Fees will reduce both of the Above trends(by shift of the Demand Curve to the Left). Medicare and Medicaid must be adapted for Basic Medical Care, with the Concept of Catastrophic Care abandoned. The shift to Basic Medical Care will underwrite Emergency Room operations, provide necessary surgical and corrective procedures to maintain Labor performance, handle Child Care, and provide Hospice and Pain-killing services. Catastrophic Care can be safely left to Private-funding specialized insurance and Charity. lgl

Wednesday, February 23, 2005


The Y2006 Budget proposal by the Bush administration is out:

Revised February 22, 2005
An Analysis of Reductions in Education, Human Services,Environment, and Community Development Programs
By Sharon Parrott, Jim Horney, Isaac Shapiro, Ruth Carlitz, Bradley Hardy, and David Kamin

It is the first time since 1989 that an Administration’s budget has not provided information about the proposed levels of funding for individual discretionary programs for years beyond the coming year.

the cuts in domestic discretionary spending in years after 2006 are an integral part of the Administration’s plan "to cut the deficit in half by 2009." More importantly, the Administration is proposing that the levels of overall discretionary funding (including domestic discretionary, defense, and homeland security funding) assumed in the President’s budget for 2007 through 2010 should be enforced by statutory caps it wants enacted this year. Enactment of such caps would lock in substantial cuts in domestic discretionary spending through 2010 even though the Administration was unwilling to detail and defend those cuts in the President’s budget.

The Cuts proposed are not small, but $214 billion over five years. They are also 'Back-loaded' with little taken out the first year. The Caps Proposal also are not like the Caps used in the 1990s, but call for automatic funding cutbacks unless specifically overridden by law--requiring Bush sign the legislation or Congress override the Veto. Bush Supporters in Congress could easily forestall the two-thirds majority for Veto override. The Bush agenda would emasculate the Congress, but do little to reduce the Deficit; nothing in the Bush passed or proposed legislation costs so little.

The Author would desire for Caps on Entitlements and Defense Spending (see previous Posts). A properly instituted 'One-Size' Social Security benefit could eliminate the shortfall in the Social Security Fund. The Defense Budget is touchable, and the quicker the better. The Proscription Drug benefit will only pay Drug companies exorbitant Profits, allowing them to continue Price increases; doing nothing for Seniors or Others who must pay for overpriced Drugs.

The Author also believes another Cap should be modified. This is the Cap on FICA taxation. Some call for elimination of this Cap, saying it would solve the SS Fund shortfall. It does not even have to be this drastic; it only has to increase by the same percentage as given to Social Security recipients as COLA indexing. lgl

Tuesday, February 22, 2005

Social Security Realism

Proposals abound on how to fix the shortfall to the Social Security Fund. This Author has previously offered a number himself (previous Posts). The President's Proposal for Private Accounts does not even offer a fix:

1) It simply advances the date of the shortfall
2) Increases the total cost of the program to the American Taxpayers
3) Demands a huge payment from the General Revenue Budget now instead of in 2042
4) Private Accounts have small chance of providing SS Recipients with alternate Income for losses endured by reducing future benefits.
5) Simple passage of the President's Plan will undoubtedly incite a major devaluation of the Dollar, so American Workers will lose many more times than the 'Once Only'
6) No One advances Estimates on the total Tax revenues which will have to be raised, to pay off all Debt while maintaining Government Services. This Author estimates overall Taxes will need to be raised 8%, simply to service the Debt(without paying it off) with continued Government services by 2020--if the Dollar holds anything approaching current value.
7) Medicare and Medicaid remain the far greater danger than Social Security; the former programs will be in crisis before the President's SS Plan is even scheduled to start.
8) The Social Security program will not even attain a shortfall, if Life Expectency stalls or declines; this is not an unlikely event, as Medical services continue to price themselves out of reach of common Americans.
9) A devalued Dollar will not lead to expansion of American Exports, but will lead to sharp curtailment of American Imports. Readers might ask Why this is included here; a 30% decrease in Imports with corresponding American provision of Goods and Services will led to another 6 million American Workers being employed, and the proposed shortfall of Social Security disappears.
10) The current leadership of Our Government is somewhat economically dense; American Corporate Profits will decline 1.3% to every 1% devaluation in the Dollar(estimated before this Week's drop against the Euro and Yen) until Imports have declined by 21%, according to the Author's estimate. How does this Relate? Corporations will react by suppressing Wages or curtailing Employment; bringing down Tax revenues entered into the SS Fund.

Private Accounts lack economic sense in real terms: they will flood the Stock and Bond markets with excess Cash, such already overfueled by Tax credits and Investment plans with Cash; vastly reducing Dividend spread to Stock and Bond Holders. Dollar devaluation will actually increase real Unfunded Liabilities under the Social Security program--whether Wage or Price indexed. The Bush plan is specifically engineered to destabilize the Social Security program, but the cost of destabilization will be much higher than expected; as it will destabilize the entire economy. lgl

Monday, February 21, 2005


February 16, 2005

It is a very creditable statement of American shortfalls in R&D as compared with the rest of the World. It remains somewhat Alarmist in attitude, though, as America must expect the World to competitively match Us in technology with the growth of Economic wealth. It had two important statements for consideration:

Since 1980, the number of S&E positions in the U.S. has grown at almost five times the rate of the U.S. civilian workforce as a whole. However, the number of S&E degrees earned by U.S. citizens is growing at a much smaller rate, slightly less than the growth in the total U.S. civilian workforce and much less than the rate of growth in the number of S&E positions available

China now rivals the U.S. as a destination for foreign capital and in 2003 was the largest recipient of foreign direct investment (FDI) in the world with $53.5 billion flowing into the country. Investment in U.S. businesses, meanwhile, dropped from $314 billion in 2000 to $30 billion in 2003 and $91 billion through the first three quarters of 2004.

Peter Morici*
University of Maryland at College Park
Febuary 2005

From 1989 to 2000, the manufacturing sector's share of real (inflation adjusted) GDP increased from 13.3 to 14.5 percent. In 2001, manufacturing’s share of real GDP declined to 13.6 percent, a normal occurrence in a recession. Since then, it has partially recovered to over 14 percent, but is not yet back to its pre-recessionary levels.

The durable goods sector, where steel is mostly consumed, has performed
comparatively better than overall manufacturing. As Chart 1 shows, durable goods' share of real GDP increased from 6.7 percent in 1989 to about 8.9 percent in 2004

Rising steel prices in the United States would cause manufacturers to relocate only if prices in the United States were rising relative to those in other countries. In fact, steel prices in foreign markets have generally risen at a faster rate than those in the United States. Hence, recent price changes have not placed U.S. manufacturers at a comparative disadvantage

From 1995 to 2004, output per hour in the U.S. private business sector increased more than 3.1 percent per year—about double the rate of the previous decade. Manufacturing
productivity grew 4.3 percent a year

When the tabulations are complete, official purchases by foreign (mostly Asian) governments of U.S. assets in 2004 will likely be in the range of about $350 billion, or about 23 percent of the value of all U.S. imports. Essentially, foreign governments are providing a 23 percent subsidy on their exports to the United States.

National Association of Manufacturers (NAM)
Overall, the NAM estimates costs of environmental regulation add another 4 percent to the costs of U.S. manufacturers. These costs sum to 12.7 percent. This amount is much greater than the impact of higher steel prices on even the metal fabricating industry. Moreover, these higher costs apply to practically all manufacturers.

Even if steel were made available to U.S. steel-using industries free of charge that would only reduce costs in steel-using industries by about 3 percent. That figure pales in comparison to the 23 percent subsidy currency market intervention imparts on imports, or the nearly 13 percent in cost disadvantages imposed by costly regulations and other structural costs identified by NAM. Manufacturers could be best helped by addressing currency manipulation and the overvalued dollar, rising health care costs, and other regulatory burdens

Morici provides an excellent evaluation of current ills; it should be read to compare with this Author's estimates. The trouble lies not with Durable Manufactures or Mining and Refining, as their growth remains sustained and healthy. The Problem enters from the NonDurable Manufactures which have declined drastically with the introduction of the Walmart Model to the overall Retail industry. Currency manipulation and Asian Government interventions comprise a major element subtracting from American production, but not near 23% subsidy; Morici ignores the added foreign expense of Transportation, a Author-estimated probable 8% increase in Production Costs. He also fails to note Corporate flight into foreign production to escape American taxation, an impact as great as the Walmart Model on the NonDurable Goods sector.

There real Problem, viewed from all angles, insists current American woes come from inadquency of American Tax Policy. It creates the fiscal deficit, which allows the foreign bank intervention which incites the Trade deficit, causing the loss of Jobs in both the NonDurable Goods Manufacturing and Retail sectors. lgl

The Swift Boat People

The NYTimes carried an article today saying USA Next has been brought onboard to discredit AARP opposition to Private Accounts for Social Security, in manner similar to the Swift Boat campaign against John Kerry--same people; by the way, the people Bush was careful to disassociate himself from during the Campaign and Election--something about illegality. We have a mindset here, not particularly Bush alone, but the entire environment of Politics in America today. How did it come about?


February 21, 2005
Digging Into the Foundations of the Military-Industrial Complex By Robert Novak


we need a strong Air Force, but the service is crippling and bankrupting itself. At a time when we need more aircraft, but affordable ones, the Air Force leadership insists on buying useless, gold-plated junk like that F/A-22, a fighter with no one to fight, but a bonanza for the defense industry.

We're at war, for God's sake. If Air Force leaders can't respect the taxpayer, couldn't they at least respect our troops and their genuine needs?

Every other military service has to make hard choices, but the Air Force has been spoiled for 50 years

Also Read:

Government for Hire
Published: February 21, 2005

The federal government now spends about $100 billion more annually for outside contracts than it does on employee salaries. Many federal departments and offices - NASA and Energy, to name just two - have become de facto contract management agencies, devoting upward of 80 percent of their budgets to contractors

More than one-third of the federal programs that the Government Accountability Office considers at "high risk" of experiencing significant problems involve large procurement operations or programs delivered mainly by third parties

But not enough attention has been devoted to one of the central policy and management issues of our time: what kinds of systems, organizational structures and skills are needed to operate a government that increasingly orchestrates (rather than owns) resources and purchases (rather than directly provides) services?

Record baby boomer retirements over the next four years - up to 50 percent in some federal agencies - provide an opportunity to transform the public work force without layoffs. But to attract a new kind of public employee, the government has to change outdated seniority rules, narrow job classifications and archaic hiring practices.

Management must move to center stage. Holding providers accountable and measuring and tracking their performance has to become a core government responsibility that is as important, if not more so, than managing public employees.

Public officials must be careful to retain control of outcomes even while their private partners directly manage services. This requires a delicate balancing act, building in the needed flexibility to enable dynamic change, while not becoming a captive of private vendors
We live in a current environment where Government is considered a 'Cash Cow' by both Democrat and Republican, with an Administration composed solely of Individuals of 'Lucrative Contract' mentality whose prioir Work experience, Associational Friends, and even Family members are devoted to promotion of Corporate Profits. Is it any wonder We possess a Government lacking in Tax revenues, which runs huge Deficits, and provides little real service. These are the People who want to take Social Security Public; excuse me--got to get the rheutric right, want to take Social Security Private! lgl

Sunday, February 20, 2005


A trend exists in American society, apparent since the Era of the Vietnam War. It may be called the usurpation of Social, Ethical, and Political issues by Special Interests for their own personal gain; the Author simply prefers to call it Corruption. Democrats decide every Issue calls for more Government spending; Republicans decree need for another Tax Break or Credit. What is Corruption in its most refined form? The Author contends it remains the manipulation of grave issues to derive personal gain.

The NYTimes today ran an Article specifying the Inspector General of Homeland Security found the new Agency spending Grant funds for Port Security development being used basically as Political Payoffs to current Administration Supporters; 9/11 has simply become another way to make Money for Business interests. Grants were being given though they were deemed redundant, ineffective, or actual developmental for new Resort areas. Actual Security at main Cargo Ports have not been significantly improved. Some $2.5 billion has been expended with little greater Safety.

One would think this to be a major condemnation of the Bush administration, but it is not! This style of Corruption has been steadily growing since Vietnam--through both Democratic and Republican administrations. Congress and the Political Parties are most at fault, but it traces back through State Legislatures and Local Governments. The practice derives from two basic factors: the First comes from political Candidates being allowed to raise any amount of political campaign contributions; the Second comes from political Lobbyists being allowed to fundamentally multiply the Incomes of Politicians. How can it be stopped?

A Political Campaign Law must be enacted to improve the deplorable situation. It must contain numerous, very specific stipulations:

1) No Political Officeholder may draw any Profits, Wages, Salaries, Royalties, or Fees other than his Office salary, plus any of the Above acquirable prior to his assumption of Office.
2) Every Officeholder must pay for all his living expenses himself, with the sole exception of an Spousal mate. He specifically cannot accept Present, Housing accommodations, Free Food or Lunches, Vacations, or paid Speaking engagements.
3) No Officeholder may accept any exterior Employment during his term of Service, or arrange any Employment until after another Candidate has been elected to his Office.
4) Every Officeholder must not only disclose his own prior Work record, but the prior or current Work record of any Family member or Friend, if and when their Employer may benefit from any action of Office by the Officeholder. This Disclosure must be Public, released to the News media in the jurisdiction of the Office, and entered into the Congressional Record if it be a Federal elected Office.
5) Any found Violation of any of the Above stipulations will receive as Punishment a mandatory imprisonment for 18 months--without benefit of Probation, Parole, or Community Service. The preceding Judge will be forbidden to alter Sentence, limited solely to determination of Guilt or Innocence.
6) No Political Candidate shall spend more than $30 Federal/$20 State/$20 Local per registered Voter within his elective District. Political Candidates must pay for all advertisement which bears his name as Political Candidate.
7) All political Advertisements, in whatever form, cannot mention any Political Candidate by name, unless issued and paid for by the Political Candidate.

The American People will only attain the level of Good Government they insist upon. Law Enforcement officialdom will enforce any Law passed upon Public insistence. It requires on Public demand for better performance and behavior from Those they elect to office. lgl

Friday, February 18, 2005

The Value of Paternalism

The primary distinction of American politics stands as the conflict between Those who believe in expansion of Government services, and Those who oppose expansion of Government. One of the most intelligent arguments by Those who oppose Government paternalism(Rightest Libertarian terminage) says it is a question of Values:

The Millionaire Next Door vs. the Politician in Washington
By Arnold Kling, Published 02/18/2005

This is not a class war -- many of the politicians, lawyers, and academics on the left earn incomes that are in the top 10 or 20 percent of all Americans. Rather, it is a values war, between a group whose core values are thrift and self-reliance and a group whose core values are paternalism and redistribution.

Many people can expect to face layoffs, self-employment, retooling, and retraining. For PAWs, this provides yet another reason to be a saver rather than a spender. For PIWs, it provides another excuse to try to get Washington involved in personal economic matters

For those of us who value self-reliance and thrift, the economic trends suggest a need to increase saving and to invest heavily in human capital. For those who value paternalism and redistribution, those trends provide an excuse to "help" more people in more ways. This tends to exacerbate the conflict of values, because ultimately the redistribution policies require heavy taxes on those of us who save and try to educate ourselves

Arnold Kling can be masterful in providing an ideological base for the Values which he advocates. His Essays, though, necessitate a Counterpoint; this Author will attempt an inferior effort:

Those who favor Thrift and Saving enjoy a lessening rate of real taxation, and have faced this declining rate of real percentage taxation since the Reagan Years; the only thing increasing in Taxation has been nominal value of Tax, said nominal increases not even matching the rate of Inflation per Class of Income. Much of the residual anger at Taxation comes from improvement of Income classification, due to rise in professional status and position. Young Labor have gravitated to better Jobs, and resent the placement within higher Tax brackets.

The young Professionals, like Arnold, totally ignore the lack of retooling capacity held by the greatest share of the Labor force; these Workers not possessing the prior Education of the young Professionals. The latter Laborers lack Funds, prior Education, and effective Job opprotunities at levels to which they could retrain themselves. There is a Case for Government intervention.

The real Problem is to determine the manner of Government intervention, with later determination of the value of such intervention. The current Model of Government intervention stands poorly suited to provide actual benefit to Those in need of it. It restricts Recipients from utilizing personal initiative to improve their condition, lest they lose the Aid which they need. It restricts what they can do, without being reclassified with forfieture of needed Aid. The Government decrees the Unemployment rate has declined, soley because Workers have run out of Unemployment benefits. The real question must be posed: Do Those who receive Aid get sufficient Aid, and if They do; is it of sufficient type and quality to satisfy their needs?

The Author has often speculated that simplification of the Welfare process could bring great relief. His thought remains that Income can be safely tracked through the Banking system(evidence of Cheating could be reduced to less than 7%). All Forms of Government intervention should be eliminated; replaced by a simple system of immediate determination of need.

Suggested Form:
1) A net biweekly Needs Income should be determined.
2) A Person's Net Income should be collated through one Banking system.
3) A Net estimate of potential biweekly Income gains potential in Currency due to individual occupation should be established.
4) A Person with insufficient Income should fill out a simple form processed by a Bank Teller, who checked biweekly deposits in the Applicant's banking accounts; making up any inadequacy to the maximum of the established Needs Income level.
5) The Form is simply sent to the U.S. Treasury along with the deposit slip for Payment; the Treasury required to check for malfesiance.

Unemployment Insurance disappears, Social Security disappears, Housing Assistance disappears, and Determination of Tax eligibility by Income level disappears. These are not the only things to disappear, though, as One considers the effect. Bank Tellers are Bank emloyees engaged in ordinary financial transactions, having no need to be paid by the Government; a vast bureaucracy disappears. Proclaimed redistributive effects of Government welfare disappears, except in the context of setting the 'One Size fits All' Needs Income level. Huge amounts of Paperwork vanishes as well, alongside opening the way for a Flat Income Tax; nonregressive taxation because revenues collected increase as does Worker Income. Oh, We forgot, smaller Government here!

Better or Worse, Who knows? lgl

Thursday, February 17, 2005

Capitalism v. Slavery

A number of Articles yesterday dealt with the issues of Slavery:

Capitalism & slavery
By Donald J. Boudreaux,Thursday, February 17, 2005

To begin with, the ethical and political principles that support capitalism are inconsistent with slavery. As we Americans discovered, a belief in the universal dignity of human beings, their equality before the law, and their right to govern their own lives cannot long coexist with an institution that condemns some people to bondage merely because of their identity.

the enormous investment unleashed by capitalism dramatically increases the demand for workers. (All those factories and supermarkets must be manned.) Even if each individual factory owner wants to enslave his workers, he doesn't want workers elsewhere to be enslaved, for that makes it more difficult for him to expand his operations. As a group, then, capitalists have little use for slavery.

History supports this truth: Capitalism exterminated slavery.

February 17, 2005 Where There's Smoke, You're Fired
By Debra Saunders

How does freedom slip away? It doesn't happen all of a sudden, without warning. It erodes in stages

Her real thesis lies in rejection the Weyco claim to have fired Smokers for smoking even off-work as justified by a refusal to support unilateral lifestyle decisions.

"Unilateral lifestyle decisions": Think about the presumption behind that statement. The alternative -- multilateral lifestyle decisions -- allows other people, the government, even big corporations, to dictate what you can eat, what you can smoke, what you can drink. To work for Weyco Inc. is to be wholly owned by Weyco Inc

It seems Capitalism is not inconsistent with Slavery, though this Author supports relevatively all of the Boudreaux ideation. His last statement holds great value, suggesting Capitalist opposition to Slavery must be dependent on a low Unemployment rate; ease of Labor conscription could mean the invasion of Civil Liberties by the Capitalists. The truth lies in the fact that every institution is as corruptable as be the Humans who guide it--even Capitalism and the free market. The Author turns to another Article to make his point:

$250 Billion and Counting
Time to come clean about the cost of Iraqi Freedom
Charles V. Peña

Compounding the problem is the fact that the president doesn't feel anyone in the administration should be held accountable for all the miscalculations about Iraq. According to Bush, "We had an accountability moment, and that's called the 2004 elections. The American people listened to different assessments made about what was taking place in Iraq, and they looked at the two candidates, and chose me."

But accountability is an ongoing process, not a one-time "moment." It is not at all clear that the election results mean the American people want to be stuck footing the bill for a war that could cost more than $300 billion, especially with the cost of the war driving the budget deficit for fiscal year 2004 to a record $427 billion.

Some would articulate the opine that the Bush administration utilizes 'the Fuhrer principle' named after a infamous predecessor on the World stage. This Author believes Democracy, or the even more-natural American Republic is not fulfilled by a simple, every four years Ballot.
He suggests most Americans are currently educated, and used to taking Tests. He would propose every Candidate for any Office must get the Signiture of at least 15% of the Voters within the Voting area to be considered a Candidate. Then all Voters must take a hour-long Test along with the Candidates; said Candidate with the highest number of Answers common to the highest number of Voters, will be declared the Winner. Recall to be made automatic with the Tests being taken every Year, and the Candidate recalled if he gets less than 60% on the Test. lgl

Tuesday, February 15, 2005

The Deficits Question

Do Deficits Matter? It depends on where you sit--and on which type of deficit you're talking about.
by Irwin M. Stelzer 02/15/2005 12:00:00 AM

On the political level, treating deficits as a non-issue also proved a successful strategy.

Which brings us to the economic level. The deficits that Bush ran up in the years in which the country was teetering on the verge of a serious recession had the beneficial effect of righting the economy. In that sense, deficits not only didn't matter, but were a force for economic good.

But that was then, and this is now. The economy, growing at an annual rate of 3.5 percent to 4.0 percent, is hardly in need of further fiscal stimulus. Yet the budget that the president sent to Congress last week promises deficits. . .

Moreover, the projected budget deficit is not threateningly large, relative to GDP. Larry Lindsey, Bush's former chief economist, points out in his latest client advisory that "The projected 2006 budget deficit of 3.0 percent of GDP is reasonable if the economy continues to grow."
Has Bush been able to treat Deficits as a non-issue? Certain realities may deny this: George W. does not realize he is already a 'Lame Duck' President, but this reality will be forced home month after month until the next Inaugeral. Republicans have only one Interim Election, before they need a new Presidential Candidate to carry them; this Candidate must rise in prestige, and Bush Budgets will not bring such prestige. No Presidential Candidate, of any Party, can accept the 'Bill coming Due in 2009' philosophy of the Bush initiatives: Proscription Drugs, Private Accounts, etc. ad infinitum. The final note comes in Bush leaving Everything out of the Budget; if all Bush initiatives were passed into law, and attributed to him(averaging over his eight Budgets), Bush would have to claim an additional trillion dollars of Debt per Budget year.

Stelzer gives Bush credit for forestalling a Recession, but did he? Bush Tax Cuts not only created the fiscal Deficit through lost revenue, but sponsored a Tax environment which promoted offshoring by deduction of Production operations flight Overseas to advoid Environmental regulation and high Wages. Was George W. Bush the competent Doctor, or the infectious disease?

Does the Economy need the economic stimulus of Bush Budget deficits, and did it ever need them? Economic growth is attributed to be 3.5-4%, but nominal Inflation is over 3%, and real Inflation is in excess of 5%. Volitile Items can be taken out of the Inflation-Index basket, if and only when such Items are expected to decrease in price. Truth states American Retail pricing for Corporate Tech items endure excessive Markup and Profits-taking ratios; the drop in Sales with retraction of Special Offers, Rebates, and Price reductions prove this(Sale Markdowns average a 7% increase in Sales 1945-1980s, a 19% increase in Sales 2001-05). No one but this Author still mentions that George W. Bush has the worst Jobs record since Herbert Hoover.

The projected Deficit is supposed to reduce as a percentage of GDP, if and only if the Economy continues to grow at its present rate. Is the Economy going to continue to grow at its present rate? There may be too much structural distortion. Materials pricing has not heard of the Bush Inflation-Index basket of Goods; they are matching the Doctors' bills. The Windfall Profits for American business Overseas are facing far more strident demands for Wage increases. Foreign Exporters to this Country find they dislike paying 2005 Production Costs with 2003 Product pricing. The Economy enjoys a Model formula of failure to keep up with the Inflation rate. lgl

Monday, February 14, 2005

Alternative Energy Sources

The primary longterm necessity remains development of Alternative Energy. There are incredible problems involved, mainly dealing with access and utility. An Alternative Energy system must provide a consistent, reliable, viable percentage replacement source for current Energy systems. This devolves into capability of generating this Energy at comparable prices to current Energy sources in equal quantity of usable form; useless without equal Energy efficiency in consumption per unit, wth sufficient units producable to repay the Capitalization Cost of development of the Energy system. The Task can be daunting!

This Author has previously expounded upon using Computer-Assisted Design (CAD) to develop nuclear reactor fuel cells which will not meltdown, can be transported easily, and emit minimal radiation when interior dampers are emplaced (properly implanted to forestall reaction). The goal would be ability to build and run Low-Cost power plants manned by minimum-competency Labor, to supply electrical power for Village, Town, and Suburb. Combination of numerous small Power plants alongside a National Grid would eliminate Power outages. The guiding formula here is actual cheaper production of Electricity with significantly lower Capital Costs, Risk, and Fuel cost.

Recent articles have analyzed progress of development of Marine Tidal energy. Electrical generation by this means could one day replace current forms of electrical generation in all Seaboard areas. Less significant gains can be realized by Dam and River electrical generation, with the technology markedly similiar. The real complaint to this type of energy system comes from surface obstruction of Traffic and View. Developing technologies are working to transfer the entire system networks underwater, where neither of the previous elements are blocked. The obtainable energy is of immense volume, but limited to Operations utilizing electricity.

The Author has previously propounded the concept of development of a liquid plastic to replace Gasoline, Heating Oil, and Diesel fuel. Most deride it because of it's similiarity to plastic explosive, the need to utilize Petroleum in it's manufacture, and the overall Production Costs associated with production in such quantities. Facts: Gasoline is among the most explosive Compounds found, yet it is safely used; Production facilities for a liquid plastic Fuel would be no greater in Construction Cost and Operational Costs than a current Cracking Plant; proper design of new Engines utilizing liquid plastic Fuel could safely get triple, or quadruple, the current Fuel milage of vehicles; and Petroleum usage would be only 17-20% of current usage in Fuels. The production of liquid plastic fuel in mass production could be easily cheaper than Drilling, Pumping, and Transporting Fuel; following by manufacture of Oil into usable Fuel. The potential clincher is ability to use Human and Animal wastes and Trash as organic base.

The Author has previously discussed the use of Wind Power for electrical generation, one small roof generator being able to supply One-Quarter of the Electrical needs of a Home when the Wind blows. He has talked of designed Windows which are See-through Solar panels, where you plug the Window frame into an outlet; asking why such Window Casings need be more expensive than ordinary glass. He has even mentioned an artifical 2X4 for Housing, composed of Plastic and Asphalt mix; properly constructed, it could possess all the same utility as Wood, save Timber, and serve as a Heat battery. Getting really weird, better quit. lgl

Faith in the Dollar

Nouriel Roubini and Brad Setser have recently published a Paper on the risks of the Fiscal and Current Accounts deficits--Past, Present, and predicted Future; accessible from either of their Blogs, where they each highlight their findings. They basically assert:

We argue that the likely collapse of this regime in the next couple of years would result in a Hard Landing scenario: the dollar would sharply fall, US long term interest rates would sharply increase, the price of most risky assets - equities, housing, high yield debt, emerging market sovereign debt - would significantly fall, and a sharp US and global economic slowdown - if not outright recession - may ensue. The probability of such hard landing is increasing.

- Chances of an orderly global rebalancing rest on three elements: 1. a significant fiscal adjustment in the US that requires - at the very least - a reversal of unsustainable tax cuts (as spending controls will not be sufficient) and giving up a budget-busting social security privatization; 2. a revaluation of the Chinese and other Asian currencies; 3. policies leading to higher growth in Europe and Japan.

The 2005 current account deficit is likely to be around $800 billion, maybe a bit more. If nothing changes, the 2006 deficit, is likely to be around $900 billion: Remember, just paying interest on the $800 billion borrowed in 2005 might add $40 billion to the overall 2006 deficit. That implies a total two year financing need of $1.7 trillion dollars IF net equity outflows stop, and a need to place around $2 trillion in debt abroad over the next two years if net equity outflows continue at around $150 b a year.

The US still needs to raise at least $700 billion by selling debt to foreign private investors, and perhaps more if net equity outflows continue. That amount of private financing may not be available from private investors around the world at current dollar interest rates.

Greenspan Not Really Optimistic on Account Gap: John M. Berry
Feb. 9 (Bloomberg) -- Federal

In the first 11 months of last year, imports totaled $1.6 trillion, 65 percent more than exports of $1.04 trillion. Exports rose 12 percent, compared with the same period in 2003, and the trade deficit would have stabilized if the increase in imports could have been held to only 8 percent. In reality, imports jumped by 16 percent. (excerpted from Greenspan's London speech)

even if the real value of imports were to fall, their nominal values might not. If the nominal trade deficit did not fall, the need for foreign financing would not either.

This Author agrees with most of the Roubini-Setser argument, and believes We are in for a Hard Landing. He thinks, though, Greenspan may have the right idea. The Cure in not in the elimination of Central Bank interventions; it stands in the refusal of foreign trading partners to accept further reduced Profit margins. The Dollar remains basically sound, based on real asset equity--Domestic and Foreign. A further devaluation of the Dollar(within a range of another 10% drop possible) seems highly unlikely. Central Bank interventions have probably ceased in greatest measure.

Third Generation analysis (the Bush Tax Cuts estimated to be First Generation) would indicate Import prices will increase in a range of 22-27% within the current Year(2005). The Fed will be compelled to raise the Overnight rate to 4% to hold down Domestic Inflation, and the quantity of Imports will decline sharply (down 37-40%) by Y2007 due to curtailment of easy Consumer Credit. Impact will be offset by OPEC being unable to sustain an Oil price over $40/barrel because of decline in economic expansion coming from American constriction of Imports.

The impact on Federal Spending will be drastic: Social Security Privatization will not occur, even if passed into law; the Drug benefit Law will not be implemented fully, and likely discarded; Bush will get his additional Funding for Iraq and Afghanistan in Y2005, but not in Y2006--except to extract all U.S. military personnel; the Bush Tax Cuts will be allowed to die; and Capital Gains taxation will be raised to Clinton-era levels. lgl

Sunday, February 13, 2005

Tax Reform

The Bush administration stands firm on pushing Tax Reform back, while advocating Privatization of Social Security first. The NYTimes reports many Republican Congressional members wish to consider both Initiatives jointly. Bush is being sagely advised by experts in the area. It is also why this Author wishes he would take on Tax Reform first. Here is Why:

It remains a firm goal of upper-Income Republicans to transfer the Total Tax Burden downwards upon Consumer and Worker. This is their absolute primary motivation, though shrouded in rhetoric. Economists and Tax Specialists suggest this be an impossible goal, though, as economic realties will destroy any expected Windfall gains for the Wealthy.

The intrinsic problem comes within the framework of necessary payment for Government services. Republicans publicly espouse elimination of Government expenditures, but they lack the Votes to terminate hated Welfare programs, and they moan loudly at the thought of canceling Profit-enriching Government supply Contracts. The real reason for the hatred of Clinton by Republicans was not his Womanizing, but his suppression of those lucrative Contracts. They currently are in a quandray: Bush has saved them from taxation while maintaining those luxurious Contracts, but only at the price of huge Deficit spending; an Option which All realize has it's limitations. Taxation will have to underwrite Government spending once more, but taxing Who?

The Outline of Wealthy Republican troubles consist of ability to pay:

1) Consumption Tax--most favored, but least revenue-generating; remember, Government expenditures account for 20% of all U.S. Income with Consumer Spending only consisting of about 60% of that national Income. Any strictly Consumption Tax will have to be about one-third of all Consumer prices, and probably more on the order of one-half of the Consumer Price. Economists mention this will sharply suppress Consumer Demand, even if American Taxpayers can regain approximately 16% of their Income from foregone Income taxes. It also have the pitable effect of being a regressive tax extraordinare, in that it would sometimes triple or quadruple the tax burden of the Poor, to the point where they might curtail their Consumer spending by 80%--relying on Government subsistence.

2) A National Sales Tax could work slightly better, but only if it included provisions horrid to Republicans: such as applicability to Business production purchases, and with inclusion of percentage taxation on the purchase of Financial Paper. The absence of the later two elements would provide only about half of the tax revenues currently gained by the Bush truncated Income tax.

3) There is the Flat Income Tax, which the Author favors by the way, but has problems which bothers by Right and Left; mainly the elimination of Tax credits, Deductions, and Exemptions.
Failure to eliminate these reductions in taxation will simply reduce total tax revenues without simplification of the Tax Code, and Government spending would still not be funded. It has one further failure which would drive Republicans wild: there is no way sufficient tax revenues could be raised, even with eliminations of Tax credits and Deduction; Capital Gains income would have to lose it's sacrosanct status, and must be considered as simple Income to get acceptable tax revenues.

4) The Value-Added Tax has the difficulty of vasting increasing Production Costs at every stage of production. This effect has the sad impact of enduring all the disadvantage of the Consumption Tax upon Consumption, the same evil impact of the National Sales tax appliciable to Business purchases, and insufficient revenue unless some aspect of the Income Tax is retained.

It is the sincere hope of this Author that any Republican wandering by this blog will have started to cry somewhere along the route. lgl

Saturday, February 12, 2005

The Myth of McCarthyism

The title is the title of a recent article written by Roger Kimball. It was a well-researched piece, and essentially based upon truth; but it remains a presentation which has to be analyzed for the motivation behind it's writing. What were the precepts behind the article?

It firmly establishes that the American Communist Party did exist, and was in the employ of the Soviet Internationale during the McCarthy era. It asserts Those who were convicted and sentenced for espionage and subverion were actually guilty. It states that the American legal system worked, therefore McCarthyism as outlined by Liberals was basically a Myth. Kimball claims this based upon revealed Soviet records currently available.

The trouble comes in Kimball's denial of American history. Thousands of Americans were harassed and threatened, Many were ruined professionally; All without resort to the American legal system. The American Communist Party was probably the third largest political Party in the United States in the midst of the Great Depression. The evil and political suppression of the Soviet system was not known during this Period among the general American Public, and the American Communist Party lost a vast majority of it's membership with the revelation of the nature of the Soviet regime in the 1940s. McCarthyism still branded All who had any affliation with the American Communist Party in their lives.

McCarthyism was a direct Conservative attack upon American Civil Liberties, then and now. The Author says Now because it is still alive and well. Thousands of American Citizens were arrested after 9/11, simply because they were of Middle Eastern origin. American Citizens were derided Publicly and Privately for disagreeing with activities of a Conservative-run Justice Dept., provisions of the Patriot Act, and political actions of a Conservative Bush administration. We find mistreatment of Prisoners held by the Justice Dept. and U.S. Military, with denial of basic Civil Liberties of legal representation, access to legal recourses guaranteed by the U.S. Constitution, or even the assurance of Detainees to hear on what Charges they were being held. Iraq, Afghanistan, Quantamio Bay, and the United States began to resemble Totalitarian regimes, with Arrest without Charge or Trial. We finish with learning Detainees were shipped Overseas so other more Totalitarian regimes could physically torture them without American Public attention.

McCarthyism is alive and well, revived by a Conservative Base concerned only with the elements of Power; they call themselves NeoCons now. lgl

Friday, February 11, 2005

Real Dollar Direction of Private Accounts

The NYTimes has published a competent article on Private Accounts, and what they will mean to yearly Social Security benefits for concerned Age groups based upon Year of retirement. The Center which did the Study estimates it will take a 4.6% yearly return on Private Account portfolios to generate replacement of currently scheduled benefits to Workers. The article itself stated the Center and article did not approve or disapprove of Private Accounts in commentary.

The Author decided he must contribute:

1) Workers must rely on Portfolios maintaining an average yearly gain of 4.6% on Investments, or they will not receive what they are promised now.
2) Workers must rely on Portfolios maintaining an average yearly gain of 6.7% on Investments, to receive a 5% gain on currently guaranteed benefits.
3) The Author estimates there is 57% chance of maintaining a 4.6% gain on Investments, and only a 17% chance of achieving a 6.7% average yearly gain on Investments.
4) What Stock Market values are upon Retirement make a vital difference. The Private Accounts may have achieved a 6.7% average gain on Investments, but if one retired during an economic downturn; his retirement might be based upon a negative gain on Investments in the Private Accounts--losing Benefits drastically.
5) The Stock Market gained is estimated to inflate by 15% of current value by 2012 with introduction of Private Accounts in 2009, but such inflation in Stock pricing will be estimated to disapate by 2016-18. Current Holders of Stocks can be expected to make a 15% Return above their yearly average Gains, if they switch their current Stock holdings to Bonds or Treasuries within the Period 2012-2016. Translated to Private Accounts' allowed investment rates and total Sums invested, it means current Holders of Stock selling under these conditions will be assured of 280% chance of 4.6% average gain and 130% of 6.7% gain in their Portfolios by equal date of retirement, if their current holdings equal the total amounts allowed to be transferred to Private Accounts.

The major incentive of Private Accounts remains the Gains expected by those currently invested within the Market, or who make a Living by managing Funds or trading Stocks and Bonds. lgl

Thursday, February 10, 2005

The Trade Deficit 2004

Brad Setser has an excellent Post today at his blog:

He basically asserts that the Trade Deficit will get no better in 2005.

The Associated Press has a series of articles today of interest, from which can be culled many choice items:

The U.S. trade deficit soared to a record of $617.7 billion last year as Americans' appetite for all things foreign, from crude oil to cars, hit all-time highs

For all of 2004, U.S. exports of goods and services rose 12.3 percent to $1.15 trillion. But imports rose at an even faster clip of 16.3 percent, setting a new record of $1.76 trillion.

The demand for foreign goods was led by a 35.7 percent surge in foreign petroleum imports

The deficit with China was up 30.5 percent from the previous record for any country, a deficit of $124.1 billion with China set in 2003. The United States also saw large increases in the deficits with Japan, at $75.2 billion, Canada at $65.8 billion and the 25-nation European Union, where the deficit rose to $110 billion.

In its monthly report, the International Energy Agency raised its estimate of 2005 oil demand growth by 80,000 barrels a day, bringing its forecast for average daily demand to about 84 million barrels a day. The IEA, a Paris-based watchdog for the Organization for Economic Cooperation and Development, attributed the revision to stronger demand from China and other Asian countries not part of the OECD.

China should keep up its strong economic expansion over the next five years, with annual growth of 8 percent driven by abundant labor and a big domestic market, the government said Thursday
It is time to restrain the American Consumer, not least of whom is the Federal Government. The best would be a 10% Import Sales Tax, which would curb American desire to consume at the source. A Foreign Exchange Bank has previously been commented on, regulating the flow of Dollars Overseas so that actual equivalent value is maintained. Economic restriction could be emplaced: an appropriate Ton-mile charge for Transportation of Product on American roadway could be assessed. All would raise the Cost of American consumption of foreign product, while the last would help curtail the use of foreign Oil.

China's planned growth rate is predicated upon sale of their Product in American markets. They are unlikely to properly value the Yuan, as it props the Sales volume of Chinese products in foreign markets. We need to implement a U.S. Foreign Exchange Bank in reponse. A loose estimate by this Author states We are funding Chinese economic growth twice: once through provision of Dollars for Chinese purchase of Oil, and secondly, through the payment of artifically high Import prices for Oil in competition with China. It says the actual Cost of these foreign Imports are about 22% higher than the listed Retail price, but paid through higher Oil prices and Unemployment Benefits. This is all at the cost of the American Standard of Living. lgl

Wednesday, February 09, 2005

The Virtues of Personal Accounts for Social Security
Edward P. Lazear

An article currently listed in the 'Economist's Voice' extolling the advantages of Private Accounts. He makes the traditional Conservative economic reference to Social Security being a market distortion; unacceptant of the proposal that a unified Pension system with inclusion remain more viable than discrete, underfunded particulate systems of Pension benefits. The unified system assures a minimum benefit going to the greatest Number of Retirees, to maintain a basic level of Consumption among all Retirees; a greater stability to the market system than it be a market distortion. Private Accounts, on the other hand, assures the minimum benefit is to be drastically reduced, and variably dependent on market investment decisions of particulate investment elements. What is the greater market distortion?

Lazear described the Social Security Trust Fund as a Government possession--which it is not; Congress and President should be reminded they do not hold unilateral right to spend Fund revenues. The Author previously articulated that the Trust Fund should purchase the Federal Reserve system. This could be resisted by American Workers themselves on ideological reasons, but at the least; American Taxpayers could insist FICA tax revenues be deposited with the Federal Reserve, leaving the Federal Reserve personally liable for lending funds to the U.S. Treasury if they found such Treasuries to be a good risk. Social Security funds in the Trust Fund would be protected by Federal Banking law. Lazear's argument as to the insecurity of Congressional and Presidental guarantees of the Fund revenues could be eliminated.

The redistributive effects of Social Security on which Lazear complains could only be worsened by Private Accounts. How? Low and Middle Incomes would suffer a far greater loss from poor investments than would wealthier Incomes, because such losses would be a much greater percentage of total held Assets, and wealthier Incomes have greater viability to hold intermediate-term investments until better Sales pricing can be obtained. Lower Incomes would be pressured to sell because of Household obligations at lower Sales pricing, thereby further enriching wealthier Incomes with better Investment buys. The adverse redistribution would only be accelerated. lgl

Postscript: Some have complained the daily Posts are becoming too long--references made to long-winded bores. Therefore, Tomorrow's Post will deal with the real Dollar aspects of Private Accounts. lgl

Border Crossing

Mexico has just issued a Booklet on how to cross the American Border illegally. Most would estimate this Author would be critical of such behavior, but he lives at Ground Zero of the illegal Border migration. He has witnessed two people die within twenty miles of his home, in the previous Six weeks (He lives three miles from the only dry Border with Mexico). It is again illegal Migrant season.

Additional Tips for Crossing the Border illegally:
1) Coyotes will attempt to have you carry Cocaine--don't do it; you will be left to die once the Cocaine is collected.
2) If you carry Cocaine, refuse to swallow balloons of uncut Cocaine; a balloon break while inside you is instant death (They like this method, as Cocaine may be unnoticed before return to the Border with subsequent recovery of Cocaine).
3) Do not hire an unknown Coyote, you will wind up dead.
4) Do not hire a Coyote who carries a Gun, you will be killed in a Crossfire.
5) Do not run if the Border Patrol catches sight of you. The Coyote will abandon you upon first sight of the Border Patrol, and the Patrol is the only sure delivery back to the Border so you do not die in the desert.

Border Crossing is dangerous, far greater than Most imagine. The Desert will kill you if you lose you way or Guide. There is no refuge for the illegal migrant within forty miles of the Border, except your Coyote if he provides that. The Border Patrol will return fire, if fired upon. Capture is a nice Bus ride to the Border, where you can again attempt to cross.. Short Hours of Desert sun, a sprained or broken ankle, or Coyote abandonment can cause death within a day or night(remember the Desert is cold at night).

The Author trys to hold down his gorge, as he states: Support George W. Bush's initiative in provision of Work Visas. lgl

Monday, February 07, 2005

Budget and Deficit

Trim Deficit? Only if Bush Uses Magic

February 7, 2005, NYTimes

But Mr. Bush has focused almost all of his budget cuts on discretionary domestic programs costing a total of $466 billion last year. Freezing spending at current levels on the vast array of programs Washington supports - thus allowing them to grow simply at the rate of inflation - would save about $10 billion next year, according to the Congressional Budget Office; a politically difficult reduction of 1 percent would save about $15 billion.

In all, Mr. Bush has vowed to cut or eliminate 150 government programs. But Republican Congressional analysts predicted on Friday that those cuts would be unlikely to save more than $15 billion. And even those savings may not materialize.
Last year, Mr. Bush called for cutting or eliminating 65 programs, for a total projected saving of $4.8 billion. But Congress agreed to eliminate only four of those programs, for a savings of less than $200 million.

For Mr. Bush to fulfill his promise of cutting the deficit in half by 2009, Mr. Riedl said, the president would have to cut $200 billion from domestic programs that now cost less than $500 billion a year.
Is the Bush Budget realistic? Hardly--it not even including funding for Iraq and Afghanistan. The real disaster comes in the attack upon Discretionary Spending programs, which Congress will never allow Cuts sufficient to provide any major reduction of Spending. Entitlements absorb the greatest share of Federal Spending, and are scheduled to absorb far more as Retirees and higher Costs kick in. Economists must unify in the call to limit Entitlements in an effective, but protective manner.

The Author's own Proposals:
(Remember he himself is a Baby Boomer.)

1) Establish a One-Size Benefit for Social Security. It raises the Cost of SS Benefits in the near term, but could cut Fund Expenditures by a loose estimate of 14% over the Period until 2042--the listed Date of Fund exhaustion. The One-Size Benefit has the advantage of being Wage-indexed, so Beneficaries are not penalized by lack of participation in economic growth. It can be justified by the increasing Costs of Medicare, to the point variations in FICA tax contributions mean little. It can be grandfathered in, even with Us Baby Boomers, so current High-Drawers will not get COLAs until they are in-line with the One-Size Benefit. Now is the time for the Switch in Benefits, while there are still larger FICA tax contributions than there are Fund Outlays.

2) We must turn Medicare and Medicaid into basic Coverage programs paying a set maximum per year, but not covering catastrophic illness care. Hospice, Pain-killing Drugs and Procedures, or necessary Rest Home care, will not contribute to the maximum limit.

3) Defense Department Expenditures must be unified; this means absolutely no extraordinary budget measures. Law--or Constitutional amendment--must dictate Congress must pass a whole Defense Budget, which must not be amended inter-Year by additional appropriations without added Tax Surcharge on Income Taxes, said Year Defense Budget to be totally underwritten by Taxation, with the Secretary of Defense charged with transference of Funds from Weapons Development to meet Deployment expenses, Troop Outlays, and necessary Equipage supply. Homeland Security will be entailed by like Law with such Budgetary stringency. Special Funding for Areas of Conflict (say Iraq and Afghanistan) will not be introduced without surcharge taxation on Income.

4) Tax Law will be amended, so Tax Credits for Investment, Recapitalization, and Stock Grants or Stock Options, shall not each exceed more than 10% of Gross Taxable Income of Business Enterprise.
The Wish List could go on forever, which is one of the problems of Tax Law: Legislators thinking they can tweak the system for better performance, with constant and ongoing Special Measures; such bringing no great Tax relief, while eroding Tax revenues drastically. lgl

Sunday, February 06, 2005

Bush Agenda

Andrew Sullivan claims in the Sunday Times that Bush is after Syria, not Iran. He asserts the Bush Adminstration is planning on maintaining 120,000 Troops in Iraq for the foreseeable future, and We do not have the resources for military adventures against Iran. It is a particular reason why the Army wants five more Combat brigades, as commented in a previous Post. It was also reported that the Military was encountering great difficulty in acquiring the additional Troops.

Some relevant facts about the military investment (Occupation) of Iraq. Nothing can stop the Insurgents/Guerillas except the Iraqi people themselves. Their failure to stop the Insurgency means American troops will have to fight the Insurgents. Here exists the first great problem: 120,000 troops is a dangerously low number of forces for patrolling a area of counterinsugentcy the size of even the Sunni triangle, let alone all of Iraq; a proper response force should be 480,000 Troops (equiped), but could safely perform with 100,000 less. It is all debateable, a question of ground saturation; but American troops risk insufficient Force response capability, and being locked within the old Firebases of the Vietnam era. Casualties will result from either of the latter events.

Donald Rumsfeld admonishes Americans to remember there are currently more than 130,000 Iraqis in uniform. Senator Joseph Biden warns such numbers are Foolscrap:

in testimony Thursday before the Senate Armed Services Committee, senior administration officials couldn't say how many Iraqi forces can operate independently against the insurgency. That's why I believe the number of Iraqis prepared to take on the insurgency is somewhere between 4,000 and 18,000.

Senator Biden makes his own mistakes in assessment of the situation:

New recruits get eight weeks in the classroom, compared with 16 to 24 weeks in most developed countries. Many arrive at the academy with minimal vetting and lack basic skills in reading and driving. After their classroom time, new recruits were to receive a 24-week field training course, working with U.S. and international trainers, but that was never implemented because of security concerns and a shortage of field trainers.

The administration must build on this counterinsurgency foundation. It should embed U.S. officers with Iraqi units to develop their operational skills. Other countries should be pressed to support and open training academies outside Iraq. We also must accelerate the effort to train police to provide basic law and order in the parts of Iraq that are not under siege by insurgents but that are plagued by violence.

Embedding American officers with Iraqi units will vastly increase the level of American Casualties, or turn all of Iraq into a Free Fire zone blowing apart the Country, rather than providing law and order. Using various training procedures will not unify Iraqi defense forces, and splinter Operational integration.

Nothing is really going to help the Troop insufficiency, which will provide a great danger. The American military has long substitued Firepower for Manpower. Such a Policy works fantastically well on the battlefield, and is absolutely absurd in patrolling Civilian population centers. Ralph Peters highlighted the problem in his defense of Lt. Gen Jim Mattis who has said:

"You go into Afghanistan, you got guys who slap women around for five years because they didn't wear a veil . . . it's a hell of a lot of fun to shoot them."

Peters made these comments:

Had Gen. Mattis collapsed in tears and begged for pity for the torments war inflicted on him, the media would have adored him. Instead, he spoke as Marines and soldiers do in the headquarters tent or the barracks, on the battlefield or among comrades. And young journalists who never faced anything more dangerous than a drunken night in Tijuana tried to create a scandal.

Troops under Fire, especially repetitious Fire over time, adopt a 'Us against Them' attitude, with 'Them' consisting of everything not in the Unit. First comes Saturation Fire response, then comes Interdiction Fire, and finally; it turns into 'For the Hell of It' Fire. The trouble comes in this Fire being basically directed towards Native populations who never wanted the Occupation in the first place. lgl

Saturday, February 05, 2005

Questioning all the Givens

There is intense debate about Social Security at the present time; almost Everyone finding holes in the Presidential Plan for Private Accounts--even those who are ardent supporters of Privatization. Many anomalies exist in the discussions, and should be discussed.

Why does the President think the Shortfall is going to bankrupt the Social Security Trust Fund?It is a continual Pay-In system, with Shortfalls at most cutting the amount of Benefits, not forever denuding the Fund of cash(1). The second questionable fact is that funding Private Accounts will create a Federal Debt rivaling the Shortfall itself, except for creating this Debt now instead of forty years hence. The third anomaly states that Private Accounts will not fix or aid the Solvency issue of the Trust Fund, admitted by the Administration itself. The fourth issue states the Medicare and Medicaid shortfalls remain far greater and more pressing than the Social Security Shortfall, and this Administration shows no inclination to address this Issue. The last anomaly states All agree that Private Accounts will provide less Benefits than Retirees would receive under the current Schedule.

The above factors may impress the Reader with a suspicion that Social Security reform is not the primary drive behind the push for Private Accounts. A knowledgable observor might suggest most Investors in the Stock Market realize Stock prices have peaked, given the current state of Capitalization, and a new infusion of Cash is necessary to expand the Stock Market balloon--already swollen with artificial value.

There are other Factors to be considered. One is the great level of uncertainty in compilation when dealing with a distant and unforeseeable future. Here is one the Author enjoyed immensely:

Exploding Productivity Growth:
Context, Causes, and Implications
Northwestern University

A long-term real GDP growth path of 4 percent a year and a 4 percent permanent
unemployment rate are endorsed in Glassman (2002) and displayed in his figure 4. The
long-run real GDP growth path in the Social Security projections tapers down from 3.0 percent to 2.0 percent between 2003 and 2015, rests at 1.9 percent from 2020 to 2040, and then falls to 1.8 percent between 2040 and 2080 (Board of Trustees, 2003, table V.B.2, p. 99).

These, as far as the Author can determine, are the GDP growth rates which almost Everyone is using to base their estimates of Trust Fund gains and losses. Sounds Good, does it not? They are regretably not the numbers which this Author chooses to use. Here is his prediction for the Future:
1) GDP will actually decline 7.2% from it's current level by 2060; this due to declining Employment rolls with necessary change to longer Product life, this complementary to rising Energy prices due to more-expensive material sourcing.
2) Life expectancy has reached it's maximum length, and will start to decline about 2020.
3) The Baby Boomers will essentially be dinosaurs by 2050, with the American population beginning to decline by 2057.
4) The Retiree/Worker ratio will reverse by 2034, with Workers increasing in proportion to Retirees.
5) The DOW industrial Average will slip to 8500 by 2010, making adjustment of the FICA tax rates a smarter move than Private Accounts.
(1) The latest White House White Paper uses a Small Business analogy as comparison of its Bankruptcy with the Social Security Trust Fund Shortfall. One cannot compare a Government program with a Business; it is why ex-Businesspeople in Government can be as much hindrance as help. A Government program has a variable Product, a variable Supply, a variable Product price, and is independent of the normal Cost/Supply Curves. Excess Costs can be moderated by alterations of Product supply, alterations of Product price, or elimination of specific Product or Service; it is not a question of Produce or Not Produce according to Market forces.


Friday, February 04, 2005

Defense Dept. Failure

February 2005 MILITARY PERSONNEL DOD Needs to
Conduct a Data-Driven Analysis of Active Military
Personnel Levels Required to Implement the
Defense Strategy GAO-05-200

The Report reads like a nightmare to Someone who can visualize the consequences. The Office of the Secretary of Defense (OSD) has the listed policy goal of not increasing active personnel levels. Well and Good, except the Army wants to increase the number of it's Combat brigades by ten, or possibly 15--We are talking 30,000 or 50,000 men. The Marine Corps was 9,000 personnel short in 2004. The Air Force was planning to reduce it's personnel--basically in security personnel--but lacked the Funding for advanced equipment. The Navy plans on reducing it's Force, but has not organized an implementation plan as yet.

The OSD states they will convert much Support Service over to Civilian employees, and so free military personnel for Warfighting capacity. The hitch here is the OSD will not allocate any funds for conversion--hiring and training--so the program is about 60% behind schedule. It should be remembered that Civilian conversion employees cannot be deployed Overseas into War Zones because of Combat specialty definition. It should also be mentioned that military personnel assigned to Combat Support specialties are universally older, likely to retire rather than transfer, and make poor Candidates for Combat positions.

The OSD demands the Service shift personnel from less-needed Specialties to more-needed Specialties, so Clerk/Typists become Military Police and Artillerymen become Patrolers. The Author can't wait until Patriot Missle operators become Mess Sargents. The real element here remains that National Guard and Reserve troops have been turned into active Regulars. The real beauty comes in the statement:

may take years before OSD is in a position to determine whether these
long-term initiatives will yield the expected increases of active duty
military personnel for warfighting duties.

Some Services are meeting their Recruitment goals--Army and Air Force are not. No Service has articulated a viable Recruitment policy change to make up for Shortfalls. Stop-Gap measures to retain Service personnel past their enlistments will continue as National Guard and Reservists stay on active duty, while Congress will not increase Manpower lists appropriately. This Author hopes the OSD will call for, and Congress will enact, a military personnel expansion; before sheer Casualties force Operational change. lgl

Thursday, February 03, 2005

Trading Equilibrium

The Author would like to thank Arnold Kling for the pointer to:

Meir Kohn

( )

The basic thesis of the Work asserts that the 'value paradigm' demands a ideal state which cannot exist because a real 'trading equilibrium' could not exist:

"trading equilibrium"—a situation in which all opportunities
for mutually advantageous exchange are being realized.

The assumption that price information is all that is needed
is essentially equivalent to assuming that exchange is free of problems
and therefore costless. There are no problems with the quality of
goods and there are no problems assuring future performance
when this is required

The real problem for the 'exchange paradigm' comes from the fact that a trading equilibrium does exist at any point in time based upon Trading partners' basic vote in Currency exchange for Product. This exchange can be 'efficient' or 'inefficient'. Kohn's dismissal of Hybrid theory therefore carries error within it.

Both the value paradigm and exchange paradigm accept 'Maximization' as a given axiom, which is a foolhardy notion at best; any statistical estimate criterea would find at least 90% of all Market Participants to be acting irrationally at all times. Market Participants do act upon preconceived plans(aka exchange paradigm), but they are Price-takers(aka value paradigm). They are willing to accept Prices even when irrational, in order to avoid Plan change.

Government does set at efficiency ideal (value paradigm) in that it sets Currency standards, and enforces prohibition of Fraud. Government, on the other hand, can interfere with Market performance (aka exchange paradigm) through adversive Taxation, Regulation, and purchase of excess materials and Products. There is a Case for Government intervention in the Market, and for limitation of Government interference in the Market.

Economic theory must accomodate both the value paradigm and the exchange paradigm. Both must take another look at Maximization, and at the power of the 'Invisible Hand'. The First is rarely utilized in practice in favor of business stability of practice, and the Later turned malignant in tone without turning the Government into a Umpire. lgl

Wednesday, February 02, 2005

State of the Union

President Bush provided the expected monologue, one without surprise or alteration of Course. The elimination or curtailment of 150 federal programs may present the only unpleasant regime change, as it is bound to cut strands of the Welfare net--something which only impacts the Poor. His reference to Our military volunteers means there will be no push for a legitimate Draft, but the continued Servitude of Our current military by mandated Service extensions. Bush continued to parrot the advantages of Social Security Privatization, though almost all purported Advantages to the program have been discredited. He also did not address the Federal Deficit, Trade Deficit, or the Current Accounts Deficit directly--the three chief problems of the American people, even greater than the dread aspect of Terrorism. His is an Administration who sets the agenda, and refuses to discuss or debate any other Topic; a tendency attuned to the appelation of 'Sticking their Head in the Sand'.

George W. Bush entered the White House in a Period where the Government enjoyed a Federal Surplus. 9/11 cost Us $30 billion, Homeland Security cost Us $125 billion, Iraq and Afghanistan cost Us $200 billion. Defense Spending has been unrestrained for three years, but Troops in Iraq and Afghanistan cannot get adequate equipage or Pay, while being extended in Service without choice. Personal Income Taxes have possibly been reduced by $300 billion through Y2005, while Deficits will average greater than that amount per year for the Period Y2003-Y2005 inclusive. Revised Employment estimates suggest the American economy has still not regained the Labor Roll conponent existent with Bush's entrance into office in 2001. He suggested heavy expenditure federal programs which assured long-term heavy expenditures and deficits, and advocates additional such programs, coincident with cutting the Welfare safety net. This Author contends the Bush record has been abysmal, but he is not one of the Faithful; he might need a Faith-based initiative. lgl

Rates of Return on Private Accounts

Paul Krugman suggests:
Schemes for Social Security privatization, like the one described in the 2004 Economic Report of the President, invariably assume that investing in stocks will yield a high annual rate of return, 6.5 or 7 percent after inflation, for at least the next 75 years. Without that assumption, these schemes can't deliver on their promises. Yet a rate of return that high is mathematically impossible unless the economy grows much faster than anyone is now expecting

To get a 6.5 percent rate of return, you need capital gains: if dividends yield 3 percent, stock prices have to rise 3.5 percent per year after inflation

The actuaries predict that economic growth, which averaged 3.4 percent per year over the last 75 years, will average only 1.9 percent over the next 75 years....But privatizers need that high rate of return (6.5%) for 75 years or more.

It really is that stark: any growth projection that would permit the stock returns the privatizers need to make their schemes work would put Social Security solidly in the black.

Estimating the Real Rate
of Return on Stocks
Over the Long Term
(commisioned by the SS Advisory Board)
in the historical data summarized by
Siegel, there is strong evidence that the stock market is mean-reverting. That is, periods of
high returns tend to be followed by periods of lower returns. This suggests that the arithmetic
average return probably overstates expected future returns over long periods

The randomness in stock returns is extreme. With an annual
standard deviation of real return of 18%, and 100 years of past data, a single year.s stock
return that is only one standard deviation above average increases the average return by 18
basis points. A lucky year that is two standard deviations above average increases the average
return by 36 basis points. Even when a century or more of past data is used, forecasts based
on historical average returns are likely to change substantially from one year to the next.

Professor Andrew A. Samwick
Director, The Nelson A. RockefellerCenter at Dartmouth College

Krugman's calculations hold that dividend yields will remain at about 3 percent over the projection period. This generates an exploding PE ratio. Instead, the inconsistency he is pointing out might be rephrased as:

"Because of the low rate of economic growth, those holding to a 6.5 percent return are assuming an unrealistically high dividend yield."
All approach the Problem from a different prospective, providing valuable information, but lacking consideration of what the Author considers the basic problem. Here is what the Author considers important:

Longevity--People have to be paid Benefits for as long as they live (Read Arnold Kling at Econlog). The Lifespan Curve is flattening, and has been since the 1970s, this because the easy extensions of life have been accomplished(Arnold disagrees). It has been proven by many Studies that Working, or Working longer, shortens Lifespan due to the stresses imposed on the human body. People to be paid Benefits are likely to die younger than the statistical average. The Lifespan Curve is flattening and likely to continue to remain static. Statistical implication states People receiving Benefits will start to decline in number by Y2046.

P/E ratios--The Price/Earnings ratio has been a traditional 14--which equates a doubling of the Investment every fourteen years. The advent of current Tax credits, IRAs, Koughs, and 401ks has raised Demand for Financial Paper (Stocks and Bonds) , with resultant rise in the P/E ratio to approximately 20; this equaling twenty years to double the Investment. Corporate Executives and Employees have been eager for Stock Grants and Options, because of the rise in price of these Instruments; causing a spread issuance of such Instruments inducing a reduced Earnings because of multiplicity--spread of Profits across greater shares. How much will Private Accounts raise the Price of Financial Paper, and how much will Earnings drop in the supply of the additional Financial Paper? A P/E ratio of 24 will be less than the rate of Inflation; a P/E ratio of 26 will be less than the rate of expected economic growth.

Medicare and Medicaid--An expansion of Both at the current 7% per year, or the expected 8% per year, could not be paid for even with P/E ratio of 14, given at rate of economic growth of 1.9%--or even an economic growth rate of 3.5%. Private Accounts for Social Security, or even Health Accounts, will not do any good for Medicare or Medicaid. Medicare and Medicaid benefits must be limited in yearly coverage.

Private Accounts will not begin to improve the Shortfall in the Social Security Trust Fund; it will actually only worsen an Accounts imbalance. A switch from Wage indexing to Price indexing SS Benefits will not change either the above effect of Private Accounts, or more than maginally alter the Accounts imbalance of the Trust Fund; it will increase the financial instability of the Elderly at about four times the rate of reduction of Benefit--Bad Call. Samwick proclaims Private Accounts will cut Government expenditure; patently false, Minimum guarantees of Benefits and rising Costs will increase Government expenditures--vastly increased by Debt-financing of Private Accounts. lgl

Tuesday, February 01, 2005

Direction of the Economy

Manufacturing Activity Misses Expectations

Published: February 1, 2005

For the year, building activity increased 9 percent to $998.4 billion, the largest increase since a 10.4 percent rise in 1996.

At the same time, the group's measure of new orders declined to 56.5 from 62.6 the previous month. In addition, ISM's index of prices paid by manufacturers declined to 69 from 72 in December, showing some easing in the pace of increases in prices for the materials they use.
The Economy appears to be in good shape, but is it? Construction sounds real good, though the Fed is expected to keep on with incremental Rate increases. The problem resides in the fact that growth in the Construction industry has been too good, with significant levels of growth in the two previous years. There are Those who estimate eighty percent of American Households currently hold Mortgages. Commercial and Government construction has not been as robust, but reflective of a booming Economy. Is the exhibitant rate of Construction sustainable this year?

The latter comment also expresses some risk. The lack of New Orders, while not suggesting any form of contraction, provides doubt as to the energy of the Recovery. This inside of the reality that Retailers are increasing Stockpiles of Unsold Goods. The index of Materials pricing lost three points, which cannot be solely a decline in Oil prices. It indicates a moderation of basic Metals pricing, always due to fewer New Orders. The latter fact means a slowing of Production--domestic and Worldwide.

The Tax break designed to bring Corporate Profits back to encourage domestic investment has shown little interest in Jobs-creating investment, according to the returned Fund schedules filed with the Treasury Dept. Most develop Plans to buyout smaller companies by Cash and Stock trades, and consolidation of the Labor forces. All expresses a lack of hard capital construction, alongside a growth in Financial Paper, already suffering a balloon effect from previous Tax credits, IRAs, 401ks, and Koughs.

Retailers building unsold Stockpiles with decline of Factory orders could very well indicate a softening of Consumer Demand, something implied by rising Interest rates and levels of Consumer Credit in the face of slowing rates of Income increase (only 0.6% if the Microsoft One-Time Dividend is removed). Construction cannot serve as an economic spur, as it loses its economic momentum from higher Interest rates and already accomplished construction. The U.S. economy truly needs some form of limitation of Imports, simply to provide the economic propellent for expansion. lgl