And you thought I would say 'Mea Culpa"

Read this, then this, and finish with this. I find a recalcitrant impulse to abandon the entire genuine efforts of honest people, and recount How I was Right; people would just nod their heads upon any Statement I made to being wrong. So I will advance to where I believe I was Right. There is real agreement on the positions chosen by the esteemed Three who plead prior lost innocence. Can Anyone tell where I am going to be Post hypocritical?

1) I did never believe that well-meaning men and women in $4000 Suits could a economy make.
2) I always believed that fancy finances designed specifically to circumvent previous Regulation was a pathway down a slippery slope, and that a long drop to the bottom was foredestined.
3) I imagined that all Players in the economy work basically for themselves, and waste little effort on maintaining a moral and ethical standard.
4) I believe the Barney Madoffs of the World are the product of their Times, and only see opportunity or its lack to operate honestly, and chose the lineal direction which maintains their good fortune for as long as is possible. I notice that these people work sometimes for decades in an environment well-regulated, losing moral and legal sway only after All begin practices which are shady.
5) I feel that the Fed impoverishes as much as it aids, negating the lifetime earnings of people through no Interest Return, simply because they cannot navigate the tricky waters of Investment; where they can be fleeced by the scoundrels mentioned in Item 4.
6) Stimulus which only aids the men in $4000 Suits may not be Stimulus at all, but a continuation of bad practice which led up to the initial Fall. Helping Bankers to make greater amounts of Money may not boost either Consumption or Production.
7) Absolute reliance on Equities to maintain Social Security would provide approximately 7% less revenue for Welfare payments before the risk of Recessions, and never provide Safety for 50% of the Populace.
8) The Fed is trying presently to artificially propel the Equity markets, and luckily, they are being as efficient as they have always been.
9) The Housing markets must eventually dump 30% of their estimated Capital value, but this cannot be accommodated simply by letting mortgages default; they will sometime have to be re-adjusted, hopefully with people still in their homes.
10) I do not see a future for the economy much better than We presently endure, and cannot witness a brighter future until We tell all sorts of Management Goodbye. lgl

State of modern economic Thought!

I dislike to disagree with James Hamilton, as he is an economist I truly prize. The idea, though, that current conditions are the best We can expect seems downright wasteful of both Labor and Capital. Congress needs to stop giving Business Tax Cuts which they utilize to no one’s benefit but themselves, and the Fed needs to stop giving Business Free Cash which they only utilize to purchase Treasuries at higher rates of Interest. Times would become much better much faster if Congress would give their spare Cash they don’t have to the States for infrastructure replenishment and Clean-Up projects. I don’t know Why economists cannot understand that the only method to improve Consumption will likely be to raise the Household Income of most Americans, which the prior two methods of Stimulus sincerely do not!

I don’t believe that low Interest rates incite deflation, or even disinflation. At the same time, I don’t much care for Paul Krugman’s advocacy of low Interest rates. I personally believe far more in the availability of Cash setting Interest rates, but this availability also includes the Fed’s willingness to flood the markets with Cash; a disaster of a Concept if ever I heard of one. I have long been an advocate of a stable fed funds rate set at around 4% through all kinds of economic weather, with at most a percentage point difference during Recessions. Keynesians and Monetarists must someday reach the Conclusion that there is very little impact upon the economy unless the funds reach beyond the financial community. Making well-heeled bankers is not the medium of economic success.

The one element plainly expressed in the current downturn stands as the refusal of mortgage issuers to aid mortgage recipients in any definable manner. These institutions still expect the promised rate of Returns for their instruments as they were initially agreed, and resist all relevant attempts to provide any real ease of escape from the onerous terms. This makes it extremely difficult for Households to expand their Consumption, a necessary component for the reactivation of the economy. Governments–federal, State, and Local–must again become major Consumers; a factor which will not happen without federal extension of financial aid to the lower levels. Understand that the success of the FDR administrations was not attributable to the monetary policies originated in the 1960s, and expanded through the decades. It was achieved by the conscription of actual labor through Government Spending. It is what is needed Now, and I wonder when the Participants at Jackson Holes will come to realize this Truth. lgl

Restarting the Economy

This may be the most rationale argument for current Fed policy which I have read, but I disagree with it in total. My position flies in the face of decades of Keynesian analysis, and I should give some Answer which is not simply denial. I have been trying to organize my Thoughts on this issue for some time; what is the best Guess Estimate of my success this time? Here are the present economic conditions:

Consumer Demand remains down but sustainable. Production Schedules are set to meet the current Consumer Demand needs without unsustainable Price increases which would further decrease Consumer Demand. There remains massive desire among Business personnel to increase their Profitability, but almost no intention to increase Production levels without a visible increase in Consumer Demand; Business does not want reduced Prices to reduce their Profitability coming through increased Production and forced Sales programs, or do they want to add any Production Costs to their current Production. Business wants low Interest rates and Tax Cuts to maximize their Profits without resort to increased Production. They are not about to hire expensive labor, or perform massive Upgrades of Production facilities. They feel that they are in a stasis position where they can only lose their Profitability with Production schedule changes. The economy might need Stimulus to improve Employment numbers, but will achieve nothing by granting Business non-Production alternatives to higher Profits.

I would publicly call for elimination of the Bush Tax Cuts in total. Necessary labor which Business cannot deny would immediately demand higher Wages, cutting into Business Profits. The increased Taxation on Business would further reduce their Profitability. Capital Gains taxation would incite Investors for greater performance from Corporate structure. Business would be forced to shift their Production schedules to obtain the added revenues denied from taxation and Wage demands. Soft Consumer Demand would disallow Business increase in Consumption Pricing. Business would immediately seek lower-Cost Production labor to forestall the drain of labor from higher-Priced labor, who could devote their time to their most favorable Profits-making activity. Guess What?–I think We have restarted the economy. lgl

How to be hated in one easy lesson!

I do believe Scott Adams. I still believe, though, that there are ways to alter the behavior in a significant manner. My first attempt to suggest people to change their lifestyle would consist of a Landscape law. It is a nice sensible thing which will make everyone scream. I will advance some likely tenets to such a law:

1) A national special Property tax will be imposed, paid to your local government, where the Property owner is charged $7 per square yard of lawn every year.
2) An additional Property tax of $1 per square yard of lawn is charged every time a lawn is fertilized or aireated.
3) An additional $.25 per square yard of lawn Property tax is assessed for every Watering of said lawn.
4) A $2 per square yard of Garden will be deducted from local Property tax assessments if the Garden can be proven to be a vegetable rather than a flower Garden.
5) Every Landscaper in the country must be licensed; no license required unless the Landscaper treats ground not his own for monetary gain.
6) Every licensed Landscaper must prove that he has the facilities and equipment to successfully cultivate both lawn, Trees, and vegetable Gardens.
7) Every Property owner or contracted Landscaper to said land must pay $3 per square yard of land in Property tax, if over 10% of the established ground is found to be consigned to Weeds per square yard of ground.
8) Local government will be constrained by the law to inspect all ground within their jurisdiction at least once a month, in order to receive such additional Tax revenues, while assessed a special tax by the federal government of $10 per square yard if sufficient Inspectors are not hired to cover such territory at least once a month.

The law might seem highly controversial, but it serves many purposes. It cuts down on both Fuel and Fertilizer devoted to what is essentially a non-economic crop. It enhances the occupations of both Landscaper and Government Inspectors–this means it is a program to gain increased labor employed over the entirety of the nation. It is an easy form of Stimulus, as it will assume much of Cost of Local and State Governments. It will cut down on the inflationary trend of Food in the long-run, and lead to the development of small business to utilize the enhanced Produce. It will actually be Energy-conservative as both Transport of Food and Landscaping use of energy is reduced. It is a Win-Win for everyone but the Taxpayer, who is going to be paying the increased Property taxes anyway! lgl

Whose Afraid??

I bring this article to my readers today, simply because it is good information for Students to possess. It is relatively long and combines with my disinclination to Post today. The Work is basically a contest of basic numbers going into projections about Social Security, and I will leave it to the Reader to make his own evaluations on the material. There are only some assertions I myself would like to make:

1) The ratio of Worker to Non-Worker cannot go down over the sustained Period in question without Life Expectancy sequences in decline. Counter-cyclical forces will increase the Pay for non-medical labor with such a decline, and the reduced urgency and training gap below medical training will favor alternate labor choice. A reduced medical force, or worse, an inadequately skilled or trained medical force will incite reduced Life Expectancy.
2) A reduced labor force will raise the premium on skilled labor to much greater degree, and any increase in medical costs for Social Security or its benefits can and will be paid by the higher salaries.
3) Privatization of Social Security is dependent on a Stock and Bond gain which is impossible to match over an extended Period, and cannot accommodate the least recession within the entire Time frame.
4) The imperfections of medical practice are already reducing the favorable outcomes for Patients, and the continued usage of both Treatment and Drugs will lead to disease immunities; all inciting far less success in medical treatment at accelerating rates in the coming decades. This will rapidly reduce Life Expectancies in the future. The Reader should be cognizant that slicing off only two years of Life Expectancy for half of the projected Period cuts the budgetary shortfall completely.
5) Food and Clean Water shortages are a far greater fear for all of Us, than is any Social Security deficit. One should recognize that lack of either Substance will radically alter the Social Security problem in a very reduced Time frame. I will not continue to the level of pandemics–everyone realizes what they will produce for Life Expectancy. lgl

Getting Tricky

I feel almost a detached hatred for the Drug companies, especially after reading this article from Maxine Udall. Maybe it comes from even earlier, after none of them offered me a Job after college like they did my Cousin. The persistence of the residual anger and resentment, like most medical conditions, has been festering for years; I doubt that it is set to explode, though there are Those who would consider this Post the explosion itself. We shall see–We shall see!

I have always been a Tax economist, as far as philosophy, even if Everyone would question my training. This means that if it need fixing, then find an abusive tax for it. It might amuse some economists, though it generally arouses anger among business personnel. The goal is to make the Drug companies act nicer, even if they are Predators in Heat. You younger Readers should ignore that last comment. We’ll just assert that We must come up with a form of taxation which will make Drug companies good citizens and responsible people.

It is easy enough for the IRS to come up with an Average Price per Drug dosage in this Country. It requires an estimate of the average dosages given in this Country, and the total Cost of those dosages in this Country; it is immaterial for this estimate to determine whether those dosages were administered or not–though administration does affect the Drug Cost. You simply divide this Total Cost by the number of dosages to get the Average Cost per dosage; it is immediately apparent that Drug companies will protest the effort due to the cost of Drug administration, which will skew the assessment, but it is equally apparent that leaving out administered dosages would be too much reduction, and who likes Drug companies anyway. We next have to get Congress to ignore their political contributions, and pass an effective taxation; which will likely kill any attempt at reform. The basic law would be simple in design: Profits for Sale of dosages less than the Average Cost would be taxed at the current rate of taxation, while Profits from Sale of dosages above the Average Cost per dosage would be taxed at a rate some 10% higher than their current taxation. It is certain that there is a minimum Cost past which Drug companies would be willing to pay the higher taxation, but what the hell; it still would be an effective control upon Drug Costs in the Short Run. lgl

New Plan

I would first like to state that I imply no criticism of Joseph Gagnon, the Fed, or Fed policy. The outlined policy is rather a traditional policy in the Keynesian sense, but I do not think such Fed action will bring any relief to the economy as it now stands. I agree with Joseph that Interest on bank reserves should be eliminated; though I would suggest a permanent end as such action should never have been introduced. Targeting 4-year Treasuries for Interest rate suppression, though, will bring distortions to the Bond markets; automatically further crippling the Consumption market over the long-term. The real error of the Fed must consist of trying to target Interest rates in the first place, always producing a skew in real capital return results over any significant period.

The Fed needs to target industrial sector development as the real Solution to the current economic waywardness. I do not know if the Fed has the empowerment to following my following program, but if not, it should petition Congress for extension of its charter. My concept would have the Fed purchasing Mortgages of subordinate governments (State and Local) for the improvement of infrastructure at the same rates that they purchase short-term Treasuries. This is the incentive for subordinate governments to improve Roads, Water systems, Sewage systems, Parks and Recreational facilities. Constant rate mortgages would not be a viable hazard to the Fed, while subordinate governments and Fed will retain the ability to renegotiate the mortgages without Interest rate changes; such things as extension of the pay periods, length of the pay periods, and conditional increases in mortgage size to handle Upgrades and Improvements. Here you get a massive infusion of Cash into the heavier Employment sectors, with little loss of either Fed control or mortgage risk.

The real need of the economy resides in Employment increase. There will not be increase in Consumer Demand without increase in Labor Rolls. The real value of my program is the end of the attempt to fuel the entire economy with Cash, when so much of the economy could act profitably with restructure; all of which will not be conducted with the easy flow of Cash at such low Interest rates. We need to get Americans back to Work, if We want a better economy! lgl

Reality in the Land of Illusion

I understand where Tyler Cowen is coming from, but will state my reasons to aggregate. You must read his Post to understand what I am talking about. All three reasons- general decline, wealth service decline, and Inventory pre-exhaustion–all lead to labor layoffs, which relatively never return until a return of factor 2; leaving aside the creation of a new industry sector. No form of financial Stimulus aids the disenfranchised labor pool, or does it dispel the disinclination to rehire without great growth ratios. Support of factor 3 stands as evident failure with a general decline in consumption–a persistence which will continue as long as the unemployed labor pool remains as large. Tyler states that current economic policy would be more refined with the three factor being weighted for their impact. I know that factors 2 and 3 will always be canceled out by factor 1: 2 and 3 if and only if 1. Factor 1 is thereby the paramount datum.

This looks right, but does not feel right! Consider placing an equal time Employment line overlaid on the graph. I will not supply it of course, as I attempt to be graphics illiterate to as great a degree as possible. It is known that We are developing a Well of Unemployment; there are as many evaluations as there are economists, but I suggest a total of 22 million Unemployed since 2000. The Inflation rate since 2000 have adequately adjusted for the loss of Consumption from these Workers, and this may the real reason there is such anxiety over the potential disinflation; a factor which could actually highlight the real stress in the economy. The thing to do here is scale current GDP in 2000 dollars. Economists are universal in stating our economic woes stemmed from the last Recession, but I think they have been developing for a lot longer than that.

I will finish this Post with this link. I admire John Maynard Keynes as much as any man, but he more than anyone was a man of his Times. He learned his Economics in the WWI environment, was later faced with the financial crisis of Europe after the German defeat, ran into the Great Depression, later faced with the Second World War, and finished trying to correct the aftermath of that great economic, as well as Social, debacle. At no time in his life could it be said that Keynes reacted to a normal economic environment. His entire thesis of Stimulus pump, though seriously revised over time, was material for an over-stressed economy, never one which failed normally through erroneous capital concentration. It is my thesis that Recessions incited from capital misallocation will not respond to Stimulus–Call me the Devil with Horns. lgl

True Debt Repayment

Examine this Post, and consider the implications. I agree with Menzie Chinn totally in his conclusion. Debtors have traditionally claimed that everything would be alright, and it never turns out well. The accumulative destruction of debt has always been hidden, and everyone gets entrapped with potential collapse at some point in their economic life; Debt seemingly designed to close in upon one at the first sign of trouble, a factor ever-present at every level of success. I wish I had statistical studies on which to base my assertions, but will wing a Statement expressing that Interest on Debt probably eats as much living Income as it enhances; this claim advanced simply because there exists institutional structure to take Profits from debt acquisition. Any introduction of Profits leads to a maximization of such revenues, which will never be of benefit to the Consumer. This is specifically not saying that finance is wrong, or not beneficial; it simply states that finance is always overused, and this overuse will destroy the benefits to the User.

There is a lot of critical condemnation of Social Security from the conservative Right, and here is a relatively counter to such claims. What saved Us from the Great Depression was the specific decision to take action to protect the Poor, and what reversed the economic downturn was getting funds into the hands of the Poor which turned them back into Consumers; something that Conservatives never admit, but was always true. Today, We have people always pointing out the differences between recessions, but the Curative to recession still remains the Same; turning the Poor into Consumers once more. We now have about twenty million people without Work, and spending less than they were in their prime earning years. We will not reestablish the economy until We get this group fully functioning once more. We gain nothing by an attack upon Social Security which will double the number incapable of economic function.

Paul Krugman provides some necessary information about Social Security. Best Estimate states than Social Security will eventually absorb about 6% of GDP. The only real fix which Social Security needs is separating Medicare from Social Security. Fancier fixes are always advanced, and will hopefully settle on simply raising FICA taxation when it becomes necessary; said increase made to replace the revenue necessary. It is too simple an Outcome, though, and opposed by both Republicans and Democrats. I would desire revision of the Tax Code, but could accept a 3% tax of Capital Gains for Social Security, and a 2% taxation of Capital Gains for Medicare to replace the necessary revenues. The hidden kicker here lay in the fact that the Capital Gains taxation rate need not be changed at all, Congress simply reminded that they must find their own funding somewhere. This should be the banner Democrats should utilize in the coming Elections. lgl

What can you say?

I am identical in tune with Bruce Bartlett about both the Laffer Curve and the Republican party. My calculation is that the Laffer Curve is accurate only when and if the Tax rate is between 47 and 50%. Anything less than 47% produces no discernable effect, and anything over 50% fairly well stabilizes into a straight line–just bad. Bruce and I are in agreement in keeping the Tax rates below 50%–in my case 47%. I know positively that Bill Buckley would not have Glenn Beck in the house of Conservatives–he reminds of Das Spiegel of the 1930s. The Tea Party Movement is a Fox Channel manufacture, and more noise than fact. I wish I could be a Conservative without being Red of Face.

One can question what economic policies can actually accomplish, but here is a list of links. Some of these ideas have worked very well, some not quite so well. How well they will work elsewhere is always a doubt for policy analysts. The real importance comes in the knowledge that there are alternatives which can be tried, even after the traditional American set of economic policy options have failed. I myself suggest that the natural Keynesian model failed in the face of greater Employment and added national debt. I would see an actual Tax increase across the board, thinking this would provide greater stimulus than Stimulus. I will not bring forth any rationale for the above at this time, as it is a Post about economic policy options.

Arnold Kling tries to define the use of the term ‘momentum’ in relationship to Employment, but actually explains Why raising Employment levels constitute such difficulty. Sectors flare and contract due to Market flows, producing much higher alteration of Employment statistics than their importance within the economy would dictate. A translation into common English could state that sectors can reduce half its employed labor force, while only contracting their production by 20% or less. Business managers almost never Hire without expectation of expansion, with the commitment to expanding Production. They simply tend to over-Hire, though they can withstand this labor oversupply under high Consumer Demand. The flipside to the Equation consists of a tendency to vastly over-Layoff to sustain Profitability under decline. This Yo-Yo effect produces most of the momentum in Employment, and means little to the overall Employment picture. lgl

Just Mean

Felix Salmon points out the real problem behind the argument behind the rant on CNBC. You would have a financial crisis without the Fed underpinning of the housing market. At the same time, Bankers love the safety and absence of Risk of Fed underwriting of mortgages to the point that they will not enter the mortgage field without such underpinning. The housing market is already collapsing because of this financial demand from the Private sector. Rick Santelli insists that it should be allowed to collapse, and then allow it to resurrect on its own terms. Felix states it would only bring a collapse without any resurrection. It is time for the Fed to get tough, and insist that Banks hold a certain amount of housing mortgage debt–like they insist on Reserves–or banks lose their ability to borrow from the Fed or other Fed-underwritten banks. It is one of those rare Cases where a regulation could achieve the desirable End.

The concept of regulating systemic risk contains mostly hot air, even if Michael Spence would advocate some form of it, simply because of its extensive, unknown nature. We can all identify areas of systemic risk, thereafter comes the problem of determining its magnitude and potential to act where. Any regulation of systemic risk will eventually consume the entire Market structure, and eventually not forestall the flare of systemic risk; it working to negate imbalance of Pricing in the financial markets–creating false value for material and Product. Systemic risk regulation simply drains the Markets of the bounce necessary to adjust Prices. Regulation will actually only increase the blowout magnitude of systemic risk.

I must take issue with this attempt, simply as an element in the Education field. My basic objection is not the idea, which could be worked quite beneficially, but the Private sector nature of the company. It would be an excellent idea if conducted by the college administrations themselves. The idea can be reworked to allow Students to reduce the Cost of their education by making excellent Grades. Colleges could adjust their tuition fees to where academically poor Students are forced to underwrite the achievement of superior Students, something which occurs later in life after college. Proper alignment would have A+ Students paying a minimal amount, and D or F Students partially underwriting even B Students. Such a Concept is harsh, but no harsher than the current economic environment on graduating Students. lgl

Real World Understanding

I often read Menzie Chinn knowing he is correct, but lacking in second generation analysis. Here he finds wage rigidity, but refuses to split into Income levels. He might find that wage rigidity is mainly primary in only the top 10% of Incomes, and relatively absent in the lower 60% of Incomes. This stands because of a real Lay-off and Rehire at lower wage mentality within the top 10% class, who are the vital Managers; long have they been separated from a sense of responsibility. Business technology today is directed towards Production which can utilize relatively unskilled and inexperienced labor; something totally in tune with the above stipulated policy. Employment losing its percentage share of total Income in this country reflects the policy as well.

Steve Collander serves as a good example of modern interpretation of the national debt. I take the contrary view to the debt expansion: mainly that it aids the employment issue little; it serves business and financial interests as an alternate source of Investment; it serves as a pressure release where Tax reform can be avoided; it does not dry up Imports into this Country, as it presents a viable alternative to excess American Dollar outflow overseas; and will cause a real crisis once the economy begins to recover and Interest on that debt quadruples. The real Cost of American conscription of debt cannot be permanently suppressed, and it will hit with oppressive pressure.

I will finish the current Post with this article from Mark Thoma. The upflow principle of taxation will always assure the upper Income classes of getting an advantage over lower Incomes. The only distinction being that they get the full advantage of the Tax Cuts, while lesser Incomes only partial benefit due to the lesser amount of Income earned in the specific bracket. It is my theory that there must be an increase in taxation for business policy to be compelled to Change. Every revision of the Tax Code has always eliminated the difficulties impacting the upper Incomes from previous recessions, which consistently means that the lower Incomes must take it on the Chin, in order to reorient the economy to Productive mode. It has long been apparent to myself that in the real business model changes must impact the upper Incomes, the suppression of lower Incomes will bring no Production schedules alteration. lgl

The Wild, Wild, Urban!!

There are those complaints that I never provide Charts or raw data. Charts require real labor, and the only thing I like raw is Meat. Here is a wealth of Charts and graphs, and it even deals with important material. I spent part of the morning talking with a Tire Dealer in my hometown, and his discussion of his recent trip to the Bahamas was vastly more entertaining than was his complaints of restricted Tire acquisition for Dealers. I have also talked to a number of other businessmen recently, all of whom complain that the corporate distributors will not accept Special orders, insisting on whole trailer deliveries; often composed of a wide assortment of which only a small part is of extreme value to the business. The Tire dealer states he is getting overstocked in certain sizes of tire, while meeting chronic shortage in mainstay sizes. There has been a reduction in distribution centers for Product supply across the board, and adamant refusal to fill Short Orders, all with the intent to cut the labor Costs of Corporations.

Distributors have only shifted the Cost of warehousing Product supply down onto the Retailer. This presents added Cost to both Retailer and Consumer; the first coming in the Cost of expensive Rent and delay of proper Product, the later in higher Costs in delays of Consumption and function of Product. I cannot be sure, but suspect that a great share of the 1.5 million closed Businesses would identify a like set of conditions coming from Suppliers. It would be nice if I could put a numeral set to the Cost of such practice, but can only state I feel this is a major cause of the bankruptcies.

It is indicative where Business decides to file for bankruptcy. The States chosen express among the lowest rates of bankruptcies in the main, meaning that Business is traveling to business-friendly States to file their bankruptcies. Business must feel that they will get a better deal within those States which do not have arcane Rules for doing business. It also means these companies have Interstate business which is getting interrupted, else they could not Shop their filings. None of this information bodes well for the American economy, and the serious Students should study the materials while taking Notes on the information. lgl

Percentatge Down

James Hamilton will always give one almost everything they need to know, and again does an effective Job. First, We are not at any major tipping point by my measure; the business is out there and steady in Demand. It remains that steadiness which holds the problem, as there stands almost no outlook for a return to full employment. The economy could chug along for years at its current rate, but will not get Us the long-term growth desired; especially as We will need a trained labor force in ten years, when We will have a major displacement of trained labor due to Retirement. Here is where our new trouble will appear, and We must get the Young established with Work experience before it happens.

Paul O’Neill and Robert Rubin agree basically with my evaluation, if not my conclusion. I agree with them in their Call for revision of the Tax system in this country. Where We disagree lies in their desire to amend the old system, while I value a replacement system. I am currently contemplating a Percentage Down tax system which I will try to explain in the next paragraph. I will state that revision of the tax code is utterly necessary, from the standpoint of generating the necessary tax revenues if nothing else.

The Percentage Down tax system is relatively simple. It starts with the Tax rate being absolutely fixed in very real terms: The tax is $35,000 on every $100,000 earned in any manner, even Inheritance; Capital Gains at this time eliminated forever. The Tax is reduced 10% for every $10,000 not earned in the first $100,000. The rest of the deductions are structural in nature, and cannot exceed a percentage greater than 20% reduction of the tax rate. Any Dependent will get the Taxpayer a 1% deduction from the declared Tax rate. There will be a Housing allowance granted of 10% if Earnings are less than $100,000 per year. There will be a 5% reduction in the amount paid for Energy Assistance, if Earnings are less than $100,000 per year. All business expenses have been handled by the compilation of final Income, but there is a final Business and labor Deduction of 5%, if final Income has been less than $50,000 per year. This system both simplifies the reportage necessary for Tax filings, but targets specific areas necessary for tax relief. It also brings into range a satisfactory system to provide Stimulus, say with a singular reduction in the total amount paid per $100,000. lgl

The real Power of Markets

I read the literature of this Post, and some of the work behind it. I am confused by it, because I recognize the real failure of State Planning. It cannot foretell the future! The Counterpoint intrudes that the Markets actually set the Production Schedules of the economy. They respond to the amount of Production materials available, and combine those materials with the desire to possess the materials for Production, and thereby set the Production Schedules. This might seem like a ludicrous idea to Some, but is the reality!

Markets not only set the Production Schedules, they also assign reality to Consumer Demand. This later is not only Consumer desire, but the ability to pay the Cost of supply of that desire. My grandfather wanted a new Cadillac all his life, and never had one. The entire issue was the Price on the vehicles. He settled for Fords. Why? Much of the material Cost of the vehicles were the same, but levels of Production and amount of Consumer desire was translated into Consumer Demand by Price. It is these two equations exposed which define the success of Markets.

Economic models never account for future demands placed upon the economy, while Markets automatically assess the alteration of viable Consumer Demand immediately. Materials can shift over the period of a day from one endeavor to another. Consumer products can rise or fall within an hour; check the entirety of Gasoline pricing and arbitrage. Markets were the first computers of the human race, and will undoubtedly last the longest! lgl

Essential Truth

I should like this Post, but I don’t. Deep Seal Drilling is not business as usual just using machines. There is already immense pressure at point of interconnect when there is 5000 feet of seawater on top of the operation. Foundation pins need to radiate out from the drill hole from the immediate base to about 8 times the distance presently utilized. Inner circle pins should have 120 depth into the bedrock, while exterior pins should have a depth of at least 60 feet; this simply to keep the base frame from being blown out. There should be a pressure transfer system where outlying pins blow before interior pins. Blow-Out Preventers should be tied to the foundation pins–separate to the connection of those pins to the base frame. These Preventers should be securely bolted to the base frame, but with breakaway bolts to where the foundation pins absorb the pressure upon breakage, the Preventer serving as a Cap upon Blow-Out. The Whole should be surrounded by an independent secondary Pipe funneling blown material to the surface. The surface should already be surrounded by a bumper system to prevent Oil spillage from spreading. The secondary Pipe should end 30 feet below ocean surface to prevent Oil geysers which could escape the bumper system.

Please retain unlimited liability. We are already getting sufficient drill holes in our oceans under the current system, and I would not enjoy anything which would multiply that number of drill holes without all due caution; a factor which will become apparent with a cap on liability. The Oil industry is too profitable for unlimited liability to forestall Oil recovery, and I want the small companies to be mightily afraid to enter into Drilling without a big pockets parent able to handle liability damages. Freezing out the minor supplies of equipment will only force the majors to develop their own equipment, a function which will improve compatibility of equipment in Service and Function. There is real Need to understand that minors are in this arena to draft off the Profits of Oil; I feel no Call to supply this many Management teams with high Salaries and Bonuses, when it comes at a Safety Cost to overall performance.

Every Consultant in any business arena survives by placing the Management of the businesses they service at the head of the feeding trough. I am not accusing Kopits of any attempted propaganda, just the natural inclination to serve his Clients. They want higher Profits and lower liability. I simply do not like his Clients as much as he does. lgl

As the Earth quakes beneath Us!

I would like to start out by answering a Question put to me in my incomplete, inadequate manner which is my nature at work. The Question asked was How saved taxation in the Past could possibly affect the tax impact of higher taxation in the future. Let Us first start with the normal 97% whose Incomes only matched the inflation rate in the past decade. Some sensible economist somewhere estimated the return of taxes to these Income Earners would reduce the growth of GDP about 1.2%: correct estimate who knows for sure. Revival of the 2000 taxation for those who made the 8% per year gain in the last decade would reduce the GDP about 0.7%. There are Those, including the Obama administration, who believe revival of taxation for these Income Earners are worth the only digital loss of GDP; faced with the Savings in federal debt contracted.

The first statistic could quite possibly be concrete in nature, because it would seem only a natural rise in Income for Labor through the time sequence. I have already suggested a reduction of Sales and Property Taxes by federal program to courteract this effect. The advanced rise in Income for the highest Income Earners does not seem entirely natural, where they earned an approximate 40% ungraded, or 52% graded increase in Wealth over Inflation during the Period of the last decade. This leads me to doubt the last statistic, as I believe there will be no economic disincentive to the increased taxation until the highest Income Earners fall to a relative position equivalent to the normal Income growth of all Labor under inflation. It is only a pretense that such Income levels will reduce their economic efforts because of the taxation; they will increase their efforts to make back the added taxation.

The Obama administration is rumored to be contemplating reduction of tax expenditures now on the books. I find this to be an exceedingly grand idea, and long in delay. It not only eliminates much of the chicanery from the tax system, but will do much to return the higher Income Earners to a normal pattern of Income growth based upon Inflation. I would like here to say that an actual normal pattern return of the higher Income levels will not actually be an economic disincentive even if attained (doubtful); it would require a 3.2% loss to the lower Income Earners for such an economic disincentive to be realized—my numbers, so of course in dangerous territory! lgl

Life in the Fast Lane

I was talking to some of my friends last Week about letting the Bush Tax Cuts expire. I stated then, right or wrong, that they could expect about a 5% increase in Personal Income tax, and about a 7-8% increase in Capital Gains tax. A lot of people claim this added taxation would be bad for business, but I seriously doubt it. The reason I doubt it stands as these Individuals have opportunity to attain higher maximization of their Income with due diligence–they work a little harder–and the fact that Government debt pulls as much or more of Investment capital from the Market as they would contribute to that capital. Menzie Chinn may provide a more balanced look at the entire Question, but ultimately doubts that removal of the Tax Cuts will have much impact.

I would like to approach the problem in a different manner. The people to be taxed once more did very well in the past decade. One can find many estimates on how well they did in actual fact what with the inflation rate being what it was, but I assume they achieved a growth rate in their Income and Capital Gains of about 8% per year before scaling for Inflation. I may be vastly wrong because I do not follow long-term inflation, but cannot imagine that the Inflation rate was over 40% for the Period; this meaning that these Income levels did about twice as well as the inflation rate, so that their Incomes are about half again as large as in 2000 after inflation.

It is clear that they are first paying more today than they were in 2000 even with the Tax Cuts. It is also clear that if the Tax Cuts expire on schedule, there would be an incredible lengthy period before they would have to pay an equal taxation to what they would have paid, if the Tax Cuts were never implemented in the first place. An astute economist could insist that the tax impact of Bush Tax Cuts expiration could not be accounted as added taxation until the new taxation had replaced the foregone tax revenues over the Tax Cut period. The wondrous element here may be that this will be what the markets will also account, and there will be no tax impact until the previous Income Gains fall back into normal alignment with lower Income sectors. If this is the Case, then the Tax Cut expiration would be a benefit, with no impact on the economy, lower Interest rates as Government debt is not assumed, and it would propel these Income levels to maximize their Income potential. lgl

Never ask me for Links--See!

I would like to say that I have read David Stockman, and agree with much of what he had to outline. Menzie Chinn, though, has a much more illustrative Post, and clarifies the status of the last Recession. I do not exactly perceive his great rebound in Investment, especially as much of it was the importation of capital goods. His sidekick blogger, James Hamilton, also has an interesting Post, and my only comment must be the Question: How long can they expect to generate side-paper Profits in a real term declining economy? They will have to eventually insist on the foreign paper trade insisted upon by Arnold Kling simply to prevent US Imports from becoming unapproachable.

I will now turn to this Work by Calculated Risk. The sum of $771 billion of net inequity carries no unmanageable element, if the debt is quickly sent into receivership. Carrying deadweight is the most precarious factor in such debt, with no one able to get a Restart. Homeowner, Bank, and SWAP have no chance to Write-Off and regalvanize. It becomes a debt slavery with too easy escalation in a scenario of degrading capital. We need more than to rewrite Paper.

I will give this Gift to the wonkish within the Reader. I would advise the Reader, though, not to read this material if there exists no pressing Classroom assignment. I have never been in favor of Cap-n-Trade, far preferring a booked simple Carbon Tax rate with resplendent supplement to actual needy recipients. I enjoy the flat Carbon tax over the progressive Carbon tax as it allows the easiest entrance into industry, and the greatest pressure to expel Carbon exhaustive users by maintenance of a normalized Pricing structure; something that a progressive Carbon tax system could never attain. Cap-n-Trade will always bring entrance issues, and a Profit hedge for heavy Carbon use. lgl