The End

I write this for those few who have maintained consistent watch of this site over the years. I was diagnosed with lung cancer this past week, and will likely not contribute more to this site. I am in Hospice right now, as the combination of low blood flow through the heart and the active nature of cancer rule out any pleasant scenarios for Chemo or Radiation treatments. I wish All well, and that the nature of this blog will be maintained elsewhere by others. lgl

Money mystifies Me

I will tell my Readers to consider this Post, and even study the graphs. I confess that I have a real problem with Stimulus overall. Stimulus, by its very nature, must be significantly effective as to swing the entire economy; when One hopes to draw the economy out of a Recession. Discussion of Stimulus in the context of the 1930s economies implies far less inertial weight to swinging the economy, as does shaking an economy many times that size. Stimulus could well be a economic policy which has reached its limits. Like Karl Smith, I really doubt a Zero Interest rate when Corporations are not spending, and Banks are not lending. I hate to pick on a particular, but the rise in Stocks could honestly express the real Inflation rate, and nothing else. I once long ago argued with a group of friends on the value of outsourcing any Government program established to promote Employment. Outsourcing leads to lobbyist demands to continue funding after the need for extra employment has passed, and the Government could layoff Workers at a proscribed rate; economically justifying the reduction. There is the added problem of Outsourcing costing more than in-house cheap Labor rates, with a Profit for the outsourcing management. I am terribly afraid that this Dog does not Bark, and even does not Hunt. The Fed cannot spread Cash into the economy without having real effect on the Pricing. The hesitation in Market Prices immediately after Fed movement on Cash release consisted of Everyone adopting a ‘Wait and See’ attitude about Price movement, before releasing any valuable Commodity in possession; this means that there was not that much for Sale, while Buyers awaited knowledge of how rising potential Commodity Pricing could affect their Sales structure. Remember this comes from a man who drove a Ford for ten years with a poor Heater in cold Weather; never have bought any Ford stock; I might have missed a real opportunity since the last Recession. I will now delve into Rachael Carson’s ‘Silent Spring’ with the ritual of getting a Banker to admit anything on the Record. We conceive that the Fed adopted the same casual attitude of debt acceptance that the Banks who were borrowing previously had to abandon. This poses a Question for myself: Under what Conditions could a central banking system fold up? I ask ths because Everyone said the big Investment banks were too big to fail. What happens when a few central banks have to admit that they have no real assets, only default Paper? I never claimed to be a Banker, but what are the Options from there? lgl

All that Nit-Picking

I am not one capable of agreeing with the Austrians, Some consider that I do not even understand their Thought processes. I here bring you a Post which I think is important coming from an Austrian, the major purpose of which is to present a Counterpoint to my own Thought, which is truly at odds with all other economic thought. My idea states that Recalculation cannot possibly take place without a fall-off in the Aggregate Demand. Austrian or Keynesian, they all have got it wrong. Recalculation requires that policymakers, whether Private or Public, clearly identify the failures within the current system. What must be fixed cannot be found accurately without the drain of Cash down the Losses hole. Reestablishing the AD simply places a Band-Aid over the Skin Cancer, as We await the deadly fiber to sink to Crisis levels and crippling state. Give me an AD curve which is 20 points below normal, and everyone agrees that Changes have to be made. I find this Post which soothes my achy, breaky Heart. I have long surrendered any goal to become the next great American author, and even to develop a committed online Readership. It is why I am starting to enjoy blogging more than ever. They tell me that what is put on the Internet never really disappeared, simply loses View rate. Now I can play Nostrodomus without Anyone laughing at me, and I might be found to be accurate in a couple of Centuries. What are the Odds? Probably less than I having achieved real Notice on the Internet today, but what the hell, why not go for It? I will finish with this Post today. Everyone wants less taxation, but does Anyone actually deserve it? I am talking about lower Incomes as well as higher Incomes. Would it not be wise to demand a set Tax rate, and collect from All? Here are some of my reasons: the Union and Labor movement would be much more powerful under a set tax rate, and overall Wages would be much higher; the bonus system currently in force would include all Contributors to the Profitability, not just Those at the top of Management; Stockholders would demand a fair share of the final take, and not be left with undistributed Dividends, which are held until upper Management can find methods to absorb most of those Profits; and tax revenues could be stabilized at high levels, and Politicians could be forced to spend within necessary limits. Your Guess is as good as Mine! lgl

The Harsh Word from On-High!

This is exactly that type of Post I can understand, but disagree with heartily. I have long since decided that the American economy can be truly saved only by revision of the Tax Code with lowered rates of Taxation, but ones that have no discounting allowed. My position on the Issue states that We cannot afford Keynesian deficit spending, even if the economy needed such which it does not. We must adopt mass, swarm labor tactics for government expenditure for any stimulation, and We must insist that such activity must be paid by Taxation. This still does not answer the claims of the Post, and I will follow with my Thoughts. Henry Ford’s standardization of Parts and assembly-line production must solve our deficit problem. This means the designation of only a One-Size payment as a Social Security benefit and Relief payment for the Poor. A simple Statement that no FICA taxation to this Point has fulfilled full payment for all Social Security payments with the addition of Medicare should silence all Claims of having paid more into the system. A Medicare and Medicaid system will be established where Insured will be allowed only a half million dollar total allowance for any 5-year period, combined with legislated Medical Provider responsibility for additional medical assistance to the Patient if they received any of the original half million; this means they are responsible for any added Costs of Treatment within the Period. A new Proscription rider will be included to the Social Security and Medicare/Medicaid system, where the previous author of Proscriptions using up a set allowance must be accountable for half of the remaining medication not covered. The Proscription allowance will be determined by Committee to provide the Drug industry with a 12% Profit ratio for their Drugs. Now We must turn to the Pensions and Retirement benefits. The Civil Service will receive no retirement benefit in excess of that provided by the Social Security benefit, so that they can double or triple the size of final benefit. Some may question the triple comment, and I will answer it. Military pensions and medical benefits will not be granted to Military Retirees until they are at least 62 years of age. Here is the Kicker: Military Retirees will lose their Pension benefits unless they continue to work for the federal government until they are 62, at the same rate of Pay as they received at time of Retirement; this helped by federal mandate that qualified ex-military Retirees will replace any Civil Service employees under a forced Retirement program; their pensions only becoming active after they reach Age 62. Retirement Investment funds are encouraged everywhere throughout the economy and society, with some of the advantages currently contained being somewhat restrained; the most notable being Tax delay can only extend for 10 years after registration, not upon actually Cashing Out. We advocate everyone plan for their Retirement, and follow clear Guidelines that Congress will outline for the greater Tax advantage. Still, in no way will it be the current Give-Away program of younger labor supporting Retiree lifestyles. lgl

The Chicanery of Corporate Taxes

I started this search by reading this Post last. There will be two other Opinions which I will cite concerning their evaluation of the material, which focus on other aspects of the situation I would outline. I work the content of the original Post through my mind, and come up with several decisions. The first one is that if actual Productivity basically matches the drop in Employment, then We are actually still in a Recession. I scribble up some Paper, curse a little, input a little Kentucky Windage, and determine that the actual Inflation since 2007 has been more on the order of 6% per year, if one discounts the falling values of Housing. Quantitative Easing saved no Jobs, and directly suppressed actual Productivity by artificially decreasing actual Demand for Product through higher Pricing of final Product. All Stimulus efforts advanced so far only aided final stage Production, which paid less for inputs, but received advanced Retail Pricing. This spurred the level of Business Profits, but only at the level of international Players who could import intermediate Production Goods; such items which could not be supplied by domestic Producers because of higher Costs of Production, and rising material Costs. Tyler Cowen brings his own View to the Mandel Post. He asserts that the Mandel data compares favorably with one current economic model hypothesis, while contradicting its opposition posit. I am not sufficiently fluent in either hypothesis to argue this Point. I do know of no economic evaluation which measures Productivity rate gains in terms of actual or real output increases or decreases. One factor Tyler does not touch upon remains the fact that a great share of the international competitiveness for input supply comes from Corporations desiring to transition to foreign production in order to escape necessary response to United States Business and Corporate Tax law. He does stress that there is definitely a structural unemployment problem in this Country further injured by a declining Productivity output. I could mention that the Fed Quantitative Easing did finance the Corporate efforts to shift Production overseas. Arnold Kling joins in with this effort, which underlines that this is not Trade neutral. It is also not Employment neutral. The real Cost of intermediate inputs are being under-valued. The amounts of such inputs are also under-estimated; but here is the kicker, the matrix changes massively when it is canopy production for a parent Corporation. The later has a real advantage in under-pricing the value of these inputs to achieve Tax advantage, when they can shift final Sales Profits overseas to the intermediate inputs production. They get taxed less on less reported Income. At the same time, they can claim a higher Profit ratio, but with lower amounts taxed. Corporations, if they are big enough, love this system. lgl

The High Moral Ground

I began reading this Piece, and started to feel disquiet, then I reached the part where Megan should have more forcibly retracted her own statements because of the follow-up information. The bright Knight is slightly tarnished armor in me decided I needed to ride my trusty stead, almost as Good as Don Quixote’s, at the gallop. I considered that I would need something new and original for evaluation, something to stick the lance point in the Corporate rear, even if my slight weight could do no real penetration. I hoped that the radio would play the Song ‘The Night Chicago Died’ so I could imagine that though the Darkness surrounded me, Right and Truth could still succeed. I was hit by a Bolt of Lightning, or at least a bit of joint pain, and came up with the Winning Ticket; otherwise known as the Alternative Corporate Minimum Tax for Domestic Sales. It is quite simple in context, some might say like its author. There are only a few short elements in the hopeful law, which I will stipulate: 1) Every Corporation and Business must pay the Alternative Corporate Minimum Tax for Domestic Sales 2) The ACMT will apply in each and every case where the Business or Corporation does not pay an equal or greater amount of Tax in the United States on the Profits of their Sales in the domestic United States. 3) The ACMT will not consider any Tax paid elsewhere of any form–including State and Local Taxation, Excise Taxes, and Taxes paid to any foreign entity. 4) Foreign Corporations and Business enterprise will be as subject to the ACMT as domestic entities. 5) The ACMT will be equal to the lowest listed Income Tax rate for Individual Taxpayers, and the final Tax applied will be the highest of the two applications–the normal Tax Accounting, or the ACMT. 6) The Profits from Domestic Sales will be considered to be 10% for Domestic Sales, unless the Business or Corporation can prove a reduced Profit from actual finance payments made outside the canopy of the total Business or Corporation.. I wish my Business friends well, as I ride off to joust with lesser Knights; I could get bruised up you know. The one Thought I would leave with all of you must be that We cannot create Debt through Spending which We know We will never be responsible for, or pay. Forcing our descendants enter Receivership is both Wrong and morally bankrupt. lgl

Some Common Sense in a World of Nonsense

This article presents me with the pressure to bring a response to the fore. I will state first that federal economic policy makers do not understand Inflation as well as they should. Their first failure comes in the ignorance of the impact of Inflation by sector. Where is all the Inflation coming from? The Answer is Food and Fuel. Both generate the highest Inflationary pressure and rate of Inflation. Food and Fuel make up the largest component in the Household budget beyond capital acquisitions like Homes and Vehicles. Capital acquisitions come with some form of mortgage, whose rate has been set in prior period, and relatively immune to Inflation. Households do not see Inflation there–they see it in continuous Daily or Weekly purchases. What are the most continuous of steady purchases?–Food and Fuel. These Costs are Inflation to Consumers, and where real Household notice is paid. Consumers are contracting their purchases by the Inflation they can see, and they see the heaviest Inflation out there. One only need to blow that C-Note on a SUV refill to notice the Inflation. The second flaw in Fed policy lies in the Interest rates–economists always talking about less than 0% as a good thing. Households have watched their Bank Deposits tank, with absolutely no Income coming from them; a sincere burst of confidence foregone, as Households thought they had a slight hedge against Inflation–now gone by Fed decree. I once had a Father who made about $30k per year off his bank deposits; thank God he is not alive today to witness the miserable $600-800 which he would probably draw from like amounts. My Father was never a big Spender, but such Interest rates would have put him in catatonic freeze in buying anything; especially with a magnificent Inflation rate which the Fed refuses to observe. I can positively explain that Consumer Confidence is being adversely affected by the Inflation. Quantitative Easing has been a long-standing Joke, whose sole Goal fulfillment has been Jobs saved, according to the economists who designed the policy. There were better Hiring rates late in the Great Depression, as the Warehouses slowly emptied. The Fed utilizes the collapsed Housing market to exclaim there is no Inflation, while concurrently, banks demand full capital asset coverage before extension of any new mortgages; this means Housing prices will descend still for quite a while due to lack of Buyers. Everyone in the Markets screams Household should invest in Stocks, Bonds, and Securities of various types, but all require constant supervision, else those investments will be even more ineffective than the 0% bank interest rates. Grandpa always told me to never draw Cards in another man’s game; you should know Gramps was a professional Gambler at one time in his career. I fear for federal economic policy makers who turn Households loose to ‘Sink or Swim’ on their own, with even less recourse to Social Services. lgl

Real Missteps in the System

I disagree with Mike Shedlock on this one. What seems like a good idea remains fraught with peril. A major rationale for spreading Taxes out over a wide base establishes that tax-paying cannot be gamed. Evasion of one type of taxation leads to deeper tax impact from other types of taxation. Case in Point: Without Property Taxes, many successful people would place their accumulated wealth in fancier, and more numerous, residences. Soon, you would find people living in Housing much too expensive for their Income, with a collapsed Resale market because of the Price they would be committed to demand by Mortgage and retention of wealth. People would be led to retain excessively large Housing at points where they could do with far less Space, and therefore the tendency would lead to superabundant construction with young people paying too much for their Housing. Property taxes do have an impact on the market, but much of that impact is beneficial. The Business escape from Taxation remains another aspect, considering that they make a huge draft upon Community Services–both their own, and their Employees; suggesting the Community taxpayers foot the full bill is not only unfair, but also impossible. The major reason for Tax Spread lies in the reduction of tax impact upon one segment of the Population. We do not need the Poor who contribute 60% or more of their Income in Life Support to be forced to pay 40% or more tax on those purchases; by the way, without Property Taxes and Income Taxes on the Poor, Government Services could not be provided; I won't even begin to discuss FICA taxes or their removal. The high Income Earners simply do not purchase or Spend to the degree necessary to tax those purchases at sufficient level. I once estimated that if all the Exemptions for the Poor granted exemption from high Sales or VAT taxes, then the remaining high Incomes would have to pay a Sales or VAT tax of around 320% to fund the current necessary tax revenues for Government services. It does not help that under similar circumstance for the Poor in Exemptions from taxation, that elimination of Income Taxes would raise Sales and VAT taxes to somewhere in the high 800s’ of percentage. Simple removal of Capital Gains taxation would put Us in the 200% range of Sales and VAT taxation. We spread out the Taxation so that everyone complains about taxation, but no one is actually incited to tax rebellion, though there is admittedly great amounts of tax evasion. Economists disagree with me, but Corporate tax evasion through purchased legislation has cost this Country about $12 trillion of national debt since 1963. The advantages granted to Corporations in like period meant only about one trillion dollars in GDP increase per year, over what was achieved in the Period. The actual Gain to GDP growth subtracting the lost tax revenues was probably less than $300 billion per year, or translated, loss of about 200,000 lifetime Jobs over the Period; check the Employment growth over the Period to see whether it would have made major difference. It can be clearly seen that loss of Tax venues can affect the entire economy in ways which no one wants, and quick assessments in the area of Tax placements are usually not Right. lgl

The Correct Direction

I fear that Greg Mankiw does not know the condition of the human soul. His Presidential Address to the nation will never be delivered. No Generation will ever accept the debt servitude of a previous Generation. The United States will default on its accumulated debt, the Question being only When. Politicians may call it by various Names in order to hide admittance of the real intent, and there may be a number of methods to achieve that end; but the end-result will be the same. Will it destroy human civilization?–No! Will it collapse the World economy?–Possibly! But there will be Recovery. People may shift around for a few years until a new economy is formed, still, there will be a new one develop. Will there be intense hardship for People?–of course! The worst possibility though, will be that the United States will wind up a Third World nation.

I agree with Paul Krugman in his list of Republican economic theories which are illusionary. I do not believe in his liquidity trap, a fancy name for stating that it is simply Cash which has to be thrown at the Problem. I, as a matter of fact, think that there is an over-surplus of Cash in the economy, and that the Fed is doing exactly the Wrong thing. My Solution for the weak economic performance defies all current economic theories, and advocate a vastly increased amount of Tax Collections garnered. I have long called for a major overhaul of the Tax Code, and I estimate that the actual Profitability of Business enterprise must be reduced by around 8% through Taxation; this means that if the Business makes a 12% Profit, We take 8% as Tax.

I first must say that such tax pressure is not unrealistic, as Business have been making at least this level of Profitability to be paying out the Bonuses and Salaries to Management–totally over-priced when they cannot seem to pay high Dividends to Stockholders. The second major importance to be made is that the higher collected Taxes will force Management to achieve greater efficiency in business practice, and initiate tri-level development plans to maintain continuous Profitability; the later meaning they have to search for opportunity in Short-Term, Intermediate Term, and Long-Term investment to keep from being replaced. That means they will have to work harder and be more innovative. It also means that major Profits cannot be invested in Treasuries for protection against adversity, as higher taxation of enterprise Profits will demand a higher rate of Return than currently being generated by Government non-taxables. The increased Tax revenues will nullify much of Greg’s Presidential Address, and the actual Reality states that Taxes are not a nullification of innovation, but actually a Spur; everyone needing to produce higher Volumes at lower Cost to Consumers to get both Sales from which Profits are taken, and cheaper Production and Distribution Costs. lgl

Your Basic Award System

I have decided to go totally off the Reservation today, and delve where no man was meant to go; this into the area of Bonuses, Pensions, Stock awards, and medical coverage. There stands so much hassle about Bonus systems and health care coverage that the system seems to be broken, which it relatively comes with the Reality as well as the Image. Business has always maintained the ideal that they should possess sole Right to determine how they award their Employees. Labor has continuously contended that Management was totally unfair in their Award system, granting Management personnel far greater advantage over the rest of its employees. I study the system, and find that both are accurate: Those who determine their own Pay, pay themselves much better than those who have no Voice in the decision process. Business is presently in a major Conflict with Labor to suspend Collective Bargaining between Business and Labor, completely eliminating the Labor Voice from the decision process. What is to be done when one agrees with both Sides?

I decide it is time to revamp the whole Award system. The first Step is to determine the base Wage Scale levels, and how these base Wages will be increased on future Growth and under the impact of Inflation. The Second Step consists on insistence that medical coverage extend as least as long as the base Wages are paid. The third Step is to outlaw any Bonus or Award system in which all Labor components do not shard equally of the benefit as apportioned by their participation within the Production process. The difficulty of determining the later Step leads naturally for the fourth Step, which would be to disallow any benefit or Award which is disassociated from the base Wage Scale.

My original Concept stands as there shall be no Bonus or Award granted except for an extension of the base Salary for an Award period past Severance of Employment, the period length determined by Management; though the filing of such Award determines by law that it must be paid. Everyone knows Business management’s lack of desire to pay Wages past the usefulness of the Wages, meaning that such Awards will be carefully crafted and of short duration. The Award can be of any Size ranging from Base Starting Salary to final Employee Salary upon Retirement. Remember that these Salaries must be paid under the same Schedule as currently-employed Labor, and are legally binding for the total summation of Time periods awarded. Medical coverage must continue for the same length of period, if it is granted to currently Employed. We suddenly find Management hampered in their easy growth to great Wealth, Labor finds much of their complaints satisfied without that much Collective Bargaining, and Business still has complete management over the level of contracted liability they will owe to Labor. We might get back to awarding past effort without massive search for personal Wealth, people might concentrate on their Jobs because they possess long-term interest in the success of their enterprise, and Business even will probably show a better bottom line. lgl

Another form of land usage and Water Treatment

I was amazed by the video in this Post, and feel that Everyone should view it. We currently have declining cattle herds, with the Meat-Producers leading the list of shrinking resources. Without further research into the material, which I may later make, I would call for a program of the federal government purchase of 2 million head of beef cattle per year on the open Market, and transfer of these animals to poor grass areas during the Rain or Wet season for the land. Here is the elements of the program of which I would approve:

1) Transfer would be made only of young healthy Stock before investiture in the feedlot Cost spectrum, so as not to affect the Cost of butcher Meats or Feed Grains.
2) I would have All tagged and branded with federal signature, stipulating that none of these animals could be sold to Feedlot, Packing Plant, or Animal Rearing Units except by the Government.
3) All care in Transfer to the allotted acreage, and final collection of the animals for Sale to Feedlots would be done by federally-employed or contracted Employees.
4) There is indication that Herding during the process hastens the Recovery, so that the Local Employment can be sustained for long-term Periods.
5) Back of the Envelope figuring leads me to the imagination that several years of such sequestration of animals will raise the level of Beef herds by 25%, while most of the Cost of the program would be recovered by the resale of the animals after 2 years.

I now have several qualifications that my farm background leads me to announce. The usage of cattle could be most effective, the use of Hogs, Sheep, and Goats would be highly counterproductive to the process. The will be a huge Cost in vehicle transfer of Herds from Dry to Wet areas when the Rain stops, but the cooling effect of the recovered areas will present less need of transference over Time. Most economists will not understand the ramifications of such activity, lacking a background in animal husbandry. One myth I would like to discard immediately will be the Claim that increased numbers of large animals will lead to increased levels of Methane Gras; this is Wrong, as the chemical decay of the areas release the same Methane as does Gestation. The second myth to be dismissed is the contention that Livestock pollutes Clean Water. Reality states that animal waste delivers the microorganisms and chemicals in natural state capable of killing both bacteria and Viruses, and the additional chemicals share many of the properties of proper fluoridation, if one allows the water to flow a couple miles from the position of animal waste deposit. It only sounds gross! lgl

Another Crackpot Idea

People often wonder at How my mind works, and I like to add confusion with cross-signaling wherever possible; here is a Case in Point. I was reviewing John Whitehead’s numbers, and considering the degree of accuracy in his projections. The improbabilities of Averages and concrete data remains pretty well-known (something about Variance in the division process after the gross numbers begin to grow), until I had the Insight that it was all a Tempest in a Teapot, and utilizing the worst extreme of Variance was always the best effort in Economics. It is like unto playing Horseshoes–scream about the One-Pointers, and forget about the Ringers; you will invariably win more Games. This philosophical point determined, I had another great Thought.

Our esteemed Government agency currently sells flight destinations routes to Airlines, limiting in number the total volume of Traffic seen in the Air. I contemplated Whitehead’s style of analysis, and asked myself Why there could not be greater rationality obtained by sale of all Routes, not only for Passenger traffic, but also for Freight; then moving on to place Trucking, Railroads, and Airlines in competition. The Effort would require the analysis of the likely expected economic value of each type of personnel and freight transfer, the variable Cost per Unit of each type of Transfer for such specific element, and the Cost of material transfer from one mode of Transportation to another. One can clearly witness that there would have to be a vast number of Special Permits to cut material transfer Costs, muddled payment accounting, and added inconvenience potential for Those committed to a transfer (here We are talking about added Cost). This enforced competition, though, would reduce Capitalization Costs, maximize Production unit usage for Equipment, and potentially increase economic value for said Transfers, and at greater Comfort.

You will find innumerable Anger issues rising to the fore, coming from lengthy Bus transference between Railheads, or Railhead and Airport. The flow of Traffic will slow, but it will raise Hotel and Motel occupancy rates; increased Local revenues, greater lost Wages from Travelers, and higher Costs to Business of sending personnel around the Globe. The Counterpoint may consist of lessened congestion at Airports, removal of the gigantic freezes at specific Airports due to bad Weather, and a Routing system which puts emphasis on what must be moved as quickly as possible, and what can take a more leisurely route. All of this done at cheaper Cost, and much less Consumption of Transportation fuel. The Concept is so nefarious that no one can ascertain whether such evolution would be an economic gain, or would be an economic loss. Still, it has such potential that Computer models should be built and tested. lgl

The Heaving Chests of the Violated

I would like to apologize to all eminent personnel, before I enter into this rave. I am not a Saltwater economist, or even a Freshwater economist; maybe I can be classified as a River Rat situated alongside a slow-moving brook. Some things I do know, one of which is that fiscal expansion must affect Resource and Commodity pricing adversely–this means maintaining a higher Price than would be otherwise natural; the Trick here being this will occur whether there is over-employment or under-employment of economic assets. Ricardo has little to do with that, except for allowance of foreign Suppliers to attain some level of economic Profits. Paul Krugman remains correct in his disbelief in the ‘intertemporal maximization’ which go on in these models; a sound rationale for this being that scaled Averages are a poor constraint for any graphical model. I disagree with Paul in his estimate that Public Spending will not crowd out Private Investment, but surely never for a reason suggested by the Freshwater economists. My Take on Public Spending is it presents an avenue of safe Investment for excess hoards of Cash at good rate of Return, which would never be invested at all if that rate of Investment rested upon Consumer Demand or the Supply of Product. I suggest that there would be less Private Investment at lower rates of Return, if Government through Treasuries didn't allow Investment of Profits at relatively high rate of Return. Remember that manipulation of Treasury Paper and its rate of Return is a political process controlled by Fed and Congress, and as consequence, Private Investment can insist on a higher rate of Return than that of the normal Risk based on market forces; Private Investment here cut off if the higher Profits are not realized, all because the safe harbor of Treasuries. This naturally curtails significant Private Investment because the added Risk Value cannot be paid by much of the proposed economic effort.

The first thing to be said is that the previous paragraph should have been much shorter. The second element must be a proper definition of discipline. The later must be flexible so that it bends under impacts, but does not break. I will interject this link here to indicate that I personally possess little discipline or logical pattern in my own efforts. I say this because the material in the Post with its own links should perhaps be read before my own advocacy of radical ideas. I start by suggesting all Concepts in any academic discipline should be reviewed almost continuously for relevance within the current Reality we face. Now I will turn to my main proposition.

I will start with the fact that We have a Social Security Trust Fund which is huge, but will run out after a period of years. The Trust Fund needs better assets than Treasuries with a Bernanke dictated rate of Return. Major Corporate Buyouts are all the rage amongst the Investment community, and huge commitments of Cash have not only been quoted, but raised. It is no secret that the Investment banks have run into the ground once, and show every indication that they will do so again. My idea is that the Fed has to save these banks anyway, and Congress has the power to dictate that these Banks under duress must be purchased with federal Treasuries held by the Social Security Trust Fund. The later gets a much higher rate of Return for their Investment, the Fed has to supervise these banks anyway, and Congress can also forbid Quantitative Easing so that the viability of these institutions must endure the stresses of the natural markets. As an intuitive aside, the proposed legislation should forbid any Publicly-held Property from granting any Salaries, Benefits, Bonuses, or Gains which would pay Employees better than the President of the United States–just a Thought! lgl

Heresy in the Modern Age

I was simply reading this article online, when I decided I would have to become a Heretic. Like most such offenses from the True Faith, this I start this with light heart and expectation that everyone will understand my position; though in truth, it will probably be greeted with vast disdain and terrorist contempt. Reaction will indeed probably consist of less than assassination, though character assassination holds high Incidence value. I might as well get started in the vilification of current economic policies at this Point, as no one steps forward to save me from myself.

My main Contention starts from an estimate that, in Reality, there is too much Cash in the system. The real reason that Stimulus and Intervention fails to produce the desired effects follows from modern business and finance methods to forestall absorption of Losses. Businesses today cut Production and Staff, not Profits. Translated differently, Business refuses to integrate the economic difficulties from which Consumers suffer. There are always too many Players too well funded to allow Recovery efforts to survive. This leaves Consumers, already losing Money and Jobs, to exert the economic energy necessary for successful recovery, facing the great mountain of Investment funds of a Business class who refuse to report any losses. They are willing to pressure Regulators and Legislators to ensure they come up with no Losses and are capable of over-Pricing any and all Production resources.

All Monetary, fiscal, and Tax policy adopted so far within the last Crisis has gone to guarantee that Business Interests would not have to eat any financial losses. I return the Reader to the Concept that there are too many Players with too much Money, and this practice will have to be stopped before serious Recovery can be effected. The best Means which should be adopted need be harsh Taxation, which will bring in tax revenues and curtail Business expansions, except in certified Profit areas. The Bush Tax Cuts in this Scenario can be likened to slow Arsenic poisoning. The best way to introduce massive harsh Taxation immediately would be nullification of all Tax remissions for the next Tax Year, except for a flat family deduction adjudged by the number of financial Dependents. Does this assessment make me the darling of both Liberals and Conservatives? lgl

Economic Stimulus and Stress

I was reading this when I decided I must advance a hypothesis I had been considering for a long time. The reason I was reluctant to advance my notion was basically due to the fact it would challenge almost all economic thought since John Maynard Keynes. Here is the basic hypothesis:

Economic stimulus has immediate advantage, but long-term hazard. Inputs of stimulus create economic elements which are foreign to market forces, and destabilize the economy in later economic performance. The major way this occurs is by altering the exact position of Stress, and the magnitudes of the Stress imposed. The Result creates economic elements not naturally joined to economy, reacting to different variables of Stress, but which can impede natural economic recovery forces by insistence that such economic elements be fully-funded and functional.

The whole is similar to building a House of Cards. We do not now possess a natural economy. The later is much smaller than what We have, but must fully fuel the mess currently considered the economy. We have a vastly expanded Government, containing among other things, a vast assortment of regulatory agencies and labor. The later must be paid on a par with their natural economy counterparts; think here all economic sectors cannot only be accounted by the labor force engaged in the industry, but also the regulatory agents to supervise the industry; again think of the Labor Wage Costs for the industry to include both labor force and regulatory agent salaries. Other elements of Government include National Parks, Reserves, Monuments, and Cemeteries–all of which Wage Costs must be paid. Unemployment Insurances Costs must not only contain unemployment benefits–but salaries for the management of the system at all levels. Government will not order specific payment of specific bills in health care, it accepting both Private and Public employment for no other reason than challenging the bill payments after Review; all costing both in Insurance premiums and health care Costs. I will not continue into the massive Hiring by Government for projects and programs almost without Number; all of which must be financed by the natural economy.

Every advent of economic stimulus not only adds to the mess, but it further makes the entire situation Top-Heavy. Intervention always creates Stresses unexpected within the entire economy–both natural and artificial–on a structure more subject to collapse. We are now at the Stage where We are manipulating the Money Supply itself because no one can conceive of major actual economic expansion intervention and stimulus. The Money Supply, though, is the seeming only connection between the natural and artificial economies through Wages, Rents, and Profits. Now We are introducing Stress factors into the Money Supply, with no economic agents being sure of the actual payments they receive; which may or may not be worth the Sale of economic assets within the market. Has Anyone asked what happens if the Money Supply actually collapses through Stress? I imagine that We have a second Great Depression if the Inflation rates reaches the mid-Teens, and it is not a prospect I can readily enjoy. lgl

The Gag Amendment

I am so sick of listening to People talking about the horrors of Unions everywhere on the Internet and Public Broadcasts. I have considered the entire situation for months, without any resolution of what could possibly be done to represent both Sides of the argument. I found that I could come up with little, but then I contemplated working from the other direction, this being what I have come up with; a real Wake-up Call I hope for a Right-Wing formation who believe they can do no Wrong. It is a constitutional amendment specifically ordered to counter unfair representation of Views. Here are the main Points:

Constitutional Amendment:
1) No Individual can criticize, attack, or otherwise condemn the Income of any other American or Legal Resident, if their own Income by Income Tax or Capital Gains Tax filings are higher than the Income or Income Class criticized. The Penalty for such Criticism will be one year's Income for one Individual of the Criticized Income Class as defined by the previous year's Tax Returns; Payable to the IRS with specific purpose of paying down the national debt. The only Exception to this Violation is in discussions made during Collective Bargaining negoitations. Such Negoitations cannot be broadcast Live on either Public Stations or Internet Connection by any means.

2) Public Broadcasts criticizing any Labor organization, Union, or Society of any type cannot be made without granting the offended Party equal Airtime without format or editorial commentary from the Public Broadcaster; all Costs of the broadcast to be borne by the Broadcaster itself, with no attempt to bill the Labor organization. The Response must be run an equal amount of times as the original Criticism during the same operational hours as the Criticism broadcast--still at Broadcaster expense.

3) Any Business, or Business organization, which pays for any Advertising casting Labor in injurious light--especially criticism of labor organization or Collective Bargaining--must pay an equal amount as the Advertising cost to the Unions specificed, it to be placed within their labor recruitment budget.

There is a definite bias today in the reportage given to labor conditions, never mentioning the position of Labor, or granting the Gains which the Labor Movement have achieved during the history of the United States. Those who consider this Amendment radical should be happy I did not include a provision in the Amendment requiring every Commentator on Wage levels to specifically state his or her own Income at each Airing based for their previous year's Tax Statements. I know that economists will hate this entire Post, but Labor is being injured by a slander campaign which is well-financed and organized by Individuals who have much better position in the World than your average Laborer. lgl

My Two Cents

I started by reading this Post from Arnold Kling. I followed it with reading both of Tyler Cowen’s Posts, here and here. I finished with previewing Matt Yglesias’ Post. I will first admit that I am totally scalping my material today, something which occasionally irritates Tyler. Second, I agree wholeheartedly with Matt that the Right uses shaded eyeglasses when considering the promise offered by the Right-acclaimed entities like Singapore, Chile, and Hong Kong. All Cases proclaimed utilize great government authority–whether cited by Left or Right–and that great government force is hidden only by style. I will finish this paragraph with Statement that the strength of government authority is governed more by population density and the need for conformance, than it has ever been driven by ideology.

I will initially contend with Tyler’s assessment of the Left being too significantly worried about the corruptive power of Money in Politics. Here is a place where One cannot be too worried! A bad Apple applies damage beyond his own circle of influence, and a group of bad Apples can ruin an entire harvest. I once constructed a model–you all recognize my skill level with models–which has since been lost to history, yet it suggested that as little as 5% of the corrupt Participants in an legislative process could skew over One-Third of the passed legislation in ways that are injurious to the Polity as a Whole. Tyler also suggests that left-leaning economists refuse to consider the federal budget as a series of integrated Accounts. I imagine this to be an overstatement, considering the Right’s refusal to touch Tax Cuts, Defense Spending, Government Contracts, or special Tax Exemptions long past their Worth. The Right is as reluctant to actually reorder Government Spending as the Left, and to blame one Side is to hide the real problem.

I review the material and think Arnold Kling may be the most lost. There is only one structural imperfection at play: Tax revenues do not meet or match Government Expenditures. One can claim that Tax revenues are too small, or one can claim that Government Expenditures are too high. The single greatest Problem in Government must be the refusal to deny the profligate Spending of previous administrations; I once called it the Win-Win situation, where both Sides achieved exactly what they wanted all the Time. This Crap needs to change before We can reach any viable fiscal policy. lgl

Where to Start

I read sorrowfully through this missive from the CBO. The main thrust of the argument was the nonsensical nature of the budget Gains made over the Period. Slow growth in Expenditure Savings were listed as caused by reduced welfare for the Wealthy, reduced welfare for the Unemployed, and a short-term suppression of normal growth in Medicare and Medicaid Spending. The worst aspect of the poor Gains was the increase in the Interest from the increased debt levels of the federal government. Only as an aside did it mention that Social Security Spending increased by 4%; it specifically not identifying whether this increase included, or excluded, the reduction of the payroll contributions for FICA. He did mention in passing that Defense Spending increased by 3% for the Period, though this was the one area where the Rules were not altered, so that it was a real runaway excess which no one wants to discuss.

I feel We have a real blind-spot of major proportions here. Economists should help in the on-going race for the Presidency starting about now. How this is to be done is by citing continuously the actual deficit areas of the Budget, and analyzing exactly where and what programs are costing the excess Spending. We as a Nation will not be able to stabilize the federal budget, and bring restraint, until We can talk about the real areas which should not exist. One of my great decisions on policy states that without Need through Specific Threat for any specific Weapons system, there should be absolutely no deficit spending to accomplish success; it is all a question of reducing Time Schedules and provision of Partial Payments. Attempts should be made to Sunset obsolete programs and policies throughout the federal government, and sell the vast quantities of materials purchased–then stored without use.

One cannot even begin to start a program of reduction of Government Spending without hard Numbers as to where the Money is flowing. This must be eliminated by a policy of Last Hands accountable, must Answer for the loss of funds. They will find where the Money went, or they will be fired or imprisoned. Every program director should be forced to advance a Paper Proposal to Congress outlining their own belief of what must be done, if funding was reduced by 20%. All such directors should be asked to forward a list of program recipients who make more than $100,000 in federal funds from the program. There should be Congressional Hearings questioning subordinate federal employees of the programs, questioning the validity of director reports and their views on budget reduction. This is the way to begin to control federal Spending, and it must be started soon, else We will drown in debt. lgl

New Thoughts

I first read the Post from Tyler Cowen, then went back to the article by Paul Krugman. Both decided upon collective solutions to the Process they describe, but I find a lack of efficiency in this Outcome. I agree with the Krugman concept of ‘hallowing out’ of the middle-Income range, as does Tyler Cowen. Paul suggests reintroduction of the power of Unions will bring Relief, which Tyler and I doubt. Tyler advances a Concept of legal defense of intellectual property, which I have read Today could be considered a Socialism of Ideas; granting the right to channel Thought and charge for it. None of the above ideas appear to be any great help in preservation of Income for the vast majority of Us.

I ponder on the entire Issue, and come up with several ideas for which I am assured I will be vilified for even contemplating; a perfect position from which to start in this assessment. My first idea is the Guaranteed Work law passed by Nation or even State. It simply states that all Items for Sale in the given jurisdiction must be assembled or packaged, one or the other, within the jurisdiction it is sold. Business will automatically claim vast Production Costs deriving from such a law; my retort being that outside of labor Costs, there would be very little additional Costs, due to the lower, more concentrated capacity of bulk Shipping with less tonnage requirement. The ‘hallow’ immediately fills as Business searches for qualified Assembly and Packaging technicians within the jurisdiction of Sale. The Wages demanded would be the Wages necessary for a Living Wage within the area, and Income justification would appear without overt Government attempts to narrow the Income Gap.

The second idea stands in the area of education. It consists of a actual Scaling Down of the current high standards of educations, for a sounder base of certified Skills. It would require High School Students to test out as qualified Apprentice technicians in at least two fields; I would suggest Carpentry, Mechanics, Truck Driving, Lab technicians, Plumbing, Secretary, Cashier, Cook, Baker, maybe even Candle-Stick Maker. I give only a minor range of potential Apprenticeships which can be devised, but requiring passing of at least two qualifications places the Student in far better position in the labor markets, even if they go on to a college education. Such a mandatory requirement has long been necessary.

The focus of my concentration is toward actions which will basically decentralize the current economy, and break the extreme power of current Business leadership to order our lives; often in ways which are hazardous to our Standard of Living. I know that such ideas will be in for vast criticism, but I believe there will be little actual economic grounds to proclaim higher Production or Distribution Costs. Only Time will tell. lgl

Economics for Small Fry

Like always, I will recommend this excellent Post, which has many very vital links to the Issue involved; then begin to talk about something else. What if Government debt in not just an irresponsible Spending pattern, but a substitute for a Futures Market on Inflation. Purchases of Treasuries or other Debt instruments simply constitute a hedge against expected future liabilities associated with a decayed Currency. Why do I ask this Question?–Because the purchase of Debt has long since passed the viability of a balanced Portfolio, even for central banks. Do people really expect the need of fancy Paper to trade in for other reams of Paper issued by the Treasury? It is not really a matter of Investment under these guidelines, but maintenance of a viable Route of Trade. You Kids need to understand that current fiscal policies are getting real shaky, almost as bad as the previous Credit Default Swaps–just played by central banks instead of Investment banks.

Here is where the ground is shaky, but should be really firm. I will get grandiose in Error, and accept the fact that Union members may draw some 30% more in total benefits than does the average Worker. I can then also admit that Union members make around 7% in total Pay Package in their Employment, as is the average benefits and Pay Package of Management. Here is where it gets tricky: Union membership had absolutely nothing to do with the Trillions lost in the Great Recession by Investors; it seems that Banker and Corporate Executive had the closest connection, and made the basic decisions. Union membership has absolutely nothing to do with the Unemployment rate, except for being immune to its impact; now under the force of Change by action of State Chief Executives–whose Pay Packages resemble Management–not Union members. It is also interesting that Management did most of the Downsizing of the Great Recession which caused the Unemployment; for which, by the way, Management generally gave themselves a Pay Raise. I like you may be a little irritated at the ballooning of Employment in Education and Health–with its attendant Cost–over the last three decades. I just don’t feel it is time to ‘Tar and Feather’ Unions and run them out of Town, simply because they want a place at the Table where all the great decisions are made.

Some of Us try to analyze what We are going to need to get Employment back on track. I will make a dire forecast, but one which will likely prove True. This states that We need 4 back-to-back months of Job Creation in excess of 500,000 per month, following with a Job Creation of 300,000 per month in succeeding months; else most Unemployed today should figure on permanent retirement. There is no way these Numbers can possibly be reached with the current political and business leadership. My Vote is to pay for the Debt with Taxation, and continue the Welfare venues as We will need them. I know such a Plan is unpopular with leadership; of course, they are making good Money, while Few others are. lgl

Left Field Analysis

I am going to go way out in Left Field on this one, and read this Account before you start. My basic hypothesis that the basic causation for the low Wage Gains for Labor comes from the suppressed Interest rate policy of the Fed. It is really way out there, is it not? I am trying to organize my Thoughts on this Issue, but it is so obtuse as to be difficult to explain. The underlying assumption behind my thinking is that Operating Business Costs are so low that industry does not need trained labor, consistently high Production levels, or prevention of labor troubles. It also is Why Business is so currently opposed to extension of Health Care, Pensions, and Collective Bargaining in toto. Securing the Profits of Business may be one of the more deadly aspects in economic impact, and the most difficult to secure against; Business personnel being totally devoted to the highest Profits obtainable.

Now I have to design my Concept, a effort of definition hard to express because of no previous discussion. I start with a little bit of history. Without playing a endless cycle of past events which will prove nothing discrete, I will simply state that the position of Labor seems improved when Government Tax law or Regulations threaten the bottom-line of Business. Wages were suppressed before the unionization of the 1930s, bettered under the Government regulation of the 1940s, improved under the returning Veterans of WWII and Korea in the 1950s, started to slip in positional power after the Kennedy Tax Cuts, worsened after the derision of Government in the 1970s which left Business unregulated though highly taxed, the Wildcatting without Regulation of the 1980s destroying much of the power of Unions, the joblessness of the late 1980s and early 90s stagnated Wages and shredded funded Pension plans, the Clinton Tax increases bringing relief to Labor in the form of higher Wages and sustained benefits, and the destruction of Labor’s bargaining position has been consistent since the Bush Tax Cuts and refusal of Business Regulation. The most troubling aspect of development has been the abandonment of Politicians of the general welfare to search for the easy funding of business-financed Special Interests.

The previous accounting defines my suspicion, though it lacks for any positive evidence there is a correlation between the sweetening of Business Profits and the increasing plight of Labor in this Country. Most will claim there is no necessary connectivity between Privileges granted to Business by Tax law and Regulation, and the loss of Labor power to insist on just reward and protection. It is exactly this correlation which must be determined if such exists, and then remedial measures devised to protect the most important component in the economy from the predatory behavior of a well-financed class, one which gains immense Profits from suppression of the majority of Participants. One has to prove the Case, before We can get either legislation, Regulation, Tax Law, or economists to response to it. lgl

Search for No-Pay Help

I would commend this Post to my Reader from Mike Shedlock, who combines much data about Population Growth, Job Growth, and Unemployment rates. His main Contention stands as the lowered Unemployment rate comes from Labor dropping from the Labor Force, rather than an increase in Hiring; 127,000 only leaves us flat on the Employment rate scale. This leads to another Point, which will be the focus of my Post, which questions how effectively economic Stimulus actually generates Production. Here lies the actual dismal science, and I will try to explain How.

I need highly energetic econ Graduate Students who are attempting to make a Name for themselves by writing that brilliant dissertation which Everyone applauds. This is because economic Stimulus has been insufficiently studied and evaluated according to some understandable scale. I will try to explain myself:

1) There is no accurate definition of economic Stimulus; economists known to extend the name to almost every excessive Expenditure make by any Government throughout Time. We need a universally accepted boundary defined as economic Stimulus, simply to be able to quantify the Expenditure. I would rule out any Expenditure which would have been Spent anyway due to political considerations, any Tax Cut or Exemption which would have been implemented due to political considerations, and any grant–like the Fed’s No Interest policy–which is simply response to political pressure from Banking and Wall Street. I want to get to this Gem of great worth which no one defines.
2) The second need consists of a list of economic stimulus grants from 1932 to the Present; a pendant effort, upon which one will find much controversy as economists will debate whether it was natural growth of Government Spending, or actual economic Stimulus.
3) The third part of the debacle must to establish the Employment statistics so that they can be integrated into an economic model expressing the true effectiveness of economic stimulus; complicated by the inclusion of a line of total Government Spending throughout the same Period from 1932 to the Present.

Now I know there has been a lot of good economic evaluation of most of these things in the Past, but I do not know of any combination put together to evaluate the true benefit of economic Stimulus over the Periods where it was implemented through its Expenditure. The later will have to represented as Step graphs of magnitude and length of Expenditure placed over the economic model.

Everyone knows I could not endure the labor, or have the specific Skills, to do such Work on my own. It would lend some young Student immense prestige, though, if he could present a creditable model along these lines, backed by the necessary data. lgl

Tax Law Simplified

This is a very good Post to read, though one has to scale down through considerable Link garbage. The Author makes the overall Point that any effective Tax Change will alter the tax status by which small business relates to the C Corporations. Five of the Views described by the Author insist that small business will be forced into higher tax impact, while C Corporations will get lower tax rates. There is always the aside of double taxation which should not be stated, because it is actually taxation on two separate entities: the C Corporation and then its Stockholders. Both entities make a substantial Income, derived quite differently, and therefore subject to Taxation. The Solution to all these Problems can be accomplished simply, and I’ll try to explain How.

I will state initially that all Parties need to be subject to low steady rates of not just Tax, but of Tax Impact. It is also true that all C Corporations insist on all the Rights of an individual citizen in all legal disputes. My Solution is simply to eliminate all Corporate taxation and all Capital Gains taxation. Are Business personnel cheering at this Point? They should not be, because I must insist that all Income derived must be subject to the same rates required of individual Taxpayers. Here is where I begin to smile: All would get the Personal Exemption, get all the Investment advantages of 401k and other type Exemptions, and even get a Mortgage credit on one structure–limited in total amount of course. There would be absolute freedom from any discriminatory taxation based upon artificial device.

The next sensible function would be to eliminate the wide-open nature of current Exemptions, Tax Credits, and Reductions granted to any one Individual–whether human or C Corporation, S and Partnerships included. Congress should be prohibited from passing any Tax law which benefits any specific group, without outlining specifically what Value, or total amount, that this exemption could excuse from the Tax base of the Individual; I would be generous and suggest a one million dollar maximum to any tax reduction. I believe that resort and commitment to these two principles will do much to avert our deficit spending, and rescue our small business personnel from the ungodliness of Tax evasion. lgl

The State of Grace

The arguments of Mark Zandi and Ben Bernanke sound terribly well-thought and admirable, but I pre-force must approach the Problem of Government debt differently. Conservatives proclaim 1963 the Great Watershed, where Taxes on Business was finally reduced. All utter benedictions of How it expanded the American economy to such great degree. Question: Did it? We know that Government Spending through The Great Society and Vietnam kept the economy humming through the early 1970s. There We come to a real parting of the Waters; first Energy Shocks, then expansion of Government Spending, until We reach that technological Great–the PC. But before We can realize it’s wave of benefit–We hit Stagflation, followed by the S&L Bailout, and further Recessions. We come to the Clinton Miracle–Conservative spitting, and retorting it must be renamed the Tech Miracle; contrariwise, occasioned as it was by a rise in Business taxation, exactly as Reagan did in the 1980s–getting Us out of a Recession once more. The We come to the Tech Bubble–a place where far too much Cash had been brought to the Tech Miracle–another Recession. George W. Bush stated What was needed was Tax Cuts, bringing delayed economic Growth, and then the Housing Bubble. We are now telling Ourselves that Stimulus will succeed, if only We allow the Bankers to go back to the misfortunes which brought on the last Recession.

Here, I will try to encode my critique. One has to count the number of Recessions since the Great Watershed. One then has to count the number of years where the Government tried Stimulus deficit spending to counter the effects of Recession. The above is not as easy as One thinks, because We have been deficit spending fairly consistently since Pearl Harbor in 1941. It takes a bit of History past this Point, as one has to estimate the length of Recovery necessary for Recessions before the Great Watershed, and one has to estimate the length of time for Recovery since the Great Watershed. The Question has three Parts: Was Recovery times faster before the Watershed, than after the Watershed; especially if We discount the disaster of the Great Depression from skewing the mix?; Why did the economy improve after the Reagan Tax Hike, and the Clinton Tax Hike, if Stimulus is absolutely mandatory for Recovery?; and Why have there been no line changes to forestall business practices which have brought Us several Recessions–like closing loopholes in financing laws and regulations?

I will now turn to my main point. Everyone I talk to about the business of Stimulus presents me with a real Problem. The basic idea is that Stimulus must be in place for an estimated Two years, but that the expected replacement of the deficit caused by that Stimulus cannot be repaid in under about 12-15 years without doing damage to the growth of the economy. I would think it Heaven on Earth if We could keep the economy from going into Recession for longer than a decade. Every economist knows that Recessions are caused by natural fortunes, and occur periodically, all with preventive measures functionally nil. What they are espousing is the continual growth of Debt until the financial industry collapses. I think it is time for an alternate economic policy, and I am afraid it must occur on Our Watch. lgl

Recessionary Leadership

Menzie Chinn gives Us a good Post on the proposed ‘Crowding Out’ of Investment; if you don’t believe, check out the Math in the link. I am not in complete agreement with Menzie Chinn about the apparent lack of crowding out of investment, but I would never attempt to argue with him using the Math. I will, of course, change the Rules of the Game. I obviously will start by statement I question not Government debt, Government Spending, Taxes, or Interest rates as propellent of the Crowding Out effect. Where would I start? At the real source of Change over the past three decades, which consist of the Pay Packages of Management. Management leadership considers the Pay Packages to be the most important element of the matrix, so much so that they are willing to refuse Tax Impact by funds transference overseas, deny Dividends to Stockholders, get a federal Judge to imply that they could hide Pay Packages from Stockholders, and borrow additional debt against the Business or Corporation in order to fulfill those Pay Packages. Those Pay Packages were the real alteration of the business model over the past 30 years, and it is time that economists examine the impact of those Pay Packages on the economy; with close attention to the crowding out effects on Investment.

The worst impact of Pay Packages on Investment may come in the direct area of Nonresidential Construction–the latest seen here. There has grown a tendency in Corporate and Business circles of refusal of Investment potential where the Returns will arrive only after long development, constraining the Income flow in the Short-Run, though enhancing it in the Long-Run. Investments of too lengthy a development ratio get dismissed, often though the real technological advantage lies with the long-term development. This skews the Labor markets, the Investment curves, and the Corporate balance sheets. The Long-Term trend here introduces a degradation of Production function, and Investment recession in the Short-Run. The famed capability of CEOs may actually be a Poison Pill for which Stockholders, Labor, and Consumers will all pay in their own time, and in their own way.

I have often thought that Gentle Ben lived in a fairytale of his own making. Such Posts as this confirm my suspicions. I question not only his ideological policy, but also his defense of his own actions. So far, I have yet to hear Fed official, Bank officer, Treasury official, or Government leadership utter a ‘mea culpa’, even though the U.S. Government has swallowed about a Trillion dollars of bullshit. An economy which is struggling to get into the Teens of Trillions of GDP, let alone out of them to the upside, cannot require a Trillion dollars of Stimulus just to stay even. This means that about 8% of the total economy must be Stimulus, just to stop Contraction. What makes it even worse is the fact Business and Corporation have functionally been told that they do not have to pay Taxes, when We are drowning in Government debt at every level. Business and Economics may not like me, but there has to be a rational Thought somewhere. lgl

The State of Everyone's little empire

I read something like this, and begin to fear for the entire field of economics. I possess the growing suspicion that the entire economic modeling process has like the Income Tax, become so riddled with Exceptions, that a valid Reading can hardly be found. We are supposed to be powering out of the last Recession, but Why is Production still below par, and Unemployment at such height? I can answer the later Question myself, but where is the failure to achieve Production levels consistent with the modeling? It reminds of the CPI, I wondering what is the Inflation rate on the thrown-out, volatile elements like Fuel and Food, and How much does the Two constitute in the total performance of the economy. Remember, any worth must show the progression over a decade at least, so no false fiddling with that stats.

Paul Krugman does not agree with me, but hell, I don’t even agree with God most of the time. He would choose to ignore all the indications of Inflation–in imitation of the Fed. Still, he would probably be the last to advance real stats on how much Household Income has be absorbed by the inflation of those volatile elements which Households so often have to purchase. I would like to know if this absorption is interrupting Intermediate and Long-Term Goods purchases–which Everyone knows that they are–but not by How Much? I am not trying to be mean to Paul Krugman or any other economists; it simply stands that We must get uncorrupted information to base sound economic decisions, and the models don’t lie unless the modelers have something to hide. We need a profundity of accuracy in this business, and We are giving an excess of garbage.

Here is an Outline of what I am beginning to fear, and it remains a valid deterrent to economic expansion. Conservatives have captured State Legislatures and Congress, and all insist on Tax Cuts, continued Government Spending on profitable projects for Business and Corporation, and limiting both Welfare and Government employment. It is incredibly foolish for Anyone to expect that the economy will improve under conditions where the Wealthy get the Welfare, and the Poor gain in both Population and Need. A Day of Reckoning will come, and it will basically consist of Interest rate going up again, and our Collective Debt generated by Tax Cuts without reason will finally destroy our economic position. My Conservative fellow Citizens do not understand that their positions will collapse long before the U.S. Government, but both can and will collapse. lgl

Actual Impact of Unions

I read this and think about how much further We must go to gain Understanding. It is simply another caricature examination of the position of Labor by Management. Neither even wants to understand the position of the Other. Labor desires to believe Management wants to suppress their interests under a proclamation of necessary support of Stockholder rights; while simply desirous of vast Wages, Benefits, and Profits for themselves. Management holds to the illusion that they are granting privileges to Labor, like negotiating with them, all the way to the idea that Wages were a Gift; under some illusion that they could get Labor for some type of Slave Wages. The article outlines that it is a question of different Mind-sets, but it might not go far enough to explain the rationale.

I once drew a sketch outlining various Costs of Labor under Slave Conditions, Starvation Wages, Management Desires and Union Desires. It was particularly loose, and Most would consider it untruthful, but I only utilized it for reference to Labor Costs. I adopted the estimated Costs of Slavery: thinking of the Cost of Warehousing and Heat of the Slaves, the Cost of feeding the Slaves, and such ascetic Costs of Slave Catchers to catch escaped Slaves; finishing with the inevitable Cost of purchase of Slaves in the first place. I found that paying Starvation Wages was actually cheaper than Slavery if one did not have to maintain the health of Workers; there being a truly heightened rise in pandemic conditions from poor Housing and poor Food quality. I ran through a uniform Wage rate on the order of what Management would likely desire to pay, all without Labor ability to improve its position. Then I ran in that which Union and Labor would desire to be paid.

The humor I found in my personal model, since destroyed, consisted of there being only a 39% Wage difference between Starvation Wages and Union Demands, and the difference would only make up about a 2% difference in the Profitability of most Businesses. Talk about your marginal utilities of which Tyler Cowen is so fond! It all seems like a tremendous lot of trouble for little Gain for Anyone. My model was created in the early 1970s, and could possibly differ greatly from the Present, though I doubt by very much. Subsequent work at the time estimated it would cost Stockholders a possible Penny per Share in dividends in the difference, and Management a possible 12% of their Pay Packages. The Range may have altered greatly under the current matrix of Business, but I doubt it. One wonders how such sharp animosities could develop over the Issue in the Present Day. lgl

How Things are, and How they should be

I possess a real problem with the stated causation here. Paul Krugman does more than hint that it remains the political clout of smaller, less population states which allows for greater stimulus to them, accounting for the more solid employment rates. There exists great difficulty in subscription to this Concept. Senators may be able to influence given amounts of Stimulus, but only at the behest of the Special Interests, never the relative size of their Electorate. I would enter a Statement that there is higher Profits in constructing Highways in rural areas than in congested Zones, greater Profits in constructing new Roadways rather than resurfacing older pavement, and the greater Profits come from elimination of extensive bridging in those Roadways. Rural paving also achieves much higher daily surfacing rates. The final comment must state that rural roadway construction requires far less Personnel, and much greater per unit use of Equipment. I would not blame or praise the smaller Populations of States for any such Awards.

One can join either side on whether Commodity price increase come from excess Stimulus, or from Supply Shortages. I personally think that Supply Shortages are present, but not for the reasons Most state. I think Government and Tax Cuts have made it too easy for Business and Mining to show high Profits. Most of the Commodity industry has found that they can maintain their Profit ratios with lower Production, and vastly reduced Labor and Equipment overuse. I believe (sincerely, for those Doubters out there) that Governments and Tax Writers have developed the wrong Business model, which far too many businesses have adopted. We have far too much Rent-Seeking in the Tax Cut and Stimulus industry today; all having nothing to do with Employment rates.

I finish today with this Post, which actually says little, unless One follows trend lines. The American economy continues to require greater education for Labor. This occurs when the extended education provides little direct Training for most personnel obtaining Work. I am going to sound Liberal here, but this means that Business and Industry are demanding their Labor force spend Four or More years outside the labor force, with a Cost to Labor of about $50k per year for the designated Individual who must foot this bill. This constitutes a Trap which costs the economy much Productive labor due to relative discrimination, and a vast pool of Debt for the financial world to draw Interest upon. I do not like the Trend, and could almost accept a Tax upon Employers to minimize their Demand for education, especially when coupled to the fact that vast amounts of Training Costs occasion due to Employment Upgrades from Staff. I will sound like a Socialist, but think that Workers have a Right to contention for Jobs matching their Skill level without discriminatory bias. lgl

Potential Start of Sanity

I have just read this short Post from Catherine Rampell. I agree with her on this issue, and felt I should discuss procedural policies by which modifications could be made. I have always felt in economic policy decisions that simplest is best, and minimum is always far better than maximum. Here is my short List of things I would do to set the House in order:

1) I would pass a federal law insisting that States and Local Governments create Minimum Wage Jobs of at least 16 hours per Week for All Unemployed who would apply, with the federal government mandated to pay for all such Labor conducted up to 16 hours per Week. The amount would at least pay for the normal Cost of Groceries for a family of 5 with tight Buying care exercised. This would have nothing to do with Unemployment Benefits, other than bringing to an end any extension of those benefits. A high number of Unemployed live in a Household which have other Income Earners who supply a great share of the Maintenance.

2) I would limit the largesse of Tax Breaks overall, setting federal Income Tax law prohibiting more than $100,000 per individual, $160,000 per joint filing, or $1 million per business or Corporation to be granted as Tax Break. It would mean that there is a Top End to how much Anyone can game the Tax Code to save Money.

3) I would advocate the initiation of a national health care system. The current system where People put off going for medical treatment until massive intervention must be conducted is an idiocy. The practice of Doctors, Clinics, and Hospitals being able to manipulate their fees to eliminate Patients who they do not desire to serve must be stopped. We must enact federal law which tells Insurers in a Public/Private system that they can only sell health insurance which pays 100% of the liability which Medicare sets, and on which they themselves pay. Supplemental Co-Pay Insurance can only be sold if it does pay 100% of the remaining Cost of all Procedures paid in order to sell such policies. The overuse of medical care can be limited by charging a $35 Door payment for every visit to a Doctor, Clinic, or Hospital. It also means that no Doctor, Clinic, or Hospital Testing Procedure can be scheduled more often than once a month.

4) People will automatically ask How I would expect to pay for the above programs considering the ballooning deficit. I will say I favor Health Insurance premiums replacing all Personal Exemptions and Dependent Exemptions in federal Income Tax without choice on the part of the Taxpayers, though they can sign up for those Premiums going to their own designated health Insurance policy; though they must pay for all Co-Pay Supplemental Insurance themselves. Those who are unemployed or unable to create such Exemptions will be paid from Gain from these Exemption removals. The Minimum Wages paid under the law will be paid by a Surtax on Income paid by Business prior to consideration of Deductions or Reductions of any type, and segregated by position of the Businesses in which the Minimum Wages were paid by State.

5) Advanced Public Employees in the Top Pay Grades must prove that they possess the Living Expenses necessary to get paid; at a rate only 125% of the total provable Living Expenses. This also includes all Specialty Consultants employed by the Executive, Legislative, or Judicial branches of Government. It is a law I strongly suggest that State and Local Governments also employ. lgl

Shirer's designation of Nazi lack of empathy

Ask me if this is a prelude to things which We do not want. I wish first to state that it indeed is a Report on Durable Goods for January, a month associated with poor economic performance because of Weather and Accounting Infringements. Here are the details which worry me! Aircraft Orders are generally placed after the First of the Year. New non-Transport Orders are generally placed within the Winter months to get placement in the Production queue for the high Production months; they being down 3.6% without the Transport. I would really like to know the magnitude of long-term Contracted Production, whether these Contracts currently are reduced in size. Worse than the Libya Crisis could be stagnation of the Markets, which will cause excess Speculator Cash to flow into Oil; funds bounding into the Market faster than real barrels of Oil. We are looking to a downgrade of value in the Stock Markets from my last Check, and the World economy does not need a Speculator-driven bubble in the Oil markets.

Megan makes more of this than is warranted, but it stands as fact that Greece has never ventured far from the City-State political format for which they are so famous. One has to understand the tribalism of the Greeks, something akin more to the Afghani than western nation-states. I can picture the disintegration of the Greek national government faster and more forcefully than that of the Libyan government. Watch, and if the several Greek cities start sending their own Trade representatives to various Ports of Call, then one can assume an unnatural form of existence will fail. Many Greeks will be outraged by this evaluation, but their anger will be far greater for my Statement, than for an eventual truthful outcome to my Words.

I will finish my tirade with this Post today. It seems that the Old Conservatives are somewhere to the Left of our current Liberals. Eisenhower sponsored Social Security, ranted against the military-industrial complex, and supported an extremely Progressive Income Tax. Ronald Reagan passed a massive increase of Tax impacts. Nixon wanted a extended health care system to the Left of Hillary Clinton. It is interesting that Those who in their millions witnessed the horrors of War, and it’s effect upon Civilian populations left desolate, found all these programs necessary; with the better-off bearing the brunt of the funding. Today, We have people who never witnessed the horrors of War trying to tell Us what people do not need. It may be destroying our Society, as Everyone leaves the care of people to Others, as they pursue Profits they will never realize. lgl

Watching Rome Burn???

The Reader may not believe my Take on this article, but here it is. Capital flows have become an extreme problem within the last 30 years; one element of the problem consisting of rapid reversals and removals which impact every economy. The genus of the Problem derives from excess Profits building in established Production, and the tendency of business leadership to closely watch financial markets, switching to those venues which show the greatest expectation of Returns. It is a Problem which has come to Us within a matter of decades, and one has to ask Why.

The extreme Profits deriving from established Production comes from technological improvement, static suppression of Wage rates, and avoidance of payment of Communication and Transport Costs through outsourcing those Costs to local and national communities. Corporations have utilized the economic blackmail of Production transference to get both lower Wages and lower Property taxation. The real construction behind the excess Returns from Production comes in the concerted effort by Business to limit or suppress the taxation on those Profits. There has been such a transfer of taxation that where Business taxation paid practically half of the tax revenues of the federal government in 1963, they now pay about 20%; down even from 2000. This means a huge cache of extra Cash swinging around in the financial world, more Cash than either established economies or emerging economies can absorb effectively.

Business leadership has sold the idea that lower Taxes promotes economic expansion. This is true in only limited context, and when there is too much Investment Cash, it holds the potential for disaster. Inflation not based upon resource shortages remains the Threat which is the real danger behind Inflation. Here is the Inflation that really bites. A Case in Point is the current Spot Price of Sweet Crude Oil, where Speculators are driving the price of the Oil upwards, even though there is a surplus of the Product. The natural correction for excess Investment Cash is higher taxation, a condition which is anathema to Business and Tea Party society. The ideation had better change in the near future, else We will attain a bankruptcy for governments of all types, alongside a degrading Production capacity due to excessive Resource Pricing. It is time for real Economists to step up to the Plate! lgl

Common Goodwill

I liked this Post from Bruce Bartlett probably a bit more than it deserves, though it is very good, simply because it churned many ideas inside my head. The first Concept I determine is that We must separate Social Security from Medicare and Medicaid. A slight increase in FICA taxation would cover Social Security benefits, especially if the benefits were set at uniform amount. The second Thought came as a blazing Star: Medicare and Medicaid could be far better financed by replacement with a National Health Insurance program underwritten by elimination of the Personal Exemption and Dependent Exemptions now on the books.

Bruce decides to move on so I follow, and find that tax revenues will consume only 14.4% of GDP this year. Bruce goes into a slight contempt, richly deserved, for the ineffective Bush Tax Cuts. Many will disclaim about the Tax Cuts for the Wealthy in the sharp reduction of tax revenues. I will assert that the reduction in tax revenues coming from Business and Industry did as much, if not greater, damage to the revenue system. Bruce Bartlett would say that Obama must renounce his pledge not to increase taxes on Those making less than $250,000+. I suggest that Obama must raise Business Tax revenues by 34% overall to actually balance the Budget. One has to understand that through the Period of 1870–1963, Business taxes paid for much of the federal government; a Time where the United States advanced to be the leading industrial power in the World, though it was also a Time without major Entitlements. I am not suggesting that We should force the Business world to pay for Our Spendthrift Souls; yet, We could increase Business taxation to a point that Business leadership only made a few dozen times the Salary and Benefits of the Average American Laborer.

Bruce’s discussion on the possibility of a greater increase in GDP to aid in deficit relief ignores the long history of short intervals between Recessions with proclaimed needed Stimulus, and requires the Dreams of Mankind not yet witnessed on this Earth. It is obvious a new tax system must be created to actually reduce the deficit and debt, and I have previously discussed many potential amendments to the Tax Code in attempts to correct the relevant flaws. 60% of American Households are losing Life-Sustaining Income at a relatively rapid rate; We are not becoming a Third World country, but Second World maybe. My favorite Tax change for the Day is a 8% Tariff whereby foreign competition will have to suffer the same distress as domestic Producers in payment of Social Welfare Costs. We do not really need to be competitive in foreign markets, We could simply be Cooperative in domestic affairs and politics. lgl

Trade, Unions, and Inflation

One must first read the Post, and then assume (correctly) that both are to some degree wrong. The major loss to Trade resides in the Welfare Costs (Taxes) which each Trading partner must pay, simply to alternate political entities. The secret success of Trade consists of the ability of the Trading partner to minimize those Welfare Costs to his advantage. Domestic production always has to pay those Taxes, while foreign production can avoid those Welfare Costs, at least at the domestic level of Trade unless there is a viable Tariff. The true Winner of Trade is the Partner who pays the lowest Welfare Costs; the true Loser is the Partner who pays the highest Welfare Costs, the domestic Taxpayer, and eventually–the Consumer. One may ask about the later inclusion, but the Consumer inevitably must buy the shoddiest Product in a decaying infrastructure over the long-term.

I found this Post which is far too critical of Collective Bargaining. There must be a place for both Unions and Employers, outlawing one will not resolve any issue. I would enjoy new legislation which handled the observed Problems far better than current observation. I would enjoy a law which made Unions completely free to Join, forbidden to collectively bargain over Wages, but able to force all Employers to collectively bargain over the Unions Dues they are forced to pay per hour of Union member employment. Unions themselves would be committed to decide what level of Health Care they would provide to Union members and their families, and what level of Pension they must grant to all members past a certain Age. Employers could set their own Wage levels, Employees could decide if they wanted to Work under such level Wages, and Unions could declare Employers deficient in Unions Dues payment if labor Contracts were not reached and fulfilled under this law (Blackball those companies). Employers could still hire Scab labor, but Unions would have the right to Picket the Production facilities and Headquarters, employing Union members not gainfully employed elsewhere.

I will finish today with this Post, where James Hamilton suggests that The Days of Wine and Roses may be over; as Inflation seems to be picking up again. One can and should ask if the Fed can maintain their suppression of Interest rates under such Conditions. The Answer is No! No one but myself may have asked what happens to the federal debt if Interest rates return to say a potential of 6% per annum? I do not like the way the economy is going, but have lived through so many Booms and Busts that I can’t even tell what is a Recession anymore. lgl

Product Tax

I tire so easily these days, especially after hearing Commentary about Core Inflation not rising as quickly as the CPI, when the later throws out all those Products and eventually Services which are actually increasing. An individual asked me What there was to do with Government organs who would not admit that American Consumers were being taxed by adverse Pricing policy in the interest of the Multinationals. I told the individual that one had to hit such leadership where it hurt, and the best avenue was Tax policy. It is here where political leadership is most vulnerable as the Tax Code is a ridiculous Joke. He returned with a query of How Tax law could handle both static Wages and rising Prices. I told him that We would need to force the Price increases across the board, so that all Wage levels would bring universal demand for enhanced Wages at the same time. He wanted to know how such could be done, but I had not ready Answer.

I thought that We had to get a little Crazy here, but in a specific way which would accomplish the task. I brought out the old venerable Product Tax. It is highly similar to the old Salt Taxes, except it has a uniform rate through the economy unlike the later. I would suggest a real punch to the assessment, with understanding that We have real need to raise revenues. I determined that 20% of total Sales will provide both revenues and shake loose Wages as well as Prices. States and Local entities could be aided by directing 2% of raised revenue to the States, and 6% of the revenue to the Local governments; under the strict proviso that the federal government was off the hook for Medicaid and Welfare. Producers will all scream about no consideration for their heavy Costs, so that with the periodic filing of Expenses, they would receive 92% of those Costs; the 8% ensuring that Business itself was taxed in manner where they could not pass the tax onto the Consumer.

The Product Tax differs from ordinary Income tax in several important ways. There remains little chance to hide Income by fictional Costs or magical debt which is never paid. The static nature of Wages is almost impossible to maintain under such circumstances as presented by the Product Tax; One can hide neither the Income or the Income loss from taxation. It strengthens the hand of Labor for Wage Increases, with vengeful Quitting if Workers do not get proper response to their own crisis from their Employers. Business can still hide their total sources of Income under such taxation, but Tax law can insist that Business must register all Cash Register tapes; a simple routine of filing each Slip daily by Internet access; the law should also include an exorbitant Fine for non-compliance, such as 50 times the sum found non-Reported. The Whole should shift the Game Rules to where Labor can achieve a greater share of the Profits of that productivity they have been showing over the decades. lgl