The Boy crying "Sheep!"

I feel for Paul Krugman, though I do not think he is right. He states that he felt that the magnitude of the Stimulus was not large enough, while I suggest Stimulus would never have worked no matter it’s size. He would, like a Gambler, double down and go for broke. The Question to be asked is What to try next if such an effort failed; which it would. Here is where it will get tricky, and I will expect full hatred as We turn to an alternate Plan.

Government needs to spend Big, but We cannot collect those Treasuries. It means More, not Less, Taxation. The easiest mode here is to let the Bush Tax Cuts run out, which they truly should. They were a bad Bet from the Start, and enriched the wrong people. We did not need to turn the Rich into the Uber-Rich. Poor people got enough from the Bush Tax Cuts to pay for one month’s Utility bills. The Rich tripled their Wealth within a decade. Some people claim that this was the great American economy at Work; I claim it was the great American Criminal at Malfeasance. Either Case assures than great maladjustments occurred within the American economy. Elimination of the Bush Tax Cuts would help rectify the inequity of the current arrangement.

A greater source of Government revenue will be needed than simply asking the Rich to start paying some back taxes. I therefore propose the great Draft Tax, where every Check, Debit, or Credit transaction will be assessed $1 in Tax. This Tax will be assessed on Banks, financial institutions, and Card companies. It will be up to these institutions to raise their charges for the financial services. It is clearly an adjustable Tax for Households, who could probably limit their taxation to $30 or less per month. It will not be so easy for Business to avoid the taxation. Some repayment of said taxation could be possible to the Poor, but I would not advise it. There will be claims that the Tax will incite Consumers to return to Cash payment for Purchases, but such activities are limited in nature, and will be a benefit salvation for many Consumers; leading them to avoid adverse Credit rates from these financial institutions. I will at this time not go into Why I believe this approach to be the best venue for economic performance, except to say I know that it will unfreeze Wage demands among lower Incomes, and retard unwarranted gain for Those excessively paid at the Present. lgl

And you thought I would say 'Mea Culpa"

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

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

State of modern economic Thought!

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

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

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

Restarting the Economy

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

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

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

How to be hated in one easy lesson!

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

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

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

Whose Afraid??

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

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

Getting Tricky

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

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

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

New Plan

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

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

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

Reality in the Land of Illusion

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

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

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

True Debt Repayment

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

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

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

What can you say?

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

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

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

Just Mean

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

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

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

Real World Understanding

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

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

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

The Wild, Wild, Urban!!

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

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

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

Percentatge Down

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

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

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

The real Power of Markets

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

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

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

Essential Truth

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

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

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

As the Earth quakes beneath Us!

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

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

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

Life in the Fast Lane

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

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

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

Never ask me for Links--See!

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

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

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

And you thought you knew what Draconian was!

I wonder sometimes if Paul Krugman may not need a little further education in economics. I specifically do not agree with Paul Ryan just about across the board. I definitely want to return the Tax rates to the pre-Bush 2000 settings. I definitely want to boost the fed fund’s rate. I want Business and Bank to have to work harder to make their Profits under higher taxation. They definitely cannot afford to stand idle, when and if it costs more to do so, and what Profits there are become taxed at higher rates. Like Ryan, I believe that Banks and Business will work harder if compelled with some degree of distress. I have to tell the two Pauls that there will be little incentive to achieve greater things, if the Businessman and Banker can sit still while the Profits roll in. The Question becomes How do We get this hard work out of them?

Paul Krugman believes We only have to supply more Cash, while Paul Ryan sees need only for Tax Cuts. I believe both are failed policies. Neither gives Business or Banking any desire to increase Profits in the face of declining Consumer Demand. It is time to take measures to both increase Consumer Demand, and to propel the work ethic of Bankers and Business. We need massive Hiring by the Government of Minimum Wage labor to increase the Income flow of Households, and higher Taxes on Banks and Business. This is the policy I have adopted, and wish that Government leadership would do the same.

I would go totally Socialist, to the befuddlement of no one, and pass legislation into law which states that all Corporate salaries and benefits must be tied to the Employment numbers. The law would simply state that if the Unemployment is higher, the Corporate leadership Salaries and Benefits must be lower by the same percentage. There is no attempt to impose a much higher taxation, just Jail time if the law is not maintained. One would need a base year from which to operate, and I would suggest the previous Employment High in the last Boom. And you people thought you knew how to build a totalitarian State. lgl

National Health Care

I do not like the tone of this article, but like some of the information in it. It becomes obvious there remains an overuse of both medical facilities and drug proscriptions. I favor a national health care system, but one where there are serious restriction of patient demand for services. The best Option for a sensible plan is one which insists the any Patient or Household parent must have paid 8% of the previous year’s registered Income of themselves in medical service expense before government contribution, double that amount with two contributing Incomes. Proscriptions will be treated separately, with a necessary expenditure of more than 1% per month of previous year’s Income before government contribution, multiplying by the number of contributory Incomes in the Household.

There will be some who question my settlement on 8% of previous Income, when health care Costs are effectively higher. This is foretold by the relative statistical amount of Income utilized prior to the advent of Medicare and Medicaid. We get the American Households back to paying the traditional amounts for medical care first, then We turn to control of the entire health care system; one which shows excessive economic Profits to the benefit of no one. We will let the traditional Conservatives still purchase health insurance, but allow them only 4% against the amount due for the registered Income through such premiums for health insurance. This means they must still prove a full 4% loss of Income directly from medical service Cost before any national health insurance benefit will be granted.

This may seem like a wildly inappropriate health program to Some. It must be recognized, though, that this lands medical Costs squarely in the Patient corner. No one will achieve an appreciable advantage by alternate source of financing health care services from government activity, and it makes national health care insurance a viable concern. It will also present great pressure on the health care industry to economize on their medical provision, and hold down Costs; as every major medical treatment will require negotiation with Government-controlled evaluation of the real Cost of medical procedures. I hold this to be the only method to bring the health care industry into viable integration with the rest of the economy. lgl

My View of Real Stimulus

One has to ask the Question on the necessity of further Stimulus. Here is some data for study on the issue. The Reader should remember that this is the peak Summer season where the greatest activity can be expected. It remains clear that We have no gang-busting spurt of activity to get Us back to normal employment. There might be an increase in Manufacturing activity for the Christmas Season in the Fall, though the Christmas Gifts mainly come from Overseas today. Secret of evaluating Fed data: When the Fed states that Retail Sales increases are modest, this means they are hopefully keeping up with the rate of Inflation. Deflation for Monetarists means that they are not getting their 1.4% Inflation, and has relatively nothing to do with Prices.

One can study this information and get an expanded view of the problem. The element I would point to within this article would be the absence of any indication that Business is trying to break out of its current trend. Core capital equipment shipments are tied to capital replacement levels, though economists would claim this is a good thing. It is not where there are a record number of Employed in this country; remember to include that Labor who are not counted simply because they have been out of a Job too long. Cliff Waldman probably has the best attitude to the data, seeing the hollowness behind the fancy dressing of the numbers.

It would seem obvious that there is need for further Stimulus. The trouble here is that Business will try to block any Stimulus which does not advantage themselves, claiming that more Stimulus costs too much with the rising federal debt; unless of course that it gives them greater Profits. I would attest that Business has gotten more than enough Stimulus, even greatly more that any need they expressed–check their record Profits under lower Production data. The Consumers, on the other hand, need a vast Shot in the Arm; not so much a heavy financial contribution, as they need more Jobs. I go back to my Plan to reduce Property and Sales Tax assessments, and connect it with a Minimum Wage increase plus a resurrection of the CCC. We need to send our Young out into the Wilderness to Clean, cut Firebreaks, and plant Trees; and pay them a slightly better Minimum Wage. The total Package will reduce Household expenses both with reduced taxation, and much lower Food and Entertainment Costs. Now here is what I would call real Stimulus. lgl

The Tax Debate

The Bush Tax Cuts and the Alternative Minimum Tax has plagued Us for years, basically because they were all designed poorly, and were set neither to Inflation or the percentage increase in federal debt. The cherished Private Sector of the Republicans would never set their own budget performance in concrete; as they insist that the federal government do. I personally prefer that all the Bush Tax Cuts and the Alternative Minimum Tax structure be abandoned as bad Tax policy, but readjusted with an alternate system granting Tax relief where needed, and relatively nowhere else. I also believe in the need for further Stimulus, but only if it is directed to Those in need of Tax Relief.

The Taxes which functionally everyone pays are Property and Sales Taxes. I previously stated I would allow both the Bush Tax Cuts and the Alternative Minimum Tax to expire, the later taking a proper legislative action. I would allow the Estates Tax to go into effect once more. This is the downside which will make Republican and Business scream. I would placate them with a Tax law reciprocating all tax revenue to States and Localities if they reduced their Sales Tax rates by 2%, and their Property Tax rates by 25%. I do not know exactly what the final price tag would be on this action, but it would basically return the Tax relief to All making less than $200k per year; all the while inciting Consumer Demand and higher tax revenues from Personal Income and Business taxes. I do know the federal government is spending about $1 trillion over tax revenues currently, and will continue this practice ad infinitum into the future under the current residue of Tax policy.

The Property Tax and Sales Tax relief will affect all equally, if not in real amounts. The Tax relief will be granted on a monthly or quarterly basis for the first, and daily for the second; this heightens the willingness to Spend rather than pay off debt as in the arena of some Reverse Income benefit. There is no doubt that the Rich will pay a lot more in Taxation, but there is no indication that the Rich truly increase their Investment portfolios under the current Tax policy. There is actually every indication that the Rich would advance their Investment capacity under the pressures of the higher taxation. There is the argument gaining ground out in the blogosphere that it is time for fiscal frugality, though it holds little Water with a federal government expanding the national debt as rapidly as it has set.

The one thing we Americans cannot afford is maintaining the current structure, which is just as dangerous as the Chinese not expanding their economy. We will go broke, while the Chinese will face Revolution and Starvation. We need Change, and We need it Now, if We expect to counter the troubles ahead. It is not the Time to play Politics. lgl

Direction

I love Paul Krugman’s work, precisely because it is correct, simply corrupted by his education. He was taught that more Cash during a downturn was the Answer for everything–a.k.a. Keynes–and that there was no limit to the potential largesse. He fails to understand that there are limits to the amounts which can be paid for production materials and labor, and that Stimulus over a set amount will only artificially hide Production declines by claimed business Profits. Less Product is produced, less Product is planned for, and less Product is delivered; but business proclaims record Profits. I hate to reveal this to Paul, but it does not make the economy better for the expenditure.

I know that this is a hard Concept to accept, and even more hated; but Stimulus must be driven from the ground up. This means that the Cash has to be delivered to the Consumers. Business will be already growling in anger, but it is to be expected. They will say this requires Tax Cuts for business, when nothing could be further from the truth. Such Tax Cuts only enlarge the Profits of business without any incentive to Invest, unless there is apparent Consumer Demand. The later will not be evident until there is a reduction in Household expenses. Stimulus under these conditions mean only that the Rich get Richer, while the quality of life declines for the greatest number.

What are the Options open to stimulate the economy? I like a moderate increase in Minimum Wage, something which produces a shelved increase in all Wage scales as Business pays for expertise. I say moderate increase because We do not want any increase in Consumer prices if We can help it; Business will scream, but the increase should be planned to not lose Business more than 3% of their Profitability. One of my most favored types of Stimulus is federal assumption of State and Local governmewnt expenses, but only if the local government authority can prove a reduction in Property and Sales Tax levels by the replacement. There are other Means at economy policy operations; I only wanting to outline the potential for achievement in this area. lgl

Does this make Sense?

One has to ask if there is anytime where it is okay to balance the budget. Mark comments that there are no easy Solutions for reducing the national debt, but there are! Martin Feldstein would concentrate on tax expenditures; a concept which would immerse all discussion into minutiae, a Hall of Mirrors from which no exit will be found. Mark states that the real problem is the Spending on Social Security and Medicare. The first Statement must say that Social Security is not really a problem at all, and requires only minor tweaks to put it on a sustainable path. The real problem is Health Care, and here the approach is all wrong! We must discuss the real factors prior to a resort to legislation, or else We only get printed Words whose enactment mean only further confusion.

We need a simple, canopy Tax law which supercedes all previous legislation. We try to take the Watch apart like children, having absolutely no idea of how to put it back together and make it work. We build a new Watch which worked, and throw away the Parts of the old Watch which conflict with the operation of the new Watch. I shall not go into the directions which We could take, but establish that the primary policy must be to raise sufficient tax revenues to constrain the national debt. Once We set an acceptable debt level, then We can understand what degree of tax change must come.

Health Care is also much easier if We target the expenditures, and not the Patients. I would first set out medical districts based upon geography, then set expenditure budgets for health care based on number of applicable Patients. I would then set the budget for the district, and tell all medical facilities they are responsible for the medical care of all people covered; it is here I would advocate universal health care, because anything less will only incite greater health care Costs in the long-run. I would be nasty, and tell all medical personnel that they will get only $2000 per Patient; with themselves distributing the health care to greatest advantage. The above distribution will be constrained by a national program of stated necessary services which must be provided; which will include Emergency Room care, Pain Suppression, necessary surgeries, and correction of the effects of Injuries. The Pay of medical professionals, publicly announced and maintained, will be dependent on the efficiency and quality of treatment directed at the permanent health of the Patients. I would get even nastier, and provision a limitation of Drug proscriptions to 3 per Patient over a year, though Proscriptions can be of a permanent nature until reversed by Doctors’ order. This is the way, I believe, that real change will come to the expenditure position of Government. lgl

A brand new Fed??

Ezra Klein gives us one view of financial regulation. Is it the correct view?–your guess is as good as mine! We are at least on the same page in considering this passage to be no real fix of the situation and danger. Some wildly inappropriate child asked me the very sensible question of How to fix the problem, and I said something like ‘Duh!" The entire embarrassment led me to study on the situation, and come up with a few ideas, though I doubt it is an original thought, or of esteem value.

My first generative concept is that the entire matrix of the Federal Reserve could be wrong. I would support a prohibition of the Fed from lending to financial institutions, or buying Government securities. I would allow the Fed to sell Government securities to aid the Treasury, but no purchase by themselves. I further would turn the Fed into a holding corporation, allowing them to only purchase Stock in private financial institutions. I would insist any such purchase must be of Voting Stock, granting the Fed capacity to intercede in lending and other bank practices. It quickly becomes a situation where the independence of the private financial institutions is restrained by national economic policy, if they desire to possess the funds for the expansion they crave. It also separate financial practice from Government public funding, forcing the Treasury to themselves enter the financial markets as a competitive player.

The question will arise at this point of How the Fed should finance their investment in the private banking industry. I personally believe that a new Pension Fund should be formalized, one that is mandatory, and somewhat rigorous in design. I would suggest that the new Pension Fund should have a mandatory 12% Payroll tax placed upon it, which must be matched by an equal Employer contribution, and one which is separate and independent of the current Social Security system; the later turned into a national Health Insurance system. All other forms of Investment by both Private and Public will be kept, though there is an obvious reduction to be expected in Wildcatting practices above normal 401k procedures. Private Accounts would be kept in all this, and the ownership of the Accounts specifically limited to the Contributor without Government intercession, but the Fed will retain the Voting power to continue their power over the banking sector. Did I mention that the Investment in this Pension Fund will be precisely limited to purchase of financial institutional Voting Stock, so neither Fed or Government develops an inclination to spread to other programs other than Contributor Savings? lgl

A Waste of a Good Saturday

I had zero plans to write anything this morning, then I read this article. Then Uwe went and asked his last question. The Answer to the question is the Consumer of the purchased Products manufactured. This is commonly known, and not truly so surprising. What is remarkable is the high favor I feel towards Capital Gains, not shared by many economists. So it be that I am writing on a beautiful Saturday morning, rather than watching the good-looking women in their Shopping for those Goods; no comments about dirty old men please!

Capital Gains are a wonderful form of taxation. They first tax only success! They don’t come bite you if you have not had a good year. It is a taxation of Profits alone. Poor business management is left to be punished with bankruptcy or loan payments. It has almost no impact on capital aggregation, another function almost totally based upon Profits; this function fuels little same sector investment, but serves to transfer Profits across Production Products so that saturated sectors do not become overfilled. Capital Gains provides further insurance from this over-fulfillment in sector, a genuine benefit though somewhat derided by economists.

What I like about Capital Gains is simply the impact it has upon Consumers. Economists would acclaim that this impact is entirely negative; but I will disagree. Capital Gains taxation is a form of Tax farming, enjoined only on successful production. The Consumers would wind up paying the taxation in the long-run anyway, though there is disagreement among economists over this Statement even. A certain level of tax revenues must be maintained to hold the borrowing power of Government, so taxation is a reality; even if some economists believe that Government does not have to be paid for. Capital Gains taxation, though, relies on Tax Farmers, who have liberty to assess the taxation of the Consumers to both their own and Consumer benefit. Taxes can be spread insequencially among Products–meaning higher tax rates on some Products, lower upon others. They are collected upon Consumer preference, and only when the Consumer has the ability to Pay; guaranteeing that Consumers themselves have the Profitability to endure the tax payment. Capital Gains has actual preference over Income taxation and Sales taxation, all because of its emphasis on successful Production. lgl

Through the Looking Glass darkly!

Arnold Kling probably sets the seminal review of the new Finance bill. What I fear is the lack of punishment of any form for collusion, artificial Price mechanisms, and evasion of personal liability from both Regulation and banking practice. Malfeasance leaves the arena of crime, and enters the concept of personal misconduct. I wonder seriously if the Too Big to Fail concept is not the culprit which must be chained. Arnold considers the free insurance as the serious fault, while I think any insurance is the fault. He would charge banks for their criminal commission, while I insist that all such institutions have violated the Public Trust; necessitating their automatic break-up, requiring a redistribution at preferred rates of all investment and stock. I seriously believe in the idea of hanging them all separately, so We do not get hung collectively!

You can find the real difficulty with attempting to forestall the growth of corporate excess. This can be accounted by the constant, and massive, desire of the corporate structure to expand with their desired goals; all while Regulators maintain only a periodic and splintered overview of the progression. The Wilson failure to extract meaningful compliance from corporate structure highlights the advantage corporations possess over Regulators, who are most often minor officials of unknown reputation and inadequate Means. This is especially true in the realm of financing any public campaign for support–where Corporations overwhelmingly lead. There remains relatively no way to sway the Public, until the Public already has been victimized.

The difference in attitude between Government and Corporation can be highlighted here. Corporations are overturning Government efforts to restart the economy through disinclination to spend on Rehiring, even though they are enjoying record Profits. They are simply piling up Cash; which they will neither spend, or distribute to their Shareholders. The last estimate I have seen places this load at about $1.8 trillion, which relatively cancels the half trillion dollars expenditure allocated by Congress to restart the economy. Corporations were pulling Cash out of the economy faster than Government could shove it in. And everyone wonders Why Consumers are not back to Spending more, when Household Income is down, and Retail prices are up; though in this area, it is only under the periphery canopy of Corporations–Banking, Utilities, and Communications access. It all points out that sharp and heavy punishments must be outlined to fight the corporate structure under conditions of malfeasance of corporate officers. Will We witness such real impact?–not as long as the lobbyists prosper. lgl

Trade Wars

Robert Reich makes a lot of sense in this Piece, but of course, I must tear it apart. The American trade deficit will never close under present policies, and will only widen with volume increase. He is only partially correct in his estimate of the loss of Jobs through trade, this coming only under conditions of a widening trade imbalance; still, refer to the previous comment. He does not recognize that current economic policy is specifically directed to switching American Imports from Consumer Goods to Industrial Supplies. This does have the prospect of increasing Business Profits, but only at the Cost of Income levels to Consumers. Robert goes back to the traditional Smoot-Hawley Act to defend Trade policy, an aged economic argument, while actual economic conditions have almost totally reversed. I will not explain the convoluted argument here, but a Tariff War would be a benefit to the American economy, lessen the power of the great International corporations. Trade wars do not always damage everyone, especially when started at high levels of economic development.

I find myself now stuck with explaining the obtuse economic argument that I tried to avoid in the paragraph above. I might as well explain it in terms of the American economy. We have now reached an economic plateau where technological development will not engender greater employment. Mechanized Production has already been introduced, and Software has been developed to a level where new Programming is simply a process of component implant. Energy development will never occur at Present, solely due to the lack of financial funding on a scale leading to massive deployment of labor and resource; in actuality, there must be a Trade War in order to achieve this deployment. The entire Business trend in place ensures that programmed mechanical Production displaces labor faster than any increase in Production could employ additional labor; there being real reasons why Production would not increase in volume even for added Trade (the increase of real Training Costs alter the competitive nature of Trade Provision), if Business has to resort to Hiring additional labor.

A Trade War breaks this planned Schedule of reducing labor roles in Production. It insists on the adoption of alternate options to obtain Product previously supplied by an interrupted Trade. It basically alters the flow of capital formation, and actually increases the volume of that Investment. Additional labor of different, more vibrant Skill levels are required at such times, and urbanization spreads to rural areas; Population concentrations start to disperse, and less Call for government services occur, as qualified applicants decrease in number while under movement. The switch in tax base insists upon disturbance of Tax Impact, and codified Tax rates are broken up with the actuality of higher tax impositions implicit under the economic conditions generated. Trade wars, therefore, themselves potentially generate a technological reform, one which re-employs a currently wasted Skilled Labor. Economists would avoid all this through lack of evaluation of the effects of Trade wars, but it is now Time to search for new Answers. lgl

The Politics of Leadership

Ordinary, or should I say little, people think there ought to be a direct line from Science to Production technique, without a necessary Run through the lobbyists. They write articles exactly like this one. They do not understand the major propellants behind all economic endeavors under an overpopulation. We have too many people to take care of, and too few resources to take care of them; and politicians who cannot withstand any drop in provision to any segment of the population which has access to public media. Leadership is always bombarded with outrage at lack of performance on any issue, and the use of inferior materials is always preferred over informed Science when there is a unavoidable delay in provision. Bad despersants are chosen over no despersants, and bad production is chosen over no production; especially were there is a loss of publicized labor. Such concepts of overgrazing of federal lands finds counter with estimates of price increases in Meat, and higher prices for bulk Wool. The mechanics of overpopulation Politics become Bread and Circuses even in the most intelligent environments.

Another reason for leadership failure comes from the existence of antagonist propaganda, as is discussed here. The main point here is the Conflict opinion to arouse Readers, it giving a high advantage because of the entertainment value; it equally being of poor performance in evaluation capacity. The real damage to leadership comes in the presence of countervailing disinformation to be utilized in opposition to leadership; information which has not been vetted, and consists of very inferior quality. Leadership finds itself compelled to defend every position taken, even when it is obvious such positions had to be taken.

The desire for esteem may be the final component within the matrix. It is not the desire, but the position which becomes important. Choice is propelled by desire, but achievement insists on new and daring proposals. A new arena must be created, with a different Take on the information, so that a fresh outlook is expressed. This only brings confusion to the leadership role, who must now assign gradients of value to leadership choice. Rancor and opposition is aroused through the simple act of making a decision, which is of no value to Anyone. One has to adjust priorities in the first place, but placate injured feelings in the second place, simply to establish any policy upheld by Consensus. lgl

Higher Taxes and Interest Rates

Stephen Williamson puts out a thoughtful short Piece; read it carefully three times, then ask yourself how much truth can be found in it. The New Keynesians are themselves responsible for the sticky price function, while the New Monetarists produce their own lack of liquidity. Both step away from natural market formulation, inciting unemployment and over-extension of debt. Each outline why Government should spend funds which the institution does not possess, and both demand such funds not increase through taxation of any type. Does this really seem like a sensible policy when championed through decades of Government interference in the economy?

I have long been an advocate that the Fed set the Overnight rate at 4%, and leave it there. Such a high Interest rate does not provide real obstruction to business performance, and grants Investment a necessary base of Profitability. It guarantees a protected platform of Savings for Labor not directly associated with Finance or the Market structure, and supplies adequate Consumption funds to a significant level of Consumer Demand. There is the unequivocal Statement that economical policy can make business performance too easy for business, allowing them to maintain inefficient Production operations with a vastly reduced Work load for themselves. Business ownership or management should not mean that one can spend 6 months of the year in leisure activities. There is something to fear in the fact that the Poor are still able to purchase Necessities, while the upper classes are still spending furiously; all while the middle classes are descending into poverty.

The above information may not make sense to some, but I will state for the Record that Consumption levels actually depend on the Income levels of the middle class. Provision of Consumption for the Poor only brings about a 4% Production profitability in tradition, with privation and reduced Consumption follow for the Poor when prices are raised. The Wealthy employ massive numbers in the luxury sectors in provision for themselves, but they gain such Income from control of the provision of Consumption for the middle class, where Production Profits often reach a real evolved level of 12%; potentially 20% if self-financed. The real threat here lies in the necessity of the middle class to handle the actual labor of Production, supplying it for Poor and Wealthy alike. Current Interest rates and economic policy ensure that the middle class is only receiving the Income rates of provision for the Poor, while paying highly similar rates to that paid by the Wealthy for a massive number of their own necessities. Such a system will obviously have a high rate of breakdown, hardly sustainable for half a decade at a time. The trouble comes when Recovery funds are drafted from the middle class who cannot afford the draft. It is kind of a sad thing to say for a man who is an advocate of both higher Interest rates and higher Taxes, but both the Poor and the Wealthy need to pay higher Taxes, and no one should escape the Costs of either Production or Consumption. lgl

Understanding on alternate level

Mark Thoma brings forth the great Question: Is the reduced Investment the result of lack of Demand, or lack of Supply? Here is a list of my own which may help the Student understand:

a) Consumers want Product, but can find no Suppliers;
b) Suppliers have Product, but can find no Consumer Demand;
c) Neither Consumer or Supplier wants Product;
d) Both Consumer and Supplier want Product.

It is a wonder how little is actually devoted in economic writings to study of those issues; a major factor being placing your reputation on the line on very fickle, and rapidly changing forces. There are certain observations, though, which can save both reputation and understanding.

1) The Concept of unlimited Want has always been oversold in economic study. There are several restrictions on both Consumer and Supplier of Product; some of which deal with the constraint of Income level, but not all. Every Consumer must handle the Junk once purchased, and there is no real overflow outlet other than to simply give it away. I remember the Snowmobile which had been driven 3 hours in 12 years of possession; Storage Costs, if accounted, would suggest One-Third of the Cost of the initial vehicle.
2) Suppliers of Product will not invest in Production unless they can find a real potential Consumption demand out there. Remember that Start-Up Costs with Mortgage and Employee Salaries equal an average 12 years before real Return at normal Profit ranges occurs.
3) Consumers and Suppliers are both constrained by Competition; Consumers cannot decide which consists of the best Choice as to model, and Suppliers fear the expansionary capabilities of competitive Producers. Neither can make an exact determination of the capacities they fear, or the value of success if they do make the right choice.
4) Government screws up all Plans of both Consumer and Supplier, while actual taxation makes up little more than a Production Cost which everyone must pay. Government policy interrupts natural economic forces, while Government regulation obstructs normal Production behavior to far greater degree, than it does obvious criminal behavior.
5) Financial institutions and instruments are designed to finance Production. Government absorbs the capacity of financial institutions to supply Production capital–raising the Cost of actual Finance–while regulation never reach predetermination levels of economic decision-making, and only cripples post-determination levels of Choice.

It may be clear that Government presents more danger than benefit to economic performance. It is equally clear that there must be some regulation of economic performance, as the descent into criminal behavior is too easy for everyone. It would actually help if the Court system was actually more liberal in interpretation than it is! I could wish that Courts would first determine by Jury decision if an activity was a criminal violation–just an Up or Down Vote–then have the Judge determine under what covering enactment the Violator should be prosecuted. The outcome would mean less need of legislation, and less time in prosecution. The term Let the Buyer Beware could be far cheaper under such conditions that the institution of Government observance. lgl

Two Ways of Thinking

It would be nice if I had evidence to counter this argument with more than Words, but I am sadly not doing research at this point. It is true that companies are hoarding much Cash, whether it equals $1.8 trillion cannot be proven by myself. David Leonhardt continues the tradition of treating Corporations with kid gloves. He wants further persecution of Labor, free Trade, remove Risk for Corporate decisions, higher Tax giveaways to Corporations, and suppression of any profitability in labor Savings by elimination of equitable long-term Interest rates. I do not think this is an Answer to anything, as Corporations are hoarding Cash simply because they spot no sincere Consumer Demand out there for a higher level of Product.
The supposition must be that Corporations have become a sinkhole where funds go in, but nothing comes out.

I think there is a Solution to this environment, though Congress is not likely to impose it. My suggestion would be tax law insisting that Corporate funds cannot be held over 3 years without becoming re-taxable at Corporate Income rates. This, combined with a limitation on bonus awards–something like 25% of the total Profits in the first year, with no down-the-road non-taxed award system–would insist that such funds would be distributed to Stockholders on a timely basis, or absorbed as Taxes at a high percentage rate where exemptions are difficult to defend. This lets Corporations understand that they spend it, or have backup Spenders to spend it for them.

The entire purpose of the legislation simply precludes a Tax system which encourages Corporate executive malfeasance in organizing slush funds which they eventually intend to spend themselves. It is not the responsibility of Congress to guarantee the lifestyle of any private citizens, though they do have a responsibility as an Employer. Why should Thousands of citizens be allowed immense Income, while Millions are denied Contractual Rights? Congress has made a Wrong Turn when they seek to penalize the Poor for simply providing the services demanded by the Affluent. I would suggest a law insisting that Government employees be laid-off when and if their Contractual Wages and Benefits cannot be met; the Government responsible for Unemployment Benefits for these Workers until Government can meet its contractual obligations to themselves. It makes much more sense to tax the Wealthy rather than the Poor, with many more tax revenues available. This is your sorta un-reconstructed Socialist. lgl

The Concept of austerity is an excellent idea, if utilized with the proper attitude. Robert Frank has some good suggestions, but lacks a coherent approach. Uniform persistence may be what is needed when the Crunch comes. The trouble develops because a positive posture towards Spending suffers when the economy starts to falter. Then everyone starts to claim special circumstance, and budgetary restraint is thrown out the window. Consistent programs are the Answer to the riddle of budgetary health, but How to organize becomes the issue. Here are some of my ideas.

1) The Interest Tax: Taxes are automatically increased to pay for the previous year’s Interest payments. The Tax burden is to be equally split between Excise Taxes, Personal Income, Corporate Income, and Capital Gains taxation. Tax authorities will automatically publish the Interest payment surtax in percentage terms on the last day of the current Tax year.
2) The Ticket Tax: Every Event requiring an entrance fee must pay a $1 tax for each attendant. Event holders have the option of either collecting the Tax, or simply considering it to be an additional Income taxation. This Ticket tax will bring in an immense source of wealth, with only a general taxation of Entertainment.
3) The Foreign Product Tax: Every Sale of a foreign Product receives a uniform Quarter per Sale tax. The Tax would be assessed directly at the Cash Register similar to a Sales tax, and of such nature that almost no Receipt will have over $3s in Taxation. It is not an excess taxation, especially if only one assessment is made for multiple identical items which are purchased on the same Receipt of the same item.

The enjoyable aspect about all three forms of taxation is the realistic evaluation that none of them would have any impact on Employment levels. The taxation is of too minute a nature, with the Products and Services so necessary for normal lifestyle conduct, that everyone would consider the taxation equal to inflation. I like this form of budget alignment because it raises huge tax revenue with little economic drag. It need be considered as it is somewhat neutral tax strategies at increased revenue levels. lgl

Points of Order

Bhagwati may be an excellent economist with finely tuned views, but he may also cheery-pick his positions as well. Read him, then ask yourselves if all your questions on the Trade issue are answered. I have a number of Myths of my own for which I would like an answer. Stay with me, and maybe we can achieve some understanding of the dilemma of Trade.

Myth 1: Production process would seem to be set up for long Transport, but where Product produced is of lighter weight and poorer quality, shortening Product life at greater ultimate use of materials.
Myth 2: Transport of Product across oceans seems to increase the Cost of Products by about 14% of the final purchase price, or 34% of the initial Wholesale Cost at Production center.
Myth 3: Transport Labor Hires increase by 40% due to cross-ocean traffic, producing an 80% Cost increase in the traffic.
Myth 4: Total Labor Hires for Production remain relatively the same when incurring the addition of Transport, though the Cost of that Labor goes up when Inputs to the success of that labor are added.
Myth 5: That the actual Productivity rate goes down, if Transport labor is included within the matrix Cost of Production.
Myth 6: That the Materials Costs of Production increases by 71% in Price, and 44% in volume, when Transport fuels and capital equipment are also inventoried.
Myth 7: The environmental Cost of Production rises to 2.3 times domestic Production when Transport emissions are included with ocean traffic.
Myth 8: Production Costs would triple, if the Public Cost of Port capital provision were included within the spectrum of Production.
Myth 9: The retention of Transport labor seeks the least-Paid, with the least benefits, of all known sectors of Production though the stated Pay provision seems high.
Myth 10: That the living standards of the World can rise without loss of living standards of developed nations, though the undeveloped world refuses to engage in greater benefits for Labor at any level.

I could come up with some additional Myths, but would like some Statements for the Record on these issues. Maybe I could find more Joy in the practice of International Trade. It is far more likely that I would find a more intense desire for a practical Tariff system which at least paid for the capital of Port facilities. Isn’t it lucky that Commentators can ignore Questions which place one ill at ease? lgl

Viva la Revolution!!!

David Frum came up with a measured argument which should be read. He seems to cover the ground fairly well. The bureaucracy entailed in any form of construction is easily found; just try to build something! He projects high accuracy in protesting the type of Government Spending which would be utilized; remember the Beltway is governed by lobbyists, all representing large Corporations who want the greatest Profit with the least labor Cost expenditure. His last Point deals with the damaged financial system. Here he might be a little off the Mark. David is still addicted to the Too Big to Fail complex. We are talking about a rotten financial system designed solely to enhance the benefits of Management and major Investors. The Fed position would assert that these economic Profits must be maintained, though the process has always been a discrimination against Debtors, Stockholders, and small Investors. I am of the belief that Too Big to Fail must be altered to Has to Fail before a bright horizon will ever appear. Government Spending must intervene to carry the flow of Cash within the banks’ failure process, but We first must get past Congress.

I witness nothing I would really desire to discuss today, much less anything that will buttress the previous paragraph, so I will digress into personal ruminations about the previous sentiment and the current state of the economy. The progress of the economy is suppressed to major degree because the Profits are channeled, and necessary sectors are not receiving the funds to properly act within the economy. The real trouble consists of the most successful of the recent boom, and their control of the policies of Corporation, Markets, Finance, and Government. They insist on the maintenance of their Share of any business endeavor, though the Recession resulted from the inadequacy of Profits to grant both their demands and fund the necessary sectors for economic performance. Failure was bound to arise, and return to success will not come until their stranglehold on the economy is removed.

This View will seem extreme to most Economists, and all Business personnel. I actually wonder at this cohesion, as small Business and small Banks endure the victimization as well as labor; themselves being a major factor in the necessary sectors which are not being properly financed and funded. Change will not be easy because of the entrenched wealth of the new Oppressors, but alteration must come before economic growth can be realized. Do I sound like a wild-eyed Revolutionary? lgl

The real value of great discourse

I don’t really believe this argument, but Readers need recognize there are different evaluations out there. Less or greater usage of temporary layoffs may make a statistical difference in the reported state of the economy, but I doubt if the laid off employees in the real world find a real distinction. It is basically an argument that business utilizes to feel better about themselves. The typical business will lay off a thousand employees rather than lose half of their Profits, all to protect a Stock value Drop of 25%. No one attempts to justify the real human loss of a potential 12 Weeks loss of Income for Employees; just to ensure that Investors and Management can maintain their extremely high Profits.

Here is a good source for reading material as far as the debate on economic orthodoxy. I am comfortably from the Outside, and can state that there has never been a model created which duplicated the economy precisely. This is not necessarily a bad thing, or is it entirely possible. There would be no markets, per se, if true values could be rationally defined in real time. The lack of possibility comes from the actions of Participants who utilize the advanced information of the models in the first place; if they were at all accurate, they would skew the movements of the markets. It is a major problem with the nanosecond Traders of the markets, who eliminate the uncertainty from the markets. Machine Trading will obviously impede the markets as they advance, all leading to distortions within the markets; a serious problem yet to be adequately addressed.

I like this article, especially its reference to Roubini. I didn’t read much of the thing, but thought it was indicative of the practice of economics. No one could exactly express what a billionaire prostitute could possibly pass on to any Intelligence agency. Incoherent data streams are inherent in both Intelligence and Economics, and anything made from those streams must at best be considered to be hunches. The whole situation for both, like the investigation of the young woman in question, has been over-explored, and in serious need of common sense. lgl