Tis not nice to fool Mother Nature!

I read this Piece from Tyler Cowen, and affix on the problem I have long seen in American society. It is basically a problem of changing the Rules of the Game for all of the Incomes below the top 20%. I call it the destruction of alternate means of Saving. It is the Federal Reserve who is the apparent enemy in this fiasco, though the real culprits are the Top Earners in the Country, who apply constant pressure to Fed policy. Bankers go along with the practice heartily, because they make far more Money in Shadow Banking than they do in ordinary Banking.

Here is a Statement of the Problem: Fed monetary policy is consistently utilized to ensure all actual Bank Deposits will lose Money, because the Interest rates paid by Banks will always remain below the Inflation rate. The traditional manner of Saving used by lower Incomes has been destroyed by this mechanism, leaving such Incomes to lose Money by Saving, or investment in instrumental means which they do not readily understand; and which, by the way, are under the total control of the Top Earners in the American economy. The interesting thing here is that these Top Earners possess both the power to determine what these forms of investment will charge the Investor, and their own Pay for handling these investment organizations. The federal government insists that Banking abandon its traditional role of being the investment vehicle of the Poor, forcing lower Incomes to channel their Savings through the financial flow of the Top Earners to the benefit of the Top Earners, while Investment return is pushed as marginally low as possible for all Investors.

There is a Solution to this chicanery: Passage of a federal law or mandate which insists that all Savings deposits at Banks must receive at least 4% Interest on all deposits made; or 2% higher than the Inflation rate determined by the CPI, whichever is higher. The law should also stipulate that Demand Deposit get at least 2% Interest on deposits, or an Interest rate equal to the Inflation rate, whichever is higher. The federal government should not be in the business of pressuring low Incomes to invest in Instruments which they do not understand, or should they be establishing economy policy which benefits only one segment of the economy; especially when this Income class already has too much deferment paid to their antics. lgl

A Different Voice

I will ask my Readers to study this Post carefully, then follow on with reading this article. I will warn you now that both are likely to bore you to death. You may get the impression that Japan is doing a better job than the rest of the World with their Working Age Population–which they are–and most of the rest of the World is destroying not only the economic viability of their Working Age Populations, but also destroying their job skills along the way. You will tell me that handles the first Post, but not the article; but I will then relentlessly insist that it also covers the second Piece. Shadow Banking–as used traditionally and gainfully today–searches hard to employ elements of the Working Age Population which would not be able to attain Work without imaginary finance. It simply is a Statement that a base level of Money systemically passed through a procedure will increase real Capital assets. It does not accomplish the real task of production profitability, which in the long-run remains mandatory to create the hard Capital assets ultimately needed to forestall the traditional economic Bust.

Statistical models may help to explain the dire situation. Production sectors reach capacity employment based upon the technological style of their production; technology universally utilized to reduce employment needs. Full capacity employment in a Production sector is considered reached when that sector could double functional output with no more than 10 hours of Overtime per Week for the Employed. Study of the Production sectors currently operating announce that almost all Production sectors are operating at capacity employment, with hardly more than one million laborers to be employed in the United States in real capital production. Shadow Banking simply creates a imaginary fund capable of financing Production commitments which are not really necessary for the current state of the economy; this simply to provide more Jobs supplying a Consumption Income of sufficient size to increase all Production sectors and their capacity employment. It is here where the entire Scenario falls on its face.

Consumption Income, even with vast expansion of Consumer Credit venues, does not expand as rapidly as Shadow Banking funds. Shadow Banking Production also acts in competition with hard asset production for the slowly expanding Consumer Income. All Production sectors–hard asset and Shadow Banking–suffer from an insufficiency of Consumption dollars received, Profits attained, and mortgage funding paid back to both Shadow and Real Banking. There is Wage Suppression by Businesses afflicted by lack of sufficient Sales, and slower growth of Consumption Income. Most economists will tell you that Shadow Banking is necessary, and that Quantitative Easing is a Must. The fact is that the first was the propellent of the last Downturn, and that the later will maintain the Downturn; simply by the protection of Shadow Banking. lgl

Changing old Management habits

I do not like this line of Thought about Unemployed labor because it places the entire onus for that unemployment on the Unemployed, when the issue has been brought on by the entire economy reaction. The reality states that all of current economic forces have joined to make low-skill labor unprofitable. I need to explain this Statement, and will try to outline it in the following elements.

The United States has consistently shied away from universal health care from the beginning. This reality, combined with the very real demand of Workers to be covered by employer-supplied health care, has trained Management to only hire high-Skill employees with high potential production. Federal regulations regarding provision of Pension contributions and freedom from discriminatory practices toward labor with attendant Safety issues have worsened the situation. Low-Skill labor face major Hiring obstacles, especially with Business switch to Temporary Labor to save on all the above Costs. We possess a highly volatile, sensitive labor market today, quick to layoff, and reluctant to Hire; with low-Skill labor unable to compete in the face of Business demand for high-Skilled productivity to pay for the Costs of Hiring.


The real First Step is universal health care. Employee health insurance may be the quickest way to accomplish this End, though Many will state it is impossible. The foremost best way to achieve this position is to separate the Employer and Employee. This means a Tax law which bills every Employer equally for a bare-bones minimum health insurance, with a maximum $15k per year payout per Individual covered–including family members of the employee. Further law would stipulate that Employers must offer a Group health insurance opportunity to every employee for catastrophic health care, for which premiums will be withdrawn from employee paychecks–though the employees do not have to opt for this Insurance. Additional law will create a national Pension Fund, to which every Employer must contribute 12% of all Wages and Salaries paid per year–including bonuses. Employees, to be eligible for the Pension rights under the program, must contribute at least 6% of their Wages through Paycheck withdrawal for at least 20 Quarters. The situation of low-skilled labor suddenly feels less dire, and the practicality of Hiring such labor cadres much more appealing; now, if We could only get Firing based on simple desire! lgl

Dirty Politics--and how to Win!

We get the image of a revetment abnormal, with the Government walls crumbling solely because We are feeding the Dragons napalm again. The article does not state it, but overwhelmingly excess Government Spending remains mainly cyclical, but the tax revenues lost are almost always structural in nature; never able to cover the bill, if the economy doubled in size and output. I am not saying that Government Spending should not be organized uniformly and regulated as a quantitative Whole with universal benefit; simply stating that proper Taxation is the only real curative for Deficits, and will have to be introduced sometime.

I like this Post, though I possess a far greater knowledge it seems of the social order of both New York and Texas. I know that only 3% of New York’s labor force is unregistered, while almost 14% of Texas’ labor force goes unregistered and unreported. I know that careful review of the Standard of Living of both States would account the SoL in New York to be almost 12% higher when the total population average is utilized, not simply the easy-to-access information. Medical Services and Food Quality are both higher in New York than in Texas, and Texan Housing in significantly lower in quality when total Housing is examined. Goods service and provision is also much lower in Texas, especially away from the major metropolitan areas. The disparity between Rich and Poor in both States is about equal in magnitude, but the Living Standard in Texas in much lower for the Poor. Government service to its citizens in probably about 18% lower in Texas than in New York, irrelevant as to the prices paid for that Government; all due not just to racial attitudes, but the isolation of geographic distance. I do not have any great resentment to Texas, and actually feel that New York provision for the Poor should be closer to the Texas Standard than to its own. This, though, equally does not constitute an abandonment of the plight of the Poor, or efforts to improve their position.

I do not agree with Peter Wehner on this one, though I cannot agree with Senator Dimwit—ah, DeMint. I do not think that refusal to raise the debt ceiling will adversely affect the federal government, if Obama knows how to play Hardball. Instead of closing down federal offices to anger American citizens, Obama must order all Defense Spending–except for provision of current military deployments–to immediately cease in the arena of Weapons development, military supply contracts to domestic bases, and a 30% reduction of permanent domestic military positions. All Civilian contractors will be notified of cancellation of Contracts, and Military units will be ordered to handle all military services (Mess, Laundry, etc.) which will be undertaken by military counterparts. I am quite sure that Congress will suffer greater duress from such Cancellations than will the President or the American people as a Whole. This is How you deal with Conservative intransigence. lgl

Talk about being an Ass

My Readers, and some Psychologists, have asked How my mind works; my stock answer is that it doesn’t. I decided I would give an Example of How my mind works. I will ask the Readers to preview these Posts: one, two, three, four, and five. I then had thought to the near universal desire among Conservatives to default on the US Treasuries granted to the General Social Security Fund, so Congress could pretend to not tax people while Spending all the money collected by FICA taxes over the years. I then thought about How poor people could forestall these Conservatives from achieving their objective of destroying the basic retirement policy of about 80% of the Population.

My first idea was and remains relevant, getting the AARP to file before the US Supreme Court for a declaration that such US Treasuries held primea focus, sort of like ‘most favored nation’ policy where these held Treasuries held first place on replacement funding, and other debts of the federal government could not be paid before they were funded under any default conditions of the federal government. I felt that such a Ruling would go far at this juncture is restraining deeply Conservative animosity to the Social Security program.

My feeling, though, was that such a Ruling might not be sufficient restraint. Here is where I thought economic modeling could really be a Savior. This would require a further US Supreme Court Ruling based on previous Tax law. It gets a little complicated, but here goes: Denial of Social Security benefits reverted FICA taxes paid in the Past to additional Taxation on Taxpayers in those Period; but where Tax law stipulated all levels of deductions and rates of Taxation. Business contributions can be discounted because of their forced payment of higher Wages at the time, if they had not paid such contributions; functionally, these contributions must be considered added unwarranted Taxation paid by Labor. The Ruling would be a simple declaration that Congress must repay all unwarranted taxation by nullification of Social Security benefits to all FICA taxpayers for all years of contributions made; all under the proviso that no confiscations of individual property can be made without due process of law. Congress may want to avoid paying the bill, but We do not have to let them get away with it. lgl

The Fallacy

Arnold Kling might be Right on this, but I possess other Thoughts. I like the idea of Emergency Health Insurance, where medical insurance must pay all Expenses over $4000. I also like the concept of internships for even college graduates, if there is a covering Employment law stating that Business must provide Board and Room as in Ages past, or some equivalent of such provision. I feel we must give some thought to the Poor and Uneducated, suggesting that under Business evasion of the two above considerations due to alternate provision, that it must adopt Poor people to fulfill the later provision. Arnold would chagrined by such an assault on the Business model, but the later model has shown absolutely no success in provision of its labor force adequately.

My greatest Concern can be found here. Conservatives in control of State Governments laud platitudes while concentrating on Tax Cuts, those famous overused rants against Public Spending. The trouble comes when anyone seriously discusses Cuts in Spending, these self-same conservatives outraged that anyone could actually expect them to Vote for Spending Cuts which would be totally unpopular with the Electorate. So they pass legislation cutting Pennies from the budgets when We need to cut Dollars. No one wants to cut the Social Spending which all agree os necessary to save their political careers and the American way of life–not even I. Here is the Rub: we will eventually need to come up with those Dollars–not just Pennies; and the only source of those Dollars are higher Taxes. We also need to stop giving higher Incomes the best break every time We pass a Tax Cut or introduce a Social program.

Readers will ask how I bring the two above paragraphs together. Here is How! We cannot expect Private Business or Charity to take over for Government welfare, then We will have to establish certain minimum standards granting the Poor–Working or Not–some venue to claim Aid from somewhere; a situation where everyone can have a Voice in society. Conservatives do not understand that We cannot suppress the Poor without altering American society in ways which will embarrass Us all. lgl

Knowledge may not be Power, but it is Profitable

Arnold Kling sadly misses the Point expressed by Peter Wilby. This is the fact that Charity is not sufficient in scope, and not consistent to deal with the real problems. Aid necessary over a long or continuous Period is almost never served by Charity; only when the situation returns to crisis proportions will there be steady return of funds. It is like the Boss who tells his Employees that he will pay everything he owes to them when he gets a chance, rather than a consistent, regular schedule of payments; I just know that such a Boss would have a multitude of Employees. The second consideration barely touched by Wilby is the huge Cost of Charity collections; a signature vastly in excess of any Civil Service, as the Collectors generally pay themselves according to their own desires. Causes are rarely great things on which to base consistent performance, just as long-term employment of Temps will not make for steady business and Sales.

I herein would like to state that I did not take Microeconomics until after I had taken advanced Price Theory; a fact which hindered me in both Price Theory and in my finally taking the Intro course of Economics. Nick Rowe explains why I had my difficulty. I would contend with his supposition that the problem would be solved with forcing everyone to take the Intro course. I personally would blackball anyone uninterested in the Intro course; it taking Someone who has achieved a B+ in the course to really state they are competent in the field. I would advise changing the name of the course to Economic Shortages, both to generate greater Interest in the course, and letting Students understand that it is material with which they will eventually have to contend.

I will let my Readers finish the day with this Post. I personally estimate that "Plunge" behavior actually creates and expands most Booms. Not until such behavior develops will a real Boom take place, and such behavior creates a Balloon when run over time. This means that very Boom will eventually will run into a Balloon, which will eventually deflate. Who are the Plungers, then, as they are the Creators of a Boom as well as the eventual Balloon? They are Business and Professional personnel who have made a success of their own endeavors, and need a source of Investment. They are generally individuals with imprecise knowledge about Investment, and depend on Others to guide their investment decisions. They also possess a strong desire to gain as great a Return on their own investments, as they previously have had in their own personal business of professional endeavor. The Crux of my statement consists of the fact that they are both old and new Investors, but without real knowledge of either Investment, or the real limitations of simple monetary involvement in generation of long-term Profits. lgl

And I promised I would be Nice!

I know not what to write on the foretelling of the new Year–Giddi-up Go on the Happy Best Wishes and all that. It is so complex that I almost feel I must separate into Good News and Bad News. The trouble comes that the Good News almost sounds like the reverse, and vice versa. Still, we might as well try this because nothing works anyway in our modern World.

Goods News:
1) The economy will not erode seriously in the next 12 months, but will basically stay the same. Like I said, the Same is not exactly a brilliant performance.
2) The US Dollar will solidify and increase in value. American Consumers will find that their Dollars will buy more. The downside to this is they will have a lot fewer Dollars to spend, and that the US Trade Deficit will become a major Topic once more.
3) The Medicare and Medicaid budgets will become an absolute disaster in this Year, so that Congress will have to adopt real medical reform, adopt higher real Taxes, or get hung from lamp posts; any one of those alternatives of real benefit, but with real antagonism being raised.
4) The power of the big Banks will finally be broken, because of their refusal to deliver the necessary Cash street-side, but it will kill any Stimulus designed by the brilliance of the new Congress.
5) Oil will again drop in Price, but only because fundamental economic functions will be constrained.

Now for the Bad News:
1) We are going to drop another 1.25 million from the Employment Rolls, though Consumers will get more conservative in Purchases with a reduction in Consumer debt.
2) Congress will find that the only way to raise sufficient funds for government operation is by higher Taxes on Business and higher Personal Incomes; the downside being that US Treasuries will take the slide once thought to be destined for the recovered Dollar.
3) Government action must be undertaken to create a new series of Minimum Wage jobs of major numbers in order to increase Employment Rolls and maintain a minimum level of Consumption; the upside may be that I may get my Military Reserve increase of 1 million more Reservists.
4) In the interest of getting a sound tax revenue base, Hedge Funds will be defined as Corporations by Congress, over the objections of many Wealthy individuals and mutual funds; the downside being that the Stock Market will show far less promise in the coming year.
5) A new medical law will pass stipulating that now medical businesses or medical suppliers may not increase their Price list, if they showed Gross Profits in excess of 10%. The new law will also stipulate that Doctors, Hospitals, and Clinics which made more than 10% of their initial Capitalization in the previous Year cannot raise their Fee and Price schedules in the following year. The law will be expanded to stipulate that CPAs, and lawyers, cannot bill any given Client more than $250,000 per year in labor billing; this does in no way limits the number of Clients or Income they may earn.

Like aforementioned, the whole does not make for pleasant reading. The way of the future is very rocky, and the Present will not go Gentle into the Good Night. lgl

Who'se your buddy?

One has to really ask who your friends are, when you start reading Pieces like this one. Once this data works through your mind, ask how many Couples have been reduced to One Income from Two Incomes over the past two years. Remember that the Couple must make somewhere are $30k in order to save at all, and need to make around $80k to get the same benefit as the upper end of Incomes. What is amusing is American Taxpayers imagine that Congress is serving their Interests in this type of Tax Cuts. It reminds of corrupt Union officials, who had to be paid off with a bigger Slice of the Wages of union members than the members got, simply in order to the members to gain any advantage.

I will recommend this long Post to my Readers who wish to find the materials to adjudge the Standards of Living expressed through different societies during the ages of Mankind. There are several methodologies explained in development of models of comparison, though I personally dislike most of the models. I prefer a poundage of Consumption materials consumed per month per Individual, thinking such Consumption could not vary relatively over Time by more than a factor of 3 under any maintenance of social structure. We are talking about Averages here, and it is easy to estimate the population size, then estimate the Transport facilities with their load capacity into the area. The model may seem simplistic, but one can get very real and verifiable statistics from the model.

Some bright Individual might at this time inquire why I would introduce two such disparate Posts in one venue. My model works very well in the current world, and has some applications here. We need only to define what Consumption poundage a American Poor Person consumed per month in a number of different periods of time; most consistent for my labor being 1993, 2000, 2004, 2008, and 2010. It would also be necessary to estimate the Consumption poundage per month of the wealthiest tier of Consumers for the same periods. Now, We can estimate how the Tax alterations of the past periods affected the poundage Consumption for both Rich and Poor. I don’t really do models–too mathematically imprecise–but I think this works to the real advantage of legislators of all stripes. Dare I say more without being arrested for subversion? lgl

The Big Risks

Mike Shedlock has probably come up with the most accurate forecast for the coming Employment Year. The one factor I do not see seems to me to be the most important factor of all. If Gasoline crosses $4 per gallon, then there will be a 70,000 Jobs per month loss. If diesel crosses the $4 per gallon limit, there will be a loss of 33,000 Jobs per month–my estimates. No one worries much until 5 gallons of Fuel costs a $20 bill. A long, hard Winter will also cost 9000 Jobs per month through April. I do not expect that Business sold enough in the Christmas Season to retain their full staff. Real Estate is going to lose more personnel under low Home sales, and Cars will likely fall off to the disquiet of significant labor. It does not look good!

Now We have to ask about the chances of fuels reaching the danger levels. Read this article! Are We going to make a new high in Oil Production? Can the current pricing of fuels be maintained in stability without a new high in Oil Production? The price of fuels would approach $6 per gallon if the price of Oil in contracts goes higher than $145 per barrel--my Guess. Rather than talk about the much higher-priced Oil, how about talking about $145/barrel Oil. We now have to talk about redirection of Consumer Demand to Fuels; every billion dollars of redirected Consumption will cost about 2000 additional Jobs per month. We find the future to be slightly rocky!

I will let my Readers ponder this thing. One now has to relate the discussion of stimulus to the whole business above. My estimates state that a $.55 per gallon rise above the current market price for fuel will cancel the entirety of the new stimulus. Here is gets much trickier: it is my estimates that a 3% rise in total State tax collections will also negate the stimulus efforts so far. A drag on Bank commercial and home loans extension consistent with the current restriction for over 8 more months will cancel the Bush Tax extensions. A combination of all factors at once will be equivalent to a 5-6% rise in overall Tax collections within this Country. To Be, or not to Be–I think We have been had! lgl

A level Playing Field

I like Tyler Cowen so much because I often find something I can contend. Wealthy people cannot find artistic merit in paying for their entertainment. Many of his Commentators find the entrance of Unions into the mix of payments to be a vast usury, with Wealthy people being defrauded. I am going to fly off the scale here, and should be roundly denounced, but I am going to do it anyway! Almost All who attend these performances regularly live in residences which cost more than $3 million (divided by 365–What?) Some 70% of them possess some Sailing vessel which range in Cost from $40k to $7 million; said vessel housed in docking for anywhere from $400–$9000 per month. They take 3 Trips per year somewhere in the World–estimated Cost of said singular trip somewhere between $30k–$400,000. Their average Christmas List costs between $30-50k. Forty Percent of these specialized Consumers possess specialized Vacation housing estimated to average about $500k–$4 million; Some with up to a round dozen of Residences.

I do not know the Price of New York Concert Tickets–probably anywhere from $400–$2000 per Ticket. They undoubtedly could not live in their primary housing for even one day for those amounts. It is unlikely they could dock their favorite vessel for more than 3 months for the number of times per year they attend these Concerts. The Pricing of the Stagehands is inline with the normal Charges for labor among the Boat-builders. They get as much Service at these Concerts as they normally receive on their yearly Trips, which is better than they receive at their Vacation homes; remember they pay more is Cost and Taxation for these secondary homes when Ticket Costs are multiplied by 365. I can guarantee that they get more Service from Concert Hall staff in their Trips to the Concert Hall than they generally receive from Anyone on their Christmas List.

Wall Street Wizards are granted the Right by so many Conservatives to demand usurious rates for their labor participation within the economy, but when the role is reversed, great outcries result when poor labor thinks to apply their monopoly positions to be paid as well as the aforementioned Wizards. I would suggest that All reexamine their concept of a level Playing Field, especially within the arena of potential Taxation. The Wealthy are lucky that I am not a Plumber! It is a sad Story when an economist could use what are relatively minute amounts of labor salary when set against the total labor force employment, just to attack Labor Unions. lgl

Lets Talk Turkey for Once

What is wrong with this Argument? Especially read the comment from Ironman after the Post. There is a relationship between median household Income and tax rates. What can that tell Us? Median household Income remains a relatively stable element throughout most business cycles, there being a real drag to Income change, depletion or Gain over the wide range of households. Personal Income and Corporate Income make vast Gains within economic booms, and are highly resistant to added taxation. On the other hand, Personal Income and Corporate Profits only reduce in magnitude during the deepest of the business downturn, and consistently remain the first to recover their advantage. I contest Mark Perry’s supposition that federal revenues are likely to grow at their current rate, when Business, Corporation, and Personal Income are at the outer shell of their taxable Income, and a whole list of tax remissions to protect the Wealthy from taxation will begin to drain their contributions to tax revenues.

Spending Restraint and Pro-Growth policies will not balance the budget. Spending Restraint will only reduce the fair value median Income households obtain from Government Spending, actually granting the higher Incomes that value in tax cuts. Pro-Growth policies provide advantage to the higher Incomes, as the median Income households substantially maintain their contributions. Pro-Business economists like to cite Welfare programs as Wasteful, but I have never witnessed higher Incomes rejecting Social Security, Medicare, or Unemployment Insurance where they have been eligible for such a program. They are often first in line, already with registered legal representation. I will devote the following paragraph to effective Spending Restraint.

Pick a Limit–any acceptable Limit–above which higher Incomes must pay for their own subsidies; I would suggest around $100k per year. Hereafter, no one draws Unemployment Insurance unless his Income falls below the Limit. All Incomes above the Limit must Sign a mortgage contract with the Social Security Administration, stipulating they will receive no monthly benefit if their Costs to the program have exceeded their contributions from Work years. I called it a mortgage because All above the yearly Limit must pay a yearly percentage of their Income–I will bring up the 8% of gross Income before Taxation for all medical expenses incurred by payment by Medicare of their medical expenses; said mortgage coming due upon their deaths, and the full amount will come due from their Estate. All Personal Incomes, Business Incomes, and Corporate Incomes must make a yearly payment of $250k to the Unemployment Insurance Fund, if their Income Tax Return grants them more than $1 million of tax reductions below the stipulated rate for their Income level. Am I a Stone in their Shoe, or What? lgl

The real World according to the Carper.

Students among my Readers should read this article twice. Shiller must get high marks for description of effect, if not the highest marks for explanation of theory. The ‘balanced-bidget multiplier theorem’ basically states that maintenance of people in their consistent Income strata provides the multiplier effect, as a drop from that Income strata would lead to a serious diminishment from current Consumption patterns. It is basically a Prevention of the deterioration effect which comes from loss of Income. We are talking about ‘Time lags’ here, and creation of artificial increased Time lags before the reversion to lower Income Expenditures. Everyone gains from a delay of eventual reduction of Wages, Expenditures, and Expenses. Business Profits can pay down existing debt, Consumers can pay downing existing debt, Consumers can purchase necessary Consumption products before reduced Income levels, and Businesses can alter their Production models in a more effective manner. It is a Statement that Short-Term inputs of Income can alleviate tie immediate impact of Income shortfalls, and lead to more successful long-range economic productivity.

You can find this basic mistreatment of Trade issues at great length anytime you wish to goggle the results. There is actually no indication that Trade reduced tensions between Nations; actually, there is much to note that unfair Trade practice did more to incite antagonism at the individual level in society against other peoples they traded with, all based upon Trade advantage fully exploited without Government restrictions; those later elements often helping to reduce such local tensions. There remains much indication that Trade on unrestricted levels adversely affects much of the local populations, propelling them to achieve an educational level they cannot afford, or delaying their initial entrance into the labor market; which they cannot equally afford. Trade activists often lay claim to Peace through Trade, citing Periods of stable Governments, while denying the Trade pressures behind most warfare which can be easily found.

I commend this Post to my Readers. Til the Season to study economic reports very seriously. The last economic reports of the Year are always as totally upbeat as any economist can make them, as they want as little depression entering the new Year as is possible. Any ordinary Problem is a major Problem if seriously cited at this time, and what is left unsaid is more than likely to be extremely sad in outlook. Old Year woes are rarely identified to enter New Year resolutions, though economists rarely express their true desires. lgl

Chances--Maybe 20%

Someday, Someone will do this to me, and I hope that I fare as well as Paul Krugman. Individuals can only respond to their environment; they lack the capacity to change it drastically in the Short Run, and rarely much in the Long Run. Suffice it to say that to be 50% Right in future predictions stands as a high Success record. This is Why I have decided to pull a Krugman attempt, and give a hazy, lazy group of far-fetched nonsense as likely to be True in a decade. I hope it makes Everyone laugh.

1) A new consistent American Tax Code will be in place, after the huge financial disstabilization where not even the Federal Reserve could claim enough assets to purchase Treasuries.
2) Employment will be Up, due to new Regulations in place which actually Tax for the overuse of energy-intensive equipment in Agriculture, Transportation, and Manufacturing.
3) Much of the Interstate system will be closed to All but Freight and Mass Transient vehicles.
4) There will be a return to Urbanization as the effects of the above stresses take effect, with Land prices dropping in the hinterland. Much will return to Agricultural use with a Population density to meet Agriculture labor needs reminiscent of the 1945 Time span, before the return of Servicemen.
5) Housing will move to Apartment-dwelling, as the Costs of maintaining Private residences continue to rise, and Service Retail returns to urban settings to follow the Consumers.
6) Technology will continue to aid society: I look forward to individual electrical generators will translate Air resistence on vehicles back into Motive power to propel those vehicles.
7) I predict a return to domestic production as the Costs of Trade and Transportation continue to increase.
8) A consistent World-wide policy of reforestation will be introduced, while in America, widespread use of Tree-planting Summer camps will replace the increasing Costs of full-time, Privately-funded, Child Care supervision. It would probably be the most popular $10 billion dollar per year Public program for Congress that they would ever have passed.
9) A system of permanent Soup Kitchens would be set up, funded by Local Government, but aided by refusal to allow Waste expense to Retail Grocers, unless the total have been turned over to a registered local Soup Kitchen. There would be a base charge placed on All who would eat there of low amount to cover Wage and Capital Costs, but with Local Voucher offices giving Stamps to use instead of Cash in the Soup Kitchens. Preferment in Apartment subsidy to Welfare Recipients close to the Soup Kitchens would negate the need for the Food Stamp programs which is wasteful of both Food and Nutrition.
10) A Statement that the above trends will only be starting in a decade, and will probably take 30 years to reach fruitation.

I will first listen to Conservatives who will denounce the entire List as being un-American, and injurious to both Profits and averse impact of Taxation. I will next listen to Liberals, who will claim that the simplistic notions of Welfare will deny the Poor the possibility to expressing their individuality, and reduce necessary Government employment. I will follow with listening to the Property-holders bellow that I am adversely affecting Land values. I will finish by entertaining those rare Philosophers who proclaim that We should let All go to hell by their own chose of destruction. lgl

The Restless Heart

Mark Perry sees the Consumer as back, but I wish for greater elements than Retail Spending Without Employment. The economy remains the crippled Cartoon when confronted by bygone Booms. Some 21,000 units were sold in Housing last November; I can remember when that many units were sold in my rural State in one month. I think back to a discussion I had over thirty years ago, where We were translating Average Income of Taxpayers into other elements. Now I would first like to say there is no way to in any way reach this conclusion in a rational manner, but I estimate that the average Taxpayer would have to own about 23,400 shares of Corporate stock and be a Day-Trader to equal the Income levels they possessed during the height of the last Boom. Two things: It is nice to know that some things never change, and I am still as poor at Math as I ever was; and the economy is about in that bad a shape.

I will turn Us away from the futuristically impossible with a far more down-to-earth evaluation by Arnold Kling; though it may be a biased in its own way. Understand that Conservatives and Liberals share a common thread: they hide their faults and Sins within a provisional ideology which can be modified to fit all circumstances. I wonder at Arnold’s praise of Cancer research, whose Price per Cure went from about $200k to about $600k since 2006. Isn’t there something in Economics about Scarcity, and proper division of Resources? I also doubt his predictions about Mini defaults, because a Credit Rating will have to reestablished for Government entities, whether they deserve one or not! Energy will also always come from a deliverable source, and Solar will not take over until electricity is genuine replacement for Oil or Coal.

I will really waste time and energy on this issue, when actual real Tax revenues from US corporate tax rates actually exceed Japanese collections. The United States may hold the Record for the most Tax remissions per Dollar of collected tax receipts. I hereby state my New Year’s Resolution, which is to congratulate Congress when it finally restructures the American Tax Code to a place where it makes some Sense. Knowing my relative animosity to Congress, I feel gratified that there is little chance I will have to praise Congress at any time. lgl

Degree of Significance

I present this Post to express my great faith in economic models. There is sharp tendency to define models in terms of the desired Variables wished present. It is like the old Packaging axiom: if it fits, the box is Right, even if it is a little loose inside–just add Packing. Economists have a whale of a lot of Packing, and utilize an incredible amount in their daily activities. I must have encountered at least a thousand definitions for even the simplest Demand/Supply interface, all leading to different conclusions about a near universal economic model. Know that there is a Marginal Utility to all such models, which becomes increasingly minute as it drifts away from the absolute Center of the argument. This might be considered the essential flaw of economics.

Are liberal economists trying to pick a fight with each other, or are they trying to find some common thread to devise another form of attack on recession woes. I could present a very ideological, and depressingly conservative, definition of balance sheet recessions. There are Those Few Strange Bedfellows who would insist that balance sheet recessions are nothing but the native system Safety value to release excessive Wages, Profits, and Benefits being paid on distressingly light actual Production figures. Americans may have been living far above their Means, and not paying for it in any significant way; the economy must find a natural Means to stabilize itself. Most of my Readers will find that that not to be very ideological, but intense contemplation might worry a considerable number of you.

Paul Krugman is a man who believes in economic models, and does a really good job of defining them with relative accuracy. He sometimes does not fully explore the differences between economies, though, and this Post points out that fact. Iceland enjoyed greater occupational opportunity than have the Baltic nations, where a loss of Jobs means Unemployed, while Icelandic model only calls for alternate Employment which must be funded. I would consider all nations to have adopted the most advantageous policy for each nation. It is also somewhat silly to proclaim that economic policy constraints in less developed nations hold real significance for a more advanced and evolved economy. lgl

The Hideous Corvee

The true nature of the Problem is defined here, but the Solutions are all wrong. It is not time to attack labor, even public labor, but to attach blame where it belongs: at the feet of Conservatives willing to suppress anything to suppress Taxes. They want all the advantages of a safe and secure life, without any reduction of their own Wage and Profit. They would most certainly insist that Others work for nothing or at Starvation Wages, in order for themselves to live at the peak of their potential Income. The real need is to shake up the extreme Comfort of the Wealthy.
I advise all Readers to await the end of this Post before exhibiting great rage, as this projected law I advocate has many Parts, some of which cancel or ameliorate prior issues. I will probably do best in simply outlining the thing to be passed into law:

1) No Public Employee will be paid for more than 25 hours per Week. The Government will insist that the following Working Hours must be devoted to Insurance and Pension.
2) Public Employees can accept payment for Government labor from private sources, but at no rates less than the listed Minimum Wage. The Employee can also list up to 4 payments per any of the 40 or more Hours which they are expected to labor.
3) Introduction of the a law of Corvee, which insists that anyone listed as a Wage Earner, Salary Earner, Capital Gains Earner above a certain level of Income, or Recipient of Professional fees must provide 10 Hours of Public Service per month.
4) All People subject to the Corvee can hire Others acceptable to the Government involved as substitute labor to the Government; the hired Personnel required to register Who has employed them, and at what Wage.
5) There will be a central labor Pool designed to combine potential Employer with potential Employee, and to see that labor is distributed evenly across Local, State, and Federal Jobs.

Study of the Situation will tell that enforcement of such a law would solve the Benefits problem for Public employees. The dedication of 15 hours per Week of Government labor to payment for such programs eliminates the Debt problems. Private Citizens can utilize the system to bring understanding of the need to pay Public Employees a Living Wage. There can be a registered program by which Private Citizens can group their labor into full Workweeks, if they desire to actually provide the Corvee instead of paying for Substitutes. Violation of the law will be a $10,000 Fine per Incidence plus the total number of hours of labor lost times the average hourly Wages or Salaries at the Violators alternate occupation. And you people thought you knew how to establish a Big Brother State! lgl

The Real End of the World

Read this Post and the links within it. I contest the basic data, but not in a manner which people are used to; Stating that it is a common element of developed civilization. Rome became a huge City whose citizens spent the entire day at the Games, a factor which went on throughout the empire. Beijing used to have huge numbers sleeping in the streets back in the day it was called Peking. New Delhi had a half-million people living homeless last time I checked. You may ask what it is that I am trying to say, and I will try to explain.

There is a historical record existent that all industry starts very labor-intensive, then pares down to being highly technological, with only about 45% of the original Workforce necessary to maintain the successful production levels. The is at direct variance to familial rearing of replacement labor cadres. There has always been a traditional increase in the labor force coming from more children raised than required for simple replacement of population. We have a functional oversupply of labor by the third Generation to fill the original cadre, which has been significantly reduced by technological development.

It is only the start of the Problem, though, as I hope to make my Readers understand. The increase in Population raises Consumer Demand and brings the development of Service industries to provide for the extended Population. Service industries, though, are subject to technological advance with reduction of employed labor force exactly like earlier industries. Now enters the growing Problem where Consumption must be paid for, and there is a shrinking number of people capable of financing that Consumption within the increased Consumer Demand minus finance. Can the economists among you explain what that last term signifies? Dark Thoughts turn efforts away from productive labor into the realm of fraud. Bernie Madoff becomes easy to understand, while hard labor becomes undignified; all within the periphery of higher Price to Those who must purchase Product, simply to pay for the pilferage. Now We are at a position where Third Generation positioning will always produce a larger Population with less Occupation, and less capacity to pay for Consumption. It has broken every Civilization in history, and there is no Solution for the Problem. Don’t you wish that We lived in a vibrant economy? lgl

Here I go Again

I recommend this Post to my Readers, and would ask you several Questions about the thing. What do you think about the potential Answers if exactly the same Questions were asked of a Poll today? How would American society have changed if the prevailing views had been adopted in follow years? Could answering the same questions by modern Polled tend to lead these people away from established Liberal and Conservative positions today? Would there be higher optimism in modern Americans if such type questions were asked of them in consistent Polling? Would persistent Polling among widespread Americans along with publication of those Results engender a greater adoption of liberal tendencies because of previous levels of success with liberal results, without undue hardship coming from most restrictions caused by the liberal adoptions? Would this style of continuous discussion among Americans actually help or hinder the political process in America? Could such a continuous stirring of American sentiment actually produce greater separation of Politician and Lobbyist?

I had thought of another idea when contemplating this article. The Republicans want a reduced Estate taxation, Democrats want a higher Estate taxation. I would promote a Compromise! Let the Republicans have their 35% after a certain level–which I believe will devolve to be about $5 million. Here is the Kicker: All Estates must first give back all Benefits received by the Deceased from the Government prior to death: this means however number of Personal yearly Deductions, all Unemployment Benefits, all Social Security and Medicare payments, and all delayed Tax Credits which were unpaid. No one ever said I could not piss off Wealthy people.

I am going to keep this Post short today, basically because it is Friday and I am already writing on Weekend time. Oh, in the above Option, I would allow them to deduct whatever FICA taxes they had paid in on themselves; though not in their role as Employer. Isn’t it wonderful to be Santa Claus, and gouge the Rich! lgl

How the Wealthy do hate me!

There stands a fast-growing Crisis in America which this Post might outline, if providing no Solution. I possess a Solution, though Conservatives will scream it is another Case of Big Brotherism that will bring down the economy. This again requires federal law, and will be cursed to the lowest depths of Hell. The federal act would force federal, State, and Local Tax agencies to collect all initial Tax revenues–just like there were no tax remissions except for Personal Deductions and Child Dependent Deductions. It is not to discount all tax remissions by wide sweep; simply a plan to generate necessary tax revenues without as much bite to Taxpayers. The genus of the law states all Cash revenue must be collected, but tax remissions would be repaid in Municipal Bonds, State Bonds, or forms of Treasuries. All can potentially be converted to Cash through Market structure after receipt of tax remissions, while federal, State, and Local authorities could exhibit some control over the Interest rates paid on the bonds. It is simply telling One and All of said Taxpayers that they must take a Stake in the welfare of the State, in order to avoid the tax censure of the State. It might actually led to less outsize Tax filings filled with excess information to acquire too little.

I pity my Readers now that I refer them to this Post; just remember that sometimes these things need be used. I bring in this information to express that Tax Cuts past this Point have an actual Stimulus factor of around 5%; meaning that we accomplish about $1.05 of economic growth for every $1 spent in Tax Cuts. People will need a translation of what I am saying because I do, so I will give one to them and possibly myself. The Recovery will stop when the federal government stops Spending, whether than Spending is by outright Stimulus or Tax Cut. Understand that We will lose some portion of that $1.05 after the Spending stops; the most likely figure lost is about $.95 of every $1 currently spent. It has the horrid aspect of potentially extending to $1.20 of Recovery reduction per federal dollar currently spent at this time.

Now I have to find my way back to my original argument. Municipal Spending goes into local Wage payments and Infrastructure construction. These two elements get the most Cash to the Street–raising the Consumption and Consumer Demand higher than any other form of Stimulus. It also possesses the longest retention periods of any Stimulus. It also represents the greatest increase in economic growth potential. Issuance of Bonds instead of payment in Cash for tax remissions ensures the greatest activity in the financial markets to generate Investment funds as these bonds must be traded to raise any Cash. Local, State, and federal authorities have the greatest chance under this system to stabilize their Interest rate structure on their debt. Every economic incentive would back my proposition, with the greatest degree of financial stabilization. I will now listen to economists tear apart my argument. lgl

Point of Law

Does Anyone want what Congress is planning to pass as Tax Cuts. Here is one analysis. I would advance a Rule of Closing, a technical term in Congress, the gist of which would state that the wishes of a previous Congress must be observed, unless a Two/Thirds majority Vote is taken by the current Congress to override the previous legislation. A previous Congress had stipulated that the Bush Tax Cuts should Sunset in 2011, and they should sunset without passage of the Rule of Closing overturning the Sunset. Those unfamiliar with the Rule of Closing should understand that it is a decision by the current Congress that the legislative power of a previous Congress should be ended on some specific Issue. Everyone in Washington has been silent about the Rule of Closing necessary, but I ask herein if any legislation without a Rule of Closing on this matter will be valid law.

People will think I am simply fighting to the bitter end–which I am. The truth, though, actually insists that they must have this Rule of Closing with its Two/Thirds majority. I am sure that even Democrats would like to shoot me at this point, as their lobbyists will be raising Hell. I am not one who cares, and herein inform the President that he might be acting unconstitutionally if he would sign such legislation into law. Obama might not of known of this Point of Law, but he should really consider that the legislation is bogus with or without his Signature, without that Rule of Closing. I would advise he throw the Issue to the Supreme Court, whose deliberations will be slow enough that the Bush Tax Cuts will Sunset on schedule.

The whole principle in question is not archaic, but a vital function of Congress which is being abused. The fact that a principle has not been used in a long time, or that it has been used inconsistently, does not validate its abuse. No American, and especially the greatest majority of American Taxpayers, want a continuation of bad Tax law which will do nothing to improve the economy. It is time We revised the entire Tax structure, not just continue bad practice. lgl

Everyone has their own ideas about regulation. Here is a well-thought response to the issue. I would myself take a scythe to regulations, but do so in an intelligent method. I would pass into law an act detailing every agency and Dept. of the federal government must re-codify all their regulations and get Congress to pass on or strike out any element found wanting of intelligence, after which end a Manual will be published as regulatory law in force for ten years; the process to be repeated after such Period. It would probably take 3 years for such a Process to take place, and would be delayed ad infinitum unless pressed, so I would pass into law the nullification of all current regulation past January 1, 2015. The Manuals, and nothing but the Manuals, would govern agency and Dept. response to everything under their supervision.

Some otherwise intelligent people have asked me Why I so dislike graphs and diagrams, except those I fashion myself. I finally found a Post which can explain my hesitation. Graphing does excellent work, if one can interpret the information from the graph accurately. The trouble arises from the fact that interpretation often is dependent in the quality and style of Training one has received in such graphical study. Check out the diagrams presented in the Post, and try to develop a sense in what they say. Now, if you are extremely wealthy, go and buy the book and estimate what they would make of the Mess ( Cost Price–$160).

I will finish today with this Post for my older Reader. One can even program the relationship between Risk and Return. It is one of the prime reasons for so many Corporations ceasing their distribution of Dividends, knowing the safety of Pricing in their Stocks, with enough growth to silence any Return demand. Understand that the Fed is shoring up the Investment banks, who are shoring up Wall Street; a constant Savings or Deposit rate of 5% per year over 40 years would have done better than equal investment in the Stock Markets over the last 40 years for about 95% of Investors–considering the Ups and Downs. I know that about 70% of the Investors in the Stock Markets should not be in Markets at all. It is simply that they possess no alternative. lgl

Ways of Doing Business

Some people insist on making things more difficult than they have to be. One can test the value of Tax Cuts in generation of Jobs simply by study of past performance. One simply has to designate the X-axis as the Tax Rate–going from 40% through Stages until 27% tax rate is reached; the viable range We could be talking, each tax rate time-dated to present a Time scale for evaluation. The Y-axis would be assigned the total amount of Labor with two graphs set up by time-dating; those who are employed, and the total number seeking employment at that specific time; One can place a Time line across the top as a Z-line. Thereafter, one has only to plot in the specific points at each period of time. I have always been of the suspicion that the graph of Tax Cuts actually resembled a Bell Curve, where over-reduction of tax rates actually reduced the tendency to acquire more labor assets (this meaning Business was using reduced Government taxation to pay for their Static Costs).

I agree with Felix Salmon that Obama’s cut of payroll taxes for Social Security will not affect the security of Social Security. The real Crocodile remains the refusal to separate Medicare and Social Security. A simple Presidential Decree stating that FICA taxes must be split into Social Security General Fund, and Medicare Special Fund would force Congress to confront the real Gorilla in the Mist. If Obama would wish to differentiate his Presidency from all Others, he would do this immediately. It would show Everyone where the real Shortfall lay, and the amounts of taxation necessary to maintain the program. Some will say this will incite Congress to cancel the Medicare program, but We are dealing with the fighting Senior Citizens here! They still do the majority of Voting, and mostly still have dominant control of political contributions. I would start the fight now, and mostly have the Dust settle prior to the next Election.

Scott Sumner tries hard to find some effective way to eliminate Government intervention from the economy, without revisiting all the tribulations of the Past. He might have come up with a Solution which will work. I am not deep enough into his analysis to tell the Stress points of the program, and whether it would actually work or find too great a resistence; an economic prospect common with all new movements in the economy. Here is my Kicker: Fiat Money is Fiat Money; the Issuer should be able to declare its worth. Scott would place an evaluation process on the fiat money, letting the Public set their own value. I would prefer a Treasury declaration that the Dollar was worth what it was in 1960, and that all Prices and Wages should reflect this value; the alternative being that Taxpayers will be subject to 1960 taxation rates. The Fed will be ordered to honor only the reduced Deposits rendered by the demanded Deflation rate. Mortgage-holders and other Debt can appeal to the Fed for revised estimate of their payments, which will be legally binding. All labor contracts will be declared Null and Void in legal proceedings, unless they have been proportionally reduced. This will probably seem really radical, but I suspicion that Labor will be far safer in this manner, than they would be under the Sumner plan. lgl

Medical Practice

Read what Tyler Cowen has to say, then consider possible options for the direction of health care in this Country. Tyler assumes that Medical Care in this country will be categorized by Price. I can think of a more capable system, though everyone will think it very Orwellian. I take my idea from the British system of Trial where Solicitor and Pleader are separated. I would leave diagnosis to Doctors, and medical treatment given to medical economists with the ZIP code style thrown in for good measure. Surgeons would be separated into an entirely third class, and hired by medical examiners by their record of success. Doctors would be paid a Piece rate for placing the Patient ailment in a Postal-style treatment code, medical economists would take the Postal code and assign Drug treatments or medical procedures, while Surgeons and Technicians would be brought in for curative treatments. Doctors could be chosen on the basis of success in diagnostic analysis, medical economists would be chosen on the basis of success in distribution of medical cases through the system; and Surgeons and Technicians would be picked according to their success rates. All would get what was a functional flat rate for types of medical treatment, with a bonus for each success. Patients would flow through the medical system, with basically no one concerned about how much Wealth was assembled by the Patients. My position is that it would be functionally a better performing medical system with higher success rates and lower Costs.

My rationale for the above decision is the distribution of tasks. Medical students straight out of training would get the ‘grunt work’ of medicine when they are young themselves and healthy, and could better spend their time perfecting their surgical and technical craft. Older physicians would be placed in diagnosis where their physical efforts will be less, but their experience along with Time to maintain their understanding of current medical literature would make them the best diagnosticians. Everyone could more easily be adjudged for their success rates with greater overall supervision, and medical examiners could keep the medical costs as low as possible. A series of constant Questionnaire evaluations would allow for a high degree of colleague evaluation of Peers and Subordinates without any onus being placed by such activity.

Could such a medical system be introduced?–probably far easier than is currently imagined. Part of the success of the medical system would be the simple fact that Patient and Practitioner do not possess a personal relationship, with all Patients evaluated based solely on medical condition. There are several medical clinics which show extremely high levels of success utilizing a similar system, able to capture expertise and delineation of task. It could be a real Winner! lgl

New Day for Health Care

I would start by asking Readers to preview this Post from the CBO. It includes important information which must be understood. Health Care Costs are rising, and the Republican advocacy of cutting Welfare benefits are unviable; the vast majority of health care patients cannot withstand health care Costs now, when those Costs make up 10% of the GDP, never will the Populace withstand a rise in those load-bearing Costs to 16% of GDP. Republicans may think they can surround hospitals with barbed-wire topped walls and Security guard dogs, but if they want any health care at all, it must be open to Everyone–too many Guns and Knives out there! Police agencies will not do well suppressing demand for health care, especially as those Officers and their families will need health care themselves.

We must approach the Problem from both Sides, by raising tax revenues, and by cutting health care Costs. My view of increasing tax revenues is return to a uniform tariff of 6% on all Imports; it not only raises immense revenues, it also cancels the added Cost of domestic production where domestic taxation for Services drain their Profitability under competition. My second plan is for Congress to pass a progressive list of taxation per units of $10,000 as an Alternate Minimum Tax; specifically, below $20,000–a tax rate of 0%, $30-50,000–a tax rate of 10%, $60-80,000–a tax rate of 12%, and above $80–100,000–a rate of 15%, and over $100,000–a tax rate of 20%. You must pay the regular taxation after all reductions, or the AMT–whichever is higher. I would like to eliminate the growth to full payment strategy currently on the Tax base, where the Taxpayer must pay the top rate wherever his Income falls throughout the total of his Income.

Reducing the health care Costs can be effective if We treat the health care problem as a unit Whole. There are some simple Rules which must be adopted:

1) Any Doctor who receives more than $60,000 in payments from Government subsidy for the treatment of Patients will be considered Government Employees and receive no further payment for their services; combined with the expectation that they will maintain a set Patient load of Government subsidized Patients throughout the Work Year, granted one month of Vacation with a substitute Doctor named; failure to maintain this Work load will cause Penalty of demanded return of Salary consistent with the percentage of failing to meet this Standard.
2) Clinics will be granted a sum of $250,000 before they are considered a Government facility in payment for treatment of Government-subsidized Patients, and given only Cost plus 10% past that Point to meet their Expenses; again meeting the Patient load acceptable to Medicine for the size of their facility.
3) Hospitals will be given an initial payment of $2 million before given the same treatment as clinics.
4) All Drugs and Medical Equipment will be paid for by Government subsidy at Production Cost plus 20%–the standard rate for medical royalty provision. Their Research Costs may be paid up to 25%, if a panel of medical economists find a marked improvement in Patient Care, but only after Proof than the regular payment schedule will not repay the cost of Research.

We have to change, and the sooner the better. Medical Insurance must be held in check, with Government medical economists setting the rate charged for standard procedures on which Insurers cannot contest the Charges–Get it from the Insured as premiums. A vast Change in Government procedure, but utterly necessary; We need all of the Above. lgl

I am quite sure that Mike Shedlock opposes my position on economic policy, but he does write very interesting stuff at times. He looks at life from the position of reducing Taxation and Spending, while I desire an increase in Taxation, and specific Spending. It stands as humorous that We feel so identically the same on the contempt We have for the way things are. The Compromise Tax Deal gains no one anything, and the very bribe produced to mollify lower Income Taxpayers was not, and will not, be desired by the Public. The American Public wants a real discussion someplace about what to do with the Deficit, and they are not getting one; I would suggest this will eventually affect all members’ decisions to remain in their jobs!

Hennessey suggests that Democrats could have won on Taxes by basically giving the Republicans what they wanted in the first place. The problem here being that keeping things the same, even making it worse with expanded Tax Cuts, cannot be the Answer if it has not worked successfully for a great number of Quarters. The real sadness comes in the fact that Retail is not doing too badly, Some would even say that they are successful in Recovery efforts. The real kicker have been that the artificial Profits of the Boom years have disappeared, and are not likely to show up soon. The most polite method of explaining the situation is that Wall Street does not want Bernie Madoff back, just his way of doing business.

Here are the greatest opposition to real economic policy. Business still believes that the Government can be robbed of tax revenues, and that it will all work out well. It is actually not working out at all. The double down quality of raising the national debt will absolutely demand restructure within 3 years, and Business estimate that it will work out well for themselves. It will not! There will be Non-Escape Taxes levied when the Crisis finally is driven home, and now is the time to avert that Crisis. You tell them, and you tell them, but they still do not want to believe. lgl

Can your Light shine in such artificial illumination?

Some economists are attempting to understand the sourcing rationale behind the payroll tax cut of 2%, thinking the whole concept is rather dubious–as do I. The difference between us, though, consists of my knowledge all good politicians run from blame, and both Sides wanted to avoid the serious impact of the Inflation rate which all of U.S. officialdom proclaimed was not there. Word to the Poor Critters: Grocery-shopping housewives have already noticed the Inflation, and are starting to burn with righteous anger, which can only grow when their husbands recognize that the 2% reduction in payroll taxes did not lessen the impact of the household bills.

The Budget Deal reinforced an economic policy of doing nothing, which a vast number of people cannot afford. We live in a La-La Land, where a Tax Cut means continuing the same rate as before, this purportedly some form of stimulus; funding for Tax Cuts comes not from Spending Cuts, but from reduced revenues to programs which are currently fully-funded though not through a revenue cut; all Tax Cuts placed where economic conditions will maximize the revenue loss (can you notice all Tax Cuts are going to Those who still have an Income of major size to tax); and Government officials who think they should get Raises because they thought of a federal freeze of Civil Service salaries. No one supports any measure of Tax reform, and WE are $283bn over Budget in the first One-Sixth of the fiscal year.

Everyone in the business community knows that continuation of the Bush Tax Cuts will not entice any further investment in Production, as long as Consumer Demand is absent–which it has been for two years. Business wants only to maintain their Profitability at reduced Production levels while waiting for the Consumer to come back; something which will not happen in the force necessary without aid from the Government; again something from which federal policy avoids because of the potential to force Tax hikes as all the fallacies are realized. The interesting thing is that Tax hikes are the real force necessary to force Business to produce more, and dump the excess at Sale Cost; Consumers regaining their participation rates by Business leaders desiring the same Profits range lost to Tax hikes. A World of Smoke and Mirrors, but one where We have lost ourselves. lgl

Debt Relationship to Inflation

I simply present this stylized gobblygook to signify I do not understand it much at all. I worry about Inflation, not from expansion of the money base, but from the acquisition of debt. It is not the actual injection of Stimulus which need be worried about, but the failure to fund that Stimulus in the first place; and the said effect of Inflation from it. Acquiring debt has the effect of lowering the value of Wages in the linear economy, while increasing the value of Profits and Rents. The reason for the benefit of the later lies in the purchase of additional productive product–non-immediate Consumption usage. Physical Product gains value under Inflation; it being cheaper to have acquired productive resource at an earlier time.

The problem with Debt comes from artificial increase in the Price of Consumption in relationship to other competitive linear economies; those who are bidding for the same Product and Resource. Such competition causes both linear economies to pay more for that Product and Resource than simple operation in a singular economy, and debt creates dispersion across linear economies. This dispersion allows the lower Debt acquisition to advance greater bidding against the debt-ridden nation, and increases the overall bid ratio higher. This means that the Price goes up for All, but with the lesser-debt nation having greater bargaining power, and paying lower Price for the Product–even though the Sale price is identical. I know that it is a hard Concept to follow, but think of its as the less debt-ridden country ability to force the more debt-ridden country to pay at the top of their dispersal range, without themselves having to pay above the Mean.

See, I told you that I did not understand this stuff. Debt-ridden countries have Consumption to maintain lifestyle, which forces them to spend their Savings, while less debt-ridden nations can afford to maximize their lifestyle, without sacrificing their Investment potential. The higher bidding caused by the greater entrance into the markets leads not only to higher Pricing and Inflation, but the erosion of Wages in the debt-ridden nation. I await my colleagues’ contempt for my poor choice of ideation and theory. lgl

The Real Facts

It can really start to get tricky after this purported deal. Obama really tried to get something substantive, but Republican pressure is great and they will soon possess the decisive Vote. Obama has repeatedly refused to take it to the people, making preemptive deals with the Opposition before Grass Roots Democrats had a chance to voice their Opinion. The Owner of a Fighter in Boxing should not declare the Opponent the likely Victor before the Match. It is not conducive to a helpful outcome. Obama and Capital Democrats do not understand the basic doctrine of Politics, which is a battle to the end. Democrats want to avoid the appearance of defeat, but they should really tell Republicans to bring it on! A battle royale insists that both Sides commit their full array of power, and the Opposition gets to witness their true agenda. I am quite sure that the Populace would be greatly interested in full revelation.

Paul Krugman stands quite Right on this one! The implications of a further reduction of federal tax revenues, with an increase in federal Spending, will be an absolute disaster for World financial markets. And this is exactly what the Deal will accomplish. The Lobbyists demand for further Tax Savings will break the Camel’s back. I predict that the bond markets will start to collapse somewhere early in the new year, as first indications of reduced tax revenues appear. The Beltway may be dense and half-blind, but they will notice when they land on the Street.

I will let my Readers view this Piece from the source. Ask how the new Deal will affect the events described in the Post, remembering Expenditures for the fiscal year have already exceeded tax revenues by $283 billion. Notice that Corporations received more refunds than made payments in this Period, and the Deal would ensure that such a condition will continue for the rest of the fiscal year. Obama and the White House were vitally concerned with hiding the impact of the Inflation which is not supposed to exist according to the Fed, but which does; this is the reason for the cut in Payroll taxes, there being no real advantage for Labor. The Democrats at the Capital level gave away the entire Store with nothing for the Hinterland. Get set for the worst Recession since the Great Depression. lgl

Getting Tough

You may ask Why this Post is important to study; I remand you to the Chart. Let me put it another way; the right hand side should also have an axis, scaled not from zero precisely, but showing the percentage of each Income level paying each form of Tax. Everyone knows this would make the Chart a little dense on the Right side, but the Chart can be expanded as needed, due to the miracles of technology. Such documentation though, even in Chart form, might produce some misgivings amidst the sad Taxpayers at the high Income level. Remember, kids, this is the way you find out the bad News about the economy–devising the correct method to analyze economic data.

There is a lady who thinks there is some Common Ground over which Democrats and Republicans can agree about Taxes and Expenditures. Republicans care not either for marginal tax rates or average tax rates, they only want no additional tax revenues coming from themselves. Democrats want to gouge the Wealthy; knowing that the Poor are safe, one cannot get blood from a stone, and the Poor and Middle Class are on some stony ground. No one talks about What has actually to be done to balance the budget in all its aspects. I will give a Roadmap:

1) Social Security and Medicare have to be separated, with Medicare given its own wondrous Tax rate and base; first Step in the Trip to a national health care system. Both Democrats and Republicans know what a pain this will be to the Pocketbook.
2) the Civil Service–hopefully State and Local as well as federal–needs to be split in two, One-Half working Monday, Tuesday, Wed., and One-Half working Thurs., Friday, Sat. Everyone would work a 12-hour Shift three day a Week; Everyone would get only 2-Weeks of paid Vacation after working at least 50 Weeks, and Congress will determine a Unit Pension benefit to be paid monthly for all Civil Services classifications. No Civil Service personnel will be employed more than 20 Working Years per lifetime, and any further Service to the nation must be paid out of potential Private charity contributions.
3) Income will be split in $10,000 Units for Tax purposes, and there be passed by Congress an Alternate Minimum Income Tax in a progressive list which must be paid for each segment. The AMT yearly Fix will become a thing of the Past, but any form of Employment taxation will accrue to the fulfillment of the segmented AMT. By the way, Corporate Income, Capital Gains, Inheritance, and Royalties and Rents will all be considered ordinary Income and taxed at the same rate.
4) Congress cannot just Vote in support of a federal program or project; they must determine How much they are willing to pay for that project every year, and the project in question let out for Bidding. Any Bid is considered sacrosanct, and the Bidder will be compelled under law to supply the Contract under the terms of the Contract.
5) Congress must drop any such project from the current fiscal year, if no Bid has been advanced under the Contract passage.

Does it seem harsh? It is meant to be! lgl

Real View

One should recognize the alternate projections which could be aroused by diversion of the Bush Tax Cuts elsewhere. Here is a pretty good stab at the wealthy end of the Bush Tax Cuts. There are a lot more uses for the tax revenues besides giving it to people who will not use it to promote the economy. It patently expresses that the low-End of the Income spectrum vitally needs the extra Cash to build their economic viability—something which makes up about 80% of the Population. There could have been additional data in the article with information on the fact that only about 18-20% of the Return, if given to the Wealthy, will actually be spent upon purchase of any economic Product–rather than financial instruments on which there is no economic return. This means that instead of an even split where almost all of the $500 would go to the purchase of economic Product; about $410 of that $500 will be transferred to commercial paper which does not generate even comparable economic activity.

This Post from James Hamilton immediately after the Leonhardt article on the economic site I utilize explains it all. None of the economic data indicates that there will be any increase in employment currently which would decrease the actual Unemployment rate–something far too great by any evaluation. The Leonhardt article explained How the current Bush Tax Cuts extended will never improve that employment, while indications exist that such current economic activity will decrease with the new year. The only buoyancy present at this time consisting of the Christmas Season. The Republican Congress may be voting to reinstate the Bush Tax Cuts while the economy is already in decline.

Here is a Post from Matt Yglesias that expresses the Opposing Side argument. The trouble is that it proposes equally flawed ideas. Still, Matt explains the argument is clear terms, with the positions of Liberals and Conservatives. The actual fact stands that We need higher Taxes, a freeze on social welfare spending, and establishment of Government-funded large-scale Work programs where no one can complain about reducing Spending once the projects are complete. The trouble remains the fact that it meets opposition from all Sides. lgl

New Taxes

Here is an article which shows that the Playing Field has never been equal. The Poor cannot afford the favoritism which the Rich hire. Could I put up with the expiration of the Obama Tax Cuts?–Certainly! Do I want expiration of the Bush Tax Cuts?–even greater Certainty! It is not only the Just thing to do; it makes an incredible sense given the skewed Expenditures of the Government not covered by tax revenues. There still exists an almost Certainty, though, that the Bush Tax Cuts will be reinstated without revision, and the Obama Tax Cuts reinstated only with sharp revision, unless Democrats make huge concessions to a Republican budgetary plan which is only of real advantage to the Wealthy. This Certainty finds establishment in the fact that all of Congress belongs to the Wealthy Class benefitted by the current system.

There are a number of Nuisance Taxes which Democrats could force upon a reluctant Republican Congress, if they desired to do so; it all a Question of turning to the Voters for support. I would pass the Accounting Tax: where every Taxpayer must pay in addition to his determined taxation an amount equal to the total Costs paid to Accountants and Tax Preparers (including lawyers). It has an inherent sense; if you create a huge documentation which must be checked, then you should pay for the Cost of checking it. It is clear that We would all want some standard deduction on this Tax; I would suggest a deduction of $250 per Individual Taxpayer, and $2500 per individual Business. Everyone else must pay the full amount to assure the price of Accounting is paid for the Government.

There is always the Deduction Tax: which is simply a taxation each Taxpayer must pay on the total amounts saved by Tax deductions, Tax Credits, and Tax Exemptions. It is optional if the Voters want to include Tax deferments until later in life. I would suggest a straight taxation of 12% of all such tax remissions, and even give an Exemption on this Deduction Tax equaling the standard personal deduction, plus maybe some deduction from this Tax for each dependent; never including a member of the Workforce. There is always the Luxury Vehicle Tax, where Purchasers must pay $10 per $1000 above any Vehicle of Standard Options average Price for the year in question. This later Tax must enter an Insurance Fund to pay for the added Cost of Car Insurance from luxury vehicle claims. I would get really nasty with a Viewed Tax, where any Politician, Business person, Lawyer, or Advertising Agent must pay $1 per minute for every minute of Viewing Time he is viewed or heard on Radio or TV; this Tax also includes repeat Airings of Material, it all being considered Advertising of Person, if not Product. There are ways to get tax revenues out of these bas, hmmn, individuals. lgl

Tough Love

I would first like to say that I don’t agree with this assessment at all. There is absolutely no drag upon Employment from the last Recession, nor will there be: it is all a question of development of Consumer Demand. It gets my goat that people imagine that the losses of a previous busted Boom will forestall a new regeneration. People have been losing Money in Business ventures to greater or lesser degree since the dawn of Mankind. Such losses produce Hunger and Risk-Taking by Those without Wealth, and the Wealthy hate the lack of Return to keep their pile growing. Economic Busts do not dampen Incentive, it enhances it! One has only to examine Germany and Japan after World War II; they starting from a bombed-out nothing to return to major economic powers in the World once more.

The second element I would stipulate consists of the statement that Tax incentives do not operate in the presence of reduced Consumption Demand. Business will not invest without solid Demand and Traffic. Consumers will not purchase if they possess capacity Products which are already paid for and working. There has to be an enlargement of the Consumer population, not a pursuit of a fed Consumer already reliably supplied with older Product. One needs Government Spending to expand that Consumption market, and it will not come from Tax incentives; especially when Government insists on deficits which serve no one, and drain private Capital markets. It is also a Truism that Exports will never replace a domestic market, no matter how rigorously sought.

I want the uniform Tariff of 6%; something which aids domestic production, while not costing the end-Consumers much more than they will pay anyway. I want the repeal of the Bush Tax Cuts as being ineffective–Past, Present, and Future. I want the Fed to stop destroying the Constant Consumer–who are millions of Elderly who cannot get a decent Return on their chosen investment instruments–Bank accounts. I want the Unemployment Benefits cut off after 60 days, forcing Labor to take what Jobs are available. I want the Government to supply those Jobs which the Private Sector will not–through massive restoration projects at every level. I would finish by passage of a federal law forbidding discrimination between Property holders to attract new Business to the area; local and State revenue coffers must themselves be replenished. Government must supply Jobs, but lower Income jobs acclimating American Consumers to a lower Income, but one where the purchasing pattern is maintained. We need to get the pretension out the economy, and the real hard work reintroduced. lgl

One Size fits None

I find a very good idea once in a while, and generally it is gummed up to a point that it is unworkable. It stands as a sick and sad concept to give the overages to Charity, like everyone wishes to make investments with no rate of Return. The idea of giving a share percentage of the Profits of an enterprise is not new, something call silent partnerships. Building a business format finding and selecting these silent partnerships creates the new Concept. What I would do is create the business, find the participating business, and sell Percentage (1) shares over the Internet for an auctioned price with the participating business capable of acceptance or rejection of the bid. Here is a Means of participating in small business growth without the ridiculous resort to Stocks, Bonds, and Commissions; I would demand a singular Commission price from both participating business and purchaser of $100 per realized Sale. The business enterprise format could also offer Insurance on fulfillment of Return for the original investment; also through Sale at auction to major Insurers with premium set by the Insurer at auction. I would also set a $25 commission for this Insurance, as I would want an up-front one-time payment for the Insurance. It could become the new Craze of the Internet!

I was arguing for the exact opposite yesterday, but Catherine Rampell may have a point. I also have a point: Taxes should not be so complicated that one must hire a Tax Preparer; a place where Workers from the same industry can join cause in cursing the IRS for the same reasons. This states that Tax benefits should be uniform and consistent. The personal deduction should be one-size fits all–both personal and dependents. Joint filings from Marriage should get a singular one-size fits all–I would suggest $10k per filing. I would suggest a one-size fits All investment tax credit of $4000, dependent upon that great an investment, but no more Cash underwritten. I would suggest a Tax-delay Credit for investment vehicle of the inverse size of Tax bracket one is in; this meaning that you pay a tax on your tax-delay credit, but that you pay that much less tax after Retirement on the Money cashed in. I would suggest a Capital Gains Sales tax of 3%, and forget all about Inheritance, Gift, Charity contributions, etc.; though I would maintain a Capital Gains taxation of 21%.

I possess a real dislike here for granting escape from Inheritance and Gift taxation, but little is ever gained anyway. As long as the Capital Gains rate and the Capital Gains Sales tax rates are maintained, more money will be received in tax revenues than in the other; simply because the later can be so completely gamed by Those who have Money, and poorer individuals should be let out anyway from taxation. I will catch hell about voiding the Charity contributions deductions, with only the Statement that Government should be our greatest and most needy Charity case. I will listen now to the complaints (do you really think so?). lgl

Real Truth

I can easily find How Wall Street and the Beltway think. The trouble remains that these ideas have brought Us grief repetitively over the years. I told All who would listen that the Bush Tax Cuts were bad, and have been doing so since they were first proposed during the 2000 Presidential campaign. Now, they want to do it one more time, with all the expectant results which never occur. There has to be a better way, but even if there was an easily definable one, the Lobbies would never allow passage.

The Democrats need a rallying Cry in the Tax debate. I would call for the elimination of the Flow-Through of the current Tax system. Everyone thinks that higher Tax brackets are taxed at the stated Tax rates, but they are only taxed at those rates after they have received the same Tax advantage as the lower Income brackets; this process creating a great hole in tax revenues. I would adopt a tax provision stating that each Taxpayer must pay the Tax rate stipulated for their Income bracket, throughout the total of their Income; not just on what had not previously been taxed at a lower rate. It is a Call on which Democrats can block new Republican tax legislation which would further denude tax revenues, and do so with widespread Public support when the Issue starts to be discussed.

My Pet Initiative is a uniform Tariff of 6% on all foreign Products. This would bring in a great deal of tax revenue, and alter the entire Debt posture of the Country; not just for Government debt, but also for Consumer Credit, all within the context of loosening up the extension of Business Credit. What is most apparent consists of the failure of the Government–federal, State, and Local–to control their Expenditures. This, more than Credit Default Swaps, has presented the stress in the financial markets; they unable to continually meet a rising demand for Credit which is never actually repaid except with further Debt. Everyone knows that this Debt is building faster than actual Production Profits, and the later has to be devoted to many other economic factors. There must be Change, and sooner than later. lgl

May the Circle be unbroken

Here are some numbers which I imagine may be a two-edged sword. The increase can be viewed as excellent, except for the possibility that it might all be going on Credit Cards. Credit and Wages should both be loosening up at this time, and if Wages are still dragging, we are asking for a flashback of the Credit Crisis with a noticeable lack of spare carry assets. What this means is that the growth in Income from new Jobs added to the economy should equal or exceed the growth of Credit; otherwise, there is not enough speed in the M2 to carry the debt burden. Translation: this means a net increase in bank liabilities without a net increase in bank Income; a distinct hazard understanding the Cost of the Writeoffs from bad debt previously built into the financial system. It ordinarily would not be an extreme risk, except for the extreme levels of Government debt currently draining financial resources throughout the World. Some may say I make too much of the Restaurant data, but the Restaurants are always the last to catch the Wave of prosperity; meaning that Credit increase has already shown up elsewhere.

There exhibits a lot of speculation about the Euro. The interesting element found universally in the developed world stands at the lack of real growth in domestic consumption. Realized growth comes from Exports if at all. Here resides the problem for the EU. Trade within the Unit must be treated as if it is domestic production, while Exporters need to deal with foreign demand at specialized Pricing so as to get the greatest Sales with the maximization of Profits by Trade deal specialized negotiations. Developed Producers suffer Profits and Sales losses by forced maintenance of uniform Pricing of Product; I know that California would like to break off from the rest of the United States over this issue. The later holds little possibility of achievement, but the EU breaking up under Crisis may be a distinct possibility, as the unification was in some sense very artificial. The Euro, as currency, must hold to the least capable of household support, so may suffer the erosion of the currencies they once replaced.

Arnold Kling makes an attempt to eliminate Boom and Bust from economic review, and does a relative good Job, but one wonders Why there is no 1982-94; could it possibly be that he does not want to embarrass the great Reagan Era? It is not my model, though I can imagine that the period 1969-81 could have been extended through 1994, especially with the S&L Bailout right in the middle of it. The devotion to Business shown from 1981 through 1992 might have exhibited a worse scenario than either side, and that the Period after 2001 might have been carried by the 1992-2001 Period to maintain uniformity. Here is the great difficulty in all economic models, not knowing just How to phrase your model for greatest utility. lgl