Spending v. Tax Cuts

Analyzing the Economic and Budgetary Effects of a
10 Percent Cut in Income Tax Rates
CBO
http://www.cbo.gov/ftpdocs/69xx/doc6908/12-01-10PercentTaxCut.pdf

An important Read for Economists, but the Daniel Altman article in the NYTimes points out a real need to regain reality in the argument. Government Spending has far greater effect upon the Economy, than any Tax Cut could; especially with Tax rates at an incredible Low, considering the size of the Federal deficit. Borrowing from Overseas will become harder, with only a higher attainable Interest rate, as the Federal Government borrows more from foreigners. This Argument has yet to bring up discussion of the effect on the Dollar of such borrowing; something the Author does not want to enter into here.

A serious ignored component in the discussion lay in the division of Government Spending. Social Welfare programs promote Economic performance, while Spending on High-Tech weaponry and Capital infrastructure does not produce as high an economic performance. Why?

Social Welfare programs attain higher economic performance because Consumers receive far higher after-Tax Income to spend on Consumption. This Spending generates Jobs, to supply the greater draft of Consumption Goods. The additional Labor, even if not paying a high or any rate of Income tax, pay basic Sales taxes, State Taxes, and Social Security Taxes; all generating greater Tax revenues, and expanding the Tax base paying those Taxes.

High-Tech and Capital Infrastructure Spending relies on a limited, high-Paid Labor force who enjoys the greatest set of Tax deferment advantages of any Tax-paying class. This is a very specialized Labor force, and celebrated for the minute percentage of the Labor force which they represent. Industry and Business concentrate in the High-Tech and Capital Infrastructure arena solely because of the limited Labor Costs and high Profits. This concentration is exhibited in the lobbying effort exerted to maintain this type of Government Spending.

The CBO estimates a 10% nominal reduction in Taxes would produce no more than a 1% increase in economic performance under Conventional evaluation, and less under a combination of Supply-Side and Demand-Side effects. Altman dreams up a $2.4 trillion increase in economic performance. This Author contends that an alteration in Government Spending patterns could effect up to a 8% change in economic performance, and for the better; if and only Government Spending patterns are rationalized. lgl

All Aboard!

Air Freight Growth Seen Slowing Sharply in 2005
By REUTERS
Published: December 29, 2005
http://www.nytimes.com/reuters/business/business-airlines-growth.html

Reuters provides good statistical information often better than the other Services:

IATA, the Geneva-and Montreal-based International Air Transport Association, said cargo carried by its 265 member airlines by the end of November was only 2.8 percent up on the first 11 months of 2004.
This figure, which industry analysts said could be boosted slightly by December traffic as companies rushed to meet holiday period orders, contrasted with the 15.8 percent freight growth for the whole of last year compared to 2003.
In October, the World Trade Organization said that by the end of this year global goods trade would have grown by only 6.5 percent year on year, down from the 9 percent growth of 2004. It also recorded a slowdown in the IT sector.
IATA said that in January-November 2005, passenger traffic on international routes grew by 7.7 percent over the same period last year. With December traffic likely to provide a small boost, the full-year figure was expected to be 7.8 percent.

They present a better economic sense than does the Airline industry. The industry is not going to become profitable through increase in traffic or Trade; this condition due to the reality of Air traffic congestion, Airport congestion without the ability to expand facilities or produce added Airports, and the incapacity to multiply the Air lanes through which Commercial traffic flies. Simple increase in Ticket pricing will adversely affect Consumer use.

It is time to consider Boarding Pass charges and Pick-up charges for receipt of freight. They possess the capability to be increased and decreased on momentary notice to respond to Fuel Costs, without hampering the Processes involved. Other alternatives will not fulfill Airline guarantees of Service, or pay for the Fuel bill. lgl

Reinsurance

Munich Re to Up Dividend Despite Losses
By THE ASSOCIATED PRESS
Published: December 29, 2005
http://www.nytimes.com/aponline/business/AP-Germany-Munich-Re.html

Munich Re happily report it can still maintain its 12% Dividend:

It said the company's board plans to propose an increase in the dividend to 3.10 euros ($3.67) from 2.00 euros.
Munich Re shares were up 1.1 percent at $138.80 in early trading on the Frankfurt exchange

The Company released some other estimates:

Total insured losses to the industry from natural disasters this year exceeded $75 billion, almost doubling the previous record set last year, the company said.

It put total economic losses -- including uninsured property -- at more than $200 billion, up from $145 billion a year earlier.

Study of the data begs of several questions. 2005 held record losses for the Insurance industry, coming immediately after the worst losses ever before in 2004. Still, the largest Reinsurer in the World--with potentially the largest losses of any Insurer--can still pay a 12% dividend of three Euros per share. One has to ask what level of Capital assets Insurers hold against commitments, and what this does to Insurance premiums. The Insurance industry has had back-to-back worst losses on Record, and still can pay a 12% premium. Most Business and industry absorbs Production losses as the Cost of entrepreneurship. What level of premium would Insured have to pay, if Insurers keep sufficient Reserves to pay Claims with a zero Dividend on Shares, as most Business must do in the face of acute losses. lgl

Trains

Europe is again buying trains:

Bombardier Gets $262 Mln Order From Deutsche Bahn
By REUTERS
Published: December 28, 2005

Do they know something We don't know? Let's see if We can figure that out. Trains cost a lot less than big Jets. Trains used a lot less fuel than large Jets. Trains haul a lot more than the barns in the Sky. The load of three Semi-tractors can fit on one train flatcar. The load of four Semi-tractors can fit in one train boxcar. Let's be honest: a Train locomotive uses about Seven times the fuel as does the Semi-Tractor, but can haul the equivalent of about 55 Tractor-trailers. Train locomotives, working in tandem, are able to haul a Train over 3 miles long for about the fuel cost of 15 Semi-Tractors. (the later statistics Author estimates--therefore questionable)

Business and industry talk about slimming Inventories and Speed; they stipulating We live in a new business environment where the 3-day cross-country trip by Train is too long a period to Order and Stock. Where did this excessive hurry come from, and why can't We meet the slower Production schedules used by Everyone else on this planet?

The irony of this Argument states the Airlines are going bankrupt anyway--Fuel Costs are too high. Aircraft remains the worst Carrier of bulk freight, because of Weight and Fuel Costs. We are the only Nation on Earth who lacks effective Passenger trains, when maintenance of such Service costs immeasurably less than maintaining Our commercial Air fleet. Travel by Rail actually is more comfortable, safer, and more spacious; the Time expended in Rail traffic easily utilizable for entertainment or Paperwork. Business moguls will not be restricted from flying through the air, but why join them? An effective, expanded Rail system would not only cancel extreme Fuel Costs, by also Traffic congestion, Pollution emissions, and Routing problems. lgl

Economic Crime

http://www.pwc.com/gx/eng/cfr/gecs/PwC_2005_global_crimesurvey
Global Economic Crime Survey 2005
PriceWaterhouseCooper

A Must-Read for Corporate Executives. Fraud Risk Management systems are over-trusted, and Companies are still underreporting instances of economic crime. Large Companies are reporting about One-Third more instances than small Companies; this does not indicate better supervision at the small Company-level, as the Survey were more likely to be questioning the senior Executives who were engaged in Economic crime at the small Company. Senior Executives were shown to be more likely to engage in economic crimes, while the incidence of severe punishment was much lower than for Middle Management or Workers.

The level of citement of maintaining lifestyle as cause for engagement in economic crime implies that the senior Executive Pay Packages have grown too rapidly. Middle and upper Management will foster economic crime to match the Payscale of better-paid senior Executives.

there has been a 71% increase in the
number reporting corruption & bribery,
a 133% increase in the number
reporting money laundering, and a
140% increase in the number reporting
financial misrepresentation.

Company Employees are losing their allegiance to their Organizations due to the wide disparity in Compensation in this Author's estimation. The old factors, cited by this Report as beneficial to forestalling economic crime, are likely to nullify as senior Management gorges itself on high Pay Packages.

The Problem is not going to go away, and it is bad:

45% of companies worldwide have
fallen victim to economic crime in the
past two years – an 8 percentage point
increase on our previous survey.

The only effective control may be Stockholder demand that all Pay Packages retain some relationship to Earnings potential. lgl

The Big Trucks in the Next Lane

LARGE TRUCK SAFETY
Federal Enforcement Efforts Have Been Stronger Since 2000, but Oversight of State Grants Needs Improvement
http://www.gao.gov/new.items/d06156.pdf

About 5,000 people die and more than 120,000 are injured each year from crashes involving large trucks. The Federal Motor Carrier Safety Administration (FMCSA) has several enforcement programs to improve truck safety and funds similar enforcement programs in states through its Motor Carrier Safety Assistance Program (MCSAP). Following concern by Congress and others in 1999 that FMCSAÂ’s enforcement approach was ineffective, the agency committed to take stronger actions.

Most of Us drive the Highways and Interstate of this Country relatively daily. We find Ourselves side by side, or in front or behind the Big Rigs constantly. They are always pushing the Speed limit, because their Pay comes in ton-miles of haulage, and faster delivery means higher Pay--as new loads can be hauled. How safe are the large Trucks?

The Answer makes sense: Real Safe--if you are not pushing it. Several elements can consistently maintain Safety. (FMCSA) will not focus on these elements, though, as it would increase freight charges. A quick list can be given:

1) No Driver should drive longer than 3 hours at a time, and no more than 9 hours per day.
2) No Driver should drive any Road systems with which he is unfamiliar. Drivers should be licensed for Routes, not just ability to drive a Rig.
3) No Driver should be allowed to drive distances greater than 1000 miles from his origin base. Drivers cannot remember Route conditions under longer Drives, it will shorten Drivers' Away time with fewer forced long drives, and actually lessen Driver compulsion for high speed. The Downside lay in Trailer surrender for long hauls, but trailers should be centrally-owned and maintained by Distribution Centers for Profit.
4) Mechanical Truck Boxes should record Fuel mileage as well as driving times, and Fines issued for excessive Fuel consumption and/or Exhaust emissions. This would improve Overall upkeep by around 12%, with Safety issues being dealt with in the Garage.
5) Drivers should be prohibited from insuring themselves, Insurance regulated and paid by the Shippers at a ton-mile rate; Insurance companies can insist specific Drivers must be relicensed or prohibited from Driving, due to exhibited Carelessness.

These are costly Initiatives, but when introducing and Accounting Accident Costs currently paid by all American Drivers, they are actually cheaper than the current system of irresponsible noncompliance with Safety measures. lgl

Merry Christmas

Everyone hoped for a solid Christmas season, but Sales were only lukewarm. 2005 was the Year of Problems, and they still have not been undone. Energy pricing is beginning to eat Profit margins, Wages are still not keeping pace with Prices, and Jobs are still disappearing in the Manufacturing sectors. A sad story for 2006.

There are good things happening, though! The Cost of Medical expenses are losing their inflationary push, narrowing the Gap between themselves and ordinary Products. Outsourcing is losing some speed as well, as many businesses realize utilization of a common language carries Expense savings. The appeal of Brand-Name Products is disappearing, and advertising Companies turn to Company self-promotion; a fortunate effect of funding for worthwhile projects to brag about begins to show up. The World could be a lot harsher place!

Merry Season for All, and enjoy Santa!
lgl

Will the Euro Eventually Surpass the Dollar
as Leading International Reserve Currency?
Menzie Chinn and Jeffrey Frankel
December 2005
RWP05-064
http://ksgnotes1.harvard.edu/Research/wpaper.nsf/rwp/RWP05-064/$File/rwp_05_064_frankel.pdf

A econometric Working paper which is relatively easy to read and evaluate. The basic question asked is whether the Euro with eventually surpass the Dollar as the common international Currency. The authors believe the EU must become a larger Production factor than the U.S. Economy, and/or real depreciation of the Dollar continues. It will not be swift in any Case, with Year 2022 cited as changeover Year if it happens. Twelve Countries trade currently solely in the Euro, and more are expected to convert. The Problem centers on the issue the sustainability of Current Account imbalances of the G7 nations: this Paper written to be given at a Conference considering the issue.

The Authors of the Paper found that the international debt situation had little impact upon the data skew, but the willingness of the Central Banks to maintain a high volume of Reserves as dollar stocks was vital, the U.S. Government needing absorption of the Dollar stocks to ensure low Interest rates for huge Government debt. The Later necessary to maintain the long-term loss of Tax revenues in the magnitudes to enjoin political support for a Federal program matrix highly disliked by American Voters. lgl

Rumsfeld and Cheney Visits to Iraq

Rumor has it that the 138,000 Troop level limit chaffs for the American leadership in Iraq, jointly Ambassador and American Military Command. Rumor states they requested an additional 30,000 Civilian Contractors (Mercenaries) to replace the drawn-down Troop levels. It costs the U.S. Military about $67k per year more for a Contractor than a Troop element; Health Insurance being about equal in Cost, without an assumed Retirement benefit. The good Republicans of the Bush administration are said to be somewhat perturbed, thinking the Cost to be quite excessive, while the recruitment of this level of Contractors will reflect in the Press. Even the extension of the Patriot Act does not buoy Spirits in the Oval office. Secretary and Vice-President have both journeyed to Iraq to lift the morale of Our Servicemen; Some say to silence various Press leaks in the American Command structure. This is the Story, at least as visualized by this Author.

It does not help that Home Sales dropped in November by 11%, indicating that the Fed rate hikes alongside Energy prices are indeed inflicting drag on the Economy. The increase in the sale of Durable Goods reflect only Price increase, as Capital formation in the Durable Goods arena decreased, when aircraft are removed from the format. Too many Economists spin their numbers on the specialized industry of Aircraft, as earlier they crowed about the Housing boom. lgl

What is Myth?

http://cafehayek.typepad.com/hayek/2005/12/twelve_myths.html
December 21, 2005
Twelve Myths

Some might think I mistrust or suggest Don Boudreaux is less than a good economist, but such is not true. The problem lies in the fact this Post is rather too sweeping in tone and content. A major Trade deficit is indication of malaise, and a debt of specific order. The debt is composed of misspent Labor resources, whether underutilized, underfunded, or undermanaged; all consisting of an economic existence which is bad.

Corporate managers do sacrifice long-run performance to ensure that their Pay Packages are always maintained, so Profits are maximized in the short-run. Prices and Wages are manipulated in order to direct Profits to arenas of personal benefit to the Corporate managers. Rare has been the government regulation ever been passed into law, except where Corporate managers have already shown deficiency of self-regulation. Government, itself, could do a far better job of protecting its Citizens against Violence; a true laudable goal of government.

More People does mean a greater draft of resources in economic supply of well-being support, and concentration of economic resources to supply of Toys for the Rich cost the greatest losses of Capitalization. Increased levels of well-being is the culprit here, with greater numbers joining Those to purchase these Toys provides an overall rise in Economic Costs. The advance of technology remains the only means to conserve overdrafted economic resources; We would fold drastically if the economic cost of individual support was as high as 30 years ago.

Democratic governments hold the probable worst record for allocation of Public funds for overall benefit of Citizens, but there is the downside; other forms of Government think to meddle with basic economic structures--far worse than democratic over-spending. The beast which is the Economy does act like an Individual, though more a spoiled child of schizophrenic character, as decentralized behavior destroys collective effort and common benefits. Government law reminds of the demands of Children, regrettably without the restraint of sensible Adults. It is fortunate Politicians do not understand the force of Economic and Financial law, the only control over Government existent in a democratic society.

By the way, this Author thinks the Boudreaux piece is quite good, but Students should know of the need for qualifications. lgl

The Dollar

The Dollar is rising against the European currencies, and Gold and Silver are dropping in Dollar evaluations. It is because of the increase in American GDP of 4.3%, which counteracts the bad news last week of a widening Current Accounts deficit and an end to the Fed interest rate hikes. Everyone may be celebrating, but it may be premature.

Energy prices are still rising, both due to Speculation and to Shortages, keeping pace with the increase of Consumer spending of 4.1%--the major cause of the rise in GDP. Consumer Spending, though, will undoubtedly deflate after the post-Christmas Sales (Author-estimated 9%). The present Interest rates imposed by the Fed will triple their impact at this point, as Grandpa and Grandma stop buying Presents. The Energy prices, though, will not be going down at all. It remains extremely hard to imagine an increase in Housing Starts or In-place Home Sales, so the Spring Construction burst will probably not spurt, but fizzle. The trouble of tying economic growth totally to Consumer Spending lay in the latter's commitment to seasonality. lgl

Bush Rewriting of Law

George W. Bush declares that he has the power to order domestic spying in case of national emergency, basically based upon the Patriot Act; now refused reenactment by Congress. Bush vows to continue the practice without mandate, to protect the interests of Those who find little need of protection--except from the grasping reach for power by George W. Bush.

Bush utilizes the same defense used by Hitler in 1933: It was okay because it we He who was engaging in it. A greater measure of egocentric megalomania can hardly be found, where an Individual claims the power forbidden to Others in like place, simply because it is He who is doing it, instead of Anyone else. The greatest danger to this Mindset is best portrayed by the Watergate Break-In, where Enemies are defined as Enemies solely because they are political opponents. The childish defense of The Terrible Two (Bush and Cheney) as they invade and despoil Rights inviolate to Americans is becoming old and boring even to the deep Republican supporters who put the Two in office to begin with.

This Author believes a Joint Statement made by the ex-Presidents condemning this usurpation of power would reassure the American polity, especially if the elder Bush added to the just criticism. The Two in Question have yet to understand some of the basic precepts of the American political spectrum, which insists Participants play by the rules of the Game. It is the wrong time for the American Electorate to call 'Foul' , so the Retired Players must act as Field Judges. lgl

Omnibus Bills

The Concept consists of tying necessary legislation or action to unadulterated crap, so that the crap can get passed. It remains a venue used by All today, consider the Hong Kong talks of the WTO. An article in the AP lineup mentions that Farmers are being injured by Tax provision 1033, which artificially raises Land prices beyond Operational Return mortgage payments. The Tax Code is replete with such type provisions, which destroy as much as they benefit. The House just included Artic Oil drilling in the Military bill; One can even favor such Drilling, and know this is the wrong approach.

Very little actual gain derives from such procedures. Political opposition induces bureaucratic obstruction and greater erratic initiatives to block measures which have not been politically resolved. The President and Vice-President are currently engaged in defending the expansion of Presidential powers, and criticizing the defeat of reinstatement of the provisions of the Patriot Act, another omnibus bill which was an over-reaction to a perceived threat; We now have Government domestic spying on Private Citizens, and transfer of Prisoners for their specific torture.

The confusion of political issues through use of omnibus bills should be constrained. Said activities allow gross inequities and violations which would not be allowed elsewise. There is need for clarity of expression, for decisiveness of political action. lgl

The Wind that Smells (Passed Gas?)

The WTO has reached a deal, but nothing is to happen right now, or even close to Now! Farm subsidies are to end by 2013, a nice Date which places the current World leadership in retirement mode at time of implementation. Three top Vacancies at the Fed in 2006, as no one wants to be responsible for whatever new Fed policy is enacted: a tight Money policy is needed, but it will doom the current Generators of economic growth. All the above-mentioned Participants were quick to join the bandwagon when unstable and dangerous leniency was introduced into Markets Worldwide that were bound to buoy up the economies of the World in the Short-run, but were all destined to create over-Investments in Capital and disbalance in development strategies of the several economies. The Later series of events is Now!

The developing countries are not going to benefit from Trade with the Developed Nations. Selling the Wealthy nations cheap Agricultural products is no panacea. Capitalization of Agricultural products will be too excessive, and Capitalization of Industrial Goods will disappear as Developed Nations undercut the Cost structures of native manufactures. Both sides of the Trade equation will also have to capitalize an excessive Transportation industry, and provision it with Energy needs which no one can afford. It can be simply put for easy understanding: Developing Countries need Trade barriers, they are the only protection from the parasitism of foreign advanced development.

There are Those who honestly believe that Trade is the salvation of the Poor, Why are the numbers of the Poor increasing Worldwide, in both Developed and Developing Nations? This Author started economic life as a Free Trader, but thinks he may end that life as a Trade Protectionist. lgl

WTO

Global Trade talks have stalled about where this Author imagined they would--where real national interests were involved. The EU refuses to set a time to eliminate Agricultural subsidies, purportedly because India and Brazil will not eliminate duties on Industrial Goods imported. The United States says it will eliminate Agricultural export subsidies, and 60% of domestic Agricultural subsidies--rubbish; the Bush Negotiators are dreamers. Farmers throughout the industrialized nations are not going to let themselves be undersold by Agricultural Products raised with 20% of the efficiency, 30% of the Productivity, and 40% of the Cost of their own high-tech Agricultural production.

The lack of balance to the WTO Draft agreement ascribed to it by the EU remains nothing more than retained commitment to established national interests by each Participant. Free Trade stands as an unreachable Goal, due to the political processes of individual nations remaining unchanged. Violative concessions are blocked at the 'Grass Roots' level of political action. It is particularly worthless to beat a dead horse. The WTO has seen its day, and will probably go the way of the League of Nations.

The Author, on the other hand, still perceives beneficial access to global integration. He believes there should be a international Conference on Pensions and Pension Rights, Disability and Medical Benefits, and on Unemployment. Stupid as it may sound, there should be international treaties covering all of these areas, guaranteeing Worker Rights sanctified by law, and thereby leveling the Playing Field of international Trade by percentage set-asides. This could well be the next Best Step. lgl

Pensions

The House passes a Pension bill different from the Senate bill, Everyone knowing the real legislation will be written in Conference. Bush is posturing to demand a tougher bill than either of the two versions currently existent, but no one takes the threatened Veto seriously, the Bush bark lacks teeth when dealing with American politics. Will significant Pension legislation get passed? NO!!

Pension plans can pay for themselves, if and only if there is uniformity to both the Contributions and Benefits schedules. This means a singular contribution alongside a singular Benefit payment. The greater the disparity between the levels of Contributions, and/or the disparity between the levels of Benefit payment, the more unstable becomes the system; no matter how devised. Contribution increases never match Benefit payment increases in the higher ranges, while inability of payment of increased Contribution at the lower ranges ensures loss of Benefit payment purchase capacity or over-size liabilities for the Pension fund.

The Author favors a unitary Contribution of 13% of the Median salary of the Beneficiaries, and a unitary Benefit payment of 35% of that Median Income annually. Eligibility for Pension benefits require at least 23 years of contribution. Disability and Medical benefits are to be separated from Pension funds with establishment of their own contributory funds. The time for Changes to Our Pension systems is Now. lgl

Statistics

People are busy reporting that Consumer Prices are down, but realistically, it was only elimination of balloon profits in crude Energy Sales. There is conflict reportage on Mall Sales this Christmas Season, with Commerce Dept. and Mall operators claiming a rise in Sales, but some tracking companies reporting actual declines over last Year. This Author has observed a heavy increase in traffic at the Discount stores (no hard numbers), but a traffic flow not just responsive to Walmart's advertised Discounts; the Dollar stores (of all various types) do not utilize traditional Pricing discounts in favor on set low Prices, and they are exceptionally full this Year.

Oil Prices are still excessive, due to Target-Buying strategies which are not based upon on hard statistical shortage Run-ins. The threat of an actual shortage of Energy for the American market has been declining since September; the latest flux rise in Oil Prices having little basis in fact. The less-marked, but more important element is the rise in Energy usage in the United States, something vastly unreported. It is a time when actual American Energy usage should be declining, instead of increasing. Economists dislike discussion of Energy conservation, knowing much of laxity in the Japanese economy came from the heavy concentration on Energy conservation. Americans, though, will eventually have to make the switch to Energy controls in Production; the Price of Energy is simply not sufficient high to frighten the current American Business elite. lgl

It's the Economy, Stupid

U.S. Trade Deficit Hits All-Time High
By THE ASSOCIATED PRESS
Published: December 14, 2005
http://www.nytimes.com/aponline/business/AP-Economy.html?hp&ex=1134622800&en=f3a432a9bfcb16cc&ei=5094&partner=homepage

For October, imports of goods and services rose by 2.7 percent to an all-time high of $176.4 billion, led by the surge in oil shipments. U.S. exports also rose by a slower 1.7 percent to $107.5 billion.

Critics blame the soaring trade deficits for a loss of 3 million manufacturing jobs since mid-2000 and they argue that Bush's push to strike free trade agreements eliminating all trade barriers between the United States and other nations has opened American workers to unfair competition from low-wage countries.

The United States set deficit records with most of its major trading partners including a $12.1 billion imbalance with the 25-nation European Union, a $8.1 billion imbalance with Canada, the country's largest trading partner, and a record $4.8 billion deficit with Mexico.

Economists of all stripes continually strip Oil prices from the matrix to find a Core Inflation. They also need to strip Oil Imports from the Trade figures to get Core Trade Deficit. The American Economy is losing Production to practically Everyone. Why? The bottom line is that the American Economy has become too specialized.

American Corporate philosophy has driven Business, Financial, and Economic Thought since the Reagan years. This Philosophy demands huge Profit ratios, with Plant closings and Production line phaseouts if the Turnover profits do not match Business format desires. A Turnover Profit of less than 10% deserves nothing but contempt, as defined by Corporate Executives who are Bill Gates' Wannabees. Tens of Thousands can be Laid-Off, but nothing can interfere with their own structured Payment package--overpriced to begin with.

Tongue in Cheek, this Author would say current American Business philosophy provides a rational justification for State-owned Enterprises. lgl

The Business Tax

The latest Presidential panel to reconsider Tax reform produces only a formula for further tax complication, and the current Bush has decided to put off Tax reform. Conservatives want Tax reduction without Spending reduction, Liberals want Tax increases to match Spending increases. Bush and other graduates of Reaganomics all believe Government debt means nothing. We drift into a greater proliferation of Taxes, Tax concession, Tax rebates, and Tax remissions which defeat Tax revenue collection of sufficient magnitude; all the while Middle-Class taxpayers are ground under by excess tax payments. Everyone, except Congress and President, think Congress should stop Spending.

This Author believes all taxes should be eliminated (at least at the Federal level) except for a Business tax based upon volume of Sales (in Dollar assessment). There are a number of reasons for this decision: Business will pass all taxation onto the Consumer anyway; Demand and Supply Curves will access the exact tax on all Products, based upon Business desire to maximize Sales; Private Sector Accounting holds the greatest efficiency in spreading Tax impact; higher charges to the Consumer will limit the aggregation of Consumer Debt; and pressure can be applied to Legislators to apply revenue-generating rates of Taxation. lgl

Trade Talks

The WTO has reached the end of its grasp! The political patronage of farm subsidies is immense, and farm subsidies will never be eliminated from Democracies. Concentration of eliminating Duties on Exports from poorer Countries also lack perceptivity. The Goods produced in these poorer nations directly compete with the production capacity of the poorer elements of richer nations. Real rationale exists for Trade Union opposition to the WTO and unrestricted Trade.

Elimination of Trade barriers has been attained across a broad spectrum, but far too many Economists wish for a complete sweep. They should not, as it could risk all of what has presently been gained. The words of Chavez are reaching throughout the World, and those words condemn the concentration of wealth in the hands of the Corporate power structure. Corporate Executive and Economists are not only outvoted, but they are outgunned. lgl

The Pandemic Threat

This Author has previously Posted commentary basically stating: Pandemics are cheaper and easier to deal with, without previous Planning or Stockpiling of Drugs. Pandemics stretch the breath of physical animal health, and can potentially affect anything; even with introduction of viral mutation from Plant life. Identification of a primary source of a Pandemic even fails, because of the potential directional spread of the mutation--which can seriously alter for every animal entity the infection might enter. The rate of mutation also defeats, as it can occur within minutes, or require decades. No Designed Drug will ever deal precisely with the ailment for which it was designed to counter.

There is almost no potential for a universal Immunization therapy. No Anti-viral or Anti-Bacterial drug is 100% effective in eradicating an undesirable infection. The residue survival stands a the main source of mutation, where the most-resistant strain of infection survives. The only true source for human salvation is the development of successful antibodies in the human structure, these developed by infection survivors and their progeny. The danger of any Flu strain will not attain the danger levels existent in WWI because of the intervening development of antibodies (not even the Bird flu), but it is entirely possible more People will suffer longer and worse bouts of flu than ever before, with a huge Pricetag attached.

There is little major threat from the Bird flu, which probably could not even cause the Death rate per Ten Thousand caused by the Flu in the 1950s. This is not to say We could not have half the World sicker than they have ever been before at a huge Cost. lgl

The Pandemic Threat

This Author has previously Posted commentary basically stating: Pandemics are cheaper and easier to deal with, without previous Planning or Stockpiling of Drugs. Pandemics stretch the breath of physical animal health, and can potentially affect anything; even with introduction of viral mutation from Plant life. Identification of a primary source of a Pandemic even fails, because of the potential directional spread of the mutation--which can seriously alter for every animal entity the infection might enter. The rate of mutation also defeats, as it can occur within minutes, or require decades. No Designed Drug will ever deal precisely with the ailment for which it was designed to counter.

There is almost no potential for a universal Immunization therapy. No Anti-viral or Anti-Bacterial drug is 100% effective in eradicating an undesirable infection. The residue survival stands a the main source of mutation, where the most-resistant strain of infection survives. The only true source for human salvation is the development of successful antibodies in the human structure, these developed by infection survivors and their progeny. The danger of any Flu strain will not attain the danger levels existent in WWI because of the intervening development of antibodies (not even the Bird flu), but it is entirely possible more People will suffer longer and worse bouts of flu than ever before, with a huge Pricetag attached.

There is little major threat from the Bird flu, which probably could not even cause the Death rate per Ten Thousand caused by the Flu in the 1950s. This is not to say We could not have half the World sicker than they have ever been before at a huge Cost. lgl

Jobs and Recovery

The Bush administration is touting its record on the Economy. The nature of the success has to be examined for an accurate view. The Economy likens unto the Shopping Mall which was worth $6 bn doing great business, because it has just had a Facelift costing $2 bn. The worth of the Mall is still only $6 bn, and Rents must be approx. 25% higher, but Business is great; great at least until the next necessary Facelift.

How many hundreds of billions did the Bush Tax Cuts give away to get a anemic performance inferior even to the Reagan recovery? When dealing with economic performance One has to understand where it has come from, what it is doing now, and the options open to the Economy for future economic performance. The current economic picture is dismal:

Government spending--Federal, State, and Local--is easily expanding at twice the rate of Inflation; something which is double the real rate of growth.

Government debt--Federal, State, and Local--is expanding more rapidly than even Government spending.

U.S. Exports are stagnant, while foreign Imports are still increasing rapidly. We are currently not only borrowing everything from Overseas, but We are actually putting Few back to work.

This is Our vibrant Economy. lgl

Tax Cuts

Despite Deficit, House Approves $56 Billion in Tax Cuts
By EDMUND L. ANDREWS
Published: December 8, 2005
http://www.nytimes.com/2005/12/08/politics/08cnd-cong.html?hp&ex=1134104400&en=180f3d878c4e1b4d&ei=5094&partner=homepage

The article explains the situation sufficiently. The crux of the problem, though, exists in the Inflationary pressure behind the Tax Cuts. We are talking at the minimum of some $75 bn additional unfunded Federal spending, no one stupid enough to imagine legislators and Senators will actually allow final vote reduction of Spending.

This Author is not a devotee of Monetarism, in any sense of the term, but the obvious increase of unfunded Federal spending would seem to nullify the drag of 3% of the nominal Overnight rates. No wonder Fed members are talking about neutral Interest rates. lgl

How Good Does the Economy Have To Be?

The Fed reports that Americans are paying more for Debt service than ever before, somewhere over 13%. A analylitical statement of the Problem states the current level of Economic performance produced a 13% Debt service rate. Reduction of this Debt service will require an increase in Productivity, without an increase in this Debt. Here is the rub of the equation: Increased Productivity insists on increased Demand, functional only with increased Consumer debt, or expansion of the number of Consumers. Elimination of Consumer debt demands an expansion of markets.

The alternative states Productivity remain static throughout the course of Debt service repayment, Consumer Demand growing only as older Debt is retired. Many Models could be constructed to overview this Scenario, but this Author sees 7.7 years as rapid enough to replace necessary Demand, while 8.6 years as too slow to generate strong necessary Consumer Demand. Both are in the absence of debt service growth! Change in debt service(increase) would lengthen time of debt service, but would increase need for Consumer Demand. lgl

Gold and Silver

World markets are agog with the specticule of twenty year highs in the price of precious metals. Most Market anaylists are betting on a sharp Price correction downward. This would seem highly likely due to Profits-taking by Market Speculators. But what if there is no correction?

Running Costs for Mining recovery have been increasing for the last Quarter-Century, while accumulated Precious Metal stocks have been diminuishing. It is obvious nothing has become cheaper, both within and without the Mining industry. The Question must be asked: Are Precious Metals regaining their Standard-Bearer definition of True Value?

The Monetarist power of Central banks may have eroded under the venue of too-slim Reserve margins, combined with unrealistic Interest rates. Only Time will tell. lgl

Three-Card Monte

White House Tries to Trim Military Cost
By LESLIE WAYNE
Published: December 6, 2005
http://www.nytimes.com/2005/12/06/business/06military.html

An excellent article which does not even scratch the surface of the Problem. Logistic replacement of equipment lost or worn out in Iraq and Afghanistan remains a simple Productivity formula, employing at most industrial engineers and Plant workers. The Profit/per Dollar spent in Production seems ridiculously low--sometimes no more than normal Private Sector production activity. An excessive Lobbyist effort could not be afforded, even if Anyone involved thought to get excited.

Weapons Systems Development, on the other hand, contains a totally different sentiment. The Profits reside not in Capital profits, but in the unscalable arena of human expertise. A probable excess of 50% of all Funds flow to human labor at rates much higher than normal Production pay. Those involved, at both levels of Corporate Executive and Specialized Labor, find the extended Pay to be vastly advantageous, to the point that it is reasonable to assume some 20% of all Funds directed to Weapons Development winds up as Lobbyist budgets.

The Pentagon has about $1.3 trillion in weapon systems in some stage of development, with over $800 billion of those costs yet to be paid.

Spending for the current year, not including the supplemental appropriations to cover the costs of Iraq and Afghanistan, has reached $444 billion, a growth of 41 percent since 2001, according to the Pentagon.

It should seem outlandish, but it is not, for this Author to suggest approximately One-Quarter of the increase in Defense spending since 2001 goes to Lobbyist expenditures to ensure these Weapons Systems are not discontinued. It reminds of the famous Song:

Tell Me No Lies, and Keep Your Hands to Yourself lgl

Oh--It will be alright!

CRS Report for Congress
Received through the CRS Web
Order Code RL33140
Is the U.S. Trade Deficit Caused by a Global
Saving Glut?
November 4, 2005
http://opencrs.cdt.org/rpts/RL33140_20051104.pdf

Conventional wisedom, Ben Bernacke, and the IMF all telling Us that the Bush Spending pattern will be alright. This Author suffers from the delusion that Investment remains dependent upon Funds undrafted to some other purpose--this drafting process governed by low, real Interest rates. There is currently low Savings throughout the World, not just the United States. There is also low Investment rates throughout the World, not just the United States. There are massive Government Budget deficits throughout the World, not just the United States. Bernacke's Savings Glut does not quite fit, nor does the Conventional wisedom that Savings would be higher if Interest rates were higher. The Report makes a nice comment at the end about how most of the American Investment has been in Residential Housing, with some commentary on the uselessness of such Investment in the Productivity process of debt repayment.

Mythical Egypt (the USA) has eaten a large share of it's eight fat Cows--One could claim more than the Five scheduled for. Maybe God will provide Manna from Heaven--not wait; that is an unfunded Social weilfare program. lgl

The Age of Speculation

Speculative Investors have always been with Us, spurred by Profits derived in enterprise where little further expansion can be utilized. Such Speculators lack expertise in the areas which they enter, and turn to what little help they can find; the slick Investment Counselor--an Individual with Standards generally on a par with Used Car Salesmen. This fact does not truly matter--as the adage about a Fool and his Money is amazingly resilient. Trouble does arise, though, in that Republican-brokered Tax Cuts have placed far to large an amount of Speculative funds in the hands of Those without understanding of mechanisms of Markets.

A real Case in Point is the current Crude Oil Price. It is pushing over $60/barrel, when it's real Market worth is less than $40/barrel. The real problem does not reside in the current Pricing, though, but in the fact $60/barrel does not do its job of restricting Oil usage. It becomes further complicated so that a mild drop in Demand would bring an incredible drop in Oil price. The level of Speculation has brought a increased level of corruption to the Market process itself. lgl

The Ire of Academics

The NY Times ran a series of articles yesterday outlining Bush administration usage of Academics. The most noteworthy recent entrant, Feaver, was clearly chosen for his propagandist value The Administration is resorting to Academic youth to fill important Posts, as tenured Academics refuse to be drawn into a forum, where the Administration has shown a tendency to abandon Subordinates--where they do not fulfill propagandist desires of the Admininstration.


Sunday, December 04, 2005
The Budget Deficit in Context
http://angrybear.blogspot.com/2005/12/budget-deficit-in-context.html

Kash clearly shows that Federal Spending has stayed consistent, while Revenues have been dropping because of Tax Cuts. There are projected $400-500 bn deficits through 2010. Most Academics intutively recognize real percentage Tax Cuts have not really gone to the average Taxpayer, only the Superich. We can understand the hesitation. lgl

A Volume Tax

Tyler Cowan posted a good piece on Taxation:

http://www.marginalrevolution.com/marginalrevolution/2005/12/what_is_the_evi.html

Does capital taxation hurt an economy?

It contains links to a number of good Studies to be considered. The trouble lay in the fact they all may miss the mark somewhat. This Author has lately been considering a monetary Volume Tax. This basically means taxation based upon the rotation of funds through each Tax-paying account without resort to any preference of any kind. Economists will quickly protest such a movement, stating loss of economic incentive. Below is a list of some of my Thoughts:

1) Taxation distorts the equalization process of equating one Product to Another through Pricing. Taxation serves as an outside Cost striking the two Products with different impact.

2) Capital Investment is distorted in that the highest Investment ratios flow to those economic elements who can generate the highest Tax reductions.

3) The sheer magnitude increase in Revenues in excess proportion to Others provide individual Taxpayers with excessive leverage, even against other Producers of higher Capitalization.

4) A taxation on Volume of Cash Turnover would regulate such turnover, and more adequately reflect the true Cost of Capitalization of enterprise.

The real primary question to be asked is whether Tax incentives actually affect the volume of Capitalization. Investors are skilled in the arenas where they have expertise, and work in a schedule which generates a consistent amount of Investment Capital. This requires much deeper thought, by both the Author and Others. lgl

Greenspan's Warning

Greenspan criticizes excess Government spending and Trade barriers. He calls for repudiation of Social welfare promises and unrestricted Free Trade. He conveniently ignores the one fact that American Consumer importation is destroying the Trade balance, alongside the erosion of native manufacturing. There is also no proof that the cheaper Consumer pricing is better for either the American Consumer or American Business. The second fact he ignores is the reality that excess American Government spending occurs due to excessive American military adventurism off Our native shores. He asks American Workers to again pay for Government excess through loss of benefits.

The intrinsic horror of the American political spectrum comes in the Participant refusal to call the kettle black. American Taxpayers should insist that Government list the total amount of Taxes paid over the last 50 years. Then they should insist the Government list the specific amount of Social Security taxes paid in the last 50 years, plus the addition of a 4% rate of Return on those funds. Greenspan, like other American leaders, blame Those who have always been the Solution--not the problem. lgl

The Bush Speech

It makes one think he is falling back through time to the days of Nixon's Vietnamization of American military limitations. Some realities could be introduced into the matrix, but they will dishearten. The first dictum must be the insufficiency of Iraqi military and police pay; a Pay sufficient incentive with less than 5 Days fighting per year, totally inadequate when fighting approximately 85 Days per year. We pay American servicemen in the low Five figures to go to Iraq, We pay Western Mercenaries in the low Six figures to fight in Iraq, and We pay native Iraqis in the military in the middle Four figures. Americans get to go home and spend their wealth, while native Iraqis must stay and face the enemies they have made. Expectation that morale or performance will improve among native Iraqi Police and Military is wishful thinking.

The American Taxpayer will eventually tire of funding both Iraqi pay and the backup weaponry necessary for the Iraqi Police and Military. The current Iraqi Government consists of those Who lived well under the Saddam regime, though most did so Overseas. They are demanding support from Those too poor, or too patriotic, to have left Iraq under Saddam. They endured the years of Saddam terror, now the years of International terrorism, without forgetting the years of American terror bombing. The personnel of the current regime lived well before, during, and now after the Iraqi war; and expect to live well even if ejected from power. One does not know how much political support they may generate. Reminds of the difference between a Bush American and a Lux American--a difference of a few figures of income.
==============================

The ISM states that Manufacturing is doing better than expected in the United States, but Exports are static. Construction is high, but a lot is Replacement structures from a Weather-torn South. Everything looks good, but Everyone knows there has been structural damage in the Economy. lgl

Return

This Author has just returned from a massive Heart attack which did not prove fatal, but required substantial recuperation. It will be slow getting back into the swing of things!

The Government has just reported a high (better than 4%) growth rate for the Economy in the 3rd Quarter. There are a lot of false images within the data, giving a sense of well-being, but it still presents a picture of a vital economy. The worst false imaging may be Fuel pricing, which cannot remain this low without a reduction of Consumption. The Fed should discontinue it's Interest Rate increases, as it has maximized the Monetartist impact of this avenue; further Rate increases could not forestall Inflation any further, while crippling the Economy. lgl

Gaza

Pain for all in Gaza
By H.D.S. Greenway August 19, 2005
http://www.boston.com/news/globe/editorial
_opinion/oped/articles/2005/08/19/pain_for_all_in_gaza/

Decolonization is never easy when there are settled populations of the colonizers to be considered, as the British and French found in Africa.

If there was a godfather to the settler movement it was Ariel Sharon, who once advised settlers to grab every hilltop in the occupied territories. Thus is the sense of betrayal magnified.

If there is only a token Israeli withdrawal -- if Gaza is being given up only to strengthen Israel's grip on the West Bank -- then there will be no peace. No one expects complete withdrawal from the West Bank anymore, but there has to be a viable and contiguous space for a Palestinian state on the West Bank for peace to have a chance, and that will be no easy task for Israel.

It is an excellent Piece which outlines the social and political considerations involved in the forcible extraction of the Israeli settlers. The Piece failed to note that a Civil War risk exists not only for the Palestinians, but also for the Israelis, both based upon the Fundamentalists v. the Secular elements. We could find dual Civil Wars occurring within the constricted space of the area.

The economic implications of this forced separation may be even more telling in the long-run. Neither so-defined nation created has the economic Reserves or Resources to sustain the Withdrawal. Reestablishing the Settlers on Israeli soil will require a vast expenditure of Funds in construction effort, while losing their ongoing economic production for a lengthy period. The previous Productivity of these Settlers will be lost to the Palestinians so that all of Israel will endure some loss of Living Standard. The Palestinians remain unrehearsed in the Managerial skills needed to continue the previous Productivity, and their Living Standard is also likely to fall. Both Nations will need outside assistance for a continual period, and One or Both will probably need it forever; as neither are really a sustainable Economy. lgl

Defense Spending

U.S. Department of Defense
Office of the Assistant Secretary of Defense (Public Affairs)News Release
http://www.dod.gov/releases/2005/nr20050815-4427.html

SARs summarize the latest estimates of cost, schedule, and technical status. These reports are prepared annually in conjunction with the President's budget. Subsequent quarterly exception reports are required only for those programs experiencing unit cost increases of at least 15 percent or schedule delays of at least six months. Quarterly SARs are also submitted for initial reports, final reports, and for programs that are rebaselined at major milestone decisions.

December 2004 (88 programs) $ 1,472,184.3 estimated Millions
June 2005 (85 programs) $1,474,049.4 estimated Millions

We are not technically at War with Anyone, and the Combat losses We suffer come from the same old Combat patrolling of soldiers in the field, which all the fancy gadgetry cannot alter.

What are the root causes of the huge expenditure?


Top Ten Department of Energy Radioactive Pork Projects in the 2006 Budget: Wasteful and Dangerous
August 2005
http://ananuclear.org/topten2005.html

Summary
This report identifies seven nuclear weapons and three nuclear energy programs in the Department of EnergyÂ’s (DOEÂ’s) Fiscal Year (FY) 2006 requested budget that are wasteful and deserve cutting or outright elimination. Cutting them would result in immediate savings of more than $1.8 billion. These cuts are a step in the right direction to reduce federal deficits and form the basis for better nuclear policy.

1. Life Extension Programs
FY 2006 Budget $348.3 million
$1.49 billion through 2010
2. The Reliable Replacement Warhead
FY 2006 Budget $9.35 million
$97 million through 2010
(both redundant under the Stockpile Systems Programs).
3. Robust Nuclear Earth Penetrator
FY 2006 Budget $8.5 million (DOE & DOD)
FY 2007 $14 million (DOE alone)
(used only to kill the Enemy, as the destruction would desolate the area after; it could not be used around any Population center, and American Troops would have to take great risks to assure the Bomb did the job and took out the Enemy)
4. Modern Pit Facility
FY 2006 Budget $7.69 million
$125.8 million through 2010
(eventual Cost $4bn and contamination of facility disposal Costs simply to rebuild plutonium triggers for old Warheads)
5. Enhanced Nuclear Test Readiness
FY 2006 Budget $25 million
$121.6 million through 2010
(simply to maintain capability to resume underground nuclear weapons testing currently banned by Treaty)
6. National Ignition Facility
FY 2006 Budget $142 million
$262 million through 2010
(Sc-fi giant Laser program to protect the Nuclear Stockpile. Would not negate current Security Costs, simply another Toy to play with.)
7. Tritium
FY 2006 Budget $87.5 million
$448.6 million through 2010
(stuff to make nuclear warheads destroy a greater area, 10 mile circumference not enough)
8. Plutonium Fuel Fabrication Facility (MOX)
FY 2006 Budget $338.5 million
( the Plutonium fuel manufacturing is actually beneficial, though they are right about canceling current levels of Weapons Grade plutonium manufacture)
9. Yucca Mountain
FY 2006 Budget $651.4 million
(must continue as on-Site storage not an Option, but Transport still unreliable, and Yucca Mountain is an environmental Joke)
10. Nuclear Energy Revival
FY2006 Budget $191 million
(This is the only Sure way to eliminate contamination, and literally, not enough is spent on it)

The DoD currently has (One Privileged Source) who states there are 314 of such Programs; at least half of which should be canceled. The Game Plan should be to inform the DoD (We are talking of the U.S. Congress here backed by the President) that the Defense Budget must come in under one trillion dollars. Programs need be shut down, Expenditure levels must be reduced for a slower rate of development, and the basic Maintenance programs for Troops in the field must be on Schedule. lgl

The PPI

Producer Price Index News Release text
AUGUST 17, 2005
http://bls.gov/news.release/ppi.nr0.htm

The year over year percentage increases tell the entire story:

the finished goods index increased 4.6 percent
finished energy goods advanced 15.2 percent
The index for intermediate goods climbed 6.5 percent
prices received by crude goods producers rose 8.4 percent

Inflation resides in these numbers, and must eventually be reflected in the Consumer Price Index. One might ask why it does not show up now. The Answer is: Because We are too busy running American businesses out of Business. We utilize cheap World Production centers to undercut domestic Production facilities, creating almost complete Price Inelasticity for their Products, so rising Costs grind them into bankruptcy or folding. Their elimination suppresses the PPI readings of associated Production materials:

Prices for materials for durable manufacturing decreased 0.9 percent in July, following a 0.5-percent decline in the prior month

June and July remain the most productive months of the Year. A decline during these months can be translated into a definition of a shrinking market. This reduced market comes from loss of Productive capacity, not from cheaper Mining and Milling Costs or greater productivity:

In July, the Producer Price Index for Total Mining Industries was 194.1 (December 1984=100), 24.7 percent above its year-ago level.

A Price rise of this magnitude means functionally that Production Costs have not gone down, and that the Mining Industries will rationally maintain full employment of Production capacity. The lowering of Prices at this Stage means the total Market is shrinking in volume by loss of Participants. Our Production facilities are decaying at rapid pace, and there is a price to be paid. The lack of industrial capacity will magnify the Inflation when it reaches the Consumer Price Index eventually, as cheap Imports turn into demons seeking to devour your Pocketbook, and George W. cannot sell any more Treasuries, as foreigners find little value in support of the Dollar when Americans have ceased buying Imports at such heightened rates. lgl

The War in DOD

DEFENSE LOGISTICS
DOD Has Begun to
Improve Supply
Distribution
Operations, but
Further Actions Are
Needed to Sustain
These Efforts
Report to the Subcommittee on
Readiness, Committee on Armed
Services, House of Representatives
http://www.gao.gov/new.items/d05775.pdf

Problems in the supply distribution
system dating back to the Persian
Gulf War have impeded the ability
of the Department of Defense
(DOD) to provide effective and
timely logistics support to the
warfighter.

What is the hangup? The DPO and the Defense Logistics Executive each claim final authority and responsibility (think final Word) for the Logistics organizational construct. Why? It is basically a bureaucratic battle between the military command of DPO and the Civil Servant Civilians of the Army Undersecretary's office. The Secretary of Defense will not clearly outline responsibility for political reasons: This area is the precise location of Patronage in the DOD. The DPO wants improvement in Supply distribution, utilizing the best seeming Contractors of the moment. The Defense Logistics Executive buys political support for the Administration, and buys lucrative employment for Defense Civil Servants once they leave Government Service. Military personnel, on the other hand, show no less affection for purchase of lucrative employment upon retirement from military service.

The SOD (Secretary of Defense) refuses to clarify roles of accountability, because the Defense Logistics Executive is under his direct domination, while he must get Military Command to convene a military review board to remove any element of the DPO. He can still utilize the DPO to pressure the Defense Logistics Executive, and he can review actual Deployed Troop Supply needs from DPO demands. The entire matrix complicates as the President and White House demand the SOD attain certain levels of political support from the award of Supply Contracts. The GAO (General Accounting Office) serves the U.S. Congress, and must present a Report detailing the most efficient Working system devisable; themselves knowing full well their Superiors are equally demanding of political support from Contract awards--working with either the DPO, the Defense Logistics Executive, or the SOD. It's a Wonderful Life--see the movie.

It still doesn't accomplish supply of Troops in the field. lgl

Munitions

United States Government Accountability Office
Washington, DC 20548
August 12, 2005

The Honorable Donald H. Rumsfeld
The Secretary of Defense

Subject: Defense Management: Munit ons Requirements and Combatant
CommanderÂ’s Needs Still Require Linkage

In October 2002 we reported1 that inadequate linkage existed between near-term
munitions needs of the combatant commanders and the purchases made by the
military services.
======================
The gist of the 9-page letter states that DOD Instruction 3000.4, DOD failed in oversight capacity, and a Conference held in November 2004 determined to reissue it. The GAO has currently found that the reissuance also failed to correct the problem. They found the basic problem was the lack of Combat Commander participation in the Risk Assessment needs for the munitions. The Letter also complained that defense agencies were not complying with the reissued Instruction, most specifically Purchase decisions had to rely on previous Year data.

A previous Post by this Author noted the Defense Dept. currently maintains three Plants for the production of Small and Medium caliber ammunition, and this was insufficient. Defense has had to turn to Private Contractors for the necessary supply, and most Sources could not meet the requirements of the Military. This Shortage of Production facilities exists in all areas of Munitions Purchase. The failure of defense agencies to comply with the terms of the Instruction comes from upper-level refusal to okay Purchase levels demanding Munitions plant expansion owned by the Government, or more importantly, from requiring the reopening or creation of new Plant facilities.

This remains an important Issue, as the National Security of the United States is at risk. lgl

Tax Picture

Forecasters Predict Drop in Deficit
By THE ASSOCIATED PRESS
Published: August 15, 2005
http://www.nytimes.com/aponline/national/AP-Budget-Deficit.html

The CBO said Monday the Deficit has dropped from $412 billion Y2004 to $331 billion Y2005, and will be $314 billion in Y2006. The article omits to mention this will be over a trillion dollar loss over three years. The CBO omits to mention that with current passed legislation going into effect, the loss before Bush leaves office will be a $2 trillion loss.

Death Tax? Double Tax? For Most, It's No Tax
By EDMUND L. ANDREWS
Published: August 14, 2005
http://www.nytimes.com/2005/08/14/business/yourmoney/14view.html

This articles explains how the Republicans plan to shave another $70 billion/per year off the Tax revenues taken in, not computed by the CBO in the analysis on Monday. This Author would advise All to read this article, as it outlined how few Households remain impacted by the Estate Tax.

The worst aspect on the current proposed Tax reduction consists in the Tax consortium which the Republicans organized to get all their Tax legislation since Bush's first Tax Cut. Small Business, small Farmers, Professionals, and high-paid Labor were all enticed with the promise of Tax breaks. Everyone was to get a Tax break, and they were to support Everyone else getting a Tax break. None of the small Taxpayers have yet to receive remission of even One month's income, but the High-Rollers have received many times the small Taxpayer's average yearly Income. It is a sick Joke. lgl

The Mercs

The Other Army
By DANIEL BERGNER
Published: August 14, 2005
http://www.nytimes.com/2005/08/14/magazine/14PRIVATI.html?hp

An excellent piece on the role of private security companies in Iraq and Afghanistan. The real factor in private security success comes in the level of actual military training received by these Employees, who sometimes have up to four times the military training and experience as to their contemporaries in deployed military units. No one knows how many private security personnel have been killed in Iraq and Afghanistan--the Article mentions between 160-200; a number which this Author thinks is a little high, but not by much.

Why do they use private security forces? The answer is easy to state, but hard to understand. The Generals use private security as Bodyguards, because they are more successful (competent). American companies operating in these Countries employ these private security agents because they are better than military unit protection (a Squad of private security agents will guard a Convoy, where military doctrine would insist on a Platoon or Company), while it would take the military a week to organize the Convoy route order.

Why do the Private Security Employees hire on? The Money, and little else. American companies operating in Iraq spend about 25% of their total Contracts on security. American Government Agencies and Agents spend almost an equivalent amount on private security. The Article mentions that Employees average $400-700/Day that could go higher; this Author suggests this is only Entry-level, Second Tour veterans probably do $200/Day better.

Why should We be grateful to these Security services?

U.S. Struggling to Get Soldiers Updated Armor
By MICHAEL MOSS
Published: August 14, 2005
http://www.nytimes.com/2005/08/14/international/middleeast/14armor.html?hp&ex=1124078400&en=c79db06067b55db0&ei=5094&partner=homepage

Typical Defense Snafu. lgl

Erosion of Growth

Japan's April-June economic growth reflected only a 1.1% yearly growth rate. Japanese Investment and Capital Construction, on the other hand, can be estimated as moderately heavy. The Japanese economy remains the most Energy-efficient economy in the World, with least Energy use per Production unit. Japan's Consumer credit stands as sophisticated as American Credit, but requires greater solvency from the Consumer.

American consumption suffers from American Business desire for Volume, not Quality, in the extension of Credit. American Credit vendors often mislead Consumers, offering Upgrades in Credit limits; knowing full well Consumers cannot match such a level of monthly repayment. Housing no longer serves as American economic salvation, as American Housing Costs have been rising much faster than Real Takehome Wages for several years. Home Buyers will still purchase and construct, but at either greater risk or much slower. American economic growth, while still present, shows indications of being hollow(less real Profit).

(The Author is irritated, as he had to rewrite this Post. His maching ate the last one) lgl

A Contractor Army

This Author has long been an advocate of return of the military draft. The Draft provides a far greater mix of skills (specifically a range of those skills). This mixture presents a vital element in Tactics affecting Command decision, with lowered expectation of immediate success in Mission achievement. This leads to Commander-level conservation of resources (they don't get their troops blown away on unaccomplishable Objectives). It alters Training procedure: the training is far more intense, but limited to direct necessary components of the military craft. Troops, on the other hand, feel heightened Paranoia from the existence of the Draft, even when they are Volunteers; the presence of unwilling Participants curbs Everyone's intent to be a hero, with expressed contempt for Mission achievement at the risk of Injury or Death.


How Should
the Army Use
Contractors on
the Battlefield?
Assessing Comparative Risk
in Sourcing Decisions
ISBN: 0-8330-3736-6
http://www.rand.org/pubs/monographs/2005/RAND_MG296.sum.pdf

This Work (the Author has only read the Summary) provides another approach, simply through the analysis of Risk in the use of Contractors on the Battlefield. The Summary (and likely the Book) is written in the academic bureaucratize with which One must have some experience to integrate the material, but defines a method by which a mix of Volunteer and Draft army could provide greater success to military endeavors.

This Author's Concept:

Army Recruitment and Training should be removed from the Military, and revert to Private Contractors, who will be granted a per head fee for the recruitment and training of Recruits in the basic military skills (supervised by military personnel). Secondary Training can also be contracted, not simply in military skills, but in Occupational skills needed by both Military and Private Sector. Young High School Graduates would get a Signing bonus for Training attendance, plus a low Wage equivalent to Minimum Wage, but with Housing, Food, Health Care, etc.--a prime source to save for College or setting up a private Household. The Recruits escape mandatory service in the Military, though they gain the equivalent Training at advantage to themselves.

This would not be a Pilot program for the Military. The Goal would be to train as many High School Graduates as possible in the basic military skills, as many as needed in the basic Occupational MOS skills, then contract with the Graduates of these Training facilities for specific Tours--whether at Home or Overseas deployment. Bonuses would be paid for Tour enlistment, and Wages would defined by MOS skill levels. The Military could utilize the Training process Score levels of Recruits in search for qualified applicants, and would be allowed to offer retension bonuses to active Touring soldiers. Troops would be making more mature and active decision in their participation, and less likely to accept bad Risk levels. The Military gains trained, more mature Troops at minimum Cost; also the possibility of a Military Draft of trained Personnel in case of need. lgl

Hamlet Encore

This Author was perplexed about choice of Subject, wondering about $66/barrel Oil, Brazil raising its Minimum Wage, falling Jobless claims, the massive Chinese Trade Surplus for July, the erosion of American Refining capacity, or a Reuters' Report that the International Energy Agency plans on raising its projected World Oil consumption again. None held especial appeal to the Author, who is feeling a tad depressed anyway; considering a friend called, stating the Author should attend a Senior Citizen Wellness program.

Is there any Good News out there today?
The Answer is Little!

The Yuan appears to be sticky without Chinese Central Bank aid, and the Dollar is dropping against other Currencies. The Iraq domestic occupation is getting bloodier every Week, and oh, ask Rumsfeld; there will have to be another Special Appropriation this Year. The IRS is not braying about Tax revenues pouring in, because they are not. American Gasoline consumption is rising, and American Gas Stocks are declining. Is this beginning to sound like the Grinch who stole Christmas?

The most disheartening element lies in the lack of Corrective measures taken by Anyone, with blame to Everyone. Congress and Advertisers have just started a new battle over the Roberts' nomination. The passed Energy bill gives nonexistent funds to Corporate entities, but not research; it containing absolutely no help for strained Refining capacity, or attempts to curb American Oil consumption. There is much comment on the Chinese Trade Surplus, but where oh where is there discussion of the American Trade Deficit (hint: a lot of VIPs do not like the numbers). Can George W. play the fiddle as well as Nero? lgl

Oil and Speculation

Oil Prices Rise Following Mixed Report
By THE ASSOCIATED PRESS
Published: August 10, 2005
http://www.nytimes.com/aponline/business/AP-Oil-Prices.html?

On Tuesday, the Energy Department slashed its 2005 world oil demand growth forecast by nearly a quarter, mostly resulting from slower-than-expected Chinese growth. World oil demand will grow by 1.7 million barrels a day this year, to 84.2 million barrels a day, the department's statistics arm said. Last month, it forecast growth of 2.2 million barrels a day

The agency data showed a 2.1 million barrel decrease in the nation's supply of gasoline, putting inventories at 203.1 million barrels, or 4 percent below last year.

While oil prices are about 40 percent higher than a year ago, they would need to surpass $90 a barrel to exceed the inflation-adjusted peak set in 1980.

The first item indicates that the price of Crude is actually greater than is to be expected, due mainly to Speculation in Oil (think Hedge Funds). The second item states Government action should be instituted immediately; this Author suggests a 10 gallon maximum purchase limit for All except commercial heavy haulers. The third item shows the lack of astute Economic knowledge. Inflation impact varies across Product, with Price impact heaviest in the necessary components. Energy Inflation impact probably stands as the worst area.

Inflation in Energy has impact which eats up Cash reserves of Commercial enterprise faster than almost any other element, except for primary component Production materials. Industries faced with Product Price inelasticity may require years to equalize Profits again. Industries with high Product Price elasticity will quickly assume unwarranted Profit margins, enticing them to overinvest; distorting a balanced Capital construction picture to the point that excess Production capacity develops in Product Price elastic industries, and lack of Production capacity artificially propels Shortages and undesirable Pricing in inelastic Product Price industries.

The Oil Refining industry faces the later condition today. Previous World Oil consumption generated high Crude Oil prices--remember Crude Oil is the Refining industry's primary Production material. The national Oil Refining industry faces extraordinary Construction Costs due to environmental regulation and Local resistance to Refinery construction. They face underutilized Refining capacity from foreign Competitors, said Supply restricting national Refining capacity to a inelastic Product Pricing schedule. National Refining capacity needs to expand Production capacity, but does not possess the Profits aggregation or Credit capacity to fund this expansion due to the low Marginal rates of their Profits.

What causes the low marginal rates of Oil Refining Profits?

Product Price Inelasticity, high Crude Oil Prices, and Environmental regulation. The first cannot be helped, and the Later should not be altered. The only Salvation comes in lowering Crude Oil prices; it is here that Profits can be generated to fund expansion of Refining capacity. Is it World Oil demand which generates the high Crude Oil prices? No! It is Hedge Fund Speculation which forces Crude Oil pricing up. lgl

Labor Turnaround?

Productivity growth at 2.2% with Labor Unit Cost up 2.9%, in the face of Unit Labor Cost having risen 4.3% year over year; complicated by the fact most of the Labor Cost came not from Wage increases, but Benefit Costs. What does this say? Workers are losing ground, while Corporate Health and Insurance are demanding higher Profits and rates of compensation. Then $64/barrel Oil enters the Picture, and The Fed has to raise Interest rates to curb Inflation while providing support for the Dollar.

What is the Outlook?

Workers are going to raise Wage Demands to pay for the increased Living Expenses generated by higher Energy Costs and higher Credit Costs. Employers will continue to drop Benefits from their Employment package--the major element being Health Insurance. The elimination of Employee health insurance will lead to larger Wage demands, sharp reduction in Health Care utilization, and vastly increased reliance upon Emergency Room care. Employers will be forced to pass Product production costs along to the Consumer, while providing less Service to both Consumer and Employee. Health Care industry Profits will decline by an expected 30%, and should decline by 80%. Tax liability will rise dramatically, no matter what the Tax rates, as Government debt spirals without effective Tax rates.

This Author believes that base of Power will shift from Employer and Corporation to Labor. Oil price and consumption will stay high, while Profits will decline in the Oil industry; Crude Oil prices will remain high because of Hedge Fund speculation until American Refining capacity matches American Energy demands. Hedge Funds, though, are not a good Bet; they will lose as much as they gain, as other industry Profits drop. Labor, abused by loss of Benefits and higher Living Costs, will demand a slower Production schedule, more Help, and a standardized Workweek. Employers will have to concede, as they must get Labor's concession to loss of Benefits. Productivity will become negative growth.

Solution: Effective Tax Rates (Sometime this Author will explain that) lgl

Computer Literate

This Author seems like the last individual to accuse Anyone of Computer illiteracy, he attending College at a time when Fortran and Pascal served as absolutely essential systems to be mastered. Then he did think to read:
July 2005
Spot and Alternative Marketing
Arrangements in the Livestock
and Meat Industries
Interim Report 310 Pages
http://151.121.3.117/psp/issues/livemarketstudy/LMMS_Interim_Report.pdf

The Report was done for the Dept. of Agriculture. It could be this Author does not possess the current updated Adobe Reader; yet, it does not detract from the fact he found no accessible Bookmarks, Links to sections of the Report, or even sections assigned a Page number in the Table of Contents. It makes it relatively hard to preview the document.

The data covered in the Report, on the other hand, can be of interest to Those who can find it. How do the private marketing arrangements between Producer and Intermediary distributors affect final Consumer Price for Product? "Spot" Markets and marketing arrangements do raise the Cost to Consumers, this is known, but the Why and How Much remain the essential questions.

Such arrangements operate in all basic Commodities markets, and it is exactly herein that Hedge Funds attempt to make the vast gains for which they thirst. Sweet Crude has topped $64/barrel, of which most Economists would assign at least $25/barrel as pure speculation. The Author suggests intense study of the area of marketing arrangements and Cash markets. lgl

R&D

Globalization of Materials R&D: Time for a National Strategy
(Free Executive Summary)
http://www.nap.edu/catalog/11395.html

Where is the United States at in the World of R&D. Most pertinent Quote:


Conclusion. The results of MSE R&D continue to enhance U.S. national security and
homeland defense by adding improved materials capabilities to the weapons and
protective systems used by today’s war fighter. The evolution of materials research in
the United States and abroad will affect the nation’s ability not only to defend against
emerging threats of the 21st century but also to ensure a healthy economy as a basic
underpinning of national security. Because knowledge and the intellectual capacity to
generate new knowledge are proliferating across the world, because innovation and
development cycles are becoming shorter, and because U.S. dependence on foreign
sources of innovation is increasing, the lead in critical technologies enjoyed thus far by
the U.S. defense and intelligence communities will be seriously eroded without mitigating
action.

The disturbing element to this Author lies in the fact he was reading identical Pap in the 1970s. Reality must set in sometime; let Us see if the Author can help:

Point One states there is an absolute limit to the development of any Technology, no further amount of effort or funding can extract greater benefit. Point Two states there is a point far short of the absolute limit where it becomes uneconomical to even develop the Technology to such an advanced degree. Point Three states that any Technological system built in excess of this point of economic exploitation will cost too much, and do too little--there being no bang for the buck. Point Four states American Defence and Intelligence will again have to oppose Enemy forces which are as equally well-equiped as We are, and then, efficient and effective Strategic and Tactical concerns will again dominate. American Defense should plan and train for this contingent, which this Author expects to occur somewhere around 2020.

The United States could continue to lead in R&D if Funds were properly directed to vital research areas. The Author has long advocated creation of a 'Surface Carbon construct' artificial Fuel to replace Oil Products. He has advocated the research for, design, and development of plastic replacements for Timber products--made from current hard Waste products like old building materials. He advocates a goal of 30% replacement of current electrical generation with Wind and Water Generation technologies. This is only the Tip of the Iceberg, what the Public can see and understand. Further Technology gain can come from Zero Pollution Manufacturing through underground, enclosed Production lines, where all Production (including Maintenance) is mechanized and run from Computer Work Stations.

Far-fetched? The actual Design and Manufacture of the Capital Production equipment for such Production would be cheaper and more Energy-efficient, Quality Control of Product would be cheaper, and Labor would not have to know more than how to run a Work Station computer system with High School Reading skills for integration of Maintenance and Set-Up Manuals. The Benefits would be complete control of Pollution emision, and compaction of the Production area; to the point, a Plant could not only put the Work Stations aboveground, but utilize the land for Agriculture, or sell for Homes. Present R&D funding goes to build fancier UAVs(Unmanned Aircraft Vehicles), rather than something economically beneficial. lgl

Corporate Profits and Government Stretching the Truth

EPI Snapshot August 3, 2005.
http://www.epi.org/content.cfm/webfeatures_snapshots_20050803

The private sector has 1.2 million fewer non-defense-related jobs today than it had four years ago. Only as a result of increases in government spending over the past four years, mostly on defense, does the private sector have more jobs now than it did before the recession.

Including defense-related jobs, by the end of the fiscal year the private sector is likely to have about 170,000 more jobs than four years ago.2 If private-sector jobs continue to grow at their recent pace through fiscal year 2005, the private sector will have 111.4 million jobs compared to 111.2 million in fiscal year 2001

Defense spending gave its largest single-year boost to private-sector jobs in the fiscal year that ended in September 2004. In that year alone, defense spending directly generated almost half a million jobs (495,000). The multiplier effect from that spending no doubt contributed to the other 434,000 jobs added in the private sector that year. By contrast, in this fiscal year, additional defense spending is supporting only 70,000 more jobs, a small fraction of the 2 million private-sector jobs being added this year.

At the current pace of job creation, it will be another five or six months before non-defense-related jobs recover to the level of four years ago.

The Government suddenly finds a lot more Private Sector Jobs for May, June, and July. Check the dates of publication.
===================================
Why are companies seeking higher profit margins?
http://www.marginalrevolution.com/marginalrevolution/2005/08/why_are_compani.html

Be sure to also attend the Brad DeLong link, and read the entirety of Brad's Post. The first Question is about Oil industry Profits under higher crude oil pricing, and Brad gives an interesting evaluation.

Tyler Cowen makes his own evaluation of the theories:

I will classify myself as 60% a finance economist, 5% a Galbraithian, 20% for "breach of trust," 5% to the Volcker disinflation, and 10% I will assign to "cultural change." The advent of information technology matters as well, but arguably this falls under "finance economist."

This Author dismisses the claims of the finance economists: The Managers have always been in Charge, ever since the days of the Robber-Barons. Managers most resemble Carny Schills, taking the Rubes (Stockholders) for everything they could get; whether by selling them worthless Stock, shorting their Dividends, or simply paying themselves all the Profits as Salary. Government alteration of Accounting rules or Law hold equally little significance to this Author, as only "Nuts and bolts" prattle which does not bother the real thieves. The Volcher disinflation was of vast importance in loss of Labor Power, but Shareholders did not find themselves the Kings of the Economy. I agree with Tyler that cultural change making about 10% of the difference, this change being the vast increase in Households holding Stock. The real culprit was indeed breach of trust, in that one group of sharks threw out another of predators, and raped the Corporate concerns--Worker, Shareholder, and previous Management. lgl

GDP v. GPI

The Genuine Progress Indicator
1950-2002 (2004 Update)
BY JASON ASON VENETOULIS ENETOULIS AND CLIFF LIFF COBB OBB
Sustainability Indicators Program
March 2004
http://redefiningprogress.org/newpubs/2004/gpi_march2004update.pdf

National accounting should be at
least as realistic as traditional
business accounting, so that
revenues and expenses are
differentiated. It should also be
more comprehensive, so that
economic policies harmonize full
employment, resource
conservation, and other social
goals instead of pitting them
against one another.

The first sentence in the above Quote is correct, as Economists should cease including remedial Costs as provision of Goods and Services. The list excluded would be that dismissed by the GPI (General Progress Indicator):


The GPI then subtracts three categories of expenses that do not improve
well-being:

1. defensive expenditures, defined as money spent to maintain the
household’s level of comfort, security, or satisfaction, in the face of
declines in quality of life due to such factors as crime, auto accidents, or
pollution. Examples include personal water filters, locks or security
systems, hospital bills from auto accidents, or the cost of repainting
houses damaged by air pollution.

2. social costs, such as the cost of divorce, crime, or loss of leisure time.

3. the depreciation of environmental assets and natural resources, including
loss of farmland, wetlands, and old-growth forests; reduction of stocks
of natural resources, such as fossil fuels; and damaging effects of wastes
and pollution.

The second sentence of the above Quote expresses why the GPI is dismissed in favor of the GDP by Economists. Volunteerism and Family life are social elements which would be basically maintained under any economic conditions. Placing a Dollar value upon these services only confuse the evaluation of the state of the economy. The associated Income Distribution values are very important, but such a Scale value does not supply information important to the health of the economy; much as Idealists adore Wealth Distribution schemes. The only Wealth Distribution scheme which is effective remains fair Tax rates without legislated Tax exemptions, Tax deductions, or Tax credits. lgl

The Challenge of Economics

July 23, 2005
Is Something the Matter With Economics?
Michael Blowhard writes:
http://www.2blowhards.com/archives/002155.html#002155

An article which should be pondered, then rejected; but you should understand why.
============================
For Those who cannot figure out Why to reject the above article, try

What is wrong with neoclassical economics?
http://www.marginalrevolution.com/marginalrevolution/2005/08/what_is_wrong_w.html
or
http://newmarksdoor.typepad.com/mainblog/2005/08/is_something_th.html
=============================
http://www.env-econ.net/2005/07/costbenefit_ana.html
Cost-benefit analysis
Dan Phaneuf

Cost-Benefit Analysis stands as the real Worksled of Economics. It is here that the real decisions which impact (generate the real data inputted into the neoclassical models) find their origin. Dan Phaneuf provides a true insight into the process. No model is perfect, and most models produce extraneous values which must be determined at false in the comparisons which are the basic academic's job.

Review materials provided by this Author simply to show that even the Adults are confused. lgl