The Called Strikeout Rule

Everyone shakes their Heads at the federal budget, All acting like there is relatively nothing to be done about it. This is not the Case, and what is needed in a rise in Tax revenues not based on some magic economic growth which never appears. I am not sure about the Numbers on all this, but the current Round of Tax breaks to Business since the last Downturn would require a economic growth rate in the high 7s percentile for approx. some Six years to make up the lost Revenues. Everyone spouts that We need all the Tax Cut stimulus to reduce the Unemployment Rate, but even the CBO states it all will have only marginal effect on the employment; meaning less than 1%. People, I guess you can call Politicians people, all swear to the Skies that no one could get any increase in Taxes. I will remind my Readers that Politicians are paid to carry their Views of the World.

Readers have asked me How We could bypass the entrenched lobby of the No New Taxes Conservatives. I recall an old Concept whose time might have come; it is called the Called Strikeout Rule. It is a Way to get around all those bunkered special Tax exemptions and Credits. It is a simple law which can be easily understood by the majority of people, who can thereby insist their legislators adopt the Rule into law. It simply states no one in a higher Tax bracket can pay less as Tax, as had the highest amount paid by any Taxpayer within the next lowest Tax bracket.

The Called Strikeout Rule says not only that special Exemptions to Taxes can be ignored by the IRS, but also; it specifically outlines that it matters not How excellent the Tax preparation designed for tax evasion, it must conform in payment to the worst Tax preparation of the next lowest Tax bracket. Now I know that most Taxpayers will not understand the demonic aspect of such a simple law, though the Wealthy will understand hardly without Words. Loose adherence to such a Rule will raise Tax revenues by about 11%, while strict obedience and compliance is estimated by myself to potentially double the current Tax collections. Pressuring for such a law should be the profound duty of any Taxpayer tired of watching the Rich get richer while the Taxpayers are still paying the same old taxes. lgl

My View of Tax Justice

Greg Mankiw presents a very good video on Taxes, which is fair and balanced; rendering a good expression of current sentiments on Taxes. He labeled his Post ‘Tax Justice’, and therefore it behooves me to render my own version of such a Concept. I would like to assert foremost that Tax simplification is the biggest item on my agenda. This first calls for all Income to be labeled as Income, with no differentiation or freedom granted by such from tax assignment. The ‘Flat Tax’ of Steve Forbes leaves me somewhat cold, as this leaves the Wealthy free of a normal assessment of Taxation based upon ability to earn more than their Neighbors. The common Progressive Income Tax also leaves me cold, due to the steady erosion of impact due to Tax concessions remanded into law. This entire system of Tax remissions leads me to condemn the entire tax system as prejudiced and discriminatory.

I believe that there should be a ‘Flat Tax’ assessed on all Income without remissions. I believe that the Tax level should be universally 12% of Income. I will further state that all individual Tax contributions must first be directed to the Social Security General Fund until the maximum payment level is met, or until the Tax requirement is paid. Past this Point in fiscal minimum, some 3% of total Revenues shall be paid to the States in substitution for a Sales Tax, and 2% of said revenue shall be directed to Local Government in lieu of Property taxation. There is a reason Why I set the base rate so low at 12%. The next paragraph will bear on this discussion.

An additional Tax increase of 1% of total Income will be added for every $10,000 over $30,000. This means that any Income over $30,000 will pay 13% of all Income, over $40,000 some 14%, and through the $10ks until a rate of 35% will serve as a maximum where Income of any source equals $350,000 per year. There is to be absolutely no Tax remissions of any type–even including Personal Exemptions. Inheritance Taxation will be at 35% starting at an initial excused $3 million dollars per heir. There will be no Investment Credits or Tax reductions of any kind, and little need for detailed Income Tax returns. The States and Local Government will still be free to impose any Property taxes they need, as well and licensing fees etc., but no further Sales taxes. Business, Corporation, Partnership, Sole Proprietorship, and Charities will face the same Tax rates and lack of Tax remissions. Churches will only be taxed on Collections that they advance to higher regional networks greater than a parish or congregation level. It is my View of Tax Justice. lgl

Anti-Business Tirade and Boxing Day!

I herein state for Full Disclosure and Clarity that I only watched a sufficient minute amount of the State of the Union Address to claim to my Democratic friends that I had listened to him; and little enough to please my Republican friends who desired I not listen to propaganda–by their definition. Then I read this blog Post. The Part which interested me the most was this Statement: "put in place over the last two years about the most anti-investment, anti-business, anti-Jobs regimen that we have probably seen in the last couple of decades." Now, I have some difficulty with this Statement. I do know that the Bush administration did implement the beginning of ‘Save the Country for Corporate America’, but Obama has not strayed far from that path. It amazes me that Corporate America could not cease the registry of Profits throughout the worst ‘Recession since the Great Depression.’ It did require the Fed to purchase a Trillion Dollars of Debt, and all sort of guarantees of Protection for the financial world. We did occasion a multitude of Home Foreclosures–for which Mortgage-issuers were protected from harm by Fed caress, and vast losses from individual Stock and Bond Holders, who were promised by Corporate leadership that, "there would be only minor Dividend payments, and Stockholders would gain when Stock Price went up, and Corporate leadership could sell their Stock Option and Stock Grants at prime price.’

Small Business is indeed suffering great distress from the Recession, finding it hard to sell within empty subdivision housing. Luckily, such great franchise Retails as Walmart, Target, etc. ad infinitum, get sufficient Tax Breaks as to ‘Last the Course’. Service Providers find there is a depressing lack of Sales, though they can be upbeat by the number of experienced Job Applicants who apply regularly; though many have limited experience in Service provision. All in All, I think Most of Us are awaiting the absorption by Small Business of the huge Corporate Layoffs created by the ‘Recession to end all Recessions’. It could be long wait, and Corporate America is getting tired of paying Unemployment Benefits from a fund which they functionally ceased Contributions into when they laid off their personnel.

I decided to provide a true anti-investment, anti-business, anti-Jobs regimen:

1) Congress pass a Minimum Property Tax which must be paid to all and every State by every business in the Country; every State allowed to increase but not lower the Minimum rate.
2) All Business entities must pay at least 30% of their nominal taxation rate, even if they can find a multitude of Tax remissions from that rate.
3) Financial institutions are forbidden to seek or accept any Tax remissions of any type; the Thinking here states that if We have to guarantee their Profitability, they can pay their Taxes.
4) Congress passes a law which states that any Small Business denied Credit by a financial institution must be reviewed by the Federal Reserve in the area, and if the Fed determines that the Credit should have been advanced, then the financial institution will pay the Fed 1% of the value of the Credit as Fine for negligent practice.
5) Congress pass a law bringing ‘Boxing Day’ south from Canada, and every Individual making over $1 million per year must wear a Jester’s suit on December 26th of each year, else be fined one-quarter of all Tax remissions granted to them for the year. lgl

Through the Lookling Glass, Darkly

A dastardly unkind Sprite asked several vitriolic Questions about my poetic elegance of yesterday’s Post. I will give several Examples of errant Wrong:

1) How can Keynesian policy avoid excessive Government Spending when the real levels of natural Consumer Spending cannot be found? Here he asking How such can be determined, when Hundreds of good economists find depressing poor Results at measurements over the general field. I told the Dolt that One does not need to discover the natural level of Consumer Spending; simply utilize the principles of Minima and Maxima. The Grasshopper would not learn, and asked How such could be utilized. I replied that all Government Spending should be centered around payment of Minimum Wage for Government projects, employing as much unemployed labor as possible. The poor unlearned Soul thought for a moment, then asked How any Projects could be completed using Minimum Wage labor, when modern practices required specialized labor to operate mechanized construction and production. The Claim was that no one would work Minimum Wage labor when highly technological advances had been made. I responded as best I could, saying that the Army Engineers (note I did not say Corps of Engineers) could operate the complicated machinery, as they were already being paid by the Government, and did not have much else to do anyway! My Critic sought to expand upon his diatribe, but I cut him off; some threats of Hell and Damnation!

2) A second imprecise Reader of my lofty words essayed as How One could determine a failure in the economic signal system which they questioned that the Austrians even advocated as infallible. I easily broke such Protest, saying that any higher proportion going to Base Resources and Mining than normal for a certain level of Production fulfilled by Consumer Demand was distortion in the signaling system of the economy. Austrians estimate that there is an automatic leveler in the Interest rates charged, and this does do it, but only after there is much Unemployment across the entire reach of the economy. Someone asked Why there would be such a lag in the signaling system. I replied that Interest rates are not actually set by markets. They are determined by corporate schedules designed to attain the greatest Return for their institution–in this case Lenders. I grew expansive at this point, and stated that certain economic studies produced sometime, somewhere (my imagination or in the 1970s) that found that Corporate Pricing was 8% stickier than were Wages through the Periods studied.

Further Questions were asked, but they became so complex that I would wait until later to find a relevant Answer defending my position; myself confident in my eternal rectitude. I sent them all packing, and swung open my medicine cabinet door. lgl

(only Some of Us consider that this happend in reality)

You can get Angry now!

One should not pretend to understand all of this, but One should integrate that the Austrians are right about Interest rates, and their ability to act as a Governor placed upon Consumer Prices. Keynes basically argued for replacement Government Spending to replace loss of Consumer Spending in deep recessions; it took the Monetarists to actually propound that you could get the same effect by monkeying with the Interest rates. I think Keynes and the Austrians were right, but only within limits. Keynes assumed one could increase Government Spending greater than the replaced Consumer Spending, which could not be done without long-term ingrained Inflation. The Austrians assume in error that Consumer Spending cannot fall below a level which will generate a sound economic signal system, which it can. Thus, we have three Views of the economy, all of which are in some ways wrong.

I promised myself I would not enter into Surge pressures on the economy, which will alter Consumer Spending totally outside the restraint practices of the Austrians. They assume every natural effect has a natural economic response, which is assuredly not the Case. Monetarists actually see nothing but the Surge effects of action upon the economy, ignoring the natural flow which cannot be sustainable suppressed over a long-term Period. Keynes recognized the Surge reductions in the economy, but would not admit that Government Spending could not exceed natural Consumer Spending without equal distress to the economy; all within a context where Consumer Spending was considered natural at the height of the last Boom, a completely farfetched illusion.

No Government action is better than misjudged Government policy, so the Austrians are correct on this Score. This is not to say that no Government policy is economically sound for it is not! My economic view differs from all three cited. Central to my View is the idea that one of the real reasons for the lasting impact of Recessions lies in the unequal impact they have on the fortunes of the economic participants. Government policy should be taken to ensure that all Participants share in the retardation aspects, as well as in the Booms aspects. This means higher Taxation for the Profits which do exist, and not necessarily by higher Tax rates. My Thought of the Day is that for every 2% increase in the Unemployment rate, that a Surtax of 10% should be placed against all viable Deductions, Exemptions, Credits, and other Tax remissions which are not Personal in origin–the later like Personal Exemption, Dependent Exemption, Household College credits, etc. This would be applicable to both Individuals and Businesses. This not only has the benefit of paying for Government Spending and reducing the Deficit, but also insists that all economic participants work harder to maintain their own personal standards of living. lgl

Off-the-Wall Solution

I would call this Numbers Mashing, though it has clean lines and details. I would suggest that the projected Growth of last year was the Inflation which the Fed stated did not exist. It is the Answer to rising Wages in the face of maintained Unemployment. I read in another article which I did not source link that Consumers made a further Dip into Savings of around 1.4% in the last year. There will not be a 4% increase in personal consumption expenditures if the diet of Savings consumption is used. Housing was down 5% last year, which I have always believed would stabilize around 2005 Price levels. Monetary policy may support the economic recovery, though I imagine it only supports adverse Past debt loads for lending institutions. I personally expect an economic growth rate of less than 3% for the coming year, with slightly worse for the following year; I fell that the American economy has reached its Peak, what with the start of Retirement for the Baby Boomers. I know that the Unemployment rate will only decrease with their Retirement. The Fed cannot have it both ways in the final analysis, and economic slack will not hold down Inflation; economic growth as stated must generate the Inflation. I think it will be a real bitch by mid-Summer.

I may have a radical Solution for the President to help the Job Market; by the way, I am scalping all these links from Mark Thoma. My Solution will seem like a really incredible Solution, until it is examined in minutia. I would call this the Forced Retirement Act. This would take the decision to Retire away from individual Labor, and place it in the hands of current Employers. Anyone over the Age of 55 could be forcibly Retired if their Employer wished to replace them with younger Labor. Social Security benefits would be calculated as if they were of Age 65, but on current Worked Quarters. I can just see the economists jumping Up and Down out of outrage.

The Pressures on the Social Security Fund would be immediately accelerated admittedly. There would be constant and raucous complaint coming from the forced Retirees. There would have to be allowance for forced Retirees to attempt employment elsewhere in the economy; and consistently, allowance for Anyone over Age 55 to retire voluntarily. The Upside would be that the already Worked Quarters would be at cheaper rate than Now or in the Future; with allowance made for current unemployment due to the Recession so that Retirees are not penalized. Vast numbers of Job positions would be opened up, and at downsized Wage levels. More People would eventually be paying into the Social Security Fund against a lower liability. Retirees would start on Retirement practices far earlier–leading to an increase in Consumption Spending without dependence on further erosion of Housing Prices; new Start-Ups of retirement homes could restart the Construction industry. It is a Win-Win in long-term fiscal budgeting, and a source We should consider. lgl

Mode of Attack

I fear that Arnold may have missed the real Cost of Corporate Power which is not the longevity or duration of their impact, but the fact that our Congress, Legislatures, Governors, and Presidents are for Sale. It also does not matter exactly What Corporations are buying at any given point in Time; it is simply that it is the creation of a political system where the Will of the People is defeated in the money-making interest of Corporations and Business. I watch the Scene playing out, and have only one Solution: make all political contributions subject to the highest rate of Income tax applicable–no matter Where or How it was generated. I am quite sure the average Taxpayer would accept a $.40 tax on his allowable Tax Form allocation of a $1, if the Corporations were charged $40,000 for their $100k funding of a PAC. This could indeed level the Playing Field, and perhaps give a little aid to the Budget Deficit.

I commend this Post in the spirit of the above message coming from Donald Marron. He is somewhat altruistic, though We can pardon him as such for a excellently written Post. It all comes down to the Money, Honey, and exactly Who gets it! The Health Care industry will not abide a reduction in their Share of the Pie, and will literally spend Millions in political contributions to assure that it does not lose an iota of their Gains. On the other Side, WE have a President and a shrinking group of Democrats (the political Cash is corruptive) who actually worry about deficits. The People want more health care benefits, but less Taxation. How will it be resolved? What can the President do about it?

My policy recommendation would be for Obama to directly ask the Congressional Budget Office to establish a Model outlining the real rate of Taxation for Taxpayers if health care Costs are considered a form of lifetime taxation. A number of models (at least Four) need be compiled: the Fate of Taxpayers under the old system prior to the Obama health care reform; the Fate of the American Taxpayer after passage of the Obama health care reform; The Fate of American Taxpayers if the current Republican legislation is passed; and the lifetime Tax of Americans if a universal health care system was introduced. I would advise Obama to start utilizing the Results of these four Models to counteract the Republican sentiment in Congress. lgl

Where were you the day. . . .

One can read this Post, and decide to discount the material. It stands as True that Norway has lower Population concentration, more highly-skilled labor cadres, no real Immigrant problem, and a philosophy of communal welfare; coming originally from the direct threats imposed by a dire climate inimical to human life. It still also stands as True that the Norwegian economy possesses far greater stability than the American economy, and such stability extends throughout the economy, not just the business structure. It is also instructive that the last real advance of the American economy came following a large Tax Increase; Boom and Bust cycles occurring with greater rapidity after periodic reductions from this Tax Increase. It can almost be claimed that Tax Cuts simply allow for the creation of Bubbles.

You can combine the previous Post with this One, and ask just where is there any expected Stimulus. Violation of strict PAYGO leads to increasing deficits, increased Debt Service Costs, higher Resource Costs to Producers with Government competition; all while the greatest segment of Income in American society is taxed less and less. Congress will not cut their Spending habits, apply heavier Taxes, or cut Welfare benefits. It works relentlessly to bankrupt the federal system, while still making a Profit for their own Class of Wealthy in the interim. A less gentle Soul than myself might even call for Treason trials, especially as the United States could easily pay for their Expenditures.

I must first say I applaud this lady, and wish herself and her program a good and fair Hearing at Davos. Then I ask myself if this kind of upbeat, illustrative American rationalism is what the United States is sending to Davos. We have massive problems which will not be resolved with Good Will efforts which do not meet the Needs surfacing throughout the World. Governments are the biggest Spenders in the World today, and rarely utilize small Business to fulfill their desires. We send Spokespeople who cant about improvements in a marginal sector of Production, while We need an Overhaul of basic budgetary systems. There are a lot of people trying to join Nero on the balcony (I know that he was not even in Rome when it burned!). lgl

Patents and Tax Farming

There remain simply too many Patents out there for anyone to keep track of, so now IBM requests a Patent for a program to keep track of the Patents. I have stated previously, and will reiterate, that there is a very simple Solution to the whole Problem. Patents are a Public award, and should never have been implemented as an Award system without definition of the magnitude of the awards; based upon a per-usage rate, combined with the cost of development of the technology. The Government that initiates the award has inherent right to determine How Much is to be gained from the award on a Piece-rate basis.

There implications of the system of Patents go way beyond a simple guarantee of Profits. Some will think this argument to be spacious, but it is very real when it comes to adding up the Money. Patents are a form of Tax Farming; an old Roman system where Senators bid on tax collection among specific provinces of the empire. The highest bidder in the Senate was awarded the right of tax collections for a province, then could impose any Tax rates he desired to raise the amount of funds to pay the Senate contract. Needless to say, Tax Farming made many Senators rich, and impoverished many provinces. Then the high bidders had the Roman Legions to impose their Tax rates and Collections; today, many utilize the power of the federal Courts to enforce Patents. Often the rates stipulated are equally as usurious.

I could easily attest that the American bill for Drugs and Medical Equipment would easily be cut by 35%, if judicious use of listed per-dosage or usage rates were imposed when the Patent was issued. Remember this is not to say that medical research would remain adequately funded; it only says rates issued to allow Americans to pay for their Drug Costs would lead to reliance on equally as efficient older Drugs or medical practices not continuously under Patent. I could easily also lay claim that Technical Software and Hardware would again be adjudged for its life expectancy, not by specifically-designed Software to cut older equipment from the Communications network. These are Changes which would remove Patents from the arena of Tax Farming, and would generate a new business mode for economic growth. lgl

Idyllic Dream as Nightmare

I read this Post, and think about What type of explanation for Government I would use to explain to small children. This did lead me far afield, which I will outline in a minute. My definition for the children comes first: Government is the argumentative manner adults decide who gets to work at what essentially without fighting, choosing one set of people to be in charge for a specific period of time, then picking another set again for the next Period. This cuts down on the amount of time which people can argue and fight. Adults will probably choose the same people to lead for a second period, if they worked out well; the adults choose another group if they did not!

I study on the two definitions, and things pop to mind. The first thing I consider is the fact that Government should spring from the base upward; there should be no pressure from the Top exerted on the Bottom. The second thing which springs to mind consists of the fact that there should be no increase in Power granted to leadership as it does rise in position. The third thing enters in that the elected people should not have greater power to get out their message than their Opponents or lower Ranks. I am starting to get the concept of a Revolution in the Making, and it is one which will be opposed by the leadership.

I think I will start with Taxation. It will be changed to supply what is needed, not for general programs. I will start with Police, Fire, and City Services. A law will state that every block must employ 1 trained Police Officer, 1 trained Fireman, and 1 trained City Maintenance Worker. These Employed will be expected to work anywhere in the City or governing jurisdiction, but each block must come up with the funding. I would suggest that every business block must come up with 3 of each category. It will clearly be evident that these Services will soon privatize, as Business will notice the advantage of getting into the business of trained labor supply; it also getting cheaper under business competition. It will work likewise going upward through the levels of jurisdiction–Education, Welfare services, litigation, and Defense handled in the same manner. Each Household committed to a set payment of taxation, which Business competing to gain the greater share of the funding. Households and Business organizations having an additive level of specific taxes they must pay, and which they are quite capable of complaining about. There can even be an Infrastructure Tax of set limit, which must be spent in the expansion of social access. It is a much simpler system than the current types of taxation, and far easier to contest. Variations of the set limits of Taxation can even be altered to suit the level of capital investment in Block or Business. lgl

Different View

I like this Post for what it does say, but not the reasoning behind it. This always comes out when working with economic models, which is the principle of diminishing effect at the extremes. Paul Krugman states that there is a position at which falling Wages would produce full employment. I contest this view. Current Production factors–We are talking structural unemployment here–will preclude any labor expansion to full employment without real alteration of modes of Production; by this I do not mean labor intensive practices of old. I will try to explain what I mean in as positive a manner as I can elaborate.

We are currently in a mid-technological range of Production; this means there will not be overwhelming investment in new Production facilities until the old facilities are Aged, or a new Cost-Saving technology has been introduced. Management has already learned How to maximize Productivity under this existing technology with minimal labor assets, minimal Operating Costs, and maximum Profitability factors. Business will hire according to the new labor model, not the developing labor model originally utilized to develop the technology. Mass labor is not going to come back to the Production cycle until new technology development is under way; which without new major advance in technology, will only come with the Ageing of old equipment.

We have here a factor which must be understood: no amount of monetary or fiscal policy will alter the plans of Business Management to significant degree to depress the unemployment rate. There is only one other factor which can alter the paradigm, which is to alter the return ratio of Profits to current business formation. This can be done by higher Taxes, placed on the Profits themselves, or on the composite materials and Resources used in current production. I advocate the double approach, and would call for a complete Overhaul of the US Tax Code–basically eliminating all special tax exemptions and deductions; the principle here is that the Tax rates should conform to the natural economic environment, which means ‘Pay as You Go’ Government Spending. This is the quickest venue to impel Business management to seek additional Profits-Making endeavors with heavy employment of labor. lgl

How I get myself into Trouble!

People have often asked me How I could get into so much trouble, as I do not communicate with that many people. I have a perfect example here! I was talking with two old friends about old Cars. Then I get to thinking about Forklifts, which I used to drive in my younger days. I asked my friends if they know of Anyone in the country who had any collection of old Forklifts that I might examine. Others heard the commentary, and asked Why I wanted to see some old Forklifts. I explained that Forklifts went back to the old Steam Engine days as an industrial equipment, and some designs over the years were quite interesting. People looked doubtful, and I explained the concept of an industrial museum; also stating that as We were situated in a centralized area of the Country, and were a relatively industrialized City, it would be an excellent location for such an industrial museum.

Other people inquired for an expansion of that Concept. I explained that it would be a good Investment for the City, probably bringing in good Receipts from a door charge; this if We could establish a good building and equipment assortment which would require at least 4 hours to preview. I also mentioned that it was a good year to hunt for equipment donations which could be accounted as charitable contributions, while the new Full Costing allowance granted to new equipment made purchase of new equipment cheaper for the companies who gave such equipment. Someone asked How Much I was talking about in Dollar terms, and I stated it could be minimally be done for about $5-7 million, but should be funded at around $15 million.

I heard several snorts of Contempt, so I decided to dig my Grave deeper. I suggested that setting up as functioning equipment displays would serve as a good Educational tool for High School Students, with Syllabus given to Shop Teachers; the later expected to actually teach the lectures. I went further and stated that Companies could also preuse such a museum to teach extended Safety courses capable of getting lowered liability insurance premiums for Companies in the area. I mentioned that We had great labor cadres to fill Instructor positions for such Courses, as there were many experienced Retirees from the local Plants. I finished with a Statement that connection with the local Community College may allow Us to issue a 2-year Degree in Production Engineering. Then I heard the Death Knell of the Issue: the suggestion that I was the obvious choice to head up the museum development. I replied that I am only an idea man, and that one needed an efficient Manager and Cost Accountant to head the Project. lgl

Why do I think I am Right, when everyone thinks I am Wrong?

I read this fine Post from Arnold Kling, and it starts me thinking. Arnold stipulates much of what I feel at fault with the American modeling process. He, of course, remains a very nice person, while I am not quite the same. His belief in the additional leisure remains correct, but I take a rather dimmer view of the process than him. The current Tax Code allows automatically for increased levels of Wages, even as the level of productivity sinks. I could call for a Tax stipulation that only 90% of paid Wages, Salaries, and Benefits could be deducted if the average yearly Productivity did not match the previous year’s Productivity per Worker. This penalizes Labor and Management for a loss of Productivity.

Labor may ask why I, a strong proponent of labor, should take such contentious position. Here is my basic ideation: The loss of Productivity of employed labor means an easing of Management control over both Production and Costs. It is a basic Means to retain skilled Labor during Periods of low Sales and slack Production. This would seem a great benefit to Business, but is it? Management adopts the easy Road of inefficient Business model, with little exertion to increase Sales or alternate Product. A Recession does not mean Opportunity to take the wife on that long Vacation–basically at Consumers’ Expense.

The need to maintain Productivity levels sharpens Labor Skills, forces Management to examine alternate Production strategies and new Product lines, and rehires unemployed labor in desire to maintain peak Production levels after current Labor tires of the increased pace. The Workweek actually shortens, Labor Rolls actually grow, and Wages per Worker actually go down. Labor obviously will find this unattractive, though the economy will show greater promise. I have always been of the inclination to believe that the economy is better-served by added stress being placed on Management to preform, rather than giving them benefits to maintain their current Work schedules under recessionary pressures. I worry about those current Managers who come in at Ten, and leave at 2:30. I don’t think this was the way the current industrial structure was built. lgl

The Art of Deduction

I like this article for what it tells Us, not what it doesn’t. It is evidence that there was communal economic activity around 4100 B.C. This stands way beyond subsistence farming. It is advanced technological alteration of basic agricultural product to enhance the shelf-life of the Crops. The size of the production facility almost insists on some form of market structure, as the volume of Product to be handled would exceed the needs of even a small group of families, let alone individual families. The discovery of a leather sandal within close proximity to the facility indicate the high probability of caravan travel, as only Travelers would invest in expensive, durable footwear in the absence of extreme Cold conditions. The indication of market structure suggests a common medium of exchange–or Money. The later would indicate some form of advance Government structure. The importance, here, being the suggested progression from tribal life to village entity, along with labor specialization.

I will now turn my Readers to this Post. One will ask what modern Baseball players have to do with ancient winemakers? It is all a matter of establishment of a Consumption market. The Post concentrates on the impact of high Pay for the best Players on the payment structure of the medium-range Players. I focus on a different aspect: What impact does the high Pay have on the attending Public? It is obvious that Team managements have been raising Ticket prices and Marketing efforts to profit from the increased Payrolls of Players, even more so among those Teams advancing medium-range player Pay at equitable scale to the higher-priced Players. The median Income of Attendants of Ball games has obviously had to rise during such Period of payment of high Pay to advanced Players.

Could a Wine-making facility of the size found been able to continue to pay for the Expense of its construction based upon the purchase habits of only wealthy individuals? The Answer to this is No! There had to be a major Population center, successive Caravans through the area, or widespread Sales of cheap Wine throughout the area. This indeed brings another aspect to Mind; the need for massive amounts of Product to make Wine, the area had to be heavily planted to vineyards. Labor in these vineyards had to be supported by grain production, so there had to exist a massive amount of land development with high rural population in the area. The Economics of History may be the most interesting aspect of the field. lgl

Cattle Feed, Anyone?

I decided to post twice today, because of this article by Andrew Revkin. It lists the likely progress of food supply through the growth of Population across Time. I will tell my Readers that there is no disaster scenario looming, where there is suddenly multitudes starving for their daily supply of energy. My main point I would like to emphasize being that the manner in which Food is delivered to everyone will make a great difference. There is sufficient arable land to maintain a Population of over Twenty billion if Eating Habits are altered.

I like to shock people with the Statement that the Food problem should be turned over to Purina and other animal food companies. They feed multi-millions of domestic animals, all very nutritionally, and do so without inconvenient Food Poisoning. These companies would study the Problem of feeding humans, and come up with a basic list of necessities–or prerequisite work which would have to be done. Let me try to imitate such a List.

People would have to be weaned from eating Meat more than once a day. This is most easily done by getting Parents to prepare the Child specific foods from Birth. The entire personal desire for specific foods could be altered in one child growth cycle. The second need is to transfer food desire to processed food, coming pre-packaged, and needing only to be heated with the possible addition of some common supplement–Milk, Ketchup, etc. People say that processed food cannot possibly taste Good; I think We ought to castigate manufacturers everywhere for the induced hatred of Soy-burgers; singular groups of a vegetable never taste Good. Mixtures of vegetables with garnishing is the way to go; people handle Salads this way, why not a casserole-style processed food? Vitamins and Minerals can be introduced easily into such Mixtures, without the disadvantages of bad Taste. We need to get into Ocean Ranching, supplying much vital protein from fish meal and flesh. Again, proper Garnishing and Heating will bring out Good Taste. Eating two Packets per day of processed food with one natural meal per day would allow both cultural flavor and necessary food, while actually cutting Food Costs with higher yield in number of people fed per acre. lgl

Economic Policy Fiction

Does Anyone wonder where Economics goes wrong and Why it does? Read this Post! I ask first if it is natural to have a nominal Interest rate of 0%? Second, I would ask if it were natural for Banks, who are dependent or should be on their reserves, to attempt a greater degradation of the reserves by pushing Inflation? What I am trying to get at here stands that there are several things which are not truly economic policy, simply criminal stupidity. They are not even political maneuvers, as no one gains sufficiently to make the attempts profitable. Banks make higher Profits, but with need to reinvest and no viable way to hold reserves in investment, they simply lend to a business leadership which is already deluged with oversupply of Investment Cash, as their Sales performance cannot even generate need for greater production capacity. There is no additional Consumer dollars out there, they already dedicated to current expenditures or a consistent Savings pattern. Remember the old adage about beating a dead horse?

I could take the argument to the Demand/Supply curves to prove excess Capital will actually decrease Demand over time, as Consumers fear the Consumption patterns of their Peers, which is decidedly below their own. I could attempt proof that the Profitable employment of resources declines into negative territory at the incremental level with nominal Interest rates at 0%. I am not good with graphs, though, and this is one area I would not like to screw up. It all means that this artificial generation of Production through false Capital provision of no Interest actually causes a real loss of Profitability and Returns.

The same can be said for excess Tax Cuts, which do no one except the wealthy Taxpayer any Good. It allows such individuals in Management decisions to adopt quasi-monopoly Price and Production placement, set to maximize their Return without further benefit to the economy. Real Prices should have dropped somewhere around 2.1% because of the Downturn, even though the Sales performance has been higher, simply because Consumption Demand should have been much higher; it will not be without the real Prices reductions. There is a very real economic trend visible where there is an attempt to force higher Prices and Profitability from limited Sales, reducing Wage levels and Standards of Living. My response simply states this is not the way to do it, and Consumers and Households will show far greater resiliency to artificial pressures than is imagined. Current economic policy is in for a rude Awakening! lgl

I hope my Readers can understand this!

The last word in the battle over Trade may be here. Ian Fletcher has vocalized most of my misgivings about Free Trade, though I will state my main complaint about Free Trade consists of the tendency of Wages to flow downwards to the lowest common denominator, with the corresponding loss of Standard of Living. Labor Gains, hard earned in one economy, are destroyed by simple purchase from other countries where such Gains were never realized. Labor in both nations are left without the Income which they should be earning. I should examine Fletcher’s rationales and explain.

No Trade is sustainable in the long-run. It is only dependent on the length of Time it takes for that lack to appear. Trade Advantage only lasts as long as the current level of Technology, and Technology itself has only the Shelf-Life of Capital, which at most is about 30 years. New Capital will always flow to the areas of greatest potential Profitability, which is almost never in the areas of direct competition with older Technology still in use. This tendency is also required to make the Stopler-Samuelson theorem work to full advantage. There is never developed Job replacement under conditions of Free Trade, and negative externalities are never computed as subtraction from the gains of Free Trade; something which has never be proven effectively as yet. The positive externalities are even trickier; Industries are robbed for Capital which flows to the new higher-Profit industries, creating higher Wages in the high-Profits new industries while Wages are suppressed in the older industries, all within the Context of All competing with the influx of new low-Wage labor from foreign sources through Imports; this relatively the only long-term capacity to pay for the purchase of Exports.

Fletcher possibly explains the problems with Ricardo’s Comparative Advantage far better than I could. The thing to remember consists that the problem with Ricardo’s theorem all revolve around the mobility of resources; none of which move perfectly, and of those which temporarily do move perfectly, they preform to create a vacuum within the shifting economy with bulge in the recipient economy. Both economies suffer from adverse alterations in Wages and Profits. My final Statement would be that Perfect Competition can never exist–even in the Short-Run. As long as there is transition from older Technology to newer Technology with competition between the Two, there can never be full production; Ricardo’s Comparative Advantage can never work fully because of the Costs of Transition, and the life of Capital insists that the Costs of Transition never cease. Advocates of Free Trade would insist that Comparative Advantage exceeds those Costs of Transition, but I would contend they do not when found operating across the entire cycle of Capital life. lgl

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