In our first year of retirement, we built a new home in Blythewood, SC. The design featured an entry foyer, 12 foot ceiling, front and center, with a dining room to the right and a bedroom to the left, both with 9 foot ceilings. I visited the construction site almost daily and was shocked to see during one visit that the talented twenty-something framing crew boss had framed the dining room and bedroom also with 12 foot ceilings. I challenged him and his response was that those framing drawings I had given him were just suggestions and that we were going to be much happier with those 12 foot ceilings all the way across the front of the house. Well, we did like the way he did it, but I suspect his creativity cost us a few thousand dollars in materials and labor.
Now I am realizing that the Executive Branch of our government views the laws passed by Congress much the way our framer viewed the construction drawings we had given him: as suggestions. And there are several problems with that, not the least of which is that the executive branch may make sudden changes of direction every four years.
This is not a Democrat vs. Republican or a Liberal vs. Conservative issue. I have heard allusions to the problem for decades expressed as differing approaches of various administrations to interpretation and enforcement of anti-trust legislation, environmental regulations, tax laws, etc. But it seems now to be the preferred mode of operation of both parties in our three supposedly power-balanced arms of government for Congress to pass complex laws of uncertain content and then hit the fundraising and campaign trails after turning them over to the Executive Branch to find out what is in them and decide what to do about it.
I blogged about this aspect of the Patient Protection and Affordable Care Act (PPACA) focusing especially on the open ended nature of the legislation indicated by the frequency of such phrases as ‘The Secretary shall,” “The Secretary may,” and “shall be determined.” There were hundreds. And then very soon after the law took effect, HHS began granting waivers (1,578 as of the end of July, 2011) to various employers from some provisions of the law. Recently a delay has been announced in implementation of a PPACA provision (CLASS) establishing a long term care insurance plan. Now we have some Republican candidates for president saying that, if elected, they will grant all states waivers from the new health care legislation. I don’t believe that is a reasonable approach. If I were president and 47 states opted out, I’d tax the heck out of them and give free health care to the citizens of the other three states.
But I don’t believe the champions of the new health care legislation should be surprised if waivers wave their heads even higher under future administrations because the precedent has been established and is being expanded. President Obama is now offering waivers to individual states from the requirements of the No Child Left Behind Act. I’m no champion of NCLB, thinking that the obvious corollary of it is No Child Gets Ahead, but Congress put it in place, and congress should fix it rather than leave whoever happens to be in the Oval Office to tinker as he or she sees fit. If one president grants waivers, will the next withdraw them? We cannot operate successfully with that kind of uncertainty.
So, my request to Congress is to slow down, read, understand, and debate the bills before voting, and raise a ruckus when the Executive Branch starts tinkering with, expanding the scope of, or ignoring elements of passed legislation. That is an abuse of power.
And, if there are just too many laws for the Executive Branch to keep up with and administer effectively, there are just too many laws.
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Sunday, September 25, 2011
Wednesday, September 21, 2011
TaxVille!
Zynga, founded in 2007 based on the idea that play would become a core internet activity, is the developer of FarmVille, a game opportunity for facebook users. I haven’t played the game and, as a matter of fact, have it, and all games, blocked on my facebook account, but I heard some discussion on TV a while ago about how popular and valuable it has become.
Actually I was on the elliptical cross trainer in the gym when I heard that discussion, and I said to myself, “No wonder our tax code is so complicated. We just love to play games!” But the sizes of our individual tax bills should not be based on our gamesmanship or the number of experts and coaches we can hire to assist us or even on what we choose to do with our incomes. Income tax should be based on income, period.
I’m not running for office and I’m not campaigning for or against anybody who is, so I don’t have to engage in the current class warfare. It seems to me that a rational take on the current situation is that some of the wealthy should have higher tax bills and some should have lower tax bills. At the other end of the scale, some poor people should be getting more assistance and some should be getting less, but that’s not a taxation issue.
The best way to solve the high end problem and collect more tax revenue at the same time is to get rid of all the special treatment allowed through deductions, exclusions, exemptions, and credits and lower the marginal rates so all the game players won’t be quite so upset. If we did that, expert gamers such as Warren Buffett would have bigger tax bills. And high income people who now pay close to 35% of their income just in federal income tax because they don’t play the games would have lower tax bills. I’m guessing a marginal rate of around 25% on adjusted gross incomes above $1M would generate more tax revenue from those high earners than the current system and would be fairer. And the people who miss the game playing can sign up for FarmVille or, if they really want to be on the edge, on-line poker.
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Actually I was on the elliptical cross trainer in the gym when I heard that discussion, and I said to myself, “No wonder our tax code is so complicated. We just love to play games!” But the sizes of our individual tax bills should not be based on our gamesmanship or the number of experts and coaches we can hire to assist us or even on what we choose to do with our incomes. Income tax should be based on income, period.
I’m not running for office and I’m not campaigning for or against anybody who is, so I don’t have to engage in the current class warfare. It seems to me that a rational take on the current situation is that some of the wealthy should have higher tax bills and some should have lower tax bills. At the other end of the scale, some poor people should be getting more assistance and some should be getting less, but that’s not a taxation issue.
The best way to solve the high end problem and collect more tax revenue at the same time is to get rid of all the special treatment allowed through deductions, exclusions, exemptions, and credits and lower the marginal rates so all the game players won’t be quite so upset. If we did that, expert gamers such as Warren Buffett would have bigger tax bills. And high income people who now pay close to 35% of their income just in federal income tax because they don’t play the games would have lower tax bills. I’m guessing a marginal rate of around 25% on adjusted gross incomes above $1M would generate more tax revenue from those high earners than the current system and would be fairer. And the people who miss the game playing can sign up for FarmVille or, if they really want to be on the edge, on-line poker.
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Paying, and Receiving, a Fair Share – Conquering Poverty
Let’s clarify one point before getting started: Income and wealth are two entirely separate and independent variables and have little to do with each other. A wealthy person may have become so as a result of earlier large annual incomes or via a strategy of delayed gratification over a long period, through inheritance, through winning the lottery, or through drug dealing or other illegal activities. But a person can be very wealthy and have little or no current income. The retired couple with a million dollars in short-term CD’s, for example, is only getting about $12,000 in interest and would fall below the poverty line. And of course illegally gotten funds stashed in safety deposit boxes or mattresses generate no taxable income at all.
Even extremely wealthy Warren Buffett’s income is only about 0.12% of his total assets ($62M adjusted gross income on wealth of $50B), and Warren Buffett could easily get ten times the income and pay the highest income tax rates on it by shifting some money out of his equity investments and putting it in CD’s or by simply paying himself a big salary. His position on taxing the wealthy is inconsistent with his personal financial strategy.
On the other hand, a person can have very substantial income and zero or negative wealth. If a new VP in a big corporation is earning a million dollars a year and has a $3M mortgage on a $2.5M house, a second mortgage that was used for the down payment, five maxed out credit cards, and a leased Jaguar, that person is broke but will appear wealthy in the poverty statistics and will probably pay more than a half million dollars in taxes of various kinds on that million dollars of income. Serves him right! He needs to read Benjamin Franklin on thrift.
Here is a link to an article, from University of California at Santa Cruz, with interesting data on wealth and income and distribution of both.
That is just background for my reaction to the news dominating, sound bite generating, data released last week by the Census Bureau on poverty in America. Ignoring the fact that the definition of the so-called poverty line is malleable and that no matter how rich or poor we are on average, the bottom 10% to 15% will always be defined by the federal government as “poor,” and ignoring the fact that some of those classified as poor are actually wealthy and that some with big incomes are really bankrupt, I wanted to take the data at face value and see what would be required for us to declare victory in the 46 year War on Poverty launched in 1965 by President Lyndon Baines Johnson. Because so far there has been no progress.
Per person income established by the Census Bureau as the divider between poor and not poor ranges from $11,344 for a single person under 65 to $4,742 for somebody living in a family household of eight (household income of ~ $38,000). Let’s estimate the average at $8,000 per person for all the mix of households, about halfway between the $4,742 and the $11,344.
The Census Bureau has determined that there are 46.2M people with incomes below the poverty threshold. Assuming that some of those people are just a hair below and some have essentially no income, it is probably reasonable to guess that the average income is half the average poverty level or about $4,000 per person.
So, to move everybody up to the poverty line (which would of course raise the poverty line but let’s ignore that for now) we would need to spread an average of $4,000 per person to 46.2M people, a total of $184B. Total federal, state, and local government spending is currently at a $5.47T per year rate. So, it would take a reallocation of only 3.4% of government spending to solve the problem by increasing everybody’s income up to the poverty line. I believe we could take that much out of the defense budget without seriously undermining our national security. (I’m assuming nobody but Paul Krugman and his small band of followers would argue at this point for increasing government spending another 3.4 %.)
So, my point is this: We have plenty of money to help those who really need it if we didn’t insist on helping everybody. If, instead of paying the medical bills and sending Social Security checks to everybody over 65, regardless of need, donating hundreds of millions to companies such as Solyndra, bailing out banks and auto companies, and funding two wars and thousands of miscellaneous local projects of dubious value, if instead of all that, we just seriously targeted poverty, we could make a real difference. It just makes me think that conquering poverty is not really the focus of the Washington establishment. After all, having a significant population of poor people creates a lot of jobs.
But, even if Washington got serious and took such an action as I suggest above, don’t forget that there would still be a bottom 10-15% defined as poor. And the war would go on.
And there is another potential problem. I’m concerned that some of those currently just below the poverty line and therefore getting small checks in the proposed new program to wipe out poverty might be a bit envious of those with almost no income and therefore getting big checks. And some of those working and just above the poverty line might be unhappy with all those who would be getting about the same amount of money without working. That’s the problem when talk of a “fair share” comes up. Determination of that “fair share” of government transfer payouts is just as difficult as determination of the “fair share” of tax payments to the government. (Check out the September 18th Gospel Reading, Matthew 20:1-16, which I think is about the Kingdom of God but includes some insights into human nature.)
And yes, of course I know that poverty can never be conquered through spreading the wealth but only through better education, improved work ethic, and a robust economy with lots of opportunity. So, maybe that is where the War on Poverty should be targeted.
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Even extremely wealthy Warren Buffett’s income is only about 0.12% of his total assets ($62M adjusted gross income on wealth of $50B), and Warren Buffett could easily get ten times the income and pay the highest income tax rates on it by shifting some money out of his equity investments and putting it in CD’s or by simply paying himself a big salary. His position on taxing the wealthy is inconsistent with his personal financial strategy.
On the other hand, a person can have very substantial income and zero or negative wealth. If a new VP in a big corporation is earning a million dollars a year and has a $3M mortgage on a $2.5M house, a second mortgage that was used for the down payment, five maxed out credit cards, and a leased Jaguar, that person is broke but will appear wealthy in the poverty statistics and will probably pay more than a half million dollars in taxes of various kinds on that million dollars of income. Serves him right! He needs to read Benjamin Franklin on thrift.
Here is a link to an article, from University of California at Santa Cruz, with interesting data on wealth and income and distribution of both.
That is just background for my reaction to the news dominating, sound bite generating, data released last week by the Census Bureau on poverty in America. Ignoring the fact that the definition of the so-called poverty line is malleable and that no matter how rich or poor we are on average, the bottom 10% to 15% will always be defined by the federal government as “poor,” and ignoring the fact that some of those classified as poor are actually wealthy and that some with big incomes are really bankrupt, I wanted to take the data at face value and see what would be required for us to declare victory in the 46 year War on Poverty launched in 1965 by President Lyndon Baines Johnson. Because so far there has been no progress.
Per person income established by the Census Bureau as the divider between poor and not poor ranges from $11,344 for a single person under 65 to $4,742 for somebody living in a family household of eight (household income of ~ $38,000). Let’s estimate the average at $8,000 per person for all the mix of households, about halfway between the $4,742 and the $11,344.
The Census Bureau has determined that there are 46.2M people with incomes below the poverty threshold. Assuming that some of those people are just a hair below and some have essentially no income, it is probably reasonable to guess that the average income is half the average poverty level or about $4,000 per person.
So, to move everybody up to the poverty line (which would of course raise the poverty line but let’s ignore that for now) we would need to spread an average of $4,000 per person to 46.2M people, a total of $184B. Total federal, state, and local government spending is currently at a $5.47T per year rate. So, it would take a reallocation of only 3.4% of government spending to solve the problem by increasing everybody’s income up to the poverty line. I believe we could take that much out of the defense budget without seriously undermining our national security. (I’m assuming nobody but Paul Krugman and his small band of followers would argue at this point for increasing government spending another 3.4 %.)
So, my point is this: We have plenty of money to help those who really need it if we didn’t insist on helping everybody. If, instead of paying the medical bills and sending Social Security checks to everybody over 65, regardless of need, donating hundreds of millions to companies such as Solyndra, bailing out banks and auto companies, and funding two wars and thousands of miscellaneous local projects of dubious value, if instead of all that, we just seriously targeted poverty, we could make a real difference. It just makes me think that conquering poverty is not really the focus of the Washington establishment. After all, having a significant population of poor people creates a lot of jobs.
But, even if Washington got serious and took such an action as I suggest above, don’t forget that there would still be a bottom 10-15% defined as poor. And the war would go on.
And there is another potential problem. I’m concerned that some of those currently just below the poverty line and therefore getting small checks in the proposed new program to wipe out poverty might be a bit envious of those with almost no income and therefore getting big checks. And some of those working and just above the poverty line might be unhappy with all those who would be getting about the same amount of money without working. That’s the problem when talk of a “fair share” comes up. Determination of that “fair share” of government transfer payouts is just as difficult as determination of the “fair share” of tax payments to the government. (Check out the September 18th Gospel Reading, Matthew 20:1-16, which I think is about the Kingdom of God but includes some insights into human nature.)
And yes, of course I know that poverty can never be conquered through spreading the wealth but only through better education, improved work ethic, and a robust economy with lots of opportunity. So, maybe that is where the War on Poverty should be targeted.
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Friday, September 16, 2011
Granddaddy Williams and the National Economy
My paternal grandfather was a hard-working staunch conservative, a Hoover Republican who traveled around East Tennessee during the Great Depression trading horses to make a living and campaigning against “Old Roosevelt.” I wasn’t around during that time, but spent a lot of time with Granddaddy in the family furniture business and heard all his stories, some of them several times. There is more about him here.
His father and brothers had been in the flour milling business, never with much success. Granddaddy told me that all during those years struggling in the mill business, he thought that if he could ever just get $10,000 accumulated at one time he could start a successful business of some kind. I don’t believe he ever wanted to work for anybody.
In the 1940’s his small town insurance agent, a Mr. Blazer I believe, suggested to Granddaddy that he get in touch with another of his insurance customers who was about to start a furniture business. He thought they might be able to help each other out. So R. H. Williams looked up O. K. Spears and they founded Spears Furniture, later to become Spears and Williams Furniture Company in Maryville, TN. Granddaddy told me that they stocked the store with three living room suites, three bedroom suites, and three dining room suites and opened the doors for business.
As I heard the story, Mr. Spears spent the days hanging around the big heating grate over the furnace smoking cigars trying to stay warm and chatting with customers while Granddaddy did the hard work. But he always appreciated the opportunity Mr. Spears gave him and, and as the business began to grow, finally began to believe he had found a way to make a living. After a few years they split up and Spears Furniture and Williams Furniture became separate and independent and attracted the next generation of both families into the same business.
I got many lectures from Granddaddy during the nineteen fifties and sixties about all the problems that would result from “easy money” being provided by federal spending and inflationary policies. He strongly resisted Social Security but of course had to pay the taxes. When he retired in the early sixties, he applied for his Social Security benefits and was told he couldn’t get them because he was still working. That was the rule at the time. It was true. He was still working but he wasn’t getting paid. He just kept going to the furniture store which my dad and uncle had taken over and helping out as he could. Granddaddy was not a man to sit around taking it easy when there was work to be done.
I don’t know if he had to go to court and prove he was not being paid to get his Social Security started or if he just threatened to do so, but the payments soon began. Granddaddy once told me that a man who wasn’t suing somebody or being sued by somebody probably wasn’t doing anything worthwhile. Well, by that standard at least, I am a failure.
Looking at all that has happened to our national economy since 1974 when the first big oil crunch gave us a slap in the face, I have to say that Granddaddy was right. We lived high for a few decades on the “easy money” policies, but the bill has come due and must be paid either through extreme inflation or a few decades of austerity.
Richard Hobart Williams: 1898-1987 - Thank you, Granddaddy, for all the love you showed me, all the things you taught me, and all the time you spent with me.
Grandmother in the really old truck and Granddaddy on the fender. Knowing Granddaddy's frugality, I bet the truck was old even when he and Mr. Spears bought it. Until Granddaddy bought a new Nash for Grandmother when she learned to drive in the early 1960's, his net accumulated investment in all the vehicles he had ever owned and driven was negative. He knew what it meant to buy low and sell high.
His father and brothers had been in the flour milling business, never with much success. Granddaddy told me that all during those years struggling in the mill business, he thought that if he could ever just get $10,000 accumulated at one time he could start a successful business of some kind. I don’t believe he ever wanted to work for anybody.
In the 1940’s his small town insurance agent, a Mr. Blazer I believe, suggested to Granddaddy that he get in touch with another of his insurance customers who was about to start a furniture business. He thought they might be able to help each other out. So R. H. Williams looked up O. K. Spears and they founded Spears Furniture, later to become Spears and Williams Furniture Company in Maryville, TN. Granddaddy told me that they stocked the store with three living room suites, three bedroom suites, and three dining room suites and opened the doors for business.
As I heard the story, Mr. Spears spent the days hanging around the big heating grate over the furnace smoking cigars trying to stay warm and chatting with customers while Granddaddy did the hard work. But he always appreciated the opportunity Mr. Spears gave him and, and as the business began to grow, finally began to believe he had found a way to make a living. After a few years they split up and Spears Furniture and Williams Furniture became separate and independent and attracted the next generation of both families into the same business.
I got many lectures from Granddaddy during the nineteen fifties and sixties about all the problems that would result from “easy money” being provided by federal spending and inflationary policies. He strongly resisted Social Security but of course had to pay the taxes. When he retired in the early sixties, he applied for his Social Security benefits and was told he couldn’t get them because he was still working. That was the rule at the time. It was true. He was still working but he wasn’t getting paid. He just kept going to the furniture store which my dad and uncle had taken over and helping out as he could. Granddaddy was not a man to sit around taking it easy when there was work to be done.
I don’t know if he had to go to court and prove he was not being paid to get his Social Security started or if he just threatened to do so, but the payments soon began. Granddaddy once told me that a man who wasn’t suing somebody or being sued by somebody probably wasn’t doing anything worthwhile. Well, by that standard at least, I am a failure.
Looking at all that has happened to our national economy since 1974 when the first big oil crunch gave us a slap in the face, I have to say that Granddaddy was right. We lived high for a few decades on the “easy money” policies, but the bill has come due and must be paid either through extreme inflation or a few decades of austerity.
Richard Hobart Williams: 1898-1987 - Thank you, Granddaddy, for all the love you showed me, all the things you taught me, and all the time you spent with me.
Grandmother in the really old truck and Granddaddy on the fender. Knowing Granddaddy's frugality, I bet the truck was old even when he and Mr. Spears bought it. Until Granddaddy bought a new Nash for Grandmother when she learned to drive in the early 1960's, his net accumulated investment in all the vehicles he had ever owned and driven was negative. He knew what it meant to buy low and sell high.
Wednesday, September 14, 2011
Samuel Clemens’s Job Getting Strategy for the Unemployed
I've been reading here and there from the recently released Autobiography of Mark Twain. Its an entirely appropriate way to read it since that is how it was written, bits and pieces never put together by Twain but now being compiled and published by six editors. The first of three volumes is available. I doubt I will stick with the book for long because of reasons outlined in this review, but I am enjoying some of his anecdotes.
I just read about Twain’s two humorous encounters with President Ulysses S. Grant, how the courting of his future wife was facilitated by being dumped out of a carriage onto his head, and interesting examples of job seeking advice he gave four different friends over a number of years. Twain claimed to have “a great and infallible scheme for finding work for the unemployed,” and that line caught my eye thinking his scheme might have some application for today’s economic difficulties. He claimed that it never failed.
Twains scheme was for the unemployed to figure out what job he wanted and where he wanted to work and then go to a boss there and volunteer to work, doing whatever needed to be done, without pay, just for the “refreshment of work” and just because he was “idle, and weary of being idle, and wanted work.” Once the offer to work for free was accepted, the person was to settle in and do the work, never complaining and never asking for compensation, with two results. First, the boss accepting the free work would begin to feel guilty for not paying such a diligent and effective worker and would want to offer him a job and second, competing bosses would observe what a valuable person the volunteer worker is and would offer to hire him. If the person received an offer from a competitor before being hired by the current boss, he was to present that offer to the current boss who would almost certainly match or better it.
Twain gives the details of how this scheme succeeded with four particular persons to whom he recommended it and who eventually became successful in their chosen fields.
OK, I know this scheme of Twains wouldn’t work today with the mass of employment law and liability concerns employers have to deal with. Even if a potential employee is entirely worthless, he or she must be paid minimum wage and the government must be paid payroll taxes. Other benefit costs such as unemployment insurance and Workers Compensation and maybe even health insurance must be paid. Heaven forbid a “volunteer” worker might be injured on the job, an event that could lead to bankruptcy of a small business. (I hate that term “small businessman.”)
I heard an anecdote about how thirty or forty years ago a person down on his luck could go to a construction site and ask the boss if there was any work available. The boss could give him a simple task that needed to be done and pay him a few dollars cash for doing it. No paperwork…no red tape…nothing. Maybe that was just in South Carolina. But it can’t be done now, even in South Carolina.
Another drawback to such a scheme today is the diminished work ethic. I am a compulsive worker and just have to have something to do. Why else would I be writing this blog? But I encounter many who have the opposite position. In the volunteer work I do, repairing homes of the low-income elderly, using all volunteers, we asked the adult son of one elderly lady we were helping if he would be available the day of the event to assist. His question: “What are you paying?” I could tell other such stories, but the fact is that our government social programs and burdensome regulation of employers have created a culture of dependency and robbed many of self respect and personal dignity. I doubt Samuel Clemens could have even imagined such a situation as we face today.
I just read about Twain’s two humorous encounters with President Ulysses S. Grant, how the courting of his future wife was facilitated by being dumped out of a carriage onto his head, and interesting examples of job seeking advice he gave four different friends over a number of years. Twain claimed to have “a great and infallible scheme for finding work for the unemployed,” and that line caught my eye thinking his scheme might have some application for today’s economic difficulties. He claimed that it never failed.
Twains scheme was for the unemployed to figure out what job he wanted and where he wanted to work and then go to a boss there and volunteer to work, doing whatever needed to be done, without pay, just for the “refreshment of work” and just because he was “idle, and weary of being idle, and wanted work.” Once the offer to work for free was accepted, the person was to settle in and do the work, never complaining and never asking for compensation, with two results. First, the boss accepting the free work would begin to feel guilty for not paying such a diligent and effective worker and would want to offer him a job and second, competing bosses would observe what a valuable person the volunteer worker is and would offer to hire him. If the person received an offer from a competitor before being hired by the current boss, he was to present that offer to the current boss who would almost certainly match or better it.
Twain gives the details of how this scheme succeeded with four particular persons to whom he recommended it and who eventually became successful in their chosen fields.
OK, I know this scheme of Twains wouldn’t work today with the mass of employment law and liability concerns employers have to deal with. Even if a potential employee is entirely worthless, he or she must be paid minimum wage and the government must be paid payroll taxes. Other benefit costs such as unemployment insurance and Workers Compensation and maybe even health insurance must be paid. Heaven forbid a “volunteer” worker might be injured on the job, an event that could lead to bankruptcy of a small business. (I hate that term “small businessman.”)
I heard an anecdote about how thirty or forty years ago a person down on his luck could go to a construction site and ask the boss if there was any work available. The boss could give him a simple task that needed to be done and pay him a few dollars cash for doing it. No paperwork…no red tape…nothing. Maybe that was just in South Carolina. But it can’t be done now, even in South Carolina.
Another drawback to such a scheme today is the diminished work ethic. I am a compulsive worker and just have to have something to do. Why else would I be writing this blog? But I encounter many who have the opposite position. In the volunteer work I do, repairing homes of the low-income elderly, using all volunteers, we asked the adult son of one elderly lady we were helping if he would be available the day of the event to assist. His question: “What are you paying?” I could tell other such stories, but the fact is that our government social programs and burdensome regulation of employers have created a culture of dependency and robbed many of self respect and personal dignity. I doubt Samuel Clemens could have even imagined such a situation as we face today.
Tuesday, September 13, 2011
Leonard Pitts Jr. Draws SRO Crowd in Columbia SC
Last Thursday evening I went to the Richland County Public Library to hear Leonard Pitts, Jr. speak as a guest of Friends of Richland County Public Library. It was a standing room only crowd, several hundred in attendance, and I suspect I was one of a very small minority harboring secret and subversive beliefs that fiscal responsibility, national debt reduction, and tax reform to simplify returns, level tax bills, and reduce marginal rates are more important and more likely to yield better long term results than additional stimulus designed to put us further in debt. But I just kept my mouth shut and my ears and mind open.
Even though I don’t usually agree with him, I enjoy Mr. Pitts’ columns because he is a thoughtful writer and gives me food for thought, and sometimes an idea for a blog posting. His concern expressed Thursday evening is that we are becoming a “Fact Free Society,” and I think he has a somewhat exaggerated but valid point. He referred to George Orwell’s 1984, which I have just finished re-reading, as presenting a dark picture of manufactured false news and facts and revised history, shadows of which are visible even now in America. He recommends that the news agencies beef up their fact checking departments to help keep the politicians honest.
Two examples he gave were of the persistent current attempts of unknown persons to persuade the public that President Obama is a Muslim and/or was born outside the United States. I probably get about one email a week on one of those subjects, and they are tiresome. Still, the rumors have been repeated so often that a significant portion of Americans believe one or the other or both, or pretend that they do as one way to help prevent the president’s re-election. I think there are lots of good reasons for voting against President Obama in the next election, but neither of these is on my list.
If he were a Muslim, that may be considered a valid reason for individuals to choose to vote against him but it would in no way disqualify him from serving as President. And, if he is, he is certainly doing a good job of keeping those five times a day prayers secret. And besides, I’m actually more concerned about the well-documented influence on him of Pastor Jeremiah Wright.
If President Obama were not US born, he would be disqualified and I am confident that wealthy and influential persons who oppose his presidency would long since have filed suit to have him removed from office or would have done so to keep him from running. Neither has happened because he was born in the United States, there is evidence to prove it, and there is no evidence to prove otherwise.
So, when you get one of those emails, just mark it “SPAM” and get rid of it. Don’t pass it on. We have much better reasons than those to hope for change in November 2012.
Even though I don’t usually agree with him, I enjoy Mr. Pitts’ columns because he is a thoughtful writer and gives me food for thought, and sometimes an idea for a blog posting. His concern expressed Thursday evening is that we are becoming a “Fact Free Society,” and I think he has a somewhat exaggerated but valid point. He referred to George Orwell’s 1984, which I have just finished re-reading, as presenting a dark picture of manufactured false news and facts and revised history, shadows of which are visible even now in America. He recommends that the news agencies beef up their fact checking departments to help keep the politicians honest.
Two examples he gave were of the persistent current attempts of unknown persons to persuade the public that President Obama is a Muslim and/or was born outside the United States. I probably get about one email a week on one of those subjects, and they are tiresome. Still, the rumors have been repeated so often that a significant portion of Americans believe one or the other or both, or pretend that they do as one way to help prevent the president’s re-election. I think there are lots of good reasons for voting against President Obama in the next election, but neither of these is on my list.
If he were a Muslim, that may be considered a valid reason for individuals to choose to vote against him but it would in no way disqualify him from serving as President. And, if he is, he is certainly doing a good job of keeping those five times a day prayers secret. And besides, I’m actually more concerned about the well-documented influence on him of Pastor Jeremiah Wright.
If President Obama were not US born, he would be disqualified and I am confident that wealthy and influential persons who oppose his presidency would long since have filed suit to have him removed from office or would have done so to keep him from running. Neither has happened because he was born in the United States, there is evidence to prove it, and there is no evidence to prove otherwise.
So, when you get one of those emails, just mark it “SPAM” and get rid of it. Don’t pass it on. We have much better reasons than those to hope for change in November 2012.
Monday, September 12, 2011
Assessing the President's Plan
I spent some time reading through the text of President Obama’s jobs speech delivered Thursday evening and summarized the specific proposals in it. First is a group of short term ideas that are in the American Jobs Act to be delivered to Congress this week for passage “right away.” Second is a group of longer term proposals to include tax reform and entitlement reform to be included in a bill that will be delivered to Congress later in the fall.
Shorter Term Ideas in American Jobs Act for Immediate Approval by Congress
1. Tax break for companies who hire new workers or give raises
2. Cut payroll taxes in half for every working American
3. All businesses continue immediate write-off of 2012 investments
4. Government will begin spending to
All the above are to be paid for by raising the Debt Commission target from $1.5T to ~$2.0T.
Longer Term Proposal to Come Later to Stabilize Debt in the Long Run
1. Modest adjustments to “programs like” Medicare and Medicaid
2. Reforms to tax code so wealthiest Americans and biggest corporations pay “their fair share”
3. Eliminate “pages of loopholes and deductions”
4. Lower one of the highest corporate tax rates in the world
5. Pay small business owners who do business with the government faster
6. Cut red tape that prevents start-ups from raising capital and going public
7. Help more people refinance their mortgages
8. Clear the way for trade agreements with Panama, Columbia, and South Korea
9. Help workers whose jobs have been affected by global competition
10. Look for more ways to work side-by-side with America’s businesses
I don’t know what kind of diagnostic journey the president and his staff took to arrive at this prescription, but I believe that the big problem, which seems pretty obvious on the chart below, is lack of recovery of private investment. Consumer spending, government spending, and net exports are all well ahead of where they were in 2006 before the crash. But private investment is down 18.9%, and it is that private investment that feeds future GDP growth. If private investment were up 20% in line with other increases instead of down 18.9%, it would be about $900B higher than it is and the economy would be roaring and planting seeds for the next bubble and crash. (Click on the chart for a high resolution view.)
The dotted/dashed lines on the chart include government transfer payments which are not a part of GDP. They represent money taken from one part of the economy, where it can no longer be spent or invested, and injected into another part for spending or investment there. Such transfer payments are up 50% since early 2006 resulting in a 17% increase in the size of government. That is bad news in my opinion. (Click on the table for a readable view.)
So, here is where I come out on the president’s proposals. The short term stuff will give short term relief to some and grief to others while growing government more and doing nothing to address the fundamental problems holding back private investment growth. But, it’s not a big deal and Congress should pass it “right away” as the president requested and move immediately to entitlement and tax reforms that will address fundamental problems, re-invigorate private investment, and improve the long term outlook for the economy if done well.
As far as the long term proposals go, fine if essentially all the loopholes and deductions are eliminated and the corporate tax rate comes down to one of the lowest in the world and stops encouraging companies to invest their overseas earnings there instead of here. And fine if Social Security is one of the programs “like” Medicare and Medicaid needing reform but the president was just afraid to mention it. And fine, if we can reach agreement on what that “fair share” for the wealthy is and also reduce the total share of government in our economy back down to around 30% or so. But I don’t like that idea of government working side-by-side with American business. I think Jeff Immelt should get out of the White House and go back to Fairfield, CT and get to work.
And no, I don’t know how paying bills on time and refinancing mortgages got in the long term plan.
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Note Added Sept 13: So now we learn the president wants to phase out income tax deductions beginning at earnings of $200,000 a year. Congress should not, and I hope will not, consider that without a major decrease in the marginal tax rates. See my post Boosting Buffett's Bill.
Shorter Term Ideas in American Jobs Act for Immediate Approval by Congress
1. Tax break for companies who hire new workers or give raises
2. Cut payroll taxes in half for every working American
3. All businesses continue immediate write-off of 2012 investments
4. Government will begin spending to
- Repair and modernize 35,000 schools
- Rehab homes in areas hit hardest by foreclosures
- Jump start thousands of transportation projects
- Put thousands of teachers back to work
- Give tax credits to companies that hire veterans
- Provide hundreds of thousands of summer jobs in 2012
- Give $4,000 tax credit to any company hiring someone looking for a job for more than six months
- Extend unemployment insurance for another year
- Delay expiration of “Bush Tax Cuts” for “typical working families”
All the above are to be paid for by raising the Debt Commission target from $1.5T to ~$2.0T.
Longer Term Proposal to Come Later to Stabilize Debt in the Long Run
1. Modest adjustments to “programs like” Medicare and Medicaid
2. Reforms to tax code so wealthiest Americans and biggest corporations pay “their fair share”
3. Eliminate “pages of loopholes and deductions”
4. Lower one of the highest corporate tax rates in the world
5. Pay small business owners who do business with the government faster
6. Cut red tape that prevents start-ups from raising capital and going public
7. Help more people refinance their mortgages
8. Clear the way for trade agreements with Panama, Columbia, and South Korea
9. Help workers whose jobs have been affected by global competition
10. Look for more ways to work side-by-side with America’s businesses
I don’t know what kind of diagnostic journey the president and his staff took to arrive at this prescription, but I believe that the big problem, which seems pretty obvious on the chart below, is lack of recovery of private investment. Consumer spending, government spending, and net exports are all well ahead of where they were in 2006 before the crash. But private investment is down 18.9%, and it is that private investment that feeds future GDP growth. If private investment were up 20% in line with other increases instead of down 18.9%, it would be about $900B higher than it is and the economy would be roaring and planting seeds for the next bubble and crash. (Click on the chart for a high resolution view.)
The dotted/dashed lines on the chart include government transfer payments which are not a part of GDP. They represent money taken from one part of the economy, where it can no longer be spent or invested, and injected into another part for spending or investment there. Such transfer payments are up 50% since early 2006 resulting in a 17% increase in the size of government. That is bad news in my opinion. (Click on the table for a readable view.)
So, here is where I come out on the president’s proposals. The short term stuff will give short term relief to some and grief to others while growing government more and doing nothing to address the fundamental problems holding back private investment growth. But, it’s not a big deal and Congress should pass it “right away” as the president requested and move immediately to entitlement and tax reforms that will address fundamental problems, re-invigorate private investment, and improve the long term outlook for the economy if done well.
As far as the long term proposals go, fine if essentially all the loopholes and deductions are eliminated and the corporate tax rate comes down to one of the lowest in the world and stops encouraging companies to invest their overseas earnings there instead of here. And fine if Social Security is one of the programs “like” Medicare and Medicaid needing reform but the president was just afraid to mention it. And fine, if we can reach agreement on what that “fair share” for the wealthy is and also reduce the total share of government in our economy back down to around 30% or so. But I don’t like that idea of government working side-by-side with American business. I think Jeff Immelt should get out of the White House and go back to Fairfield, CT and get to work.
And no, I don’t know how paying bills on time and refinancing mortgages got in the long term plan.
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Note Added Sept 13: So now we learn the president wants to phase out income tax deductions beginning at earnings of $200,000 a year. Congress should not, and I hope will not, consider that without a major decrease in the marginal tax rates. See my post Boosting Buffett's Bill.
Saturday, September 10, 2011
Adding Value, Making a Difference, Even if Homeless
I'm about to get in trouble here, but let me try to minimize the trouble by emphasizing that this posting has nothing to do with the seriously mentally ill or seriously disabled homeless or with homeless parents struggling to keep their families together and find safe places for their children to sleep. Through our churches and other non-profits and various government programs, we should be taking care of such persons by providing dependable food, clothing, and shelter.
This post has to do with the tough ones, the capable ones, the independent ones, those who have learned to survive on the streets or camping in nearby wooded areas and who support themselves with handouts from sympathetic or threatened people they encounter on the streets. They may have minor disabilities or mental illnesses, a drug or alcohol problem, a criminal record, and may have completely alienated their families, but they are not helpless. I know something about them because I have talked with quite a few over the past several years.
I’m looking forward to seeing such a homeless person voluntarily walking the streets of Columbia with a broom and a large plastic garbage bag, sweeping and picking up litter, just trying to do whatever he or she can do, given the circumstances, to make the city streets, his or her home at least temporarily, a better place to live. I have a twenty dollar bill in my wallet for any homeless person I find exercising such civic responsibility.
The reality is quite different with such persons often generating litter and otherwise making conditions worse and the cities less attractive to visitors as indicated in this quote from a recent The Bay Citizen article about public toilets proposed for San Francisco.
San Francisco has a reputation of being very supportive of homeless people with the result that there are perhaps 6,000 or more there at any given time. (That puts the 10,000 documented incidents in perspective: Not so bad on a per-capita basis.) We drove through the Tenderloin District several years ago and saw very quickly that it was not a good place to park the car and get out for a city stroll.
But you would think that with so many homeless people there, supported by the city and the people of San Francisco, with time on their hands, the streets and sidewalks and even the storefronts would be spotless and tourists would be swarming in to see how the homeless appreciate the support they get from the community. I guess it is a lack of leadership. Or maybe a lack of work ethic.
And maybe a significant contributor to the problem is a low level of expectations of the homeless. We all know from personal experience that low expectations are destructive and demoralizing and that high expectations can be inspiring and enabling. We can help some of the homeless, I believe, by expecting more of them and making ways for them to meet those expectations. To do anything less is disrespectful and patronizing of them.
And, if you are an employer, keep your eyes open for that homeless person cleaning the streets and gathering litter. That person will make a good employee, assuming they pass the background check and the drug test. And they can use the $20 I'll give them to buy bus tickets to get to work the first week.
And, if you are upset with my position on this issue, please go back and read the first two paragraphs again.
This is a picture I took of a Congaree River homeless camp at the east end of the Gervais St Bridge.
_____________________________________________________________
And thanks, by the way, to Catholic Charities of the Midlands for establishing Clean of Heart in downtown Columbia, SC, to enable the homeless to get showers and do their laundry on a regular basis. I fully expect them to take advantage of it, leave the shower and laundry areas spotless, show appreciation for the service, and voluntarily pass on the favor in some way. We can all help make the world a better place to live.
Here are two earlier posts on the homelessness issue.
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This post has to do with the tough ones, the capable ones, the independent ones, those who have learned to survive on the streets or camping in nearby wooded areas and who support themselves with handouts from sympathetic or threatened people they encounter on the streets. They may have minor disabilities or mental illnesses, a drug or alcohol problem, a criminal record, and may have completely alienated their families, but they are not helpless. I know something about them because I have talked with quite a few over the past several years.
I’m looking forward to seeing such a homeless person voluntarily walking the streets of Columbia with a broom and a large plastic garbage bag, sweeping and picking up litter, just trying to do whatever he or she can do, given the circumstances, to make the city streets, his or her home at least temporarily, a better place to live. I have a twenty dollar bill in my wallet for any homeless person I find exercising such civic responsibility.
The reality is quite different with such persons often generating litter and otherwise making conditions worse and the cities less attractive to visitors as indicated in this quote from a recent The Bay Citizen article about public toilets proposed for San Francisco.
There were nearly 10,000 documented “incidents of human waste” cleaned up last year in the Tenderloin alone, according to Dina Hilliard, executive director of the North of Market-Tenderloin Community Benefit District, a neighborhood improvement effort financed by local property owners that pays for sidewalk cleaning.Source: The Bay Citizen (http://s.tt/13a3n)I’m all in favor of public toilets, and the older I get, the more I like them. But if there aren’t public restrooms and you gotta go, that is no justification for leaving a mess for somebody else to deal with. And the sidewalk cleaning service being paid to do the clean up is a good example of bad GDP.
San Francisco has a reputation of being very supportive of homeless people with the result that there are perhaps 6,000 or more there at any given time. (That puts the 10,000 documented incidents in perspective: Not so bad on a per-capita basis.) We drove through the Tenderloin District several years ago and saw very quickly that it was not a good place to park the car and get out for a city stroll.
But you would think that with so many homeless people there, supported by the city and the people of San Francisco, with time on their hands, the streets and sidewalks and even the storefronts would be spotless and tourists would be swarming in to see how the homeless appreciate the support they get from the community. I guess it is a lack of leadership. Or maybe a lack of work ethic.
And maybe a significant contributor to the problem is a low level of expectations of the homeless. We all know from personal experience that low expectations are destructive and demoralizing and that high expectations can be inspiring and enabling. We can help some of the homeless, I believe, by expecting more of them and making ways for them to meet those expectations. To do anything less is disrespectful and patronizing of them.
And, if you are an employer, keep your eyes open for that homeless person cleaning the streets and gathering litter. That person will make a good employee, assuming they pass the background check and the drug test. And they can use the $20 I'll give them to buy bus tickets to get to work the first week.
And, if you are upset with my position on this issue, please go back and read the first two paragraphs again.
This is a picture I took of a Congaree River homeless camp at the east end of the Gervais St Bridge.
_____________________________________________________________
And thanks, by the way, to Catholic Charities of the Midlands for establishing Clean of Heart in downtown Columbia, SC, to enable the homeless to get showers and do their laundry on a regular basis. I fully expect them to take advantage of it, leave the shower and laundry areas spotless, show appreciation for the service, and voluntarily pass on the favor in some way. We can all help make the world a better place to live.
Here are two earlier posts on the homelessness issue.
Disrespecting The Homeless
Letter to Mayoral Candidates, City of Columbia
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Wednesday, September 7, 2011
Postal Problems Persist
In November 2009, I did a posting on the United States Postal Service. It includes a chart, still pertinent, showing that on an inflation adjusted basis, our first class postage rates have not increased since 1970. I just re-read the post and I'm pretty happy with it still, but I am no longer puzzled about the answer to this question I asked near the end of the post:
The current problems are spelled out in a September 4 New York Times article by Steven Greenhouse, Postal Service is Nearing Default as Losses Mount.
The USPS has to change and the longer such change is delayed, the more drastic and disruptive it will be. The Postmaster General has several proposals, outlined in the NYT article, to keep the mail coming, but seems to be getting little sympathy or assistance from his board.
The same problems have been challenging the Canadian postal service, and, in a drive through British Columbia a year or so ago, we noticed that mail is no longer being delivered to individual mailboxes at driveways in at least some rural areas. Instead, groups of mailboxes have been installed to save carrier time and improve safety by providing a safe place to stop while the mail is distributed.
That could be good for "social networking" as rural residents will probably meet up more often at the mailbox stations.
In the meantime, if Congress insists in maintaining current service and employment levels, lets get the rates up to cover the cost. The US has the most difficult and cheapest postal service of developed countries and needs to immediately cover the cost of the service being provided. A rate of $0.70 would be entirely consistent with the long term (45 years) pattern of rate increases. And a boost in the rates for that bulk stuff I keep getting and sending straight to the recycle bin might help reduce the volume of it. (Click on the chart for a better view. Then hit the back arrow.)
But maybe, in the earlier post, I was wrong about the needed changes not causing anybody's untimely death. Senator Susan Collins of Maine is quoted in the NYT article as saying the Postmaster General's proposals "risk producing a death spiral."
Note: This is actually my third posting on the US Postal Service. About a year ago, Carrying the Mail was a reflection on my grandfather's service as a rural mail carrier, first on horseback and later in a series of Chevrolets, in Seymour, TN.
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"The United States Postal Service clearly has the option of being immediately self sustaining and debt free by simply reducing costs and raising rates in its monopoly market and could certainly do so without causing anybody’s untimely death. Why is that not happening?"Now I realize that, even though the USPS is supposed to be self sustaining, receiving no tax dollars (except loans of borrowed money of course), the US Congress serves as the Board of Directors and must approve any significant changes in employment, employee benefits, employee agreements, postal services, and prices of those services. Well, no wonder the USPS is failing! Five hundred and thirty five board members, each with his or her own special interests and constituencies and no individual responsibility for success or failure of the USPS. And the US Congress is unlikely to do anything that might irritate constituents and reduce re-election probabilities.
The current problems are spelled out in a September 4 New York Times article by Steven Greenhouse, Postal Service is Nearing Default as Losses Mount.
- "Labor represents 80 percent of the agency’s expenses, compared with 53 percent at United Parcel Service and 32 percent at FedEx..."
- "...decades of contractual promises made to unionized workers, including no-layoff clauses..."
- "...so low on cash that it will not be able to make a $5.5 billion payment (for retirees' future health care) due this month..."
- "...feuding Democrats and Republicans in Congress...have failed to agree on any solutions."
The USPS has to change and the longer such change is delayed, the more drastic and disruptive it will be. The Postmaster General has several proposals, outlined in the NYT article, to keep the mail coming, but seems to be getting little sympathy or assistance from his board.
The same problems have been challenging the Canadian postal service, and, in a drive through British Columbia a year or so ago, we noticed that mail is no longer being delivered to individual mailboxes at driveways in at least some rural areas. Instead, groups of mailboxes have been installed to save carrier time and improve safety by providing a safe place to stop while the mail is distributed.
That could be good for "social networking" as rural residents will probably meet up more often at the mailbox stations.
In the meantime, if Congress insists in maintaining current service and employment levels, lets get the rates up to cover the cost. The US has the most difficult and cheapest postal service of developed countries and needs to immediately cover the cost of the service being provided. A rate of $0.70 would be entirely consistent with the long term (45 years) pattern of rate increases. And a boost in the rates for that bulk stuff I keep getting and sending straight to the recycle bin might help reduce the volume of it. (Click on the chart for a better view. Then hit the back arrow.)
But maybe, in the earlier post, I was wrong about the needed changes not causing anybody's untimely death. Senator Susan Collins of Maine is quoted in the NYT article as saying the Postmaster General's proposals "risk producing a death spiral."
Note: This is actually my third posting on the US Postal Service. About a year ago, Carrying the Mail was a reflection on my grandfather's service as a rural mail carrier, first on horseback and later in a series of Chevrolets, in Seymour, TN.
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Monday, September 5, 2011
The 38% Problem
We have been seriously distracted by the trivialities of the debt ceiling and Warren Buffett’s tax bill from the really big problem: Total federal, state, and local government spending in the US is now at 38% of GDP. I say that is too much and should be no more than 30%, which is where it was at the end of the Clinton administration. For those who suggest that 38% is not enough and that spending needs to be increased, I have to ask, just how much would be enough? (Click on charts for a high resolution view.)
WARNING: STOP HERE IF YOU DON'T LIKE CHARTS AND DATA. IT'S ABOUT TO GET WORSE.
I covered this issue in an April 30 posting, pointing out the 38% problem and the fact that the Federal Income Tax which receives inordinate attention only amounts to 6% of GDP or about 16% of total government spending, and then got completely redirected to trivialities by the news cycle.
This is a more complete picture (Click on the chart for a high resolution view.) going all the way back to Lyndon Baines Johnson and showing the three major components of government spending. Consumption spending is spending of government funds on goods and services and has stayed fairly constant over the 44 years shown, varying between 14% and 18% of GDP, with no obvious long-term trend, and ending about where it began. Transfer payments are direct payments to individuals including Social Security, Food Stamps, Unemployment, Etc., and these have marched steadily upward and tripled from 5% of GDP to more than 15% of GDP. Interest on the national debt shows a hump peaking around 1990 and then tapers off in spite of the fact that the debt has continued growing. Ever wonder why the administration wants to keep interest rates low? If interest rates were a more normal 5%, current total government spending would be well over 40% of GDP.
Certainly a portion of our national wealth is best spent through government on things government does best, but opinions vary widely on what size that portion should be. I’m thinking we need to get it back down around 30%. We have a very complex system that is not going to handle sudden changes well, but we need an obvious inflection point and a significant long term downward slope. It’s the only way to keep the government boxes from growing at the expense of the productive part of the economy.
(I just finished reading 1984 and can't help wondering if all the data I find online from which to create these charts and graphs are fiction created by some government agency called Minidata. I guess not, because, if the powers that be were creating data, they would create a prettier picture.)
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WARNING: STOP HERE IF YOU DON'T LIKE CHARTS AND DATA. IT'S ABOUT TO GET WORSE.
I covered this issue in an April 30 posting, pointing out the 38% problem and the fact that the Federal Income Tax which receives inordinate attention only amounts to 6% of GDP or about 16% of total government spending, and then got completely redirected to trivialities by the news cycle.
This is a more complete picture (Click on the chart for a high resolution view.) going all the way back to Lyndon Baines Johnson and showing the three major components of government spending. Consumption spending is spending of government funds on goods and services and has stayed fairly constant over the 44 years shown, varying between 14% and 18% of GDP, with no obvious long-term trend, and ending about where it began. Transfer payments are direct payments to individuals including Social Security, Food Stamps, Unemployment, Etc., and these have marched steadily upward and tripled from 5% of GDP to more than 15% of GDP. Interest on the national debt shows a hump peaking around 1990 and then tapers off in spite of the fact that the debt has continued growing. Ever wonder why the administration wants to keep interest rates low? If interest rates were a more normal 5%, current total government spending would be well over 40% of GDP.
Certainly a portion of our national wealth is best spent through government on things government does best, but opinions vary widely on what size that portion should be. I’m thinking we need to get it back down around 30%. We have a very complex system that is not going to handle sudden changes well, but we need an obvious inflection point and a significant long term downward slope. It’s the only way to keep the government boxes from growing at the expense of the productive part of the economy.
(I just finished reading 1984 and can't help wondering if all the data I find online from which to create these charts and graphs are fiction created by some government agency called Minidata. I guess not, because, if the powers that be were creating data, they would create a prettier picture.)
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Friday, September 2, 2011
Methobapterians in Union, SC?
With the holiday weekend coming up, I was thinking about what would be a good Labor Day field trip. I thought of Union, SC, a little town northwest of Columbia in the heart of the old textile industry and wondered what might be going on there to celebrate Labor Day. Apparently not a thing.
I googled “union sc history” and found a site for the Union Chamber of Commerce. It included a short history of the town and county. I had expected the name to have something to do with failed union organizing activities, but I was surprised. The town was named for “the old Union Church,” a place of worship shared by Methodists, Baptists, and Presbyterians.
I don’t know what the poverty line was back in those days, but I’m pretty sure those Protestants willing to share a worship space were well below it while being completely unaware of it.
But not everybody was poor. Thomas Cary Duncan founded two cotton mills and financed and built his own railroad to connect the two. As a result of his investments, hundreds came from neighboring states to work in the mills.
The citizens were apparently patriotic, as well as religious, because Union County had the reputation of being the only county in the US to avoid the draft during WWI because the number of willing volunteers made it unnecessary. Maybe everybody just wanted to get out of Union, but I doubt it.
I guess a little bit of poverty brought on by the current economic difficulties could bring us together again, but in today’s toxic political environment, class warfare seems more likely.
I googled “union sc history” and found a site for the Union Chamber of Commerce. It included a short history of the town and county. I had expected the name to have something to do with failed union organizing activities, but I was surprised. The town was named for “the old Union Church,” a place of worship shared by Methodists, Baptists, and Presbyterians.
I don’t know what the poverty line was back in those days, but I’m pretty sure those Protestants willing to share a worship space were well below it while being completely unaware of it.
But not everybody was poor. Thomas Cary Duncan founded two cotton mills and financed and built his own railroad to connect the two. As a result of his investments, hundreds came from neighboring states to work in the mills.
The citizens were apparently patriotic, as well as religious, because Union County had the reputation of being the only county in the US to avoid the draft during WWI because the number of willing volunteers made it unnecessary. Maybe everybody just wanted to get out of Union, but I doubt it.
I guess a little bit of poverty brought on by the current economic difficulties could bring us together again, but in today’s toxic political environment, class warfare seems more likely.
Thursday, September 1, 2011
Real Estate Recovery Complete
Wednesday’s WSJ included a very informative table of home price changes and indices for 2000 through June 2010 in twenty US metropolitan areas. Prices were indexed to January 2000 = 100.
The key sentence in the story mentions monthly and annual changes in a leading home price index and concludes that these changes have resulted in “sending prices back to the pre-boom 2003 levels.”
Well, that is exactly what we have been waiting for. Get the air out and get prices back to a level which is reasonable in historical context and at which buying and selling will occur.
There is a tendency to think of “recovery” in terms of getting prices back to the peak levels of 2006 and 2007. That is like waiting for the NASDAQ to get back to its early 2000 high of 5000+, about twice the current level, before investing in technology companies. That would not be recovery. That would be a serious relapse if it happens before those houses bought at inflated prices need new roofs, paint jobs, and kitchen makeovers.
If you bought a house in Miami, Los Angeles, Las Vegas, or Phoenix in 2000 and sold it in 2006, rejoice and stash the money in your savings account. If you bought in one of those cities in 2006 and got a sub prime mortgage to do it, you made a mistake. Take your lumps in the latter case, just as you would have taken your profits in the former, and move on. Don’t look for bailouts.
Here is the most often overlooked aspect of home ownership. If you bought a house you could afford at the peak and bought it with the idea of doing a heap of living in it to make it a home, you did well. (I know, because that is what I did.) No point in bemoaning the fact that you could have bought it cheaper earlier or later. It might not have been available earlier or later. Just refinance your mortgage at historically low interest rates and enjoy it. And, if you need to sell it and move to another city or a larger house, don’t worry. If your home is down 25% and the larger home you want to buy is down 25%, the difference between the two is also down 25%.
If, on the other hand, you bought a house you couldn’t afford with the hope of flipping it for a quick profit and got drenched by the bursting bubble, you got just what you deserved. Speculators should focus on liquid investments on which stop-loss orders can be established.
One column in the WSJ table is price change from the peak, and the first thing that caught my eye was that Dallas had the smallest drop from the peak, -8.4%. Then I realized the reason was that the Dallas market never had a bubble. It never got sick. Prices are a reasonable 15% higher than in 2000.
Los Angeles, on the other hand, has dropped 38% from the peak but house prices there are still up 70% from 2000. If I were going to move somewhere to get a job and buy a house, I believe I would carefully consider Dallas (I hear there are lots of low-paying jobs there.) and stay a long way from LA. Ignore the WSJ article, but take a good look at the table. You can see it here.
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Well, that is exactly what we have been waiting for. Get the air out and get prices back to a level which is reasonable in historical context and at which buying and selling will occur.
There is a tendency to think of “recovery” in terms of getting prices back to the peak levels of 2006 and 2007. That is like waiting for the NASDAQ to get back to its early 2000 high of 5000+, about twice the current level, before investing in technology companies. That would not be recovery. That would be a serious relapse if it happens before those houses bought at inflated prices need new roofs, paint jobs, and kitchen makeovers.
If you bought a house in Miami, Los Angeles, Las Vegas, or Phoenix in 2000 and sold it in 2006, rejoice and stash the money in your savings account. If you bought in one of those cities in 2006 and got a sub prime mortgage to do it, you made a mistake. Take your lumps in the latter case, just as you would have taken your profits in the former, and move on. Don’t look for bailouts.
Here is the most often overlooked aspect of home ownership. If you bought a house you could afford at the peak and bought it with the idea of doing a heap of living in it to make it a home, you did well. (I know, because that is what I did.) No point in bemoaning the fact that you could have bought it cheaper earlier or later. It might not have been available earlier or later. Just refinance your mortgage at historically low interest rates and enjoy it. And, if you need to sell it and move to another city or a larger house, don’t worry. If your home is down 25% and the larger home you want to buy is down 25%, the difference between the two is also down 25%.
If, on the other hand, you bought a house you couldn’t afford with the hope of flipping it for a quick profit and got drenched by the bursting bubble, you got just what you deserved. Speculators should focus on liquid investments on which stop-loss orders can be established.
One column in the WSJ table is price change from the peak, and the first thing that caught my eye was that Dallas had the smallest drop from the peak, -8.4%. Then I realized the reason was that the Dallas market never had a bubble. It never got sick. Prices are a reasonable 15% higher than in 2000.
Los Angeles, on the other hand, has dropped 38% from the peak but house prices there are still up 70% from 2000. If I were going to move somewhere to get a job and buy a house, I believe I would carefully consider Dallas (I hear there are lots of low-paying jobs there.) and stay a long way from LA. Ignore the WSJ article, but take a good look at the table. You can see it here.
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