September 3, 2011

September 3, 2011

1. The recent net zero jobs report was actually positive.  We see more private sector jobs and less government jobs.  This is a trend reversal and as long as it remains we are headed in the right direction
2. Bernanke is doing nothing.  He should be doing nothing.  This is a positive trend.  The world needs predictability.  That is the strength of the US.  If we are constantly changing our monetary policy how can the world function efficiently?
3. The US government is at a stalemate.  This is a very positive situation.  Anytime the government tries to alter the free market there is a price to pay.  If the government's hands are tied then the free market can function. 
4. T Boone Pickens is a man of great insight.  He has identified an area of growth for America - Energy.  This should be on every economist lips.  How to increase our energy independence since it consumes such a large percentage of our trade deficit.  I know of a small company that has been trying to get seed money for their energy idea.  It is for the conversion of pine chips to ethanol.  1/3 of the chips can be converted to ethanol.  Hitler did this in WWII when he could not get Oil.  The company can unlock the remaining 2/3's by heating the chips in a slurry using the waste product from a barrel of oil.  About 10 gallons of each barrel is not usable because of high sulfur content.  This small company has a patent that removes the sulfur during burning.  Now this waste product is shipped to China at a cost to refineries.  China burns it and it still ends up in the atmosphere.  So much for the EPA and the clean air of the world.  This company claims there is enough annually renewable pine chips in the US to provide enough fuel for all the cars in the US using their system.  They can't get seed money from the Fed or from others. 
5. Social Security can work if we go back to the original structure.  The average life span was 62 when SS started and those at age 65 received payments.  If the life span is 67 make SS start at age 70.  Adjust this annually using this +3 year formula.  Presently means test SS to take the pressure off.  Eliminate other payments such as disability.  Limit SS to only those who live long enough to collect.  End of story. Any modification to SS would require the same approval as would be an amendment to the Constitution. Create a separate model that would be based on charity and those disabled or dependents would be qualified to accept $ from charities. 
6. Health care.  Implement the Australian Health Care model.  They have both private and public hospitals and are moving to a private system as the public one is not sustainable.  If Obama Care is law then a reciprocal system should be established for those who want to opt out.   These persons should receive a tax credit equivalent to the per person cost of Obama Care.   This would create the incentive for health education, cost control, incentivize healthy living habits and make it so private hospitals do not have to accept all patients to the emergency room.  You can tweak the opt out system to be free of tort liability and any debt incurred by an opt out person who uses the public system would not be dischargeable in bankruptcy. 
7. Education reforms are necessary.  Degrees cost too much and their utility value is negative.  Permit every person in the US that is in a licensed profession to grant qualifications to a single individual to enter the profession based on the equivalent degree period.  Similar to how the trades operate with apprenticeships.  For example an MD can certify another person's ability to qualify for a Medical License every 6 years.  This person would be able to take the Exam for credentials same as a medical school grad.  This would put pressure on the University system to be competitive and improve the value returned. 
8. Let's put pressure so the tax code is limited to a number of letters or spaces.  This way we can contain expansion of the tax code after putting in reforms.  Changing this number of spaces would require the same procedure as amending the constitution.  Let's flatten out the tax code.  Create a tiered income approach.  0-10K no tax, 10-25K 5%, 25-50k 15%, 50-infinity 25%.  No deductions.  Credits can be offered only to the point of tax liabilities in a given year.  Make this the same for Corporations.  Dividends would not be taxable since they have been taxed on the corporate level.  This puts the incentive on persons to invest in Corps with dividends.  In the long run taking the pressure off of Social Security since it would be means tested.  No more 401s or other inefficient gimmicks.  Plain and simple buy effective quality companies that pay dividends.  If your income from dividends and working income exceeds 100K your SS payments are not paid and can be credited to your children's SS account or direct reduction of US debt in your name. 
9. Our election system needs reforming.  Every person qualified to vote must pay a nominal fee directly to an independent company that would lodge their vote.  This would be done online using a credit card or bank account.  The voting period will be for 6 months.  Anyone who qualifies for office will be listed on the ballot.  The vote tally will be available instantaneously.  A person can logon and see their vote is credited to their candidate and have the ablility to change their vote before the end of the election period.  Those 20 persons receiving the highest number of votes will be given 1/20th of the total received from the election cycle.  They would not be permitted to accept anything above this amount.  Their ability to borrow would be limited to the previous election cycle reimbursement.  Their borrowed funds must be made public on the website.  Any infraction in disclosure would block them from ever holding public office presently and in the future.  Present office holders would not be eligible for the reimbursement and could not begin campaigning or be listed in the ballot until the last 3 months of the 6 month period.  They were elected to perform the duties of an office and not to campaign.  They would not be eligible for any loans or contributions.  Their previous public service record must be sufficient. 

We hear numerous people refer to the coming fiscal cliff.  What is the fiscal cliff?  Is it like we are jumping from some elevation to our death?  No, it isn't.  Nobody is going to die.  Over a 1000 government agencies will see their budgets reduced including the Military Budget. The Military Budget will be reduced 6% this year and following nine years.  Let's look back at history.  Harry Truman ended WWII during his Presidency.  Two years after ending WWII the defense budget was cut 75%. The US economy began expanding each year after until 2008.

We hear numerous people refer to the coming fiscal cliff.  What is the fiscal cliff?  Is it like we are jumping from some elevation to our death?  No, it isn't.  Nobody is going to die.  Over a 1000 government agencies will see their budgets reduced including the Military Budget. The Military Budget will be reduced 6% this year and following nine years.  Let's look back at history.  Harry Truman ended WWII during his Presidency.  Two years after ending WWII the defense budget was cut 75%. The US economy began expanding each year after until 2008.

Let's repeat this very important fact.  The current defense budget is 902 Billion.  After the 6% cut the defense budget in 2013 will be 852 Billion. If anyone knows the name of the current war we are fighting let me know.  I want a country not a war on terror, war on drugs, war on poverty or other similar accolade. 

More interesting facts: the US economy entered the 1946 year with the largest debt in history, over 100% of that years budget.  This was the year when Truman instituted miliatry spending cuts and public sector union crack down.  The GDP remained basicly the same with a fractional decline from 1945 to 1946 after this the economy grew.  

A few other interesting facts: 

1. Barack Obama shares common principles with Theodore Roosevelt and both were winners of the Noble Peace Prize
2. The US debt steadily declined after 1945 until President Nixon's Term.  
3. After Nixon the US debt only declined during the Carter and Clinton terms
4. A decline in GDP is not necessarily a bad thing if there is a fundamental transition going on.

GDP or Gross Domestic Product is the total of all economic activity including wasteful non productive government activity and other non wasteful projects.  If wasteful  spending (ie government expeditures and excessive military spending without a cause ) is reduced a temporary decline in GDP is likely to happen.  Next time someone tries to win a discussion based on a declining GDP, look them straight in the eye and say SO THAT IS A BAD THING?

Interesting Video of Vanderbilt, Carnegie, & Morgan . These three men had more wealth than the top 40 wealthiest men today. They also controlled more assets than the US Government.  Teddy Roosevelt initiated a redistribution of wealth from the 3 rishest men to more of the working population.  At that time 90% of the US population lived below poverty levels.  He was called a progressive.

Fiscal cliff, that's all we hear on any so called "News" shows or talk shows.  Why are quality news reporters who will present the entire situation so rare?  Why don't any of these national news shows put the coming events scheduled for the end of the year into their proper perspective.

Fiscal cliff, that's all we hear on any so called "News" shows or talk shows.  Why are quality news reporters who will present the entire situation so rare?  Why don't any of these national news shows put the coming events scheduled for the end of the year into their proper perspective.

Here are the effect of the Bush Tax Cuts expiration in perspective. The middle class worker making under 75K will loose $1,132 to higher taxes.  This is not a life stopper or something to loose sleep over. The middle class income payor will give back about 2% of yearly wages to the Federal Government. A million dollar income earner is giving back to the Federal Government .6% of their income if the Bush Tax Cuts expire.  Let's compare this.  Middle class under 75K is paying 2% of their earning to the Federal Government whereas the Million Dollar earner is paying only .6% or a third of what the Middle class guy does in percentage terms if the Bush Tax Cuts Expire.  

Let's address what is called Sequestration.  Sequestration is an automatic cut of 6% based on 2012 spending negotiated by Congress and President Obama in July 2011.  Let's put this spending cut into perspective.  Sequestration rolls back government spending by one year to what budget levels were in July 2011.  That sounds like a good idea not like a fiscal cliff.  More than anything it sounds like the American People have been mislead to some degree.  Maybe if the negotiated cuts took the size of government back 4 years but to negotiate a deal that keeps spending at what was the current government levels at the time the deal was made seems like a bait and switch ploy. So much for finding a decent news reporter to actually report what is actually happening.  Bottom line is the Middle Class Earner looses more on a percentage basis than the Million Dollar Earner if the Bush Tax Cuts Expire.