Monday, June 27, 2011

Deport 'em

Ms. Rajagopalan (Newsday)makes numerous unsupportable statements about deportation. By her statistics, almost a third of those slated for deportation are aggravated level 1 felons. The attempted qualification is always a red flag and makes her statistic a joke. Kidnapping and several categories of murder, manslaughter and rape are level 2 felonies – but they don’t count. Neither does she mention how many of the committed crimes and just didn’t get caught. That is, caught for crimes other than entering the country illegally. Even by her slanted definition, it is scary that she considers that “only” 1/3 of these people are violent felons. There are few circumstances where that group statistic would be considered as desirable.

She ends by promoting an effort to determine why so many illegal immigrants have remained here on a near permanent basis. How about because they get lots of stuff that is free to them but costs others lots of money?

The Luddite

With what may be the stupidest statement on the economy and jobs creation that was ever made, the First Dope is now pinning unemployment on automation.

This is from an interview on NBC:

“There are some structural issues with our economy where a lot of businesses have learned to become much more efficient with a lot fewer workers,” the president said this week. “You see it when you go to a bank and you use an ATM. You don’t go to a bank teller. Or you go to the airport and you’re using a kiosk instead of checking at the gate. So all these things have created changes in the economy.”

The number of tellers, in fact, rose to an all-time high of 607,960 in 2007 from 493,000 at the start of the decade, according to the Bureau of Labor Statistics. The recession and a wave of bank failures eliminated 52,000 teller jobs over the past three years. So there are still more now that there were.

The Dope is correct that there has been a structural change. There are now fewer people who know how to shoe a horse and there has been a mass reduction in number of phone operators who did things like putting Sheriff Taylor’s call through to Aunt Bea. But wonder how many people employed at companies – like say Honeywell – would have jobs without automation.

But now he has a jobs plan: Hope to move backwards and Change to a pre-industrial society. Won’t be as popular as his last slogan but then neither is he.


Popular mythology teaches us that a corporation will do whatever is necessary to make a profit and that they practice various forms of discrimination against women and minorities. Somehow, it is better for the bottom line to not get the best salesman, manager or whatever and it is also better to pay the one who is less qualified more money only because it is a guy. We are expected to believe that the evil geniuses that run these corporations attempt to maximize their profits by paying second rate employees more money. The argument just does not make any sense but it is good for the trial lawyers.

Tuesday, June 21, 2011

The Trust Fund

The act2 article that states that “as a legal matter” Social Security Trust Fund is in a surplus position is absolutely true. The qualifier – as a legal matter – is the red flag that says “SPIN”.

For over 40 years Social Security taxes have been used to buy US Government Securities. The government issues securities and the Government spends the money. Now the Trust Fund holds $2.5 trillion dollars (2009) in IOUs from the US Government and those 40 years of cash tax receipts are long gone.

You put $100 in an envelope every week for 40 years as your retirement plan. Every week you take out the cash, put an IOU to yourself for $100 in the envelope and spend the cash. At the end of 40 years, how much money did you save? You are also in debt for 8 to 10 times your annual income and borrowing about 40% of your current expenses. But you do have the IOUs which you really, really intended to pay back.

With our borrowings/debt at the current levels, the Trust Fund can realistically be valued at 60% of its face. The Social Security system is in desperate need of corrective changes now but until there is a clear description of what is or is not in the Trust Funds, no progress is possible.

Saturday, June 11, 2011

Weiner roast

Don't understand. Weinie lied but not under oath; Weinie didn't - as far as we know - actual physically violate any of these woman and none of these women - so far - worked for him. And the majority is calling for him to resign. But there was a guy who did lie under oath and who did physically violate a subordinate in the most vile way possible on public property. Those of us who wanted him gone were criticized because we were invading his private life. Strange, so why the difference? It seems Weinie's problem is either a.) that the office he disgraced is not high enough or b.) anti-Semitism. Which one do you Clinton defenders who are after Weinie pick?

Tuesday, June 7, 2011


For days everywhere from the steps of the Capitol to CCN’s Weiner vehemently denied sending out the pictures; blaming unnamed hackers and even slandering the messenger with the help of the media. Democratic flaks (Begala, etc.) came out of the woodwork to say there was no big deal in sight. (At least they got that right.)

The AP has now even found a covey of people in Weiner’s district who will vote for him after he lied. They will do so because he has been a good Congressman for them and they believe that although he has admitted lying and panicking under pressure, he has now un-lied, probably. Their only known behavioral standard for disqualifying a politician from serving seems to be being a Republican.

But politically, it makes no difference. Democratic response to their miscellaneous scandals is that these are private circumstances and the candidates have a right to their private lives. True enough.

The issue here is not the actions of people in the private lives. The issue is the judgment - or lack of it - that they exercise. If you want to send out pictures of yourself that are in bad taste, that is your business. However, it cannot be considered good judgment. We all giving our representative our proxy and count on their good judgment just as we have an expectation of honesty. Honesty is another failing of many but we should not confuse differences of opinion with lies. Weiner lied on the steps of the Capitol, in CNNs’s TV studio and took every other opportunity available to blame unknown hackers and pranksters, call it a joke and slander the reporter who broke the story. With every statement he made, he knew with absolute certitude that he was lying.

His press conference to un-lie admits to mistakes and admits to panic under pressure. Great just what you want in a high pressure job - a guy who panics. Fortunately for him, the Democratic party is a party of forgiveness. The party has allowed people to serve and forgiven: Klan membership, driving off a bridge and killing a campaign aide, tax evasion, your partner running a prostitution ring out of your apartment, favorable loans, lies under oath, and just regular non-felonious lies.

So let the Democrats do what they want. It is only to be hoped that the American public will see that some standards of judgment, honest and grace under pressure are appropriate. If that is not the majority there is no hope anyway.

Teens and Jobs

Summer jobs for teens are difficult to find; so are full time positions. No surprise there. What is a surprise is that the article on the reasons for the difficulty never mentions the mandated minimum wage. The fact is that most teen employment is not absolutely necessary to any business. A business owner’s decision is to hire some kids to help out with the lower end of the tasks involved or not spend the money. It is a financial decision that is made more difficult in this economy. But the decision cannot be made based upon what it is worth to the owner but the owner has to pay the wage the government says must be paid with the result that fewer kids get hired. Less than 3% of employees make the minimum wage. The biggest beneficiaries are the unions who have wage increase based upon the minimum rate. Time to dump this feel good idea.

Blaming the Other Guy

The country has what is laughably called a debt ceiling and there is a perceived need to increase it, at least in the short term. One political party just wants to increase it; the other party admits the need to increase the limit and wants to include some firm commitments to reduce future spending. Mr. Goldmark can only find fault with the party who wants to restrict future spending. In his view, restricting spending is playing with fire while uncontrolled profligacy is a reasonable. He further offers the scare tactic about vital services and Social security checks being cut off. It is freely admitted that Social Security checks will go out what is not so clear are vital services will be discontinued.

Newsday and Free Markets

Mr. Akst has finally determined that the free market should dictate prices. He makes a great case for market prices rates for town owned dock space – as public space increase to market rates, private dock rates will come down due to the competition. Exactly, but it is difficult to determine why he does not apply the same solution to every other issue. His past comments about energy, health care, etc. are invariably focused upon how the government needs to fund the solutions. He must own a boat.

Monday, June 6, 2011

Free Market

Mr. Akst has finally determined that the free market should dictate prices. He makes a great case for market prices rates for town owned dock space – as public space increase to market rates, private dock rates will come down due to the competition. Exactly, but it is difficult to determine why he does not apply the same solution to every other issue. His past comments about energy, health care, etc. are invariably focused upon how the government needs to fund the solutions. He must own a boat.

Loose Money

Great news. Banks are making car loans to people with marginal credit scores. That’s wonderful for the auto industry. It’s a free market and they have to do something with all the money that the Fed keeps printing. But once upon a time, banks made lots of mortgage loans to people with marginal credit ratings. As I recall that didn’t work out too well and can’t see how it can work this time. It would be really good if the banks that do this don’t get bailed out again

Thursday, June 2, 2011

Profit Plans

The current economic plan is to set up enemies to blame for whatever goes wrong. While claiming to be a friend of business, this Administration has fed the populist urge to blame banks, oil companies, drug companies, insurance companies and any other industry that makes a profit – unless they are heavily unionized or in Nancy Pelosi’s district. Favorites get waivers from Obamacare and subsidies; those who are not get audited, increasing regulated, don’t get waivers and are blamed for anything that goes wrong.

The latest plan is to eliminate tax breaks for oil companies and make then pay more taxes – a popular stance. The oil companies announce high profits and are an easy target but a thought or two would be instructive.

The first thing to note is that no corporation really pays taxes. Companies get money by selling something to customers; the money corporations use to pay their taxes comes from - customers. Suppose you own a business selling widgets and tomorrow there is an additional 10% widget tax. What do you do? Probably raise your prices about 10%. So who is paying the tax?

It is no surprise that big companies make more profit in total dollars than small ones. They have more invested. It is also no surprise that they make more when prices rise. The reason is profit margin - the return of their money. Suppose you risk $100 in an investment and at the end of a year you have $110. Pretty good these days, you made 10%. But suppose you risk $10,000 and at the end of the year you had $10,010. Both investments made $10 but one guy did well and one guy didn’t because their return percentage was markedly different. Oil companies have billions invested and they make billions but their margin is not particularly high.

Headlines about how much money a company makes in absolute dollars is not particularly informative. But this is helpful to the demagogues who have a need to blame someone else and distract from the Administration’s efforts to raise fuel prices in every way they can. The Secretary of Energy is on record as supporting higher oil prices; the EPA puts all kinds of roadblocks in the path of the oil companies; leases are discouraged; oil flow from Alaska is reduced; drilling is pushed to the most expensive places to drill. All of these things contribute to higher fuel prices. While this is all happening, additional dollars are being printed. When the dollar’s value goes down, oil prices go up. Their need for a scapegoat is obvious.

Ending subsidies is not a bad idea but singling out one industry is and most of the tax deductions under discussion are available to all businesses. Ending all subsidies is a different discussion but the plan to end subsidies for oil and continue to subsidize the energy producers that are currently in favor just creates another Government Motors. Does anyone think these government subsidies will end? If these energy producers need government subsidies to succeed we are only creating another ward of the State.

Whether solar, wind or bio-fuels become economically feasible is something that will be determined in the future. Whether anyone likes it or not, there are no viable and affordable wind/solar/biofuel/hybrid cars available and when they are available, it will be quite a while before people can afford to replace their current cars. While the Administration devotes its efforts to increasing oil prices in order to assist sources that might be of use in 10 years, we get $4+ gas prices.

Administration efforts to increase oil prices and blame the messenger have to stop. More importantly, the reasons for the increases need to be properly identified so that corrective measures can be directed at the real root causes.

Akst Angst

Mr. Akst’s article (Newsday) about banks is an example of misdirection that would make Houdini proud. The formula is predictable: Lead with something about the Bad Guys - CEO’s make a lot of money and credit card rates are high - to stir the populist pot; link that to the need for unavoidable Government action - holding rates down; and throw in a sympathy line - Grandma is paying for this).

The implications are that Grandma is paying CEO salaries, that Banks are holding down their borrowing rates, and that the government is the white knight that will correct this mess. Well, no it is not.

CEO salaries have nothing to do with Fed Rates or Grandma; perhaps shareholders should hold them more accountable but that is another discussion.

The bailouts (all of them, some of them?) were not unavoidable. The Government’s responsibility was to honor the guarantees they made on the sub prime mortgages that Fannie Mae and Freddie Mac were pushing and securitizing. The sub prime market was their creation in an effort to support the Government’s social policies.

Banks are certainly beneficiaries of the Federal Reserve policy of artificially keeping interest rates low but they do not make the policy and the policy is certainly not unavoidable. It is the Federal Reserve that sets the rate and has printed trillions of dollars in the last few years. This devaluation has made everything more expensive – gas, clothes, food, - everything. This is inflation that Bernanke does not recognize but it does impact Grandma. Her savings have less value and her monthly check buys less but has nothing to do with the banks, their CEOs or their salaries. The Fed is just supporting the Administration’s announced policy of making oil more expensive.

Some banks credit card rates are higher than other - so shop around – some cars cost more than others. It should also be noted that recent Government legislation limits the fees for overdrafts, bounced checks, exceeding card credit lines and such. This spreads the costs for these things from the people who do them to everyone. The government thinks that is only fair but means that Grandma is paying for bounced checks whether she does or not.

Just set up some bad guys – banks, oil companies, insurance companies, drug companies – and link anything that goes wrong to them. It keeps the pressure off of the ineptitude of Government actions.

Tax Gymnastics

Peter Goldmark’s article (Newsday)about corporations and taxes had three main points: that the US does not tax corporations enough; that corporations keep overseas profits overseas to avoid taxes and that creates jobs overseas; and that there are too many lobbyists and the tax code provisions are too complicated.

The last one is the easiest. Whatever the reason, the tax code is too complicated and has specific provisions that apply only to specific companies or industries. It must be simplified.

The other points can be disputed. Corporations do not pay taxes in any situation. Businesses obtain the money to pay taxes from their customers. A simple quiz is instructive: You own a business selling widgets. Tomorrow the tax on all widgets sold goes up 10%, what do you do? Right. You (the business) raise your prices at least 10%. So who paid the tax? Right again - the customer. The government got more money and the business broke even – assuming sales stayed the same which they probably didn’t – and the customers paid 10% more than they used to for their widgets.

His comment about overseas profits is confusing. There is no doubt that that overseas profits stay overseas because they are taxed if they are brought back into the country. He acknowledges that leaving this money overseas creates jobs overseas and his strong implication is that they should bring the money back and be taxed to pay their share. But bringing the money back would create jobs in this country. The current choice is between avoiding US taxes and creating jobs overseas or bringing the money back and paying taxes which leaves less money for job creation. A simpler solution would be to allow the companies to bring the money back, avoid taxes and create the jobs here. Use the money companies generate overseas to create domestic jobs. What a concept! Other countries funding US job growth for a change.

Universally bad

Universal health care might be inevitable but it is not good. We are living in the rubble of an attempt at universal home ownership and the same people who brought us that failed concept have moved on to promoting universal health care. Let us not kid ourselves. The Obama healthcare plan makes no attempt to control cost and counts revenues over a longer period than expenditures even to come close to breaking even. This is a program in which Administration favorites ask for and receive exemptions while others are forced to participate while tort reform, allowing policies across state lines, and other areas of cost control areas are not even considered.

The political party supporting this has a platform based upon convincing the public that the government will provide a house, healthcare and most everything else for free since the other guy will pay for it. The only certainties are that the definition of the other guy will have to continually expand to meet these expectations and that this Administration has created another protected class that will be exempt from the program.

When the voters who get something from the government exceed the voters who pay for government there can be no end and we are approaching that point. Soon the campaign promises will be about universal ownership of a Lexus, a flat screen TV and an iPad.

Why not, the other guy will pay for it?