Run on your record, not from it

If you have served the country honestly and voted for things you felt were right, why would you run from your record? We are faced with a situation where the economy is still sluggish but we avoided a Depression. We passed health care reform, but could only go so far because of Republican opposition. We reduced our presence in Iraq and refocused our efforts in Afghanistan. There are efforts underway to help small business, improve the country's infrastructure, improve the environment, increase taxes on the wealthy and maintain middle class tax breaks.

Yet, we see a situation where the public is angry and has been fired up by misinformation provided by, in many cases, wealthy individuals who don't want to pay higher taxes. Stand up and educate, don't slink away!

There is a lot more that needs to be done, and failure to finish the job will simply lead to further prosperity for the few at the cost to the many. I'm not talking socialism, but our policies need to restore our declining middle class. The amount of wealth concentrated in the top 1% of our population has never been higher. More and more Americans are falling below the poverty line. Millions of Americans nearing retirement have inadequate resources and without effective social policies that save Social Security and Medicare will find themselves up the creek without, well a nest egg.

Propaganda about wealthy people creating jobs is simply that. They act in their own best interest and if creating a job increases their profitability they will create a job. Let's remember that. They are not, in the business world, altruistic. We have to always remember policies have to encourage job creation in this country. Just letting them keep more profits will not accomplish that. It has to be profitable to employ Americans.

I don't know how the election is going to turn out, and suspect that the misinformation will succeed unless it is countered by the truth. Health care reform is important. Education is important. Helping job creation is important. Improving the environment is important.

It's time to stand up and be counted.

Free Trade equals fewer jobs but more rich people

For the last couple of days the circus on the East Side of Manhattan was in full swing. Now I do think that countries should work together and am by no means opposed to a world forum. However, when you have someone like Mahmoud Ahmadinejad espousing ludicrous theories about an event that happened almost ten years ago, you have to say "wtf?"

Now politics is politics and we know he is playing to a specific audience. The video of him making his outrageous accusations will get played for a receptive audience and actually increase his prestige.

Of course criticizing the UN for allowing this behavior is really not fair since we have plenty of similar examples in our own current political races. The country is suffering significant economic problems, caused by many different factors but certainly exacerbated by the widespread export of jobs due to lifting of trade restrictions under our business oriented past administrations. Now, free trade is good on a macro basis, but if you have the highest standard of living, what free trade will do is level the playing field over time, meaning that those on the top will suffer some while those on the bottom will benefit. So we have an increase in unemployment while large corporations send jobs to India and China (either directly or by replacing American made products with theirs) and they boom while we suffer. Of course it is not convenient to let most Americans in on this so instead the problems are blamed on policies that really had nothing to do with the problem.

Since we seem unable to improve our competitive position, and increase jobs in this country, we are left with a large number of angry Americans who are willing to listen to almost anyone who promises to make things better. Lets extend the tax cuts for wealthy Americans so they can invest more money overseas. Lets cut benefits to our poorest Americans to force them to accept jobs that won't support their families. This is basically the tea party platform and to a large extent the Pledge to America. It isn't worded that way but they perpetuate a myth that allowing tax rates to revert back to what they were when we didn't have a deficit will destroy the economy.

The economy we have now is the recovered economy. Growth is going to remain anemic unless we improve the competitive posture of the country. The policies we need to pursue are actually pretty simple, reduce dependence on foreign energy, switch to a tax on products sold in this country, and make pension and health insurance costs a social responsibility and not a business cost. Simply this would reduce much of the incentive to export jobs. It certainly wouldn't destroy incentive to work but would allow all Americans some peace of mind related to medical bills and old age.

Certainly, the benefit level can be supplemented with private insurance and private investments, but for those who work at low paying jobs their entire lives, in their old age they would have enough to get by.

Now the Tea Party Tools of the rich denounce common sense proposals like this as socialism and unamerican. Of course many of these angry people would have a hard time actually saying why socialism is so bad, but these policies are social policies, not socialist policies. Generally it levels the capitalistic playing field.

The Pledge to America promises to enforce the constitution as originally intended. Really? In 1789 we had slavery, no voting rights for women, no direct election of senators, no income tax, etc, etc. I guess they mean as originally written and subsequently amended, but maybe not, I can't tell.

Do they think we can’t do the math?

I just get insulted when I hear proposals that promise things that just don't add up. If you want to get to a balanced budget and reduce taxes, you have to stop spending. A proposal that acts as if they can eliminate enough discretionary spending (only 1/3 of the budget) to accomplish these goals. Republicans won't even reduce subsidies to rich absentee farmers since they tend to be Republican supporters.

I would like to see a plan by program as to how to achieve a balanced budget. It's not going to be achieved by not collecting taxes.

Rehabilitation

Today we hear that the recession ended back in June 2009. Of course this is a technical call based on whether we had growth in a quarter or not. Now, if you lost 20% of the economy in the recession and have anemic growth, you may be technically out of recession but you are certainly not back to where you were. It will take years to recover from the losses. For some individuals, and the NY Times had an article today about over 50 workers who may never get jobs at the same level they had, the recession is permanent.

Many of the jobs we lost will never return. I've discussed this previously and the main hope is that we create jobs in new industries, such as environmental related jobs. I expect that jobs will be created in unanticipated areas. However, it is also likely that the skills for these new jobs will require training that many of our unemployed don't have and they are now competing with new entrants who may very well have these new skills.

At any given time the economy has winners and losers. The winners are not always deserving and the losers aren't either. If you followed the rules, worked hard, contributed to a company's success for many years but that company simple goes away or sends your job overseas leaving you in the loser group did you deserve that?

If you believed that the American dream required you to buy a house in the suburbs and an SUV when you were working and you did those things, only to find the house worth less than your mortgage, did you deserve that?

Suppose you became unable to work due to illness or disability and lost your employer provided health insurance, did you deserve that?

People talk about economic recovery as if the economy is going to be just as healthy as it was right before it. This is going to require a lot of rehab before we are normal again.

The mess we are in

As we head into the fall we are starting to see some glimmers that the recovery will continue, or perhaps better to say that the economy will continue to grow weakly from its new baseline. The dramatic events of 2008-2009 were really like the earthquake that causes devastation but is really the release of all the pent up energy built up in the tectonic plates in the preceding period.

The country had a large number of negative long term factors that were masked by the apparent increase in housing prices which allowed much of the population to spend well above their means and create an aura of prosperity when really it was more like play money.

We simply have too many Americans who are not equipped for the world we live in, who expect to maintain a standard of living that they can't earn in the world marketplace and a technological revolution that is exposing these facts.

Most of the problems were probably inevitable, but the deregulation and free trade groups (things that are good for big business but not so good for the undertrained/overpaid American worker) sped them along. In addition, we accelerated the stress by enacting unaffordable tax breaks that quickly turned a surplus into a deficit and proceeded to fight an unnecessary war in Iraq that cost billions and billions of dollars while achieving little. The war against the terrorist camps in Afghanistan was necessary but the one in Iraq was simply an ego trip by our late President.

So we have too many houses and too many unemployed Americans. The jobs that many of these unemployed performed are gone and not coming back. Generally the jobs they might be qualified for will pay much less than they used to make and they have lost the houses, or at least the equity, that financed their lifestyles.

The contraction of 2008-2009 was not a temporary thing, like some of the recessions in the past, with a bounce back recovery. The new baseline is what it is and growth is going to be slow unless we take some actions to help the root cause of our issues.

We need to create jobs by exploiting our national energy resources, meaning gas, coal and renewable to improve our balance of payments and reduce our trade deficit.

We need to encourage conversion of homes and businesses to be more energy efficient increasing construction jobs for the renovation.

We need to fix our infrastructure creating jobs.

We need to switch to a tax on sales and reduce taxes that encourage job exportation.

We need to fix the way we fund health care and join the rest of the civilized world.

We should be encouraging immigration to increase the number of young workers willing to start at the bottom and achieve the American dream.

We need to make sure our schools are imparting the skills our young people need for the future, not the skills of the past.

Government spending must be brought in line with Government income, and this might be painful but the choice has to be made to reduce services or increase taxes (possibly some of both).

We need to get started and the politicians need to put the interests of the country ahead of their own.

Its time.

Media Uproars

It I

It may be obvious to many but a lot of the issues that appear in our media are at best minor events that are stirred up to get an audience. Famously, going back to the late 1890s, the Hearst paper may have created the public outcry that led to the Spanish American War over an incident involving an explosion on a ship that many think was an accident versus an act of terrorism.

What I find interesting is when those who use the freedom of speech protections in our constitution decry others, such as the Koran burning minister (he never burned one) in Florida for exercising his freedom of speech. Had the national media ignored him he could have had a jolly old bonfire and outside of a few local supporters, no one would have known. However the coverage that ended up getting the President to take a position (one that seems to be anti-free speech) led to protests and probably a number of deaths.

Now, I don't see much purpose in burning Korans, but isn't it likely that at least some Koran's that don't sell eventually get destroyed? How many simply end up in the trash considered useless clutter by purchasers who bought them at some point for who knows what reason. Quite a few years ago I bought one to see what it said during a period of religious exploration I was going through and since I no longer have it I guess I threw it out. Of course I didn't think of it as anything special and certainly didn't dispose of it in any special way. Maybe I should expect protestors to show up soon.

Now of course my disposing of the Koran wasn't announced, in fact I don't remember what I did with it and it may simply be at the bottom of some box in the attic, but let's get real, it's a book with a binding and some pages that a man created. Even if the words represent a holy message, the object I was able to purchase wasn't anything special. This is true of bibles, flags, Talmud's and anything else created by man. The fact that some other people want to attach some ridiculous concept to the object is really of no concern to me, unless of course they actually do something to me.

You can't cry fire, unless of course there is a fire, in a movie theatre since doing so creates an immediate hazard to the people that you deceive. You can announce that the movie sucks, and you can be ejected but not imprisoned, because you are entitled to that opinion. Now, if you burn a Koran, or using a 1960s analogy, an American Flag, are you creating an immediate danger? Certainly not since the symbolism does not deceive anyone. In the 60s flag burning created counter protests and now Koran burning cause's Muslim outrage. These responses are not a reason to restrict the right to freedom of speech. I don't have to agree with either to support the right they have to express their opinion.

However, the media can use the uproar largely created by the media to sell more media I guess.

Times twists facts for Back to School Article

The on-line and print versions of the New York Times had an article implying that the back to school season was disappointing for retailers. It had a number of interviews with shoppers and had at best two facts that it linked to in the article, both of which were misrepresented. The first was a statistic that bases on a Chase survey 73% of shoppers were budgeting the same or less this year for back to school than last year. A link was included and at the end of this article are the relevant results. First of all, only 38% of those interviewed had back to school budgets. Of those 73% planned to spend the same or less. Of course this meant that 59% meant to spend the same or more. Realistically though, common sense tells us that those who budget almost always do it to control spending and many fail to stay within the budget. Second, only 38% bothered to have a budget. Those without budgets tend to spend more impulsively. Generally this statistic has little if any predictive relevance as demonstrated by the strangest twist of fact in the article.

"That pattern was reflected in the August sales results from several retailers, where there were only small sales increases at stores open more than a year despite heavy discounts."

Ok, but when you go to the link provided it shows that overall same store sales were up 3.3% (higher than expected) and the analyst felt that represented a sign that the consumer was back. Now of course, some of the stores didn't do as well as others, so the quote is probably technically accurate, but it certainly misrepresents the information in the linked article.

What probably happened here was that they expected a disappointing back to school season and had this article prepared. When the facts didn't quite support the premise they simply twisted them a little and ran the article anyways.

 

 

Chase Slate-U.S. News Consumer Monitor FINAL

NOTE:  all results shown are percentages unless otherwise labeled

 

Below are findings of an Ipsos poll conducted by telephone August 3-9, 2010 on behalf of Chase Card Services & U.S. News and World Report. For the survey, a nationally representative, randomly selected sample of exactly 1,080 adults aged 18 and older across the United States was interviewed by Ipsos. With a sample of this size, the results are considered accurate within 3 percentage points, 19 times out of 20, of what they would have been had the entire adult population in the U.S. been polled. The margin of error for sub-segments is higher, and base size refers to weighted bases. All sample surveys and polls may be subject to other sources of error, including, but not limited to coverage error, and measurement error. These data were weighted to ensure that the sample's composition reflects that of the actual U.S. population according to U.S. Census figures. Respondents had the option to be interviewed in English or Spanish.
An asterisk (*) indicates a percentage value of greater than zero but less than 0.5. Wave 1 data is contained in parenthesis next to this wave's data, and was carried out June 15-21, 2010 according to the same technical specifications as Wave 2.

 

ASK ALL IN SCHOOL OR WITH CHILDREN IN SCHOOL

 

1. Do you have a set budget for your back to school shopping? (Base = 346)
   

 

Yes	38
No	62
(DK/Refused) (VOL)	*

 

IF YES AT Q13

1. Would you say your back to school budget this year is bigger or smaller than it was last year? (Base = 131)
   

 

Bigger	27
Smaller	41
The same	32
(DK/Refused) (VOL)	0

What we didn’t do

Today we found out that the European stress tests were not as comprehensive as they might have been and the markets have decided to sell risk assets. Of course I don't think anyone is actually surprised that the tests, designed by a group that was trying to provide reassurance to investors, was not the most stressful stress test. However, the revelation provides an opportunity to short some stocks and make some profit from the volatility.

One would think that any concerns about the stress tests would have been offset by the increasing likelihood that the mid-term elections are going to lead to a deadlock in congress. It's pretty clear that Wall Street and probably Main Street are not convinced that the Government really has any good ideas, and having them debate a lot and produce nothing of substance is the preferred status quo.

It is sad how ineffective our leadership has become, not because they are not bright people, but because they are too influenced by unrealistic fringe groups that aren't pragmatic enough to be successful. If you want to have cleaner energy we should have moved, on an intermediate basis, into natural gas. It is plentiful, burns cleaner than oil and would help the balance of payments. It isn't good enough to satisfy the environ-nuts who want to go right to a solution that can't be implemented for many years, leaving us with an oil based economy.

If you want to create jobs, you needed to create real jobs by improving the infrastructure and providing credits to convert to friendlier energy sources. It would also help a lot to even the playing field with foreign manufacturers by reforming the way we tax business, relieving them of health insurance and pension concerns and making sure everyone selling product in this country is paying a comparable share of the costs of these programs.

If you want to help housing, well it may not be helpable, but if you incentivized banks to reduce current mortgage burdens in exchange for a future share in the sales price it might have avoided a lot of foreclosures.

Instead, the visionaries of this crisis came up with what are past described as multiple level derivative actions that hopefully would improve the situation. We increased the money supply and drove interest rates down hoping that it would ease credit opportunities and make mortgages more affordable. However, in a situation with so much lost wealth, the cash was used by banks and corporations to increase their balance sheet and not to increase the amount loaned out and not to increase investment and not to lower mortgage burdens,

In fact there was so much cash being hoarded that we have a possible bubble in treasuries.

If there is a lesson learned it should be the following. If you want a to happen do the most direct possible thing to get there. If b is a direct cause of a, do b. Once you decide that e influences d and c which then influence b which influences a, the logic may be good but the links are subject to unexpected consequences.

 

1938 Again?

In the New York Times there was an op-ed piece that discussed the similarities between 1938 and today by Paul Krugman. The point of the article is that we are repeating the mistake that FDR made in 1938 where worries about the deficit overrode the need for more stimulus leading to a revived recession. He goes on to state that the beginning of World War II led to massive deficit spending that led to prosperity and the boom years that followed the war.

Of course one thing that we know about that period is that in addition to the massive deficit spending, much of the world infrastructure was destroyed in other parts of the world, giving this country with it great industrial base a significant advantage in selling products. In addition, the deficit spending was accompanied by rationing that led to a great pent up demand for consumer products following the end of hostilities. Another factor that can't be ignored, or at least shouldn't be ignored is that the war reduced the labor force in a number of ways. The most obvious would be the casualties but just as significant was the GI Bill that sent so many returning GIs back to school to receive training that they otherwise would not have had. Also, the threat of communism led to an expansion in the size of our military posture and spending that ebbed and flowed but consistently exceeded depression era levels.

One other factor in the post war years that shouldn't be ignored is the baby boom. This led to a tremendous increase in demand for housing and services in the newly created suburbs that exemplified the prosperity of the 50s and 60s.

Which one of these factors led to the prosperity we experienced post War? I would have trouble picking only one. So if we want to bring about a new prosperity I guess we have to spend trillions building up the army, diverting industry to war production, destroying much of the world's infrastructure and have another baby boom.

The Recovery

Can our anemic recovery continue? It isn't even clear that we really have a recovery if you listen to some analysts. According to them, without job growth, we can't see any real improvement. Of course, there is some validity to this. If you are unemployed, things are certainly not going well. However, we always have unemployed and the question to ask is what the "new normal" for unemployment is?

There is an article in the times that points out a trend that has been going on in this country for a while. Certain jobs that provided good wages and a decent standard of living are simply going away. They are being outsourced to other countries or eliminated via automation. To some extent these jobs are being replaced by lower paying service jobs or being replace by higher paying technical jobs that require training and education. If you are in the middle, you will probably have a problem qualifying for the higher paying jobs and you may be reluctant to accept the lower paying service job. In fact, it is possible that the lower paying job won't replace the benefits you get by being unemployed.

If you are getting unemployment insurance and are eligible for Medicaid because of your low income, taking a low paying job without benefits may decrease your standard of living. In fact, we have set up many people in this country to see a reduction in their standards of living. Without a dramatic reform in the way we do health care in this country, it is somewhat unavoidable. The added cost of benefits being imposed on employer's simply makes it uneconomical to higher low priced workers.

In the scheme of things, businesses who want to be profitable simply can't afford to hire these people, since they cost more than they produce. Make no mistake about it, profitability is the key and for the immediate future American business is not going to spend unless the profit potential is clear. We have seen the increase in productivity and what we have failed to accept is that the American economy has shrunk and will grow in a health way. This is sure footed growth and the existing industries are not going to rehire all the people who were let go.

However, if history tells us anything it is that a resource will eventually be utilized. Those unemployed are a resource and sooner or later they will be absorbed into the economy, at least most of them will. Of course they may get paid less than they did previously.

Simply, businesses have shrunk in response to demand and are now at profitable levels. They will grow as demand grows, but they are not going to take wild gambles.

It's the recovery and it is anemic, but it is the only recovery we have.