There is an old saying, “Follow the Money.” The current stimulus package is going to provide tax credits to everyone, even those who pay no taxes. What happens when you give people money? They buy stuff, which is good for the economy, right? Well we have a huge trade deficit and most of the consumer goods that will be purchased with this money are made in China and other countries. So, following the money, if we give it away our population will spend it on goods from China, thus saving that economy and doing very little for ours over the long haul.
How can the government use its billions to actually fix this problem? I am quite certain our new President has the brightest minds available working on this. What I have gleaned from the conversation, however, and I find this typical when people are panicked, treat some of the symptoms but are not bold enough to craft an actual cure. One thing is clear, we have got to get back to making things.
For years, at least 40, the US has become increasingly uncompetitive in world business. We like to blame it on low wages, and that certainly plays a part. In addition, we have the cleanest, safest plants in the world. Of course they are all closed or closing. It makes no sense to provide funds to people who will buy foreign-made goods or to businesses if there is no real way for them to compete in the global environment. They will both spend the money overseas and there will be no advantage to the US economy.
What to do? Here are some ideas. (See my prior posts for more details below)
1. Pollution Tax: Create a Pollution Tax that everyone who sells anything in the US has to pay. This will raise the costs of imported goods that are manufactured in countries with little regard to pollution of the water, air and ground in their countries. Balance the international playing field a bit.
2. Increase Loan Guarantees: Dramatically increase SBA and other guaranteed loans. Guarantee loans are made by banks. Banks will loan money again and the government is not out the cash now. Make the borrower use the money in the US to hire people and create facilities.
3. No Minimum Wage: THIS IS GOOD FOR THE HARD WORKING MIDDLE CLASS! The minimum wage forces hard-working middle class Americans to pay, out of their own pockets, extra wages to the worst workers in the company, or of course the company moves the whole plant to China. When a company moves overseas, the US loses the higher-paying supervisory and management jobs as well as the hourly workforce. Make all workers, even the lousy ones, earn their wages and there will be MORE jobs that pay higher wages.
4. Reduce Immigration Restrictions: Let immigrants in, let them work at below minimum wage and allow American industry to grow again, bringing higher paying supervisory and management jobs back to this country.
5. Flat Corporate Tax: Create a flat corporate tax on gross revenues over one million dollars that all businesses pay. Eliminate all of the complex tax rules that allow some profitable companies to avoid paying any income taxes, and all the complex tax requirements and credits that have been laid on the system throughout the years. Then the government can start over if necessary.
6. Eliminate the Payroll Tax: It discourages American workers. Roll the required tax revenues into the flat corporate tax.
7. Fund High-Tech and Clean Fuel R&D and New Businesses: As the President has pointed out, this has a great future to drive new higher paying jobs.
8. National Competition-based Health Insurance: Pass a national, competition based health insurance plan, with catastrophic coverage for all. Take health insurance benefits out of the province of business. They do not know how to do this very well. Put it in the hands of professionals and let people get creative.
9. Balance the International Playing Field: Regulations are important, but use them to balance the international playing field. If US companies have to do something, foreign companies that import into the US should have to do so as well, or pay a commensurate tariff that balances the playing field for US manufacturers.
If we do not correct the problems with US manufacturing this is all a waste of time. Countries that make things will grow. Countries that provide services and buy things from other countries gradually shrink.
If you are an environmentalist, who do you want manufacturing goods - the US or the Chinese?
If you care about the poor, where do you want workers to work, in the US or in China?
If you care about safety to workers and consumers, where to you want things made, in the US or China?
We have no choice but to find ways to compete in the global economy. Level the international playing field.
The only saving grace is that really wealthy people invest their money in foreign lands and since they prefer to live in the US, they bring the profits back here. How long will that last? Only so long as Americans have money to spend to buy foreign goods. That is slowly slipping away. Open your eyes and see the real, hard problem.
Give away money = save China’s economy.
Invest money in business and level the international playing field = save the US economy.
We are all rooting for you, Mr. President. Good luck, but please do not save China.
Saturday, January 24, 2009
Thursday, January 22, 2009
The American Mutts – And Proud of It!
We are all proud, and we should be, that Barack Obama is the first African American president. As a tall white anglo male, I represent the group most favored of this great country and I am extremely proud of this national accomplishment. I think it is time for a great celebration. Of course our President, like you and me, has a very diverse lineage. Kenyan and Irish among them.
It would be a wonderful thing for President Obama to step forward and denounce all labels for race, national origin, whatever and declare that we are all mutts. He clearly supports this position. That is what makes us Americans. Just like the President, we are all an amalgam of brave souls, outcasts and misfits from countries around the world.
We are American Mutts!
I would love to see Barack create a national day, some historically irrelevant Saturday in June so it will be nice everywhere, and declare it a day for celebration of our American Muttness.
Focus on the fact that we are all shades of the same general brown color, not black or white or whatever.
Focus on the fact that our ancestors came from all over the globe, but we should celebrate not those countries but the mixtures of histories that make Americans who we are.
Celebrate the fact that we represent every religion on the globe, but encourage participation by non-believers.
Have parades and speeches and lectures and parties.
Sign legislation abolishing laws providing special treatment for any group over another.
Review the purpose of the Constitution, the 16th Amendment, the Declaration of Independence, and the many speeches throughout our countries history, but do not dwell on the past – celebrate the future.
It would be a wonderful thing for President Obama to step forward and denounce all labels for race, national origin, whatever and declare that we are all mutts. He clearly supports this position. That is what makes us Americans. Just like the President, we are all an amalgam of brave souls, outcasts and misfits from countries around the world.
We are American Mutts!
I would love to see Barack create a national day, some historically irrelevant Saturday in June so it will be nice everywhere, and declare it a day for celebration of our American Muttness.
Focus on the fact that we are all shades of the same general brown color, not black or white or whatever.
Focus on the fact that our ancestors came from all over the globe, but we should celebrate not those countries but the mixtures of histories that make Americans who we are.
Celebrate the fact that we represent every religion on the globe, but encourage participation by non-believers.
Have parades and speeches and lectures and parties.
Sign legislation abolishing laws providing special treatment for any group over another.
Review the purpose of the Constitution, the 16th Amendment, the Declaration of Independence, and the many speeches throughout our countries history, but do not dwell on the past – celebrate the future.
Certainly we will always be different. Every mutt is different from all others. That is what is wonderful about mutts.
When we celebrate "diversity" we point out and even label Americans as within certain separate but equal categories. African-American. Italian-American. Chinese-American. Christian. Jew. Atheist. Whatever.
Shouldn't we celebrate that we are all unique American mutts and then celebrate our INDIVIDUAL differences and strengths rather than our labels.
I want to be recognized as an American who is tall and bright. Not a European-American, Christian, White person. These are labels which bear no relation to my individual characteristics whatsoever. They are, however, how we define ourselves today and they are irrelevant.
We are mutts, mutts are each unique, and we should celebrate THAT.
Rejoice in the variety that makes us American and begin to develop a new culture without labels, without stereotypes and without prejudice.
Create a new pride in being an American Mutt!
American Mutt Day!
When we celebrate "diversity" we point out and even label Americans as within certain separate but equal categories. African-American. Italian-American. Chinese-American. Christian. Jew. Atheist. Whatever.
Shouldn't we celebrate that we are all unique American mutts and then celebrate our INDIVIDUAL differences and strengths rather than our labels.
I want to be recognized as an American who is tall and bright. Not a European-American, Christian, White person. These are labels which bear no relation to my individual characteristics whatsoever. They are, however, how we define ourselves today and they are irrelevant.
We are mutts, mutts are each unique, and we should celebrate THAT.
Rejoice in the variety that makes us American and begin to develop a new culture without labels, without stereotypes and without prejudice.
Create a new pride in being an American Mutt!
American Mutt Day!
Be Proud to be an American Mutt
Monday, January 19, 2009
The Pollution Tax
Al Gore proposed that we institute a carbon tax on the carbon emitted by any company. This is a good idea so long as it applies to every company that sells anything in the US. I also believe that while carbon is important to Mr. Gore, the US should be concerned with global pollution and the tax should be based on pollution.
The US imposes expensive regulations on its manufacturers while China and other countries do not. Regulations and taxes should be designed not to impose unequal burdens, but to level the playing field. There is no incentive to improve pollution performance if your competitor will not do the same. We now compete in a global marketplace, but we can only control what occurs within our borders.
The pollution tax should be an amount high enough so that it is cheaper to comply with anti-pollution regulations. It should be applied to all US companies and to all importers of goods into this country. There should be two levels or considerations, one on the plant itself and the second on the products sold in the US. It is not terribly helpful if a clean facility produces polluting products.
The pollution tax would be a set percentage of the value of the goods produced in the facility no matter where they end up. Each company, foreign and domestic, would have the EPA investigate its facilities and product, and then grade them as to how well they meet US standards. Foreign companies that import into the US would be required to pay the EPA to perform this service.
If the company passes, then the tax is waived. If it fails, then a tax is imposed based on the level of non-conformance. Each year the standards should be increased and the tax increased for non-conformance. This should be clearly set forth so that everyone understands what is coming.
If a foreign company refuses to pay to have the EPA inspect the facility, then the tax is imposed and imports are prohibited from that manufacturer. Imports will be allowed once the outstanding tax is paid and the EPA is permitted to inspect and grade the facility. Once graded, the new and adjusted tax, if any, is due going forward. So long as it is paid, imports are permitted. It will be the requirement of importers to make sure that all imports include a seal of approval from the EPA.
Pollution Correction Rebate: The entire pollution tax will be used exclusively to help US companies comply with the required standards. US violators pay the tax, but once they prove they have corrected the problem, the costs of making the corrections will be reimbursed by the government from the taxes from all companies, foreign and domestic. Any costs incurred to meet new standards would come from the Pollution Tax fund.
Since this applies equally to foreign and domestic companies, it would go a long way toward balancing one of the inherent inequities between US and foreign manufacturing. Since the proceeds go toward helping US companies comply, it benefits US industry and cleans the world at the same time.
International standards applicable to all companies would likely be developed. The US will likely develop arrangements with certain countries to perform the review on the EPA’s behalf. In the end the US is a leader in environmentally clean industry and US manufacturing gains a modest advantage over competitors from polluting countries, at least until the world is a clean place to live.
The US imposes expensive regulations on its manufacturers while China and other countries do not. Regulations and taxes should be designed not to impose unequal burdens, but to level the playing field. There is no incentive to improve pollution performance if your competitor will not do the same. We now compete in a global marketplace, but we can only control what occurs within our borders.
The pollution tax should be an amount high enough so that it is cheaper to comply with anti-pollution regulations. It should be applied to all US companies and to all importers of goods into this country. There should be two levels or considerations, one on the plant itself and the second on the products sold in the US. It is not terribly helpful if a clean facility produces polluting products.
The pollution tax would be a set percentage of the value of the goods produced in the facility no matter where they end up. Each company, foreign and domestic, would have the EPA investigate its facilities and product, and then grade them as to how well they meet US standards. Foreign companies that import into the US would be required to pay the EPA to perform this service.
If the company passes, then the tax is waived. If it fails, then a tax is imposed based on the level of non-conformance. Each year the standards should be increased and the tax increased for non-conformance. This should be clearly set forth so that everyone understands what is coming.
If a foreign company refuses to pay to have the EPA inspect the facility, then the tax is imposed and imports are prohibited from that manufacturer. Imports will be allowed once the outstanding tax is paid and the EPA is permitted to inspect and grade the facility. Once graded, the new and adjusted tax, if any, is due going forward. So long as it is paid, imports are permitted. It will be the requirement of importers to make sure that all imports include a seal of approval from the EPA.
Pollution Correction Rebate: The entire pollution tax will be used exclusively to help US companies comply with the required standards. US violators pay the tax, but once they prove they have corrected the problem, the costs of making the corrections will be reimbursed by the government from the taxes from all companies, foreign and domestic. Any costs incurred to meet new standards would come from the Pollution Tax fund.
Since this applies equally to foreign and domestic companies, it would go a long way toward balancing one of the inherent inequities between US and foreign manufacturing. Since the proceeds go toward helping US companies comply, it benefits US industry and cleans the world at the same time.
International standards applicable to all companies would likely be developed. The US will likely develop arrangements with certain countries to perform the review on the EPA’s behalf. In the end the US is a leader in environmentally clean industry and US manufacturing gains a modest advantage over competitors from polluting countries, at least until the world is a clean place to live.
Saturday, January 17, 2009
The Bail-Out and Stimulus Package
Every economist will tell you any time you ask that the Federal Government is a closed system. Whenever it gives out money to someone it has to take that money from somewhere else. This includes higher taxes, fewer programs or mortgaging the future through higher deficits. There is no free money.
Politically, the Bush administration and the Obama administration and both Congresses are hell-bent on a bail-out and stimulus package. So as long as this is going to happen anyway, we should look at how it should be structured and what should go along with it.
The basic theory is that if you give people money, they will spend it. They will buy things they would not otherwise buy, which in turn helps the businesses that make those things and they are able to keep more of their employees (even if those employees are in China). When people are hurting for cash, do they buy the higher price items made in the US or the lower price items sold at Walmart and made overseas? In theory it does not matter because the Chinese guy buys something and eventually the money raises everyone. Do Chinese assembly line workers buy American made goods?
But this begs the question, why should the US government and US taxpayers provide money to help employ the Chinese? There is certainly no way to stop it. Once I got my $600 last Spring, I bought stuff. I have no idea where it was made. Did last Spring’s stimulus package help the economy? Are you better off for it? China grew at 13% last year. Where did the $600 go? Where did the $350 billion go?
The goal of spending US cash should be to build the US economy. At its core, what is wrong with the US economy?
We don’t make things anymore. The only way to build an economy is to make things that people want to buy. So, if we are going to spend this money anyway, what should we do to make sure it helps the US economy?
1. Dramatically increase SBA guaranteed lending to entrepreneurs and small business. Virtually all of the current unemployment is being experienced by Baby Boomers over the age of 45 years old. They represent a highly paid glut of humans in our population. In our current situation, they can never be re-employed at high rates. These people have experiences, talents, training and ideas. Help them start new businesses using those capabilities and they will hire others.
Plus a loan is not a net drain. The vast majority of SBA backed loans are re-paid. Even a 5% default rate, which is extraordinarily high, is cheaper than giving away all this money. Plus these are guarantees. Banks lend the money. So there is no actual cash out the door and banks start lending and making money again. The best of all worlds.
That is the politically doable part, but don’t disregard it because you do not like or understand this next part. It is really important though.
2. Eliminate the minimum wage. It is not paid by businesses. It is paid by hard working middle class Americans who get less so the company can allocate some of their hard-earned wages to the dredges at the bottom who, by definition, are not worth even minimum wage. These dredges recently got a raise for being the worst workers in the company. Eliminating that will make US manufacturers more competitive, which simply has to happen.
3. Allow all immigrants into this country. We need low-paid workers to do the stuff at the bottom of the manufacturing pyramid. We will GAIN jobs, because we will hire Americans to supervise, manage and oversee these low level workers. Those are all the HIGH-PAYING jobs that are lost when we move manufacturing overseas and they are perfect for the unemployed Baby-Boomers.
4. Pass my health insurance plan – see prior post. Get corporations out of the insurance business. Get the States out of the regulation business and make healthcare a national issue which will reduce costs. Allow anyone to band together to negotiate great group rates or create huge self-insurance plans where wellness drives cost reduction. The government should provide catastrophic coverage which will reduce rates to most because the coverage costs are capped.
5. Create a flat corporate tax on revenues over $1,000,000. Eliminate the payroll tax, which is a disincentive to hiring and paying workers. Roll all income and payroll corporate taxes into one simple flat tax. This will dramatically reduce compliance costs for American companies and avoid complex schemes to create a tax loss and avoid paying any taxes. If a company has revenues over $1,000,000, they pay a set percentage of those revenues in taxes, even if they are losing money.
Congress uses taxes for social engineering. I think that is wrong, but it is a fact of life. A flat tax actually makes this easier and more powerful. Every company pays it so they will ALL have the intended incentive if a credit is provided. Not just those showing a taxable net profit.
Small businesses (under $1,000,000 in gross revenues) pay no taxes, so all the complicated corporate, LLC, partnership and Sub S schemes to avoid “double-taxation” that they pay attorneys and accountants for is eliminated. These are families trying to make a living and hire people.
So if we do this, what happens?
Businesses are relieved of a significant amount of unnecessary overhead in trying to do things outside their core competencies – taxes and benefits. The government gets the same amount in taxes and more control over corporations.
There are low-paid workers able to fill the bottom of the manufacturing pyramid and this employs supervisors and management for the Baby-Boom generation that is currently suffering most. These positions are now lost to China. This helps grow the US manufacturing base which grows the economy.
There are plenty of important regulations regarding working conditions, the environment and the like which must remain. When we make things, we do it in a much better, safer and cleaner manner than anyone else in the world. Our unions will make sure that fair wages are paid if that gets out of line. We have a great system. Let it work.
If we help fund small creative entrepreneurial businesses, the true greatness of our economy, we will put the brilliant minds to work on reaching the dreams they never pursued because they had jobs. Small companies built on great ideas build nations. But they too need easier tax burdens, fewer non-core responsibilities and workers who make what they are worth all the way through their organizations.
Finally, workers who are paid only what they are worth, the definition of the minimum wage, will work harder, get to work on time, reduce drug and alcohol use so that it lessens the impact on their performance and will try harder to be better so they can make more. Immigrants will come and go as job availability dictates. Without a minimum wage they may be able to find better employment in their own countries and go back. Problem solved.
Simple but difficult solutions that would work and no giving away money. We shall see.
Politically, the Bush administration and the Obama administration and both Congresses are hell-bent on a bail-out and stimulus package. So as long as this is going to happen anyway, we should look at how it should be structured and what should go along with it.
The basic theory is that if you give people money, they will spend it. They will buy things they would not otherwise buy, which in turn helps the businesses that make those things and they are able to keep more of their employees (even if those employees are in China). When people are hurting for cash, do they buy the higher price items made in the US or the lower price items sold at Walmart and made overseas? In theory it does not matter because the Chinese guy buys something and eventually the money raises everyone. Do Chinese assembly line workers buy American made goods?
But this begs the question, why should the US government and US taxpayers provide money to help employ the Chinese? There is certainly no way to stop it. Once I got my $600 last Spring, I bought stuff. I have no idea where it was made. Did last Spring’s stimulus package help the economy? Are you better off for it? China grew at 13% last year. Where did the $600 go? Where did the $350 billion go?
The goal of spending US cash should be to build the US economy. At its core, what is wrong with the US economy?
We don’t make things anymore. The only way to build an economy is to make things that people want to buy. So, if we are going to spend this money anyway, what should we do to make sure it helps the US economy?
1. Dramatically increase SBA guaranteed lending to entrepreneurs and small business. Virtually all of the current unemployment is being experienced by Baby Boomers over the age of 45 years old. They represent a highly paid glut of humans in our population. In our current situation, they can never be re-employed at high rates. These people have experiences, talents, training and ideas. Help them start new businesses using those capabilities and they will hire others.
Plus a loan is not a net drain. The vast majority of SBA backed loans are re-paid. Even a 5% default rate, which is extraordinarily high, is cheaper than giving away all this money. Plus these are guarantees. Banks lend the money. So there is no actual cash out the door and banks start lending and making money again. The best of all worlds.
That is the politically doable part, but don’t disregard it because you do not like or understand this next part. It is really important though.
2. Eliminate the minimum wage. It is not paid by businesses. It is paid by hard working middle class Americans who get less so the company can allocate some of their hard-earned wages to the dredges at the bottom who, by definition, are not worth even minimum wage. These dredges recently got a raise for being the worst workers in the company. Eliminating that will make US manufacturers more competitive, which simply has to happen.
3. Allow all immigrants into this country. We need low-paid workers to do the stuff at the bottom of the manufacturing pyramid. We will GAIN jobs, because we will hire Americans to supervise, manage and oversee these low level workers. Those are all the HIGH-PAYING jobs that are lost when we move manufacturing overseas and they are perfect for the unemployed Baby-Boomers.
4. Pass my health insurance plan – see prior post. Get corporations out of the insurance business. Get the States out of the regulation business and make healthcare a national issue which will reduce costs. Allow anyone to band together to negotiate great group rates or create huge self-insurance plans where wellness drives cost reduction. The government should provide catastrophic coverage which will reduce rates to most because the coverage costs are capped.
5. Create a flat corporate tax on revenues over $1,000,000. Eliminate the payroll tax, which is a disincentive to hiring and paying workers. Roll all income and payroll corporate taxes into one simple flat tax. This will dramatically reduce compliance costs for American companies and avoid complex schemes to create a tax loss and avoid paying any taxes. If a company has revenues over $1,000,000, they pay a set percentage of those revenues in taxes, even if they are losing money.
Congress uses taxes for social engineering. I think that is wrong, but it is a fact of life. A flat tax actually makes this easier and more powerful. Every company pays it so they will ALL have the intended incentive if a credit is provided. Not just those showing a taxable net profit.
Small businesses (under $1,000,000 in gross revenues) pay no taxes, so all the complicated corporate, LLC, partnership and Sub S schemes to avoid “double-taxation” that they pay attorneys and accountants for is eliminated. These are families trying to make a living and hire people.
So if we do this, what happens?
Businesses are relieved of a significant amount of unnecessary overhead in trying to do things outside their core competencies – taxes and benefits. The government gets the same amount in taxes and more control over corporations.
There are low-paid workers able to fill the bottom of the manufacturing pyramid and this employs supervisors and management for the Baby-Boom generation that is currently suffering most. These positions are now lost to China. This helps grow the US manufacturing base which grows the economy.
There are plenty of important regulations regarding working conditions, the environment and the like which must remain. When we make things, we do it in a much better, safer and cleaner manner than anyone else in the world. Our unions will make sure that fair wages are paid if that gets out of line. We have a great system. Let it work.
If we help fund small creative entrepreneurial businesses, the true greatness of our economy, we will put the brilliant minds to work on reaching the dreams they never pursued because they had jobs. Small companies built on great ideas build nations. But they too need easier tax burdens, fewer non-core responsibilities and workers who make what they are worth all the way through their organizations.
Finally, workers who are paid only what they are worth, the definition of the minimum wage, will work harder, get to work on time, reduce drug and alcohol use so that it lessens the impact on their performance and will try harder to be better so they can make more. Immigrants will come and go as job availability dictates. Without a minimum wage they may be able to find better employment in their own countries and go back. Problem solved.
Simple but difficult solutions that would work and no giving away money. We shall see.
Friday, January 9, 2009
Stimulate the Future
I confess I have not read the stimulus package that almost President Obama has crafted, but I have read the many reports as to what it contains and I thought I would throw in my two cents worth as well.
My hope is that Obama makes huge changes to the way our government works. I have proposed many, and there are others. For this package, however, I would suggest a growth initiative rather than a hand out. No one wants a hand-out. They want a future.
Dramatically Expand Small Business Loans for Start-up and Early Stage Companies for all sorts of business ideas, but especially for start-up high-tech, bio-tech and other businesses of the future. Provide money so that those laid-off workers with great ideas can start their own huge new business and hire their laid-off co-workers. Since each small business needs around $400,000 on average to get started, a mere $40 billion starts 100,000 new small businesses. If each business hires 5 people on average, that is 500,000 new jobs. The vast majority of this money will be repaid, with interest, so this is not a sunk cost.
Invest in New World Infrastructure Improvements like a nationwide government owned wireless network that everyone can tap into. Build a system that is compatible with every communications provider and with international systems and rent space to them to eventually recoup the costs. We would train a whole new high tech workforce and allow business people to conduct international business from anywhere. Build it with American made high tech equipment to drive the development of that industry in the US and train even more workers.
There are other things that should be done, but they are too controversial.
The minimum wage is, by definition, an overpayment of our worst workers and this overpayment comes from the pockets of our better workers. It is a nice idea, but in the end it robs from the middle class and gives to the least worthy. Not sure that makes sense.
If we allow freer immigration at low wage rates we would bring back US manufacturing and add higher paying supervisory and management jobs decreasing overall unemployment and help to make the US a producing nation again, which is what builds national wealth.
Reallocate Social Security so that only retired middle class and poor receive it and provide that the tax is on all earned income rather than the current cap which requires the middle class pay a higher percentage. More money in and more money allocated to those who really need it.
President Obama’s plan contains many of the other critical issues, but should focus a great deal more of the total to these.
Alternative Energy Investment.
Bridges, Sewers and other Infrastructure Improvement.
Worker Retraining.
Don't just give us money. Drive forward to build our futures.
I am sure that our wise and dedicated representatives will do what it right. Perhaps my thoughts, if only in principle, will help.
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