The draft recommendation by the Deficit Reduction Panel surprised me. Not only did it say many things that needed to be said, but it attacked many of Washington's sacred cows.  It's about time someone did that -- after all, Washington has too many.

Personally, I like their idea of simplifying the tax system to get rid of loopholes and breaks.  Of course, we know that won't fly -- companies stand to lose too much money.  Google alone ("Do no evil, pay no taxes") paid an effective tax rate of 2.4% last quarter.  If they contribute 1 year's tax savings to lobbying to keep their tax breaks -- that is about $1 BILLION to use for lobbying.  According to an article on Bloomberg, the government loses out on nearly $60 billion annually due to these loopholes.  Individuals will lose breaks as well, such as the mortgage income tax deduction.  Some will pay more, some will pay less.  It's a trade off.

But I see the real threat to this is not the corporations.  Its America itself.  There was a brief period of American greatness based around "Ask not what your country can do for you -- ask what you can do for your country."   It got us to the moon, an achievement which we have yet to surpass or even come close to.  That era is long gone.

What has replaced it is frightening.  It's a society where nobody wants to take responsibility or contribute.  It's been replaced by a call where everybody pays too many taxes and nobody is willing to accept cuts to their programs.  You can't cut social security or medicare -- it's not fair that our seniors might have to be willing to share the burden.  You can't cut a military procurement program like the F-22 that the military wants to cut -- 44,000 jobs might be lost to save $44 billion.  You can't cut the military 'cos that makes us look weak.  You can't cut farm subsidies -- the farmers have waaaay too big a lobby and they worked hard for those subsidies.  I could go on and on...

What can you cut?  You can cut education because children don't have a lobby to fight for them.   You can cut the EPA, because it makes rules that cost big business money while improving everybody's lives.  You can cut Medicaid because nobody wants to fight for the poor these days.  You can only cut things that don't have lobbies working for them.  You can only cut things that don't have lots of money which gets dumped into campaign funds.  And who says you can't buy democracy?

If we are going to solve this mess, then there are 2 things that are clear:  (1) you're going to pay more taxes, and (2) you're going to have to suffer with some of the cuts.  Personally, I say yes, raise the taxes.  Do it gradually over a period of time so there isn't a big shock to the system.  And let's debate what we're going to cut as a nation, but let's keep the lobbies and special interests out of the debate.

Free Trade? That'll be $14.95, please...

I read the comments Obama made about Free Trade last Sunday.  And while I agree with them in theory, unfortunately, there is no such thing as "Free Trade".

There are always strings attached.  Sometimes, they are very clear -- China, for example, has the currency manipulation issue.  This is pretty cut-and-dry; by manipulating their currency, China keeps their exports competitive and probably costs everybody else lots and lots of jobs.

But other costs are truly hidden.  Take, for example, the environment.  In the US, if you produce toxic chemicals, guess what?  You have to dispose of them properly and safely.  In other countries, you dump them wherever.  By saving a dollar in waste disposal costs, we get to buy some goods slightly cheaper at a cost of destroying the planet.  Or, more likely, by pushing the cost of cleaning up the toxic mess to our children, or our grandchildren, ...  Again, this costs us jobs only this also destroys our planet.



I remember the Wall*Mart advertisements talking about "no matter where you shop, Wall*Mart saves you $3,000 a year!" -- or something like that...  How about this?  "We save you $3,000 but your grandkids will be paying that back 10x over!"  That's probably more apt.

What is truly frightening is that this "Free Trade" begets more "Free Trade".  The United States can no longer manufacturer most of what it consumes.  Thus, we now need free trade to survive.  Think of it this way -- when you buy an iPhone, it came from China.  Your shirt came from the far east.  My Levis came from Egypt.  My computer came from Taiwan.  The mouse from Vietnam.  In fact, looking around my desk, only the paper things were probably "Made in America" -- assuming I count Canada as part of America, that is...  We need this free trade to survive.

 

It's the Economy, Stoopid...

What happens when the economy doesn't get better?

Good question.  Right now, the Fed is using Quantitative Easing, which is essentially the last tool in their playbook.  After this election, they must feel like a quarterback where everybody knows he's going to try and sneak it up the middle.  If it works -- great, if not, the other team probably gets the ball.

And when that other team is recession, that's not good.

The new congress won't pass any further stimulus.  That is pretty clear.  The "Voice of the people" dictated that.  It's all going to fall to private industry to get us out of this mess.

That said, banks have a lot of uncertainty on their balance sheets, with bad loans, the foreclosure mess, the possibility of having to buy back billions of bad mortgages from the government.  So far, you can't rely on them to help.  The manufacturing sector has moved abroad; and even then you need people who want to consume the goods.  The service sector relies on a strong middle class who demands services -- and recently, that middle class has been shrinking and the poor have been rising...  There is infrastructure -- but construction, two of the largest contributors -- is hurting.  There are too many unsold houses and too much empty commercial real estate.

When we get to the point of saying, "We need another round of stimulus", how do we deliver it?  Tax cuts?  Well, people are saving the money and not spending it; as a result, they don't have nearly the bang they should.  Sure, the banks get back some of their funds -- but they aren't loaning it out.   Also, if you give me a tax cut, I'm probably going to invest it.  Investing is good for the economy, right?  Well ... sort of.  I'll invest it where the government is committed to growing a strong and prosperous middle class.  You know, places like China, India, Brazil...  That leaves spending -- which congress will be trying to cut.


So, what next?  You had best be hoping that things just get better on their own.  If that happens, people will probably then give the Republicans lots of credit for having done absolutely nothing, having already forgotten they created this mess in the first place...

Election Thoughts...

Yesterday was election day.

The thing that struck me more then anything was driving home, the sheer volume of signs that littered the median.  At the corner by the BP station, there were probably a dozen signs advertising "Bill Brady for Governor", "Mark Kirk for Senate" and "Dold for something".   Outside of the school where polling was, there were dozens more.  All of them -- with one single exception (he was independent) -- were for Republicans.

What really bugs me about this?  All these signs were posted on public property.  Where I live, it is illegal to post election signs on public property.  You can't post them on the medians.  You can't post them at a school.

These people are running for office and will be put in a position to write our laws.  It would be nice if they actually respected them.


Another quick note ...

I just watched a city-owned truck drive by my office and pick up the abandoned and forgotten election signs.  How fitting -- taxpayer money going to clean up the mess left behind by a bunch of Republicans!