Corporate Political Money

Corporate money given to politicians is like cocaine. After tasting it for a while they can't say no. The pusher keeps asking for then demanding a higher price for his goods. After a while, the addict will completely abandon his/her principles and mores to keep the junk coming. And it is just soooo easy. All they have to do is cast their vote and turn their face away from the consequences and have another round of golf.

Cross posted at my Vulnerable Geometry blog.

Occupy This!

A woman I see on the train platform on irregular occasions had just returned from several work trips around the country. Her return to the Baltimore area was marked with seeing the rudimentary protest in the Inner Harbor by people who were creating the beginnings of a local endeavor of the Occupy{insert your location here} movement. All over the country small unaffiliated groups of protestors have been sitting around outside of their chosen protest venue expressing their discontent with the status quo.

Generally, this fragmented movement is targeting the banking and finance industry as being the cause of our economic ills, the barrier to resolving them, and evil incarnate that is destroying the global economy. She said that the protestors were in a useless pursuit with such signs as “Honk if you’re pissed off.” They had no agenda. No demands. No target for their ire.

I mentioned to her that these protests were everywhere and were not coordinated. There was no pre-conceived plan of attack. No particular interest group was co-opting the agenda for their special interests. Everyone brought their own agenda.

When I told her this, she said that it seemed to be a useless effort with no clear direction. I rebutted by saying that “you have to think of them as a metaphor for how the whole economic and political landscape is right now.”

To this she said, “That’s scary.” I concurred. The problem is that the protestors and the people whom they are protesting are equally clueless as to what to do or how to do it. As time passes the protestors are coming together and are streamlining their message. Soon they may actually have an outline message and a spokesperson to take it to the world. One side or the other needs to do this first. He who accomplishes this endeavor will win the battle. Then we all win.

The Seduction of Americans

Americans have been seduced by the consumer economy that we came to depend upon but now are in jeopardy of losing. The seduction is not limited to just America. Indeed, a large portion of the world is in the same predicament. People by the millions subscribe to wireless access accounts that on one side of the equation gives them connection to vital and mundane information, video games with which to exercise their thumbs, mp3 music downloads and video content, the ability to speak their minds in 140 character increments.

There are important uses for the devices in their hands and the broadband radio connection that makes it all possible. On the other side of the equals sign is the billions of dollars reaped by the wireless providers. At $40 per month, each subscriber pays $480 each year for the connection. With 100 million such subscribers, the service providers collectively earn $48,000,000,000. There is no question that the providers are investing many of those billions in more and fasted infrastructure. They are investing in more content and more variety of content. They are buying licenses for TV shows, movies and even more music.

That continued investment is all part of the seduction. Before cell phones, before the wireless hand-held devices, there was… nothing. Well nothing like what we have today. Before the cell phone was the land line where one had to 'find a phone', have a coin, to make a call. No body ever had to ask the question "where are you" when they called you. Parents never called their child during school, nor ever had an important reason to do so. Calling the school was sufficient in any family emergency. School kids never had a need to call a friend until both were home for the day. Women used to be capable of buying groceries without a wireless phone service in their ears. Men on the train could actually commute to work without having an eye and ear on the world. I'm not saying that it is not fun to be able to talk with someone while engaging in an otherwise boring activity, but that is part of the seduction.

We now have a full web-connected wireless generation of adults who have grown up with this connectivity as an expected attribute of life. It is this seduced generation that lacks activism for anything outside its own electronic neighborhood and horizon. While they are thumbing away at alien invaders and machine-gunning enemy soldiers by the dozens, they are not finding interest in external affairs like where their health care dollars come from, how they will be able to afford a house or apartment of their own, raise a family, indeed BE a family with a spouse and children of their own. Originally the video slaughter was confined to the bedroom or basement family room. Now the digital arena had move out to the streets and into every conceivable venue. I recently watched an early teen boy plowing away at his device killing something while his pre-teen sister texted someone all while sitting at a restaurant table with their parents who seemed to be successfully ignoring each other and their two children. Dad got up when his cell phone played the Star Wars Theme and walked outside to speak privately.

The shift in social norms aside, the whole country is neglecting the future while being encouraged to consume even the more online content. My parents admonished me to not watch too much TV when I was a child. There was only so much TV I could watch with two sisters and one television. With the proliferation of media seduction, every family member has a personal screen to watch. The biggest one is reserved for the NFL and hockey games as a priority followed by the Blu-ray movies on down to one variant of CSI on another. People watching TV and surfing endlessly for something interesting on the Internet do not get up and become involved in anti-corporate, socially aware activities.

While standing in hours long lines to be the first person you know to get the next iPhone, or other Smarter Than Thou© wireless device a person cannot pay close attention to what is being done to the environment in your name. One cannot be too concerned what happens to the old device that is discarded in favor of the new one. Don't worry yourself. It is nothing. Here look at this 8G model that is upgradable to 10G when the network is ready.

Consuming entertainment content either by going to a concert hall or downloading to a hand`held device is not in and of itself a negative thing. When it supplants all motivation to shape a survivable future, it is a terrible problem. When a politician can pass a law that cuts the incomes of hundreds of thousands of employees and curtails their access to health care and the electorate reaffirms their office in a recall election, too many people were not paying attention.

As the unemployment level and the number of people living below the poverty line grows to unprecedented numbers and people do not get out and demand something be done about it, there is something wrong. When 50.7 million people have no access to health care other than to visit an Emergency Room and beg, there is something wrong in this country. While there are a multitude of reasons people do not respond to these issues, there is a strong correlation with the amount of wireless content that is being consumed that serves to seduce Americans into inaction.

Debt and Tax Breaks

Debt and Tax Breaks

Repeat after me, "Every formula and equation has an Equals Sign in it."  Irrespective of ones politics, religion, economic posture or ethical persuasion, it is a hard and fast fact that cannot be denied or discounted.

As a nation presided over alternately by Republican and Democratic presidential administrations, Houses of Representatives and Senates we have swayed our allegiances back and forth between extremes.  The pendulum swings between raising taxes and cutting taxes, providing financial support to people who cannot support themselves and taking that support away, funding education and pulling that funding, investing in our infrastructure and neglecting it, fighting wars and ending them, building a great nation and watching it decay.  Always, always the tax revenue to pay for such positive things falls short of the actual costs and we issue debt paper to make up the difference.

In July-August 2011 the nation teetered on the brink in default because the Republican lead House of Representatives decided that the debt ceiling increase that a Democrat President wanted was no long acceptable after 14 debt ceiling increases in a 10 year period, 8 of which were under a Republican Presidential Administration and were used to fund two wars and provide tax relief to about 3 million Billionaires, Millionaires and hugely profitable corporations.  This top 1% of Americans represents more wealth than can actually be counted.  And when Republican legislators turn on the tears of hardship and poverty for their constituent wealthy, they try to equate them with the Average Joe who is truly over taxed.  "We cannot raise taxes on the American people and job-creators," is the cry.  It is as though there is any comparison between the two categories of Americans.  Let's face the Equals Sign.  Three million Americans who have incomes in excess of $1,000,000 per year paying an additional $100,000 would generate $300bn per year in tax revenues.  In ten years they would reduce the deficit by $3 trillion.

So late on August 2, President Obama signed the debt ceiling/spending cuts bill into law.  This bill saved the nation from default on our debt but it did far worse in every other way.  It did nothing to increase our ability to pay down our balance, i.e. increase taxes or remove tax breaks.  This in itself will slow the repayment of the debt balance considerably.  Without additional tax revenues, the full burden of paying the debt balance falls to the people who are now paying taxes and sits on the shoulders of people who previously were supported by the tax/debt funded programs.  Mathematics are inescapable.  Even at the July 2011 debt level of $14.3tn, trying to pay it off with 30-year Treasury Bills using a constant 3% annual interest rate we would have to pay $1tn a year for 20 years to do it.  This includes the current $429bn we are already paying on our debt today.

There is no rational argument that can be made for not balancing our Federal budget with all means available.  But trying to do it with only spending cuts in not a rational approach.  Trying to do it that way makes the least capable people pay the most and it will take the longest while causing pain to the most vulnerable population of the county.

$2.7tn of spending cuts will cause businesses and corporations to lose a lot of profit.  They will have lower gross earnings and therefore will not be able to afford to keep as many employees.  Congress specified the spending cuts level without saying which budgets would be impacted.  If all the funds that are cut paid for $50,000 employee compensation packages, 5.4 million jobs would not be funded and would not exist for the next 10 years.

Most of the budget of Federal agencies goes to employee costs and grants to communities that spend it on consultants, planners, architects, doctors, etc.   Other programs provide direct assistance for food, shelter, medical care, training, transportation so that people have the basic necessities to live and provide for a family.  Since they do not save the money or use it to pay off credit balances, they in turn support local businesses that profit from the money the low-income people get.  In short, who really benefits from a Section 8 housing subsidy payment?  A family gets shelter and the land owner gets the money.  Give a woman Food Stamps – she gets the food and the grocery store gets the money.

It is foolish to think that cutting the amount of spending that Congress has demanded will not have a slowing affect on the economy.  The money that seniors receive from Social Security goes directly into spending on essential goods and services.  That becomes the income that businesses want and need in order to be those 'job-creators' that Freshmen Congressmen and women keep telling us are out there somewhere.

So where will Congress make the cuts?  They most certainly will cut the support for education.  Most Republicans already hate the public school system in this country.  They want vouchers to send children to private schools where they can get a "proper education" free of the Liberal biases and the Darwinian theories.  No Socialism will be taught there.  Now we can expect that states and local counties will have to pick up the lost funds themselves. 

Unemployment Compensation is a dirty word if it must last more than 13 weeks.  Well, two words.  Anyone who is out of work for more than a couple of weeks is not really trying.  They want to be a leech on the workingman who has to pay their unemployment checks. And the unemployed justify their attitudes by figuring that wealthy people will be paying them what they are due.  It seems that UC was alright until about 10 million people needed it and rehire prospects became futile.  It seems that McDonalds is always hiring crew positions. That is unless the restaurant is closing because local customers don't go out anymore and the drive through traffic has stopped due to area unemployment. If a burger or chicken franchise is closing, the local economy must really be in dire straits.

Doctors, hospital and clinics have been hurting for many years as the Medicaid and Medicare reimbursement rates have been cut or did not keep pace with increases in costs. Forty-four percent of the funds transferred from the Federal budget to the states is for Medicaid costs.  When the Federal budget limits Medicaid spending, the states will have to pick up the difference.  Hospital Emergency Rooms have been the method of sole resort for poor people to get medical help.  Hospitals are under statutory obligation to serve EVERY person who presents himself inside their doors.  No one pays directly for that treatment but the hospitals do make up part of the unpaid balances by charging higher service fees and costs for a bed over night.  We can lower their direct payments, but we will pay for the costs anyway.

Maybe there will be an upside to this balanced budget hoopla.  We won't be able to keep spending tens of billions each month for wars that are financed with the sale of Treasury Bills.  We will have to pull up the stakes and come home.  Did I hear a "Yeah, right"?  In a manner similar to the obsolete style of providing medical care in this country we must overhaul our military philosophy.  Hundreds of thousands of men and women will come home from tours of duty to NO JOB.  No prospects for employment either.  Maybe if wealthy conservative citizens feel threatened, they will agree to pay some more of their money to fund the wars?  They can start by reimbursing the rest of us for the $1.07tn we have already spent in Iraq and Afghanistan protecting their business interests and supporting their defense contractors.  I'm going to guess, not.

Beginning in August and continuing through the next 6 months about 1 to 1.5 millions jobs will evaporate due to the lack of Federal funding that states will not be able to compensate for.  The economy is a going concern as business investors would say.  When any business suddenly loses 25% of its revenues, they cannot immediately stop 25% of its expenses.  The relationship is not a linear, one-to-one, relationship.  However a business is far more able to summarily dispose of their workforce to contain losses than is a family.  When the income of a household is reduced, the parents cannot just turn a child out of the street.  They cannot set Gramps out on the sidewalk with his old leather suitcase and hope he will survive.  Actually, the more hardhearted people CAN and DO do that.  But we are supposed to be a civilized highly developed nation and such things are not supposed to be necessary.

We instituted support programs that serve to make sure that people have shelter, food and medical attention.  We added programs specific to caring for children.  Now that the going is getting tough, fiscal conservatives cry that they are being charged too much for that support.  Maybe if all the very wealthy criers were to shoulder a larger share of the costs, the lesser wealthy fiscal conservatives would not have to be like middle class tax paying Americans and pay as much.

Useless Parking Improvements

Useless Parking Improvements

The BWI parking garages recently completed a long awaited reopening of the Garage 1 first floor area that was designated as permit parking for persons with disabilities. The single lane of permit spaces reopened during the first week of May along with the relocation of permit spaces from the other side of the bus lane over in Garage 2.  The lane of permit spaces in Garage 2 were decommissioned as permit spaces and restriped for use by everyone, everyone that is except anyone who needs a space wide enough to get in/out of their car using a wheelchair.

As anyone who parks at the BWI rail station knows, first floor spaces are a coveted resource in short supply.  They are coveted by persons who want to get out of the garage first to try and avoid the congestion on Amtrak Way up to Route 170.  People with nominal physical anomalies and no need for extra parking width obtain official Maryland Disability Parking Placards by filling out the self certification application and getting a doctor to sign it.  Now they have legal access to the coveted first floor parking spaces.  Some posers conspire to use permits that were issued to spouses, friends or other relatives.  A few obtained the permit while inconvenienced by a temporary condition and now have carte blanch to get out of the garage easily.

The irony of posers who claim cardiac conditions or bad knees is that in order to use some of the permit spaces, they need to walk or run the length of the garage to get to their cars rather than being on one of the higher levels adjacent to the elevators.  Anyone who is running to their car and is parked in the permit area is by definition a poser, a liar and a cheat.

The project to consolidate the permit area into one garage and increase the numbers to 56 spaces was a waste of money.  It took less than one week for the over abundance of posers to fill the spaces before 7:30 AM leaving persons who use wheelchairs to seek spaces on the upper levels on the ends of aisles such that no one parks too close and blocks access to the car.  At best estimate, 50 of the 56 people using the permit area are posers who have no need for wider spaces or shorter walking distances.  I stand by my characterizations of the commuters who use the spaces and challenge any of them to prove me wrong.

I also assert that even if the garage authority designated the entire first floor levels of both garages as permitted space, they would soon fill up with parkers who have placards and license plates that allow them to not be cited by the Transit Police for parking violations.  There is an over abundance of people who have placards who would use them if they could to park on the first floor.

It's All Tuna!  

Obama's Spending Growth

There are two ways to spend Federal Dollars.  Spend them on "operating costs" such as Medicare, Medicaid, Military, Social Security, interest on debt.  They may also be invested in "capital costs" such as road and rail infrastructure; replacement infrastructure for water, sewer and "wire" utilities; new sources and distribution of energy; research and development ways to derive more benefit for our dollars; education and training of the replacements and expanded staffing of our medical services.

There are two ways to raise the funds that we spend and invest.  We can tax various activities and assets to generate revenues and we can borrow the funds from people and countries that have a trade surplus with the US.  The FED issuing more dollars into the economy is merely a form of borrowing against the future. 

Borrowing to pay immediate operating expenses is really a bad decision.  It is the same for the nation is it is for an individual or family who charges a lot of expenses on a credit card when there is insufficient income to pay the balance due each month.  Many people got into difficult position with their debt when they counted on a pay increase or bonus that did not materialize.  The setback may also be attributable to an unexpected expense such as illness, injury or layoff.

Borrowing to build for the future or facilitate lower monthly expenses is a good reason to borrow.  College educations, continuing education credits, replacing an old car, replacing an old furnace all can bring about a better financial situation down the road.

Not taxing enough assets at a high enough rate for our immediate operating expenses leads to bad borrowing.  Bad borrowing leads to present people leaving a financial burden for the next generation if it is not paid up within about 20 years.  Bad borrowing is repeated each year such that the debt can never be repaid by those who benefited from it.

Borrowing to build a 50-year bridge is a reasonable debt if the balance is paid off in the 50 years that the bridge will stand.  Borrowing to build a power plant of any kind is a reasonable debt since it will keep making electricity for many decades and a second and third generation may still benefit from it.

Obama's problem today is that it is on his watch that all the neglect of several decades has come together with the reduction in revenues that the nation needs for paying the obligations.  We did not tax enough when we needed to do so.  We did not pay down our debt balances.  We spent one trillion dollars on a decade of war in two countries.  We watched millions of jobs move beyond our borders.  We allowed ourselves to have a massive trade deficit with China and the OPEC nations.  A lot of that trade deficit came back to us as credit on easy terms, therefore we were not eager to stop it.

We watched as the largest population cohort, the 79 million Baby Boomers, aged from worker status to Social Security status while doing nothing to prepare for the cost of that money.  They aged out of Blue Cross, et al, into Medicare.  2011 is the year that the floodgates open for Medicare enrollments.  As people reach 65 they become eligible to start collecting Social Security payments, too.  We can make President Obama shoulder the burden for the debts incurred on behalf of those millions of Americans.  After all it is on his watch that it starts.  Problem is that even with a second presidential term in office, the problem of retiree income and health care payments will long out live the Obama Presidency.

The growth in SSI recipients will continue through 2039.  After that year, barring any major life extending factors, the over 65 population will begin to drop.  By 2044 every Baby Boomer will be over 80 or dead.  Although the Baby Boom population will be aging out of the system, there is a second wave of future beneficiaries, not quite as large, following close on their heels.

Congress, economists, and visionaries need to figure out how we will provide for our non-working parents in their last few decades of life.  One political party wants to curtail SS and Medicare in order to contain costs.  It is ironic (read idiotic) that their mouth-pieces in the pseudo-news media are the ones who are warning that their opposition wants "death panels" that will ration health care and turn medical decisions into a government bureaucracy.  There is no faster way to kill off elderly people by the thousands than to have them starve in cold dark quarters because they have no money for food and heat or access to doctors.

It is not just the publically funded retirement income and health care that is growing without control.  The lack of control is not for a lack of trying.  The lack of control is due to the increased numbers of people who each year age out of their jobs.  Their employer funded pensions and health insurance continues to mount.  As the balance sheet accrues more retiree expenses, more of the company income must be applied to those accounts.  This means less profits for the owners and shareholders.  This means higher prices for the products and services.  Higher prices make the business less competitive in the global market where foreign laborers either get health care and pensions from their government or they get nothing at all.

The bottom line to us is that we need a new paradigm of funding our retirement and health care costs.  In our purely Capitalist system of business where all the means of production are in the hands of private citizens and private businesses, the only method of funding for our retirees and other non-working people is to levy a tax, or legislate that an employer pay all the bills.

President Obama has had the supreme misfortune to have been the man elected to the Presidency at the crossroads of global change.  He is faced with powerful forces that that no other American President has had to face.  His war legacy will be the "War on Global Economic Collapse."  It is a WWIII even though no Nukes are being hurled at each other.  The fact that only a few burning tires and minor demonstrations have yet perforated the curtain erected by partisan media on both sides is a testament to the leadership of our President and the many other national leaders who are trying to keep a smoldering world from bursting into flames.  When America went to war in Afghanistan and Iraq, the ultimate cost of doing so was unimportant to Congress.  We have spend more than a trillion dollars so far without a single tangible benefit or hope that any part of it will get paid back to the American taxpayer.  Because we borrowed that money, our descendants unto the fourth or fifth generation will be paying that bill.  Congressional  partisans quibble over a few millions in earmarked funding while demanding taxbreaks or taxes to balance a budget and not stymie the economic recovery.  In all this wrangling and rancor we loose sight of the need to find a solution to our poor budget practices and invest in ourselves.

We have been willing to spend $1 trillion on our current military wars.  How much are we willing to pay for keeping our economies from being destroyed?

 

Stimulus Funds: Misdirected Efforts

In most situations one can choose to take one path or another and end up in the same place either way.  That is true for economic activities too.  If the Federal government did nothing to stimulate the economy, eventually the economy would recover all by itself. Eventually the GDP will return to pre-recession heights and the economy will be healthy once again.  If we followed that course the Milton Friedman devotees would be excited beyond belief.  With the policies that are being implemented now, the economy will recover and the Keynesian Economists will be the ones who celebrate while the Friedman say that it recovered in spite of the spending and it would have recovered faster if they were in charge.  So pick your side.

The reason we need the government to intervene with public spending is that while the economy is healing itself and returning to normal humans need to eat.  They need to stay warm in the winter and obtain medical services in order to survive until the post-recession economy once again has a place for them.

One of the problems is this country has chosen to not repair the infrastructure we built at the same rate as it is decaying.  The decay is occurring at a very predictable rate and the required spending is a calculable number.  In not keeping pace with the required repairs, the Budgetmen look like they are watching our money, but all they are doing is creating a future debt that will be passed on to our progeny.  Fiscal Conservatives claim that our monetary debt is irresponsible while ignoring the fact that the physical debt continues to mount with each day that infrastructure decay is ignored.  There is no difference between the debt obligations of borrowing money and that of ignoring the spending that will be made eventually.  Infrastructure decay will not go away on its own.

Infrastructure decay will not go away by Friedman Economics either.  There is no corporate entity in this country, no marketplace, that will benefit from replacing the broken sidewalk pavement in a city or small town.  There are no businesses who will step up and rebuild a sewage treatment plant gratis.  There are no wealthy families who seek to keep the estate tax on hiatus who will donate the untaxed assets to replace all the 100 year old water mains in the city.  For this we need taxes and legislators who have the guts to stand up and say we need to spend the money now.

Over the last couple of decades of deficit spending and debt creation we have amassed a physical debt of several trillions of dollars.  Wherein we may have needed to dedicate $200 billion to infrastructure replacements we actually allocated $100 billion.  To make matters worse we borrowed much of that money.  So for a period of ten years we have a deficit of $1 trillion to make up for.  These numbers are not exact.  No one has tracked the actual amounts nor committed to detailed studies of all the items that have been neglected.  It is only when Mississippi River Interstate bridges collapse or California gas transmission lines burst and incinerate 169 houses do we suddenly and temporarily take notice of our failings.

And like monetary debt incurring interest, physical debt incurs interest in the form of higher costs at later dates.

Stimulus spending needs to do two things.  First it needs to satisfy human needs like food and shelter.  Second, it needs to accrue value to the future.  When the Bush tax rebate of $300 was distributed, most people used it to pay a debt.  Most of the money went directly back to a credit card company.

If cash is given to a poor person, let us say a single mother with two small children, the children will get food to eat and be warm on a January night in Ohio.  That money will go to the grocery store and home heating utility company.  From there it will go to the checkout clerks and truck drivers who delivered the food.  It will also go to the utility company stockholders and gas price speculators.  At the next exchange the farmer, manufacturer and jobber will get the money for growing, producing and shipping the food. The utilities will invest some of the revenues in replacement infrastructure and use funds to buy the gas it sells.  In a greatly simplified money stream, the funds end up at the bank when all the business and mortgage loans are paid on time.

The other schema is to give the money directly to the banks and leave out the littleman.  In that process, the bank gets the money and no one else derives any benefit from it.  The economy is short circuited and the large wealthy people end up with the cash and we get nothing for it.

Let's look at $300 billion in bank bailout funding.  What did we get and what could we have gotten?  We made it possible for some very wealthy bank employees to get huge bonuses and salaries even as the economy tanked.  The intended liquidity of funds did not happen.  Yes, many of the banks paid back the money, but we got hundreds of thousands of mortgage foreclosures at the same time.  Every foreclosure means a family had to move somewhere else.  Mostly it seems they moved in with friends or relatives since the rental market tanked too.  Maybe they left the country to follow their outsourced job.

Now $300 billion disbursed to 10 million home owners would allow and average of $30,000 per mortgage.  A 3 year recession is 36 months.  That would mean that a subsidy of as much as $833 per month could have been made for each of 10 million mortgages.  It would not have to be free money.  It could be taxable.  It could be repayable at the sale of the property.   The bottom line is that all the home owners who lost their homes could have been spared the suffering had the stimulus/bailout plan placed the funding as the bottom of the scale rather than at the top.  If the money had been invested at the bottom, many people who lost jobs and therefore their homes would have been in a better position.

Stimulus politics aside, we do need to invest in our infrastructure, now or soon.  It might as well be now when we need to stimulate employment.  We need new sidewalks. We need to repair bridges.  We need to bury our overhead utilities.  We need to redevelop our energy systems.  We need to overhaul our sewage treatment plants and water distribution systems.  We need to do it today or tomorrow.  You take your pick.  Today stimulates our weak economy.  Tomorrow it is just another perfunctory project that needs to be done and there is no political strength to get it done.