Sunday, April 20, 2008

Prisons As A Cost Center

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In the American criminal justice system, people are Currency to be passed around the business circle as fast as possible, like that Twenty dollar bill mentioned before.

Prison inmates create a revenue stream even though it is tax money that funds the system. As long as the total expenditures remain only a small fraction of the total governmental budget, it remains a very good part of the economy. Just a few of the economic benefits are:

1. Contractors who build prisons are paid
2. Guards are paid their salaries
3. There is the prison food service
4. There is laundry, uniforms and facility upkeep.
5. There are bail bonds to be bought

Just recently in California (1999) it was disclosed that MCI had a contract with the county detention facilities to provide all its prisoner phone call services. Prisoners were allowed to only make collect calls at premium prices. The government received a 44% commission on the proceeds that were charged to inmate families. A $3.00 per call surcharge was collected in additional to the highest per minute rates charges to any customers. The funds were paid into the state general fund to the tune of about $16 million annually.

In the United States we have about 2,000,000 annual inmates. Being housed at $20,000 per year generate a $40 billion revenue stream that fuels the economy. Some of the convicts are violent and dangerous people who have murdered, raped, molested children and other such heinous crimes. There are those who got caught up in the minimum sentencing laws for less than worthy reasons. All of these people have been made into revenue generating cost centers at the expense of their freedoms. They are part of the $40 billion penitentiary enterprise that has become a growth industry in US. We seek to incarcerate everyone who disagrees with a legislative majority opinion of what is okay and what is not. Although there is no single company or jurisdiction to whom the benefits of this industry accrue, a great many people build their lives around holding and housing inmates irrespective of what it is that landed them in a cell in the first place. They, like the Economy, do not care. A person is committed and it is the penal system's job to hold that person as long as specified. They, like the Executioner, are not judging the condemned. They are merely doing their job.

Police officers also benefit from the petty crimes committed to pay high prices for smuggled narcotics that result in those addicts being incarcerated for their drug addictions. With only 1 million police officers and a salary of $20,000 the benefit to the mindless emotionless economy is $20 billion annually.

Every large business enterprise lobbies Congress to pass legislation that will benefit that business. Loggers lobby for access to National Forests. Oil companies lobby for access to artic wildlife preserves. Pharmaceutical companies lobby to get their drugs on the market and to limit the liabilities of undesirable effects of those drugs. Even insurance companies want relief from huge damage awards or having to cover high risk or merely overly frequent occurrences of loss. So the beneficiary enterprises that earn revenues from the high levels of crime also lobby to create a "better environment" for their goods and services, too.

What better way to garner support for their industries than to whip up a frenzy of negative public sentiment against Crime! and Criminals! Without regard to who they are or what they have done? Now remember, whether we spend our millions of tax dollars on warehousing people or on fixing the problems that create the need for warehousing, the economy benefits by the total dollars spent, not on what it was spent on or who received the money. The only variables are, which people get a paycheck - the social worker or the prison guard, the drug clinic doctor or the warden.

In Baltimore, MD, alone there are an estimated 60,000 heroin and cocaine addicts either using the white powdered type or the rock version called Crack. Minorities and urban dwellers are more likely to be addicted to the Crack version while the Caucasian and suburban dwellers are more likely to be addicted to the powder. Penalties for possessing or selling the Crack version holds prison terms that are two to ten times longer than for the powdered stuff.

A typical daily consumption costs $100 per addict. That becomes $6,000,000 per day in total consumption. Let us assign half of that cost to the people who can still hold gainful employment and pay for their habits with legally obtained funds. The other $3,000,000 per day has to be raised through crime. At 10 cents on the dollar for fencing stolen goods and pawn shop loans, the amount of stolen property is $30,000,000 per day. Annualizing that number it becomes $10.95 Billion to support the habits of Baltimore's cocaine addicts. Now apply that number to the 50 largest cities in America and that's $547.5 Billion annually.

If I were a retailer selling electronic devices and other portable things like watches, rings and gold chains, I would love the trade that drug addicts create for my business. If I were a manufacturer of such things, I would likewise appreciate the market that the drugs create for me. In neither case would I have to have any connection to the production, transport, import, sale or buying of controlled substances in order to realize this benefit.

Saturday, April 12, 2008

Tuna! Why is it Tuna?

It's All Tuna!

In 1978, while visiting in Nahant, MA, I heard a story from a friend and successful businessman about a shipload of tuna sitting in a North Sea harbor waiting to be unloaded. The owner of the cargo received a phone call telling him that the ship was being denied access to the port by government authorities. He desperately needed a way to unload the tuna anyway he could. He promptly located a buyer to take it off of his hands by selling the tuna before it rotted at a fraction of its retail price to minimize his losses. "I have a great deal for you, Bill. You can buy this tuna that is sitting in the harbor and resell it at a profit. You can make a fortune." Bill bought it and saved
the owner from total ruin on the shipment.

Bill called on a friend of his to be a buyer for his tuna. Bill said to the buyer, "I have a great deal for you. You buy this tuna from me. I'll make a profit. You sell it and you can make a profit, too. The price to you is still way below the market price."

So John bought the tuna, making a profit for Bill. John knew a man who owned a supermarket chain and offered the tuna to him at a profit. Kevin bought the bill of lading and arranged to have the ship eventually unload. After a few days of dealing, the ship was unloaded and the tuna was distributed and stocked in the stores.

It was only a few days later that the reports started to come in. People were being made ill by the tuna. Kevin called John to complain. John made a hasty call to Bill and Bill called the original owner. He was more than a little bit perturbed. The original owner blew his stack, "Hey, it's not my fault. I thought you understood that the tuna was not for eating - it was for buying and selling."
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Author's Note: The book cover images in the side margins of this blog are my own publications of eBooks available at both Amazon and B&N. Please take a moment and go to the sites and read about them. Then if you like it, buy one or two.

Political Concepts Of Wealth And Taxation

Political Concepts Of Wealth And Taxation

· The Republican concept of taxation and wealth building is based on the supposition that an educated few well capitalized people and corporations know best how to run a nation and conduct business. It is based on taxing the vast middle class to pay for the needs of the lower class population. If the monetary needs of the government cannot be met by middle class taxation, then vast borrowing is in order. This process provides a two-way benefit to the wealthiest of citizens. First their taxes are lessened giving them more funds "to invest." Then they invest in such things as 30-year Treasury Bills that accrue interest to the investor and must be paid with funds raised from taxes on the middle class. The only people and businesses that can invest in a 30 year instrument is someone who has ample funds for all their immediate needs and will be investing only to benefit its second and third generation descendants.

· The Democrat concept of taxation and wealth building is based on the supposition that many people will benefit from having a personal stake in the future by having the ability to build wealth while taking care of the less fortunate population who needs financial supports. Taxation should be based on the ability to pay and the concept that individuals who concentrate vast wealth do it on the labors of the middle and lower classes that struggle to make a living wage. Further beliefs are that the wealthy will not put their funds where the masses need it but rather where it will concentrate the most additional wealth for themselves.

· The Royal concept of taxation and wealth building is based on the supposition that taxpayers are superfluous in an economy that is awash in wealth that can be pumped out of the ground and sold for whatever minimum price the ruling family members choose among themselves. The price can go up from that base depending upon the market forces, i.e. how badly the users want it and how much they are willing to pay all the intermediaries along the way. Wealth accrues to the ruling family and the people merely get in the way. Oil production is a form of mining that indeed builds wealth.


I have a difficult time distinguishing honorable intentions to help humanity and the profit motive to make a big score doing something that just looks like helping humanity. You can see it in the books that tell you that every illness is treatable with the right combinations of foods and herbs, that you can only learn about if you buy my book and read it. You can’t borrow the book or listen to someone tell you the truth. You can only reap the benefits if you buy the book. What else don’t I know? That is what will hurt me.

Every drug on the market, no matter how beneficial it is, generates huge profits for the pharmaceutical company that developed it. And, yes, there are side effects that can be worse than the illness it treats. But if you really want relief from your tri-literal malady, you’ll be willing to ask your doctor about this new wonder drug.

Every day researchers and marketers discover a new ailment with three or four letters that, only coincidentally, has a recently discovered treatment. It’s never a cure. There’s no future in cures. The book lists the cures, though. What might have been a great intention at the start has become perverted into a profit center and a way for investors to get a piece of the action for nothing more than lodging some money in a brokerage account.

US medical science is first and foremost a for profit business. Companies must make money and a return for its investors. The companies must protect their assets, i.e. the drugs, with patents that assure that they have total control over the most important drugs that humanity needs. Not only do they need to cover the costs of R&D they must make Billions off the sales of each preparation in the US market while Europe and other foreign regions are able to buy the same drugs at far better prices.


Wheaty Oaty Ricey Tuna 

Although food and beverage manufacturers all try to keep the cost of their products low, they never endeavor to get them to the lowest level possible. What's the use of going too far below the competition? As long as the dominant companies have their comfortable market share, there is little need to go to extra ordinary lengths to make the product less expensive. Actually in many instances, the cost of the product is small compared to the cost of putting that product in a six color pressboard box or in 16oz plastic bottles. Often the packaging cost is greater than the value of the food it contains. In short, the consumer is paying the manufacturers for colorful enticements to buy the brand named item rather than for the nourishment that product provides. And when one considers the prolific numbers of snack food items on the shelves at $2.49 to $3.99 per bag, one can see that the heavy emphasis is on the impulse and mindless consumption part of our diet.

The highest markup can be made chipping and dipping a 30 cent potato and packaging it in a shiny metallic plastic bag for $3.00. After all that bag isn't cheap. Twelve ounces of Wheaty Oaty Ricey flakes in the box costs twice that of a one pound loaf of bread in a simple plastic bag. But if the manufacturer would forego to the colorful packaging and be able to charge the single dollar the food is worth, then the store that makes only a 2% markup would only make 2 cents. Now that is hardly worth stocking on the shelf.

A lot of people and a lot of companies piggy-back on the sales of 'hot items.' Remember the Cola advertising competition that draws a billion dollar annual budget. There are a lot of people behind those costs who derive their livings from the consumer who wants a cold sweet or salty drink and a crunchy potato treat. If the welfare of the consumer were important, we would sell our products without all the hype and pass the saving on to them. But then a lot of people would not be able to earn their livings.

The epidemic of obesity in this nation is part and parcel of the lack of concern that the economy has for the people who consume the goods and cycle money through the GDP. Our companies pound the airwaves with inducements to eat, eat, drink and eat some more. They produce foods and snacks that contain sugars, salts, fats and carbohydrates and bombard the eyes and ears of everyone with the message to consume it. And we consume it.

We consume it to the point where soon an economy airline seat will be obsolete. Our children have reached the point that even the most rigorous exercise regimen cannot offset the calories they consume. Just one teaspoon of sugar daily equals 16 pounds of body weight when consumed in excess of the caloric needs of the person and his/her activity level. One regular 12 oz. soda per day is approximately the same as that raw sugar. But carbonated sodas and salty carb and fat snacks constitute a multi-billion dollar segment of the GDP. So eat it up. Our corporate sponsors need the revenue.
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Author's Note: The book cover images in the side margins of this blog are my own publications of eBooks available at both Amazon and B&N. Please take a moment and go to the sites and read about them. Then if you like it, buy one or two.