Category Archives: Fiscal Policy

Government Shutdown – Partial – OK, But What’s Next? Default?

Paul Krugman, PhD

Paul Krugman, PhD, Nobel Laureate

The House Republicans, led (or maybe followed) by John Boehner, R, Ohio, are ready to shut down the government in order to force President Obama to delay implementation of various components of the Affordable Care Act, aka “Obamacare.”

They are not shutting down the entire government. The government will halt so-called “non-essential services.” The EPA, FDA, IRS help desk will be furloughed. This is precisely what Grover Norquist, Charles and David Koch and other big Republican donors want. It’s what they mean by “Starve the Beast.” Oddly enough the shutdown does not include Congress, which will remain in session, so our Representatives in the House and the Senate can continue to work, or at least draw paychecks. Continue reading

Occupy Wall Street, Obama, The American Jobs Act, Veterans & Patriots

The same way that they filibustered the The American Jobs Act of 2011, Senate Republicans filibustered the Veterans Jobs Corps Act of 2012. According to the Examiner, here,

the proposal failed 58-40, with most Republicans voting against it. Sixty votes were needed to overcome the procedural hurdle and push the bill toward final passage. Five Republicans – Sens. Scott Brown (Mass.), Susan Collins (Maine), Dean Heller (Nev.), Lisa Murkowski (Alaska) and Olympia Snowe (Maine) – voted with all 53 members of the Democratic Conference to sidestep the procedural roadblock.

I know the Republicans CLAIM to be “Fiscal Conservatives” and “Patriots” but the evidence shows that they are neither.
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Senator Kerry: “We need to invest in our infrastructure.”

Senator John Kerry

Senator John Kerry

I met Senator John Kerry at the Harvey Nash Inc. Leadership Breakfast at the Plaza Hotel in NYC on Friday, March 2, 2012. He spoke unequivocally about infrastructure, energy, mass transit, and foreign policy, saying,

We need to invest in our infrastructure. The people who talk the loudest about ‘American Exceptionalism’ are destroying America.

Sending our children to college is competitiveness, not elistism.

“The American Infrastructure Financing Authority,” Kerry said, “would generate revenue by loaning money to people to build infrastructure. It has bi-partisan support. It should be a slam-dunk. But we can’t get it passed because of Republicans intransigence. The American people have to force the Republicans to compromise and force the Democrats to stand tall.

In the ’70’s we were #1 in college graduates; now we’re 16 th. We were #1 of the G 20, now we’re 5th.

The Acela can go 150 mph – and it does for about 18 miles between New York City and Washington, DC. It can’t go 150 mph over the Chesapeake Bay bridge because in doing so it may wind up in the Chesapeake. It can’t go 150 mph in the Baltimore tunnel because the vibrations may damage the tunnel.

Acela

The Acela

Editor’s note: The Acela runs it’s top rated speed for 16 miles on a 220 mile trip – about 7.3%. The trip on regular Amtrak is 4 hours. The trip on Acela is 3 1/2 hours. That’s about 62.9 mph.If the tracks would allow the train to make the run at it’s design speed of 15o miles per hour the trip would take an hour and a half, not 3 1/2 hours. Average 125 mph, it would take about an hour and 45 minutes.

Image of wall of Bridge to the Holland Tunnel

A few years ago we were first in manufacturing solar energy. Now China has taken over that industry.

China spends 9% of GDP on infrastructure. Germany spends 5%. We spend less than 2%.

We are using the infrastructure that our parents and grandparents built. And it’s crumbling!

Wall of the bridge leading to the Holland Tunnel

Wall of the bridge leading to the Holland Tunnel

In order to compete we must rebuild our infrastructure – and send our children to school.  (And sending your children to school is not elitist.)

Kerry spoke like a Keynesian:

Saving GM and Chrysler saved about 1 million jobs. Had they been allowed to fail Ford and all the suppliers, and all the clothing stores, food stores, delis, diners, restaurants – all would have failed. Saving the American auto industry saved the midwest from a Depression. That’s not socialism; that’s what government is for. And Ford, GM, and Chrysler are profitable!

Editor’s note: Ford did not take TARP money. GM, Ford and Chrysler are building cars people want to buy, and people are buying them.  The following chart shows market capitalization, stock price, earnings per share, price earnings ratio and net profit margin for GM and Ford. Chrysler is not included because it is privately held.

Company Valuation Stock Price EPS P/E Ratio Net Profit
(Billions) (3/2/12) Margin
Ford $48.4 $12.72 $5.01 2.54 14.84
General Motors $41.4 $26.45 $4.58 5.77 4.06

According to San Francisco Chronicle / Bloomberg, here,

U.S. auto sales accelerated to the fastest pace in four years …  a 15.1 million seasonally adjusted annual rate, exceeding the 14.2 million pace that was the average of 17 analysts’ estimates… the best since February 2008 when U.S. sales ran at a 15.5 million rate,

GM deliveries rose 1.1 percent to 209,306 cars and light trucks, beating analysts’ estimates for a 4.8 percent decrease. Chrysler sales increased 40 percent to 133,521 and Ford Motor Co.’s climbed 14 percent to 178,644. Toyota Motor Corp. and Honda Motor Co. deliveries each gained 12 percent, while Nissan Motor Co. sales rose 16 percent.

Yet Romney, Santorum, Gingrich and Paul persist in the lunacy that bailing out GM and Chrysler was a mistake.  If they don’t want to govern, why do they want to be President?

Kerry also said:

Successful businesses today have a lot of cash. But the executives are reluctant to invest because the economic climate is too uncertain. That’s why government must step in.

This statement could have been made in 1932 by Franklin Delano Roosevelt or John Maynard Keynes.

Kerry criticized Santorum. “Saying my grandfather was a coal miner, so I could go to college, go to grad school, get an MBA and a JD, then get elected to the Senate, then make millions lobbying, and tell you not to send your kids to college…” If that’s not elitism and demagoguery I don’t know what that is.

The current political climate in Washington is terrible, that’s why Olympia Snowe is leaving the Senate. The Republicans are intransigent, they refuse to compromise; they are focused on destroying Obama’s Presidency – and will sacrifice America to do it. When G W Bush was President it took 30 days to get a judge approved. Today it takes 100 days, maybe 200 days. There were two (2) filibusters in the 19th Century, and another two (2) in the 20th before WW II. Strom Thurmond’s filibuster of civil rights legislation, a few more in the 60’s. Today there are 100 filibusters per session.

And “do the math, folks, we can’t balance the budget on the backs of our poor and our seniors. We must raise revenues. The Bush tax cuts on the wealthiest 1% and 2% must end.”

Kerry spoke about money in politics, and the disaster that was the Citizens United decision.

He also noted that Congress has an approval rating of 8%. I know why. Or at least, why I have disgust and contempt for most of the members of the House and Senate. The Republicans won’t compromise; they are beholden to “King” Grover, aka Norquist the Zeroth, and Democrats are too willing to compromise.

However, he ended on a positive note. He is confident that President Obama will be reelected, and is also confident that America’s best days are yet to come. All we have to is take the money out of politics, force the Congress to change, reelect the good incumbents and throw the bums out.

Furman Appointed to Manalapan Township Finance Committee

Lawrence J. Furman, MBA, co-founder of Popular Logistics, has been appointed to the Manalapan Township Finance Committee (Township here,  news article here). The Finance Committee reviews  expenditures, projects tax receipts, and submits the budget to the Township Committee. Back in 2007 Furman suggested that the Township Committee look into deploying solar energy systems on municipal properties. He was appointed to the Manalapan Township Environmental Commission in 2007, served for two years. In 2008, he ran for School Board with a platform built around solar energy for the schools.  While he lost the election, and Manalapan does not yet have solar energy systems on municipal properties or schools (are these related?) people are talking about it. He earned his MBA in Managing for Sustainability from Marlboro College in December, 2010.

He has delivered various iterations of a talk entitled “Beyond Fuel: Energy in the 21st Century,”  at the June meeting of the NYC Business Sustainability Action Round-Table, NYC B Smart, and in September, 2011 at the Space Coast Green Living Festival, Cocoa Beach, Florida.

Furman has been thinking about energy and what we now call sustainability since 1976, when, as a student intern with the New York Public Interest Research Group, Inc., NYPIRG, at Rachel Carson College, then at the State University of New York University of Buffalo, he helped develop a case for offshore wind power. His testimony, delivered to the “NY State Legislative Committee on Energy, the Economy, and the Environment” stated:

We could power the New York City Subway System with a battery of wind driven electric turbines, located off the shores of Long Island. It would burn no fuel, and, therefore, unlike coal, oil, gas, and nuclear power, create no waste.

When you factor in the life cycle of the fuel, and the pollution and health costs of the wastes, this would be less expensive than the fuel based alternatives.

Reflecting on this today, he said,

“My colleagues and I knew what we were talking about, but the Committee members didn’t get it. Sadly, it seems that the Committee’s name – Energy, the Economy, and the Environment – indicated it’s priorities.”

“If the cheapest unit of energy, the ‘negawatt,’ is the unit of energy that you don’t need, then the next cheapest is the ‘nega-fuel-watt,’ the unit of enegy you obtain without consuming fuel.”

On this committee I intend to look at our energy expenses and see where we can save money in the long term with PV Solar, LED lighting, insulation, micro-hydro, etc.

Progressive Tax Policy

Taxes are the price we pay for civilization.” – Oliver Wendell Holmes.

Progressive tax structures are not about punishing the rich. They are a recognition that wealthy people derive benefits from being in society. Warren Buffett, Steve Jobs, Bill Gates, Michael Jordan, Oprah, for example, got rich because people buy their products or watched them play basketball or on TV.  Paris Hilton is wealthy because her great-grandfather built a successful business. Their successes are wonderful. But their success should not require me to subsidize their lifestyles.

This tax structure can be implemented by October 31, 2012, and effective January 1, 2013, if not by Congress, then by Executive Order.

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Protesting Marked Cards and a Stacked Deck

Warren Buffett_ Follow LJF97 on Twitter Tweet  I spoke with two of the Wall Street protesters this morning. We discussed credit unions, other cooperative ventures, Buckminster Fuller’s ideas, capitalism, and productivity. (“A 4-day work week,” Fuller was quoted as saying, “would give us time to enjoy the wealth we create.”)  We didn’t talk about Warren Buffett or President Obama, but it seems that both would agree with the protesters’ sentiments, as I do, that our financial system “favors the rich and powerful at the expense of ordinary citizens.” (The protests and the protesters’ motives were described here by Colin Moynihan in the New York Times, Sept. 17, 2011.) The protests are also covered by Think Progress, here.

Buffett, in “Stop Coddling the Super-Rich“, published in the NY Times, said

I paid … only 17.4 percent of my taxable income — and that’s actually a lower percentage than was paid by any of the other 20 people in our office. Their tax burdens ranged from 33 percent to 41 percent and averaged 36 percent.

If you make money with money, as some of my super-rich friends do, your percentage may be a bit lower than mine. But if you earn money from a job, your percentage will surely exceed mine — most likely by a lot.

Obama’s initiative is explained on White House . gov and Talking Points Memo, and by Obama in recent days, “It’s not class warfare,” he said, “it’s math” and “If it’s class warfare,” he said in Ohio and Kentucky, while discussing an old bridge between southwestern Ohio and Kentucky that needs to be renovated, “I’m a warrior for the Middle Class.”

Move On has a petition here, saying, “I agree with Buffett – and Obama.”

Despite the evidence, from the 2001 to the present, that cutting taxes on rich people does not create jobs, Charles Gasparino, in the New York Post, a Rupert “We-hack-cell-phones-for-fun-and-profit” Murdoch product, said, here, “taxing the rich will destroy jobs.”

Gasparino is clearly wrong. And Buffett and Obama are clearly correct. Rich people can afford to pay higher taxes, and asking them to pay 17.4% while others, who need to spend a much higher percentage of their income on food, clothes, and housing, pay 33% to 41% does not seem fair.

But the question is “What do we do with the money?” Buffett has also said that he would never have made the money he made had he not been born in the United States, and had he not gone to Columbia University and studied “Value Investing.” He basically argues that the cultural climate and economic systems in the United States enabled him to become wealthy, that this is a good thing, and others deserve the same opportunities. “We must plan for the future and invest in infrastructure. And the wealthy should pay their fair share. ”

Tax policy must be linked to fiscal policy. What we are doing today, Obama, Buffett, and the protesters would say, is using tax policy to make rich people more rich. They would argue, and I would agree, we should use tax policy to develop infrastructure. One idea is to build a 40 kilowatt photovoltaic solar array on each of the 92,000 public schools in the United States.  Solar only generates power during the day; schools need most of their power during the day. This would use tax revenues to pay for infrastructure upgrade – and tax revenues pay public schools electric bills. PV Solar systems provide energy without pollution, without toxic wastes, without greenhouse gases. And in the event of an emergency, if disconnected from the grid, we would have a network of 92,000 local emergency shelters with power during the day, when the sun is shining.

Marked cards and a stacked deck are great when you’re doing card tricks. But don’t play poker against a cheater using them.

Mitt Romney: "Corporations are People"

Mitt Romney  Follow LJF97 on Twitter Tweet On the campaign trail in Iowa, Mitt Romney said, “Corporations are people.” (NY Times, Washington Post)

An argument can be made that Mr. Romney meant that corporations are composed of people, that they magnify the abilities of individuals. However, Ayn Rand might suggest that the candidate made a collectivist statement. Mr. Romney could also have meant that corporate profits eventually wind up in the pockets of investors like himself and Warren Buffett, and their heirs, like his children and Paris Hilton. However, that may be a nuance that may be lost in the political debate.

It could also be that Mr. Romney meant exactly what he said.

But what is closer to the truth, I think, is that corporations are legal mechanisms by which people use to limit their liability and to develop and protect their wealth.

In my courses at the Marlboro MBA in Managing for Sustainability, we discuss corporations as a “nexus of contracts.” That’s not really a definition of a person that a flesh and blood person, a person whos DNA is DNA would use.

People, that is flesh-and-blood-based people, DNA-based people can own corporations. Corporations can own other corporations. But neither people nor corporations can own people.

In “The Divine Right of Capital,” Marjorie Kelly (Amazon, EcoBooks) clearly describes why corporations ought not be considered “persons.”

But that’s not the only issue I have with Mr. Romney’s statements in Iowa.

Mr. Romney also said, “Social Security, Medicare, and Medicaid account for about half of Federal Spending.” This seems to be factually incorrect. According to the Congressional Budget Office summarized on  Wikipedia, Social Security, Medicare, and Medicaid account for 43% of total federal spending, in fiscal year 2010. (Note that total defense spending is greater than the 20% reported in the figure because certain programs and agencies, such as the CIA, the NSA, and other defense and intelligence agencies are funded, in part, out of the “Discretionary” category.)

While $1.491 Trillion, 43%, is $350 Billion less than 50% of the budget of FY 2010, you could argue that Mr. Romney was exaggerating for effect, something politicians do. However, I imagine if we were to raise taxes to 50% on the wealthiest 1% of Americans, people with over, say, $50 Million, Mitt Romney has $284 Million, and say, “It’s only about 43%,” he would at the very least question our understanding of mathematics.

Mr. Romney also said, “You can raise taxes, that’s not the approach I would make.”

That is the approach I would take. As noted here, taxes are “The price we pay for civilization.” They are revenues raised by the people in governments to pay for the things they understand must be paid for; things like education, infrastructure, security. I would raise taxes on people making more than $250,000 per year. And raise them significantly on people, making more than $1,000,000 per year, whether they make their money as actively as salary, or passively as dividends, capital gains, or distributions from trust funds.

I make less.  A lot less. My expenses – my health insurance, the costs of food, fuel, etc., are going up.  My income, however, is going down. In “real” terms, as inflation is going up, and in actual numbers, as the bonus I used to be given have shrunk or been eliminated because of, it has been said, “the economic conditions faced by the firm.”

The government Lincoln defined as “Of the people, by the people, and for the people” needs money to pay its obligations. It needs money to build infrastructure. And as has been noted, Keynesian economic theory suggests that in an economic conditions such as we face only the government can be willing to act to create jobs. The government can only really raise money by borrowing it or by raising taxes. We should be developing government programs to shift the energy paradigm to clean, renewable, sustainable energy. It will create 2.4 Million jobs, directly cut unemployment from about 9.1% to about 7.3%, indirectly cut unemployment by another 1.0 to 2.0% and generally stimulate the economy in a terrific manner. (Click here).

As we have noted before, and will doubtless do again, Popular Logistics is a POLICY blog, not a POLITICS blog. However, we  do think about politics, at least occasionally.  And it appears to this blogger that Mr. Romney just lost the election. Whether he has lost to Mr. Obama or to one of the other Republicans remains to be seen.

 

Socialists v Stalinists

John Boehner, Eric Cantor, & a friend Follow LJF97 on Twitter Tweet The Washington Post reported, here, that John Boehner, Eric Cantor, Paul Ryan, and the “Young Guns,” their Republican comrades in the House of Representatives, PLANNED as far back as January, 2009 to use the debt ceiling to create a political crisis. It seems to have worked. The Republicans held fast, Obama and the Democrats blinked. The rating agency Standard & Poors, S&P, downgraded their rating of the credit-worthiness of the United States of America, President Obama’s core supporters seem to be abandoning him. And the stock markets are plummeting – the Dow Jones Industrial Average dropped 1000 points in 3 days.

Allowing US debt to be downgraded – forcing it to be downgraded – will cause a rise in interest rates, an increase in unemployment and bankruptcies. Altho a rise in interest rates will benefit bondholders. This is not the fiscal policy I expect from the party that claims to be fiscal conservatives. Altho, as noted, it does benefit bondholders.

The government should be creating jobs.  Our elected representatives should be guiding the ship of state to a prosperous and sustainable future, not selling it short.

The NY Times reports, here, that S&P’s downgrade will spur the Republicans to demand more cuts in government spending, which will put more people out of work, furthor erode the economy. The only hope for the country is for Obama to realize that there is nothing he can do to win the love and admiration of the right wing, to ignore them and look to the center and to his base, and do what is good for the country, regardless of what Bachmann, Boehner, Cantor,  Ryan and the Young Guns, and Grover Norquist want.

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Taxes – The Price We Pay For Civilization

“Taxes are the price we pay for civilization.” – Oliver Wendell Holmes.

Neil Armstrong on the surface of the moon

Your Tax Dollars At Work, Courtesy NASA

Follow LJF97 on Twitter Tweet Taxes fund Medicare and Medicaid so the poor and the elderly can see a physician and get treatment when they are sick. Taxes fund education for our children and our neighbors children so they can grow up to be doctors, lawyers, engineers, architects,  accountants, teachers, plumbers, electricians, carpenters, builders, actors, etc., so we can buy things that work properly, travel safely, enjoy life, so we can, in a word, thrive.  Taxes fund police, fire-fighting, defense, judicial and other services so we can be secure in our homes and our persons, so the innocent do not go to prison, so the guilty pay their debts to society, and so we, when we do foolish things, can compensate those we accidentally harm. Continue reading

The Crash of 2011

US Capitol Follow LJF97 on Twitter  Tweet I thought the market would crash in the wake of the Earthquake / Tsunami / Nuclear Meltdowns at Fukushima. It didn’t. However, something much less serious may be bringing the market – and the economy – to it’s knees. Politics. The Voice of America reported here that Standard & Poors downgraded US debt from AAA to AA+. Click here for the S&P’s Special Report and here for the full report.

S&P’s analysts wrote:

The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the Administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government’s medium-term debt dynamics.

John BoehnerIt is clear that the emphasis on cutting government spending, eliminating government jobs, eliminating benefits to unemployed citizens, rather than raising revenues and developing infrastructure is not in the long term or short term interests of the United States. As the 512 point drop in the Dow Jones Average, and the downgrade of US debt indicate, Republicans and the Tea Party should be careful for what they wish for – they just might get it.

In the discussions over the debt ceiling, John Boehner said something to the effect that if a family or a business is borrowing too much it simply must tighten it’s belt. Continue reading

Debt, Catastrophe, and Foreign Entanglements

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A young father of our country. The battle raging today between Democrats and Republicans will not solve  the nation’s debt problems, nor avert a financial catastrophe in the future. The politicians do not appear to have a handle on a comprehensive solution to our financial woes. I’m not certain that I do, either, but I feel an obligation as a citizen and a stakeholder in our nation’s present and future to present my ideas and add to the debate.

The issues, as I see them, revolve around the debt ceiling, government obligations, the economy, consumer debt and what George Washington might consider foreign entanglements of the kind he warned us against in his farewell address. The solutions must benefit the American taxpayers today and in the future. Here are the issues and some ideas toward resolution. Continue reading

Roughing It

Interior of Pilatus PC 12.  Follow LJF97 on Twitter  Tweet A s they struggle to pay their bills, forced to work, the wealthy cope as only they can. By sending their children to summer camp in private jets. In  “To Reach Simple Life of Summer Camp, Lining Up for Private Jets” Christine Haughney, in the New York Times,  July 24, 2011, wrote:

 “A turboprop Pilatus PC-12 carrying Melissa T., her daughter, her daughter’s friend and a pile of lacrosse equipment took off for their home in Connecticut, following the girls’ three-week stay at Camp All-Star in nearby Kents Hill, Me. Shortly after, a Cessna Citation Excel arrived, and a mother, a father and their 13-year-old daughter emerged carrying a pink sleeping bag and two large duffel bags, all headed to Camp Vega in Fayette. … as the economy limps along, more of the nation’s wealthier families are cutting out the car ride and chartering planes to fly to summer camps. One private jet broker, Todd Rome of Blue Star Jets, BlueStarJets.com, said his summer-camp business had jumped 30 percent over the last year.”

A quick check on the Camp All Star web site’s “Dates & Rates” page suggests that 3 weeks will cost about $4500.  Trips, horseback riding and hockey are extra. Getting there on a private jet, would add $6,318 to  $15,240 per party, $2,106 to $5,080 per camper for a camper, his or her mom, and a friend.  As I tell people, it’s the trip, not only the destination.

Tell me again, Mr. Boehner, why the wealthy can’t afford to pay taxes?

Beechcraft 350, exteriorI did some checking. Went to Blue Star‘s website, priced a charter for three (3) from Allaire Airport in Monmouth County, New Jersey to Augsta State in Maine. I was surprised at how affordable it is. Blue Star offered 5 alternatives, all turboprops:

  • A Ratheon Super King BE 350, a 9-passenger aircraft, $6,318, which is $2,106 per passenger,
  • The BE-C90, a 6 passenger turboprop, $11,270, or $3,757 per passenger,
  • The BE-100, an 8 passenger turboprop: $12,151 for the trip, $4,050 per passenger.
  • The BE 200, in a 9-passenger configuration, for $13,043, $4,348 per passenger, and
  • The BE-200 in an 8-passenger configuration: $15,240, $5,080 per passenger.

These data are summarized in the table below.

Plane Trip Per Passenger, 3 passengers Per Passenger If Full
Ratheon Super King BE 3509 Passenger Turboprop $6,318 $2,106 per person. $702 per person for 9.
BE-C90, 6 passenger Turboprop $11,270 $3,757 per person. $1,878 per person for 6.
BE-100, 8 passenger Turboprop $12,151 $4,050 per person. $1,519 per person for 8.
BE-200 9 Passenger Turboprop $13,043 $4,348 per person. $1,630 per person for 9.
BE-200 8 Passenger Turboprop $15,240 $5,080 per person. $1,905 per person for 8.

I don’t know if the airline serves food, drinks, or offers in-flight movies. But caviar is only $115 per oz (Russian Sevruga, Caviar Express, Glendale, CA).