I was just playing around a little with President's Obama's cap and trade numbers.  Has anyone looked at these?  And if they have, why hasn't anyone asked the direct questions?

The President says he will raise $646 billion over 10 years.  Now someone is going to have to pay that, and he swears it will not be the the bottom 95% of taxpayers.  Just a little simple math.  There are about 300 million folks in this county.  5% of 300 million is 6 million.  (I know not everyone pays taxes, but I'm giving Obama as much leeway as I can). That adds up to $107,667 per person.  Now given that the average family is 2.6ish...that comes to just about $300,000 per family just to pay for cap and trade. 

Why has no one thrown that number in the President's face and asked if he seriously expects these folks to sit still for that?  Of course it could just be the truth that this will get equally spread over all citizens, in which case, each family's share will only be about $6,000....Someone ask these questions please!

After sitting around watching Obama's cabinet picks self-destruct, listening to stimulus proponents admit that they can't think of a time that deficit spending has ever helped during a recession and myriad other stupid Government tricks, I have finally figured it out.  Politicians are just plain stupid.  There is no other way to explain their actions, and it even makes sense.

I mean, who else would expend the energy and the capital to get a job with so little reward and so little real power?  Once upon a time, we may have been led by the best and brightest, but that time has long since past.  Ronald Reagan may have been a throw back, but by and large we have a bunch of folks who have risen to their level of incompetence (to steal from Lawrence Peter).

Now this is a dangerous situation, a German Field Marshall once observed that there are four types of officer, one type is lazy and stupid...they should be left alone because they do no harm, think William Jefferson from Louisiana.  A second type is intelligent and industrious, they make the best staff officers because they take care of all of the details...for the life of me, I can't think of an example.   The third is lazy and intelligent, and is suited for the highest office.  Although I'll catch flack...that is Regan to me, not physically lazy, but not one to waste effort, words, or motion.  The final type of officer is stupid and industrious...these must be immediately shot as they do nothing but cause work for everyone else while destroying everything around them.  Can anyone say the 111th  Congress of the United States?

So there you have it...Remember, never attribute to malice that which can adequately be explained by stupidity.

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First up we have an article by a couple of academic economists who point out that not only did the New Deal not help during the Great Depression, but it probably extended it by 3-5 years beyond when it would have ended if they had just left things alone read it here http://online.wsj.com/article/SB123353276749137485.html.

Then we have another article pointing out that the money in both versions of the stimulus bill (House and Senate) that is supposed to help expand the reach of broadband is so tied up with conditions and counter-incentives that no broadband company would touch the money with a 10 foot pole http://online.wsj.com/article/SB123353476246637693.html

One of my favorite parts of the last article points out that the cost of broadband, in terms of a standard unit is $3 in the US, 13 cents in Japan and 33 cents in France. Why the difference? Because government regulations designed to “help” consumers discourage the completion that drives the price down.

This just goes to show that Ronald Reagan was right Government is not the answer. There are only a couple of things that the Federal Government can do that cannot be done by the individual states better. They can provide for the National Defense (and trust me…after 25 years in that job, they don’t do a great job, they just do it better than the states could) and they can resolve disputes between states…again, not that they do that particularly well they just do it better than the states can themselves.

Obama’s response to the Federal Government’s ability to break bowling balls is to get the Federal Government even more involved. He wants to regulate salaries at banks and on Wall Street. He wants to tell the automobile companies what type of cars they must sell. He wants to force banks to make more loans (in spite of the fact that a) banks making bad loans is what got us here and b) turns out that banks lent more money last year than the year before). And perhaps the most stupid thing of all, when we are in a recession caused by people borrowing money they didn’t have the means to repay, Obama wants the Government to borrow money it doesn’t have the means to repay to encourage banks to lend money to consumers who don’t have the means to repay.

If this weren’t so tragically stupid, it would be hilarious.

There is very little in the world more frustrating than watching people try to solve a problem with a method that you know will not only not work, but which will in fact create an even bigger problem. That is where we are with the “economic stimulus” package now winding through Congress is just such a disaster.

It helps to understand a little macro-economics. (Oddly enough it helps more to understand a little, than to understand a lot…because then you start understanding too much, you think you are smart enough to see an exception to the rules.) There really are three things that have been at work for a while to put us in the position we are in; the Gross National Product (GDP), the Demand level, and the rate of inflation. In a nutshell, the housing bubble (caused by our Democratic friends in Congress) artificially inflated the GDP. In economic terms, the “real” GDP exceeded the “potential” GDP. In real easy terms, the population was spending more money than the output of the country warranted. We were able to do that by running up debt, but more importantly, by borrowing against make-believe value in our homes. 

Now normally, this situation is self correcting. According to economists, when the demand causes the “real” GDP to exceed the “potential” GDP, prices rise to bring things back into alignment. However, the fed has been so scared of inflation, that they haven’t allowed this to happen. So instead, people continued to take money out of their over inflated home values to buy things that were priced lower than they should have been given production levels. Eventually, this Ponzi scheme of housing prices exploded. There is no place for Americans to go to get money they don’t have to pay for items they can’t afford. 

So basically, the growth of the GDP for several years has been overstated. What we have here is a correction. The GDP will come back to reflect the actual money that Americans earn in a year, instead of that amount plus the amount we took out of houses whose value was inflating while the rest of the economy was flat. Using a historic relationship between GDP and unemployment, an unemployment rate of 10% would translate to a total GDP contraction of about 7.5%. 

That is where we are. Now borrowing $1.5 trillion is only going to fix this one way, the government can try to artificially pump up the GDP again by creating supply where there is no demand. The result will be that the GDP will continue to fall, but that inflation will insert itself rendering the money that folks have been able to hold onto less valuable. This is a little condition known as stagflation that hasn’t happened since J Carter was President. The result will not be pretty. 

So what is the solution? Simple, do nothing. The economy will right itself. Once the GDP stabilizes, unemployment will stabilize along with it. The GDP will begin to grow again at a normal pace until the next government or industry induced bubble. The path the Government is taking, unfortunately, is a trip to our own “lost decade” much like the Japanese in the 1990’s

Stay tuned, and keep your fingers crossed.

I read an article this morning that claims that Obama has only four years to "save the world" from climate change. (http://www.guardian.co.uk/environment/2009/jan/18/jim-hansen-obama)  Now call me paranoid if you like but I think the reality of the situation is this...the environazis are seeing the hand writing on the wall.  All indications are that we are entering a period of cooling.  (Which oddly enough has been predicted by those scientists who think the sun influences our climate more than CO2 emissions.)  It is far more likely that the greens realize that in four years there will be no sane person on the planet who believes that we are suffering from man-made global warming.  That will mark the end of their ability to impose a radical agenda designed not to save the planet, but to re-distribute wealth and stop growth of industrialized countries. 

Currently the enviromentally ill are quite adept at ignoring evidence that they are wrong.  (My favorite currently is claiming that October set records for high average temperature even after it was discovered that the increase was due to numerous reporting stations using September's data).  But..as the temperatures continue to fall world-wide, eventually people will stop listening.

I wonder if we will call Obama, Gore et al to task in that eventuallity.

Personally, I won't hold my breath

Seems to me that this is exactly what the democrats have done.  Let's look at some details.

Aid to education: $120 billion
Increased Medicare Payments: $87 billion
Renewable fuels research: $54 billion
Increased unemployment benefits $43 billion
Health care for the unemployed $39 billion
Increased food stamp benefits $20 billion
Increased Pell Grants $15.6 billion
Aid for hospitals to automate records $20 billion

Now by my math, that is roughly $400 billion of the stimulus package, and I'll be damned if I see where it will create one, single, solitary job.  I also don't see any increased demand. (even if I thought that would help, and I don't).  Throw in another $275 billion of "tax cuts" that amount to $40 a month per couple and there is $675 billion dollars not doing a thing to help the economy.  But our kids and grandkids will have to pay the bill.

This can't happen...write your representatives today and tell the "not no...hell no"

I'm not a big one for sitting by and playing nice.  I think that republicans and conservatives need to send a loud and clear message to the new administration right now.  The Senate has 15 days to turn down the President's request for the remainder of the TARP funds. Now, we are probably not capable of stopping the release of those funds, but we can make it very painful.  Imagine if one of the first acts this "change" President has to accomplish is to veto an act of congress.  I do believe that is something we can accomplish.

Join me in the revolt today...write your senators and let them know that you will not take kindly at the ballot box to anyone who fails to vote in favor of withholding the funds. 

You can find your senators' contact information at:

http://www.senate.gov/general/contact_information/senators_cfm.cfm

If we are going to save the country we have to start somewhere.

It is funny to me that no one seems to be asking the simple and obvious questions about the "stimulus" package Congress is about to debate.  We should be asking ourselves, how is this going to help the economic situation? (It won't ,Kensian pump-priming has never worked, and there is no reason to believe it will work this time) and How are we going to pay for this?  The budget crisis is the real crisis we will be facing soon. Fortunately, there is a simple method for solving the crisis that answers both of these questions.

Step 1).  Across the board PERMANENT tax cuts.  This answers the first question, how is this going to help the economy.  There is research out today that shows that the rate of people losing/leaving their jobs is actually lower than it was a year ago.  The reason for the rise in unemployment is the lack of new jobs.  Right now there is a terrible sense of uncertainty, particularly as regards tax rates.  Permanently lowering the rates would reduce the uncertainty and at the same time create an incentive for people to create new jobs.  New jobs would reduce the unemployment rate.  Amazing how simple that is.

Step 2)  How do we pay for that?  There are two parts to this, first there is the increase tax revenue that seems to always follow a tax cut, but we will set that aside in favor of a much simpler tool...zero based budgeting.

Zero base budgeting is really simple.  The government would start by budgeting all of it's non-discretionary requirements, medicare, social security, and national defense.  After that, every other expenditure is listed in rank order...from most important to least.  The government then simply counts down to where their expected revenue runs out and draws a line.  Nothing below the line gets funded.  The result, a balanced budget in year one.

This is how families traditionally budget.  There is no reason the Federal Government can't do the same. 

Write your senators/representatives, let them know you are watching.

I've been writing my elected representatives this morning to complain about the proposed economic stimulus package (and I suggest you do the same).  My basic tack has been that increased government spending will not help the economy recover.  It never has in the past, and there is no reason to believe to that it will in this case.  There are still some Kensians floating around out there who think we can spend our way out of this recession, but they are wrong and they are missing the cause of this particular downturn.

The United States over the past several decades has had one of the worst savings rates in the world.  That is, as savings is normally measured.  It is true that we, as a country, put less away in traditional savings than most any other country.  But...we have saved in a different way, by investing in common stocks and, more importantly, through the appreciation in value of our homes.  After the recent unpleasantness, many folks now find themselves with no savings to speak of.  The economy will not improve until these savings are recovered.  The spending plans proposed by the President elect will do nothing to improve this.  This, more than anything else, is the cause of the continuing depth of this recession. 

What might work?  Well something to increase the savings rate quickly might help. Perhaps a policy that makes savings deposits tax exempt until they are withdrawn, coupled with a complete tax exemption on interest on savings.  Perhaps the same treatment for investments by individuals.  This is a type of targeted tax reduction that would directly lead to an economic recovery. 

As usual, just my .02 worth.

I'm a conservative, so it is no surprise that oppose the bailout of the auto industry.  But one of the reasons that I knew it would never work finally got pulled, kicking and screaming, into the open last night.  I'm talking about the United Auto Workers.  Now there is a lot of talk about how much autoworkers do or don't make.  The UAW has been screaming at people who used the $73/hour estimate, saying that it was a misrepresentation of what autoworkers actually make and that their salary is actual comparable to the salary of non-union workers in Japanese/Korean/German auto factories in the US.  So...last night the GOP said put up or shut up.  They included a condition on bailout funds that the UAW reduce their wages to a level comparable with the Japanese/Korean/German auto factories in the US.  The UAW, predictably threw up a road block.

That has been the major problem with the bailout proposals all along.  The proposal has no stick to force the UAW to negotiate and they never will.  The UAW will drive those companies into bankruptcy sooner rather than later.  Only when a bankruptcy judge is staring them in the face will they make any concessions whatsoever.  Even then, they may not...anyone besides me remember Eastern Airlines?  Remember what the mechanics did to them? 

And oddly enough, the fault does not lie with the rank and file union members.  It lies with the leadership.  Unions in America have only two purposes today.  The first, and most important purpose, is to provide outstanding paychecks to otherwise unqualified union leaders. Union leaders could really care about little else.  If management could figure a way to send $1 of every $5 saved in salary to the union leadership, the rank and file would soon find themselves paying to come to work.   The second purpose is closely related to the first.  Since union leaders haven't figured out how to get management to (legally) pay them directly, they have to convince the rank and file that they are better off for being members of the union (or convince state government to enact closed shop laws).  They do this by negotiating contracts that make sure that the members get paid the most money for the least work possible. For good measure they have to also make sure that, as much as possible, being hired means automatic promotion and retention for life. 

So there you have it.  UAW leadership has to torpedo any deal that involves any restriction on their ability to blackmail the automakers into paying wages above what the market allows and protecting shoddy workers.  Because of that, any bailout is bound to fail, and even bankruptcy will not work unless the UAW is kept out of any negotiations.

Have you driven a Ford/Kia/Hyundai/BMW/Mercedes/Honda lately? 

I was reading this morning that we are near a bail out agreement for the "Big 3".  There is a lot of speculation as to what the strings will be, but apparently there will be some sort of government oversight.  I read in a couple of articles that people really want the senior executive's pay capped, and that they companies won't be able to pay dividends while still owing on the loans. No where have I seen any serious talk about the unions giving back anything.  Now according to news reports, the average union auto-worker makes $78 an hour an the average non-union auto-worker makes $48 and hour (for those of you keeping score that means the average non-union auto-worker has to scrape by on more than $99K a year compared to the $162K for the union worker).  Now if GM just reduced their wages to average non-union wages they would save $7,980,000 EVERY HOUR! (266,000 workers times $30 an hour).  That is $16,598,400,000 a year.  There is your $16 billion bail-out right there.

Was digging around a little this morning and found some facts and figures on government "infrastructure" projects.  After Hurricane Katrina here in Louisiana, we had "Project Blue Roof" to install tarps on houses damaged by the hurricane.  For the average 1500 square foot roof, the government paid the primary contractor $2250 (pretty similar to the cost of a basic three-tab roof, but that is another story).  By the time the money had passed through hands and gotten to the only person who actually had a job installing that tarp he got between $30 and $50.  Extrapolating that math each of those 40,000 jobs Obama spoke of would pay $555 a year.  Or another way of looking at it, he could actually "create" about 900 $25K jobs for 1 year with a billion dollars. 

Now if those same $1 billion are put into the hands of consumers, and assuming that they will spend 90% and save 10% (pretty high savings assumption), the result would be a $10 billion kick in the economy.  Seems like a no-brainer to me.

Short post this morning.  I was reading about Obama's latest public works proposal.  Leaving aside the whole idea of the government "creating" jobs, where does he get his figures?

According to the article this morning, "Obama estimates every $1 billion spent will result in 40,000 jobs."  Now here is my basic math...1 billion divided by 40,000 equals 25,000.  That means if there was no friction...loss of money on the way from the federal government to the workers, $1 billion would pay 40,000 workers $25,000 for one year.  (For the economists in the group, there is the money multiplier, but it is questionable if it applies here, and even if it did, it wouldn't change things much). 

Not sure that a one year job paying $25,000 is exactly what folks have in mind.

Every now and then, I am amazed at how dumb our elected officials think we are.  But then again, we let them get away with it.  I was reading this morning about the chances of passage of the "card check bill" in the new congress.  What it basically comes down to is that it will pass the House, and it has the votes to pass in the Senate, but it may not have the 60 votes necessary for cloture. 

Now I'm pretty opposed to this bill for a lot of reasons.  Being a former union member in my youth, I know that unions exist for the sole purpose of keeping union officials employed.  To effect this, unions attempt to make sure that their members get paid as much as possible for doing as little work as possible on as few days a year as possible for the shortest time possible before being able to retire at full salary.

But I digress.  What really frosts me is that Harry Reid is pushing senators, such as Mary Landrieu from my home state, to vote for cloture, and then vote against the bill to save face back home.  What is that falling on my boot? Rain?  I don't think so.  People have to got to start paying attention and holding their elected representatives accountable.  We need to let our senators know, as my better half and I did today, that a vote for cloture is the same as a vote for passage, and we will view it that way.

If we let these folks know that we know the rules as well, maybe we can make them play the game in the open.

Just my .02 worth

I was just reading about Obama's call for a new $700 billion dollar stimulus plan to support creating 2.5 million jobs over the next two years.  Being the kind of guy I am, I did a little math, and here is what I came up with.  If we spend $700 billion over two years to create 2.5 million jobs, those jobs will have cost us $140,000 annually--each.  If on the other hand we just write a check to the 9.199,000 unemployed for each of the next two years, we could give them each $38,000 a year. 

Does this seem way out of line to anyone other than me?  Especially considering that every tax dollar that pays for these jobs came out of some other tax payers pocket, this is beyond ridiculous.  Why on earth would we want to spend so much to get so little in return.  Imagine the job creation you could get out of the private sector by just reducing the tax burden.

It never ceases to amaze me just how dumb our government thinks we really are.