Among the issues most commonly discussed are individuality, the rights of the individual, the limits of legitimate government, morality, history, economics, government policy, science, business, education, health care, energy, and man-made global warming evaluations. My posts are aimed at thinking, intelligent individuals, whose comments are very welcome.

24 June 2011

More Taxes to Pay the National Debt?

Do we need higher taxes and fewer tax deductions to pay the deficit of $1.597 trillion this year?  According to the Office of Management and Budget, the federal government will spend $3.771 trillion this year, which is an increase of $1.043 trillion of spending since 2007.  This is a 38.23% increase in spending in 2011 compared to 2007!   The spending increase since the 2008 Democrat Congress budget is 32.2%.

The deficit ballooned because of this spending increase coupled with a smaller $393 billion loss of tax revenue because Americans have been made much poorer now in comparison with 2007.  Many see that as the result of government shackling the private sector with higher taxes, many more regulations, the threat of still more draconian administrative regulations, the increasing requirements and expenses of ObamaCare, and the massive printing of money.  The result has been a massive transfer of wealth from the jobs-creating private sector to the jobs-devouring government sector.

If we were to start repaying this national debt today over a 30-year period in equal payments, our annual payment would be $900 billion.  Note that is almost all of the massive spending increase that has caused our present debt woes.  If we are to come up with an extra $900 billion per year to pay our debts, we already face a frightening task.  Perhaps it is so frightening that few people are willing to face the crisis at all.  If we ignore the debt until 2012, but then start to make repayments, the long-term interest rate of 5% is likely to have returned and the annual principal and interest payment will be about $2 trillion!  Imagine making debt payments equal to 73% of the total spending of 2007.  Can you imagine squeezing defense spending, medicare, medicaid, the administration of ObamaCare, and Social Security into 27% of the budget?

We must make a choice.  We must either increase taxes and slightly decrease spending as the Democrats want to do, or we must greatly decrease spending and allow the economy to grow with modest tax decreases as the Republicans mostly want to do. 

Tim Geithner, the Treasury Secretary, just told the House Small Business Committee on 22 June that the Obama administration wants to squeeze another $1 trillion out of people earning more than $250,000 a year over the next 10 years.  Most of these people are small business owners.  They are precisely those small business owners who are making enough money that they can hire more people.  Nonetheless, Geithner maintains that cutting spending by $1 trillion would have a more negative impact on the economy than will the tax increase on the "rich."  Like most people, he is ignorant of the effect this will have on company owners choosing to invest in new production-enhancing, and thus job-creating, equipment.  He does not think about the need to buy more building space to put more production capability and employees into.  Finally, he is not thinking about the fact that few employees are sufficiently productive soon after being hired to carry their own weight.  Money has to be set aside to pay them while they get enough on-the-job training to become profit centers.  Expanding a business is commonly a very expensive proposition.  Adding one person in a small business is a big incremental step in terms of the necessary addition to company income.  Rational businessmen do not expand a business without a strong sense that they will be able to make a decent profit for their risks and effort in doing so.

ObamaCare and the Dodd-Frank financial reform act raised taxes.  The inheritance tax was brought back by the Democrats as a special scourge of small businesses.  While most other developed countries have learned the advantages to reducing the corporate tax rate, the U.S. has not.  It now has the highest corporate taxes in the developed world, since Japan recently reduced its previously equally high corporate taxes. We are also one of the few countries that taxes earnings a company makes in another country.  This causes U.S. companies to invest those earnings in other countries rather than in the U.S.  Our tax policy encourages them to create more jobs abroad than at home.

As a result, more and more companies financed by Americans are being started in other countries.  Many American companies are re-incorporating in other countries with lower taxes.  Favorites for such purposes are Luxembourg, Bermuda, and the Cayman Islands.  In 2008, there were 3 U.S. initial public offerings (IPOs) by companies incorporated in tax-haven countries for every 10 that were incorporated in the U.S.  Ten years ago, only 1% of U.S. IPOs were incorporated in either the Cayman Islands or Bermuda.  In 2010, 26% of them were!  So far in 2011, 21% of new IPOs have been incorporated in these island tax-havens.

In 2004, Congress acted to limit incorporations in tax-haven countries.  Companies with a substantial change of ownership could re-incorporate in a tax-haven country, however.  This actually encouraged the sale of many companies.  The IRS changed the rule to require a complete buyout in 2009.

The venerable American company Samsonite was taken over by CVC Capital Partners and is now incorporated in Luxembourg, but headquartered in Hong Kong.  Asia is now its primary market.  The semiconductor spin-off of H-P, Avago Technologies Ltd., was bought out by Kohlberg Kravis Roberts & Co. and is now incorporated in Singapore, though its headquarters is in San Jose, CA.  It now has built extensive operations in Singapore.  Freescale Semiconductor Holdings I Ltd. went public in the U.S. last year after a buyout from Motorola Inc. which used to own it, but now it is incorporated in Bermuda.  It still has extensive operations in Austin, Texas.  U.S. investors in 2009 had so many securities holdings in Cayman Island companies that they are the fourth highest total for any country in the world!

Most other developed countries have learned either from the disasters of their own adoption of socialism and the anti-business mentality or from watching the deleterious effects of socialism in other countries, that economic growth will be stunted by soak-the-rich and squeeze businesses schemes to fund the welfare state.  Many of those countries are stuck with the welfare state, but have learned that it cannot be sustained at all without a growing economy.  The American Democrat Socialist Party has not learned this lesson.  RINOs in the Republican Party have not learned it very well either.  As a result, we are growing at a much slower rate than many countries around the world now.  We used to talk about the Old Men of Europe.  Well, we are becoming the Old Man of the World. 

This is totally unnecessary.  We have only to unshackle business and stop penalizing the so-called wealthy or the small businessman to completely change this around.  The Democrats have made it perfectly clear through Obama, Biden, Geithner, Reid and Pelosi that they have learned nothing.  Chris Van Hollen, a particularly wrongheaded Democrat from wrongheaded Maryland, is a Democrat negotiator in the Biden deficit-reduction talks and has said that Democrat principles require a tax increase on the wealthy and business owners.  He is accompanied on the Democrat side by the radical James Clyburn of South Carolina.  It is no wonder that Eric Cantor, the Republican House Majority Leader, and Senate Minority Whip Jon Kyl were compelled to leave the Biden talks.  It had become too ridiculous to work toward a compromise with these ignorant job-killers and company-killers from the Obama administration and the Democrat sides of Congress.  Earlier, Tom Coburn, Senator of Oklahoma, had similarly given up hope of a rational outcome from talks in another set of negotiators known as the Group of Six.  I have to applaud these sensible Republicans.

When the lemmings swarm over the cliff edge, sensible men refuse to follow them.  Actually, I have heard that lemmings are more sensible than Democrats.  They really do not rush over the cliff.  That is just a fable for them, but it is the everyday purpose of our Democrat political leadership.

22 June 2011

USDA Makes Heterosexism Ugly

Most of us did not know that heterosexism does not describe those who practice or advocate the desirability of heterosexuality.  No, according to the US Department of Agriculture (USDA) and Sec.Tom Vilsack, it means the belief that marriage can only be between one man and one woman.

I am trying to figure out where this idea comes from.  Does liberalism mean that only one man and one woman can enjoy the benefits of a liberal society?  Perhaps it does now, when liberalism seems to mean that one great socialist leader and his First Lady will rule the country and choose everyone's values and impose them on everyone using the force of government.  This was not the origin of the term liberalism, however.  Libertarianism still means that one favors liberty for all and conservatism still means one favors many traditional values, so most isms do not have a parallel to this new word heterosexism.

Why is it that sexism does not mean that one believes in the desirability of sex or that one enjoys sex?  No, in our strange new world, sexism means one is biased against those of one sex or another.  In this vane, one would think that heterosexism would mean that one was biased against heterosexual activities.  But no, heterosexists are according to the USDA advocates of heterosexuality.  This would be in keeping with the traditional use of words such as liberalism, socialism, conservatism, and libertarianism, rather than the screwy use of the word sexism.  But, the USDA says that heterosexism is not just in favor of heterosexuality, but that its essence is the denial of marriage to those who are not heterosexual.  I do not know why attitudes toward the marriage rights of others must be wrapped up in this term at all.  This is very strange.

But applying this rule to other words that ought to be of the same family, leads us to the conclusion that homosexism is the denial of marriage rights to those who are not of the same sex.  Bisexism is the denial of marriage rights to those who are heterosexual and to those who are homosexual.

The USDA is re-educating its employees against biases directed at those who are not heterosexual.  Of course, any government agency has no business being biased on the basis of sexuality in its hiring and promotions.  The USDA is going beyond this to attack certain ideas about marriage though.  Given that the U.S. Supreme Court has not yet ruled that states cannot discriminate in favor of heterosexuality in marriage, it seems a bit premature for the USDA to be framing those who oppose marriage rights for those who are not heterosexual as bigots.  Mind you, I think such people are bigots, but the government's courts and Congressional law have made no such determination.  The Obama administration is all in favor of discriminating against those who believe marriage should be reserved to one man and one woman, however.

Furthermore, the USDA does not make marriage laws, so it is pretty much irrelevant whether some of its employees believe marriage should be limited to one man and one woman.  Any effort to dictate that they cannot think this is an attack on the religious beliefs that many people hold and is as clearly wrong as would be USDA discrimination against the hiring of homosexuals or its attempt to re-educate them to become heterosexual once hired.

This USDA effort is in the context of a diversity and inclusion program.  It is being pushed forward by the Office of Personnel Management as a model for all of the other agencies of the federal government.  It will then be pushed upon the states and upon all government contractors.  In practice, such diversity training and incentives result in managers preferentially hiring and promoting two-fers.  They will be rewarded for hiring or
promoting lesbian women and homosexual Black men, while discriminating against heterosexual white males and even those who are only one-fers, such as heterosexual Black males or white females.  This leads to what ought to be seen as clearly unlawful and immoral discrimination.

To overcome the fact that this is such transparent wrongful behavior, it is useful to actually denigrate the word heterosexual.  It has to be converted into a put-down.  This has been done with white male as in "The Founders were just a bunch of white males, so their work was full of evil and discrimination.  Therefore we can dismiss the Constitution in its entirety, not to mention the Declaration of Independence."  The strangely defined word heterosexism helps to give the word heterosexuality a very negative connotation.  Defining heterosexism as evil and as a denial specifically of marriage rights helps to accomplish this important goal of the Progressive Elitists.

It will be interesting to observe in time if one sense of the meaning of Progressive Elitism becomes the belief that only Progressive Elitists are allowed to marry.  When that starts to happen, will most Americans see that as a new form of bigotry?  Or will they just accept the idea as a return to the aristocracy's natural rights such as they enjoyed in the Dark Ages and Medieval times?  After all, the Progressive Elitist believes most Americans are too stupid to choose their own values and to manage their own lives.  It is clear that they already think of themselves as the educated aristocracy who by right take care of the dumb and uneducated peasants, who should be treated just a little bit better than the pigs.  Maybe.  Many environmentalists and animal rights advocates among the Progressive Elitists believe most of the peasants should not be treated as well as the pigs or the snail darter.

As I have discussed many times, the government ought not to be in the marriage business.  If marriage is a spiritual union of two or more people, then it belongs in the private sector.  Government should only offer domestic partnership contracts and these should no more limit the partners than a small business contract does.  These domestic partnerships should be completely non-discriminatory, so long as the partners are only consenting adults.  See my prior discussions on the right to form domestic partnerships without government discrimination here, here, here, and here.  Marriage or domestic partnerships are surely relationships in which one should be completely free to exercise one's right to the freedom of association.

21 June 2011

Government Motors Urges Us to Drive 193 MPH

How odd it is that after decades of the federal government twisting the arms, legs, and other appendages of state governments to lower their speed limits on the Interstate Highway System and on US Highways, Government Motors is now aggressively marketing a Cadillac that achieves speeds of 193 mph on the highway.  Yes, it has wiper blades designed not to lift off of the windshield at that speed says the oft-repeated TV ad.

In this day of the Nanny State, when warning labels proclaim that only professional riders should ride small bicycles built for young children, this would seem a surprising turn of events at first glance.  But upon reflection, we remember that the cigarette tax is a good part of the reason that cigarettes have not been banned.  The state and federal governments make big money from the sale cigarettes.  If marijuana had been similarly taxed, it would not be banned today.  Now that the federal government has a direct and very substantial financial interest in Government Motors, it is hardly surprising that GM is now free to advocate a car designed to achieve speeds of 193 mph.  If that helps sales by creating a new, less stodgy, image for Cadillac, then the Nanny State training wheels need not be attached.

So, the old argument that high speeds are not an efficient use of fuel and therefore endanger national security by forcing us to buy oil from the OPEC nations who do not like us, is now set aside in the interest of making Cadillac seem sexier.  The argument that high speeds are dangerous and should be prohibited, is now inverted into one that implies that driving at dangerous high speeds is sexy.  And everyone knows that sex sells cars.

The fact that the government gave GM up to a $45 billion tax break by allowing it to continue to write off any current and future profits against losses prior to its reorganization is an ongoing embarrassment the government is trying hard to hide.  It has given GM a further domestic tax break of about $14 billion.  On top of that, the government still owns 26.5% of GM stock and wants to unload that well prior to the upcoming 2012 election.  It is estimated the loss upon the sale of the stock will be between $10 and $25 billion, where the upper estimate is based on the sale of so much stock no one much wants dragging the price way down.  These are the real costs of the GM bailout.

Of course all these losses do not stop Obama from bragging about how the government will get all of its money back on its GM investment.  Perhaps his whopper will be a lot less apparent to most of the People most of the time if a sexy Cadillac can be driven at 193 mph!  That should make GM stock much more valuable in a hurry.  This administration needs to leave GM behind long before the 2012 election so its losses will be old news by then.

19 June 2011

Deficit Pushes Senate to End Ethanol Thieving of Taxpayers

The monumental deficit has pushed the Senate to repeal the $5 billion of tax credits and subsidies per year for corn growers, ethanol refiners, and gasoline blenders.  A tariff of $0.54 per gallon on imported ethanol would also be eliminated.  38 Democrats, 2 independents, and 33 Republicans voted to end these pointless subsidies which had wrongly been sold as a path to cleaner skies, energy independence, and a means to reduce CO2 emissions.  I have long pointed at these subsidies, along with the mandate for ethanol production still required by the insane Renewable Fuel Standard law, as a clear sign of Congressional and Presidential perfidy and a determination to rob the taxpayers blind for naked political power.  For more than 30 years, the attitude was clearly let the General Welfare be damned as the votes of special interest groups were bought. 

The repeal bill was sponsored by Senators Tom Coburn of Oklahoma and Dianne Feinstein of California.  14 Republicans and 13 Democrats opposed the 73-27 vote repeal action.  Obama and his Sec. of Agriculture, Tom Vilsack, still oppose the end of these deleterious subsidies, claiming they are needed to reach Obama's imagined plan to reduce oil imports by one-third by 2025. The House has not yet voted on ending these ethanol subsidies and will reject the Senate bill because tax bills are constitutionally required to be initiated in the House of Representatives.  Fortunately, the ethanol subsidies will expire at the end of this year unless the House and Senate renew them.  This Senate vote makes it unlikely that it will renew this special interest travesty.

The ethanol subsidy is a $0.45/gallon of ethanol tax credit given against the excise tax of $0.184 per gallon of gasoline paid by gasoline blenders such as Valero and Marathon Oil.  This allows the blenders to pay more for corn ethanol made by such companies as Archer-Daniels-Midland and to compete for corn used as food or as livestock feed. 

The overall effect of a repeal of the subsidies upon food and feed prices will be minimal, since the mandate for ethanol use in fuel by the Renewable Fuel Standard law passed by the last Democrat Congress requires 12.6 billion gallons of ethanol use in fuel this year and up to 15 billion gallons in 2015.  By 2022, 36 billion gallons of so-called renewable fuel must be blended into gasoline, though only 15 billion gallons of that can be conventional corn-derived ethanol.  The remainder is somehow magically supposed to come from other low-carbon biofuels, such as switchgrass, which as yet produce a negligible 3 to 4 million gallons a year of ethanol or fuel in expensive pilot plants.

This mandate and the subsidies have caused the price of corn to be over $7/bushel all spring, which is twice the price of a year ago.  The subsidy and the high price of oil has caused blenders to use a billion gallons more corn ethanol than they were required to use.  This put still more pressure on corn, corn products, and meat products.  On Friday, buyers bought corn in the Toledo, Ohio grain trading hub at $7.35 per bushel.  A desperate turkey grower even offered $8.37/bushel of corn and got few offers of corn at that price.  Corn supplies are expected to be at a 15-year low in late August.  This may force some makers of corn-derived ethanol to shut down their plants.

The impact of ethanol from corn on the market and on some states can be judged from the graphic below from the 17 June Wall Street Journal:


Note that the food, seed, and industrial use of corn has grown very little since 2000 and the use in feed and residual use has shrunk since 2005 due to the increased cost of corn brought on by the huge increase in ethanol production since about 1998.  Iowa, the first major event for presidential candidates produces 21% of all U.S. ethanol, which is more than twice the production of any other state.  It is no accident that so much of the Iowa corn production is bought for the purpose of ethanol production.  The subsidy takers know how to put the political pressure on.  About 5 billion bushels of corn, or 40% of all corn production, is used to produce ethanol.  The great growth in corn production that has resulted has displaced other food crops and led to price increases severe enough that the World Bank and other international institutions have called for an end to corn ethanol subsidies.

The end effect due to the continuing ethanol in fuel mandate will be continued very high corn prices.  The income tax taxpayer will be relieved of a burden, but that burden will be shifted to the consumer.  It is better that the burden be on the consumer, which is a much broader base of people than the minority who pay federal income taxes.  It would be better yet if we removed the renewable fuel mandate and simply allowed the free market to figure out which fuel resources will be used.  Obama's centrally-planned economy will be a disaster just as all prior central planning has historically led to catastrophe.  The last place a catastrophe will come from will be man-made global warming due to CO2 emissions.

04 June 2011

Continued High Unemployment -- A Manufactured Crisis to be Exploited

The on-going recession began in mid-2008 due to a housing bubble and financial instability brought on by the federal government's and Federal Reserve's easy money policies, which had been pricked by the needle of the 2007 sharp increase in energy prices.  Throughout the recession, which according to government numbers is falsely said to have ended in mid-2009, the government has continued to pursue the easy money policies that caused the recession.  What is more, it has selectively decided that some individuals and companies will not pay the price for bad decisions they may have made, albeit with much encouragement from the government.  This has heaped all of the costs of the recession on those who bore no or little responsibility for the recession or on a few responsible actors the government does not like for one reason or another.

To be more precise, the economy was rebounding from the recession in the latter part of 2009 and in early 2010.  But then ObamaCare and the Dodd-Frank financial "reform" bills were passed and the Democrats clearly wanted massive tax increases.  These actions and many strange and arbitrary regulations created an avalanche of business uncertainty to add to the lingering uncertainty of the earlier bailouts and company asset thefts by the government. The second dip of the recession started in the latter half of 2010.  Then, once again, perhaps due to the extension of many of the Bush tax cuts, the economy showed some signs of recovery in the first quarter of this year.  But, continuing government ineptitude mixed with deliberate destruction of the private sector, caused the second quarter of this year to slip back into recession mode again.  This fact was hidden by the unrealistic measures of price inflation, which ignored large fuel and food price increases and over-emphasized some improvements in technology values.  Apparent increases in GDP were likely just artifacts of the understated inflationary effect on goods and services of the huge stimulus spending and the two Quantitative Easings.

Each month, I calculate the real unemployment rate and the number of missing jobs in comparison to January 2000 when most anyone who wanted a good job could find one.  In the belief that were good jobs available, as large a fraction of the population would be wanting to work today, one can calculate the needed jobs and the missing jobs.  The latest numbers based on the Bureau of Labor Statistics unemployment report for May 2011 follow:


There actually was a nanoscale improvement in the number of missing jobs relative to April 2011.  The bad news is that the improvement in jobs creation ought to be much, much better at this time after the mid-2008 start of the recession if we were really seeing any improvement of the economy.  There were 693,000 more missing jobs in May 2011 than there were in May 2010!  A new crop of high school and college graduates is emerging and there are no jobs for them.  This is now a three-year old recession!  Recessions of the private sector never last this long.  Only government can make such an extended recession.  This is truly the Great Socialist Recession.

We are mired in the doldrums and there is no wind in sight.  The business community expects the Obama administration and the Democrats to continue making systematically awful choices with respect to the business of business and job creation.  It is true that Congress is doing less harm since the Republicans gained control of the House, but that has only invigorated the administration's determination to cause as much harm as possible through executive branch agencies.  Some of this is incompetence in business and economic matters, but some is very likely an effort to simply make many Americans dependent upon big government.  The plan is to make many individuals so destitute that they will think government is their only salvation.  It is to put many companies so at risk in the hands of regulators that they will bow and scrape before government to save their heads from the chopping block. 

What is better than a crisis of no growth, inflation, and joblessness for government to aggrandize its power?  This is well-understood by those many Democrat Socialists who hunger always to expand the scope and power of government, while making the private sector tremble in fear.  They well remember how the Great Depression grew government and gave the Democrats the initiative in politics for decades.  Some of the most influential Democrats are hoping the present crisis will give them the same power, if only they can make this recession into a long-lasting depression or at least something close to one.  These supreme power-lusting Democrat Socialist leaders are a minority of the party, but they are in control of the party policy.  The Great Socialist Recession is very unlikely to end until Obama is no longer occupying the White House and the Democrats no longer control the Senate.