Warm Southern Breeze

"… there is no such thing as nothing."

How to fix this ROTTEN economy

Posted by Warm Southern Breeze on Friday, March 11, 2011

Here are a few “quick” points, and anecdotal observations, followed by solutions.

According to published reports, unemployment has ranged, on national average, between 9-12%. However, some suggest that the real unemployment rate may be much higher, in some cases, up to twice – or more – of the reported figure. Adding strength to that argument is the fact that 1.) the government reports “seasonally adjusted rates,” 2.) has quit reporting unemployment for people out of work for over a year, and since 3.) many people have completely exhausted their their unemployment compensation benefits – two years, maximum, I believe – and 4.) Republicans do not want to supplement the benefits any longer, and the 5.) Bureau of Labor Statistics reports category U6 employment as employment, when instead it is underemployment – that is, those who have accepted part-time jobs when they are seeking full-time employment.

As well, some people have simply quit looking for work. Some people have moved back in with family – parents with children, children with parents, and other family with family, and more. Aging parents are being cared for by their children. Students have ceased attending school – higher education – and some have not sought higher education because of economic duress.

Regarding employment questions on the census – obtaining a truly accurate picture of unemployment – a standard, if you prefer, every decade; some folks, when asked in person will balk and say they’re “self employed,” when it’s really a euphemistic term meaning “I don’t have a job right now,” because to be unemployed is seen as a social stigma, a black mark, a pox, a negative mark on oneself. Thus, asking an anonymous question so that an honest answer will be given is wise. But to those whom moan, groan and complain… and even protest about such questions on the census, those folks are impediments to progress, sticks in the mud, and “just don’t ‘get it’.” They enjoy being rebels, agitators, and causing trouble – rather than creating solutions.

• We’re not in a  “Great Recession,” this is Great Depression II. The only reason folks aren’t calling it a depression is because so many would freak out. But the markers are still there. This is NOT Great Recession, this is Great Depression II.

• The president (POTUS) should have nationalized the banks, insurance companies and stock brokerage houses. That way, he could have fired all the corrupt and crooked top dogs (“executives,” though I think “dogs” an exceedingly more appropriate term), set their salaries, and ruled in the obscene profits and benefits they’re STILL rewarded with. It sure would’ve saved TARP! Heck… it probably would have even eliminated it! And “Quantitative Easing” wouldn’t even be a word!

That goes for the BIG OIL companies, too!

• While the Sarbanes-Oxley Act brought accountability to the CEOs of corporations, collusion and commingling of funds was reintroduced with the elimination of the Glass-Stegall Act (which should be re-enacted), which forbade banks, stock brokerage houses and insurance companies from operating in each others’ business. Now, it’s one giant incestuous fiscal orgy.

Sure, lawsuits would be filed, but look at the bright side. Lawyers would be put to work! And judges would have to work even more, as would juries! And besides, does anyone really love Wall Street types? Those folks continually demonstrate that they are NOT to be trusted. They love money – not people! And human nature being what it is, a lover will do anything to get more of the object of their love. So if you love money more than people, you’ll do anything to get more money… including hurt people. Loving things more than people is a very warped, demented and unbalanced perspective, anyway.

And by the time we got our nation’s economy back on track, the infighting types (the chronic complainers, and lawsuit filers) would have quit anyway.

• Cut Congress’ salary in half – same for the POTUS – and re-examine their 100% salary retirement benefits. Chances are, if you’re a Congress critter, you have a 50-50 chance of being a millionaire BEFORE you leave “service.” In February 2007, there were 123 retired Members of Congress, whose average pension was $35,952 in 2006. Others were significantly higher.

• Make the Social Security Trust Fund a hands-off account. That is, the exclusive use for the Social Security Trust fund should be to pay claims upon it – and nothing else, ever. Currently, it’s a virtual “slush fund,” meaning that it’s part of the general budget, and used to pay for everything in the budget… including – oh yes, Social Security. By so doing – making it a hands-off account – it would become solvent virtually overnight. Currently, the SSTF is not “broke” per se, but it’s pretty darn close.

Here’s how the bookkeepers finagle the SSTF. Imagine it as a Petty Cash Fund at work, which has a balance of $100. Petty Cash is used to pay for incidentals in the course of work, such as a book of postage stamps, somebody forgot their lunch money, snacks, parking meter money, etc., and is paid back most often in a week, and at the very latest in a month. The recipient may take $5.00 for incidentals, signs and dates an IOU (I Owe You) for the amount borrowed – sometimes notating the purpose of the expense – and pays back the borrowed money the next day, or within a week – again, in no case more than 30 days. When bookkeepers examine the Petty Cash Fund, they balance the account using IOUs and Cash On Hand. So, if there are $75 in IOUs, and $25 in Cash On Hand, the books balance. The problem is, that IOUs can’t be negotiated. They’re not “negotiable instruments” like money is. In the case of the SSTF, the money that’s being removed to pay for numerous projects – including Alaska’s infamous “Bridge to Nowhere,” and other (hopefully) more worthy projects – is being replaced with IOUs. In this case, the IOUs are future payables – that is, they are notes (loan papers) that are issued by the U.S. Treasury. Sure, it’s the full faith and credit of the U.S. government, so it’s good as gold, eh? In one sense, yes. In another no. When bookkeeping comes around to see if the books balance, they do! Why? The future a payable has value. It’s “face value” is the amount of the loan. In other words, a note for $100,000 is worth $100,000. The problem with using IOUs to fund the SSTF is that eventually, the due dates on the notes will come due, and in the mean time, the money that’s being placed into the SSTF by workers is currently being paid out as quickly as it comes in. We’re now in that situation. Some folks have said that presently, there are three workers paying the Social Security of every retiree. The Social Security Administration says this: “Today, about 155 million people work and pay Social Security taxes and about 54 million people receive monthly Social Security benefits.

They also identify that, “You pay Social Security taxes on your earnings up to a certain amount. That amount increases each year to keep pace with wages. In 2011, that amount is $106,800.” Why do the über-wealthy get of scot free? Why don’t they pay Social Security tax on ALL their income?

• Return the tax structures to post World War II levels – tax the filthy rich and corporations – you’re not a corporation, and you’re not filthy rich – heck, you probably don’t even make $250,000/year!

HIRE people – put them to work!

Okay… since private enterprise is not doing that, let the federal government do it. Give jobs to every man and woman that wants a job and is able to work. I’m talking about useful, genuinely beneficial jobs that would benefit our nation.

The CIA World Factbook has indicated on the subcategory “Economy” under the nation identified as “United States” that “Long-term problems include inadequate investment in economic infrastructure, rapidly rising medical and pension costs of an aging population, sizable trade and budget deficits, and stagnation of family income in the lower economic groups.”

Not many people may recall the so-called “alphabet agencies” created under president Franklin Delano Roosevelt (FDR), whose efforts brought America out of the Great Depression, improved our national infrastructure, created a large middle class, and brought numerous benefits to this nation, and placed us on the fast track to being a “super power” nation.

The Civilian Conservation Corps, for example, built numerous parks, and other amenities we now take for granted. The Tennessee Valley Authority brought rural electrification to previously darkened hills and hollows throughout the Southeast. In the process, it brought increased health, created farm and other markets, and innumerable business opportunities.

All those people were paid good, living wages, had healthcare for themselves and their families, clothing allowances, housing stipends, and more.

For the federal government to hire people would stimulate private enterprise, since government would be ordering materials and goods, so private manufacturing would be stimulated, mining, factories, shipping, sales and more would be boosted.

Our nation’s roads, waterways, electrical power grid, and more would be improved, and numerous benefits would be reaped.

If private enterprise is not hiring (and they’re not), and since the federal government has the ability to print money – create wealth, if you will – then improving our nation’s weakest areas by putting people to work (employing them) in improving our nation’s crumbling infrastructure would benefit everyone.

It’s a fairly simple concept.

But some – Republicans and “TEA” Partiers – don’t want to spend money, just like true miserly tightwads. They simply want private enterprise to run everything… including government. They are genuine governmental deconstructionists. Why else so we see and hear of “private security firms” in Iraq and other Middle Eastern nations where conflict is current?

Think about this: If government has the power to print money (and they do), and true wealth is created and generated by creating or selling something (and it is), when no one in the private sector is buying, the obvious solution/answer is that the government should buy.

Hello? Is anyone listening?

6 Responses to “How to fix this ROTTEN economy”

  1. Hi Breeze…

    Yep, Molly here, and I’m listening! I agree with just about everything you wrote. We do need to eliminate the cap on social security and we do need to get more tax money out of those filthy rich. Do you realize that one hedge fund manager, a guy by the name of Paulson, made 4 or 5 billion last year? Not millions… but billions! I’ve been infuriated about this ever since I read it.. I don’t know why everybody else isn’t as infuriated as I am. Is there anybody out there that really thinks this guy “earned” that money.. and the poor bloke next door, losing his home because he has been out of work for two years despite incessent looking.. is just “lazy”?

    Argh…

    I did want to correct you on one item, however. People who are out of work, no matter how long, no matter whether or not they are still getting benefits, are still counted as unemployed as long as they are actively looking for work. I also have a blog, and I wrote about that here:

    How the Unemployment Rate is Calculated .

    I do believe, however, that our current methods of calculating the unemployment rate, a method which has not changed in a long time, seriously understates the nature of the unemployment problem. We have 25,000,000 + who are traditionally unemployed, underemployed (part-time), or who “want a job” but haven’t looked in the past 4 weeks for some reason. That doesn’t count those who say they no longer want a job but perhaps have retired or just dropped out of the job market for awhile.

    Great blog! Keep writing!

    Like

  2. You fail to understand the economy. By taxing corporations you are really taxing all of us. Corporations have no other choice than to pass the tax on to us in the form of higher taxes. We are already at the top of the ladder when it comes to corporate taxes in our country over other countries. This is why some businesses are starting to leave our country.

    Let me give you and example of how ignorant your statement is. About 30 years ago, liberals like you stated that we needed to tax the rich more so they got Congress to pass a 10% luxury tax on all luxury items. At the time, I was working as a salesman selling to among other businesses the yacht building industry in our country.

    Once this tax was passed, the rich started looking around the world and realized that they could buy their 5 million dollar yacht overseas for about 3.5 million and also save the $500,000 luxury tax. The rich did not pay any more taxes but it bankrupted the yacht building industry in our country and the ones who really got it stuck to where the working class guys building those yachts who all lost their jobs and their homes and had to retrain for another career.

    Let me give you another example of how ignorant your statement is and how you totally do not get how our economy works. In Minnesota, more liberals like you decided that they needed to stick it to the rich so they passed a 300% increase on property owning landlords who had rental properties. The landlords had no choice but to raise the rent on all of their tenants, the little guys who could least afford to pay that increased tax.

    In both cases the taxes were repealed as absolute failures that they were but you liberals still keep beating the same drum and expect different results.

    The way to fix our economy is to let the people start their own businesses and to pass a flat tax on everyone no exceptions and no deductions. If you make $10,000 a year you pay 15%. If you make $10,000,000 a year you pay 15%. Or you could have a national sales tax that does not depend upon income. Their are many illegal enterprises that never pay taxes like hookers for example. If you had a national sales tax of say 7% on all non food items, then we could reduce the tax burden on everyone and get way more tax dollars into our treasury.

    Blessings on you and yours
    John Wilder

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    • Warm Southern Breeze said

      Thanks for reading, and for your response, John! Yacht building! That’s funny! Industries and manufacturing have became traitorous turncoats and quit manufacturing here on our shores because Congress allowed encouraged them to do so. Yes, Congress has written laws that encourages manufacturing to LEAVE our shores – and it has NEVER been about “taxes.” It’s about PROFIT, John… MORE MONEY for the greedy CEOs and the Wall Street Gang.

      Remember CAFTA? I do. I recollect it very distinctly, because Rep. Robert Aderholt, (R, AL) was the solitary hold-out on its passage in Congress. He was leaning toward not voting approval for its passage, but was persuaded after conversation with then-President George W. Bush that passage of CAFTA would not hurt the sock manufacturing industry in Ft. Payne, AL, and then voted for its passage. As soon as the announcement was made that CAFTA had passed, it wasn’t two weeks afterward that folks got their notices that their jobs were going to be moving to Mexico, Honduras and other nations named in CAFTA. Now, there’s only one sock mill in Ft. Payne, AL, which was formerly known as “The Sock Manufacturing Capital of the World.” And it’s soon to close. Somebody lied, don’cha reckon?

      National sales tax? That’s even more hilarious! So-called “fair” taxes actually hurt the working families and working poor! It’s pretty simple to understand why. If it takes $1000 annually to live, and you make $10,000, that’s 10% of your income. But if you make $1,000,000 why, that’s 0.1% of your income. The statistics demonstrate that the period of our nation’s greatest growth, meaning the creation and expansion of the middle class, was in the post WWII era. It’s not rocket science or brain surgery – all we have to do is look at the time when we had our greatest growth, and repeat the process. Stop rewarding multinational corporations who have no loyalty to the United States for moving off shore, and re-enact higher graduated tax rates for the über wealthy. Even “the Oracle of Omaha” Warren Buffet, CEO of Berkshire Hathaway, in his report to stockholders in 2003 wrote “Corporate income taxes in fiscal 2003 accounted for 7.4% of all federal tax receipts, down from a post-war peak of 32% in 1952. With one exception (1983), last year’s percentage is the lowest recorded since data was first published in 1934.

      “Even so, tax breaks for corporations (and their investors, particularly large ones) were a major part of the Administration’s 2002 and 2003 initiatives. If class warfare is being waged in America, my class is clearly winning.(emphasis added) Today, many large corporations – run by CEOs whose fiddle-playing talents make your Chairman look like he is all thumbs – pay nothing close to the stated federal tax rate of 35%.” Oh yes… he also supports higher taxes for the über wealthy like himself. FYI, personal and corporate income taxes during that time (post WWII era) were, for the most wealthy, in the 70%+ bracket.

      You wrote that “The way to fix our economy is to let the people start their own businesses and to pass a flat tax on everyone no exceptions and no deductions.” I have two questions pertinent to that suggestion: 1.) What’s now preventing them from starting businesses? There are two choices, as I see it: a.) Nothing, and; b.) Banks which refuse to lend; and 2.) What’s now preventing a so-called “flat” tax from being implemented? Though I could be mistaken, most taxes are based upon consumption – not production, and with the possible exception of personal income – which is why personal income tax for working families should be significantly lowered, although it could be construed that we do “consume” certain governmental services. Adding credence to the assertion that most taxes are based upon consumption, why are states’ and local economies “in the tank”? The masses of individuals are not buying (consuming) anything! (Wait, wait… let’s sell more yachts to the über-wealthy! That’ll fix everything!)

      Concluding, I note that your response addressed one issue – income tax rates for corporations & individuals. I wrote about several other issues, among which were numerous points on the unemployment rate – which condition itself (and our economic meltdown) was secondary to the elimination of the Glass-Stegall Act, my assertion that economic indicators support the idea that this is Great Depression II rather than “Great Recession,” the Social Security Trust Fund dilemma and how to remedy it, Congressional compensation, etc., but you wrote nothing about any of those issues.

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  3. Too bad this thing does not have an edit function. I realize that I misspoke when I said that corporations have no other choice than to pass on higher taxes on us in the form of higher prices not taxes.

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  4. […] Breeze on Tuesday, March 22, 2011 In a response to a reader’s remarks upon the entry “How to fix this ROTTEN economy,” I had quoted in context the published remarks of Berkshire Hathaway CEO Warren Buffett […]

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