novatownhall blog

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Browsing Posts in Economics

As I have stated here on many occasions we got this equation all wrong. The mantra amongst corporatists over the past couple of decades has been “what is good for big business is good for America”. I would amend that to say that what is good for business is not necessarily good for America.

Today we do not have capitalism, but crony capitalism. Many large businesses of all types rely on the profligate spending by the federal government.

For those that did not hear, Walmart warned in its annual business report that cuts in Food Stamps would hurt its business.

This is NOT an anti-Walmart rant. They are simply doing what large businesses do: try to make profits by whatever means necessary. Target, Giant, and K-Mart are no different. Neither are defense/weapons contractors for that matter. It’s just that Walmart is more successful and has recently admitted it. My point here is to further point out how upside down things have become that these large businesses are counting more heavily on uncontrolled federal spending as part of their business plan. Most of the squealing about any defense cuts whatsoever originate from defense contractors who want to keep profits nice and fat. Thank God for Crimea putting that talk to rest, right?

Point here is that the food stamp/SNAP rolls are increasing and that is good for the oligarchs and plutocrats. That’s more profit for companies like JP Morgan Chase who profit handsomely from EBT card use.

What are we going to do when/if the day comes that there are no more EBT cards and corporate handouts?

When reality meets dogma. Reality ALWAYS wins

Yup. Makes sense to me. The world is more unstable than ever before and more people want to do harm to America and the western world than ever before. Hagel sure knows what he is doing. Oh. Hagel is a republican and is an absolute buffoon. How did he ever get elected to that post? What a disgrace to the party.

Now defense needs some culling in areas, no doubt. And Hagel talked with the top brass ( who tend to be more political in this day and age) for concurrence. Making military personnel pay for more things and get less in benefits would make anyone want to enlist (read: the draft will be coming back shortly). Money will be available to keep the F35 albatross going forward (why not just copy the Chinese–they already perfected the damn thing) but out goes the U-2. That means that anything to be seen by satellite will be hidden because our foes know when the satellites come into position. And the Warthog (ground pounder’s best friend) will go away. I assume Dragon Flys and Apaches will now cover that role. And the drones will be relied upon more than ever. Operations will be performed by SOG and we will disable and dismantle an enemies chance of waging war by internet.

Where will the savings go from all these “cutbacks”? Paying off the debt? Building a border fence? Probably into more ludicrous “outings”, rounds of golf, slush funds, entitlements. I know with this savings that the debt ceiling and budget will continue to go up. My advice is stock up on defense weapons. We may need it when Red Dawn comes to past.

Let me explain. From the time I was a young child I always had an interest in science, gizmos and sci-fi–the “what if” science. All the books and magazines I read led to a future of robotic service to free mankind from work. Gene Roddenberry promoted this concept theory in his Star Trek series. People living life as they felt. No money because everything was “free”. Everyone had their niche and only worked their “shift”; always finding time for family, FO time or just hanging out in 10 Forward, getting stewed. Sounds so lovely, doesn’t it? Well, it seems we’re trying to get there without robots but still with the need of money.

The CBO came out with a report that shows Obamacare “frees you from job lock”. Read this article. Now normal people who feel they have job lock (and are currently working) would apply for a different position or even another job to get what they need BEFORE they changed or reduced hours. Here (If you can even decipher this inane diatribe) we learn that it creates entrepreneurs. You can now do art or yoga or be with the kids or just meditate all day in your bathroom and not have to worry any longer about your healthcare because it is subsidized. You can work less because there is always a dept. of the government that will give you a handout so that you are equal with the common person and how they live. In other words “who cares about work. Someone is going to take care of your dead ass.” And that care takes money……someone else’s money.

The recession ended in 2009. People still can’t find jobs and we enhanced 26 weeks of unemployment payouts to 99 weeks. Then extended it. Then extended it again. Who pays for that? Employers and taxpayers. We give and enhance the rolls of all types of subsidies. Who pays for that? The taxpayers. Now you have people with job lock becoming emancipated with healthcare subsidies. Who pays for that? The taxpayers. If you are on subsidies, that means you don’t make enough in payment to afford the goods…..which also means you can’t afford to pay much in taxes. So who are the ones that can afford paying taxes? The ones with job lock and responsibility. Only problem is is that there is a balance point where if more is paid out then comes in, you can no longer support the people on subsidies.

What does this mean? Let’s look at France as an example. Their work week is like 35 or 37 hours and when they retire, they get some irrational amount for the rest of their lives. They’re crying the blues because retirements cannot be fully paid out. Why not? They have socialized medicine. They don’t have job lock. Of course their tax rate is something ridiculous like 80% and their millionaires are leaving the country. Why would we want to emulate a culture and economy like that when we have seen that it doesn’t work time and again? Their economy sucks and is getting worse. Our economy sucks and, regardless of what the government tells you, we ARE getting worse.

I got two pieces of mail the other day. One was from my banking institution which relayed to me some new fees being introduced. This institution never had these fees before but now seem to feel they must supplement losses they are incurring. The other was from my benefits center. My employment agreement contained bargained 1x my salary in group term life insurance free and any multiples to 5 paid for by the employee. I have 1x in retirement. Now I am getting a statement asking for a significant tax (as reported to the IRS with Medicare and SS withholdings needed) for that insurance. I can pay for the same policy personally for LESS than the tax they want me to pay. And why are they asking for Medicare and SS from that tax? Seems companies are hurting from this economy more than is being let on and the government is finding more sneaky and devious ways to pick people’s pockets.

Don’t talk to me about job lock bullshit. Obama plus Obamacare equals the ruination of the middle class and America as we have known it. If I wasn’t raised correctly with moral ethics maybe I would even think about getting some of that free candy and become a squirrel whisperer!

The big gov’t action figures always win:

Get one of the figures here – as soon as they figure out how to bypass the regulation to build them.

In the meantime, read these ten examples of the power of the ‘Kronies’ (yep! Republicans are guilty too)

Also here is an article showing that companies that cater to the rich are are doing quite well while those that cater to middle class are struggling:

In Manhattan, the upscale clothing retailer Barneys will replace the bankrupt discounter Loehmann’s, whose Chelsea store closes in a few weeks. Across the country, Olive Garden and Red Lobster restaurants are struggling, while fine-dining chains like Capital Grille are thriving. And at General Electric, the increase in demand for high-end dishwashers and refrigerators dwarfs sales growth of mass-market models.

Luxury auto dealers are likewise doing well, while others struggle.

Yet the biggest movers weren’t mass-market pickups or SUVs, but luxury vehicle brands from Cadillac to Lamborghini, many of which set sales records and sold every vehicle they could build or import last year — and only see more to come in 2014.

At this point the top 20% account for 61% of personal consumption expenditures – with the top 5% responsible for more than half of that. We are sadly headed toward being a society where most people either do not work or do not make much money with most of the consumption being on the higher end. While there is certainly nothing wrong with high end consumption, an entire economy based on zero-sum status competition games rather than genuine innovation does not bode well.

Unless there are drastic changes to the crony economy 15-20 years from now, few will be able to afford to live in a neighborhood with low crime, good schools and relatively high social trust.

Oh, our political elite are leading us down a very prosperous road indeed! [/sarcasm]

…than in the rest of the country, according to this article by the Rasmussen Media Group.

The clearest indication that things are out of balance nationally is that the median household income in our capital city is 73 percent higher than it is in America. This reality was reflected and exaggerated in “The Hunger Games,” where the capital city lived in lavish excess at the expense of those living horribly in the outlying districts. While the movie presents an extreme example of the problem, five of the nation’s seven wealthiest counties now surround the capital.

The Washington Post also published an article which brought attention to the great changes to this area:

In almost every way, the region continues to be shaped by the presence of the federal government. But as this series, the Insiders’ Game, has richly illustrated, the idea of “serving the public” has taken on a somewhat different meaning — one less rooted in sacrifice, stewardship and the chance to make a difference, one more given to celebrity, manipulation and the chance to make a big score.

We previously discussed here on this site the neo-feudalism that is developing in this country, but did not go much into the underlying reasons behind it. Daniel J Mitchell, a fellow at the CATO Institute, has a blog that is a great read and often hits on this theme: we here in Northern Virginia benefit greatly from the largess across the river. He posted this “theorem” on big government that I found to be largely true:

Why would he say such a thing? Well, consider that being a member of today’s financial elite depends largely on access to the ruling class in D.C. and that there is no investment bank, pharmaceutical enterprise, tech giant, physician association, lawyer association, manufacturer, etc without an office on K St. On the one side you have Democrats who admit that this is the big gov’t system they desire, and on the other you have Republicans who cloak cronyism, back scratching, and favor swapping for their powerful friends in talk of “free markets” and “economic liberty” on the stump. They let the large corporations have the bail outs while they grumble about “welfare queens” in the policy speeches.

Also, more and more are beginning to take notice this disparity and many have compared us to the denizens of the Capital City in the Hunger Games (see here and  here and here for just three examples).

Watch the following video for another explanation of this problem:

Also see this article where Iain Murray says that for every federal gov’t bureaucrat there are 5.5 more that are “hidden” in the private sector. And some fast food restaurants are now even lobbying for the government to allow them to accept food stamps. Walmart alone made over $14 Billion in food stamp transactions in 2012 and other businesses are clamoring to get into that game.

According to the Washington Post (see article here), Jim Moran’s congressional district received $43 billion in federal contracts, which is about as much as the entire state of Texas! Then there’s this little nugget:

At the same time, big companies realized that a few million spent shaping legislation could produce windfall profits. They nearly doubled the cash they poured into the capital.

Put your mind around that. Some companies putting more money into lobbying than toward R&D! This article states that lobbying is the best investment a corporation can make these day:

But if you put your money in a mutual fund or an IRA hoping to ride the gravy train, you missed the biggest and best investment opportunity in history. The real place to park your money is in Washington, D.C. That’s because the way to get ahead isn’t to work hard or make things; it’s to lobby Washington for special privileges.

Now, guess where many of these oligarchs, plutocrats, lobbyists, and political overlords live!… Northern Virginia.

This is where big government cronyism and corporatism leads. It actually breeds the very inequality that we all complain about. Small businesses do not have the connections that the large corporations have. A small business in Oklahoma can not afford to have a lobbyist working for them. They can’t afford an accountant that knows every tax loop hole. They can’t afford to keep a well connected lawyer on retainer.

My other point in continuing to remind everyone that we, here in Northern Virginia, may in some cases be exactly what we see others outside of this area railing against. Are we the very “bad guys” that we complain about? However, considering that this can not possibly last, we need to know that we are in danger of the carpet being swiped right out from underneath our feet. It is very artificial.

Believe it or not, President Obama said something that I actually agree with when he stated that income inequality is the “defining challenge of our time”. We can expect to hear about this more and more often as the years pass as the problem becomes worse. One of my primary themes on this board is that we need to stop looking to political solutions and start looking to our families, friends and neighbors. More importantly, I believe that we need to seek to be the one that others can lean on in times of need rather than the opposite. In short, I believe that those who trust either of the current parties to fix our problems are doing themselves a disservice. The forces arrayed against a restoration of a solid middle class are growing in strength and impact and we need to focus on personal/local responses rather than political ones.

Check out this report which says that about 47 percent of total US employment is at risk (while production has continued to rise). Then take a look at this report by an Oxford academic which says that in the next 20 years machine learning and mobile robotics could even cut into a lot of careers (such as legal writing) that were previously thought to be safe. In other words, this portends an economically polarized society.

Now of course President Obama and I view this problem from two different directions. First of all, just to be clear, I am certainly not advocating perfect income equality or a classless society. (But believe it or not, I don’t think President Obama and the Democrats intend that either – they enjoy being wealthy). When I speak of “income inequality”, I am referring to the disappearance of middle income families and do not mean that everyone should be earning the same money as we used to hear in talk radio straw-man arguments. (I also predict that not only will this straw-man will no longer work but some of the professional conservatives in Conservative, Inc will even hijack the issue)

That said, from my point of view, while there is a massive income gap, wage stagnation and labor participation is shrinking as the demand for less skilled labor declines, I do not believe that there is a solution in the federal government to this problem (unless one wants to pass laws to outlaw technological advances). This problem is going to continue to exist whether there is a Republican in the White House or a Democrat.

This is a global phenomenon by the way. Spain’s overall unemployment for example rate is 27% (Spain’s unemployment rate for people in their 20s is more than twice that number!) and Greece’s unemployment rate is 28%. Corporations in those nations have no way to employ these people profitably. The USA unemployment number is relatively low only because more people are dropping out of the work force altogether as low skilled workers are being replaced by automation and corporations have less use for middle management due to automated means to manage and monitor.

President Obama and pretty much everyone else in Congress believe in the current “bread and circuses” solution and have for a while (anyone remember when President Bush told us to “go shopping more”?). Democrats believe that the elite must provide a robust welfare state for those left behind so that they can participate in the economy. The Republicans on other hand believe in “make work” (e.g. expansion of the military, maintaining military bases, weapons contracts) and accept the premise of the welfare state and call for one that is partially privately run.

Affluent Democrats/Liberals often say that high taxes are the price that they as rich people should pay for a stable society – and besides, the wealth that is redistributed ultimately finds its way back into their pockets anyway (e.g. Walmart did $14 in food stamp business in 2012). Otherwise, the “masses” will riot and/or crime will rise and there will be no civil society.

I agree that we can not sustain a functional society/economy where ultimately only a small population of affluent elites make excellent money and pay all of the taxes while the vast majority are unable to find work and/or are only finding menial work/hustling and/or getting some gov’t assistance to make ends meet. But the federal government has skewed the playing field so much that it is nearly unrecognizable. Many large corporations are now based on selling exclusively to the federal govt and lobby to make sure the spigot stays wide open. Then on top of that, the rewards of these corporations are privatized while the risk is socialized. We are witnessing the biggest splurge of government and business largesse in our lifetimes – perhaps ever.  An era in which these political insiders are enriched while the regular people are sacrificed.

I predict that this issue of “income inequality” is going to be the major issue in the 2016 race (with lots of talk about it perhaps even in 2014). However, Democrats will simply call for much higher taxes and engage in class warfare rhetoric and make the word “rich” into a pejorative, while the Republicans will call for cutting spending. Neither side will offer any real solution as it will be business as usual in Washington, DC where the federal govt continues to “choose winners and losers”. Democrats choose their winners when they are in power. Republicans do likewise when they are in power. No matter what the “American Exceptionalism” dogma may state, hard work is no longer enough to be successful. These days, one often needs to be politically well connected too. Some people are in the business of simply helping people “make connections”.

The ruling class are far too powerful and I just don’t believe that either side will call for the real reforms that need to be made. The solutions are not going to come from Washington.

- Self-government, means self government.

We have heard for decades that we are on an unsustainable course where federal spending is concerned. Both sides know this, and while the Republicans have consistently paid lip service to the issue “limited govt”, none have really leveled with you on what this actually means. We hear speeches sprinkled with phrases such as “taking back America” (whatever that means) and “getting more Republicans elected” all wrapped in the rhetoric of limited govt. They do that because they know that quite frankly we are spoiled. Many, for example, claimed to vote against Ken Cuccinelli because they were angry about the partial govt shutdown in October. (Last I checked, Cuccinelli was not in Congress and was not running for that office, yet was punished for that by some) We can’t claim to want smaller/limited govt while at the same time desiring all the benefits of large govt.

Self government means that we have to learn to take control of our own neighborhoods. It may mean that some of us have to volunteer at the fire dept, attend the town hall meetings or even run for local office. It means that we will not be able to get a federal grant to widen that road or build that library. That means that if it is to be done, we have to do it locally. And if it can’t be done, we are not going to whine about it to Washington.

This also means that many of us may have to simplify our lives, acquire new skills and teach them to our children. Some are already learning to hunt, fish, raise animals, cure meat, plant and grow vegetables and preserve food. I know a wonderful family that is doing just that and sell the goods from their farm at the various area Farmer’s Markets. These are excellent skills to have. This may also mean less (or even NO) trips to the movies, canceling the cable subscription, eating out much less and other such activities and finding cheaper, more enriching family activities. May sound quaint, but it also means checking up on our neighbors and having that relationship where you can borrow that proverbial cup of sugar.

Here is some suggested reading I am reposting:

James Madison and the Making of America by Kevin Gutzman;

Rethinking the American Union for the 21st Century by Donald Livingston;

The Return of Common Sense by Eric Szuter

Give them as Christmas gifts for family and friends