Thursday, April 7, 2016

WHEN GETTING RE-ELECTED IS MORE IMPORTANT THAN DOING GOOD FOR THE PEOPLE (ORIGINALLY PUBLISHED 10/5/11)

In any dialog among or between people, especially in debate or argument, name calling is considered inappropriate. Consequently, although I would like to call our President a liar, I will refrain.

He uses the "inciting" words of let's close the tax loophole. The choice of the word loophole attempts to rally the economically uneducated. There are no loopholes in the tax code.

Charitable deductions are the government's attempt to incentivize contributions to charity. The interest on mortgage deduction is an attempt to incentivize the purchase of homes. (Could you imagine advocating the reduction of an incentive for home purchase under current economic conditions?) The lower rate on capital gains is another incentive for us to invest our savings for the longer term.

There may be a few so called tax incentives (loopholes) that don't serve an economic purpose. These are few and far between. President Obama recently quoted Ronald Reagan. He completely took out of context what President Reagan said. Watch out for Obama. Most of his advocacy is self serving and destructive.

Buzz words like loophole are meant to rally your spirit to vote for him. Look more closely at the impact of his suggestions.

THE LIES POLITICIANS TELL (ORIGINALLY PUBLISHED 7/11/11)

Public corporations prepare financial statements. One of these statements is generally called an income statement or profit and loss statement.

Simply put, a company first reports revenues, then subtracts its expenses that created those revenues and then reports whats left as pretax profit.

From the pretax profit federal taxes are subtracted. What's left is called Income after government taxes.

This income is generally used for three or four things. One is to pay dividends, since the majority of shares in America are owned by pension funds, mutual funds and individuals, the dividends are paid to the American public. The second thing the money is often used for is to buy back company shares. When this happens the money is paid to selling shareholders who then deposit it in their bank, reinvest it or spend it. Thirdly the money is spent on capital expenditure; putting up plants and buying equipment. Whatever little is left is retained in the corporation in order to maintain more employment and stability for the company.

NOW THE GOVERNMENT COMES ALONG AND SAYS "WE WANT MORE TAXES". TAXES ARE AN EXPENSE LIKE ANY OTHER EXPENSE OF RUNNING A BUSINESS. THE IMMEDIATE REACTION OF THE COMPANY IS TO THINK ABOUT RAISING PRICES OR REDUCING EXPENSES TO OFFSET THE TAX INCREASE, THEREBY REDUCING CONSUMPTION.

THE NEXT THING THAT HAPPENS IS THAT THE MUTUAL FUNDS, THE PENSION FUNDS AND OTHER SHAREHOLDERS RECEIVE LESS, CAPITAL EXPENDITURES ARE REDUCED, EMPLOYMENT IS REDUCED, AND A TAX INCREASE GENERALLY DOES NOTHING BUT ATTEMPT TO TRANSFER MORE MONEY TO THE GOVERNMENT. THE GOVERNMENT CAN THEN HIRE MORE PEOPLE AND MAKE THEM MORE BEHOLDEN AND THEREFORE VOTE FOR THE PARTY THAT RAISED THE TAXES AND PRODUCED NON-GROWTH GOVERNMENT JOBS.

THIS IS CALLED A NEGATIVE CAPITAL FORMATION ENVIRONMENT. IT'S SOMEWHAT MORE COMPLICATED THAN THIS SIMPLISTIC EXPLANATION AND ALTHOUGH IT MAY MAKE THE FINANCIALLY UNEDUCATED FEEL THEY ARE GETTING A FAIR SHAKE, IN REALITY IT DOES THEM MORE HARM THAN GOOD.

THE STANDARD OF LIVING MUST GO UP (ORIGINALLY PUBLISHED 7/18/11)

Charlie Rose was interviewing Larry Summers. He asked him what steps have to be taken in order to get growth to accelerate.

Mr. Summers listed five points. I thought they were all smart. Then Charlie asked Mr. Summers "What about the social compact the government has with the people?"

It never hit me so clearly as it did that moment, the government is like a corporation, it's just a piece of paper.

So who was he talking about that had this social compact with the people? He couldn't be talking about the government because the government is just a provider of services for which it taxes the people.

BUT IN TODAY'S WORLD, MOST AMERICANS DON'T PAY ANY FEDERAL INCOME TAXES OR PRACTICALLY NONE. THAT LEAVES A SELECT VERY FEW PEOPLE WHO HAVE MADE MONEY AND NOW ARE THE ONES BEING ASKED TO HAVE THIS SOCIAL COMPACT WITH THE PEOPLE.

In other words, if you are successful in American, you are a charity machine to everyone else. The democratic party argued that this approach prevents revolution and allows some people to succeed. The implications of this kind of a society are negative for the masses. A standard of living that hasn't increased for ten or twenty years won't until there is a system where everyone is taxed for those services received thru their "compact with the government". That is one of the things that has to be done to create growth.

BLOG FOR THE DAY...(ORIGINALLY PUBLISHED 8/14/12)

I said in an earlier blog that the political rhetoric, name calling and class warfare commentaries would inhibit the solving of the problems that exist in our society.

To make this discussion even clearer if someone makes a lot of money they either spend it or invest it. If they build a huge house, their money is transferred to the contractors, brokers, furniture manufacturers, plumbers and everyone else. If they buy stock the money is transferred to the seller, it’s not put under pillows. The same is true for money left to heirs, it circulates through the economic system.

The poorer among us don't want to hear about creating more wealth.  Unfortunately a dynamic, growing, thriving business community is exactly the recipe that will assure an increasing percentage of the population achieve the so called "American Dream".

WHO IS REALLY TO BLAME...(ORIGINALLY PUBLISHED 10/17/11)

There is a man by the name of Stanley O'Neal. He is a black man. He was also the CEO of Merrill Lynch. He also presided over Merrill Lynch during the near bankruptcy of the firm.

After the finanacial crisis of 2008, Vanity Fair magazine wrote a scathing article about the enormous failures of this man and his enormous contribtuion to the housing and related crisis. (November 2010)

The name of the article was "The Blundering Herd". STANLEY O'NEAL WALKED OFF WITH HUNDERDS OF MILLIONS OF DOLLARS OF COMPENSATION. According to the article Mr. O'Neal left the firm with "161 Million in retirement benefits and Merrill Lynch stock."

Why in the world did the Occupy Wall Street people march to the homes of white people who had relatively nothing, if anything at all, to do with the financial crisis of 2008? Why hasn't our President spoken to this man's (O'Neal) enormous failures and greed.

Picking people for jobs of any sort based on gender, race religion, etc. is self defeating but being politically correct, when there are facts that suggest the falseness of that approach, is equally as dangerous.

DISTORTION OF THE TRUTH (ORIGINALLY PUBLISHED 9/23/11)

There's another crazy article in the New York newspaper where a "ultra liberal" professor, who is very good with words, pontificates about the so called "wealthy Americans pay remarkably little in taxes". He doesn't point out that one of the main reasons may be that they have invested their money in tax free bonds. The tax free nature of the bonds is federal government policy in order to provide lower interest rates to states and municipalities. The low capital gains rate is government policy to increase investments in capital assets and to protect the savings in mutual funds, pension funds, 401ks, etc.

The writer then maliciously claims that Representative Ryan (who I often don't agree with) wants to exempt the very rich from bearing the burdens of taxes. No matter how you slice it, most of the taxes in this country are paid by the successful. In any case, so few people are in the "rich" category one has to ask, why not spend your time figuring out how to make more people rich.

Let's get it straight. No matter who you tax it takes money away from them, reduces their consumption of goods and services and drives the country further downward. Basically the attack on the few rich people increases unemployment and reduces economic activity. The silly writer talks about the top 100th of 1 percent of income distribution and how much their supposed income rose. That number can easily be affected by just a handful of people and is of no consequence. Who cares about the top 100th of 1 percent anyway?

The writer also talks about a sustained attack on organized labor. Its too bad the writer doesn't point out that almost every major industry that's been unionized has been a total catastrophe. The last time I looked organized labor was already causing dysfunction in the auto industry even before it can really recover.

As regards financial deregulation, it had very little to do with the economic disaster of 2008. Government policy, greed and a bubble were more responsible for what occurred.

I won't comment on the rest of this politically, left wing and inaccurate editorial except to tell Elizabeth Warren and the writer of this article that you should both go live in another country, in one bedroom with a shared bathroom. Then you should give the rest of what you have away, so you can pay your share to "fulfill the social contract" that you don't understand in the slightest.

FIRST BLOG OF THE DAY - U.S. HEALTH CARE COSTS (ORIGINALLY PUBLISHED 7/10/11)

Let this sink in over and over and over again. According to easily available sources:

A. Half of the population spend little or nothing on health care.
B. 5% of the population spend about half the total amount of health care costs.
C. To put it in clear terms, 5 people in every 100 account for 50% of U.S. health care spending.

It's another example of not putting the real facts on the table because it's politically unpopular. Therefore we waist billions of words and we never solve the problems.
 

Shepard Osherow. All Rights Reserved