Reality Check

We keep hearing and reading everyday from our politicians and the media that we are facing unprecedented problems in this country and that things are worse now than they have ever been. In short these are the worse of times for the United States. Given the drumbeat of gloom and doom, we start to believe it.


Nonsense. Let's put things in perspective.

1929- 1939-- the Great Depression, massive unemployment , dust bowls, runs on the banks, Hoovervilles, breadlines, labor union clashes,etc.

1940-43 -- Nazi Germany marching through Europe and advancing on Leningrad, Britain under siege, Pearl Harbor and Japan sweeping through the Pacific. We were losing the war and many thousands of our men were dying.

The 1950's -- The Korean War and the expanding Communist Soviet Union and it's nuclear threat ( remember those drills hiding under school desk), culminating with the Cuban Missile Crisis in 1961. McCarthyism and its fall out.

Racism and bigotry were rampant. Eventually strife arose from the Civil Rights Movement in the 1960s and beyond , including the riots after MLK's assassination.

The Viet Nam War, with so many killed and wounded, and massive demonstrations, protests and civil disobedience in the 1960's and early 70's. The country was torn apart.

Remember all the years when we constantly lamented Urban Decay , the Rust Belt and the loss of our Farm Economy. Don't forget the era of Stagflaion and long gas lines from the Arab Oil Embargo . The Savings and Loan Crisis that we were told would cripple our economy for generations .

Our cities were crumbling , factories were closing and farmers couldn't make a decent living. The "inner cities " were dying.

Women and minorities did not have the rights and opportunities they have today.

We had some very bad recessions in the mid 1970s and early 1980s and 1990s. The stock market crashed in 1987. We had  the bursting of the DotCom bubble in 2001, with the sharp economic down turn that followed. Of course let's not forget 9/11.

Remember that in the 50s the top tax rate exceeded 70% and has been essentially falling since to where we are at today.

If we honestly examine it, the "good old days" weren't all that great.

Our current problems , while very serious, don't compare to some of the problems we have  dealt with in the past.  Maybe that is why we have to amplify the problems we  have today.

Of course the unemployment rate is a terrible problem, and our debt and deficit are very serious problems that have to be addressed.  Foreclosures and housing prices are dreadful after the sub prime lending crisis set off the housing collapse which lead to the financial melt down and resulting Great Recession.

However inflation and interest rates are low.

We are in the painful , but ultimately beneficial, process of de-leveraging our debt levels.

Those who have jobs are doing reasonably well, and are now feeling less worried about losing them.
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While home values have plunged most people are secure in their housing situation and the market is finally recovering .

The stock market , where so many Americans ( at least 50%) have their retirement accounts and the like, has come back strongly from it's lows and the main market problems today appear to be from Europe and with our politicians.

Our corporations are operating at very profitable levels and basically are awaiting increased demand ( and the election) to justify new hiring. Reportedly they are sitting on a mountain of cash but need to have confidence in the economy to invest it.

Notwithstanding Standard and Poor's, the world believes that US Treasuries are still the safest investment in the world. The only threat to our credit rating is our Congress.

Our farm economy is so strong that it should be embarrassing to them to still be getting large government farm subsidies.

The wars we are involved in are winding down and are being fought by volunteers who, for a variety of reasons, have chosen to be in the military. Therefore the rest of us really haven't had to sacrifice to fight these far off wars. The risk of a terrorist attack is real but sadly it is the nature of world we live in.

The one thing that really is broken, and is worse than our past,  is our political process.

Our politicians, abetted by the pundits, have created a toxic atmosphere over things that in reality can be relatively easily dealt with by people of good will and reason. For example, Simpson Bowles would do the job on the deficit and the debt, and relatively painlessly.

Why hasn't either party embraced it? The so called Gang of Six are on the right track but partisans on both sides of the aisle block compromise at every turn.

Since our country's strengths are so extensive and our assets are so strong , we can do the things that need to be done, if the political will is there.

We can afford to raise revenue. There certainly are areas where spending can and should be cut significantly. Meaningful adjustments to entitlements can be made in a relatively minor and thoughtful way which would have a major impact on bringing down the debt and the deficit.

Once a program which includes these things is developed and implemented, confidence in our political process will be restored and the economy will start to grow again and finish the job of solving our debt and deficit problems; as occurred in the 1990s when economic prosperity generated increased tax revenues from increased incomes and profits.

We are lucky our problem are so solvable -- think Greece and other countries in Europe .

However, there are too many politicians and pundits who don't want to solve our problems . No , they just want to win elections to gain or retain power.

When will we all wake up to the fact that they care more about winning elections , with all the spoils that provides, than what is in the best interest of the country.

Maybe that has always been true, and is just a part of human nature, but it's so much more apparent these days.

Shared sacrifice through political consensus is the answer. Compared to what we have had to do in the past, it shouldn't be all that hard.

Eric

Update : 2015

Housing prices have largely recovered; foreclosures mostly over.
The stock market remains strong.
Unemployment  at 5.5%; millions of new jobs created since date of this original post.
Inflation still tame
Deficit has been cut in half.
US economy leads the world. Dollar strong and oil prices low.
Yes, we still have some serious problems, but to hear the politicians and media ( from all sides) things have never been worse in this country.
How crazy is that. Why must we always beat ourselves up?

Things that make no sense to me-part 1

Things that make no sense to me:


1. Cuts in public sector jobs as demanded by GOP  and GOP complaining about high unemployment rate.

2. Lowering retirement age in Europe when people are living longer healthier lives.

3. Fewer teachers when we want to improve education.

4. Fewer cops when we want to reduce crime.

5. Fewer talented immigrants allowed into US when they enhance our country . Quotas should be based on education rather than nationality;  by all means let the better educated ones in.

6. Illegal immigrantes taking jobs from their own fellow legal immigrants , yet they support them. While quite selfless, it still seems illogical.

7. State and local employees with better union rights than federal employees.  Except for teachers, police and fire, it makes no sense to have state and local employees have more collective bargaining rights than federal workers.

8. Why can't government issue anyone who wants one a free picture ID.

9. Euro without a fiscal  union.

10. China without democracy; how long will that last.

11. Islamic separation of state and religion.

12. Hunger in midst of plenty.

13. Lack of universal health care.

14. Fear of nuclear power. How many have died? Very few, none at Fukushima.

15. Terrorist treated as criminals rather than war enemies. Why aren't they enemy combatants?

16. Gold as a valuable medium of exchange. Why is it so valuable?

17. Why not spend for infrastructure ? The companies and workers are private sector not government.

18. Germans who retire at 67 , bailing out Greeks who get to retire at 60.

19. Media that can't separate lies from facts. Being balanced is no excuse for not identifying lies and half-truths.

20. Democrats who want more jobs but are anti-business.

21. Asking banks to make more loans and then criticizing banks for making more loans.

23. US Open golf where they make the course much tougher for the tournament, but reduce par to 70 from 72 or 71.

Eric

Income gap action plan update

After the Scott Walker recall  debacle -- if you're going to attack a "king", you'd better kill him-- I went back and pulled out my action plan to actually narrow the growing gap between the haves and have nots ( different from the 1% v.99%) in our country.


I'm pleased to report that shareholder actions have picked up, at least in a very public way, and pressure is growing to rein in out sized executive compensation. While I can't take all of the credit for this , I can only assume people are reading my blog!

As to strengthening unions and thus raising middle class compensation, last night was a real set back, and ill-advised, for the reasons I set forth below regarding public employee unions, as opposed to private sector unions.

The failure to recall Govenor Walker ( people don't like recalls for anything less than malfeasance) really set the whole union movement back. I guess it's remarkable they did as well as they did, but who cares if you lose.

Again I believe that private sector unions must be divorced from public sector.The state and local public employee unions should operate the same way as federal workers unions do.

Doesn't anyone see the irony of pubic employees working for Obama having no greater rights than public employees working for Scott Walker?


We need stronger private sector unions, but being associated with the public sector, where the tax payers are the owners, only makes it harder. Within the public sector we have to look at teachers , police and firemen differently from other government employees. Those three categories of government workers are more vital than the others who are more akin to federal employees who have very limited collective bargaining rights.

 A reformed private sector union movement, which works with management to both increase profits and increase worker compensation and benefits, is needed to strengthen the middle class and narrow the income gap that threatens the very stability of our country.

Eric

Words and Meanings- European Style

Words and Meaning - European Style

Following on from my last post, where I explored the different meanings of the same words used by Democrats and Republicans, it is interesting to see how those same words are used by Europeans of the Left and the Right.


1. Growth, as opposed to austerity-- Who doesn't want growth. Even those who are pushing austerity also would like growth. However the Left and the Right  differ as to how to accomplish growth.

While the Left today talks about wanting growth , one of way to achieve growth is to cut taxes. However , to Europeans, especially on the Left, that is an anathema.

Another way to stimulate growth is to reduce government regulation and bureaucracy , but the Europeans don't believe in that either.

No, the only thing Leftist Europeans would do to stimulate growth is to increase government spending.

But where would they get the money to spend?

If they try to borrower, who would lend, and at what price? The debt in many countries is already very high and many countries have to pay really high rates of interest. Spain and Italy are hovering around 6%, while the US ( which also has too much debt) is under 2%.

If they raise taxes to increase spending doesn't that just retard growth?

Frankly, I'm at a loss to understand what Europeans mean by adopting a growth strategy, particulary within the Euro zone.


2. Tax Reform -- In Europe they don't talk much about that, other than to raise taxes. However, as I mentioned earlier, I've always thought that raising taxes is not good for growth.

I guess one thing they can do is to get people to actually pay the taxes they owe, which isn't so easy in places like Greece.


3. Debt Reduction-- You'd think that would be a big one; and it is for the Right in Europe. However, the Left just wants to leave it for another day and , in fact , wants to do more spending that will actually increase  debt further.


What to do now that the Left is in ascendancy?  I have no idea , especially given the constraints of the Euro zone;  but that's a whole other issue.

So once again everyone in Europe is  for the same "words" however , just like in the US , they have different "meanings", depending on ones politics.


Eric

Words and Meanings

Words that don't mean the same thing.


1 . Tax Reform--

To Democrats it means higher taxes, especially for the rich.

For Republicans it means lower taxes for everybody, but since the rich pay most of the taxes, any lowering mostly help them.

Both agree on fewer "loopholes",  neither agree which loopholes should be eliminated.


2. Economic Growth-- Everyone is in favor, however for :

Dems it means more government spending.

GOP it means lower taxes and less regulation.


3. Cutting the debt and deficit-- Everyone wants to do that ( at least eventually), however for:

Dems it means raising taxes and cutting some spending , mainly military,

GOP it means cutting spending and that's it.


So isn't the solution to pick a bi-partisan group of experts, both in and out of the government, to come up with the best comprehensive solution?

Oh wait, we already did that. It's called Simpson Bowles.

And guess what, both parties rejected it, even the President who set it up in the first place.

I guess we'll just keep on using the same words that simply have different meaning depending on who's using them.

Of course the one word almost no one wants to use, irrespective of it meaning, is compromise.

Eric

Financial observations

While I have already covered some of the topics, this is a recap of some unconventional wisdom observations on issues not often commented on in the media of any political stripe.

According to CNN, over 60% of Americans either directly or indirectly own stocks traded on Wall St. Think of all those 401(k)s , mutual funds , union and other pension funds, 521 college plans,insurance annuities and policies , and other retirement and investment funds. In addition some of the biggest players on Wall St are employee benefits or union funds-- like Teachers, Calpers,Nysters and so on.

Therefore to a significant degree a strong Wall St actually benefits Main St.

Lots of ordinary people benefit from Wall St and I think they are the same people who pay all the taxes , because ( also according to CNN)  47% of Americans pay no federal income taxes ( none of those who pay nothing are the "rich" thanks to AMT).

That's why most tax cuts benefit the rich, since it's so difficult to cut lower income earners taxes. However we do actually pay some people who pay no federal income tax.

So when you talk about federal taxpayers bailing out Wall St what does that really mean? Are we to a large degree bailing out ourselves? And just who are those "taxpayers " anyway? Certainly not the ones who pay no federal income taxes.

Also what kind of country are we if our "shared responsibility" as citizens at the federal level is only participated in by 53% of our citizens.

How is it we venerate Joe Six Pack , who pays very little, if any, taxes and treat people who pay taxes in six or seven figure amounts like they were the scum of the earth, if not outright evil. Just once I'd like to hear a politician say "thank you" to those who pay most of the taxes.

Also why is the " blue collar " guy so venerated. I'd rather have the 24/7 hard charging white collar executive or professional who works 100 + hours a week instead of the union guy who stops working when the whistle blows unless he gets paid overtime. When his union contract says he doesn't have to do something, he won't do it even if it is for the good of his company and as such his job.

What does being a a "lunch bucket " guy mean anyway and why is it such a good thing? Don't get me wrong , I'm not knocking the union guy ( I actually think unions saved capitalism in the early part of the last century), I just don't understand why he is such symbol of what's right and good in America.

We have this bias against successful people, even though most of us would like to be one of them. Maybe that's it.

While I too believe, and have written numerous times, that executive compensation, not tied directly to performance, has gotten way out of control, why is no one complaining about professional athletes, entertainers, media stars and the like.

What does it say when a weak hitting second basemen can make millions of dollars a year or when there was a guy sitting on the Bulls bench last year who has never, and will never, play a minute in a game for the Bulls, yet made in excess of $8 million dollars that year and the year before?

Don't tell me that tax payer money isn't involved. Think of all those stadiums and other taxpayer funded amenities (tax breaks, infrastructure, police, etc.) that are lavished on many sports franchises.

And what about movie stars? They can get paid more for one movie than a Goldman Sachs CEO makes in a year.

While we're at it, what about all those TV and radio news people and commentators who lambaste greedy Wall St execs and bankers and who themselves make well into 7 figures. What societal benefits have they given us that merits their high compensation? Yet they complain about the compensation of bankers and other high paid execs.


As I've written before, my purpose in doing these posting is to point out certain anomalies and inconsistencies in what we hear and read everyday form our politicians and media from both the left and the right.

Eric

Great Expectations?

We constantly hear about market disappointments arising from not meeting (or the opposite exceeding) the expectations of analysts or other experts. The recent example of the addition of 120,000 new jobs not meeting expectations of experts has given rise to a sharp market decline today.

Maybe the problem is not the number of jobs created, but rather the skill and accuracy of the estimators. If the estimations had been for 120,000 new jobs would the market have reacted any differently?

The same observation is applicable to those company earning reports that either meet, exceed or are below analysts' estimates.

It seems to me that a major problem is how good the estimator analysts are at their jobs.

If analysts started doing a better job of estimating, how would the markets react to that?

Eric