Going Out to Eat

It’s nice the President thinks the Federal Budget is like going out to eat. Unfortunately his analogy isn’t quite right. The correct analogy is that you go out to dinner with all of your friends and some acquaintances. Everyone orders what they want. When it comes time to pay the bill, everyone throws into the center what they think they owe.

You have the people who knowingly throw in more then covers what they order. Other people throw in far less then what they owe, and others get it just right. When all of the money is collected in the center it becomes apparent there isn’t enough money to pay the bill. Some of the under payers usually make a quick exit, not wanting to pay their fair share. Others stick around and try to sort it all out to cover enough money for the establishment. If you go out with your friends enough times at some point it’s time to make all of the friends and acquaintances to pay their fair share. The Federal Budget is crafted in much the same way. Wants are put above means.

Why isn’t it the same with the Federal Budget? Isn’t it time to tax everyone with a Federal Income Tax? Shouldn’t we stop giving a free pass to people instead of running massive deficits? So lets raise taxes across the board sufficiently to cover our Country’s obligations. This would make budgets real for the 47% of people who don’t pay income taxes. It’s easy to say you want $4,000 per capita of Federal Services when you don’t pay a dime to provide those services one indicates is necessary to operate the Federal Government. It’s much more effective to tax 100% of the population then it is 10%.

Maybe you don’t think it’s fair that all people don’t pay their fair share. Maybe then we could institute a check box on the tax forms indicating how many people you are willing to cover and then charging you for the taxes. A fair solution to problem, where those who think not everyone should pay are given an opportunity to pay more. It would be interesting to see how much Warren Buffet would put down. After all he is always complaining his tax rate is less then his secretary's. This would be a put or shut up tax. It would give Warren Buffet the choice to pay the same tax rate as his secretary and in the process cover the less wealthy then himself. We do live in a democracy so lets have people vote with their dollars on how much the poor should get discounted rather then force the payment by gun point.

HSR-Dedicated Funding

A recent article on High Speed Rail in California painted a bleak picture of the future of the project. The main problem appears to be no dedicated funding source to pay for the $98 billion project. California does have some rail lines already in place and could be used as a funding source to fund the HSR line through the center of California. Here are some yearly ridership numbers I found:

Amtrak California	11,866,636
Metrolink	10,250,000
San Diego Trolley	4,746,768
BART	17,160,000
Sacramento RTD	33,000,000
Total:	77,023,404

If we take the same approach as the anti-road contingent and press for rail to pay for itself, we can have the riders of the rail line pay extra per trip. If we add a dollar per trip for the HSR rail, we can raise over $77 million dollars per year. By the time the HSR project is finished in a projected 2034 a total of $1.69 billion dollars of the projected $98 billion dollar cost would be raised. Of course we need the HSR rail to be fully funded, so in order to make that happen we need to charge the 77 million trips an extra $58 per trip. No problem right?

The War on Poverty Has Failed

Yesterday I read an article on a local (San Luis Obispo, CA) business person’s social experiment on providing jobs to unemployed. Unfortunately his experiment showed that unemployed people either want to cheat the system or not work. It’s a clear sign that the war of poverty hasn’t solved the problem of poverty, but made it worse. Instead of taking the steps to make themselves better, people have the State funded option of not working. The job he was offering was picking grapes for the harvest of his vineyards. While a manual labor position, he was offering to pay between $8-20 per hour depending on their efficiency at picking grapes.

This is a stark difference to the environment of the Great Depression. During the Great Depression the central coast was the hotbed of jobs. People from all over the country flocked to the area, not for the great weather, but for the jobs in the numerous agricultural fields in the area. The Central Coast of California was not affected by the great dustbowl of the Midwest and was able to continue to grow the crops of lettuce, beans and other vegetables. The history books tell stories of people camping out next along the roadways with the hopes of finding a job. John Steinbeck told their stories vividly in his literature.

So what’s the difference today? It has to be the war on poverty that provides an alternative to work. Why work? Each week that Government provides a check to entice you to stay home. Sure it’s intent is to keep you living while you search for a new job, but in reality it has become an anchor on the getting America back to work. While most of the news stories of people not taking jobs focus on the farmers unable to find allowable workers, it also affects a litany of suppliers and distributor’s of the agricultural products. To ensure food safety agricultural products are often packaged in disposable packaging. Without growth in the need for packaging, packaging plants don’t expand. If there’s a lessening of demand for the packaging they close plants or reduce the number of plants. Truck driver’s don’t have work, since they don’t have anything to haul. It kills jobs.

During this economic downturn Congress has decided to extend unemployment benefits at a cost of $40-$60 billion dollars for six months, repeatedly. While Nancy Pelosi claims this is the fastest way to create jobs, I’m arguing the exact opposite occurs. It just provides more benefits for not working. Why take the job in the field that will provide a multiplying affect on the work? It’s easier to stay home.

So lets stop the War on Poverty and spend the money on reducing the deficit. Lets make a better situation for children and grandchildren by getting rid of the humongous deficits the War on Poverty has created and restore the American work ethic in the United States of America.

Corporate Taxes–They cover the costs!

A quote by Elizabeth Warren has been going around the internet indicating that corporations should pay more taxes, because they benefit mainly from the infrastructure that they use to conduct their business.

There is nobody in this country who got rich on his own. Nobody. You built a factory out there — good for you!

But I want to be clear. You moved your goods to market on the roads the rest of us paid for. You hired workers the rest of us paid to educate. You were safe in your factory because of police forces and fire forces that the rest of us paid for. You didn’t have to worry that marauding bands would come and seize everything at your factory, and hire someone to protect against this, because of the work the rest of us did. Now look, you built a factory and it turned into something terrific, or a great idea — God bless. Keep a big hunk of it.

But part of the underlying social contract is you take a hunk of that and pay forward for the next kid who comes along.

But don’t businesses already cover those costs?

Taking a look at the Federal Budget we can see that corporations paid the Federal government a shit load of money.

Corporation Taxes 2010	(in millions of dollars)
Income Taxes	$191,437
Social Insurance*	$432,407
Transportation Fuels	$11,030
Transportation Trust Fund	$34,992
Airport and airway Trust Fund	$10,612
Inland Waterway	$74
Tobacco	$17,160
Tobacco Assessments Trust Fund	$937
Total:	$698,649
* 1/2 of Social Insurance Receipts

Now I’ve included transportation costs in the number since they primarily are paid to the benefit of businesses. Whether it’s people going to work or visiting a place on vacation to frequent businesses that cater to tourists. There is also the fuel taxes to transport goods and services.

Now lets look at the expense side of the ledger.

2010 Budget Outlays (in millions)
	Business	Citizen	Unsure
050 National defense:
Discretionary:			$            714,179
Mandatory:			$                7,130
150 International affairs:
Discretionary:			$              57,028
Mandatory:			$                3,567
250 General science, space, and technology:
Discretionary:	$         30,996
Mandatory:	$                  91
270 Energy:
Discretionary:	$            3,714
Mandatory:	$            4,018
300 Natural resources and environment:
Discretionary:	$         36,768
Mandatory:	$            2,884
350 Agriculture:
Discretionary:	$            7,329
Mandatory:	$         12,518
370 Commerce and housing credit:
Discretionary:	$            7,398
Mandatory:	$     (126,390)
400 Transportation:
Discretionary:	$         29,014
Mandatory:	$         71,075
450 Community and regional development:
Discretionary:	$         21,347
Mandatory:	$             (244)
500 Education, training, employment, and social services:
Discretionary:	$         89,481
Mandatory:	$            5,674
550 Health:
Discretionary:	$         58,537
Mandatory:		$      347,675
570 Medicare:
Discretionary:	$            6,246
Mandatory:		$      446,372
600 Income security:
Discretionary:	$         65,680
Mandatory:		$      558,362
650 Social security:
Discretionary:	$            5,764
Mandatory:		$      701,065
700 Veterans benefits and services:
Discretionary:	$         53,274
Mandatory:	$         71,170
750 Administration of justice:
Discretionary:	$         51,976
Mandatory:	$            3,180
800 General government:
Discretionary:	$         18,838
Mandatory:	$            4,824
900 Net interest:
Mandatory:		$      196,193
920 Allowances:
950 Undistributed offsetting receipts:
Mandatory:			$            (82,116)
Totals	$       535,162	$  2,249,667	$            699,788

As we can see from the breakdown, the costs of the benefits to the corporation to conduct business is around $535,162 million. Now I’ve probably kept some costs in the Business side that belongs in the Citizen side and the defense budget can be argued either way. But in her quote she doesn’t include national defense, so I excluded it and put in the unsure total. Also the profit from TARP maybe should be excluded from the number. Even if we do that business is really close to covering all of the benefits.

Now these are just Federal numbers and don’t include expenditures on the state and local level. But I do think these numbers are reflective of what you would find on those levels also. So Elizabeth Warren’s quote sounds great on the surface, but once we look at the underlying numbers we can see that businesses pay their fair share to the government to cover the benefits they receive.

Take a look at the Citizen column, does something look out of whack there? I’ll cover that in a future post.

Golden State Advantage

If you live in the State of California, you may have noticed advertising of the Golden State Advantage EBT program, formerly known as Food Stamps. If you are using Food Stamps I think the place in the photo below is the last place you should be looking for food. Maybe head on over to the fresh food isle where you can get more bang for your buck. But based on the sign Rite Aid must find that many EBT purchasers frequent the candy isle.

Subsidized Housing

What’s the point of subsidized housing? Are we just warehousing people? As I took the train from the central coast of California to Southern California I noticed a smattering of satellite dishes on subsidized housing. Considering such a service costs $35 to well over $100 a month, it brings up questions of what is the end goal of the subsidized housing and if the residents are looking to get to the same goal. There is much more beneficial things the people could be doing with their housing savings costs. For instance one could take nearly a whole semester’s worth of classes at a Community College or save up for equipment or supplies to run their own business. Or are they there for a discounted free ride courtesy of the Government?

An Observation

Reagan ran on hope and a belief in the people and as a consequence brought prosperity; Obama ran on change and a belief in the government and as a consequence brought            ?        .

“Unemployment Checks Fastest Way to Create Jobs”

A certain Senator from California alluded that the fastest way to create jobs is sending out more unemployment checks. I fail to see how this in any way is going to create jobs quickly or at all. If anything it prevents draining additional money out of the economy, but that’s not creating jobs that’s preserving jobs. If you are unemployed that’s a big difference because you’ll still be unemployed and without a job.

There are actions Congress can take that would create lots of jobs. Here’s a list of things Congress could do to create a bounty of jobs, in no particular order:

• Temporarily disallow local, State and Federal laws that prohibit or limit the selling of items on the street. Have you seen apple sellers on street corners? While not successful in creating long term jobs the International Apple Shippers Association did provide temporary relief for some during the Great Depression.
• Make it free to incorporate a business, let people easily create their own job.
• If jobs are important the Federal minimum wage rate can be temporarily reduced.
• Federal environmental laws can be temporarily relaxed or the Government can hire more workers to process the permits. How about taking the permitting process from a 6 to 9 months to a week? Think of how many projects could have been started in the past year, creating jobs. I know I’m currently working on projects that are going to be delayed because of this, and this delays jobs being created.
• After working with the Davis Bacon wage rates, they could be slashed in half. Doing so would increase the number of Federal and State projects that could be constructed increasing the number of jobs available.
• Turn back on the pumps at the Sacramento Delta to nearly instantly create jobs on the West side of California’s Central Valley.
• Create actual jobs and resurrect the CCC, CWA, NRA, TVA, REA and CWA. While the original programs can’t be called a total success, they did provide jobs and more benefit to society then handing out $64 billion to people to sit around and gripe about being unemployed.

These are just a few ideas on how to actually create jobs. Sadly I don’t think any of these would be on the Senator’s list. I guess it’s not really about creating jobs, but to make sure she’s able to purchase votes for the next election.

Project Recognition

When are project recognition plaques appropriate? I get people want credit, but does every project need them? While usually a small cost in relation to project costs, having recognition signs do add up to big money.

Maybe some signs, required by law, may violate the spirit of election laws. For instance in the State of ‘budget challenged’ California voters are often asked to vote on bond measures. Once in place government agencies receiving funds are required to put up signs indicating which bond measure provided funds to construct the improvements. It seems to me this is a political message so the next time a similar type bond message comes up you’ll be sure to vote for it. Definitely has the appearance of inappropriate allocation of public funds.

 

 

Its Not the 1930’s

You’d think that politicians would recognize that today is not the 1930’s and they have tools available today that don’t have to increase the national debt. The basic theory utilized today, and from the 1930’s, is that the government should step into the void and replace the spending of the private sector. In doing so the government runs a deficit, pumping money into the economy. The problem is that this doesn’t generate sustaining economic activity.

During normal times a developer develops a project, hiring contractors, architects and engineers. Hopefully he makes a project and takes some of the profit to start a new project or takes the success of the last project to solicit investments from investors for the next project. The contractor does a good job and is assured of getting future jobs and buys equipment or resources to reduce down time. Other people see the success of the developer and develops their own projects or invests in developments. The system provides hope of a better tomorrow.

If the system breaks down at some point, through a bubble, government regulations or a scarcity of resources the system breaks down. The developer doesn’t move on the next project, the contractor doesn’t buy new equipment and makes due with their current equipment and higher maintenance costs, fishing boats are put out of business, etc. Sometimes the slow down happens slowly like in the 1980s and sometimes it ends in a large crash like it has recently.

The problem with government stimulus is that the government decides the winners and losers and doesn’t provide much visibility in the future. If your a contractor working on stimulus funded projects would you buy equipment with a 5 year lifespan or overhaul your 5 year old equipment. Currently, based on Caterpillar sales, I would say many contractors are doing the cheaper overhauls.

There is still money out there ready and willing to invest in projects. Unfortunately it’s sitting on the sidelines, most likely in government treasuries used to pump money into the economy. Ironic isn’t it. The government has tools at it’s disposal to get the money on the sidelines to jump back in. Mainly they have the ability of extracting the government out of the way of projects already planned. Sometimes it’s projects the government is funding themselves.

While working at the County of San Luis Obispo on bridge replacement projects, the main impediment was the permitting process. There are still bridges working through the permitting process ten years after they were started. Imagine all of the bridge projects that could be done if the government stepped out of the way of its self and had those projects started? Imagine if the government said they were streamlining the permitting process for bridge replacement projects for a period of 5 years and that it would take no longer than 3 months for the necessary permits to be processed. The bridge contractors would have the visibility to purchase new equipment for those projects.

Another example may be found up and down the coast of California in the form of the Coastal Commission. I think the Coastal Commission was set up to protect the coast, but it mainly operates as an extortion ring. Want to build your house on your property, well you’ll have to pay for stairs so people can go through your property and make it to the beach. Want to get a permit to relicense your nuclear power plant? That will cost you a trail along the road to the main gate of the power plant. There are some desalinization water plants planned along the coast of California funded with private financing. Many of these projects are being delayed going through the permit process. How about streamlining the process to get these projects built? It doesn’t cost the government anything, except for providing good services to the people. Imagine if the Coastal Commission was put on hiatus how many investors would get off the sidelines and invest in projects before the extortion agency was reinstated.

Numerous people are out of work in the San Joaquin valley of California. You’d think it was a product of the current economic malaise, but it’s because a court ruling regarding pumping of water from the California delta. Many farmers who are the beneficiary of the pumping of the delta water have had to make their fields fallow, putting many people out of work. You can take a look at the area in this unemployment video. Its the dark area in California at the start of the video. The government could provide a solution to this problem or restart the pumps putting people back to work. The ruling in question was to protect an endangered species, unfortunately the ruling puts at risk around 20 other endangered species who benefited from the pumping of the water.

My point is the government has the ability to fix the current economic problems without spending money they don’t have. They could simply get out of the way and let people get back to work.