How Big City Working Society Is Changing

If you want to know the effects of heavy-handed government with a tax and spend philosophy look at the middle class of a city and the extremes of income in that city.

I will take New York City as my example, but it can be any large U.S. city that is reasonably well run and not on the edge of financial and moral bankruptcy as some are.

There are the very rich small minority, possibly athletes. There are the very poor, usually on welfare and Medicaid. Then there are “The Struggling."

These are often entrepreneurs, shopkeepers and self-employed, along with small pensioners. trying to make ends meet, in the face of huge taxes and high living costs.

The true middle class are the civil service and teachers, transit workers, sanitation workers and other strong union members. They are the ones who control politicians and the votes. They are the ones with salaries that are much higher than those that prevail in private industry. And those with enormous retirement benefits the amounts of which are often hidden from the rest of the city taxpayers. Retirement benefits of city workers often are city budget-busters.

They are the middle class.

The Hidden Value=Added Tax

There are many forms of taxes. Some are broad-based, such as the cap-and-trade carbon emission program, the payroll tax, income tax, or a national sales tax that the Europeans use so widely.

The latter is also known as value-added taxes or VAT. In VAT, taxes are added at every level of sale and can become enormous. They are popular as a means whereby government can easily impose layers upon layers of taxes on the public after politicos have exhausted conventional means.

It has been estimated that the Obama Administration’s budget plan may need another $16,000 per household to balance the ever-growing budget deficits, according to the Congressional Budget Office. This can come only from a VAT that will affect everyone, the poor and the middle classes who the politicians have sworn to protect from tax increases.

So much for political promises.

Capping Executive Salaries and Risk

The whole idea behind capping top executive salaries is envy, which left-leaning politicians use as a political ploy. After all, ball clubs get taxpayer subsidies, on which I often comment. No politician dares to cap ball players’ salaries at $500,000 a year instead of the $20 million or so some make while performing at a kid’s game.

If the idea of salary cap were to reduce corporate risk, there would be some justification. But that procedure does not limit risk. There are ways of attempting to reduce risk in the way salary incentives are given, or operations are hedged, but not with the arbitrary off-the-top cap by government edict. That appears to be too much of a threat to the U.S. Constitution, and contractual rights.

Another sign of creeping state control that too few have noticed.

Cash for Clunkers Was An Unsuccessful Handout From One Taxpayer to Another

The cash for clunkers program was commented on by me prior to its execution. I pointed out why it would be a fiasco. It was a left-leaning, political freebie to the middle class for the wrong purpose.

Bottom line: It proved to be a non-stimulus procedure, that hurt future new and used car sales, as well as auto mechanics who repair cars.

This happens as a rule when government meddles in free markets, whether it be manufactured goods or services. And I include health services as well.

Stimulus Money Is Not Stimulating Enough for Business

There is no decent bank credit available as the result of the stimulus so far. Banks who were “too big to fail” were given funds to help clean up their books but do not have enough, nor have they the inclination to make sufficient loans to meet demand.

The Obama Administration was hoping stimulus money would be spent quickly to boost the economy. That hope has been a complete failure.

Treasury and Federal Reserve officials in charge are great bureaucrats with wonderful resumes. But they have one common failing. They contribute little hands-on business experience. They cannot imagine the mindset of a small, successful businessman with a few or perhaps fifty employees who needs bank funds and cannot find ANY bank with funds to give.

The Obama Administration and State Union Jobs

Much of the $230 billion federal government cash sent to states to stimulate their economies is being used to balance state budgets. But poor state fiscal planning is obstructing proper utilization of those funds.

So far this so-called stimulus that has been given by the Obama administration has gone primarily to bail out favored states. Within those states the funds have been used to bolster governmental jobs and government pensions. Emphasis has been made for the creation of government jobs that are or will be unionized.

Unfortunately, government jobs do not have the multiplier effect of private industry jobs. Its lack of effect has been obvious.

Health Insurance Co-ops Could Not be True Co-ops

True health insurance co-ops that are being discussed as possible health insurance programs, instead of a government “public option” would take as much as a decade to properly create.

It would take operations already in existence, banding together for a purpose to reduce costs. They cannot be created out of thin air by a government rule. Not the way the Obama administration wants to create a single payer system.

The government today has its hands full administering ongoing Medicare and Medicaid with its messy complications, and its fraud. How will it get its bureaucratic hands to create co-ops out of thin air?

If the government attempts a co-op of this kind, it will be merely fooling the public with a euphemism for nationalized medicine through its “public option.”

Anti-Trust Direction

The fervor we get from the government in the form of antitrust action against big business, will depend to a great extent on the political philosophy of the Obama administration. You can tell it is anti-business by the extent of that fervor.

What exactly is anti-competitive? The whole idea for government is to see that there is true competition, so that the consumers’ interest is best served. It does not necessarily mean you have to chop large corporations down to smaller size.

Giant corporations can often compete better on behalf of consumers, than do scores of smaller corporations. It depends on the industry. This is especially true in high tech where huge amounts of capital may be needed for all competitors.

But left-leaning government regulators may think differently merely on their own biased principles. They tend to look at corporate size and not at affects on the consumers.

The Farce of Creating a Product Pollution Industry

We have created a useless, expensive product pollution industry, to see how much an industry and even individual products pollute the environment.

First you must decide the definition of pollution. Is it CO2 pollution? Is it some chemical that may be toxic. Or is it the latest imagined Environmental Pollutant of the Year? Those aspects alone are always dubious and controversial.

Example: I walked by a dry cleaners store and noted they were offering “organic” dry cleaning. Did anyone tell the merchant that good old fashioned benzene solvent was fundamentally organic? So why bother with this newfangled stuff?

The product pollution industry and its consultants have become a thriving industry.

The real reasons behind this are twofold.

One: A marketing concept to sell public do-gooders on the idea a company is doing something ”green” for the community and the world.

Two: Establishing a protective insurance policy in the event the do-gooders sue because they believe you are destroying their planet.

The College Education Rip-off

Folks need to realize you don't need a four-year college degree to be successful.

Vocational education does pay off for many of those who have lost jobs or are seeking entry-level positions in trades.

Even lower-level electricians today make on average $48,000 a year. Plumbers make $47,000. That's more than the average American earns.

But some people look down on vocational school. A degree from a four-year college is considered first class. A vocational-school degree is not.

College administrators and politicians should drop the promotional hype. Higher college enrollment and government loan programs and subsidies may be good for the college marketers, but they do not produce the training need to fill real, paying jobs in industry,

Flexible Fuel Alternatives

About 6 million cars on the road today are “flexible fuel” vehicles. Some can run on fuel that is 85% ethanol and 15% gas. However, when using E85 you get about 15% fewer miles to the gallon.

E85 does burn cleaner and does not pollute as much but the overall benefits are questionable. And the cost may exceed that of regular fuel in time. Besides, the use has increased the cost of corn, which is a food used as a basic worldwide.

Unfortunately, ethanol has now become more political a factor than a logical fuel for consideration as an energy alternative.

Gas Station Operations and Gasoline Prices

A thought now that gasoline prices appear to be heading up slightly and, perhaps, may go higher with a weaker dollar and inflation.

Stations earn between 10 and 15 cents on a gallon of gas, on average. When prices climb, gas stations have their profit margins shrink in order to remain competitive. So they earn less per gallon.

Also, their credit card fees, are about 2 ½% of all purchases. That cut is always a significant factor affecting margins.

Furthermore, gasoline prices go up faster than they go down. That is the way supply and demand normally influence wholesale as well as retail gas pricing.

So why blame gas station operators for high gas prices when they occur?

The U.S. Supreme Court and “Honest-Services” Obligations of Executives

The U. S. Supreme Court is finally going to hear arguments on what I feel is an extremely important case. While it is an appeal by the former Enron Chief Executive, Jeffrey Skilling, it affects every business person with responsibility for operating a company, especially where a large group of employees and the public are concerned.

The question: What constitutes “honest-services” to shareholders or to the public, when it comes to reporting on company financial conditions? I feel it is a case of whether a glass is half empty or half full.

Because the CEO has to be an optimist to prevent the proverbial corporate roof from easily falling in, and employees and customers fleeing, losing jobs, etc., you must give the executive some legal leeway or slack.

A top executive who is not a cheerleader is doing an extremely poor job. Unfortunately, too many jurors and judges are not aware of this business fact.

You cannot holler “fraud” at the drop of a hat every time disaster strikes a company. That is a ploy used by plaintiff lawyers doing what they do best, and who always charge that the glass was half empty.

Need A College Education to Earn Big Dollars?

Some facts of business life: Going to private trade schools or two year community colleges, where trades are taught, will provide skills that more likely will result in jobs.

A college education that offers general knowledge that can just as easily be picked up in the library might provide nothing practical that will help earn a living.

This is quite evident when you look at the records of both conventional colleges and the private trade schools or two year community colleges and compare their graduates’ earnings results.

Those who have employable skills will earn top dollars at jobs that employers want, even in deep recessions. The others, with their fancy-school diplomas sit around depressed for the lack of opportunity they see, for all their effort toward those impressive but useless degrees.

The Value of the Bankruptcy Law

Creditors always have legitimate claims over a bankrupt’s assets. But not all claims are equal when dividing those assets.

Some lenders may have provided cheaper funds in return for a more secure claim over assets, were things to go wrong. Thus, they rank above others, when funds are allocated among lenders, Then there are employees and stockholders to consider when disbursing funds in bankruptcy.

But bankruptcy law is specific in the way scarce funds are to be allocated. Until the Obama administration came along and set its precedent for the Chrysler bankruptcy, giving the unions favored status for its own political solution for what ordinarily would have been business contract law.

Only in present-day America.

Bank Payroll Controls

What are pay controls going to accomplish at companies which accepted bailout funds? Will such caps solve any problem, aside from drawing attention away from the Washington politicians’ inability to do anything correctly to resolve deep recession problems?

When you hire and attempt to keep personnel, you pay market labor prices. Or you get inefficiency. Moreover, the best employees leave for other opportunities.

Executive earnings were never a factor in the past financial meltdown. They were insignificant numbers, relative to overall financial problems. Executives whose salaries are being capped today are convenient scapegoats for ignorant and crowd-pleasing politicians.

Who hires these czars who cap salaries? Who are a czar’s friends? Who are his or her friendly lobbyists? What makes a czar qualified to judge?

In investment banking, employees generally get 50% of revenues. It is hard to tell what job is risky in advance to warrant a huge earnings reward. Only politicians have 20-20 hindsight, to tell bankers they are making too much money. That is, when and if everything works out well.

By the way, how many in the media are conversant with how fascism operated in Italy, Germany and Spain in the 1930s? Those fascists meddled with business the same way left-leaning politicos in the U. S. are today

Left-leaning Politicians Hate Profitable Companies

Have you noticed how left-leaning politicians love to castigate so-called profitable companies? They love the ones too big to fail, so they can bail them out. While they berate them for being “greedy” and a menace to social welfare.

There is a reason for this. Such companies fit into these politicians’ templates in their bid to suck up to voters.

Yet they forget that companies that make a profit can be taxed. They forget that such companies employ lots of people that politicians supposedly champion.

Also, if companies are publicly owed and are making such outrageous profits, what is stopping the politicians or the public, directly or in the form of pension funds, from owning stock in them? So all can profit and not just the “filthy rich.”

Then again, when big companies lose money, they can be taken over by our current government. Think of the political favors down the road that politicos can create with that power.

The Liability of a Corporate Director

You have a special liability if you are a corporate director. Even in a small corporation. And you will not be able to easily buy insurance to cover that liability.

Worse, were you able to buy corporate director’s liability insurance, it would not cover accusations of fraud.

You say you would never commit an act of fraud in any business you are in, large or small?

Be assured: Any plaintiff attorney worth his or her salt will charge you with fraud, no matter how innocent you are. It’s a powerful weapon. Also a business fact of life and risk you must take in court.

The Europeans May Not Truly Want Us to Emulate Them

Many on the Left in America want the U.S. to become more like the governments in Europe. That means socialized medicine and more governmental control of industry and society.

Despite requisite heavy spending and taxation for this European-style socialism, the only budgetary savings can come with defense issues. And slowly but surely, the Obama Administration and Congress will be giving Americans this touch of Europe by reducing defense expenditures.

You would think the folks overseas would all eventually be pleased with this honor. However, Europeans may not fully realize it, but the more America acts like them, the less secure Europe becomes.

Europeans spend very little on defense, compared to the U.S. We are the ones they always have been able to rely on. In other words, we have been paying for their defense without much outlay on their part all these years.

Who will defend Europe if the U.S.A. also cuts its defenses to the bone?

The best most of their armed forces can now deliver is meals-on-wheels.

The Inept Government Approach to Job Creation

Leftists in government have a firm idea of creating jobs: Make work. Be it at a government office. Or at a construction site. Hand out a pick and shovel if that is what it takes.

Left-leaning politicos have no concept of creating jobs by using the psychology of entrepreneurial spirit. That is why they will tax small business in the depths of a severe depression. Why they raise minimum wages for small businessmen to pay during economic recessions. Through the use of all such dampening forces to see that jobs are not created by what they consider questionable private business.

Basically, the Left does not like business. They look at profits as criminal, to be taxed away for allocation or redistribution back to the community by wise governmental bureaucrats.

Unemployment Numbers Can be Misleading

The reports on the number of jobless can be misleading. Example: There are those, who once jobless, find new employment within reasonable time. Then, there are those with in-between jobs that may be just temporary or part time. And others during a recession, who go off for work in totally different areas, and for lesser than conventional work hours.

The number of weeks someone is unemployed is an important statistic. While many unemployed give up seeking work after a while and if able, retire earlier under Social Security at reduced benefits. So you see hidden variables.

New job creation figures are important. I also look to see the type of jobs created. Government work is not creative. It does not have a multiplier effect as do private industry jobs.

So be careful how politicos and the media color unemployment statistics,

Hollywood’s and Other Fictional Influence On Business and Finance

What Hollywood and other fiction contributors have to say about business and finance unfortunately extend beyond the realm of entertainment, They have become an ingrained form of education. And because it is a subtle type imposed over the years, it has become extremely effective.

Unfortunately what has come out of Hollywood and fiction for decades as been anti-business. It has featured, for example, pro-plaintive lawyers, fighting criminal big business executives, on behalf of “little guys”. Templates may vary slightly but they are pretty much the same.

Ironically, the fictional mischief we see and hear too often mirrors what actually occurs in the world the writers of such fiction live in, not the real world.

The Myth Behind Pharmaceutical Charges

Listen to or read the liberal media and you get the impression that drugs are too high in the U.S.A. because companies are overcharging, compared to their prices, for example, in Europe.

Prices for the same pharmaceuticals are certainly much cheaper overseas. The reason is simple. Pharmaceutical companies are blackmailed into selling them below true cost overseas, under a contract they have been forced to sign.

To do that, and with the full knowledge of the governments holding a gun to their heads, they must raise prices in the U.S, to make their profit.

It’s as simple as that. No profit, no business. No business, no drugs are produced. These days you spend as much as a billion dollars to find and research a new drug before you place it on the market.

Think about this the next tine you get an economics lesson from a liberal on the enormous profits the drug companies make. And if they are so profitable, why are not all the geniuses on Wall Street falling over each other buying drug stocks? If you look, you will notice that pharmaceutical securities are not investor favorites.

But they are left-leaning politician scapegoats.

The Truth of Why insurance Companies Drop Policies, and Medicare

The Obama Administration has demonized insurance companies for dropping policies. I am not here to defend the insurance industry but to get at facts.

I was a senior banking and insurance analyst and know something about insurance and feel I can give some independent comments on the subject.

A policyholder can have his or her policy dropped for a number of good moral and valid reasons:

One: Material lying about preexisting conditions. No one should be allowed to buy fire insurance while a fire is in progress.

Two: Fraud. Material misrepresentation which is so basic that the company would otherwise not have accepted the risk

In one of the companies independently studied, only 0.1% of policies or 20,000 cancellations were made. It sounds like a lot when politicians talk their point, but it’s a study from millions of policies over a 5 year period.

On the other hand, our government does not tell you it cancels 6.8% of Medicare claims. Think of that the next time you consider truth in advertising, especially when you hear about government health care.

The Swiss Health Care System

The Swiss health care system is a step in the right direction if some politicians truly wanted to repair health insurance coverage. It’s certainly better than anything the Obama Administration and Congress have proposed.

It’s more efficient and will eventually cost less than anything being considered.

The plan is somewhat like that that advocated during the 2008 campaign by Republican Sen. John McCain (Ariz.) and being proposed now by Senators. Tom Coburn, R-Okla., Richard Burr, R-N.C., and Rep. Paul Ryan, R-Wis.

Under the Swiss plan, everyone is covered by private insurance. There is no government-managed or employer-provided coverage. The poor are helped to buy any insurance they cannot afford.

Employees under a U.S. comparable plan could receive in cash, tax free, what their employers currently spend on premiums, provided they used the money for insurance on health care. Poor people, including past Medicaid recipients, would get government money to buy insurance.There would be no discrimination against anyone on account of illness.

The plan would be expensive at first, but unlike any public plan which socializes medicine. True interstate competition among insurance companies, hospitals, and doctors, would bring costs down over time.

Patients could really choose the best and lowest cost providers on the basis of published outcomes data. Insurance companies and providers would bid for clients and customers as to needs and cost.

The government's role would merely be to oversee transparency, The government would create an information system, with regard to insurance companies and providers

This is the one plan that gives consumers a role in controlling health care costs, by running their own plan

Preventing Health Problems is Great but Costly in Dollars

In an Aug. 7th letter to Rep. Nathan Deal, Congressional Budget Office Director Doug Elmendorf’s aide, said: "Researchers who have examined the effects of preventive care, generally find that the added costs of widespread use of preventive services tend to exceed the savings from averted illness."

"It is usually necessary to provide preventive care to many patients, most of whom would not have suffered that illness anyway." This costs money that would not have been spent.

We should always attempt to prevent illness. But prevention increases costs not reduces them.

Remember: The study comes directly from the respected CBO. And flies in the face of the Obama Administration’s claim for savings that will flow from its vaunted health care plans.

For-Profit Colleges Are Competing Too Well

A sign the for-profit schools, known also as career colleges, are doing well, is that politicos often complain the schools are making too much money. The fact they are growing and thriving is an indication their students are getting value for tuition.

Conventional colleges, which often are mismanaged, tend to lose money, though they are highly subsidized by governments. Conventional schools continually solicit needed funds from alumni.

Colleges can be run as a for-profit business, and teach students properly as well. Conventional colleges, as I have noted before in my comments, make a habit of losing money and failing to adequately teach their student-customers.

International Climate Change Politicking

One thing is certain, the U.S.A. Left is hell bent on seeing to it that there will be restrictions on industry under the guise of climate control. How much their clamor has to do with climate and how much with the gathering of taxes to implement other purposes must be considered.

The main goal of the Left is always more control by government, to accomplish whatever the Left wants to achieve.

But other so-called polluters on Planet Earth won’t agree to do what the U.S. will be asked to do. They say we ought to tighten our pollution belts because of our past industrialization. After all, they. chiefly China and India, are only starting at the game. They want us to give them some slack.

But we say they are going to pollute hereafter with a vengeance because their populations and industry are growing so much faster.

What is unfortunate: Our left-leaning politicians will concede to their way of thinking, in time.

Americans Really Love to Rely on Government?

In one of his interesting columns, the economist, Walter Williams quoted the philosopher Bertrand Russell, suggesting that "Men are born ignorant, not stupid. They are made stupid by education." Dr. Williams also quoted Albert Einstein: "Insanity: (is) doing the same thing over and over again and expecting different results."

Professor Williams wanted to know whether it was stupidity, ignorance or insanity that explained the behavior of Americans who seek government involvement in their lives.

A good percentage of Americans believe politicians are corrupt. Congress has about a 10% approval rating. They see the poor shape of Medicaid and Medicare. And how they cannot rely on Social Security to remain sound too far into the future. The Post Office has never been a paragon of efficiency. Public schools fail in teaching kids. So why depend on government except for operating our defenses?

But let’s face it. The politicians of today know, as the politicians of yesteryear knew, folks have a short memory. The media goes along with the politicos it favors.

Frederic Bastiat and Compassionate Economics or Business

Compassion is sympathy for those who have had misfortune. There is a desire to eliminate or mediate the suffering. Empathy is the wish to share in an other's emotions or feelings.

In his 1850 essay, "What is Seen and What is Not Seen," Frederic Bastiat noted " There the economist and member of the French parliament pointed out that law produces not only one effect, but a series of effects. Of these effects, the first alone is immediate; it appears simultaneously with its cause; it is seen. The other effects emerge only subsequently; they are not seen; we are fortunate if we foresee them."

Bastiat further said "there is only one difference between a bad economist and a good one: The bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen."

It’s the same way you can have compassion for workers who lose their jobs. They can be seen. You cannot have compassion for unknown potential workers in other industries who don’t get job offers because a compassionate government subsidizes an unprofitable company. The potential employees are never hired and are therefore unseen.

You may say that unfortunate, known homeowners who lose their homes through foreclosure, make it possible for unknown potential individuals who may not have been able to afford a home in the past.

Our Energy Policy is Being Suffocated

Energy consumption and supply are being tightly controlled by government. The United States has plenty of natural gas and oil reserves, both offshore and in Alaska. We have almost unlimited coal supplies, plus oil shale. We certainly can build new nuclear plants to add to the mix.

Developing sources of energy would save trillions of dollars in imported fuels, while keeping dollars and jobs at home. It would give the US energy autonomy, while we develop more solar, wind and renewable energy for the future. While it would would stiffen our foreign policy stance.

Not only that, we will have better control over oil drilling by doing it ourselves. By not relying on foreigners to bungle operations in a way that is not as environmentally-friendly as ours.

But ironically, our environmental policy is suffocated by environmentalism.