Monetary and Fiscal Policies Make a Difference

The Federal Reserve can do just so much with monetary policy. The financial media are constantly concerned with Fed policy, especially when the economy is in dire economic panic as it is today.

What will the Fed do to relieve unemployment? What will the Fed do to get the economy booming again?

This emphasis on the Federal Reserve is incorrect and misleading. There is little the Fed can do when the cost of money is already close to zero, thanks to its efforts.

You have, instead. to turn your attention to the president in the White House and the Treasury, and its fiscal policy. Monetary policy is important but so is fiscal policy.

The Treasury, under the control of the president, is doing its own thing with a fiscal plan that can totally negate the Fed’s monetary policy, and now does.

College Debt Defaults

It’s rough spending a fortune to get through college, only get a degree that does not enable you to find a viable job. It is worse when that a career puts you in extreme debt.

Defaulting on college-induced debt can be a dilemma. You will have to get a handle on the type of debt, whether federal or private, and its terms. I suggest you contact the National Student Loan Data System, at www.nslds.ed.gov.

There may be some forgiveness programs for government workers and teachers, along with AmeriCorp volunteers and similar programs.

As a precaution, avoid heavy student loans. Do not go much further into debt than you may already have.

Cap-and-Trade: A Potential Economic Disaster

Cap-and-trade was thought of in academia as a good idea decades ago but the two students who devised the original concept. which left-wing politicians today have implemented, no longer believe in their original theories.

A University of Wisconsin graduate student in the 1960s had an idea to cap pollutants. Today Thomas Crocker says he is skeptical that cap-and-trade is the most effective way to regulate carbon emissions.

It appears now that the purpose of cap-and-trade is primarily to raise taxes and give bureaucrats more power to control our entire industrial output.

Cap-and-trade also has created an industry that has become very profitable for those promoting faulty science.

VAT (Value Added Taxes)

VATs are taxes added to products at every level of manufacture.

In Europe VATs run as high as 25%. In Britain, the value added tax has grown from 10% to almost 18% and is headed yet higher.

VATs are insidious because they are hidden, They never appear as a tax but only as part as the cost of what you buy. The consumer usually never complains directly against the politicians responsible for imposing them. But instead rails against the innocent merchants on the retail end of the transaction who are the tax collectors.

This is perfect for use by left-leaning politicians. The intermediary businesses and the merchant are also stuck with the paperwork and the inherent bureaucracy that are part and parcel of such taxation.

Now you see why left-leaning politicians in this country are now entertaining the idea of using VATs to pay for their budget deficits, while claiming they are not raising taxes on the poor and middle class. The VATs do just that.

Catastrophic Future Environmental Costs

Analysts look at bad loans and strength of assets. They should also be looking at contingent liabilities. This includes future environmental costs. Industry balance sheets are not accounting adequately for future environmental cleanups

They include contaminated groundwater and heavy-metal pollution, asbestos, oil and gas leaks, as well as the obligation from1970’s laws such as Superfund. Companies have had to add accruals to their books for these charges.

The question: How well are corporations accounting for these liabilities? Many major company books are showing only minimal contingent costs of this variety.

This, at a time when they are in the midst of a deep recession that is beset by hard government taxes and restrictions.

Why Read Congressional Bills Before Passing Them?

There’s a good reason why it is essential to read a bill before it is passed. I give you the 2,400 pages of ObamaCare which are being read and analyzed now, months after the bill was rammed through Congress and quickly signed.

Just some items you and many, many others may have missed: such as taxing the purchase and sales of gold coins; forms of affirmative action for minorities; the appointments of about 150 new boards to execute provisions of the bill’s regulations.

And costs beyond left-wing political imagination.

The Good Luck Factor in Business Management

I have often wondered what makes for a successful top-level business manager, particularly the chief executive. Is it simply good technique learned on the job or in college? Or is it inbred in his or her character?

Or maybe nothing but just excellent managerial psychology? Tests show psychology can have some bearing.

Or can coincidental happenings and sheer good luck be factors, being in the right place at the right time?

I have found from my management experience in large and small business, that it is a combination of all of the above.

But with a common denominator. You do not need schooling or extensive book learning. You do need common sense and persistence.

I comment on many of these principles in this blog from time to time. ( See the Earl J Weinreb NewsHole® comments.)

Death Panels in Health Care Legislation

I would like to revisit the ObamaCare legislation because of its impact on the U.S.

Individual doctors have never been happy in the past with standards set up by panels. Doctors have always differed in opinions of how to treat patients. Yet, their peers on boards often tell them what the “accepted” treatment may be for a particular condition at a given time. Those suggestions are predicated on averages and doctors correctly insist no patient is “average.”

As I noted in my earlier blog on life expectancy in the U. S., according to a study by Harvard's School of Public Health, disparities within the country exist among Asian-Americans, African-Americans, as well as those of other ethnicity. There are inherent DNA factors and life-long diet and culture influences, of which a personal physician will be aware.

I repeat my warning: They may not be called death panels, but any board-dominated edict telling a doctor how to treat an average patient that also considers that patient’s age and related illnesses, is, in effect, a euphemism for restricting treatment.

Life Expectancy and Government Influence

Life expectancy has much to do with health care and the Obama administration has had much to say about that.

DNA and similar factors also have an influence. Such as diet and everyday eating habits. Along with ethnicity considerations.

According to the CIA World Factbook's 2009 estimate, U.S. life expectancy is 78.11 years. In Britain it's 79.01. In Taiwan's it’s 77.96.

Questions: Is the best explanation for this is how they pay for medical care? Or diet and culture? Does Japan's health-care system explain Japanese longevity?

According to a 2006 study by Harvard's School of Public Health, disparities within countries do exist. Asian-American women have a life expectancy of 87 years. African-American men have a life expectancy of 69. The healthiest white people in America are in the low-income Northern Plains states. So health-care systems are not the biggest factors.

The higher life expectancy, the more we will spend on health care. Older folks are a major factor of cost. Cut costs by government fiat and you will be reducing lives.

Remember, President Obama has said the "chronically ill and those toward the end of their lives are accounting for potentially 80 percent of the total health care bill out here."

When it comes to civil liberties, liberals are often distrustful of government power. But, for some reason they prefer the U.S. providing "guidance" on, which lives are more valuable than others.

Unions and Consumer Interests

I don’t mean to be anti-union. But clear-thinking and logical approaches to the questions and problems that concern the relationship between unions and consumers are never fully answered in the media.

Reporters and columnists are afraid to tangle too hard with unions. Reporters and columnists may have liberal leanings. The media also don’t always think through their subject matter very clearly when they are subject to publishing deadlines. And they may well be union members.

Further fact of life: Unions are in existence primarily for members, not the public. Be they metal workers, autoworkers, school teachers, government clerks, etc. They are not primarily there for the customer or consumer, with whom the union member must deal.

Example: When school teachers go on strike, or insist on higher wages, they are Number One. When they are against school vouchers, which can offer kids faced with inferior schools the better choice, the teachers' concern is not the kids but themselves.

So it is with every union member, except when their self-promotion ads say otherwise.

Why Entrepreneurs Are Not Starting New Business

In past recessionary cycles, many new businesses were started; usually those without jobs had added incentives and opportunity. More than half of the Fortune 2009's 500 list of companies were begun during recessions or bear stock markets. Times may have been bad, but hope was abundant.

I started an employee contracting business during such a recession in the economy and stock market. With a single office, I soon had ten offices, with 74 around the country and in Canada, after 17 years. when I sold my company interest.

I eventually employed well over 10,000 permanent employees, and a large multiple of that number on a part-time basis.

All this without government stimulus or hand-out funds. The company had started from scratch with private capital and then sold stock to the public for additional financing. It made operating profits all the years I was part of ownership and top management.

What we need today are more entrepreneurs starting up new business that creates real jobs, and less high-tax government standing in the way. We are not getting jobs, because of fear and a lack of hope.

That can be attributed to a dread of much higher taxes on business with no expectation that anti-business rhetoric from Washington will subside.

Corporate Earnings, Government Spending and the Recession

Corporate earnings can increase when wage costs are significantly reduced. But that can still mean unemployment may continue to remain high. While productivity will go up.

But that happens only during what they call a classic recovery. In fact, some economists say the end of a recession is marked when productivity goes up. But that still does not remedy high unemployment problems.

Our present deep recession is spurred on by the Obama Administration’s spending sprees and costly legislation. That necessitates huge taxes that hurt large and especially small businesses, before they can attempt to recover.

When companies can avoid imposed governmental fears and start hiring again, and keep earnings up, will there be real positive signs of the end of the recession.

The current fiasco is a classic example of what happens when government uses a combination of useless stimuli and high taxation, and other anti-business devises to get business going.

Leave business alone so that earnings will create the jobs for a true recovery.

State Capitalism in the U.S.

I have written often on the subject of state capitalism and how the Obama administration has been advancing along its perilous path.

Along this subject line, I suggest the book, “The End of the Free Market: Who Wins the War Between States and Corporations, by Ian Bremmer (Portfolio, 2010).

Bremmer says that state capitalism, "is a system in which the state dominates markets primarily for political gain." He discusses state-owned corporations in key industries such as natural resources and defense. He shows how sovereign wealth funds in the hands of those with suspect principles, enables state capitalism among autocratic states, to reap the benefits of capitalism, while maintaining a grip on limited political freedom.

I would also suggest all Americans read up on the rise of Benito Mussolini in Italy. It is a lesson for those on the Left.

All Americans ought to mull over the consequences of state or crony capitalism.

New, Enabling State Bankruptcy Laws

I suggested in a previous blog that a major solution to the various state budget problems could be resolved with a change in the bankruptcy law, which is federal. State governments and agencies could abrogate onerous contracts which bankrupt them, were they enabled by law.

Abusive union wage and pension contracts could then be adjusted, Of course, politicians in those states have a chance to survive budget deficits without bankruptcy by simply voluntarily saying no to outrageous union demands. But then too many will lose union election campaign contributions.

They will have to be forced to be budget-compliant, and only bankruptcy is the answer.

Blaming Bush for Deep Recession

I’m repeating what I have placed on my financial blog because of its importance and relevance.

All economists seem to agree. A sharp economic downturn usually produces a very brisk economic upturn. So it is stupid, and a blatant demagogic ploy for an American president to blame his predecessor for any economic recession he may have inherited, yet cannot handle.

Fact: The worse an inherited downturn may have been, the better it makes a new president look, as the inevitable, impressive rebound occurs. All without government-changing and budget-busting stimuli.

However, we now have an incoming, bumbling, fumbling and meddling administration that has, by itself, created a deep, deep recession out of what should have been a normal, quick recovery.

They are thus looking for a convenient, political scapegoat. Certainly it’s not a classy effort, and it’s plain dumb.

Who do I really blame for all this ignorance getting continued economic play in America? The financial and general media who should know better and who has economic facts on hand.

Many members are stupid or often lean too leftward to report the basic economic historical facts. Good media reportage would refute the Obama administration’s whining about any inherited “Bush recession.”

(Note: Bush never mentioned the downturn he “inherited” from Clinton, nor did Reagan harp on the mess he got from Carter.)

Public Employees and Budget Conflicts

State government employment has grown 16% in the past fifteen years. Salaries and pension obligations mount, paralleling that increase. Medicaid and other state spending has risen, along with state employee rolls. It’s no wonder that state budgets are bursting their bounds.

Moreover, state and local governments are beholden to public employee labor unions. These politically oriented groups keep the contractual agreements made in boom times under severe pressure even when recessions call for belt tightening. Retirement fundings are particularly out of kilter.

Something will have to be done fast by willing state politicians. Up to now they have fudged their books by assuming, falsely, that they will earn more on public pension assets than they can ever hope to make in the future.

The solution will only be to elect officials who take the matter in hand. Force the unions to take less or force layoffs. I will comment on state bankruptcy possibilities in the future.

We Need The Rich After All

I know the Democrat party manages to dream up a scapegoat mantra for every election. The Left will have to come up with ever more ideas for coming elections.

How do they continue to get such ideas on soaking the rich as scapegoats, unless they hide the following evidence as they never did before?

Consumer spending represents to thirds of all goods and services produced in the country. GDP/ Moody’s Analytics says the topmost 5% by income represent 37% of all outlays. (The top 10% probably account for about 50%) The bottom 80% reflects only 39.5%.

So, you if soak the rich with taxes, you cut back on important consumer spending. But you do get wonderful campaign demagoguery with which to wow the unintelligent masses.

How Much Do Big Corporations Want to Earn?

How much does corporate management want to earn on its capital? How do most evaluate their capital investments?

The long term cost of corporate capital ought to be the after-tax cost of debt plus the after-tax return on equity that their investors usually desire. This is what the corporate investment projects and operations must produce in our normal present-day economy. (I make exception for deep recessionary psychology when management is afraid of a government that wants to raise taxes.)

In most companies, during normal times, the number comes out about 10%.

You can see how liberal, Left-leaning governments, who have no genuine business outlook, have no inkling how to get the country out of an economic funk. Such objectives are never part of their observations.

Prices for Products and Services

Whether you are in business or if you are a consumer, it’s worth your effort to review how products or services can be or are priced in the real world.

One is based on a cost-plus basis with a standard mark-up. That add—on is subject to competition.

Some times the real competition comes from those offering accessory services, to add to basic services. The basic product or service is sold at around cost. That service may even be free or almost negligible, in relation to cost, as is the safety razor. Profits come from the razor blades.

What the bottom line price amounts to will depend on what the consumer feels the product or service is worth. Often, government bureaucrats get into the act, but they manage to get the concept wrong with their meddling.

Big City’s Middle Class Politics

When you want to know the effects of heavy-handed government’s tax and spend philosophy, look at the city’s middle class and the extremes of its citizen’s income.

Take New York City as an example, but it can be any U.S. city that is reasonably well run.

There are the very rich small minority, and the very poor, usually on welfare and Medicaid.

Then there is the influential, true middle class: The civil service employees and teachers, transit and sanitation workers, and other strong union members. They are the ones with salaries that are much higher than those that often prevail in private industry. And those with generous 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. Moreover, they tend to influence city politics. They are the ones who control politicians and the votes.

The rest are the voiceless middle class. These are often private sector entrepreneurs, non-union professionals, shopkeepers and self-employed, along with small pensioners, all trying to make ends meet, amid taxes that hurt them proportionally the hardest.

Too Few Small Businessmen in Congress

I have always believed that our government fails the public because it is composed of too many lawyers with too little business experience. Particularly the knowledge of what it takes to operate the type that employs so many in the U.S.

If the reps in Washington and the different state houses could imagine the problems of entrepreneurs and small business, they would know what makes the real economy run. You do not get this from college professors in ivory towers or bureaucrats with cush jobs and over-stuffed pensions.

In this regard, I recommend a highly cogent Op-Ed article written in the Wall Street Journal (8/9/10) by Michael P. Fleischer, the president of a small New Jersey company. In it, he gives the reasons why he is not hiring, given the uncertainties and expenses with which government is burdening his business.

When Washington and the state houses understand the plight of small business, they will start on the road to getting America back working.

For more on business management, see the Earl J Weinreb NewsHole® comments.

Should You Get a Trademark, Copyright or Patent?

The first impulse an individual gets with a new idea is the that of protection. It makes sense. You never want someone to copy, into what you have put time, effort, and perhaps lots of your money.

But protection is not easy to get. Before running off to an expensive attorney, I would suggest you get the basics. You can explore this in a library or online.

Trademark and copyright information is the easiest to get and you may not initially need an attorney. Patents are more difficult.

Moreover, a patent, even when pending, can be a problem, because its details are exposed. . Moreover, even granted patents can be copied anyway. And the patent office is tough to work with, though you have an experienced lawyer. The. personnel may not fully be conversant with what you have submitted..

Many inventors avoid patents for some products which they feel will be legally copied, and rely on being first as the product’s marketer.

As you can see, patents and other forms of protection, can be tricky

The Value-Added Tax or VAT

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

The latter is also known as the value-added tax or VAT. In VAT, taxes are added at every level of sale and can become enormous. They are popular with bureaucrats as a means of government easily imposing layers upon layers of taxes on the public.

It helps after politicians have exhausted conventional means.

A VAT will affect everyone, the poor and the middle classes who the politicians have sworn to protect from tax increases.

So much for political promises.

Salary Caps and Risk

I have recently commented on the insanity of salary caps.

If the idea of salary caps were to reduce corporate risk, there would be some justification. But that state capitalist 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 the government edict variety.

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. They overlook the dictatorial means bureaucrat are using to achieve their aims

Capping Executive Salaries

The idea behind capping top executive salaries was envy. Left-leaning politicians use that as a political ploy. After all, baseball clubs get taxpayer subsidies, on which I often comment. No politician dares to cap ballplayers’ salaries at $600,000 a year instead of the $20 million or so some make while performing at a kid’s game.

Hollywood producers get tax benefits, which attract them to certain shooting locales, so they can afford to pay their liberal actors/stars up to $20 million per flic. Some come from communities getting Federal handouts. The politicos never object to such Hollywood top-earnings.

But then Hollywood usually leans leftward.

Want to stop the idiocy. Apply the caps to Hollywood subsidies as well. That will stifle the political interest.

Cash for Clunker Ideas: Unsuccessful Taxpayer Handouts

I commented on the cash for clunkers auto program 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. And it failed, as predicted.

It proved to be a non-stimulus gambit, 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.

Yet, the Obama administration throws out feelers every once in a while to see if such stimuli can be done for other industries. These ideas from staffers are fortunately being quashed early on, before they see the light of legislative day.

Stimulus Money Is Not Stimulating Business

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

The Obama Administration stimulus money was never really meant to be spent quickly to boost the economy. That exaggerated 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 businessman with perhaps fifty or less employees, who needs bank funds and cannot find a bank willing to part with funds at risk.

State Union Jobs

Much of the federal government stimulus cash sent to states to stimulate their economies was 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 them, the funds have been used to bolster government jobs and pensions. Emphasis has been made for the creation of jobs that are or will be unionized.

Unfortunately, state or federal government jobs do not have the multiplier effect of private industry. Its lack of effect has been obvious thus far.

Health Insurance Co-ops

It’s not too late for a revamping of ObamaCare.

True health insurance co-ops had been discussed as possible health insurance programs, instead of a government “public option.” Co-ops would take as much as a decade to properly create. The Obama administration still has the public option and the co-op as a backdoor option in mind.

This 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 has wanted 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 in the future, it will be merely fooling the public with a euphemism for nationalized medicine.

Anti-Trust Fervor

Government fervor, in the form of antitrust action against big business, will depend to a great extent on the continued leftward political philosophy of the Obama administration.

What exactly is anti-competitiveness, to warrant antitrust action? The whole idea for government oversight is to see that there is true competition, so that consumers’ interests are best served. It does not necessarily mean large corporations must be chopped down to smaller size.

Giant corporations can often compete better on behalf of consumers, than do scores of smaller companies. It depends on each industry.This is especially true in high tech where huge amounts of capital are often required.

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

Creating the Pollution Industry

We have unleashed a useless, expensive pollution industry, including individual retail products that may pollute the environment, not just the nasty stuff from the giants.

But what is the definition of pollution? Is it CO2 gas we exhale with every breath? Is it some chemical that may be toxic? Or is it the latest imagined Pollutant of the Year? These aspects alone are always dubious and controversial.

Example: Dry cleaners now offer “organic” dry cleaning. Did anyone tell them that old fashioned benzene solvent was fundamentally organic? So why bother with this newfangled stuff? (Organic chemistry is built around a benzene template,)

The product pollution industry and its consultants are now a thriving industry. Why?

One: The marketing concept to sell the public on the idea that a company is doing something ”green” for the community and the world.

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