Government Spending Makes Jobs?

It has become a mantra of the left and the Obama Administration. It is Keynes Economics 101. It keeps getting repeated over and over.

It does not work.

It did not work during the Great Depression. It did not work for Obama’s stimulus efforts and all other allied spending programs. It certainly did not work for Greece and other failed economies, present and in the past.

But because the concept appeals to the lowest mentalities with no idea of the past, those who also vote, the lame mantra happens to be an extremely useful political tool.

So supposedly intellectual politicians continue to pontificate the mantra over and over, in an attempt to get reelected again and again.

The Real Financial Meltdown Responsibility

A new book has documented what many observers and I have been saying for the past several years, to overcome the drivel on the perceived story behind the financial meltdown of 2008, that liberals and the left, abetted by the conventional media, blamed on “greedy” bankers.

Ironically, the liberals and left who were chiefly responsible for the financial meltdown, were able to further legislate their failed regulation into the even more questionable, flawed Dodd-Frank Act, naming the bill after two of the legislative actors responsible for the original debacle.

Surprisingly, the book is from a long-time New York Times reporter, Gretchen Morgenson, and the financial analyst, Joshua Rosner, and is titled "Reckless Endangerment." The Times represents the media who I consider particularly friendly to the left-leaning sentiment that has permeated the thinking on the subject.

Morgenson and Rosner have offered their critique on all the participants in the financial mess; the rating agencies, investment bankers, real estate brokers, etc.

However, with Fannie Mae and Freddie Mac and to their political benefactors, mostly liberal Democrat politicians and organizations, the incentives were always there for more mortgage production, more insider profits, and more party campaign contributions.

The warning signs were there. The admonitions for caution were there. Key members of Congress were in the forefront of waiving off disciplinary warnings.

With a couple of prominent exceptions, the politicians were Democrats claiming to do good for the poor. The supposed idea was to give homes to the poor but the rich got much richer, while the poor couldn’t even afford what homes they got for so little.

Along the way, insiders enriched themselves and their friends, stuffed their campaign coffers, and resisted all attempts to enforce market discipline. When the inevitable collapse arrived, the entire economy suffered, ( See the Earl J Weinreb NewsHole® comments.)

Real Business Men?

The media glorifies many rich business men and women, as business gurus because they happen to have made billions in business. Yet these folks have never really operated a business.

They may have started a business for which they received stock certificates that have become very valuable. But they have never run a business.

The public is duped by the difference simply once they see so much wealth.

I find there is a difference. Yes, some actually have run businesses. Sam Walton who originated Walmart was one. People who opened up and closed the premises, and who did the hiring and made up the payroll.

If you oversee just the stock price and merge companies and buy others, you are a different sort of business person. The public too often makes no distinction, yet hands out the same plaudits. See the Earl J Weinreb NewsHole® comments.)

The Usual Merger/Acquisition Problems

When corporations announce mergers or acquisitions they love to give the reasons why there is the premium invariably paid by the acquirer to shareholders of the company being acquired.

After all, there has to be an incentive to sell the business. And sometimes, that premium of the targeted company’s book or operating value can be quite high, well above current market pricing.

One of the main reasons often given for this premium is the alleged value of synergy. That is, the innate benefits to be derived from having the merger. However, studies show that synergy frequently is not as beneficial as it’s made out to be. Problems always arise where unexpected, from merging staffs and personalities. And they may not be easily minimized.

It’s difficult to determine who really gets the benefit. I feel they’re usually done too fast, and far too often for CEO ego satisfaction. ( See the Earl J Weinreb NewsHole® comments.)

Skewed Unemployment Numbers

Monthly government unemployment numbers often have little to do with reality. If corporations spewed out such faulty figures they would be hauled off to court and officials jailed.

The media emphasis usually goes along with the official government charade by placing a spin on what you are supposed to make of the raw figures, depending on the political party they favor.

One illustration was the Obama administration’s creation of the “jobs saved” number. When actual “job lost” numbers are the norm. Jobs saved were merely estimates of the “coulda, shoulda, and if” variety, that could not be truly measured.

But worse, unemployment statistics leave out those who have given up looking for work, or are counting part-timers who cannot find full-time work. Right now the government is reporting unemployment of about 9% when it’s well near Great Depression levels, at 16%. And for minorities, it is running much higher.

Importance of Cutting Corporate Income Taxes

The U.S. corporate income tax is too high, in relation to what is being imposed by other countries, many who unabashedly claim to be socialist or who have otherwise managed economies. They definitely don’t profess to have capitalist underpinnings. And I include Communist China in this category.

Yet, they all realize the importance of relatively low corporate tax rates.

Yet, the Democrat party in America has a social mantra of “soaking the rich” and the corporation is targeted as rich, though the taxes paid are really a cost of doing business and must be priced into what’s sold.

There is no logic in keeping U.S. corporate taxation as high as it is, when you want to keep American business competitive in global markets and at home.

And while we’re at it, let American corporate already-taxed earnings overseas come back home, tax free, The funds can be used here.

What Americans Spend On Private Health Care

Much is made about how much Americans spend on health care, compared to others; the French, as one example.

We spend about 16% of the GDP on health-related services. Fine, it’s perfectly acceptable to do so, if we get the best care available. Provided it’s not directed and controlled politically by the government. That is when mismanagement sets in, as it has whenever government runs any business or service,

And while the French spend about $6,000 per household less on health care, they get far less in services and quality than Americans do, a fact that proponents of ObamaCare never disclose.

How Bureaucrats and Government Go Wrong

Steve Forbes, on Forbes.com, April 21, 2010, wrote a piece of basic economics for the laymen, which I repeat here, for the public to learn and also remember.

The media does a poor educational job, but Mr. Forbes sums up a bit of Education 101, also for those whose parents have bankrupted themselves to send kids to college.

Mr. Forbes reflects on the erroneous supposition that there are always ”wise” men around who try to manipulate economic problems and fine-tune the necessary financial remedies necessary to mitigate and rectify them.

Job Training Does Not Require College

About 60% of jobs in 1950 did not require special skills. According to ETS, Educational Testing Services, there were plenty of jobs for those looking for work requiring no special abilities.

Now about 80% of jobs are considered skilled and need training, not all of which are available to high school graduates.

This is a fault of high schools. You don’t need a college degree for most non technical work positions. You would not, if K-12 standards in English and mathematics were adequate.

We send kids to expensive college where they become useless graduates. All we have to do is train them for useful, profitable work while in high school. They can go on to master good paying jobs once they have the basics. ( See the Earl J Weinreb NewsHole® comments.)

The Medicaid and Medicare Fiasco

Congress created Medicare and Medicaid in 1965, Politicians kept expanding benefits, while talking about controlling costs. Yet costs kept skyrocketing.

This couldn’t happen in private business because of the likelihood of bankruptcy. But government intervention prolonged losses and made matters much worse and expensive. As long as taxpayers continued to pay the bills. Eventually enormous amounts have been paid.

This same government failure, as we see with fraud-infested Medicare and Medicaid, is on the menu with ObamaCare.

Are You Paying the Huge Athlete Salaries?

The Left complains when a "rich" top executive gets more than a million or so a year of “taxpayer-protected” income. What about a ball player who hires no one, who makes ten million and more a year? And may actually be a loser?

Remember: Money is fungible. The payment does not have to be direct. Money can be substituted from one pocket of government or payer to the other, to hide the source of funding. It adds up to the same total outlay.

Yet, many ball parks are subsidized in some way by government, and thus the fungible funds are being used to pay grandiose athlete salaries.

Give Tax Breaks for Health Insurance

Nothing the government does is truly cheap, except quality, when you total up the direct and indirect costs. ObamaCare health insurance never will accomplish what it intends to do.

One suggestion: Tax employer-provided health-care benefits but return this money to employees in the form of tax deductions, to buy their medical insurance as they buy home and auto insurance.

That will make insurance transferable and keep workers on their jobs with coverage. You will then have health-insurance security and portability, along with personal independence.

And even more competition among about 1500 insurance carriers. With certain lower health insurance costs.

Institutional Management of Investment Portfolios

Large investors such as pension funds, foundations and major mutual fund managements, often critique the management of companies in which they invest.

There are two schools of thought about the solution. The main idea has always been that you do not buy or retain ownership of securities in firms whose management you do not like.

Investors who actively promote their influence in making managerial changes often have another motive. They often are more interested in takeovers and active management.

Furthermore, it takes a lot of nerve and arrogance on the part of outside investors who think they can micromanage because they have a large stake in a company. They may make better use of their time elsewhere.

Sure, they may want to look for over=zealous salaries and bonuses and for fraud, but that should be all. Good corporate performance is what they should seek.

Socialist Fantasy and Capitalist Realism

Some interesting notes:

Socialism always ruins environment. As evidenced in Soviet Russia, China and communistic Eastern Europe. Capitalism has invariably treated the environment as an asset for future use.

Socialist countries use capitalist principles only to bail them out of dire economic disaster after socialism fails.

Even in so-called socialist countries, it’s capitalist principles that countervail socialist errors.

Budget Deficits are Dangerous

Government wasteful spending is more than a waste of money.

Excess spending that produces budgetary debt causes even deeper recessions than we would have. In fact, I have repeatedly reported that so-called stimulus funds have actually been a political slush fund, doled out to “friendly” recipients. And that independent study has shown actual overall job losses while the “stimulus” was applied to mainly help certain states balance their bloated budgets.

Remember the Soviet Union with its periodic Five Year Plan stimulus efforts and their notable lack of success?

But budget overspending will do to us in the future what it is doing to Greece and several other European countries today.

Oil Price Increases and the Political Left

Let’s repeat the left-wing political drill. Every time the price of oil and gasoline goes up, call for a congressional hearing and put oil company CEOS on the grill.

Of course, the results, after all the political hoopla, will be the same. The politicos find nothing, despite all their efforts.The media get their headlines and stories. But the facts will be overlooked--again.

The oil companies pay an effective tax rate of 39.8%, much higher than most corporations, far too high in an industry where exploration is so necessary and so expensive.

Facts: Oil prices are determined by expectation of future long-term oil production. Supply and demand for oil play an important part, and the left does all it can to reduce supply. So the left-induced Merry-go-Round goes on and on.

A Real Stimulus: Part 2

Further to what I said recently about a real stimulus to revive a depressed economy:

A stimulus ought to be a genuine job generator. Experience shows it should work quickly and be practical, not effective after the eventual, normal recovery would have occurred. After all, there are frequent normal cycles in an economy.

Moreover, a real stimulus will not change the country’s political and social infrastructure. To many politicians, a stimulus is the hope of political opportunity.

The stimulus should not be an excuse to provide political payoffs. A stimulus is not supposed to promote voter turnout or change the form of government. And it certainly should not cause inflation to endanger our children and grandchildren in the future..

A Real Stimulus Vs The Bogus

A stimulus planned during a recession must act quickly, if it is to be practical. It’s supposed to stimulate the economy with minimal cost.

Any government really fully aware of how to stimulate a morbid economy would institute a quick tax cut on all types of income; that always works, Tax cuts on interest and capital gains.

Corporate tax cuts are tremendous boosts to an overall depressed economy especially when most foreign country rates are much lower than those in America.

College Tuition Can be Cheaper

There’s no reason college cannot be cheaper; that is, if colleges were under pressure to really try to reduce costs.

Take a recent study done by Christopher Matgouranis, Jonathan Robe, and Richard Vedder, a Professor of Economics at Ohio University, and the director of the Center College Affordability and Productivity group.

Reporting data at the main campus, at Austin of the University of Texas, the study says tuition fees could be cut in about half by asking 80% of the faculty with the lowest teaching loads to teach half as much as the 20% with the biggest loads. The top 20% now cover 57% of the teaching.

Many professors simply do not teach but spend time on research, much of questionable utility. Also, student-teacher ratio standards make little sense, while college bureaucracies are in need of major cost-saving overhauls and streamlining which can reduce tuition levels even more.

Loss Reimbursement for Securities-Adviser Litigants?

I have no sympathy for advisers who often charge clients for services the clients may well do themselves. But why sue such advisers who have no crystal ball and who cannot see if an investment will turn down?

And yet many pension funds do sue advisers who could not see a downturn in the mortgage markets a few years back.

This lacks common sense on the part of the funds’ clients, other than a ruse to collect money from any source available. So why not sue, hoping a judge and jury will not be conversant with how legitimate securities markets work in real life?

The Important Job Interview

I started and helped operate a profitable major employee- contracting business for 17 years. The work varied from ordinary clerical to nurses and physicians. Lots of suggestions get thrown about on this important subject of securing a job.

Let me tell you one that makes more sense than others I see being professed in the media as the best .

Try this job interview technique with a prospective employer AFTER the interview:

Now that we have had our discussion, do you have any reservations about me that you would like to have me explain or answer?

That helps get into any problems that may be about to stymie your efforts..

Suggestion A Six Month Moratorium on All federal Regulations

An important suggestion that the vast majority of Americans are not thinking of: There should be a year’s moratorium, or a period until the next presidential election, on all new federal regulations until an independent audit can be arranged to evaluate what we now have.

I can guarantee the U.S. economy and political system will not spin out of control. But we will get a handle on duplications and such inanities as spilled milk on farms being treated as “oil spills.”

And while we’re at it, an audit of the massive Federal Register, to reduce it’s ridiculous size.

State Budgets and Political Influence

The media often gets aroused over Wall Street’s salaries and bonuses. Government salaries get only slight attention.

While we know about Uncle Sam’s spending these days, state and local outlays are also beginning to get commentary because severe budget problems are a tremendous source of problems for all states and cities as well.

I am referring to exorbitant pensions held by millions of active and retired state and local public employees. These include city managers, teachers, cops. garbage collectors, guards and others. They represent at least three quarters of public employees who have what is called defined-benefit retirement plans.

They have the ability, unfortunately, to organize voters and thus control politicians who keep adding to taxpayer burdens until there are not enough taxpayer funds to go around for the feeding frenzy to persist.

The Economy and Inflation

A 2003 report by the Federal Reserve calculated the effects of government debt and its impact on long-term interest rates. It was done before the current deep recession and weak “recovery”and the efforts of the Obama Administration.

The report concluded: "A percentage point increase in the projected deficit-to-GDP ratio raises the 10-year bond rate expected to prevail five years into the future by 20 to 40 basis points. Similarly, a percentage point increase in the projected debt-to-GDP ratio raises future interest rates by about 4 to 5 basis points."

In other words, the effect of inflation in the form of higher interest costs.

Inflation induced by heavy deficits does not arise rapidly during a recession, but it jump-starts once recovery gets going. Then it quickly gets out of hand.

All the theory economists use as remedies get stymied by politicians who know the medicine will cause economic belt-tightening. Those remedies will be be over-ruled by political considerations.

The present Greek debacle is the perfect example of what happens when belt-tightening is avoided too long.

The Dubious Wisdom of Crowds

The assumption that the masses can be correct may arise from a theory that there is a certain wisdom in crowds. There has been some limited research on this to explain how a form of futures market can explain, for example, how the public could predict future election winners.

Practical results from the use of such theory has been non=existent. No real futures market has ever resulted from past attempts to implement such theories.

The problem here is that if crowds were prescient, there would be no booms and busts and no economic manias as have existed over past centuries. All securities markets would then be predicable.

On the contrary, evidence over the years suggests the opposite; crowds are invariably wrong.

Institutional Investors as Corporate Managers

Why should mutual fund managers and other institutional investors intimately direct corporate management of the companies in which they invest? That function is far different from their job of selecting securities. They have little time or the ability to attempt to get too close to be involved.

I know that the job of an investment manager is to pick good corporate management. But that can be superficial at best. To truly evaluate what is good or what is bad management takes lots of on-the-site inspection and knowledge with which fund managers are not equipped. They may say they have that ability, but that would be mostly conjecture.

Despite this, there is a constant clamor from groups, usually with little business acumen, who insist that institutional investors, including mutual fund managers, micro manage each and every investment they make. That is an impossibility.

Another reason I suggest investment in funds that track indexes. (See the Earl J Weinreb NewsHole® comments.)

Government Stimulus Sleight of Hand

Funds removed from one pocket and placed into another pocket of your pants, is the same money. The amount is the same, no matter what pocket it comes from.

In the same way, money can be substituted from one pocket of government to the other, to hide the source of funding.

It adds up to the same total outlay.

What the government in Washington called stimulus funds, for the most part, became slush funds. for use by its politically-preferred state governments. These states used the money, to a great extent, to help balance its own budget deficits.

The reason state budgets are so out of hand can be attributed primarily to their unionized pension obligations. It is estimated this is a major, ticking financial time bomb, waiting for more government bailouts under various guises.

Taxpayers who cannot recognize stimulus sleight of hand will be taken as suckers again. And again. And again.

The Waste of College Attendance

Colleges have financial motives to admit dumb high school school “grads.”. The U.S. Department of Education statistics indicate that three quarters of high school students who graduate in the bottom 40% of their classes still get to attend college.

Most never graduate college, though they may spend as much as eight years, and more, in school. And, they often leave in heavy debt.

What is more, few of these students get jobs that ever require a college education. Their efforts simply wast precious time and money.

Medicare, Medicaid and Social Security of the Future

By 2050, Social Security, Medicare and Medicaid, will take up nearly the entire federal budget. By 2080, Medicare alone will comprise the entire federal outlay.

There will have to be drastic corrections done by our politicians but many, primarily on the left, prefer to defer taking on the problem. It does point up government stupidity today, created for us, our children and grandchildren.The left has made a bankrupt system for us and our descendants. Solutions can only involve less services, reduced benefits, rationing and higher taxes, as well as inflation we have never experienced before.

The College Education Fantasy

The college system does more for colleges, teachers and staff, on balance, than it does for a large portion of their consumers.

Only 40% of two million college freshmen graduate in four years; 45% never graduate. And graduates are ill-prepared for careers.

Forget about education. The experience helps parents boast that their kids went to college, and it does the same for the dropouts themselves. They generally never have to mention whether they ever did earn a degree or job skills.

Or whether or not their major was medicine or “communications,” or a form of physical ed. Whatever the major, it frequently fails to prepare a student for a worthwhile job.