Government’s reponse to job losses… give me more!

The economy continues to contract and people continue to lose their jobs. It is also important to remember that companies are reporting losses and people that work on commission, though employed are suffering huge losses in income. All of this means less taxable income to all levels of government. So that would mean less revenue and deep cuts in government programs.

Well not so fast. That is unless you raise sales taxes on everything! You see government is not allowed to do with less. They just have to find another place to take it. So if you aren’t making any money, you still have to buy food. I am sure they will also raise taxes on those that have the fortune to be employed and on any company that dares have any success during the recession.

I appreciate the catch 22, they have services they have guaranteed to people and projects that they “need” to do. And we are just not giving them as much money. How dare we! But just like I have done, projects need to be put on hold, spending needs to be taken way back. So just like the rest of us 8.5% of all government spending should be dropped immediately.

The government cannot grow when the economy is shrinking, it is simple unsustainable. And the economy will adjust to compensate for the higher burden by shrinking once more. Lessons on how to turn a recession into a depression. The only way out is to shrink government spending until the economy recovers and to stimulate the economy to recover faster.

That does not mean giving money to failing companies or paying workers to do nothing or to make up new projects to fund just to keep people busy. To me stimulus means accelerating the natural recovery and failures in the current economy. The only way to do that is to take less money from the people and corporations so that they can help themselves and their corporations effect change. It is basic economics and more and more of us are working through it each day.

We will get there, I am sure; maybe not until after the new depression. It may take that much to get people to remember; government does not create, its abilities to distribute are governed by us, doing works in our best interests to move this country forward. There will be many dark days ahead but the American people, the individual, will once again have our day in the sun.

Well played, Mr. Obama

Many is the media are “confused” by the seeming contradictions in the ever expanding spending coming from Washington and the statements about the desire to “balance the budget”. Since most of them are devoid of 5th grade math skills they can’t make the connections that most of the rest of us can make…”this just does not balance out”. But I believe that it does balance out and very quickly. I believe the President is honest is his desires to get the budget deficit cut in half by the end of his first term and that this is in no way a conflict with the current spending or his budget.

The goal is not to try and pay for this or to worry about revenue at this point. The goal is to establish government dependence and control. I believe that President Obama is playing this perfectly. He is spending out of control because the public is demanding that they “do something”. True, this spending will have little impact on stimulating the economy. It will however create entire agencies and government dependence among those that will now survive based on the bailouts. Many believe that this is overplaying their hand. I think not. This is their hand. What will happen to the public economy is obvious to almost everyone and the public outcry shows this as well. But many believe that he is misjudging the economy or the American people. I believe this is exactly the intent.

As these policies and the next budget are passed (there is little chance enough Democrats will change sides to stop it) massive spending will hit many sectors of the economy. Government funding will push out private equity. Dependence will be created. More bailouts, Healthcare takeovers, locking up the energy industry will all limit the economy and limit tax revenue. But Mr. Obama has stated he wants to balance the budget and soon. Unlike many that see this in opposition to his current spending and budget, I take him at his word. Revenues will not go up. Unemployment will not go down. But this increasing crisis is exactly what is needed for the next phase of the project.

That is the “need” to tax everyone at a very high level to balance the budget. Many look at the budget as written and say that this must occur anyway. They are correct and believe that it will therefore be stopped early on. But with a complicit media, no 5th grade math, and a struggling economy, it will pass. Once you lock out private investment, once agencies are established, once your industry, your health care and your energy are a service of the Federal Government; could you (would you) “deny” yourself those services as they are transitioned back to a free market? Not enough will, a new recession and risk will be avoided by the American voters; and under a tax load of greater than 50%; the control is established.

This level of control cannot be undertaking directly. You already see the concern building based on the individual policies today. But Obama has learned from the mistakes of socialized health care that gave us the Republican Revolution in 2000. You cannot get these changes passed in a good economy and in the light of day. He is ensuring that our dependence and need are sufficient so that we have little choice.

Well played Mr. Obama.

Is Obama a muppet or the puppet master?

Those that know me well, know that, during the election, I had the opinion that Obama was a muppet. May argued he was left wing, and that may be true. Other argues that he was more center-left. Though I believed that he was likely far more left then his words, what he said and what he believed was of little consequence in this election. Besides foreign affairs the President if mostly a figurehead. He has little to do with writing or enforcing law. In this case a figurehead for Nancy Pelosi and Harry Reid.

I hoped that I was wrong or even if I was right that he would have a mandate and the quest for power would allow him to manage congress. But like the old Star Trek episode, “Patterns Of Force” where they “instituted a theoretical form of Hitler’s National Socialism upon the lawless Ekosians because he believed that it is the most efficient system of government ever devised”, the government has taken over and supplanted the figurehead.

Obama talked about “fixing roads” and “helping the states” yet the stimulus bill is full of pork and pet projects that dwarf the valuable spending. Now we have a “funding bill” that is full over 4900+ earmarked projects. So I, I believed that I was right. That he had no power and no control over the Congressional leadership and that they he was a puppet to the puppet masters.

At least I thought I was right until Tuesday and Wednesday. He spoke the other night about restoring the upper tax brackets to those under Clinton. To cut spending in non-critical programs and cut the deficit in half in 4 years. Then the news about his plan began to release on Wednesday including 650+ Billion to begin universal healthcare. The numbers simply do not add up. Then the tax increases began to to leak; including limiting home interest deductions [that should help the housing market]. A total “estimated” budget of 3.7 trillion on tax payer funded income of 2 trillion. If the economy contracts a bit more and/or the price tag goes up (duh) then we are talking about government spending on a pace that is double revenues. This does not include the “one time” spending in the bailouts. So we are looking a deficits that would require tax revenues to double or triple in the coming years.

There is no amount of taxation on “the rich” that can cover that bill. Since over 40% of wage earners already pay zero income tax, this burden will be carried by the ever decreasing population of the employed “wealthy” [which will now be defined as anyone that makes over the median income]. The GDP of the US is estimated to be 13.75 Trillion dollars in 2008. So we are talking about taxation at 30% of all GDP (higher to cover the bailouts). To put that in perspective: taxation has never been over 20% of GDP. In fact it is well understood that tax revenue and GDP are tied tightly together at about 18.5%. [I have found reputable sources that have out tax burden at about 30% already. Based on 13.75 Trillion in GDP and 2.67 Trillion in revenue..my simple math gives me 19.4%] . So we will need to get from 2.67 Trillion to well over 4 trillion [note that none of this includes growth in already expanding government programs].

Now it is possible that we will not actually pay for this. Seems that “paying for things” is simply out of vogue right now. But either we will pay for it or our children and grandchildren will pay for it with interest.

Based in these simple facts, I have come to the unfortunate conclusion that the puppet is part of the game (that reminds me of a Twlight Zone episode). That he is using his popularity and oratory skills to say what we want to hear and then turn around and sell us out. So it looks like, some where right, he is a left wing liberal and intent on creating a socialist republic within the United States with an overall tax burden of 40+%. Either that, or his economists have failed 5th grade math and they are completely inept (since they don’t pay taxes maybe this is the lesser of two evils). 2010 is coming, I pray we will not be too late.

Jobs and Industries Democrats are trying to kill

This is meant to become a running list of all of the industries specifically targeted for destruction by the Democrat party. Many of these are obvious but the goal it to look at the ripple effects of each of these decisions and understand the impact on the unemployment picture and the economy as a whole.

Target: Big Oil
Impact: Rig Workers, Parts Manufacturers, Local Service, Gas Prices (which impacts inflation)

Target: Tobacco Companies
Impact: Employees, Farmers, Tax Revenue (all those pet programs “for the kids” supported by this revenue)

Target: Banks
Impact: Employees, New York Restaurants, Las Vegas (and other conference cities), Event planners, wait staff, cooks

Target: Private Jets
Impact: Manufacturer, Small Airports, Pilots, Service Technicians, Oil Companies, Steel Manufacturing, Parts Suppliers

Hope that you do not know anyone in any of these industries or reliant on these industries. The economy is connected, pick and choose winners and losers and the ripples are long and wide. The end results is always the same, lower employment; usually in the service sectors that support these businesses and towns, lower tax revenue and more government control of free enterprise. Make no mistake. This is either the end goal or they are incompetent. I believe they know full well what they are doing and government control of private business is the end game.

Obama Recession hits -20%.

Yeah, I said it. This current downturn since November (even earlier) is now on Obama. As the economy rolled quickly down the hill, Obama had the option in each debate, his stump speeches, his acceptance speech and to any microphone since to stop the bleeding. He has not. All he would need state is that any economy in turmoil cannot afford higher taxes. Especially on capital gains. What is ironic is that raising the capital gains rate will have little impact by the time it is passed anyway. Anyone with gains to take is getting out of the market and no one is getting back in. The economy is shrinking, companies are fighting to stay above water and they are laying people off.

Obama threatened to raise taxes, threatened investors with a near doubling of the capital gains rate, threatened companies with more oversight, more taxes and more unions. He backed down on none of it and now he is elected.

Many thought the market had already taken its lumps, found a new low and prepared for this before November 4th. I thought it had to and I put some back in. What many missed, including me was the senate fight for 60. Some were talking about it but it did not seem likely. But as the election approached it became possible. Then on November 5th three elections were undecided and three seats was all that was needed…and down the market went.

Since that time those elections sat undecided. One concluded this week and the Democrats are now two away. One is so close and in a Democrat controlled state, so that is likely to change hands… leaving us with one…Georgia… and down goes the market.

The fears Obama put in every business owner, every investor, and any tax payer that was really listening look even clearer now then they did before the election. The ability to implement each and every program [deficit be damned], raise taxes, limit corporations, empower unions…kill growth, drive up unemployment, capital the US economy for years to come… these are now all possible… and the markets sink.

I believe in irony and I believe if the Dems hit 60 the Dow hits 6000 (a < 50% decline from its highs).

A clear difference in philosophy

I heard an explanation of the differences between Conservatives and Liberals that I thought was interesting. The comparison was something along the lines of … Two Americans both have big dreams. The conservative wants to wrok for himself, create a company, provide for his family, grow the business and retire comfortably. The Liberal wants to make sure that others are provided for, that health care is afforable and poverty is reduced. What is so different is not these dreams but the way in which they are acheived. Unfortunately, the second man’s dreams are accomplished by taking money from and destorying the dreams of the first.

I found this interesting at first and the more I thought about the better it fit. Looking at it from the other man’s point of view. The dreams of the first man have no impact on those of the second. In fact his ability to grow the business does support providing others with employment, possible philtopic donations and the ability for employees to succeed and pursue their own dreams. Why can’t the second man create a company, pursue business partners and provide for others on his own accord? Why is it necessary to require extraction of income from others? I find it very likely that there is a buiness opportunity in helping others. In fact if local companies were taxed less and incented in their philithropic efforts this business venture would be even more likely.

Update: 401k still at risk with Democrats control

This is an update the story posted October 9th.

If I were to say “pay into a guaranteed retirement account administered by the Social Security Administration.” You woudl say, “I already know about Social Security, so what?”. Well you woudl be wrong. See this is the “new” retirement alternative being contemplated by the Democrats in the house.

The Theory goes… Since the Stock Market has taken such a hit, it proves the falsity of the idea of investing your retirement in US stocks. Therefore, we should use the money from the program to design a better program.

At least three major problems with this “theory”.

First, there is not money in this system that the government has any right to. You see in the minds of a Liberal Democrat a tax incentive to invest in your own retirement (a goal set forth by the law) is money they don’t have. It is counted as money the rotten-evil-tax payers of this country dare to keep to themselves. What “tax break” you ask? The taxes you did not yet pay on income placed in the 401k and the tax break for companies that match your investments. So they want to require that you put another 5% [on top of the 6%+6% that you and your employer put in today].

This leads me to invalid point number two. The tax break is a deferment of taxes until the need to extract funds. The belief is that your tax bracket may be lower at that point then it is today but there are no guarantees of that. It is hard to call that a tax break. IN fact with democrats in congress it is very possible that retirees in the coming years will find that they are withdrwing at a higher bracket then when they started putting in the money in the 1980s and 1990s.

The third and most reveling of the falseness of their arguments is that the new funds would be “invested in special government bonds that would pay 3 percent a year”. Oh sooo many issues… “Special”… you mean like “Freddie Mac Mortgage Backed Securities special”? Or more likely “Special” meaning, “I won’t tell you know because it is in the general funds and to be paid back by your grandchildren’s grandchildren when I am long gone from Congress.” I digreess. On to the main point. Three percent per year. I think I can beat that with guaranteed CDs without giveing over the money the feds. Well… I took a deep breath and opened up my recent 401k statment. Really, I did it. I took a look at my rollover 401k. This is a high risk stock (98.7%) 401k from an old employer. One that is not confused by current contributions, matching and dollar cost averaging. In the past year it is down about 35%. Ouch… In the past three years it is up a misely 1.2%. If I look back 5 years it is averaging…6% a year. Yep 6% a year over 5 years including a once (twice) in a century downturn.

Since that is an annualized return $20,000 would have grown by $3579 more in the last five years then via the “new” government plan. To be fair they are offering a $600 credit so their plan have returned only $579 less, assuming I qualify for the full tax credit against my $20,000 investment. So if my retirement savings were anything over the $20,000 (which it better be if I plan on living past that first year of retirement) their plan is an even bigger loser. Note that this is already a slight loser in comparison with what can be deemed the worst economic environment for stocks in recent history.

So why would Democrats want to capitialize on the current fear to “stabalize” your retirement when it is a quaranteed loser? The simple answer is that in their mind the 80 billion dollars we all get to right off for 401k contributions is their money and they want it back. The other side of this it the unasked question… what happens to the current dollars if the 401k laws are revoked? Does that mean full conversion and a captial gains tax windfall? Would they dare wait until Obama raises captial gains from 15% up to 28%?
We shall wait and see but the mathematical answer is still to allow for direct privatized investments by individuals.