Thoughts Before The Alarm Sounds

Let's pretend that you are the sole proprietor of a small business – one that employs 15 or 20 people. Suppose you manufacture two products: shirts and widgets. Both lines are selling very well - your bottom line nets out to about $100K, on which you pay about $15K in income tax after deductions. Now the government, in its relentless pursuit of job creation, lowers your taxes to $13K. How many new employees will you hire with that extra $2,000? (A no-brainer.) Suddenly your sales of shirts drop 50% because your competitors have outsourced their production to India; do you keep all the employees in the shirt production line, or do you lay some of them off? (Another no-brainer.) Your accountant tells you that the government will give you a hefty allowance if you install automated equipment (made in China) that will enable you to compete. In fact, you will need even less employees than you have now! Do you buy the new equipment? (This is almost too simple.) Suddenly a ne...

Although 2011 was not a very good year for planet earth, at least for the humans living there, if I am going to be truthful, it was an average year for me personally. Except for climbing stairs, or even walking uphill, I do not think my physical condition is much worse than it was a year ago. (Of course, it's definitely not any better.) But I have been warm and well fed, and the fun times have outnumbered the other kind many times over. But as with most old accountants, in order to keep from losing my balance I need to formally close the books on the old year, and set things up for the new. Literally! We keep reasonably accurate financial records throughout the year, and I like to use them to get some idea what to expect in the new year. For example, the Social Security Cost Of Living Adjustment (COLA) amounts to 3.6%. That's not bad, although considering there has not been an increase since 2009, it's not really a world-beater. The government said inflation was not a fa...

     Not officially, of course, but the recent actions of the Great Comproloser certainly mirror those of his “loyal opposition.” In spite of Dick Cheney's remark that “deficits don't matter,” the Republican strategy for insuring that Obama is a one term president consists of carping about, what else? The deficit. (Cheney would probably not be conservative enough to run for office as a Republican in 2011.) And it might work, but Obama should know better than to join them.      But the problem is not the deficit, it's jobs, jobs, jobs.      On August 5, 2011, Standard and Poors lowered the Federal Credit Rating from AAA to AA+, a rating that most businesses would love to have. Expectations were that the government would have to pay a higher rate of interest in order to borrow money through T-bills, Treasury Bonds, etc. One week later, August 12, interest rates on government securities were at an all time low. Lenders still c...

      The founding fathers left us with two concise views of the role they expected government to play: In the Declaration of Independence, Thomas Jefferson wrote, “...all Men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty, and the Pursuit of Happiness – That to secure these Rights, Governments are instituted among Men...” The Preamble to the Constitution states, “...in order to form a more perfect union, establish justice, insure domestic tranquility, provide for the common defense, promote the general welfare, and secure the blessings of liberty to ourselves and our posterity, [we] do ordain and establish this Constitution for the United States of America.”       Because of the makeup of society, however, the fathers were not quite as principled, at least by today's standards, as one would expect from the foregoing statements. Electors in federal...

     ...But it is going to last a long time for the rest of us. As I wrote on February 15th, “The conservative mantra that 'offering tax incentives and other perks to business will stimulate job recovery' is true, but the jobs will not be in the USA.” The tax incentives being offered today will exacerbate the problem in still another way.      The major offering to business is allowing the manufacturer to deduct up to $500,000 of new equipment in the current tax year. In the past the cost of such equipment had to be spread over the life of the equipment. (In the interest of being “fair and balanced,” this tax break has been available for several years, although on a smaller scale).      For example, suppose a manufacturer buys $500K worth of equipment that is estimated to last for 20 years. In the past he could deduct 1/20 of the cost each year for 20 years. If his tax rate was 35%, he would reduce his taxes by $8,750 each ye...

      The disagreement between climatologists and deniers goes on. In a 2009 survey, 97% of respondents who listed climate science as their area of expertise, and who also have published more than 50% of their recent peer-reviewed papers on the subject of climate change, agree that human activity is "a significant contributing factor in changing mean global temperatures."       In a recent CNN poll of the general public, when the question “. . . from what you have heard or read, do you believe increases in the Earth's temperature over the last century are due more to the effects of pollution from human activities, or natural changes in the environment that are not due to human activities?", 50% replied human activities, 46% said natural causes, and 4% were unsure.       There seems to be a general mistrust of the findings of science, which I believe is due primarily to the constant barrage of false information ...

      When it comes down to opinion versus facts in an argument, there are well-known tools available which opinion can use to overcome facts.       For example, if one is arguing against experts, persons who have devoted a major portion of their lives to understanding the subject under discussion, one can always find, or even create out of nothing (e.g., the Discovery Institute), a couple of renegades to dispute the majority. Then the opinionated one does not discuss the competing claims; instead he trumpets far and wide that “even among the experts there is disagreement on the subject.” The idea is to sell the imaginary controversy, not the facts. This is the method used in the case of evolution versus intelligent design. Hopefully this movement ended with the opinion in the Kitzmiller vs Dover Area School District case.       Another tool of the opinionated is to take some statement or event out of context,...

      The Senate is set to vote on the 2,300 page Dodd-Frank Wall Street Reform and Consumer Protection Act , designed to establish much needed reform in the financial services industry. Supposedly the bill will monitor the types of transactions which led to the recent recession. With the announcement that Republican Senators Collins and Snowe of Maine, and Brown of Massachusetts would support the bill, the required 60 aye votes on Thursday seems assured. But as usual with the Senate, anything can happen.       The bill establishes a number of new government departments (Surprise! surprise!) to implement and maintain its regulations.       The new independent Consumer Financial Protection Bureau will be housed at the Federal Reserve, and will be responsible for ensuring that consumers get all pertinent information when shopping for mortgages, credit cards and other financial products. It will protect them from...

      Many people are calling the BP oil spill Obama’s Katrina. The reference, of course, is to the inefficient response of the Federal government to the catastrophe incurred when hurricane Katrina came ashore along the Louisiana coastline in 2005. So how do the two events compare?       As a result of Katrina, at least 1,836 people lost their lives, and an estimated 1,000,000 people were redistributed from the gulf coast states to other areas. As of July 1, 2006 it was estimated New Orleans had lost almost 220,000 residents. On March 30, 2010, 260 families were still living in trailers provided by the Federal Emergency Management Agency.       The government has been criticized for its slow response to Katrina, but under the National Response Plan, the responsibility for the management of such disasters lies with local authorities until they ask for help. New Orleans mayor Ray Nagin had ordered an involuntary ...