Thoughts Before The Alarm Sounds

     ...But it is going to last a long time for the rest of us. My last two postings listed several reasons why I believe the recession is going to be permanent for the non-rich. (See February 16 and February 21). Today I want to highlight another problem which will hinder the US from returning to the employment position which prevailed prior to the Bush years: Government pension committments.      According to researchers at the Kellogg School of Management at Northwestern University, state and city governments are committed to paying pensions in the amount of $3.574T for which no funds have been provided. In addition, estimates of unfunded Federal pensions are $600B, for a total of $4.174T. (The number doesn't look so big untill it is written out: $4,174,000,000,000). The New York Post estimates that current payments for all governmental pensions amount to $81,500 per year per household. That money comes out of our taxes and it does not includ...

     ...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...

     ...But it is going to last a long time for the rest of us. At last the rich have managed not merely to stack the deck in their favor, but to cut the not-so-rich completely out of the game. Not only that, they have managed to get rewarded in the process. It is as if, after having been mugged, we told our attacker to come along home – we have more money there.      For those who measure prosperity by stock market indexes, the recession is over; people for whom the job market is the basis of measurement strongly disagree. I am going to let you in on a little secret: In today's post-industrial society the two are polar opposites! Unless something drastic is done, the unemployment rate is going to rise and fall in tandem with the equity market indexes.      During the industrial era, manufacturers had to rely on workers to produce products, and they still do to some extent. But in the information era, production is not neces...