Thursday, June 16, 2011
Solving the budget deficit, rationally – continued
LOOKING AHEAD by Wally Dobelis
Last week this article addresses means to save the budget by improving the social benefit scheme –Social Security, Medicare and Medicaid. This week we will try taxation, or lack thereof.
First, though, a continuation about savings available from defense spending. There are 100,000 Americans in Afghanistan, fighting the Taliban and training President Hamid Karzai’s troops. Until recently the Taliban would not consider negotiating, under the premise that US will be forced to withdraw by costs of the war, and then they will have everything. Recently, though they have been talking, secretly spurred forward by Sheikh Mohammad Omar, their spiritual head, who had suffered mightily by maintaining his Pashtoon pride (wali) obligation to protect his guest (Osama bin Laden, solo, not the clan). Now two more terrorist chiefs are gone. Without Osama he is free to talk. He presumably realizes that a US withdrawal will not give free reign to Talibans, as long as secret US agents send information, which gets routed to Roswell AFB in Nevada, checked by high altitude overflying U-2s, analyzed by terrain experts for veracity and AJAG Corps lawyers for collateral damages, and if correct, some small drones with bombs will fly from a nearby neutral country to blow up the culprits. US is winning by technology, you can run but you cannot hide, America has devoted Gunga Dins, and unlike Rudyard Kipling’s Britain, it has incredible reach, and can chop off any enemy leaders at will, one generation after another. A negotiated peace is the only way out, and US can withdraw 9/10ths of the troops to US bases where they can recover, at huge savings in the defense expenditures that can be put towards the budget deficit.
I have sought opinions from friends, ranging from an insurance actuary to a pizza shack owner, and believe me, America is well informed. The pizza man points to wasteful predatory state practices, e.g. in NYS allowing an Asian immigrant open a business, e.g. a gas station, tax-free for 10 years, which he then can sell to another immigrant, to repeat the cycle, with the profits flowing back to family aid in Asia. The pizza man could not qualify, by selling to his friend, although socially he would be more beneficial, with the profits spent here. He also pointed to a steam heat and other health product factory, upstate NY, which closed and moved abroad after 10 years, firing 300 employees, and a small local furnace maker, who moved his shop to Asia, to save on high American labor costs. High labor costs here? Well, he pointed to a local contractor who needed two union carpenters for two days, and was supplied with them by the union local, at $1,400 for two, plus taxes and fees oriented towards paying unemployment benefits, which are very high for the seasonal carpenter trade. His was not an anti-union attack, it simply pointed, once more, to the huge hourly labor rate difference between US and developing countries, which makes a balance of trade in manufactured goods virtually unattainable.
It is true that the US workers' standard of living exceeds by far those of underdeveloped countries. The standard economist parry is to wait until the Chinese, like the Japanese before them, attain an equivalent domestic standard of living ($3,000 GDP in 2009, to be $32,000 in 2032). That would be survivable, provided the US were more self-sufficient, not losing its workers’ technical skills. Some tariffs for for imports would help. This the US did, in the post American Revolution period, all the way up to Pres. Wilson, building up the great American industry. Unfortunately, we grew fat and flabby, and have lost it or dropped it, to the point of only 18 percent of our GDP coming from manufacturing. We are married to a trade deficit. Other low industrial producers make up for it by specializing e.g. through people export and internet services, such as the Philippine nurses, MDs and tech support people, Indian help centers and IT outsource companies and Cuban physicians in Africa (Angola) and the Chavez countries in South America. US can do it with high-tech products provided our fingers have not lost their skills, with nuclear plants (world standards need be established), green energy plant products (wind, sun, water, high capacity batteries), and, particularly, with federally maintained green energy programs. Meanwhile, what we have is young entrepreneurs supported by universities and financiers in developing Facebook based social networking services.
Jumping to taxation, in the past decades the inflation adjusted income for the majority of us has fallen, while for the rich it has risen. We are in a war and emergency situation. Traditionally, for emergency years the marginal income tax rates have been high, to 70 percent. Higher income tax rates for the really wealthy need be agreed to. It is our social compact. Tax havens abroad for corporations are unfair when they permit the corporation to withhold reporting, and bargain for special low treatment. Special rules that permit GE and the oil barons and others huge corporations go tax-free need be revised. Corporations that outsource offshore kill jobs at home for the benefit of their investors. There is no evidence that the large income receivers contribute to capital investment and new jobs in the US (think of the beneficiaries of the Bush tax cuts). On the contrary, investors look for growth opportunities and stocks in Southeast Asia. The Treasury should also examine the list of deductions that Alternate Minimum Tax rule questions, for validity. Are agriculture supports needed? The extent of deductibility of marginal interest paid on home mortgages needs reviewing. Home ownership needs sponsoring; it is the only way for the majority of retirees to survive, since their average income is a sad $ 14,000 annually.
This is to start with. Washington to copy.
Last week this article addresses means to save the budget by improving the social benefit scheme –Social Security, Medicare and Medicaid. This week we will try taxation, or lack thereof.
First, though, a continuation about savings available from defense spending. There are 100,000 Americans in Afghanistan, fighting the Taliban and training President Hamid Karzai’s troops. Until recently the Taliban would not consider negotiating, under the premise that US will be forced to withdraw by costs of the war, and then they will have everything. Recently, though they have been talking, secretly spurred forward by Sheikh Mohammad Omar, their spiritual head, who had suffered mightily by maintaining his Pashtoon pride (wali) obligation to protect his guest (Osama bin Laden, solo, not the clan). Now two more terrorist chiefs are gone. Without Osama he is free to talk. He presumably realizes that a US withdrawal will not give free reign to Talibans, as long as secret US agents send information, which gets routed to Roswell AFB in Nevada, checked by high altitude overflying U-2s, analyzed by terrain experts for veracity and AJAG Corps lawyers for collateral damages, and if correct, some small drones with bombs will fly from a nearby neutral country to blow up the culprits. US is winning by technology, you can run but you cannot hide, America has devoted Gunga Dins, and unlike Rudyard Kipling’s Britain, it has incredible reach, and can chop off any enemy leaders at will, one generation after another. A negotiated peace is the only way out, and US can withdraw 9/10ths of the troops to US bases where they can recover, at huge savings in the defense expenditures that can be put towards the budget deficit.
I have sought opinions from friends, ranging from an insurance actuary to a pizza shack owner, and believe me, America is well informed. The pizza man points to wasteful predatory state practices, e.g. in NYS allowing an Asian immigrant open a business, e.g. a gas station, tax-free for 10 years, which he then can sell to another immigrant, to repeat the cycle, with the profits flowing back to family aid in Asia. The pizza man could not qualify, by selling to his friend, although socially he would be more beneficial, with the profits spent here. He also pointed to a steam heat and other health product factory, upstate NY, which closed and moved abroad after 10 years, firing 300 employees, and a small local furnace maker, who moved his shop to Asia, to save on high American labor costs. High labor costs here? Well, he pointed to a local contractor who needed two union carpenters for two days, and was supplied with them by the union local, at $1,400 for two, plus taxes and fees oriented towards paying unemployment benefits, which are very high for the seasonal carpenter trade. His was not an anti-union attack, it simply pointed, once more, to the huge hourly labor rate difference between US and developing countries, which makes a balance of trade in manufactured goods virtually unattainable.
It is true that the US workers' standard of living exceeds by far those of underdeveloped countries. The standard economist parry is to wait until the Chinese, like the Japanese before them, attain an equivalent domestic standard of living ($3,000 GDP in 2009, to be $32,000 in 2032). That would be survivable, provided the US were more self-sufficient, not losing its workers’ technical skills. Some tariffs for for imports would help. This the US did, in the post American Revolution period, all the way up to Pres. Wilson, building up the great American industry. Unfortunately, we grew fat and flabby, and have lost it or dropped it, to the point of only 18 percent of our GDP coming from manufacturing. We are married to a trade deficit. Other low industrial producers make up for it by specializing e.g. through people export and internet services, such as the Philippine nurses, MDs and tech support people, Indian help centers and IT outsource companies and Cuban physicians in Africa (Angola) and the Chavez countries in South America. US can do it with high-tech products provided our fingers have not lost their skills, with nuclear plants (world standards need be established), green energy plant products (wind, sun, water, high capacity batteries), and, particularly, with federally maintained green energy programs. Meanwhile, what we have is young entrepreneurs supported by universities and financiers in developing Facebook based social networking services.
Jumping to taxation, in the past decades the inflation adjusted income for the majority of us has fallen, while for the rich it has risen. We are in a war and emergency situation. Traditionally, for emergency years the marginal income tax rates have been high, to 70 percent. Higher income tax rates for the really wealthy need be agreed to. It is our social compact. Tax havens abroad for corporations are unfair when they permit the corporation to withhold reporting, and bargain for special low treatment. Special rules that permit GE and the oil barons and others huge corporations go tax-free need be revised. Corporations that outsource offshore kill jobs at home for the benefit of their investors. There is no evidence that the large income receivers contribute to capital investment and new jobs in the US (think of the beneficiaries of the Bush tax cuts). On the contrary, investors look for growth opportunities and stocks in Southeast Asia. The Treasury should also examine the list of deductions that Alternate Minimum Tax rule questions, for validity. Are agriculture supports needed? The extent of deductibility of marginal interest paid on home mortgages needs reviewing. Home ownership needs sponsoring; it is the only way for the majority of retirees to survive, since their average income is a sad $ 14,000 annually.
This is to start with. Washington to copy.
