Here's a question for you. Who said in so many words the best way to avoid war is to be prepared for it...Ronald Reagan or Hugo Chavez? Would you believe both?
Reagan is credited with saying, "The defense policy of the United States is based on a simple premise: The United States does not start fights. We will never be an aggressor. We maintain our strength in order to deter and defend against aggression - to preserve freedom and peace."
Bloomberg reported in a November 8, 2009 news article, “Generals of the armed forces, the best way to avoid a war is to prepare for one,” Chavez said in comments on state television during his weekly “Alo Presidente” program.
Were they both right or both wrong? Reagan was not satisfied with the status quo U.S.-Soviet relationship of MAD and detente. He promoted a stronger defensive position that ultimately led to the demise of the Soviet Union and the fall of the Berlin Wall which happened twenty years ago today. Was there an ensuing peace with the Soviet Union? Do we still have it two decades later?
The U.S. agreement with Colombia, giving American troops access to seven Colombian bases is part of an effort to “strengthen and increase ties with countries in the region,” Robin Holzhauer, spokeswoman for the U.S. Embassy in Caracas, said by telephone. “We’ve done that with governments who want to have partnerships with us.” Colombia has said the agreement would help combat drug trafficking. Apparently, Chavez isn't buying it.
How much can nations increase their defenses without planting seeds of war in the minds of their neighbors? Will this U.S. agreement with Colombia start another mini-detente with Venezuela?
Monday, November 9, 2009
Friday, November 6, 2009
Recessions & unemployment
I enjoyed the irony from today's AP.
"The unemployment rate has surpassed 10 percent for the first time since 1983 — and is likely to go higher. Nearly 16 million people can't find jobs even though the worst recession since the Great Depression has apparently ended."
Apparently ended? How do those newly unemployed people feel about the apparent end of the worst recession since the Great Depression? Is it even the worst recession since the Great Depression?
One of the rule-of-thumb definitions of a recession is two consecutive down quarters of GDP; by that definition the current recession started in the fourth quarter of 2007 which is not in dispute. If you assume that a recession ends after two consecutive up quarters of GDP, as AP apparently does, then we are "out of the woods" so to speak because the first, second and third quarters of this year saw changes in GDP of -6.4%, -0.7% and +3.5%, respectively; the last two quarters are "up".
While 3.5% is historically strong and -0.7% is a big shift in the right direction from -6.4%, it is driven primarily by private investment, namely residential investment which grew at 23.4% in the third quarter of 2009. This is probably due to a large number of people buying homes that were overpriced for years and the first time homebuyers tax credit. As the price of anything falls, more of it is purchased. However, this same residential investment figure had been negative (an average of -20%!) from the first quarter of 2006 through the second quarter of 2009. Wouldn't it be good to see a few more consecutive up, if not positive, quarters of residential investment specifically, private investment generally, private consumption and overall GDP before we conclude that the recession is over? (Government investment and consumption also factors into GDP, but what it invests and consumes must first be taken from the private sector.)
Also, if this is the worst recession since the Great Depression, then what was the 1983 recession? In 1983, unemployment was just as high and reached even higher (10.8%) before trending back, and inflation and interest rates were much higher then too (10.3% & 21.5%). Shouldn't we wait for numbers similar to or higher than these before we say that this recession was the worst? Well, since it's apparently over now, I guess it was not the worst recession.
Furthermore, "Congress sought to address the impact of long-term unemployment this week by approving legislation extending jobless benefits for the fourth time since the recession began. The bill would add 14 to 20 extra weeks of aid and is intended to prevent almost 2 million recipients from running out of unemployment insurance during the upcoming holiday season. President Barack Obama is expected to quickly sign the [$24 billion]legislation."
Do these people realize that this is essentially a loan...and a buyoff? They probably do not know or don't care, but I bet Congress does. This President and Congress have already spent $1.4 trillion more this year alone than has been taken into the treasury. Since they don't have the money now, it must be borrowed or printed. Who has to pay back this loan or deal with the inflation down the road? The same people getting the "benefits" and their children will pay it back. Congress also has to keep the electorate happy at least until next November.
If the recession is over and unemployment remains high, then is this not a jobless recovery similar to the one over which Bush presided in his first term? Hiring usually lags behind GDP growth and that played out after the last recession. Will a similar recovery occur now?
"The unemployment rate has surpassed 10 percent for the first time since 1983 — and is likely to go higher. Nearly 16 million people can't find jobs even though the worst recession since the Great Depression has apparently ended."
Apparently ended? How do those newly unemployed people feel about the apparent end of the worst recession since the Great Depression? Is it even the worst recession since the Great Depression?
One of the rule-of-thumb definitions of a recession is two consecutive down quarters of GDP; by that definition the current recession started in the fourth quarter of 2007 which is not in dispute. If you assume that a recession ends after two consecutive up quarters of GDP, as AP apparently does, then we are "out of the woods" so to speak because the first, second and third quarters of this year saw changes in GDP of -6.4%, -0.7% and +3.5%, respectively; the last two quarters are "up".
While 3.5% is historically strong and -0.7% is a big shift in the right direction from -6.4%, it is driven primarily by private investment, namely residential investment which grew at 23.4% in the third quarter of 2009. This is probably due to a large number of people buying homes that were overpriced for years and the first time homebuyers tax credit. As the price of anything falls, more of it is purchased. However, this same residential investment figure had been negative (an average of -20%!) from the first quarter of 2006 through the second quarter of 2009. Wouldn't it be good to see a few more consecutive up, if not positive, quarters of residential investment specifically, private investment generally, private consumption and overall GDP before we conclude that the recession is over? (Government investment and consumption also factors into GDP, but what it invests and consumes must first be taken from the private sector.)
Also, if this is the worst recession since the Great Depression, then what was the 1983 recession? In 1983, unemployment was just as high and reached even higher (10.8%) before trending back, and inflation and interest rates were much higher then too (10.3% & 21.5%). Shouldn't we wait for numbers similar to or higher than these before we say that this recession was the worst? Well, since it's apparently over now, I guess it was not the worst recession.
Furthermore, "Congress sought to address the impact of long-term unemployment this week by approving legislation extending jobless benefits for the fourth time since the recession began. The bill would add 14 to 20 extra weeks of aid and is intended to prevent almost 2 million recipients from running out of unemployment insurance during the upcoming holiday season. President Barack Obama is expected to quickly sign the [$24 billion]legislation."
Do these people realize that this is essentially a loan...and a buyoff? They probably do not know or don't care, but I bet Congress does. This President and Congress have already spent $1.4 trillion more this year alone than has been taken into the treasury. Since they don't have the money now, it must be borrowed or printed. Who has to pay back this loan or deal with the inflation down the road? The same people getting the "benefits" and their children will pay it back. Congress also has to keep the electorate happy at least until next November.
If the recession is over and unemployment remains high, then is this not a jobless recovery similar to the one over which Bush presided in his first term? Hiring usually lags behind GDP growth and that played out after the last recession. Will a similar recovery occur now?
Friday, October 30, 2009
Dealing with Iran
Consider the following excerpts from a NYT article dated October 29, 2009.
Mr. Ahmadinejad also suggested that Iran expected Western countries to honor payments for nuclear assistance it made before the 1979 Islamic Revolution. Iran paid more than $1 billion to help build a French reactor in return for access to that reactor’s fuel. After the revolution, France reneged on the contract. “We have nuclear contracts,” Mr. Ahmadinejad said. “It has been 30 years, we have paid for them. Such agreements must be fulfilled.”
and
If Iran’s stated estimate of its stockpile of nuclear fuel is accurate, the deal that was negotiated in Vienna would leave the country with too little fuel to manufacture a weapon until the stockpile was replenished with additional fuel, which Iran is producing in violation of UN Security Council mandates.
So, while Iran's president violates a mandate from the UN, it wants the West to honor its contract with Iran made 30+ years ago. Is this a case of the pot calling the kettle black or payback for the West's breach of contract?
Mr. Ahmadinejad also suggested that Iran expected Western countries to honor payments for nuclear assistance it made before the 1979 Islamic Revolution. Iran paid more than $1 billion to help build a French reactor in return for access to that reactor’s fuel. After the revolution, France reneged on the contract. “We have nuclear contracts,” Mr. Ahmadinejad said. “It has been 30 years, we have paid for them. Such agreements must be fulfilled.”
and
If Iran’s stated estimate of its stockpile of nuclear fuel is accurate, the deal that was negotiated in Vienna would leave the country with too little fuel to manufacture a weapon until the stockpile was replenished with additional fuel, which Iran is producing in violation of UN Security Council mandates.
So, while Iran's president violates a mandate from the UN, it wants the West to honor its contract with Iran made 30+ years ago. Is this a case of the pot calling the kettle black or payback for the West's breach of contract?
Saturday, October 24, 2009
Having it both ways?
I'm trying to resolve two seemingly contradictory AP articles regarding the economy. One dated October 20, 2009 is entitled "High jobless rates: The new normal?". The other one dated October 21, 2009 is entitled "Economy recovering in many areas, but not others." A few contradictions seem to exist.
While the former tells us to just get used to higher unemployment and a lower standard of living due mostly to a faltering auto and construction industries, the latter tells us that "pickups in housing and manufacturing activity are leading the budding recovery in most of the country". Economists and policy-makers say the former, and the Federal Reserve board says the latter. I think those two entities need to collaborate. Is the economy getting better or worse? Does the auto industry not comprise a significant part of manufacturing activity? Is the construction industry not primarily driven by housing? Are they improving or not? Is the worst over or yet to come?
The latter article continues to say that the gains in housing spurred on by the first-time homebuyer tax credit could fizzle after that credit expires at the end of November and that factories ramped up production to restock inventories depleted by the now-expired Cash for Clunkers program. So this budding recovery supposedly started by the infusion of government (i.e. taxpayer) money will falter once that money runs out or policies expire or change at their whim.
Does the AP want us to believe that there is just enough life in this economy to keep the same bums in office, but not quite enough life to not let them continue intervening for the "public good"? While government dangles a carrot in front of us, there is a buffet line awaiting us all if they would just leave us alone as the Constitution requires. We the people must hold them to it next November.
While the former tells us to just get used to higher unemployment and a lower standard of living due mostly to a faltering auto and construction industries, the latter tells us that "pickups in housing and manufacturing activity are leading the budding recovery in most of the country". Economists and policy-makers say the former, and the Federal Reserve board says the latter. I think those two entities need to collaborate. Is the economy getting better or worse? Does the auto industry not comprise a significant part of manufacturing activity? Is the construction industry not primarily driven by housing? Are they improving or not? Is the worst over or yet to come?
The latter article continues to say that the gains in housing spurred on by the first-time homebuyer tax credit could fizzle after that credit expires at the end of November and that factories ramped up production to restock inventories depleted by the now-expired Cash for Clunkers program. So this budding recovery supposedly started by the infusion of government (i.e. taxpayer) money will falter once that money runs out or policies expire or change at their whim.
Does the AP want us to believe that there is just enough life in this economy to keep the same bums in office, but not quite enough life to not let them continue intervening for the "public good"? While government dangles a carrot in front of us, there is a buffet line awaiting us all if they would just leave us alone as the Constitution requires. We the people must hold them to it next November.
Thursday, October 8, 2009
Tax cuts for the rich too!
The GOP recently sent a letter to the President outlining their solution to the increasing unemployment which stands a shade below 10%, the highest rate in 26 years. They outlined six specific proposals with which I agree in principle but failed to go far enough on the following proposal:
"Lower taxes for all taxpayers by reducing the current 15 percent rate to 10 percent and
reducing the current 10 percent rate to 5 percent. This will provide an immediate increase in income to every taxpaying family in America and free up capital to help small businesses hire more workers."
While I applaud tax cuts for people in these brackets, which includes me, how many of them are business owners much less ones that employ people? Low tax bracket people are employees. We may have a little more money to spend, but people in higher tax brackets would have little incentive to expand their businesses, give raises and/or higher more hands.
Those taxpayers in the higher tax brackets, such as my employer, are not specifically mentioned. Is this by design so as not to be asking for too much at once? Did the GOP forget to mention them? Certainly not. Why not be bold and go for the gold? If only these two lower rates are reduced, not every taxpayer will see an increase in income.
The higher tax rates currently stand at 25, 28, 33 & 35%. What will happen when those rates rise to 28, 31, 36 & 39.6%, respectively, in January 2011 when the "Bush tax cuts" expire?
I have heard some media outlets say that the recession is over. Others say it is waning now. Still others say the economy will recover next year. When those tax rates rise at the end of next year, another recession will result as capital is once again tied up in government hands or shifted to more friendly overseas tax environments. Government may expand, but not everyone wants to or can work for them. The public sector can only spend what they first take from the private sector. I believe even the thought of rising tax rates in 2011 will hinder investment now. If you knew of an upcoming increase in expenses, would you upgrade you cable service, buy that new car or higher another employee? Businesses must look years ahead to predict if an investment will payout so that they can stay in business and not layoff anyone.
The letter was signed by the following members of the GOP:
House Republican Leader John Boehner
House Republican Whip Eric Cantor
House Republican Conference Chairman Mike Pence
House Republican Policy Committee Chairman Thaddeus McCotter
House Republican Conference Vice Chairman Cathy McMorris Rogers
House Republican Conference Secretary John Carter
National Republican Congressional Committee Chairman Pete Sessions
Rules Committee Ranking Republican David Dreier
Chief Deputy Whip Kevin McCarthy
Congressman Roy Blunt
Employees should let them know that we want employers to get a tax cut too. The unemployed would do well to do the same if they want to work.
"Lower taxes for all taxpayers by reducing the current 15 percent rate to 10 percent and
reducing the current 10 percent rate to 5 percent. This will provide an immediate increase in income to every taxpaying family in America and free up capital to help small businesses hire more workers."
While I applaud tax cuts for people in these brackets, which includes me, how many of them are business owners much less ones that employ people? Low tax bracket people are employees. We may have a little more money to spend, but people in higher tax brackets would have little incentive to expand their businesses, give raises and/or higher more hands.
Those taxpayers in the higher tax brackets, such as my employer, are not specifically mentioned. Is this by design so as not to be asking for too much at once? Did the GOP forget to mention them? Certainly not. Why not be bold and go for the gold? If only these two lower rates are reduced, not every taxpayer will see an increase in income.
The higher tax rates currently stand at 25, 28, 33 & 35%. What will happen when those rates rise to 28, 31, 36 & 39.6%, respectively, in January 2011 when the "Bush tax cuts" expire?
I have heard some media outlets say that the recession is over. Others say it is waning now. Still others say the economy will recover next year. When those tax rates rise at the end of next year, another recession will result as capital is once again tied up in government hands or shifted to more friendly overseas tax environments. Government may expand, but not everyone wants to or can work for them. The public sector can only spend what they first take from the private sector. I believe even the thought of rising tax rates in 2011 will hinder investment now. If you knew of an upcoming increase in expenses, would you upgrade you cable service, buy that new car or higher another employee? Businesses must look years ahead to predict if an investment will payout so that they can stay in business and not layoff anyone.
The letter was signed by the following members of the GOP:
House Republican Leader John Boehner
House Republican Whip Eric Cantor
House Republican Conference Chairman Mike Pence
House Republican Policy Committee Chairman Thaddeus McCotter
House Republican Conference Vice Chairman Cathy McMorris Rogers
House Republican Conference Secretary John Carter
National Republican Congressional Committee Chairman Pete Sessions
Rules Committee Ranking Republican David Dreier
Chief Deputy Whip Kevin McCarthy
Congressman Roy Blunt
Employees should let them know that we want employers to get a tax cut too. The unemployed would do well to do the same if they want to work.
Thursday, September 24, 2009
Resolutions
The United Nations Security Council recently passed a unanimous resolution calling for the world-wide end of nuclear weapons. That sounds wonderful. I hope it happens. It begs a few questions though.
Who will enforce it, and how will it be enforced? There were 14 resolutions over a decade's time essentially demanding that Saddam Hussein's Iraq "come clean" with his WMD. It took a small coalition of countries, including only two of the five permanent security council members (U.S. and U.K.), acting outside of the blessing of the U.N., to enforce those resolutions and ultimately discover that there was either not an imminent WMD program and threat or that it was secretly moved out of Iraq before the invasion in March 2003.
Did all countries possessing nuclear weapons vote for it? Yes and no. All of those countries on the council did so, but there are at least five other countries not on the council that possess, or are on the verge of possessing, nuclear weapons. These five countries are India, Pakistan, Israel, Iran and North Korea. I would surmise that the former three, if council members, would have voted no since they have not even signed the Nuclear Non-Proliferation Treaty to which they would give more consideration and should have more weight in a court than a resolution.
The latter two are not on the council, have not signed the treaty and are open about their intentions to fully develop those weapons or programs. In fact, one member of this council (U.S.) failed to get two other members of this council (China and Russia) to cite these latter two countries by name in this resolution.
What good is this resolution if its members could not enforce a less contentious resolution years ago? What good is this resolution if non-members possess nuclear weapons and have no intention of disarming or worse yet plan to accelerate the programs already in place? Will this resolution be just one more in a long line of "all talk and no walk"? Even children quickly discover that as long as they go punished for wrongdoing they are emboldened to continue in it.
Who will enforce it, and how will it be enforced? There were 14 resolutions over a decade's time essentially demanding that Saddam Hussein's Iraq "come clean" with his WMD. It took a small coalition of countries, including only two of the five permanent security council members (U.S. and U.K.), acting outside of the blessing of the U.N., to enforce those resolutions and ultimately discover that there was either not an imminent WMD program and threat or that it was secretly moved out of Iraq before the invasion in March 2003.
Did all countries possessing nuclear weapons vote for it? Yes and no. All of those countries on the council did so, but there are at least five other countries not on the council that possess, or are on the verge of possessing, nuclear weapons. These five countries are India, Pakistan, Israel, Iran and North Korea. I would surmise that the former three, if council members, would have voted no since they have not even signed the Nuclear Non-Proliferation Treaty to which they would give more consideration and should have more weight in a court than a resolution.
The latter two are not on the council, have not signed the treaty and are open about their intentions to fully develop those weapons or programs. In fact, one member of this council (U.S.) failed to get two other members of this council (China and Russia) to cite these latter two countries by name in this resolution.
What good is this resolution if its members could not enforce a less contentious resolution years ago? What good is this resolution if non-members possess nuclear weapons and have no intention of disarming or worse yet plan to accelerate the programs already in place? Will this resolution be just one more in a long line of "all talk and no walk"? Even children quickly discover that as long as they go punished for wrongdoing they are emboldened to continue in it.
Saturday, September 12, 2009
In defense of private solutions
From time to time I come across a local issue that perks my interest. An article on the front page of the Times Record News today reported that the owners of the local Castaway Cove water park would like the city to assume ownership. I could not disagree more with this idea.
This water park was built shortly after I arrived here in Wichita Falls over six years ago and opened in June 2004. Somehow, the owners have accrued over $4 million in debt despite annual gross revenue of $1.4 million. The article did not comment on their expenses or net revenue which I assume is negative since they want the city to assume its ownership. Why sell something that is generating profit?
The article also states that despite a total investment of $8 million over the past five years the property is valued at $10 million. So what's the problem? Why not put it on the open market for another individual or private entity to buy? Maybe this is too simple, but consider an offer of $5 million...the current owners could pay off their $4 million debt with change to spare, and the new owners would acquire it at half of market value. Why go to the city first?
One reason for the city-first option may be the short fuse; the owners say they will have to permanently close the park after it closes for the summer on Sunday September 13th. Are the owners not essentially looking for a bailout? Hmmm...where would they get the idea that the government could bail them out? The city recently made plans to take a federal grant to beef up our police force. Could it also be that much larger companies such as GM, Chrysler, AIG, etc., when faced with financial ruin, went straight to easy money Uncle Sam instead of the harsh but efficient open market via bankruptcy?
The last column of the article details how much of an asset this park is to the city in terms of attracting local residents, both civilians and military from Sheppard AFB, business parties, out-of-towners, tourism, etc. These will probably be some of the selling points made to the city council on Tuesday September 15th. Well, if the park is such an asset to the community, then why is it losing money? The same management group is slated to continue managing it if the city assumes ownership. If the park is losing money under their management, is this a good idea? No, it's worse. Whereas only private investors are losing money now, we the city residents would be losing money if the city assumed ownership. Have the owners considered all private, market options? Have they even considered new management? On this point, the article is silent.
Whenever government at any level assumes control or ownership of a private business, all residents of that city, county, state or country assume its liability against their will. Whenever a business or industry is profitable, investors will be attracted to the same, or repelled if unprofitable, by their own choice, i.e. they still have recourse.
That government entity, in order to get our vote or approval, will tell us that profit (assuming any is even made) will be earmarked for debt reduction, supplementing budgets or allow for tax cuts or at least lower future tax increases. That sounds good, but since when does any government run anything efficiently enough to make a profit? The feds have nearly $12 trillion in debt now and the big three entitlement programs have a present value of $50 trillion in unfunded liabilities and commitments.
We live in a time where cities, counties and states look for bailouts from Uncle Sam who can constitutionally print money out of thin air or borrow it from China. Whenever an individual or family spends more than it makes, they will eventually face a day of reckoning. When will that day come for our federal government, and who will bail them out? Whoever it is will have no recourse unless they leave the country.
This water park was built shortly after I arrived here in Wichita Falls over six years ago and opened in June 2004. Somehow, the owners have accrued over $4 million in debt despite annual gross revenue of $1.4 million. The article did not comment on their expenses or net revenue which I assume is negative since they want the city to assume its ownership. Why sell something that is generating profit?
The article also states that despite a total investment of $8 million over the past five years the property is valued at $10 million. So what's the problem? Why not put it on the open market for another individual or private entity to buy? Maybe this is too simple, but consider an offer of $5 million...the current owners could pay off their $4 million debt with change to spare, and the new owners would acquire it at half of market value. Why go to the city first?
One reason for the city-first option may be the short fuse; the owners say they will have to permanently close the park after it closes for the summer on Sunday September 13th. Are the owners not essentially looking for a bailout? Hmmm...where would they get the idea that the government could bail them out? The city recently made plans to take a federal grant to beef up our police force. Could it also be that much larger companies such as GM, Chrysler, AIG, etc., when faced with financial ruin, went straight to easy money Uncle Sam instead of the harsh but efficient open market via bankruptcy?
The last column of the article details how much of an asset this park is to the city in terms of attracting local residents, both civilians and military from Sheppard AFB, business parties, out-of-towners, tourism, etc. These will probably be some of the selling points made to the city council on Tuesday September 15th. Well, if the park is such an asset to the community, then why is it losing money? The same management group is slated to continue managing it if the city assumes ownership. If the park is losing money under their management, is this a good idea? No, it's worse. Whereas only private investors are losing money now, we the city residents would be losing money if the city assumed ownership. Have the owners considered all private, market options? Have they even considered new management? On this point, the article is silent.
Whenever government at any level assumes control or ownership of a private business, all residents of that city, county, state or country assume its liability against their will. Whenever a business or industry is profitable, investors will be attracted to the same, or repelled if unprofitable, by their own choice, i.e. they still have recourse.
That government entity, in order to get our vote or approval, will tell us that profit (assuming any is even made) will be earmarked for debt reduction, supplementing budgets or allow for tax cuts or at least lower future tax increases. That sounds good, but since when does any government run anything efficiently enough to make a profit? The feds have nearly $12 trillion in debt now and the big three entitlement programs have a present value of $50 trillion in unfunded liabilities and commitments.
We live in a time where cities, counties and states look for bailouts from Uncle Sam who can constitutionally print money out of thin air or borrow it from China. Whenever an individual or family spends more than it makes, they will eventually face a day of reckoning. When will that day come for our federal government, and who will bail them out? Whoever it is will have no recourse unless they leave the country.
Subscribe to:
Posts (Atom)