Tuesday, February 28, 2017

WELFARE MISUNDERSTOOD

President Donald Trump repeats a pledge he knows little about.  It also seems that few Republicans are aware that Federal welfare has a time limit.  (In the following discussion  quotes from the references are in italics ).

“Welfare” as it now exists in the United States aims to provide a short-term safety net for very needy families with children and prepare adults to get jobs. The Temporary Assistance for Needy Families law passed by Congress in 1996 said that cash assistance should be limited to no more than five years (sixty months) over a lifetime. But states were allowed some flexibility to extend this limit for up to one-fifth of their welfare recipients who face unusual problems.*

 The problem with welfare is not so much in reducing the number of families in poverty on welfare, but on somehow covering the increasing number of families with children who are in poverty

President Donald Trump Thursday repeated his pledge to boost job prospects and wages for American workers, and then went a step further by pledging to reduce dependence on government assistance for families on poverty.
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Over the last 20 years, the national TANF average monthly caseload has fallen by almost two-thirds — from 4.4 million families in 1996 to 1.6 million families in 2014, according to the Center on Budget and Policy Priorities.  Since the 1996 welfare reform law created TANF, the number of families who get benefits has fallen from 68 out of every 100 with children in poverty to just 23.**
(Click on figure to enlarge)

TANF was created during the Clinton administration as part of a broad welfare reform law that replaced the Aid to Families with Dependent Children program. The new reform law gave states fixed grants in exchange for greater flexibility in how they could use the funds.

The new program also put a time limit on how long families could receive cash benefits and tied assistance to employment or other work-related activities (emphasis mine).**

* https://thesocietypages.org/ssn/2013/05/13/what-happens-to-poor-families/
*  http://www.cnbc.com/2017/01/26/heres-how-president-trump-has-it-wrong-on-welfare.html

Monday, February 27, 2017

STOCK PRICE OUTLOOK FOR 2017

The US economy is good and better than most if not all foreign countries.  We have recovered better from the Financial Armageddon (aka Great Recession) than Europe, for example.

My guess is the following, that legislation of taxes and regulation won't happen until at least the end of the year.  With the current good economy and increasing earnings of companies, stock prices may continue to rise in some irregular fashion, occasionally creeping to new all-time highs.   but do your own due dilligence, as they say. The worry that the Health Care Industry will be decimated seems to be over and Health Care company (pharmaceuticals, and others) stock prices have started to rise again.  After all, the bulk of the Baby Boomers is just starting to dig into retirement.

I have mixed feelings about the war on pharmaceutical prices being over because something is needed badly to control prices, but the armistice is good for my Health Care mutual funds and REITs.

There undoubtedly are many regulations that are not needed but no doubt they are not the ones that will be discontinued (One that stopped severely mentally disturbed people from buying guns, has already been eliminated).  Decreasing the income taxes is a very inefficient way to stimulate the economy  (the wealthy buy bonds and property elsewhere like Switzerland, the middle class pay down debt).**

Decreasing corporate business tax may be different.  The stated rate is 35.5% but the average company pays about 27%.**  An analysis I have read in Barron's suggests that lowering the corporate tax rate to 22% might simulate enough business to pay for itself and the average company will actually pay about 15%.  Might be worth a try to see if it works.  Going lower seems as if it will add to the deficit.

* http://stopcontinentaldrift.blogspot.com/2010/05/effectiveness-of-taxes.htm
** GAO, however, sees it differently and says that the percentage of companies that pay no income tax is  a little over 60% .  More large corporation pay some tax, but about 40% do not.  What GAO says is of profitable large corporations, 20% or fewer of them pay no Federal income tax, depending on the year.

Saturday, February 25, 2017

REMOVING A PRESIDENT FROM OFFUICE

I used to wonder if President Donald (The Bully) Trump would finish out his four year term, as President, but lately I have begun to wonder whether he will finish out his first year.  He may be (1)impeached and convicted (say over his association with Russia), but I found there is a second way (2) 25th amendment that covers unfit to serve for any reason (such as physical or mental incapacity, among other reasons. ).

(1) Impeach And Convict    Impeachment may be started with the accusation by a member of the House of Representatives that an official  has committed Treason, Bribery, or other High Crimes and Misdemeanors.*  It turns out that what is meant by High Crimes and Misdemeanors is not defined.  To me a misdemeanor is not a very serious offense, but clearly it  is meant to appliy only to extreme cases.  Only a majority vote is needed in the House to impeach.

If an official, such as the President or Supreme Court Judge among others, is impeached, the matter goes to the Senate  for a trial where a two-thirds vote is needed to convict the official and remove them from office.  The impeachment process was initiated only 7 times in the 19th century but 11 times in the 20th century.*  In the impeachment case brought against Present George W. Bush, by Representatives Kucinich and Wexler ,one of the many items was Bush's use of signing statements where he would sign a bill into law but add a note that said it did not apply to him  The case died in committee.


 25th Amendment to the Constitution**  The 25th Amendment was adopted on February 10, 1967 and was initiated after the assassination of President Kennedy.  Following are details of the amendment., but iSections 4 and 5 are most pertinent to this discussion.  There are psychiatrists who are currently saying, even publishing that Trump is mentally instable and therefore a danger.***

Section 1. In case of the removal of the President from office or of his death or resignation, the Vice President shall become President.
Section 2. Whenever there is a vacancy in the office of the Vice President, the President shall nominate a Vice President who shall take office upon confirmation by a majority vote of both Houses of Congress.
Section 3. Whenever the President transmits to the President pro tempore of the Senate and the Speaker of the House of Representatives his written declaration that he is unable to discharge the powers and duties of his office, and until he transmits to them a written declaration to the contrary, such powers and duties shall be discharged by the Vice President as Acting President.
Section 4. Whenever the Vice President and a majority of either the principal officers of the executive departments or of such other body as Congress may by law provide, transmit to the President pro tempore of the Senate and the Speaker of the House of Representatives their written declaration that the President is unable to discharge the powers and duties of his office, the Vice President shall immediately assume the powers and duties of the office as Acting President.
Thereafter, when the President transmits to the President pro tempore of the Senate and the Speaker of the House of Representatives his written declaration that no inability exists, he shall resume the powers and duties of his office unless the Vice President and a majority of either the principal officers of the executive department or of such other body as Congress may by law provide, transmit within four days to the President pro tempore of the Senate and the Speaker of the House of Representatives their written declaration that the President is unable to discharge the powers and duties of his office. Thereupon Congress shall decide the issue, assembling within forty-eight hours for that purpose if not in session. If the Congress, within twenty-one days after receipt of the latter written declaration, or, if Congress is not in session, within twenty-one days after Congress is required to assemble, determines by two-thirds vote of both Houses that the President is unable to discharge the powers and duties of his office, the Vice President shall continue to discharge the same as Acting President; otherwise, the President shall resume the powers and duties of his office.[3]
* https://en.wikipedia.org/wiki/High_crimes_and_misdemeanors
** https://en.wikipedia.org/wiki/Twenty-fifth_Amendment_to_the_United_States_Constitution
*** http://www.msnbc.com/the-last-word/watch/trump-s-mental-health-the-elephant-in-the-room-883814979800

Friday, February 24, 2017

U.S. TRADE SURPLUSES AND DEFICITS

President Donald Trump says he can't find a country for which we have a trade surplus .*  The problem is we can't rely on the President to tell us the truth because he couldn't have looked very far.  Though we do have a trade deficit overall, there are lots of countries for which we have trade surpluses, e.g. Australia , a surplus of over $12 billion.  Highlighted in the figure is another, Brazil with a trade surplus of $4 billion.  The U.S. has trade surpluses with most South and Central American countries (e.g. Panama over $5 billion) including Argentina and Chili also with $4 billion surpluses like Brazil.  Other key trading partners where we have surpluses are UK, Belgium and the Netherlands.  Surprising to me is the large trading surplus for Hong Kong ($28 billion).  President Trump apparently didn't look hard enough but who is surprised at that?.

In the reference the figure below is interactive:
(Click on figure to enlarge)

* http://www.cnbc.com/2017/02/23/trump-cant-find-any-us-trade-surpluses-here-you-go-mr-president.html

Thursday, February 23, 2017

AMERICAN FABRICATED STEEL

When I was young, you had to buy American on government contracts.  This was eventually done away with because you could save money by opening up contracts.  And "American" companies circumvented the rules by moving to more favorable tax locations, usually with just mock offices.  So there was a lot of lobbying pressure to do away with the rule.

On the Keystone XL and Dakota Access pipelines, however, you are talking about private companies doing the building and not financed by the American government.  So President Donald (The Bully) Trump's edict that they must use American fabricated steel seems to me to only have jaw boning effect.*

What if the Canadian government says that the companies must use Canadian fabricated steel?  Trump has already OKed the building of the pipelines,  Will he rescind the edict?  And what if the companies use 51% American fabricated steel and the rest Canadian steel?

Notice above I use the word "fabricated" because the ore might come from any iron ore producing country and not necessarily mined in the U.S.  But we always seem to focus on the last step.  "American made cars" use parts that come from all over the world but the fabrication is done here.  Human beings are strange people.  Even the steel may come from elsewhere in a bulk form and the fabrication is done here.  That makes it U.S. steel.

What if the steel is fabricated somewhere else by an American based company?  Does that qualify as American made?  I think probably so.  Thin of oil.  Exxon-Mobile produces oil all over the world, is that American produced oil because Exxon is registered in the U.S.?

Does the following answer any of the questions?

In a meeting with small business leaders, Trump clarified that he not only wants pipeline companies to purchase pipes fabricated in the United States, but also expects the pipe suppliers to use raw U.S. steel. 
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Trump also revealed how he would pressure pipeline companies to comply: by potentially refusing to exercise eminent domain, the government's ability to appropriate private land.
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"First of all, this is private investment, so there's no legal authority for the government to require a private company to use domestic materials," he [Dan Ikenson, director of the Cato Institute's Herbert A. Stiefel Center for Trade Policy Studies.] said on Thursday, prior to Trump's comments at the retreat.
"Is it good policy to have the president dictate where U.S. companies buy their inputs? No. I think that's terrible. I think that's dictatorial. I think it's very bad precedence."**
President Trump needs some counseling.  It turns out that half the pipe needed for the Keystone XL Pipeline is already made and the Dakota Access Pipeline is nearly completed and may enter usage as soon as April.***  Is Donald (The Bully) Trump going to demand that the pipe already manufactured be scraped. Is he going to demand that the pipe be rip up that is buried?

* http://www.cnbc.com/2017/01/26/trumps-plan-to-force-pipeline-makers-to-use-us-steel-is-dictatorial-and-a-bad-idea.html
** http://www.cnbc.com/2017/01/26/trumps-plan-to-force-pipeline-makers-to-use-us-steel-is-dictatorial-and-a-bad-idea.html
*** http://www.cnbc.com/2017/02/23/trump-keystone-dakota-access-pipeline-makers-must-buy-us-steel.html

Wednesday, February 22, 2017

CORPORATE TAX RATES AND BANK BUSINESS LOANING

Though the stated corporate tax rate is 35%, few companies pay the whole rate.  I believe the average is more around 26%, but many companies paid no Federal tax in 2012, for example, because of loss carryovers resulting from the Great Recession.*  I don't know how much Federal revenue would be lost if the corporate tax rate was reduced to 15% as many companies pay about that now. Even now, corporations pay only 11% of the Federal taxes and 4% of the state.*

Barron's, however, recommends a tax rate of 22% which they feel is enough to be counteracted by increased business to make a revenue neutral sum.  This would probably lower the effective tax rate to 15-18%.

Trump seems to appreciate all of that. On the campaign trail, he proposed slashing the rate that businesses pay on income from 35% to 15%. That might be too much—it could significantly reduce the government’s tax haul and add to the nation’s already unacceptable debt burden. Barron’s recommends a cut to 22%, which would be revenue-neutral, allowing businesses to produce just enough additional taxable income to offset the effect of the lower rate. And getting a 22% cut through Congress would be easier than 15%.**

Janet Yellen refutes claims that banks are not lending:
However, Yellen mentioned a recent survey from the National Federal of Independent Business, in which only 2 percent of respondents cited access to capital as their greatest obstacle. "Lending has expanded overall by the banking system, and also to small businesses," she said.
Brown also asked how U.S. banks are doing compared with their global competitors.
"U.S. banks are generally considered quite strong relative to their counterparts [in other countries]," Yellen responded. "They've built up quite a bit of capital, partly as a results of our insistence that they do so." ***

* http://www.justfacts.com/taxes.asp
http://www.gao.gov/products/GAO-16-363
** http://www.barrons.com/articles/cut-the-top-u-s-corporate-tax-rate-to-22-1480137247
http://www.forbes.com/2011/04/13/ge-exxon-walmart-apple-business-washington-corporate-taxes.html
*** http://www.cnbc.com/2017/02/14/janet-yellen-banks-are-lending-and-quite-profitable.html
http://www.nfib.com/surveys/small-business-economic-trends/

Monday, February 20, 2017

"ENEMY OF THE PEOPLE"

Like many others, President Donald (The Bully) Trump's comment that the media is "The Enemy Of The American People"  reminded me of the brilliant and timeless 1882 Norwegian play by Henrik Ibsen "The Enemy Of The People"  The play is so relevant to what Trump is trying to do today, silence the media.  In fact, the Ibsen play also involved the media (a newspaper). It worked then (1882), but not today so far.

Following below I have excerpted an abstract of the play from the Daily Beast along with some of their comments (http://www.thedailybeast.com/articles/2017/02/20/how-donald-trump-made-a-norwegian-playwright-the-most-important-man-of-the-moment.html?via=desktop&source=Reddit):

As the play opens, Thomas Stockmann, a doctor, is anxiously awaiting a piece of mail. The envelope arrives, and inside it is a lab report he’d ordered up from the university in Oslo on the quality of the local water in Kirsten Springs. The town had opened a spa and baths and was attracting visitors from across Norway and indeed Europe, but Stockmann began to notice the previous summer that a lot of people were getting sick. 

The lab report confirms that the water is toxic. Stockmann’s friends—including the publisher, editor, and lead reporter of the local liberal-reformist newspaper—drop by. He shares the news with them, and they thank him for this act of civic gallantry and express confidence that the town will bow to him in gratitude. “By God, doctor,” the editor exclaims, “you’re going to be a leading man in this town!” 

Doktor Stockmann’s brother, Peter, is the town mayor. Thomas excitedly shares with him the news that he—and science—have gotten to the bottom of things, and now the problem can be fixed. Peter is decidedly unenthusiastic. Thomas is confused. Peter informs his brother that fixing the problem—it is one of the play’s most remarkable contemporary echoes that the pollution is caused by an upstream tannery, certainly unregulated in 1882—will require redoing the water system root and branch. This will necessitate a tax increase. On top of that, of course, once word spreads, tourists will stop coming to the insalubrious baths, which have been the great source of the town’s income and pride.

Well, you can see where things go from there. For a time, Thomas is convinced he will triumph. I have the press and the majority on my side, he proclaims, to say nothing of the science. How could I lose? “The liberal press will stand up and do its duty!”, he proclaims. 

Then, slowly, the screws tighten. Peter offers Thomas the chance to go before the townspeople and announce that it was all a mistake, he’d vastly overstated the problem. Thomas refuses. The liberal newspaper, which was all set to publish his article, reverses course and deserts him. In desperation, Thomas rents out a lecture hall to explain his findings to the people, but Peter takes the floor before Thomas and riles up the mob. The newspaper publisher—who, just like small-town newspaper proprietors today, comes from and represents the local business community—stands up and declares Thomas “an enemy of the people.”

He loses his job and his home. His wife stands beside him but his two young boys are beaten up at school, and his grown daughter, known about town before all this for her radical ideas, loses her job as a teacher. The schoolmistress received three anonymous letters denouncing her, she tells her father, and Thomas’s reaction to them could be said almost to the word today of abusive pro-Trump tweeters who hide behind their Twitter handles: “The big patriots with their anonymous indignation, scrawling out the darkness of their minds on dirty little strips of paper. That’s morality, and I’m the traitor!”
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For Ibsen and his audiences, all that was needed was that the science was on the doctor’s side. He and they didn’t live in an age when corporations were spending billions of dollars trying to persuade the public that science was “fake science.”
So that’s where “enemy of the people” comes from. The enemy was unpopular, and undoubtedly an “elitist”; but he trafficked in fact, and he was right.