Saturday, September 24, 2016

FIXING THE ECONOMY

The WSJ recently published an article by Jeffry Sparshott, "Want to Fix the U.S. Economy?  Start With the Broken Political System."*  Reading the entire particle is highly recommended.  The article contains some quotes  by Harvard Prof. Michael Porter and his colleagues.  Referenced below is the entire 70 page article by Porter and colleagues.**

“The political system is obstructing our economy,” said Michael Porter, a professor and co-author of a new report on U.S. competitiveness in the global economy.
...................................................................
“Overall, we believe that dysfunction in America’s political system has now become the single most important problem facing America,” Mr. Porter and fellow faculty members Jan Rivkin, Mihir Desai and Manjari Raman wrote.  The Sparshott article also contains a number of figures, one of which is shown below demonstarting the decreease in productivity  over the last 60 yrs.
The political problem is caused by the American voters repeatedly voting for gridlock.  When they do throw out some of the rascals, they seem to be replaced by people even worse.   An example is the Tea Party.  I was impressed in the early days of the Tea Party how many of the adherents had been unemployed for a long time.  I can understand that they felt that the government had failed them so who needs it.  I sympathize with such people, but it is hurting America.

What’s the solution?  ... For example, the White House and lawmakers from both parties have long called for an overhaul of the corporate tax code but there hasn’t been any progress. The report also highlights “distortions and abuses” in the international trading system, lagging infrastructure investment, burdensome regulations and an unsustainable federal budget as areas demanding attention.*

But not everything is bleak/  As the WSJ by Sparshott article concedes and  quotes:

To be sure, the outlook isn’t entirely bleak. Messrs. Porter and Rivkin said businesses are taking a more active role in local communities again while local and regional initiatives have been taking the lead on workforce training and infrastructure development.*
“And we have got enormous strengths for which any other country would kill,” Mr. Rivkin said, citing entrepreneurship, innovation, capital markets and management skills. “We’ve got strengths on which we can build, weaknesses we can fix.”*

American business is to be complemented for the remarkable recovery from the Great Recession, a near death financial collapse, where one political party has refused to let the government help; yet complain that the recovery is so slow..

* http://blogs.wsj.com/economics/2016/09/15/want-to-fix-the-u-s-economy-start-with-the-broken-political-system/?mod=djemRTE_h
** http://www.hbs.edu/competitiveness/Documents/problems-unsolved-and-a-nation-divided.pdf

Friday, September 23, 2016

MOTIVATING MINORITY CHILDREN (Biographical)

In the mid to late 1960s, I was induced to join a group whose aim was to motivate 5th grade children in a high-rise, low-cost housing complex in Denver one night a week during the school year.  I wasn't sure how I could contribute, but would try.  The makeup of the development was 90% Hispanic, 5% African American, and 5% other (Caucasian, Asian,, etc.).  It turned out however, that at least half the "classes"* were African American.  I was to learn that there were 20 or so mother's in this complex who would do anything to help their children have a better life than theirs.  Whatever the problems faced by African Americans, the Hispanics problems were worse.

Now I was a research geologist with no training in teaching children so I wondered what I could contribute.  The first thing I noticed was the children had trouble especially with arithmetic: multiplication and division.  So I bought some flash cards and at the beginning of the "class," I would warm up the children with contests as to who could get the right answer first.    As time went on, the competition appealed to the children, especially the boys, and they would spit out the right answers to things like "What is 23 times 22?"  The flash cards went up to 25.  And the children would go home and teach their siblings so that as the years went by, everyone got better, but the African Americans were always the best.  Division was more difficult as you can only do simple division with flash cards.  The children easily mastered these.

I also would attract one or two children to make and paint paper mâché volcanoes.  When done, I would steal some dry ice from work and drop it into a empty Campbell's soup can with some water in it so we could have smoke come out of the volcano. It was lots of fun for both of us.  It was also educational in that I would keep up a patter on volcanoes as we went along and let them know there were opportunities there for a career.

As a scientist, I admit I used to look down my nose at secondary school teachers whose courses were so easy, but, in these meetings, I learned respect for grade school teachers. The teachers had learned something about relating to children that I didn't have.  Remember now, these teachers had spent all day teaching, but came out at night to do some more.  I recall one teacher who looked to me like she was always on the edge of a nervous breakdown, and the children would flock to her and tell her all of their problems.

The school year after the Martin Luther King assassination was tough and not much progress was made.  I figured, however, that the fact that these children were exposed to a Caucasian who didn't hate them was learning enough.

Things got pretty wild for awhile.  One night as I was leaving, a bunch of students were mulling around the lawn in front of the school door yelling things like "Burn the expletive place down."  So I was a bit apprehensive as I opened the door to leave, but I calmed myself with the thought that I had a lot of these kids in the motivational classes, and they didn't seem to hate me.  As I stepped out, three big African American girls that I had in a "class" approached me and said, "Dr, Ford, Dr. Ford, we are going to riot.  We really are going to riot."  To which I replied "Wherever you girls are is a riot."  They laughed and laughed and rolled on the ground.  I then walked to my car, unimpeded, and drove home.

We were told to never let a child back into the "class" once they had advanced to the 6th grade.  The 5th grade was considered the last good year before the children found out what their fate was to be.  I had one African American girl who had "graduated" to the next grade come up to me and beg to be let into the "class" again.  "Dr. Ford, Dr. Ford, please, please, please let me in."  I was weakening when a small African American boy started poking her in the back.  She swing around and kicked the little boy in the stomach.  "I'm sorry, but I really can't let you back in."

There was one African American girl who had a beautiful name - Charlotte Hawkins - who could run faster than the wind.  No one could beat her, not the instructors, male or female, and certainly not me.  She did go on to become a runner of some note in college though she never got to the top.  I hope something good happened to her.

Some wise people decided to introduce some high school students to the "class" on the basis that they could better relate to the 5th graders.  In fact, the high scroll students turned out to be a problem,  they would gather together and talk or show that they really didn't wasn't to be there.  What seemed like a good idea was a big mistake.

In October, I was transferred to Zurich, Switzerland for a year.  When I left, Denver had been in a building boom for several years.  There was lots of optimism in the people of the complex as the men could find work.  When I came back, the building boom was over and the men were out of work again.  Also it seems something happened to one or more of the high school girls and the effort was disbanded. I had looked forward to taking up where I left off, but that part of my life was over. I had no children of my own, so such works were a way of my making a contribution to society.

* I use class in parentheses because they were not classes in the usual sense, but one motivator on one or a few children with the students making the choice of motivator and each motivator did their own thing to help motivate the children.

Wednesday, September 21, 2016

POINT OF NO RETURN (Biographical)

If you do field geology for any length of time, you run into dangerous situations.  I didn't have many, but I did have a few.  One dealt with returning back to camp after a days work of mapping geology in New Mexico. Normally, there are two of you working together, but, on this day, I was alone.  I was not in very good physical shape because of my bouts with collapsed lungs.  The way back to camp going the way I came was very long so I decided to take a shortcut.

I went to the edge of a cliff of limestone I'd guess was maybe 50 ft high or so and could see the road below that would be easy walking so I decided to climb down the cliff.  It didn't look hard, and I started to pick my way down until I came to a spot where there was no easy way down.  I could see there was a reasonably broad shelf  below so I thought that I could drop down to it and hope there was an easy way down from there that I couldn't see.  It was something like a 10 ft drop onto the shelf.  If I dropped down and there was no way to get down further, I was stuck there until somebody found me, and it wasn't long until it would get dark.

So I edged my way over the little cliff, managing to hold onto the top edge of the cliff with my fingers and dropped onto the shelf below.  It turned out there was an easy way down the rest of the way so I got on the road and walked slowly back to camp.  Beer never tasted so good as when I got back to camp totally exhausted.  After that experience I was given a partner.

Monday, September 19, 2016

TRUMP BEST REPUBLICAN?

The reason I feel Donald Trump is the best Republican for president is that so many people who know him say they are surprised at the way he is behaving in the election season.  I have long felt I know he has tailored his political approach to appeal to what has become known as the Deplorables, a term they have in fact adopted.*  As I have said before, he is not leading a group of people, he is following them:**
ALL his comments are carefully crafted to appeal to this large group of people who believe Obama was born outside the U.S., that he is a secret Muslim, that all Hispanic illegals should be deported, that we should build a wall on our southern border, that Muslims should not be allowed to enter America (I suspect many would find the idea appealing that all Muslims should be deported or placed in detention camps.), etc., etc.  It isn't pretty folks but there it is.  You aren't going to solve this hate by getting rid of Trump.  It will still be out there, as Trump is followingthese people, not leading them.

Although Trump is the Flip Flopper In Chief, his overall stance seems to be in line with Republican values. He has a problem with establishment Republicans in that he says out loud what most Republicans believe but think should be only said in private because it doesn't sound good.  Trump favors a tax plan that will enrich the wealthy.  Paul Ryan favors a tax plan that favors enriching the wealthy.  Trump believes that women that have abortions should be punished some way.  Paul Ryan believe that abortion should be illegal.  And so it goes.  The Libertarian Party was established by Republicans that don't follow the Evangelicalism of the Republican Party.  It will be interesting to see how this attempt evolves.  Right now it seems to take more votes from Democrats than Republicans, most of whom seem to accept their party become a religious party.

That said, Trump has fabricated a Hillary who is a genuinely bad person.  Fortunately, that Hillary is not the Hillary running for president.  Hillary Clinton is the one who is running for president, and she has been a long-time advocate for children's upbringing (It Takes A Community To Raise A Child), children's health, etc.), women 's rights, and We Are Stronger Together.  After Barack Obama was nominated for president, Hillary worked hard on his campaign for president, was his Secretary of State, and has wrapped herself in Obama on her current candidacy for president.  That a couple of Hillary's aids in her run for president in 2008 explored the birther issue is mute. She never espoused it and certainly has not pursued it since.  It was no excuse for Trump to the promote the birther issue for five years since.  It is incredible that Republicans think it is,

We are well into the silly season in American politics, and I plan no further discussion of this election cycle.  In fact, I try to avoid all dnews of politics during the rest of this period.  We will see if I can hold onto this.

 *http://stopcontinentaldrift.blogspot.com/2016/09/im-deplorable_15.html
http://stopcontinentaldrift.blogspot.com/2016/09/basket-of-deplorables.html
** http://stopcontinentaldrift.blogspot.com/2015/12/donald-trump-final-comments-i-hope.html

Friday, September 16, 2016

TAX CUTS AND ECONOMIC STIMULATION

Well, we have it again, Donald Trump has proposed the tired old proposition that, if you cut taxes, the  increased economy resulting from the tax cut will replace the loss of revenue.  Though Ronald Reagan once followed this, he became so alarmed at the Federal deficits he was ringing up that he started increasing taxes again. I believe he did it 12 times and recovered nearly half the revenue lost from his tax cuts.  Reagan never did come close to balancing the budget.

As a result of Reagan increasing taxes, I ended up paying more taxes than I did before his tax cuts.  One of the loop-holes he closed was being able to take interest paid on time purchases from your income tax.  Of course the tax cuts weren't meant for the likes of me, but for the wealthy.

If the proposition was true, why not cut taxes to zero and have infinite Federal revenue?

I discussed years ago (beginning in 2010, my all time favorite) why cutting personal income taxes is an inefficient way of  stimulating the economy.*  The problem is that the wealthy do not spend all their money productively.  For examples, they buy bonds (municipal, Treasuries, corporate, foreign) which can be productive if they are new issues not to pay down other debt (e.g. high interest debt).  They buy existing stock (companies only benefit from selling new issues), and then they spend on luxuries such as Canadian personal Bombardier jets, chalets in Switzerland, island in the Bahamas, and the like.  And the poor pay down debt.  Many of these enrich other countries and are good for the global economy but do nothing for the U.S.

Then we have the example of president "Dubya" Bush who cut taxes a lot, particularly for the wealthy, and plunged us into the near economic death, the Great Recession.  To be fair, it wasn't just the tax cuts that plunged us, but his opposition to regulation of the financial industry that may have been the biggest cause.  Of course having two wars paid for on the cuff (borrowing) didn't help (Disclosure I did support the war in Afghanistan because I thought we had to do something after 9/11, but I didn't support having a tax cut on top of it.).

There are two  types of business tax cuts.  Trump wants to lower the corporate tax rate to 15%.  I'm not sure how much fiscal damage it would do as I believe that is about the rate companies actually pay now because of tax breaks.  GE, for example became famous for, among other things, not paying any corporate taxes for 2010.  GE said that it wasn't true and that they would pay a "small income tax" for 2010.***

The other corporate tax cut that might be beneficial is to permit companies to repatriate money held from profits overseas.  This has been done before and

Buybacks have become a popular use for foreign earnings****
Others are using the cash to pay down debt.
Last month, President Barack Obama proposed letting companies bring back the profits they hold at overseas subsidiaries at a tax rate of 14%, and then proposed taxing foreign earnings going forward at a minimum of 19%.****

Stryker, which makes medical devices, said last year that it earmarked $2 billion for return to the U.S. The company incurred tax bills in Europe when it moved some of its intellectual property to the Netherlands from other European countries and realized that those taxes would help reduce its U.S. tax bill on the money to roughly 5%.

“We will use the funds to drive growth in our existing businesses through investments in acquisitions, dividends and share repurchases, in that order,” said CFO Bill Jellison.****

Some companies also paid out special dividends with a part of the repatriated money and made some acquisitions.****

In 2004, the United States Congress enacted such a tax holiday for U.S. multinational companies, allowing them to repatriate foreign profits to the United States at a 5.25% tax rate.[1] Under this law, corporations brought $362 billion into the American economy, primarily for the purposes of paying dividends to investors, repurchasing shares, and purchasing other corporations.[1] In 2011, Senate Democrats, arguing against another repatriation tax holiday, issued a report asserting that the previous effort had actually cost the United States Treasury $3.3 billion, and that companies receiving the tax breaks had thereafter cut over 20,000 jobs.[2] A second repatriation tax holiday was defeated in the United States Senate in 2009.[1]

Very little of the money repatriated in 2004 ended up in new productive investments that was the purpose of the low tax rate so corporation cheated.

* http://stopcontinentaldrift.blogspot.com/2010/05/effectiveness-of-taxes.html
Also see: http://stopcontinentaldrift.blogspot.com/2010/07/trouble-with-income-tax-cuts.html
http://stopcontinentaldrift.blogspot.com/2010/09/jobs-disconnect-between-business-and.html
http://stopcontinentaldrift.blogspot.com/2012/06/lowering-tax-myth.html
*** http://www.factcheck.org/2012/04/warren-ge-pays-no-taxes/
**** http://www.wsj.com/articles/u-s-companies-bring-more-foreign-profit-home-1427154070
https://en.wikipedia.org/wiki/Repatriation_tax_holiday

JOBLESS CLAIMS AND JOB OPENINGS - JULY 2016

JOBLESS CLAIMS
It was the 80th straight week that claims remained below the 300,000 threshold, which is associated with robust labor market conditions. That is the longest stretch since 1970, when the labor market was much smaller.*


(Click on figure to enlarge)

This is the first time since April that I have posted on jobless claims.

JOBS
Jobs are opening up faster than they can be filled.**

To be sure, millions of workers who gave up looking for a job after the Great Depression have been returning to the workforce, offsetting some of the demographic headwinds.
But an ongoing wave of aging baby boomers is leaving the labor force for good, reducing the number of workers available to fill new jobs.
...................................................................
Employers posted 5.9 million job openings in July, a rate of 3.9 percent, according to the Job Openings and Labor Turnover Summary (JOLTS) report. That compares to 5.62 million job openings in June, according to Thomson Reuters.**

(Click on figure to enlarge)

The reference to the figure below contains some commentary on Donald Trumps economic plan that may interest you.**

* http://www.cnbc.com/2016/09/15/us-weekly-jobless-claims-sept-3-2016.html
** http://www.cnbc.com/2016/09/15/trumps-25-million-new-jobs-promise-doesnt-add-up.html

Thursday, September 15, 2016

TRUMP BUSINESS DEALINGS

Finally someone gets concerned about Trump's business dealings.  I urge you to read the full article in the latest issue of Newsweek and it isn't pretty.  This can be done online, but I include here a few excerpts to give you a flavor of the article (see reference below)

Updated | If Donald Trump is elected president, will he and his family permanently sever all connections to the Trump Organization, a sprawling business empire that has spread a secretive financial web across the world? Or will Trump instead choose to be the most conflicted president in American history, one whose business interests will constantly jeopardize the security of the United States?*
....................................................................
A close examination by Newsweek of the Trump Organization, including confidential interviews with business executives and some of its international partners, reveals an enterprise with deep ties to global financiers, foreign politicians and even criminals, although there is no evidence the Trump Organization has engaged in any illegal activities. It also reveals a web of contractual entanglements that could not be just canceled. If Trump moves into the White House and his family continues to receive any benefit from the company, during or even after his presidency, almost every foreign policy decision he makes will raise serious conflicts of interest and ethical quagmires.*
...................................................................
Trump’s business conflicts with America’s national security interests cannot be resolved so long as he or any member of his family maintains a financial interest in the Trump Organization during a Trump administration, or even if they leave open the possibility of returning to the company later. The Trump Organization cannot be placed into a blind trust, an arrangement used by many politicians to prevent them from knowing their financial interests; the Trump family is already aware of who their overseas partners are and could easily learn about any new ones.*
.....................................................................
The problem of overseas conflicts emerges from the nature of Trump’s business in recent years. Much of the public believes Trump is a hugely successful developer, a television personality and a failed casino operator. But his primary business deals for almost a decade have been a quite different endeavor. The GOP nominee is essentially a licensor who leverages his celebrity into streams of cash from partners from all over the world. The business model for Trump’s company started to change around 2007, after he became the star of NBC’s The Apprentice, which boosted his national and international fame. Rather than constructing Trump’s own hotels, office towers and other buildings, much of his business involved striking deals with overseas developers who pay his company for the right to slap his name on their buildings. (The last building constructed by Trump with his name on it is the Trump-SoHo hotel and condominium project, completed in 2007.)*

* http://www.newsweek.com/2016/09/23/donald-trump-foreign-business-deals-national-security-498081.html
Also see: http://www.newsweek.com/2016/08/12/donald-trumps-business-failures-election-2016-486091.html