THE WEALTHY AND THE "LAME DUCK" SESSION

People seem surprised at the compromise between the Republicans and the Democrats on the tax policy for the next two years, but it really isn't such a mystery. The Republican party is all about the wealthy, and they will agree to most anything to keep the taxes low on the wealthy. During the George W. Bush administration, they wanted to lower the highest tax rate from 39.6% to 35%. When they saw this would not fly, they included tax breaks for the middle class and the poor. So in 2010, we saw the Republicans retain the 35% top income tax rate for the wealthy but agreed to many compromises on keeping the existing tax rate for all plus some other benefits like lowering the Social Security payroll tax by 2% and extending the unemployment insurance for 13 months.

It seems clear that the Republican party will agree to almost anything to preserve low tax rates on the wealthy. The Republican Party is all about preserving and increasing the fortunes of the wealthy. Their philosophy is called "trickle-down economics" in which the rich have the money, and they spend it with some money trickling down to the middle and poor classes. The fallacy in this, aside from the wealthy not being elected by the lower classes, is that all the money doesn't trickle down. The wealthy buy bonds, both Treasury and foreign government bonds as well as corporate bonds. Some of the corporate bonds may be productive, but, if they are to pay down debt to lower interest rates, they aren't. They also buy things like chalets in Switzerland, islands in the Bahamas, and Canadian bombardier personal jets which may trickle down in the global economy but not in ours.

The wealthy know there aren't anywhere enough of them to win elections so they have to get allies. The most important of these are the religious right which has the energy generated by righteous indignation and the Southern Strategy. Something that I have never understood, however, is the number of non-union laborers who vote Republican. I can understand that they might be upset by the Democratic party emphasizing the rights of disadvantaged groups like minorities, women, and more recently homosexuals, but they don't get anything from voting Republican. If fact their wages are decreasing and being outsourced by the party they vote for.

But the compromise bore fruit that let the wealthy keep their low taxes (the increase was going to be only from 35% to 39.6%) and reinstate the inheritance tax at 35% for the next two years on estates above $5 million even though the compromise will increase the deficit by nearly a trillion dollars. The result was one of the most productive "lame duck" sessions that I can recall. They passed the new Start Treaty which surprisingly the Republican Senatorial leadership opposed for reasons unknown as the administration acceded to a number of their demands, they eliminated the Don't Ask, Don't Tell provision for being in the armed forces (which itself was a compromise during the Clinton Administration),** and the health plan for the first responders in the 2011 Trade Center disaster. The one important bill that was overturned was the "Dream Act"* which would have given Conditional Permanent Residency to children of illegal immigrants who grew up in the country if they went to college for two years or joined the military forces for two years. They would get permanent residency if they got a degree or finished two years of college in good standing or served two years in the military and received an honorable discharge. I can see no reason not to give Conditional Permanent Residency for six years to anyone who joins our military forces for two years or Permanent Residency if the served two years and received an honorable discharge as they are risking their lives to get it (Heck, I would give them citizenship.), but perhaps the objection was the provision about going to college. This was not the first time this act appeared before congress as it was introduced to the Senate in 2001: http://en.wikipedia.org/wiki/DREAM_Act

Once gain the come Back Kid has come back.

* The DREAM Act is an Acronym for Development, Relief and Education for Alien Minors Act.

** See In The End Liberalism Wins: http://stopcontinentaldrift.blogspot.com/2009/12/in-end-liberalism-wins.html

THE COMB

(A story composed in five minutes on the topic of Dollar Store at the North Carolina Writer’s Network Meeting, April 25th, 2009. Normally, my writing for these rapid fire exercises aren’t worth saving, but I thought this one was worthwhile.)

I had never been in a Dollar Store before. Oh, my, they had so many wonderful things and only a dollar each. I saw a comb that intrigued me – fluorescent yellow and long. Oh, I wanted that comb. I kind of have to have that comb so I pulled my money out of my pocket and counted it - change and change. There was a quarter, a dime, a nickel, and two pennies. I wasn’t good at counting change, but I knew this did not add up to a dollar. I looked around, but no one was paying attention to me. I could grab that comb, and I was sure my pocket was deep enough to conceal it. My mother told me that people that steal, burn in hell. I certainly didn’t want to burn in hell, but I really wanted that comb. I wanted it bad. So I looked around again and quickly put the comb in my pocket.

A voice behind me said, “Trying out that comb young fellow before you buy it?” I turned, and here was this old man standing, leaning against a rack. Where in the world did he come from?

“Yes,” I said, “but it doesn’t fit so well in my pocket so I will put it back.”

YOU DON’T KNOW UNTIL YOU BRING IT IN

The NPRA or National Petroleum Reserve (see figure) was established in 1923 for exploitation for oil and gas in a national emergency (for the relative position of the NPRA see figure. In the 1970s and early 1980s, the U.S. Geological Survey (USGS) contracted exploration drilling of the area, searching for another super giant oil field like the domed reservoirs (structural trap) found in Prudhoe Bay (estimated total production of 13 billion barrels of oil), the largest oil field in North America but 9th largest worldwide. None was found. In the late 1990s with the discovery of the giant Alpine field (estimated to be 800+ million barrels of oil) in a pinch out of reservoir rocks (stratigraphic trap) near the border of the NPRA, but in Prudhoe Bay, exploration in the NPRA was renewed. An appraisal by the USGS in 2002 estimated very large possibilities for oil production along with very significant quantities of natural gas. (http://pubs.usgs.gov/fs/2002/fs045-02/) of 6.7 to15 billion barrels of recoverable oil (BBO) and a mean value of 59.7 trillion cubic feet (TCFG) of natural gas, pending a gas pipeline being built to the area. This year (2010), however, the estimates have been greatly reduced to 896 (MMBO) and 52.8 TCFG of natural gas as a result of further exploration drilling. The current estimate for recoverable oil is now about one-tenth the estimate in 2002. What the real production is likely to be is anybody’s guess (http://energy.usgs.gov/flash/slidesNPRAWEBver2010.pdf). You don’t know until you bring it in.

The Bakken Shale of North Dakota and Montana in the U.S. has received considerable misleading press. You probably have seen comments that it contains more oil than Saudi Arabia. The amount of estimated recoverable oil of 3.65 BBO (http://pubs.usgs.gov/fs/2008/3021/pdf/FS08-3021_508.pdf), though huge, is much, much less, even much less than the Prudhoe Oil Field estimated recoverable oil of 13 BBO and a fraction of the estimates of others as high a 300 BBO as recently as 2006 (http://en.wikipedia.org/wiki/Bakken_Formation). There certainly is a lot of activity on the Bakken shale, but we won’t know the ultimate reality of production until the oil is brought in.

The Alaskan Natural Wildlife Reserve or ANWR (see figure) has received very large estimates of oil potential (http://pubs.usgs.gov/of/2005/1359/OF2005-1359.pdf) of 10.4 BBO with oil prices above $50/bbl; however ANWR is yet to be drilled. The target under consideration is area 1002, a very small part of ANWR (see figure). The 95% probability is 4.25 BBO at high oil prices such as exist today http://pubs.usgs.gov/of/2005/1217/pdf/2005-1217.pdf. but the favored drilling area has already been moved from the eastern part of ANWR to the western part. Production will again be from stratigraphic traps such as for NPRA. Even though the current assessment is said to be the best ever made, I would suggest that in view of previous attempts to estimate oil production in the NPRA and for the Bakken Shale, that we be a bit careful about accepting such large numbers until the oil is brought in. I believe that the area needs to be drilled just to find out what is really there. The environmental damage could be minimized by drilling in the winter on ice beds instead of gravel, with vehicles using ice-bed roads and perhaps from just a central platform with drilling done in many directions and extending for miles underground.

HURRICANE WARNING (Biographical)

In examining stone buildings, monuments, and memorials for the National Park Service in the 1980s,* they wanted to know if the dome of the Jefferson Memorial was made of limestone or concrete as the contractor was given his choice on this. I told them that was easy. It must be concrete because he could make the ceiling with just a few molds and repeat the casts for the ceiling, but, to do it from limestone, each block would have to be machined which would be very expensive. Well, they wanted to know the answer anyway, but I wasn’t to knock off a piece of material from the ceiling with my rock hammer, even a little piece, and wasn’t to drop acid on it. All I could use was a flashlight and a hand lens (a little powerful magnifying glass or loop). I told them that there was a good chance I couldn’t tell the difference between limestone and concrete, but they said I should make my best effort.

So they had the scaffolding put up , I don’t know but maybe 20 feet, to a ledge just under the ceiling. They wouldn’t permit drilling of anchors into the memorial for scaffolding, of course, so it was a free standing scaffolding which swayed back and forth quite a bit. I was to climb the scaffolding, wait until it swayed near the ledge, and step off onto the ledge. All this was made a little more exciting because there was a hurricane warning. Well, I did this, nervously, because I wasn’t sure the scaffolding wouldn’t fall over. Even with the flashlight, the lighting wasn’t good, and I couldn’t tell whether the ceiling was made of concrete or limestone. To be honest, I probably couldn’t have told the difference even with good lighting. Workmen below kept calling me to hurry up because a hurricane was coming. I waited for the scaffolding to sway back to the ledge, stepped onto it and climbed down. As soon as I got off, the scaffolding was taken down. It turned out that the NPS had spent $25,000 to put up and take down the scaffolding only to hear from me that “I don’t know.” Incidentally, the hurricane never appeared.

*See http://stopcontinentaldrift.blogspot.com/2010/12/muammar-qaddafi-and-me-biographical.html for more details on the acid rain program.

MUAMMAR QADDAFI AND ME (Biographical)

A concern of the 1980s was acid rain. A program was formed called the National Acid Precipitation Program or NAPAP for short. The National Park Service (NPS) was in charge of acid rain damage to materials, including building stone. In 1983, they requested someone from the U.S. Geological Survey (USGS) to help set up stone test sites. I was Assistant Chief Geologist of the Eastern Region at the time and had plenty to do; however, none of the scientists who knew something about building stone or acid rain dissolving carbonate minerals would volunteer for the duty. The Assistant Chief Geologist for Program said in a meeting that it would be a pity if the U.S.G. S. couldn’t respond to the request. Though I knew nothing about building stone and little about climate, I volunteered. I thought I would learn something about climate in the job. It turned out that I didn’t, but my previous experience helping set up the Lunar Sample Program in NASA proved invaluable. I also had a certain knack for conflict resolution that became important as progress was made setting up the stone detection sites. The NPS also wanted me to examine memorials, monuments, and other stone buildings for pollution damage. I begged off saying that I knew nothing about this subject, but they asked me just to do my best effort. The first monument to be examined was the Jefferson Memorial, which was completed during WW II because President Roosevelt thought it would be good for the morale of the nation. I was accompanied by a well known mineralogist from the USGS who knew nothing more about pollution damage to stone than I did. It was a memorial I had been to as a tourist many times and never noticed any problems. It was amazing, however, that when you started to look for stone damage, you could see it all over the place. We had carte blanche to examine the memorials and monuments so we even went up on the roof and down into the basement which I didn’t know existed before. There were long, perhaps a yard long, and thin stalactites coming down from the ceiling as acid rain filtered down through cracks in the main floor of the memorial. On the roof, there were small clots of grayish material standing slightly above the surrounding marble, i.e. in positive relief. Sometime later, I remembered that I had forgotten to measure by how much relief these clots were so I requested permission from the NPS to go back up on the roof again and got permission from the Park Police to do so. When I got to the kiosk guarding the stairs to the roof, the guard called someone on the phone and then someone else. These calls were taking quite a bit of time so I asked what the problem was. The guard told me that Qaddafi, the dictator of Lybia, had threatened to kill President Reagan so permission also had to be obtained from the FBI and CIA. I said, “For heaven’s sake, why didn’t you tell me. I would rather these organizations had never heard of me. I would have come back some other time.” I did, however, get permission to go up on the roof and got my measurements. It was true that from the roof of the Jefferson Memorial you did have a good, if distant, view of some windows in the White House.

BAMBOO BRUSH (Poem: Haiku)

Brisk blows the fall breeze

Down the hill to the blue sea

Through the bamboo brush.

Originally written in 1965 after an extended trip to Japan.

DUMBING DOWN OF AMERICA

If you listen, we are told that many of the jobs lost in this recession will never come back. But there are those that say that all we have to do is make a couple of simple adjustments to the Federal budget and Federal government policy, and the jobs will come back. They won’t.

Everyone should read an article by Fareed Zakaria in Time Magazine titled "How To Restore The American Dream" (Thursday, October 21, 2010 issue) which explains why.* Of course, there are jobs that have been outsourced to foreign countries where workers can do the job at much lower pay. Zarkaria quotes: Steven Rattner, who helped restructure the automobile industry, tells the story of getting a new General Motors plant online in Michigan by bringing management and unions together. "The unions agreed to allow 40% of the new plant to operate at $14-an-hour wages," he says, "which is half of GM's normal wages. The management agreed to invest in this new plant. But here's the problem: workers at GM's Mexican operations make $7 an hour, and today they are as productive as American workers. And think of this: $14 an hour translates into about $35,000 a year. That's below the median family income. The whole experience left me frightened about the fate of the American worker." If a Mexican worker can do the job of assembling an automobile just as well as and American worker at half the pay of the lowest paid American worker, why shouldn’t the car be assembled in Mexico?

But outsourcing is only one part of the explanation of why many jobs won’t return. Of at least equal importance "Neutron Jack" Welch, former CEO of GE and a political conservative is quoted as saying: First, technology has produced massive efficiencies over the past decade. Jack Welch explained the process succinctly on CNBC last September. "Technology has changed the game in jobs," he said. "We had technology bumping around for years in the '80s and '90s, and [we were] trying to make it work. And now it's working ... You couple the habits [of efficiency] from a deep recession [with] an exponential increase in technology, and you're not going to see jobs for a long, long time." Welch gave as an example a company owned by the private-equity firm with which he is affiliated. In 2007 the business had 26,000 employees and generated $12 billion in revenue. It will return to those revenue numbers by 2013 but with only 14,000 employees. "Companies have learned to do more with less," Welch said.

On top of these, we are told that there are good jobs that go begging because qualified people can’t sell their homes and move to the openings. The mobility of Americans is becoming seriously compromised.

But I am also worried that our present political system is not helping. In an age in which we should be doing everything in our power to make our workforce more competitive to the global workforce in technology, there are those who are discouraging this effort. The Democrats do essentially nothing, but the Republicans are actually negative. They have turned the word "elite" into a derogatory term and speak of our elites as not "real Americans."

But I understand the problem. As a former Republican (until the Goldwater nomination.), I understand that the Republican Party is all about the wealthy, preserving and increasing their fortunes. The idea is that you give the financial resources to the wealthy and let them distribute it as they see fit, i.e. the "trickle down" economy. There are not enough wealthy, however, to win elections so they need to find allies. The so-called Evangelicals, of course, have been one group, and of course there is some overlap in that there are no doubt some wealthy that are also Evangelicals. But much to their credit, the Republicans have coopted many of what should be their opponents, the "lunch pail" or hourly wage set of unskilled, semi-skilled, and skilled manual laborers. In doing so, however, they have felt they had to demean the highly educated and have turned college and graduate schools, especially the "best" ones, almost into an epithet by turning the word "elite" into a derogatory term. This anti-intellectualism is not helping.

Is it no wonder that much of our youth avoids what are considered to be difficult subjects like mathematics and physics and derides anyone who can solve a transcendental equation with a derogatory term like "nerd?" But Republicans and the Tea Party really don’t have to do this. The Democratic Party is the party of social libertarians and Joe Six Pack feels that the Democratic Party is unfairly favoring women, minorities, and homosexuals. Thus they feel that the Republican Party is their only hope of keeping "them" in line. It doesn’t seem to matter that under Republican control, their wages have stagnated and that many of their jobs have been exported elsewhere or lost to automation.

Alan Blinder is also worried. ....The crucial distinction for the future, he argues, might be not between highly educated and less educated workers but between those jobs that can be done abroad and those — such as nurse or pilot — that cannot. Even nurse and pilot, however, can be filled with immigrants willing to take lower pay here but which is very good compared to where they came from.

In between are the skilled manual workers and those in white collar operations like sales and office management. These jobs represent the beating heart of the middle class. Those in them make a decent living, usually above the median family income ($49,777), and they mostly did fine in the two decades before 2000. But since then, employment growth has lagged the economy in general. And in the Great Recession, it has been these middle-class folks who have been hammered. Why? Autor is cautious and tentative, but it would seem that technology, followed by global competition, has played the largest role in making less valuable the routine tasks that once epitomized middle-class work.

Zakaria continues: Fundamentally, America needs to move from consumption to investment. Everyone agrees that the best way to create good jobs in the U.S. is to create new industries and companies and to innovate within old ones. This means large investments in research, technology and development. As a society, this needs to become our strongest focus. The only good jobs that will stay in the U.S. are jobs related to knowledge and innovation. Additionally, in the 1950s, America was the only research lab in town, accounting for the vast majority of global scientific spending. Today, countries around the world are entering the arena. Two weeks ago, South Korea — a country of just 50 million people! — announced plans to invest $35 billion in renewable-energy projects. We should pay for this with a 5% national sales tax — call it an American innovation tax — which would be partly offset by a small reduction in income taxes. This would have the twin benefits of tamping down consumption and yielding some additional funds. All the proceeds from the tax should be focused on future generations, because we need to invest massively in growth.

If American citizens are not interested in science and technology, there is still a solution: The often overlooked aspect of investment is investment in people. America has been able to create the future in large measure because it has tapped into the energies and work of immigrants. It has managed to invest in human capital by taking smart, motivated people from around the globe, educating them in the planet's best higher-education system and then unleashing them in a dynamic economy. In this crucial realm, the U.S. is now disinvesting. After training the world's best and brightest often at public expense we don't find ways to make sure they stay here by giving them a green card but rather insist that they leave and take their knowledge to another country, where they will invent, inspire, build and pay taxes. Every year, we send tens of thousands of the smartest Indians and Chinese back home, which is a great investment in the future of those countries.

"Most jobs that will have good prospects in the future will be complicated," says Louis Gerstner, the former CEO of American Express and IBM. "They will involve being able to juggle data, symbols, computer programs in some way or the other, no matter what the task. To do this, workers will need to be educated and often retrained." We need more and better education at every level, especially job retraining. So far, most retraining efforts in the U.S. have not worked very well. But they have worked in countries that have been able to retain a manufacturing base, like Germany and parts of Northern Europe. There, some of the most successful programs are apprenticeships — which cover only 0.3% of the total U.S. workforce.

There are advantages to the U.S. system. We don't stream people too early in their lives, and we allow for more creative thinking. But the path to good jobs for the future is surely to expand apprenticeship programs substantially so industry can find the workers it needs. This would require a major initiative, a training triangle in which the government funds, the education system teaches and industry hires — though to have an effect, the program would have to be on the scale of the GI Bill.

There is much more to Zakaria’s solution in the Time article including fiscal sanity, the tax code, corporate tax rates, and benchmarks. The article concludes with a paragraph on reasons for optimism. You are urged to read the full article. But one thing is clear. There are no fast solutions. Decreasing the size of government in the short term, at least, will have a negative effect on the economy because people will be put out of work, adding to the unemployment picture, and contracts will be terminated, hurting contractors. But as he states, medical costs and state retirement plans must be brought under control.

*http://www.time.com/time/nation/article/0,8599,2026776,00.html

Note added 08-29-2011: The electioneering is already on for the 2012 presidency by the Republicans. It is shocking what some of the candidates are saying. Some of this is covered by Paul Krugman in "Republicans Against Science:" http://www.nytimes.com/2011/08/29/opinion/republicans-against-science.html?ref=opinion&nl=opinion&emc=tyb1

Note added 08-30-2011: George Will in Rev The Scientific Engine, Washington Post (January 2,2011) has tackled this question of "educational elites" that are so despised by conservative populists: "America has been consuming its seed corn: From 1970 to 1995, federal support for research in the physical sciences, as a fraction of gross domestic product, declined 54 percent; in engineering, 51 percent. On a per-student basis, state support of public universities has declined for more than two decades and was at the lowest level in a quarter-century before the current economic unpleasantness. Annual federal spending on mathematics, the physical sciences and engineering now equals only the increase in health-care costs every nine weeks."

MODERN DAY SLAVERY IN AMERICA

I have lead a short- course in Modern Day Slavery in America. Modern day slavery in the U.S. is a severe problem that is widespread. Estimates of the State Department are that 15,000-20,000 slaves are trafficked into the U.S. PER YEAR (I am unable to find out how these numbers are estimated., but it is reasonable to expect that the number greatly exceeds the number caught.). The CIA estimates even higher numbers like 50,000, but no one knows the exact number. There are also American citizens that are enslaved.

How can this be? Didn't President Lincoln issue the Emancipation Proclamation freeing the slaves? Actually this applied only to the Confederate states, but the 13th Amendment was passed in 1865 that freed all American slaves.*

Recently to strengthen the prosecution of slavery cases, the Trafficking Victims Protection Act of 2000 (TVPA) was passed. Non-U.S. citizens must be certified to participate by the Department of Health & Human Services (Usually must cooperate in prosecuting their oppressors. Victims under age 18 need not be certified. U.S. citizens need not be certified.).

The TVPA authorizes up to 5,000 victims of trafficking each year to receive permanent resident status after three years from issuance of their temporary residency visas.**

Victims of trafficking under the law include making housing, educational, health care, job training and other Federally-funded social service programs available to assist victims in rebuilding their lives.

Created new law enforcement tools to strengthen the prosecution and punishment of traffickers, making human trafficking a Federal crime with severe penalties.

Addresses the subtle means of coercion used by traffickers to bind their victims in to servitude, including: psychological coercion, trickery, and the seizure of documents, activities which were difficult to prosecute under preexisting involuntary servitude statutes and case law

In 2003, more than $200 million was authorized to combat human trafficking through the Trafficking Victims Protection Reauthorization Act of 2003 (TVPRA). TVPRA renews the US governments commitment to identify and assist victims exploited through labor and sex trafficking in the United States.

On December 12, 2008 the House and Senate unanimously passed the "William Wilberforce Trafficking Victims Protection Act of 2008" which reauthorizes the Trafficking Victims Protection Act of 2000.

Types of modern slavery: almost anything can have slaves, but the main types are:

Agriculture (mainly men)

Forced prostitution (mainly women, but underage is common)

Domestic work

Importation of goods made with slave labor elsewhere.

Removal of organs

and of lesser numbers:

American females being exported for forced prostitution, perhaps mainly to Mexico.

At least one case is known where the slaves were paraded naked in a bidding room remindful of when slavery was legal.

Elements of modern slavery: foreigners and American

Foreigners

A locator finds candidates in a country, often promising high paying work compared to local opportunities and/or opportunities for education. Anyone is vulnerable, especially the mentally impaired.

The locator or someone in their organization transports the slave, often with a fake passport or smuggles the slave into the U.S. for a high fee ($1,500 seems to be a common fee which is very large for the mark or their family). The slave is to work off this fee or the family borrows the money which may be a year’s income for the family which must be repaid.

The locator (In Mexico, they are called “coyotes.”) sells the slave to a recipient organization (Agricultural picking, prostitution ring, or domestic family for quite a high sum, perhaps another $1,500). Beatings begin upon entering the U.S. and are an important part of the slavery to break the spirit. If prostitution, the slave is often “indoctrinated” upon entering the U.S. The slave often does not know where they are and does not know the local language which inhibits escape.

The recipient takes the slave’s documents and tells the slave that, if they try to escape, they will be caught and maybe killed and/or their families back home will be harmed.

The slave is often locked up when not working, often in crowded rooms with many others, sleeping on the floor perhaps on thin pads. Often there is little time for sleep and meals are poor or even non-existent. Beatings continue on the slightest provocation. In domestic cases the mark often sleeps in the basement on a small pad.

Introducing drugs to the slave seems mainly used in forced prostitution. If the slave does not “behave” drugs are withdrawn until the mark complies.

Americans: i.e homegrown slaves

Psychological methods

Drugs

Emphasis in the course was placed on North Carolina where the course was held:

News Item: Make sex trafficking unwelcome in Charlotte (Charlotte Observer, Oct. 9, 2006.

News item: Sex rings prey on immigrant women (Charlotte Observer, Jan. 29, 2006)

News item: Woman rescued after investigators discover human trafficking operation in Greensboro; Five arrested (Burlington: TheTimesNews.com, May, 8, 2010).

Some Books of interest:

"The Slave Next Door" by Keven Bales and Ron Soodalter . University of California Press, 2009, 312 p. ($16.47 at Amazon.com). The text of the course.

“The War On Human Trafficking: U.S. Policy Assessed” by Anthony M. DeStefano, Rutgers University Press, NJ, 2008, 175 p.

“A Crime So Monstrous” by E. Benjamin Skinner, Free Press, NY, 2008, 328 p.

Some Organizations:


Coalition of Immokalee Workers (perhaps the first organization to take trafficking head on) (http://www.ciw-online.org/)

Freedom Network (USA) (http://www.freedomnetworkusa.org/) which was established in 2001, is a coalition of 25 non-governmental organizations that provide services to, and advocate for the rights of, trafficking survivors in the United States (http://www.freedomnetworkusa.org/). Since the enactment of the Victims of Trafficking and Violence Protection Act of 2000 (VTPA), Freedom Network (USA) members have worked closely with trafficked persons to ensure that they receive necessary services guaranteed under the VTPA and have also been engaged in monitoring implementation of the law.

FreeTheSlaves (http://en.wikipedia.org/wiki/Free_the_Slaves) US sister organization of Anti-Slavery International (the world's oldest human rights organization). The largest anti-slavery organization in the United States. Emphasizes international slavery. The coauthor of the text for this Adult Academy is Keven Bales a cofounder of Free The Slaves and current president.

Break The Chain Campaign (http://www.breakthechaincampaigndc.org/) Rescues women domestics that are mistreated or enslaved.

Other Articles

Coalition of Immokalee Workers involvement in several anti-slavery agricultural cases:
http://www.ciw-online.org/slavery.html

Slave Labor on Hawaii's Second Largest Farm:
http://humantrafficking.change.org/blog/view/slave_labor_on_hawaiis_second_largest_farm

6 charged in human trafficking scheme involving Thai farm workers:
http://articles.cnn.com/2010-09-03/justice/hawaii.human.trafficking_1_global-horizons-president-thai-workers-guest-workers?_s=PM:CRIME

Seeking justice for trafficked domestic workersin American Courts:
http://www.iwpr.org/PDF/05_Proceedings/Bahan_Della.pdf

Selling Our Children: Atlanta does battle against the sex trafficking of kids:
http://www.sojo.net/index.cfm?action=magazine.article&issue=soj1008&article=selling-our-children

Make sex trafficking unwelcome in Charlotte, NC:
http://www.charlotteobserver.com/2009/10/09/991874/make-sex-trafficking-unwelcome.html

Woman rescued after investigators discover human trafficking operation in Greensboro; five arrested:
http://www.thetimesnews.com/articles/woman-33668-rescued-human.html

Virginia's human trafficking problem:
http://voices.washingtonpost.com/local-opinions/2010/06/human_trafficking_comes_to_vir.html

31 Arrested in Human Trafficking Case (New York):
http://www.nytimes.com/2006/08/16/nyregion/17ringcnd.html

Footnotes:

* The 13th amendment, which formally abolished slavery in the United States, passed the Senate on April 8, 1864, and the House on January 31, 1865. On February 1, 1865, President Abraham Lincoln approved the Joint Resolution of Congress submitting the proposed amendment to the state legislatures. The necessary number of states ratified it by December 6, 1865. The 13th amendment to the United States Constitution provides that "Neither slavery nor involuntary servitude, except as a punishment for crime whereof the party shall have been duly convicted, shall exist within the United States, or any place subject to their jurisdiction."

In 1863 President Lincoln had issued the Emancipation Proclamation declaring “œall persons held as slaves within any State, or designated part of a State, the people whereof shall then be in rebellion against the United States, shall be then, thenceforward, and forever free. “ Nonetheless, the Emancipation Proclamation did not end slavery in the nation. Lincoln recognized that the Emancipation Proclamation would have to be followed by a constitutional amendment in order to guarantee the abolishment of slavery.

The 13th amendment was passed at the end of the Civil War before the Southern states had been restored to the Union and should have easily passed the Congress. Although the Senate passed it in April 1864, the House did not. At that point, Lincoln took an active role to ensure passage through congress. He insisted that passage of the 13th amendment be added to the Republican Party platform for the upcoming Presidential elections. His efforts met with success when the House passed the bill in January 1865 with a vote of 119 to 56.

With the adoption of the 13th amendment, the United States found a final constitutional solution to the issue of slavery. The 13th amendment, along with the 14th and 15th, is one of the trio of Civil War amendments that greatly expanded the civil rights of Americans.

Page URL: http://www.ourdocuments.gov/doc.php?doc=40

U.S. National Archives & Records Administration 700 Pennsylvania Avenue NW, Washington, DC 20408 • 1-86-NARA-NARA • 1-866-272-6272

**Visas: There are many kinds of Visas: T-Visa (allows victims of trafficking to become temporary residents of the US), A-3 Visas for household employees of diplomats who have diplomatic protection, G-5 visas for households of international agencies such as the United Nations, B-1 Visas for domestic workers who “belong” to business people, foreign nationals and Americans with foreign residencies, J-1 visas for “au pairs” from Europe, H-2A visas are for temporary agricultural guest workers.

CHICKEN & EGG ECONOMICS

(Originally from: The Motley Fool: Investment Analysis Clubs/Macro Economic Trends & Risks, Post # 340401)

Government actions seem to be frustrated at every turn. In QE1, instead of loaning the money out, they parked it again with the Fed so the Quantitative Easing did little good. http://www.2000wave.com/ (John Mauldin, "Pushing On A String," Sunday September 26, 2010)

A second thing I have thought about is to let companies repatriate money stuck overseas because companies don't want to pay the difference in taxes between where the money is and the U.S. corporate rate.

In an excerpt from: http://stopcontinentaldrift.blogspot.com/2010/09/jobs-disconnect-between-business-and.html This was done in 2005, for example, but: "The danger of leaving this money overseas is that the companies will start wanting to do something with it and build factories and labs overseas rather than in this country. (The fear with encouraging the money to be repatriated is that companies would use the money to buy back stock and increase dividends, neither of which is productive and even more phony acts. This is what happened the last time this was done in 2005 as a result of the “Homeland Investment Act”.****)"**** http://www.nytimes.com/2009/06/05/business/05norris.html

A third thing that might be done is let the taxes on the very wealthy increase on expiration of the Bush tax cuts and lower the taxes on companies. http://stopcontinentaldrift.blogspot.com/2010/05/effectiveness-of-taxes.html But these possible benefits could be circumvented the same way a tax holiday on repatriated profits was in 2005.

So are we in a Catch 21 situation? Companies will not hire until they see signs of consumption picking up, consumption cannot pick up until unemployment is decreased significantly. Lastly, many jobs will go unfilled because workers cannot move to their location so long as they cannot sell their houses which are probably underwater (appraised at a lower value than the mortgage).

JOBS: THE DISCONNECT BETWEEN BUSINESS AND GOVERNMENT

There is a disconnect between companies and politics in bad times. The business of companies is to provide profits (not jobs) whereas the voting public demands that the government provide jobs and will change the Federal management political party when they cannot do so.


Under the present situation, the government is further to provide jobs at no cost to the taxpayer, a very difficult thing to do. There are those who wish to stimulate the economy by lowering personal income taxes; however, this is a very inefficient way to stimulate the economy as I have said elsewhere.*


During good times, everything is fine, companies will tend to provide jobs to increase profits, even more, the politicians get a growing workforce, and nearly everyone is happy (“nearly” because some are always left behind).


Now there are companies that will keep their workforce during bad times, at least for a while, because they feel that the training costs and startup costs outweigh the savings from letting the workforce go and shutting down some of all of their facilities, either selectively or en masse.


There are even a few companies that will keep their workforce for moral reasons and not business reasons.


The workforce is the elastic dimension of capitalism, even though many companies do all they can to minimize the size of the workforce through all sorts of automation. They will also minimize the size of their domestic workforce if they can find cheaper labor elsewhere through outsourcing. Still, it is by increasing and decreasing the workforce that companies mainly regulate their expenses.


A good example of automation eliminating jobs was when the cotton gin was invented which eliminated the need for all sorts of northern slaves to work at picking the seeds out of cotton but an increased need for slaves on plantations growing increased amounts of cotton. Thus the more difficult ones were shipped down the Ohio and Mississippi rivers to Natchez to work at growing cotton. This is where the saying sold down the river came from* * At one time, Natchez was a thriving community but is now just a small tourist town with no other industry to speak of.


There is a move again to cut the taxes on profits from foreign operations that are repatriated into the U.S. (e.g. John Chambers of Cisco).*** Right now companies must pay the difference between taxes paid to the foreign government and the taxes that would be paid if the profits were obtained domestically. It is felt that money would be brought back if the taxes in doing so were eased to the low single digits. I (who, of course, have no influence what so ever) would like to try a 5% tax on bringing foreign earnings back into the country. The danger of leaving this money overseas is that the companies will start wanting to do something with it and build factories and labs overseas rather than in this country. (The fear with encouraging the money to be repatriated is that companies would use the money to buy back stock and increase dividends, neither of which is productive and even more phonier acts. This is what happened the last time this was done in 2005 as a result of the “Homeland Investment Act”.****)


But easing the corporate tax burden on returning profits could enhance the prospect of building factories and labs in this country instead of overseas and thereby encourage some hiring if companies would cooperate. This the government could not only do at no cost to the American taxpayer, but bring in some tax revenue as well. It is felt that there is something like one or two trillion dollars of corporate profits overseas so at 5% we might be talking about $50 to $100 billion dollars of tax revenue. True this is only a baby step regarding our Federal deficit, but I think the solution is to take many baby steps and do so gradually so our system can adjust. And there could be a multiplier as well through construction of factories and labs (both of which involve labor) plus staffing such as mentioned above.


* http://stopcontinentaldrift.blogspot.com/2010/05/effectiveness-of-taxes.html
**http://www.bigsiteofamazingfacts.com/what-does-the-expression-sold-down-the-river-mean-and-how-did-the-phrase-originate
*** http://www.msnbc.msn.com/id/39173765/ns/business-personal_finance/
**** http://www.nytimes.com/2009/06/05/business/05norris.html

WELFARE FOR THE WEALTHY

A recent Wall Street Journal had a major article titled The Estate Tax (Monday, September 20, 2010). In writing for "Get Rid Of It", Ed McCaffery in "It's Unfair, and There's a Better Way" curiously says "It is a simple moral case..." In a country that prides itself on the Judeo-Christian work ethic, it would seem to me that the moral case is that there should be no inheritance, that every generation should start from scratch. Even in this case, the children of the wealthy would have an advantage because of better education and health care. Besides, inheritance, at least a large inheritance, promotes sloth just as welfare for the poor is thought to promote sloth. Inheritance is just promoting sloth for the wealthy. In this regard, I agree with Michael J. Graetz who authored the "Keep It" article "It's Fair, and We Need The Revenue" and who wrote, "On the other hand, large tax-free inheritances do encourage their recipients not to work. People who receive large inheritances are about four times more likely to drop out of the labor force than those who inherit only small amounts."

Still, I realize that deep in people's hearts is a desire to leave something to their children and maybe other heirs, besides debts, even though most families cannot do so. Under the previous inheritance law, the first $3.5 million in inheritance was exempt from taxation (up from $1 million before that), and the tax on the balance was 45% (down from 55% before that). It seems to me that this is very generous. After all, an income of 5% from a $1 million inheritance, a percentage easy to attain, is $50,000/year, a sum actually somewhat above the median FAMILY income of 2009 ($49,777).* It seems to me that the previous law on inheritance tax was more than generous concerning inheritance, and would hardly encourage the wealthy to "spend it all" during their lifetimes and die broke as Ed McCaffrey suggests.


*http://en.wikipedia.org/wiki/Median_household_income

DE-DEVELOPING AMERICA

Well, to de-develop America* sounds like a very Christian goal but unrealistic. Capitalism requires ever more consumption. You can either do this through population growth, though the increased population has to have the money to consume (a problem right now), or through getting the existing population to want always more (the purpose of advertising) or both. Of course there are places in the world that could well use more consumption, but we haven't figured out a way to get them the money to buy things. Capitalism also requires an ever increasing population of low wage workers (thus outsourcing). One would think that automation would decrease the need for low wage workers, and may to some degree, but recent history has shown that the low wage workers abroad can operate such equipment so the need for low wage workers still exists.


Communism as practiced always seems to end up with a dictator and a not benevolent dictator at that. Communism as practiced also does not invoke common ownership of goods and property. The trend has been for Communistic nations to adopt Capitalism (China, Russia) which seems to be raising the standard of living for many, but with very serious pollution problems.


Socialism seems to work in some countries like Sweden (which curiously has a high suicide rate, perhaps as a result of lack of sunshine in the winter) and other Scandinavian states. Socialism is not working so well in the U.S. because we insist on getting government services without paying for them. It is all very nice to cut out the services, but, as soon as some disaster occurs, even people who say they want small government, suddenly want a LOT of government aid and fast (see BP Deepwater Horizon oil spill)!** Canada seems to be able to invoke Socialism and still balance their budget, but they don't have open-ended government services as we in the U.S. do.


So, frankly, I don't know of a solution to this problem. I wish I did.


*White House Science Czar Says He Would Use ‘Free Market’ to ‘De-Develop the United States’ In a video interview this week, White House Office of Science and Technology Director John P. Holdren told CNSNews.com that he would use the “free market economy” to implement the “massive campaign” he advocated along with Paul Ehrlich to “de-develop the United States.”
http://www.cnsnews.com/news/article/51702 September 16, 2010


** http://stopcontinentaldrift.blogspot.com/2010/06/if-it-wasnt-so-tragic-it-would-be-funny.html

BEST ONE-TERM PRESIDENT EVER?

Barack Obama's record is very impressive particularly considering the opposition he has faced to almost everything. It started with the Stimulus Package, Cash for Clunkers, Health Care Reform bill, the BP oil spill fund and dividend discontinuation, GM & Chrysler rescue, and what has come to be called FinReg, among others. Though people tend to "blame" Obama for TARP, it was actually a George W. Bush initiative. Since it will eventually turn a profit and only one major financial institution failed (Lehman Bros.), how can one say it was not successful? Obama's real problem is unemployment.

Stimulus Package While it is probably true that the Stimulus Package has not created many permanent jobs, it has saved for awhile thousands of teachers, firemen, and police jobs. If these people had been put out on the street, certainly the economy would be in worse shape today. And the amount of highway construction going on is immense. It is the nature of construction jobs that they are not permanent, but thousands of workers must have been hired for these highway jobs.

Cash For Clunkers The claim was made on Cash for Clunkers, that it "just" advanced the sale of automobiles that would have been bought anyway. That does not seem to be the case in that the automobile companies continue to sell a lot of autos and are turning nice profits, even GM and Ford. The purpose of Cash For Clunkers was to get some low mileage cars off the road and that it certainly did.

Healthcare Of course I wish the Healthcare bill was a cleaner bill rather than the 2,040 page monstrosity it became, but in modern America, you seem to have to buy all sorts of extraneous things in major legislation to get it passed. And after that some important things weren't in the bill like single payer, Public Option,* tort reform, and completely getting rid of Medicare Advantage which costs 15% more than regular Medicare. At that, the Health Care bill, for example, has 788 amendments of which 161 were by members of the GOP (http://www.slate.com/id/2223023/). But finally after decades we have something nearly universal that we can start with. Obama said he would get a Health Care bill when he was campaigning for President, and he got it in spite of massive opposition. In our own extended family, the provision to increase the age at which children may be covered by the parents health care plan to 26 has been very important for a partly employed graduate student. It may well be that health plans will cost somewhat more, but there is more than just "me" in morality, and , finally, the right thing has been done or at least begun by covering some 30 million people that are currently uninsured. Many Presidents in the last 70 years have tried to get a Healthcare bill passed and failed. Obama succeeded.

FinReg (also known as Dodd-Frank) At 848 pages, the FinReg bill was comparatively brief; yet who knows what is in such a monstrosity? It took two years to write and get passed. The financial crisis we were in was so severe that I am really surprised that more Republicans didn't feel compelled to vote for it. Of course the financial industry got it watered down, but it seems to me that most analysts that seem objective feel it will do good. For example, Henry Paulson who was Bush-43's Treasury Secretary is pleased with the bill.** Other advances include placing "... derivatives on exchanges and clearinghouses, by creating a systemic risk council, by forcing banks to provide "funeral plans" that explain how to unwind them in the event of a failure, by creating an Office of Financial Research to collect daily data and provide quick analysis on transactions, there's much less chance that a financial crisis would leave regulators totally confused about what's going on, and who owes what to whom."* For more see the Ezra Klein article.** It is true that much is yet to be worked out on implementing the bill as is the case to some extent in the Healthcare bill too. For these reasons, it is probably best to slow down and work out these two major bills before taking up others like energy policy. That is a pity but is needed.

BP Dividend Elimination and Remediation Fund I have covered this item elsewhere: http://stopcontinentaldrift.blogspot.com/2010/06/if-it-wasnt-so-tragic-it-would-be-funny.html. In brief, first people laughed at Obama to think he could get a huge company to eliminate its dividend (said to be too important) and set up a $20 billion fund to reimburse damage done to businesses and individuals. When, in fact, BP voluntarily complied, the cry went up that he was too strong a president. Do we want a strong president or don't we in times of disaster? Well, I'm very impressed. Readers may also wish to take a look at a related item on BP: http://stopcontinentaldrift.blogspot.com/2010/06/its-only-matter-of-time-before-we-hear.html.

Unemployment Unfortunately for President Obama, the single most important statistic for reelection is the unemployment picture. When the voters perceive increasing unemployment on election day (whether it is true or not), the incumbent loses. This was the case with Jimmy Carter and George H.W. Bush. Of course in the next 26 months, the current dismal unemployment picture could turn around, as it did for President Reagan, but our current economic picture is much more severe than it was in the early 1980s and a vigorous growing employment picture seems unlikely. Therefore I feel that President Obama probably will be a one-term president no matter his other outstanding accomplishments; however, we have learned that it is dangerous to count out The Comeback Kid.

Notes added For 2011: Obama's accomplishments continue. His orders led to the killing of Osama Bin Laden on May 2, 2011. More controversial is the killing of the American trader Anwar Al Awlaki in Yemen on September 30, 2011.*** Got the new Start Treaty ratified by congress (Surprising opposition to this is what makes it so significant.); it went into effect on February 5, 2011. Lifted restrictions on stem cell research on March 9, 2011. Eliminated Don't Ask, Don't Tell on September 20, 2011, over strong congressional opposition.

*http://en.wikipedia.org/wiki/Single-payer_health_care; http://en.wikipedia.org/wiki/Public_health_insurance_option

**"We would have loved to have this for Lehman Bros.," Henry Paulson told Andrew Ross Sorkin: http://voices.washingtonpost.com/ezra-klein/2010/07/what_finreg_does.html

*** http://www.nytimes.com/2011/10/12/opinion/justifying-the-killing-of-an-american.html

DOES GOVERNMENT SPENDING HAVE A MULTIPLIER?

I keep hearing that government spending has no multiplier effect on the economy, and I have wondered what is behind this so I started Googling around and found the following article from the Heritage Foundation (URL at the bottom). I guess my thought is that the reasoning is partially correct and partially wrong. First I'll start with what I think is at least mostly wrong:

And if the original $1.2 trillion in deficit spending failed to slow the economy's slide, there was no reason to believe that adding $200 billion more in 2009 deficit spending from the stimulus bill would suddenly do the trick. Proponents of yet another stimulus should answer the following questions: (1) If nearly $1.4 trillion budget deficits are not enough stimulus, how much is enough? (2) If Keynesian stimulus repeatedly fails, why still rely on the theory?

The problem with this paragraph is that the $1.2 trillion dollar deficit was not from NEW spending by the government,it was almost entirely because of a decrease in revenues by the government from decrease income and production due to the great recession. In other words, the government kept performing its old programs while the money to implement them decreased. After all, you would have to eliminate the ENTIRE Federal government as we know it (including the DoD) to eliminate the estimated deficit this year. The following paragraph, however, makes some sense:

Congress cannot create new purchasing power out of thin air. If it funds new spending with taxes, it is simply redistributing existing purchasing power (while decreasing incentives to produce income and output). If Congress instead borrows the money from domestic investors, those investors will have that much less to invest or to spend in the private economy. If they borrow the money from foreigners, the balance of payments will adjust by equally raising net imports, leaving total demand and output unchanged. Every dollar Congress spends must first come from somewhere else. This paragraph would be true if the wealthy, for example, spent the money comparable to what the government does. In other words, if the wealthy increased the number of homes they were building, say, to counteract an increase of government infrastructure spending (most on roads, so far, I believe). Thus a billion dollars spent on new houses by the private sector would probably have a multiplier equivalent to a billion dollars spent by the government on roads. Would that reality be this way. I've explained why it would not more than once on this blog. For a long version: http://stopcontinentaldrift.blogspot.com/2010/05/effectiveness-of-taxes.html.

In brief, much of the wealth of the wealthy is not invested in productive things for this country, and the sums invested in productive things does not increase significantly in a recession. It is not just I who have this reasoning, but Greenspan too worried that too much of the gain from the Bush tax cuts would be invested in bonds by the wealthy and the middle class in paying off debt. Suppose the wealthy increased their purchases of real estate in a recession when it can be purchased at fire sale prices? To what degree would this stimulate the economy. So far as I can tell it would be none or at least very little. After all, the amount of real estate in the country is constant. But I do agree that much of the stimulus money spent so far has been defensive, i.e. spent on preserving existing jobs of teachers, policemen, firemen, etc., and, therefore, preserved jobs rather than create new ones. But if this was not done, there would be considerable purchasing power lost to the economy. Would the wealthy have picked up not only the slack, but increased their spending on productive things? I sincerely doubt it. Thus I think the government spending does have a multiplier, more like Zandi's analysis: Mark Zandi of Economy.com has boiled down the government's influence on America's broad and diverse $14 trillion economy into a simple menu of stimulus policy options, whereby Congress can decide how much economic growth it wants and then pull the appropriate levers. Zandi asserts that for each dollar of new government spending: temporary food stamps adds $1.73 to the economy, extended unemployment benefits adds $1.63, increased infrastructure spending adds $1.59, and aid to state and local governments adds $1.38.[4] Jointly, these figures imply that, in a recession, a typical dollar in new deficit spending expands the economy by roughly $1.50. Others, I am sure feel differently.

http://www.heritage.org/Research/Reports/2010/01/Why-Government-Spending-Does-Not-Stimulate-Economic-Growth-Answering-the-Critics

Slightly modified from Investment Analysis Clubs/Macroeconomic Trends and Risks of Motley Fool

BP DOES IT AGAIN

The reason that things are so messed up in Iran is due to BP's (then the Anglo-Iranian Oil Company) lobbying the British government to get the U.S. to overthrow Prime Minister Mossadeq of a duly elected Iranian parliamentarian government, which the CIA did. (http://en.wikipedia.org/wiki/BP) Relations with Iran and the U.S. have gone downhill ever since.

Now it is alleged that BP lobbied for the exchange of parishioners in the Lockerbee bombing over Scotland (http://www.aolnews.com/politics/article/bp-lobbied-brits-ahead-of-lockerbie-bomber-release/19555218) where the bomber Abdel Baset al-Megrahi of Pan Am Flight 103 was released because he supposedly had terminal cancer. BP is said to have stated that the slowness of the prisoner exchange was endangering an offshore drilling agreement with Libya (http://www.cbsnews.com/video/watch/?id=6698475n).

Isn't it strange how BP keeps hopping up in connection with so many disasters, such as the Texas refinery explosion of 2005 where 15 were killed and 170 injured, and, of course, the mega environmental disaster of the Deepwater Horizon explosion and major oil spill problem which is still ongoing.

President Obama wants a six month moratorium on new deep water drilling. It seems to me only reasonable for the Deepwater Horizon out-of-control well be solved before more deep water drilling is undertaken. Should President Obama allow more drilling at this time and another such oil spill occur, he no doubt would be not only politically damaged but his administration would be over. My understanding is that a group of oil companies have gotten together to make plans for a rapid response to another deep water oil well spill and is setting rules on the types of drill mud and casing to be used. This is exactly what is needed and is to be applauded, and it may not take a full six months to expedite it.

Snip: "Critically, the new system is expected to be deployed within 24 hours of an offshore spill, and to be able to fully contain the oil spilled within weeks, said Sara Ortwein, a vice president of engineering at Exxon, which has taken the lead in setting up the spill plan.
A new nonprofit entity, called the Marine Well Containment Company, will be created and be in charge of operating and maintaining this emergency capability. The entity, modeled in part after the Marine Spill Response Corporation, which was set up after the 1989Exxon Valdez oil spill in Alaska, will also finance research to look into new ways of tackling an underwater spill." (http://www.nytimes.com/2010/07/22/business/energy-environment/22response.html?_r=1)

INVESTORS ACCOUNTABILITY

Also see: http://stopcontinentaldrift.blogspot.com/2010/06/corporations-are-political-entities.html

Corporations are political institutions. One of the big rules in favor of investors is that the owners (i.e. the stock holders) got a law passed that they are not held accountable for the malfeasance or losses of their company. Think about the value of that.

The above is not true about all types of owners. For example, general partners ARE held accountable although limited partners are not.

Stock holders and limited partners can lose their investment*, but they are not held accountable for malfeasance or losses of their company. Whew, what a relief!

Officers, however, can be held accountable for malfeasance in their companies. Think Enron.

*If you buy on the margin, you can lose more than your investment, of course, but we don't do that, do we.

THE TROUBLE WITH INCOME TAX CUTS

Also see: http://stopcontinentaldrift.blogspot.com/2010/05/effectiveness-of-taxes.html earlier from May 2010.


The trouble with income tax cuts are that they are a very inefficient way to stimulate the economy, in spite of what certain people may say. The wealthy buy Treasury bonds and notes and the middle class pay off debt. Although both are admirable, they don't stimulate the economy. The wealthy also buy things that don't stimulate our economy such a purchasing foreign bonds, personal Bombardier jets (Canada), chalets in Switzerland, and islands in the Bahamas (now also islands in Greece) though they may help stimulate the international economy. Yes, there is some investment in new initiatives, but the pay back on those that succeed (and most don't) is rarely immediate and usually takes years. Think of all the years it took Amazon.com to become profitable, for example.

My own suggestion is to let the income taxes expire (just on the wealthy if you prefer) and use some of the revenue to cut corporate income taxes (and let some go for government debt relief). This will make our companies more competitive in exports and, hopefully, cut their prices some domestically. This could lead to more profits stimulating stock prices so that the wealthy could recoup some or all of their income losses.


Slightly modified from post # 63705 in Industry Discussions/ Real Estate Investment Trusts: REITs of Motley Fool

DID THE STIMULUS INCREASE UNEMPLOYMENT?

The general consensus is that the Federal stimulus plan at least preserved employment, at least temporarily, over what it might have been if the stimulus plan had not been passed. There are, however, the contrary views. In a paper by Louis Woodhill (http://www.realclearmarkets.com/articles/2010/07/12/what_if_stimulus_advocates_were_half_right_98569.html:)

he states:

In "The Job Impact of the American Recovery and Reinvestment Plan" dated January 9, 2009, Christina Romer and Jared Bernstein outlined the rationale for, and the expected results from, President Obama's "stimulus" program. Their report included the now-famous graph that warned that without action, unemployment would rise from 7.4% in December 2008 to 9.0% in mid-2010, after which it would begin to decline.

...........................

If Romer and Bernstein were right about the base case, then, rather than creating jobs, stimulus actually destroyed them. By June 2010, stimulus was supposed to have "created or saved" 2.8 million jobs, on its way to a total of 3.7 million by the end of 2010. However, total employment in June 2010 was actually 3.2 million less than what Romer and Bernstein projected it would have been without stimulus.

...............................

It makes sense that stimulus (government borrowing and spending) would destroy jobs. Government bonds are bought with investment dollars. If there is no change in incentives to call forth more output, then if the government sells more bonds, other forms of capital must be liquidated in order to buy them. Without tools (capital), workers can produce nothing and their jobs disappear.

The above is an interesting canard. The reason for the above statements is that Woodhill claims that money borrowed by the Federal government has taken away from money that could have been borrowed by the private sector (e.g. businesses). At least one problem with the hypothesis is that corporations are hoarding cash. Why shouldn't they when their plants are operating far below capacity? Why would they add more capacity in such a situation? In addition banks aren't lending. The banks have the money to lend but they claim demand is not only low but finding credit worthy candidates is difficult. So there is ample money available for funding the government debt. AND we have not taken into account above of the willingness of foreigners to buy our Federal debt (e.g China and Japan). Every graph I have seen shows overall borrowing declining, not staying the same as the article suggests (i.e., borrowing is a zero sum game. If A increases, then B must decrease).

I believe others, including some conservative economists, that the stimulus did save jobs and added some, but they tended to be overwhelmingly saving and creating jobs temporarily, such as highway construction, teachers, police, and firemen. Particularly among teachers, police, and firemen, this year these jobs that were propped up are now being lost; however, my impression is that stumulus construction jobs are increasing now that that there has been time for planning.

(Much of the above appeared as post #63572 (15 June 2010) in the Industry Discussions/Real Estate Investment Trusts: REITs board of Motley Fool.)

THE AMERICAN SOUTH AND WAR

The American South has a tendency to be very war-like. They not only were eager to start the Civil War, but, when the political Solid South was a part of the Democratic party, it was the Democratic Party that was the war party (WW-I, WW-II, Korea, early Vietnam). The Republican Party had an isolationist bent, and there were those who even opposed America’s involvement in WW-II. Then the Republicans adopted their Southern Strategy and lured the Solid South into the Republican Party, after which the Republican Party has become the war party (escalation of Vietnam, Lybia bombing, Panama, Afghanistan, Iraq; I do not count Reagan’s Granada War as it was a joke. At least Reagan found someone we could beat.).


Now it seems there may be the beginnings of a rift in the Republican Party and an isolationist group of mainly northern Republicans seems to be raising their heads: Pat Buchanan has been an isolationist for a long time and George Will has opposed the Afghanistan war beginning with the last presidential election. Some others seemingly against the Afghanistan War are: Michael Steele, Michelle Bachman, Liz Cheney, and Ann Coulter, though one or more may really be in favor of the Afghanistan war (e.g. especially Michael Steele according to some) and are just using public opposition to the war as an election ploy to be used against the Obama regime and congressional Democrats. But they also seem to be adopting a conservative opposition to big government which has been missing for a long, long time in the Republican Party. Reagan never came close to balancing a budget, nor did Bush-41 or Bush 43. In fact if they could get tax cuts, primarily for the wealthy, they seemed to be happy with any resulting Federal deficits. After all Republicans pushed though two wars that they never tried to pay for, massive tax cuts primarily for the wealthy that they never paid for, and an increase in the large drugs benefit package that they never paid for. In fact, Bush-43 urged people to go out an shop after the disaster of 9-11-2001.

Personally, I have no opposition to these Republican’s claim that Afghanistan has become Obama’s war. It is very nice that several Republicans have come out and said that it is America’s war. But the Obama administration’s major escalation of the Afghanistan War shifts the "ownership" of the war to him. There is no sign the Democratic base favors this escalation, quite the contrary. But if the Afghanistan War should be successful and Afghanistan become a stable country that doesn’t harbor terrorists, then Obama also will deserve the credit

INFLATION OR DEFLATION ?

I keep hearing people worrying about inflation when deflation seems to be what is occurring.

It is being observed that interest rates on Treasuries are falling (including the 30-yr which is now below 4%, I believe) and have been for some time which is deflationary, not inflationary. What is their time frame for inflation? Do they think it will happen, for example, before the end of the year? What will trigger it?

The employment picture is not good, which is a deflationary sign not an inflationary sign. Interest rates are falling, on CDs and Savings Accounts as well as on Treasuries, which is not an inflationary sign. Public confidence is falling which is not an inflationary sign. Financial sector loans on real estate are falling which is not an inflationary sign. Corporations are banking money which is not an inflationary sign. Housing sales seems to be in a double dip which is hardly inflationary. There are increasing cries for Federal and state fiscal austerity which is not inflationary. In fiscal austerity, government employees (teachers, policemen, firemen, Civil Servants, etc.) get laid off, contracts with companies get canceled and new ones are curtailed, etc., which is deflationary, not inflationary.

I think people look at all that deficit spending by the Federal government and think it MUST mean inflation. It seems reasonable. But what all that deficit spending seems to be doing is to keep the present situation from being much worse than it is. Well, I have been expecting runaway inflation since 2001, but no longer speculate when it will occur. As for me, I'm going with deflation and finally became convinced of it just a few months ago and have been investing accordingly, e.g. such as buying a block of 30-yr Treasury bonds at 4.5% interest a few months ago. With the fall to 4% interest, the value of the bond has increased by about 7.5%. There are those who speculate that the interest rate will fall to about 3%.

MOMENT OF PEACE (Poem)

The early morning mist is gone.
The sun, still low, jets through the trees
Whose trunks' deep shadows cut across the green.


The air still fresh remains.
The creek still winds down to the seas
Between steep banks of mud and stone.


A fragile scene, calm and quiet.
A phantom scene forgotten soon,
As life sweeps past this moment of peace.




Originally written in 1962 and published in 1996 in Stevens, C.A. (ed), Carvings in Stone, National Library of Poetry, p. 528 (Library of Congress: ISBN 1-57553-066-X)

IF IT WASN'T SO TRAGIC, IT WOULD BE FUNNY

The BP Deepwater Horizon oil well disaster has brought out some of the contradictions of life that would be funny if the situation wasn't so tragic. In Louisiana, Alabama and Mississippi, you have three very conservative states where people believe in small government; yet, with the BP oil spill these people can't seem to get enough of the Federal government (http://www.whitehouse.gov/deepwater-bp-oil-spill/). They want more from the Federal government, and they want it faster, though in the Exxon Valdez oil spill in Alaska, the Federal government did not get involved at all. After eight years of an administration engaged in dismantling Federal government regulatory functions, there are now cries that the government regulatory bodies involved in the BP spill didn't do their jobs. So you may believe in a minimal Federal government, but, it turns out that when disaster strikes, you want your Federal government to have regulated it and then to fix it.

And then when it was said that President Obama wanted BP to put up a $20 billion fund* run by an independent manager and to discontinue their dividend out of respect for the disaster, first people said he can't do that. But, when BP did do these things voluntarily, there was an outcry against our president being a strong president, rather than admiration for his strength. I don't recall any outcry when President Truman sized the railroads in 1946, although this was to break some unions and not regulate a company. Again in 1952, President Truman nationalized the steel industry, once more to break a union strike. In this case, the Supreme Court ruled he did not have the authority to do so. However, in President Obama's case, BP voluntarily complied. The person to oversee the dispersal of the $20 billion fund - Kenneth Feinberg - is the same man who oversaw the 9/11 Victims Compensation Fund and is highly regarded (http://www.nola.com/news/t-p/frontpage/index.ssf?/base/news-14/1276756264251880.xml&coll=1).

*This fund will not be filled all at once, but at $5 billion/yr for four years so the company will not be seriously impacted.

IS BP TOO BIG TO FAIL OR CUT ITS DIVIDEND?

From a post on Motley Fool about the BP Deepwater Horizon spill: ...it's only a matter of time before we hear the refrain "well, we can't let BP fail, they're too big and would collapse the global economy". In fact, we're already hearing rumblings of that, if you read the reports about BP alone representing 13% of all FTSE dividend income.

I'm sputtering. I'm aghast. I really don't know what to say. The above comment only summarizes what I was hearing yesterday about how a company that has caused the hugest (words fail me) environmental disaster in our countries history shouldn't even lower its dividend because it would hurt too many people. And the disaster is still going on. It shouldn't even be in business.

Where was the outcry, for example, when GE cut its dividend? It too is a huge company, and I presume it paid dividends to lots of widows and orphans. Whatever may happen to GE in the future, I believe it has yet to have a negative quarter for earnings. When I sold my GE stock, I took one of the largest losses of my investing career, and I had bought the stock many years ago between $20 and $25/share, which hardly seemed exorbitant.

Standard Oil was broken up. ATT was broken up. What has happened to us that BP is too big to be broken up. Here is a company that kills its employees (15 with something like 170 injured in 2005 and 11 more this year which is 26 within five years).

I just can't believe what I am hearing. I have never bought BP stock because I believe they are a rogue company.

Maybe I should have done all the above in caps! I'm screaming!

...............................................................................................

Turns out that on June 3, 1979 the Ixtoc I exploratory well blew out 600 miles south of Texas in (where else) the Gulf Mexico. The spill is rated as the third largest ever (http://en.wikipedia.org/wiki/Ixtoc_I_oil_spill). It spilled 10s of thousands of gallons per day for 9 months and was finally capped on March 23rd of 1980. In the case of Ixtoc, most of the oil stayed far out to sea although there were major bird kills. Texas did take large precautionary measures.

Note this well was being drilled in water only 50 m deep, and it still took more than 9 mo to cap it. Also note that the famed Red Adair was involved in trying to stop the well flow. And note that the well continued to flow for three months even after the relief well made contact. No one knows where all this will end. Considering the Itex well experience, I wouldn't bank too much on the relief well stopping the flowage from Deepwater Horizon. So I wouldn't get my hopes up too much for Deepwater Horizon oil flow stoppage in the foreseeable future.

I would like to think that modern technology has improved so a better job will be done on Deepwater Horizon than on the Itex spill, but I don't know. The sequence going on in the Deepwater Horizon spill sounds awfully similar to the Itex spill, and you have to deal with a mile deeper water situation. Also the environmental damage from the Itex spill was very minor compared to Deepwater Horizon. I think that BP is in lawsuit city.

(The above is based on several posts on Motley Fool. These post are #330577 and #33076 in the Industrial Analysis Clubs/Macro Economic Trends and Risks; post 6365 in the Investment Analysis clubs/Dividend Growth Investing.)

CORPORATIONS ARE POLITICAL ENTITIES

There has been a good deal of discussion lately about Federal govenrment bailouts of industries. The AIG bailout may be the largest, but it is hardly unique. Some of us may recall that in 1979, Jimmy Carter bailed out Chrysler which actually paid off the loan early. Also a duty was put on Japanese imported automobiles which raised their cost by about $2,000 to make the U.S. automakers more competitive but hurt American consumers.

There was also a railroad bailout, in 1959 of the Great Northern Northern RR. In a recent article in the WSJ (06-10-2010), the headline reads Bernanke Expects "AIG To Repay Aid." And in a hearing, the CEO of AIG Robert Benmosche "...said taxpayers are 'going to get your money back plus a profit.'" So eventually this may turn out all right.

I think that there is a great misunderstanding about what corporations are. They are political organizations that are supposed to play by the rules set out by the government. Of course, they develop a life of their own and do their best to get around the rules all they can. One of the biggest political aspects of corporations are that stock holders are not liable for losses sustained by a corporation. We like to fantasize that there is some macho aspect to corporations that they are tough guys who live or fall by their own merits. Actually they are political organizations that go to the government whenever they are in trouble and continually try to skew the laws in their favor.

More common are indirect bailouts, such a tariffs. Just within the last decade, tariffs were put on imported steel and Canadian lumber to bail out the American steel and lumber companies. And of course, an infamous one is the tariff put on imported sugar cane ethanol, mainly from Brazil, to make such importation uneconomic so that the American corn ethanol agribusiness is profitable but again at a cost to the consumer.

SOMETIMES YOU GET ONLY ONE ACCIDENT

Just how many accidents will BP be permitted? Look, if you run your car into a telephone pole at 60 mph, you are probably permitted only one accident, in spite of air bags and seat belts. Or you might be driving safely on a interstate when a semi-truck trailer comes over the median strip smashing into you. Though it was not your fault, you were permitted only one accident.

But consider BP. Perhaps their worst "accident" was when they had their previous name of The Anglo-Iranian Oil Company which arranged for our CIA (Hard as that may be to believe.) to eliminate the duly elected Prime Minister of Iran. What did that Prime Minister (Mossadeq) want? He wanted the same deal that BP had signed with Egypt, i.e. 50% of the profits. Yes, at one time, within the lifetime of many of us, Iran had a democratic government. But BP (current name) managed to get us to do away with a democratic (parliamentarian) government and reinstitute the Shah and a regime more "amenable" to BP. Of course the rest is history. The Shah was eventually replaced by the ayatollahs and a government hostile to the U.S. with countless deaths and several times more serious injuries. See: http://en.wikipedia.org/wiki/BP for a more complete but still brief history.

I don't know just how many serious accidents BP has had, but another disastrous one was the 2005 Texas City refinery disaster in which 15 people were killed and 170 injured (http://en.wikipedia.org/wiki/Texas_City_Refinery_explosion). This was at the third largest refinery in the U.S. Actually, the refinery was a part of Amoco before BP bought Amoco.

And then there are small accidents like the recent Trans Alaskan Pipeline accident that shut off oil transport for 10% of the U.S. oil consumption for more than 3 days. Well, no one lost their lives or were seriously injured in this accident. Though this is the longest accident to fix on the pipline, it is just one of a number of ongoing accidents.(http://www.usatoday.com/news/nation/2010-05-29-alaska-oil-spill_N.htm?csp=24&RM_Exclud e=Juno) But if spills of the Alaskan pipeline were the only problems BP faces, perhaps we could live with it, but they add to the list.

Then of course, there is the BIG ONE in the deep water of the Gulf of Mexico. This accident smells. Again there was loss of life (11 killed), a mounting and broad ecological disaster to both the sea food (shrimp, fish, crabs, etc.), tourist industry, and, last but not least, the loss of millions of barrels of oil. This disaster is still developing.

One has to think, hasn't BP had enough accidents? How many lives have to be lost? How many serious accidents have to be incurred? How much oil has to be wasted? How many global political problems are they to be permitted to create? Haven't they caused enough trouble? Isn't it time that BP be disbanded? It may be too bad that the BP Amoco deal didn't go the other way, i.e. Amoco acquiring BP. But it didn't. How much longer is BP going to be allowed to mess up society?