A GIFT TOO MUCH IS TOO MUCH OF A GIFT

A poor baby boy was orphaned when his parents were killed in a tragic airplane crash. He was raised by his uncle. Upon graduation from high school, his uncle asked him what he would like for a graduation present. The groovy teenager replied that he would like some wheels -- that is, a sports car. The next day, when the boy got home, the uncle told him that there was something to drive around in, in the back yard. The boy ran to the back yard with great anticipation, but all that was there was a brand new Army tank, heavy category, with treads and all.

The boy tried to hide his disappointment while he said, "Gee thanks, Unc. It's a nice heavy tank, but really a light sports car would be just as good."

"What's the matter with it."' asked the Uncle, none too kindly.

"Well, it just won't a-go-go, if you know what I mean."

"Yes, I admit it wont go as fast as a sports car, and it may be a bit more difficult to maneuver, but it'll go anywhere a sports car will go and a good many places an automobile won't."

"But Unc, I'm not worried about assassination. What I'm interested in is assignation."

"Well, I don't have a spare car," the Uncle replied. "It's a nice new tank of the finest make, and you should be happy."

Moral: Sometimes it is all right to look a gift horse in the mouth.

1965

Note: The above short story in the style of James Thurber was written in response to trying to order a light duty lath in our branch of the government. This order was resisted by the central shop that was way overloaded with work, yet wanted all the work. Finally, we were offered a new heavy duty lath that the central shop had just received and was a great overkill. For example the chucks weighed as much as 70 lbs and had to be loaded on with a hoist.

IT'S THE FLOODS, STUPID!

While I don't want to minimize the physical effects of large earthquakes and hurricanes, we have witnessed that the biggest damage in two recent events in 2011 was caused by floods rather than the shaking or high winds: the tsunami in Japan and the floods accompanying all the rain in the hurricane Irene.

I have been in many earthquakes up to magnitude 6 as I spent four years in Pasadena, CA, and three months in Japan. I also lived in a suburb of Denver, CO, for 15 years that included the time of earthquakes increasing in magnitude that got in to the 5-6 range of magnitude on the Richter Scale (remember that a magnitude 6 earthquake has a factor of 10 more energy than a magnitude 5 earthquake). These Denver earthquakes turned out to be due to disposing of pesticides down a 12,000 ft hole and greasing a horizontal fault. A former classmate of mine and then a colleague recommended pumping out the column of highly toxic pesticides to reduce the head (How would you like to be in the crew that did that?). It was controversial as some said this pumping might increase the earthquakes; however, he prevailed and was proven to be correct. For one experience I had with an earthquake in Japan, see: http://stopcontinentaldrift.blogspot.com/2009/11/you-are-so-lucky.html

While I have never been in a hurricane, I was involved in a false alarm that was scary enough because I was on unsecured scaffolding: http://stopcontinentaldrift.blogspot.com/2010/12/hurricane-warning-biographical.html

For an account of the Theology Of Natural Hazards, see: http://stopcontinentaldrift.blogspot.com/2010/05/theology-of-natural-hazards.html

MORE

As stated elsewhere, America is a consumerism society (http://stopcontinentaldrift.blogspot.com/2011/07/our-consumerism-society.html). Knowing this , companies do all they can to get us to want ever "more," "more" whatever. But we are well into the new normal of this country where we cannot always want more. We are going to have to decide when enough is enough. When we are happy with what we have and concentrate more on maintaining that. The effect on the economy of the country of not always wanting "more" will be severe. In fact a new economy will have to be invented.

There are people who have decided that we have far too much government. Unfortunately our previous president ruined the economy of the country, and we now have Federal revenues of what they were in 1950 as percent of GDP, though we have twice the population we had then. In the meantime in order to keep the country from sliding into a 1930s style recession, our government spent a lot of money; however, the situation is so dire that our government is running up huge deficits that are making some people very nervous. A recent article suggested that we need to cut the Federal budget by $7.4 trillion over the next decade. If we do this, it will put us into a deep depression at least as bad as in the 1930s.* Think of things we have now that we didn't have in 1950, for example, but with twice the population we will have to go back farther. So one better think of what is enough to make you happy and try to arrange your life to protect that. Even the Debt Ceiling Compromise, if totally enacted, may put us into a recession toward the end of the 10 years: http://stopcontinentaldrift.blogspot.com/2011/08/debt-ceiling-compromise-effects.html

The topic of "more" has been in some movies too. For example take Key Largo. At a point in that movie Humphrey Bogart says to Edward G. Robinson (the crook), "I know what you want." Robinson replies, "Whaaat?" Bogart replies, "You want more. That's what you want." Robinson sort of looks off into space and says, "Yes, yes that's what I want. At least I always have." These are not direct quotes but close enough.

Another is The Treasure of Sierra Madre. The grizzeled old prospector says to his two tenderfeet, "Before we go to search for gold, we have to set a goal for how much we want." The tenderfeet don't like it, but go along. In the end the grizzeled old prospector has none of the gold but is being well taken care of by a tribe of Indians because he saved one of their children. He is happy. One of the tenderfeet who has the gold, Humphrey Bogart, gets captured by benditos who don't know what gold dust is and let it be carried away by the wind while Bogart gets killed. The other tenderfoot leaves the gold to go in search of the wife of a dead prospector and apparently he is happy too. I very much like both of these movies because of their morals.

*Recall that Social Security was in existence then but there was no cost of living increase.

PEOPLE HAVE ALWAYS SAID TO ME .....

Awhile back I went to my dentist for some work. I was in rare form and share my following quips:

Dentist: "You know, you have a small mouth."

Me: "And here all my life people have been telling me, 'You and your big mouth.'"

Dentist looking at reddish purple marks on my arm: "How'd you get those marks on your arm?"

Me: "People my whole life have been calling me thin skinned. Now I am 80, and I really am thin skinned."

Dentist asking what I was doing before coming to see her: "Well, I was out to lunch. In fact people have been telling me that I've been out to lunch my whole life, but this time I really was."

DEBT CEILING COMPROMISE: EFFECTS

There are two parts to the debt ceiling compromise: (1) is a decrease of about $900 billion in the Federal budget over the next 10 yrs.; (2) is an additional cut in the Federal Budget of $1.1 trillion over the next 10 yrs (I have seen the figure quoted as high a $1.5 trillion) to be decided upon by 12 congressmen over the next six months. In addition, Part 2 has a "poison pill" proviso in it that, if a Super Committee of 12 congress people cannot come to a recommendation of how the $1.1 trillion of cuts can be made, then there is an automatic decrease in the budget of $1.1 trillion with half coming from defense and half from discretionary spending. If the Super Committee can come up with a compromise, then it will be immediately voted on, without amendments, by congress. I can't see these 6 Republicans and 6 Democrats coming to a compromise so I presume that the "poison pill" proviso will occur.

Steven Rattner made an interesting discussion of this on Morning Joe on August 3rd (http://www.msnbc.msn.com/id/3036789//vp/44000516#44000516). Rattner shows a graph in which are shown the increase in the Federal budget before and after the Part 1 of the debt limit compromise. In 2020 he estimates that the Federal Budget would be 25.9% of GDP, whereas the increase in Federal revenues will be only 18.4% of the GDP. Part 1 of the debt limit compromise, however, will reduce the increase of the Federal budget to 24.4% of GDP, lowering the rate of increase in the Federal Budget so it is approximately parallel to the rate of increase of revenues, and thus shows an annual Federal Deficit to $1.5 trillion, presumably in perpetuity.

Rattner did not consider Part 2 of the debt limit compromise because it hasn't been enacted yet, but, if the poison pill is enacted, the projected deficit in the Federal deficit should be in a gradual decline as percent of GDP with a slow convergence to the Federal revenues.

As might be expected, "defense" hawks in congress object to the provision in the "poison pill" that 50% of the cuts come from the DoD and claim it will ruin our security. No doubt this is overstated as they only need to cut $55 billion from a continuous program from a budget in excess of $671 billion for 2012 to come to $550 billion over 10 yrs. The cuts from discretionary spending are a little more severe in a discretionary budget of about $500 billion in that they would have to cut $55 billion from continuous programs to arrive at the $550 billion, their contribution. There are Departments and Administrations with much larger budgets than this. For example the the Presidents proposed discretionary budget for the Department of Education Budget for 2012 is $77,400,391,000 which is reduced to $66,023,391,000 by a decrease in mandatory funding. Though there are those that propose shutting down the Department of Education, it is unlikely to occur. Some other departments with budgets above $55 billion/year are: Agriculture, Health & Human Services, Treasury, Office of Personal Management, and Social Security Administration. I don't suppose that any of these budgets would be totally or significantly reduced. For example in Agriculture, congress hasn't even been able to get themselves to eliminate the corn-based ethanol subsidy, even though the savings in carbon dioxide emission are marginal, and, if you cut down a forest to grow corn, you come out behind.* Not only is the corn based ethanol subsidy marginal in reducing carbon dioxide, but fields converted to corn from other crops help make these other crops more expensive.

Because Step 1 of the Debt Ceiling Compromise only slows the growth of the Federal Budget, I assume it will not push us into a recession,** but , if Step 2 is invoked, the Federal budget will begin to go negative and detract from our GDP (Gross Domestic Product) along with our negative Net Trade Balance. Both Government spending and the Net Trade Balance are in the equation to calculate the GDP. The net Trade Balance deficit right now is around $500 billion a year so would be $5 trillion dollars over 10 years (If the economy improves, it will be greater, and, if we go into a recession, it could be less.). Though it is only a guess, Step 2 might subtract an additional $2 trillion from the GDP over the 10 years. My reasoning is that if $900 billion decreases the rate of increase about in half, another $900 billion should flatten the rate of increase and allow another $200 billion (to make a total of 1.1 trillion) to start decreasing the Federal budget. As the consumer is pretty well tapped out, it will be left to industry to make up for the estimated $7 trillion from the negative Net Trade Balance plus the decrease in the Federal Budget and to push us into a positive GDP. There is no way we can have a positive Net Trade Balance because we refuse to face up to our addiction to foreign oil. Unfortunately, this addiction also leads us to fund our enemies to fight us. I have no idea if companies can more than make up for the negative estimated $7 trillion contribution to GDP from the Net Trade Balance plus the decrease in the Federal spending.

* Note added January 5, 2012. Toward the end of December of 2011, the subsidy was in fact repealed; however, the tariff and percent of gasoline that must be ethanol has not changed and in fact was increased from 10% to 15% by Obama (http://247wallst.com/2011/12/30/us-ethanol-subsidy-is-history-adm-vlo-peix-gpre-czz-rds-a/ & http://www.nytimes.com/2010/10/14/business/energy-environment/14ethanol.html).

**Actually, whether the $900 billion of Part 1 can put us into a recession is complex because the deductions are back loaded, i.e. they will be more in the out years than the near years over the 10 years. I don't know by how much the back loading is. If, say, $500 billion were to be taken out in any one year, it could push us into a recession, but the back loading is probably not that severe. The same applies to Part 2, but is more serious as the Federal budget actually is reduced.

NOT JOBS; IT IS DEFEATING OBAMA THAT IS IMPORTANT

The minority leader of the Senate, Mitch McConnell, said in July on Fox News that the number one goal of the Republican Party is to have President Obama defeated in the 2012 election.* He has said this more than once. For example, he said something to the same effect in October on 2010 in an interview with the National Journal. * Note the number one goal is not to increase employment or to get the economy running again but to defeat Obama. So he is willing to let the U.S. unemployment and economic picture limp along until after the next election when, if all goes according to plan, President Obama will be defeated. Well, isn't that nice? Such an attitude might backfire. If the employment picture remains grim up to the next election, I suspect that many of the Tea Partiers will be sent home. The electorate expected more of them than to protect or, better, increase the fortunes of the wealthy.

Republicans carry this myth that by firing government employees and government contractors, you increase employment. Huh? By firing people you increase employment? Well, the idea is that you will more than make up for this loss by increases in private industry. Um, perhaps, but it won't happen right away, and I don't know of any examples. In fact, we just went through the FAA fiasco where 4,000 government workers and more than 70,000 contract workers were laid off because of disputes over the unionization of the FAA. They were going to let this situation go until September, but a deluge of criticism caused the Senate to work out a temporary bridge to September to reemploy those laid off. Republicans probably didn't care about the government workers, but those 70,000 plus contract workers got notice.

Republicans also take on faith that increasing taxes will add to unemployment and decrease the well being of the economy. They point to Pres. Reagan's tax cut, but ignore Reagan's increasing of taxes too several times that made up for about half the revenue lost in the tax cuts. Even Reagan became alarmed at the size of his budget deficits (He never came close to balancing the Federal budget.). Then, of course, Pres. G.H.W. Bush raised taxes and Pres. Clinton raised taxes again and employment as well as the economy flourished in the 1990s, though Republicans squealed that these tax increases would ruin the economy. Then Pres. G.W. Bush lowered taxes, and the economy went into the toilet. Where's the proof that increasing taxes adds to unemployment? The evidence over the last 20 years points to the contrary.

*http://www.examiner.com/political-buzz-in-national/mitch-mcconnell-r-ky-maintains-gop-s-priority-is-defeating-obama-2012

YOU CAN ACCOMPLISH A LOT IF YOU .....

We have all heard the saying that you can accomplish a lot in this life if you don't care who gets the credit, but we have a new one. You can accomplish a lot in this life if the other side thinks you are CRAZY! We just had a demonstration of this in the debt ceiling debacle where it was hard to tell which world the tea partiers were in. They were just fooling weren't they, weren't they? If so their act got to be so convincing that the more rational Republicans like John McCain and conservative op-ed writers like David Brooks and Ross Douthat began to believe them also.

I admit that I don't know what was in the bill just passed as I hear conflicting accounts, but I believe very little of the bill will apply to FY 2011 or 2012. There is hope that the economy improves by 2013; however, I have my doubts (http://stopcontinentaldrift.blogspot.com/2011/07/our-consumerism-society.html).