Tax Debate or Obfuscation...???

One of the most intriguing parts of the tax debate is the dramatic inability to articulate the differences in positions distinctly enough to allow for making a clear choice. This leaves the American public mystified. On the one hand, tax cuts will be problematic to the government budget thereby perpetuating deficits. And on the other hand, it seems tax cuts are stimulative albeit with diminishing effect as one goes higher on the income scale. That is why a compromise may be made. And that is why opinion polls show American public support of extending the Bush tax cuts for all brackets. Who benefits from this confusion? Why is the American public opinion important anyhow? Do they even understand what's going on?

To illustrate, it isn't clear how an individual who makes millions of dollars annually will add jobs with the extra take home pay if they aren't a business owner. They'll have more disposable income but the increased likelihood (think marginal propensity to consume) of them spending that disposable income dollar by dollar diminishes. In fact, as one climbs that income scale, the propensity to spend diminishes & the propensity to save increases. Now, while an individual may save by leaving the funds in a savings account, purchasing a CD, investing in a mutual fund, etc, this is all savings. And while the term investing as used in an individual's case may connote investing, it actually is counted as saving in economics. In economics, individuals save and firms invest. And so, in saving how is this money being used to create jobs? Well, a bank may use the funds on deposit to extend a loan to a business to expand operations. Or help a business move part of their operations overseas. So, perhaps one can say there is a 50-50 chance that these proceeds will be used for either domestic uses or foreign uses. But many businesses aren't expanding operations domestically because they already have a situation of overcapacity.

Okay, so lets say this person is a business owner. It is unclear how likely a business owner is to take tax cuts and re-invest it into their business. For a businessperson to substantiate an investment activity in their company, there must be the attendant return. At this point, with so much capacity unused, what is the incentive for a business to expand their operations? And if they're expanding, as in the case of a small, growing business, what is the likelihood of them using funds from taxes vs getting a loan or an investor? And does all expansions include adding a position for a person to fill? Typically in times of a recession, there is an oversupply of labor that itself threatens those who continue to hold a job. At any moment one can lose their job or be replaced by a more willing candidate seeking a job – especially at a lower rate. So, employers tend to find willing, more helpful employees to take on more responsibilities. This is part of what typically leads to improved productivity in these times. So, how indeed does paying less taxes aid a business owner in adding more jobs? Or more pointedly, why would a business owner take their increased income and invest it into their company?

So, what we have illustrated here is the inability to distinguish between a business & an individual tax situation, between saving & investing in economic terms, the different tax usage implications, etc to get to the point of understanding how these issues affect the economy. I intentionally didn't answer all of the questions posed to demonstrate the added complexity of these issues. In my estimation, these issues are too complex for the American public to know enough to have an opinion. But this also demonstrates that taking a stance entails answering these questions. And depending upon how one answers these questions, one may see how a position is taken.

Overall, one gets the impression that much of the debate is intentionally obfuscated to create a smoke screen in order to get what is desired – keep tax the cuts across the board. And, good or bad, that is what they may be getting.

To Whom Do The Benefits Accrue?

In economics, an important question that is asked in economic analysis is: "To whom does the benefits accrue?" After making that determination, a value judgement typically yields a policy formulation. In the current state of economic affairs, we find ourselves saving more thereby spending less on consumer goods, paying down debts, etc. If there is any wonder why we're still in the "pain zone" so to speak, its because we're in a transition space with implications of structural realignment. But take a look at one aspect of the benefit accrual analysis: saving more means more money in bank accounts for banks to lend & lending is historically low, spending less on consumer goods is keeping jobs at bay as businesses still have untapped capacity and so lack an incentive to hire, households are paying down their debts and in doing so forgo opportunities to make consumer purchases that further complicate the situation. So, with more money in the bank & consumers paying down debts, this begets the following question(s): To whom does the benefits accrue? What is that money doing in the bank? Where does this money that is paying down debt going to? Who is benefiting from all of this?

STAND BY...!!!

I read Friday's NY Times Op Ed article by Nobel Prize winning Economist Paul Krugman entitled: The Lame-Duck Economy. He talked about the transition and how it related to the times of the New Deal. A lot had happened and there was a huge power vacuum at the height of the crisis. He stated that the outgoing administration had no credibility and the incoming one had no authority. And due to idealogical differences there was no concerted action. He said this is happening now.

Reading this took me back to a post Russ & I wrote sometime back: Standby for Heavy Rolls. We are definitely changing course. And the interim is likened to the rocky motion of the ship as it comes about. But I think that the most interesting thing about going back to this post, is that we are going to shake off the doubts in due time and we are going to head in a new direction. Even with the bad news in this article, I kept thinking: Stand By...!!!

I will post the relevant parts of the post. And I recommend reading Krugman's Op Ed piece to experience the contrast I did. I welcome your comments.

Standby for Heavy Rolls

"Standby for heavy rolls, as the ship comes about." This is the announcement I made over the ship's intercom so many times when changing course in choppy waters. The announcement is broken up with a pause (signified by the comma) so that it can be clearly understood. It is passed over the intercom to ensure the safety of the crew onboard the ship.

When the ship comes about or turns, it is in a state of transition that takes time; and along with the rough waters, can feel unsteady and shaky. During this time, the ship’s crew pauses to secure themselves and any loose items within their realm of control. As the ship shudders from the different forces acting on the ship’s bow – some trying to keep it back from turning and others aiding in its course change – the ship slowly but surely turns. It shudders and shakes off the inert forces trying to keep it back. It shudders and shakes off the rust that could threaten its integrity. It shudders and shakes off any doubts of heading on a new course. And it turns; but if you have ever seen the bow of a ship as it turned to a new heading (direction), you may understand the visceral power of seeing it set its sights on a new target course, bringing its strength of purpose to bear. Its mighty engines roaring toward a new horizon and beyond that horizon await a port of call that is exhilarating to the ship’s crew.

The crew describes the individuals or the stakeholders. And the ship described here can also describe households, communities, cities, counties, states, regions, and our nation. The choppy waters represent the waters or environment (economic, social, political, etc.) we will face, as the ship comes about. Be that as it may, we face some daunting challenges and our natural inclinations to resist change make it tougher. But in the end, that is not our true inclination. We will not be inert; we will be undaunted. We will not shirk our responsibilities; we will answer the call. We will not shun new ideas; we will ask how can it work? We will not be worthless; we will fight for something worthy! Let us rise to the challenge that will allow us to change course and see a new horizon.

STAND BY... EXECUTE... OVER...!!!

-

Economic Times... Past & Present

I remember a quote by former US President Calvin Coolidge that I like. And conducting an internet search to find the exact verbage, I found a site full of quotes by him. Interestingly, there are quotes that apply to the times even though they were uttered back when the US President count was at 30. For those who don't know, we are about to change to 44.

I will post these quotes and my comments follow each. Some speak for themselves.

"All growth depends upon activity. There is no development physically or intellectually without effort, and effort means work". -Calvin Coolidge

This is still true today.

"Economy is the method by which we prepare today to afford the improvements of tomorrow". -Calvin Coolidge

Today, it has reversed. Economy is the method by which we prepare tomorrow to afford the improvements of today. - Me

"Heroism is not only in the man, but in the occasion". -Calvin Coolidge

This is the occasion for us to rise and overcome the problems we are facing.

"I have found it advisable not to give too much heed to what people say when I am trying to accomplish something of consequence. Invariably they proclaim it can't be done. I deem that the very best time to make the effort". -Calvin Coolidge

Need I say more?! ;-)

"No enterprise can exist for itself alone. It ministers to some great need, it performs some great service, not for itself, but for others; or failing therein, it ceases to be profitable and ceases to exist". -Calvin Coolidge

Do something, not for your own existence, but for society as a whole.

"Industry, thrift and self-control are not sought because they create wealth, but because they create character". -Calvin Coolidge

"No person was ever honored for what he received. Honor has been the reward for what he gave". -Calvin Coolidge

"Duty is not collective; it is personal". -Calvin Coolidge

"If I had permitted my failures, or what seemed to me at the time a lack of success, to discourage me I cannot see any way in which I would ever have made progress". -Calvin Coolidge

This is a good time to introduce the quote I set out to find in the first place:

“Nothing in this world can take the place of persistence. Talent will not; nothing is more common than unsuccessful people with talent. Genius will not; unrewarded genius is almost a proverb. Education will not; the world is full of educated derelicts. Persistence and determination alone are omnipotent. The slogan “press on” has solved and always will solve the problems of the human race”. -Calvin Coolidge

"The nation which forgets its defenders will be itself forgotten". -Calvin Coolidge

LETS ACHIEVE ENERGY INDEPENDENCE.

"The right thing to do never requires any subterfuge, it is always simple and direct". -Calvin Coolidge

"There is no dignity quite so impressive, and no independence quite so important, as living within your means". -Calvin Coolidge

By spending away the future for today's consumption -- among other things. We are going through a major re-alignment process in our economy. We are about to embark upon the biggest overhaul in our society in a generation or two. And Achieving Energy Independence will be one of those. By achieving this, there will be less transfer of payments overseas to buy an asset (OIL) that is then burned. That's almost like buying a house and then burning it down -- don't make too much sense. ;-)

"They criticize me for harping on the obvious; if all the folks in the United States would do the few simple things they know they ought to do, most of our big problems would take care of themselves". -Calvin Coolidge

"You can't know too much, but you can say too much". -Calvin Coolidge

THAT IS ALL. CARRY ON!

OR SHALL I SAY:

PRESS ON!!!

.

Texas Oil Tycoon Tackles Renewable Energy

An excerpt of an interview of Texas Oil Tycoon T. Boone Pickens:

So you're an oil man who's turning his back on oil?

Foreign oil is costing us $500 billion a year. In 10 years, $5 trillion goes out of the country. It's nuts. It's the greatest transfer of wealth from one area to another in the history of the world.

TOGETHER WE CAN STOP THIS.

Read more here.
By: David Case

5 worst excuses not to go green

By Lori Johnston • Bankrate.com

Going green is a lot like losing weight. Many of us talk about doing it but when it comes right down to it we come up with myriad excuses.

Surveys show most Americans recognize the environmental crisis and they're concerned about global warming. But to actually do something about it? Excuses abound.

Following are the five most prevalent excuses for not going green, why they're cop-outs and simple steps for shedding them.

Excuse No. 1: 'It's too expensive.'

Some people think greening their home means installing "fancy-schmancy" things like solar panels, but it's simpler than that, says Jenny Powers, spokeswoman for the Natural Resources Defense Council.

For example, compact fluorescent light (CFL) bulbs cost more upfront (an estimated $2 to $15, for specialty bulbs), but they last 10 times longer than standard incandescent bulbs, she notes. CFL bulbs use 75 percent less energy, resulting in savings of $30 or more in electricity costs during the life of each bulb, according to data from the federal government's Energy Star program.

"So you'll be paying a lot less on your energy bill, and over time you'll more than make up for your cost," Powers says.

Seeing the potential savings in the long run is a way to get beyond this excuse, says Edwin Stafford, associate professor of marketing at Utah State University in Logan, Utah, who studies green marketing.

Powers says you can look for products with the Energy Star seal because they are more energy-efficient and will result in savings on your electric bill.

"It doesn't mean switching to solar power or putting up a wind turbine in your yard," she says. "Those are great things to do, but it's not necessary."

Thomas Kostigen, co-author of "The Green Book: The Everyday Guide to Saving the Planet One Simple Step at a Time," notes that even turning down the thermostat a degree lower for the heat and a degree higher for air conditioning can save approximately $100 a year on your utility bill.

Excuse No. 2: 'My individual effort won't make a difference.'

Just look at the statistics. Americans saved enough energy in 2006 to avoid greenhouse gas emissions equivalent to those from 25 million cars, according to Energy Star data. These efforts also saved $14 billion on their utility bills.

It may be tough to understand what it means when statistics refer to taking 25 million cars off the road, Kostigen says. But he advises looking at it like this: You're saving energy and also helping save the planet because you're not emitting as much carbon, which relates to car pollution.

"There are very simple things we can do that seriously add up to a great, great impact," Kostigen says.

Excuse No. 3: 'It doesn't fit into my lifestyle.'

It's a misconception to think you have to live out in the country to be eco-friendly, says Powers, who lives in New York City. She says urban living can be great for the environment, if you take steps such as using public transit or shopping at local farmer's markets.

"You can be green whether you are living in a concrete jungle, like I am, or you're living out in nature," she says.

Maybe you think the problem isn't where you live, but the stage of your life. She says parents can buy organic food for their kids. Suburbanites can use a rail system instead of driving to work. Tech-savvy folks can use eco-friendly gadgets, such as those with solar-powered features or batteries that can be recharged.

"It fits into all types of lifestyles," Powers says. "It's about energy use and transportation, choices at a supermarket or the mall."

Excuse No. 4: 'Green products don't work as well.'

Green products often carry negative baggage, Stafford admits. When they started being sold in the 1970s, people believed they were using "some mix of twigs and things to unclog their sinks."

"That, I think, has changed," he says. "You have a lot of green products that I think actually work better than nongreen products."

Front-load washing machines clean clothes better, use less detergent and are energy- and water-efficient. They're also gentler on your clothes, due to the technology of tumbling clothes rather than having them sit in a big pool of water and trying to shake the clothes clean, Stafford says.

Other products he identifies as being successful in offering a consumer benefit include compact fluorescent bulbs, Tide Coldwater detergent and solar-powered items. He notes that users of Tide Coldwater can also save $63 a year -- the company claims users can save up to 80 percent of the energy normally required per load.

When Stafford recently remodeled a bathroom in his home, he tried to use nontoxic and energy-efficient items.

"I found all of these things at Home Depot and Lowe's," he says.

"The greenness almost became secondary," he says. "Most consumers don't buy products to save the planet. They buy products because it's going to clean their carpets, it's going to nourish them, it's going to provide them warmth."

Excuse No. 5: 'I don't know where to start.'

You may already be environmentally friendly, but just don't know it. If you buy bulk items from wholesale warehouses such as Costco, you are using less packaging and helping the environment, Kostigen says.

Another easy way to start relates to your computers. When they're not in use, but still plugged in, they're draining a little bit of energy out of your wall outlet, Powers says. "That's costing money and that's costing global warming initiatives, for no reason at all," she says.

She suggests plugging computers and other items into a power bar and flipping the switch off when you're not using them. That could account for as much as 10 percent off your electric bill.

Those cute screen savers also aren't needed anymore because of new technology, Powers says, but when you're using them, the computer is operating at full power. She recommends getting rid of the screen saver and putting the computer into sleep mode when you're away from it.

Once you realize you can take these simple no-cost steps, Kostigen believes it will lead to recycling efforts or thinking of the environment when buying bigger-ticket items, such as appliances, cars or homes. Another simple way to begin is having bills sent to you via e-mail instead of postal mail.

"I think once we're presented with a raft of opportunities, we'll take the ones that really resonate with us the most and the ones that we can really relate to the most," says Kostigen.

Actual article can be found here.

PROPOSED Excuse No. 6: 'I'm going to die anyway!'

I will write a future post with my comments on this later. Stay tuned! ;-)

Green is back as the Greenback Payback (???)

I have had the privilege of speaking with many folks in the local community about becoming energy independent. Most times, we would cover the range of issues that contemporary media make relevant by virtue of their reporting. But going beyond that takes them to an uncharted territory.

Nevertheless, the conversations almost always gravitate to becoming “Green” in general. Unsurprisingly, many ask what the payback is to make an investment in “Going Green.” So, it would seem that the incentive for “Going Green” is getting “Green” back – that is the Greenback (as our Dollar is affectionately called). This can be a misnomer as “Going Green” can cost more than the Green you get back (think Greenback). The reason is tied to simple nuances in the variations of the definition of terms we use to discuss this phenomenon. I would be asked: “Does it make economic sense?”, “Is it financially feasible?”, etc. Both questions to the untrained eye mean the same thing. But does it? I will answer that in a later post – stay tuned! ;-)

Getting back to the point of the post.

I was recently helping an uncle of mine move into his newly purchased home where we talked about energy independence and the notion of paybacks. I gave the example that if my home lacked proper insulation, it could create a problem where the resistance to heat is low enough that the air conditioner would come on frequently to cool down the home. This frequent running of the AC translates to higher energy usage and finally a higher electric energy bill.

After discussing the benefits of diminishing this problem we talked about a recent remodel job he did to the bathroom of his recently purchased home. So, I wittingly asked: What kind of payback do you expect?

He returned a blank stare and asked: “Payback?! I have a bathroom that I can proudly use and entertain guests without shame. I remodeled it because it needed to get done, not because of any payback.”

I wonder if his point would be well taken.

Knowledge is power: Wield it.