Archive for December, 2008

Job Creation Magic

Wednesday, December 24th, 2008

The government class doesn’t grasp the reality of the typical, middle-class American. President-Elect Barack Obama states that his goal is to create 2.5 million jobs. With 10 million men and women in the official unemployment line, and millions more underemployed, a couple of million new jobs doesn’t cut it. If this is the serious economic crisis that the government class, the economists, and commentators accept almost unanimously, why should one adopt a goal that at best leaves us in a crisis? So let’s shoot for getting 10 million American men and women back to work. Here’s how.

First, the federal government has an obligation to remove the illegal immigrants from this country. There are at least 10 to 12 million illegals here. Let’s take a guess that at least 5 million have jobs that could
and would be done by Americans. Voila! Five million jobs.

ICE (Immigration and Customs Enforcement) removed a record 349,000 illegal immigrants in 2008, a 21 percent increase over last year and a 77 percent jump since 2005 according to the San Jose Mercury News. That is an improvement. It sounds good. However, the influx of illegals is about 1,000 per day. So ICE is barely keeping even. There still remain over 10 million aliens who are subject to deportation.

Second, if you add in the LEGAL immigrants, there are over 38 million foreign-born people in the U.S. today. The rate of influx has been, and remains, a shock to the American system. There is an alphabet soup of
visas, e.g. H1-B, L-1, green card, etc., by which foreigners are allowed into the country to work legally. That can be stopped immediately by executive order. And, then there is the annual allocation of over 600,000 regular and permanent immigrants. (Annual means EVERY YEAR!) That could be stopped until every American (citizen and legal resident) has a job. Why continue to add to the employment problem in this country? A more detailed discussion of the immigration issue is found in “Illegal Immigration Is Bad For Americans”

Third, how many jobs have been directly and legally outsourced to foreign countries? Think of the call centers in India as just one example. One commentator put it this way, “If the data can travel down the internet, the job can be done just about anywhere in the world.” These are not manufacturing jobs. The global companies simply want to make an extra buck. All these jobs can be returned to the United States of America. The jobs belong to American men and women who deserve them.

Fourth, the U.S. has an enormous foreign trade deficit. It alone could bankrupt this country. The response of the Congress is simply to ignore the problem. To stop the hemorrhaging, the U.S. should and can take action. Let’s start with a 10% tariff on all imported goods and services and raise it until the U.S. at least has an even balance of trade. I can hear your objection that the the U.S. must respect the World Trade Organization rules which prohibit that. That’s not true. The WTO treaty says that no country should single out particular industries. As long as the tariff is applied to everything, each country is entitled to apply import taxes. Until Americans take this most basic step, we’ll continue to become weaker and weaker. Let’s call it a serious matter of national security.

Living in the U.S., do you ever feel that you’re in an asylum that’s being run by the inmates? Remember the oft-quoted definition of insanity?
It is “making the same mistake over and over again and expecting a different result.” The metaphor you can remember is: “When I find myself in an ever-deepening hole, the first thing I should do is throw down the shovel and stop digging.”


References:


“Illegal Immigration Is Bad For Americans”

“Know Nothing Party”

San Jose Mercury News, November 29, 2008
Border crossings shift back to California routes.

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Posted in Jobs | 1 Comment »

Madoff Madness

Friday, December 19th, 2008

What hasn’t been said about the Madoff firm running a $50 Billion Ponzi
Scheme? There is no statement nor discussion of how to keep it from
happening again. To do that, put the finger on the underlying problem.
Starting question: how did the Madoff scam continue for years and years? After all, Madoff operated in a super-regulated, super-overseen
environment. Look at the layers and watchers policing those companies.

First, any investment company of any size must have an outside auditor.
Second, the National Association of Securities Dealers (NASD) “oversees” its members; they too can examine the books and business practices. Third, the Securities and Exchange Commission (SEC) is the federal regulatory body. Fourth, the Securities Investor Protection Corporation (SIPC) insures investment accounts against theft and fraud for the same amount which the FDIC insures bank accounts. Last, ultimately, the Congress is the originator of the laws authorizing the cascade of regulations to protect all parties.

The entire “system” failed time and again at every step. For the securities industry, the policing of Madoff is rather like the handling of Hurricane Katrina. Just picture President Bush (or Clinton) saying to the head of the SEC, “Brownie, you’re doing a hell of a job!” That sarcasm and contempt can be directed to all levels, as “Congress people, you do a great job for people like Bernard Madoff!”

At the ground level of the system, there is the run-of-the mill policing of a company that should catch shenanigans. That is done by an outside independent and competent accounting firm. They match a random sample of accounts and transactions. They “follow the money.” But, the firm auditing the Madoff firm could not have missed every irregular exception all the time, could they? Wouldn’t you think something would have shown up by the time the first billion went unaccounted for? Well, the audit function failed. (This is not rocket science, is it?) The auditing firm may simply be neither independent nor competent. One reasonable solution would be to require by law that a new audit firm be selected every year or two. And, why not have the SEC give Madoff a choice of 3 randomly selected audit firms?

At the next level, the SEC and NASD are also police. The job can be as
simple as policing the auditors. The first step would be to inspect the
audit report in the comfort of their offices. A second step would be to
receive complaints about the Madoff firm. The SEC says they’ve been
receiving allegations for over ten years, but did nothing. Even if there
had been perfect audit reports and no allegations, a third step would be
expected, just a reality check to police the police. That third step by the SEC would be to run an annual mini-audit of their own. But, wait, the SEC head says the SEC hasn’t looked at the Madoff firm for at least ten years. What more do we need to know? Eureka! Let’s stop here. Until this system defect is solved, there will be more Madoff scandals, more Ponzi schemes. And, even outright theft can go undetected most of the time for years and years at a time.

This is definitely not rocket science. Has anyone else come up with this as a solution? If you’ve seen it, please take a moment to post it as a
comment. And if you haven’t seen it, please comment on this analyis. The feedback makes it all worthwhile. Today, the words of Lily Tomlin come to mind: “No matter how cynical you get, it’s almost impossible to keep up.”

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Peter Pan at General Motors

Sunday, December 14th, 2008

General Motors and the UAW have lots of serious problems. Just one is a sort of children’s fantasy from the first time they signed a contract. For decades, the contracts included a promise of future payments to retired GM auto workers. The key word is “promise”; the time horizon was far in the future. Nobody can predict the future, but the parties seemed to believe in a crystal ball. But both management and labor acted as if they did. Do you remember that Peter Pan said, “I don’t want to grow up.” And, we know that little children believe in Santa Claus. Did labor and management believe they could get something for nothing?

Fast forward to now. The auto companies’ UAW contracts to pay retirees are a tremendous liability. The analysts say that it requires total payouts of $73 for each hour of work done today. Of course, today’s active workers don’t make that much. That’s what you get when you throw the retiree payments on top of the wages.

It looks like the UAW has always gotten the best of management. Or, is it simply that both labor and management leaders could kick the can down the road? Union leaders could boast how good life would be tomorrow? And, management didn’t have to shell out any extra money right away. So, why are these unrealistic contracts allowed to exist at all? Other unions require that their employers contribute cash to their retirement funds every payday. For example, an active, working employee would get $20 per hour on payday. That would include both the wage and a contribution to that employee’s “pension fund.” At that point, the employer has no future obligation.

So here’s the obvious solution: Require that any new/future labor contract in the entire country be paid for with “cash today.” The Congress can pass such a law. The Congress can step in as the “grown-up” to keep the children’s fantasies from doing great harm. In fact, why shouldn’t everybody, union and non-union, have a mandatory pension plan which is funded with “cash today?”


References:


A workable solution for everybody is “The Lifetime Plan.”

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Posted in Auto Bailout | 1 Comment »

American Reconstruction

Monday, December 1st, 2008

Typical working Americans are reeling from the decline in
jobs, income, and savings. Our country is now setting a new
record in the number of people receiving foodstamps. It’s
at 30 Million people qualifying for a welfare benefit now.

Second, the Medicaid medical safety net is covering
65 Million. This program alone represents a fortune in
taxpayer expenditures.

Third, one in 10 mortgage holders was either delinquent on loans in September or in foreclosure. In this fragile American economy running on credit, it is clear that the men and women who lose their jobs
simply cannot pay the mortgage.

Fourth, there are over 10 million people unemployed. That’s what’s used by the media to report the official “unemployment rate” of 6.7%. But that’s not the best measure. Here’s why. Remember, if you mowed a lawn for your brother-in-law last month, and he gave you $10, you are counted as “employed” by the government. Are you just working a half-time job when you need and seek full-time work? What if you have given up finding a job? The “unemployment rate” does not count you as unemployed.

The Labor Department does have another statistic that includes all of the unemployed and underemployed. Today it’s at 12.5%. My rule of thumb is to double the traditional measure to get to the American “misery rate.” Thus, there are over 20 million men and women who have been jettisoned from the workforce.

What’s the way to lift this burden on millions and millions of people in these dire straits? What’s the best way to drastically reduce the government pay-outs?

JOBS! Put these people to work, and they won’t need food
stamps, Medicaid, and the unemployment insurance benefits.
Solving the JOBS PROBLEM is a win-win-win approach.

Jobs should be the primary goal of any fiscal stimulus package
which Congress creates. And, that can also be the goal
of state and local governments. They just don’t get enough
bang for the buck when they give away tax credits. That’s
a proven fact.

If the federal government is determined to “borrow and spend,”
then wouldn’t we like to have full confidence that we Americans
get something worthwhile? Something of permanent value?

The only way to do that is to guarantee that the money
is all spent in the U.S. and employs Americans. That will
create jobs. Second, to get a benefit of truly lasting value,
the first and best solution is to repair and re-build infrastructure.
“Infrastructure” means physical, visible, long-lasting
improvements. That includes highways, railways, bridges,
water systems, and sewers. There has been a growing backlog
for years. And, it’s so democratic. Infrastructure benefits everybody.

Example 1: I am personally familiar with a small town which
has water lines 105 years old. When it was built, the life
was estimated to be 110 years. Goodness! What would life be
like if you couldn’t get water out of your faucet? What if
you couldn’t flush your toilet?

Example 2: Who can tell me what it costs to commute to work on roads and streets that feel like washboards? Ever break an axle or a shock absorber? I have. And, during your daily commute, your vehicle itself vibrates, shortening its life.

Example 3: How about that bridge in Minnesota that collapsed? The backlog of bridge repair and replacement is huge. When will the
next collapse occur?

In summary, if some work is done sooner than absolutely necessary, then that’s okay, too. It’s not frivolous make-work. Better sooner than later. Better safe than sorry. Building infrastructure is the way to get America moving.

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