Fancy

All the experts keep saying that Obama doesn’t have a foreign policy but I have figured it out. I call it the Fancy dress policy. This is based on the county song about a mother who was destitute and dying and she had 16 year old daughter whose assets are well described. The mother used the last dollar they have to make Fancy a red dress and sends her out into the world with her last words of advice. She tells her daughter, just be nice to the gentlemen friends and they will be nice to you. I believe that Obama is following the mother advice on his foreign policy. He seems to believe that if the United States is just nice to the rest of the world they will be nice to us.

Cruz tax plan

It is not easy to compare tax plans by various candidates but Ted Cruz came out with one yesterday and I see it as follows. A married couple with no children earning $50,000 currently pays $3,502 in federal income plus $3,825 in payroll tax for a total tax of $7,327. Under the Cruz plan this same couple would pay $1,400 in federal tax plus $1,071 in payroll tax for a total of $2,470. Don’t get too excited yet. Cruz also proposes a value added tax (VAT) of 16%. He says the corporations will pay for this but the old story is that corporations don’t pay tax they just pass the cost onto their customers. The VAT is based on consumption that is you pay for it when you buy something and since most couples earning $50,000 will spend all their after tax money they will pay $50,000 less $7,327 or $42,673 and 16% if that is $6,827. Assuming they spend all of their net income their total taxes will increase from $7,327 to $9,297. Now let’s look at one of those rich people called the one-percenters, a married couple earning $500,000 a year. Under current tax law this couple will take home $244,000. Under the Cruz plan this same couple will pay 10% on the net income and 16% VAT. If they spend all of their money they will net $370,000 which is $126,000 more.

Growing the economy

Wages for low to upper middle income workers have been stagnant for 35 years and each president during this time period has promised to resolve this problem by growing the economy. Prior to the 80’s there were two ways of doing this. It was called priming the pump at the top or priming the pump at the bottom. The first suggested that if businesses have more cash they will invest in new facilities and this will provide new jobs and competition will force waged up. The second was to lower taxes and thus give more money to consumers who will spend more causing businesses to expand and thus more jobs and higher wages through competition. Both of these methods worked during the first half of the 20th century. When Reagan tried priming the pump at the top it didn’t work. Businesses had discovered that it was more efficient to buy an existing facility than to build a new one. They avoided the cost of construction and had a ready-made well trained work force. No new factories meant no new jobs. Clinton followed Reagan in the 90’s and tried priming the pump at the bottom by lowering taxes on the middle income groups but wages remained static. This should have worked out better since there were no recessions and we had the dotcom growth in the market but the results were that wealthy people’s income rose rapidly but middle income did not. The Bush 2 years were stunted by the great recession caused by the mortgage crises and this distorted things. His plan was to reduce some of the health care cost born by companies and use this to increase wages. Companies had been holding back on wage increases to pay for increases in health care. He pushed through two major tax cuts, one in 2001 and a second in 2003 trying to prime the pump from the bottom. He was hit with the 9/11 disaster and then the great recession so the results were skewed. Obama’s approach was to transfer funds from one group to another. He pushed for more unemployment benefits, forcing companies that do business with the government to pay higher wages, raising the minimum wage, extending overtime pay to low level managers and in general using government rules to raise income for middle income workers. To date this has not worked. The Republican candidates are saying that they will removed restrictions placed on businesses by the EPA and other regulatory agencies, they will simplify the tax code, invest in infrastructure and allow the free market to work it’s magic. Hilary will do the same except she will impose more regulations not less. In addition she will build on the Obama plan to raise the minimum wage. Both parties will push for infrastructure improvements. Neither party has said much about expanding the energy business and shipping natural gas and oil around the world. Too bad!

Sweden

Bernie Sanders often talks about the utopian life in Sweden where health care is free, college tuition is free and childcare beginning at age 3 is free. The question is, who pays and the answer is everyone. Swedes who earn a salary on par with the average municipal worker contribute the equivalent of 70 percent of their monthly salaries in taxes, a new study has found. This means that if you earn $50,000 per year your take home pay is $15,000. Swedes have decided that the government knows how to spend their money better than they do and in many cases that may be true but do Americans what to give up that right. Here, if you want to go without healthcare and buy a Cadillac you can do that. It may be foolish but you have the right to make personal decisions. People like Sanders believe that the average person cannot care for themselves and they need the government to take care of them. Whether this pays off is challenged by the fact that the average Swedish student graduates with more debt than an American student. This is because other expenses like food, rent and transportation are so much more costly.

Hats off to Sanders

Hats off to Berry Sanders! I have been critical of Sanders for saying that he will pay for his programs by transferring money from the rich to the poor but now I no longer have to say that because Sanders has become an honest broker. Someone must have shown him the math. Sunday on ABC’s “This Week,” Democratic presidential candidate Sen. Bernie Sanders (I-VT) said his tax increases would “hit everybody” because he would raise the payroll tax to pay for paid family and medical leave. The payroll tax is the 7.65% that comes out of everyone’s pay check called FICA. This is where the real money is because this group includes all those who earn money. It is composed of 6.2% for social security and 1.45% for Medicaid. Using this approach, Sanders will be taking money from the low and middle income groups and giving it to low and middle income groups. This is the old liberal concept that believes that the government knows best on how to spend your money. They will do it more fairly, the key word being fairly.

Classroom

On the news today there was a situation that took place in a high school classroom, that in the past, I would have had a different take on but now that I have spent some time in the classroom, I see in a new light. A female student was disrupting the class and the teacher asked her to leave the room and she refused. He notified the office and they sent in a policy officer, (yes most schools have a police officer on staff and in the building). The officer asked her to leave and she refused and he picked her up and dragged her from the room. I say drag because she held tightly to her chair and both she and the chair were removed. The response to this scene from the public was surprise at the physical confrontation. The question is, how else could this have been handled in a way that would avoid the physical contact. Perhaps they should ask all the other students to go to another room and leave her there alone. While this confrontation is unusual it is not uncommon for one or a few students to disrupt the class. This means that the teacher must spend most of the time trying to control the behavior of a few while the others are left to fend for themselves. These students who are trying to learn might be better off going to the library and working alone without the teacher. One of the many responsibilities of parents is to teach their children to respect authority and if this is not done then these types of classroom disruptions are predictable. These same students will most likely have confrontations with law enforcement in the future. The stage was set for this young woman’s problem long before she ever came to school.

Outsiders

Over the past several decades voters have expressed their displeasure with Washington culminating in the last few polls showing congressional approval in single digits. Even individual members are only rated at 25% by their constituents. Most experts agree that there is an anti-Washington feeling spreading throughout the country. When congress is graded at less than 10% approval it must be across party lines and therein lies a dilemma. If democrats are unhappy with Washington why are they promoting Mrs. Clinton? She has spent the last 25 years in powerful positions in the Capital, including 8 years as first lady, 6 years as a senator and 4 years as Secretary of State. This tells me that party loyalty is stronger than dissatisfaction with Washington. It tells me that desire for change in Washington is exaggerated by news reporting. It tells me that people are not concerned with Clinton’s ties to Wall Street. It tells me that the public concern about her honesty is not a big deal. I have heard over and over that the reason for the rise of people like Trump and Carson is because people are fed up with Washington but that must not be the case if Clinton is going to be the nominee. The idea that this is the year of the out-sider is suspect since Clinton is anything but an outsider. The only way for this to make sense is if the out-siders drop out of contention and the republicans nominate a career politician to compete against Clinton but who says the voters have to make sense.

Cover-up

It was in the summer of 1972 that the Watergate break-in occurred and Nixon was paranoid about the upcoming November elections. Instead of just explaining that some of his underlings screwed up and taking the blame he went into cover-up mode. The same thing happened with the Benghazi incident. It happened just before election and Obama was in a panic thinking that the Republicans would use this incident as evidence that he was weak on defense and thus the cover story that has caused so much trouble for Secretary Clinton. In politic s like any other business the cover-up is often worse than the crime.

More in social security cap

If you are a business owner you pay 12.8% of your first $118,000 income into social security. This is $15,100. If the earnings cap on social security is removed then the business owner who earns $500,000 will pay $64,000 per year into social security. This happens because self-employed people pay both the employees amount which is 6.4% but then they also pay the employers matching 6.4%. Looking at an example of what we would all call a rich person, that is, a businessman who earns $500,000 after deductions we see the $64,000 in social security tax plus $14,500 in Medicaid tax, plus $4,500 in excess Medicare tax, plus $155,000 in federal income tax, plus $30,000 in state income tax, plus $10,000 in alternative minimum tax for a total of $278,000. This means the take home pay from a person who has a net income of $500,000 is $222,000. While most would be thrilled with this amount of income, most have not taken the risk of owning their own business and when you know that four out of five businesses don’t make it past five years, most would not try it. In addition these business people are where the new jobs come from and they should be encouraged.

Social security cap

One of the many ways to shore up the social security fund is to remove the income cap. Right now people pay 6.4% of their income into social security up to $117,000 of income. If social security tax was collected on all income this would bring in about 100 billion dollars per year. While this would be collected from the 1% it would not affect the super- rich or top one tenth of one-percent who are often referred to as the billionaires. These people get their income not from wages but from capital gains and social security is not taxed on capital gains. Once again this tax would be fall hardest on those who earn between $500,000 and one million per year and these are the job creators. If you want to have the billionaires pay into this fund the law must be changed to collect social security tax on capital gains. Recall that capital gains are monies earned from investments as opposed to wages.

Climate

I am personally convinced that the addition of man-made carbon dioxide to the atmosphere contributes to the slow warming of the planet. I have suggested that the use of methane hydrate is the solution to this problem but those who push for wind and solar refuse to look at other solutions. They are slowly twisting in the wind as they try to justify their position that the end of the world as we know it is at hand and will come to fruition by 2050, at least that is the latest dooms day date. For years they talked about global warming but when the temperatures leveled out they renamed the problem climate change. This allows them to selective choose various weather events to prove their point. A quick google check proves that other than wild fires other climate events have either not changed or gotten better. Case in point, major hurricanes! In a stroke of luck, no major hurricanes rated Category 3 or higher have struck U.S. soil during the past nine years, a new study finds.This is the country's longest "hurricane drought" in recorded history, or since 1851, the researchers said. The previous record lull lasted eight years, from 1861 to 1868, they said. Here is a quote from the congressional committee designed to study climate. • Globally, weather-related losses ($) have not increased since 1990 as a proportion of GDP (they have actually decreased by about 25%) and insured catastrophe losses have not increased as a proportion of GDP since 1960. • Hurricane landfalls have not increased in the US in frequency, intensity or normalized damage since at least 1900. The same holds for tropical cyclones globally since at least 1970 (when data allows for a global perspective). • Floods have not increased in the US in frequency or intensity since at least 1950. Flood losses as a percentage of US GDP have dropped by about 75% since 1940. • Tornadoes in the US have not increased in frequency, intensity or normalized damage since 1950, and there is some evidence to suggest that they have actually declined. • Drought has “for the most part, become shorter, less frequent, and cover a smaller portion of the U. S. over the last century.”2 Globally, “there has been little change in drought over the past 60 years.” This argument over climate change is promoted by politicians who get campaign money from wind and solar projects and from writers who get grant money from the government for twisting information to reach certain conclusions.

Union pay

In my heart of hearts, I have always been pro union but only private unions. I feel there is no place for public unions. Chrysler is threatening a strike and one of their top demands is to increase the salaries of starting workers. This is to make up for the slight they gave these people when they worked their way out of bankruptcy. While the government gave the best deal to the union, at the expense of the stock and bondholders, the union sacrificed the new employees in the process. They agreed that new employees would start at $15 per hour which was half what existing employees received and they are now demanding to make up for this transgression by asking for $19 per hour. I hope they get it without a strike.

Minimum wage

I have often said that taking money from the rich and giving it to the poor will not work because there are too few rich and too many poor but there is a way that redistribution of income can work and that is by raising the minimum wage. Typically employees of fast food places and retail stores like Walmart are paid low wages and would benefit from an increase in the minimum wage. These outlets serve many millions of people and most of these are low to middle income people. If McDonalds raised the price of their hamburger by 50 cents they could double the wages of the non-management employees. If Walmart raised their prices by 6% they could double the wages of their non-management employees. Since the group paying the extra money is very large the transfer of funds would be significant. Instead of $10 an hour these employees would be earning $20 an hour. This is a transfer of wealth from middle and upper middle income groups to lower income groups. This will have little to no effect on the so called one percent since these people don’t frequent McDonalds or Walmart.

Students

I noticed an interesting trend while observing the students. The first part is not new as the young black guys feel they don’t have to study because they will be professional athletes. The second is new as the young white guys who feel all they have to do is play computer games because they are going to make millions doing that. I know this because whenever they finish their assignments, I take a few minutes and ask them what they see in their futures. These answers are usually given by students who show little to no interest in their school work. Unfortunately many of these will be disappointed