Some weeks ago I wrote about how politics is interfering with obvious solutions to the Medicare, Medicaid, Social Security and Health Care problems. Today I want to point out how politics is getting in the way positive climate change.
The first big mistake was ethanol. It is now shown that producing ethanol uses up more energy than it makes. We always knew this and that is why it was heavily subsidized by the government. One of the biggest expenses with ethanol is the final distillation, which separated the ethanol from water. If we want to go this direction then the best approach is to develop a microbe that will produce a hydrocarbon like 2, 2, 4 tri-methyl pentane. Have the microbe designed to feed off of cellulose products like the grasses that grow wild in the Midwest states like the Dakotas. You can harvest several crops per year and the grass needs no irrigation, no herbicides, no pesticides and no fertilizer. The hydrocarbon is not soluble in water, so it can be skimmed off the top and avoid the costly distillation process.
The second mistake is going to hybrid cars. We know that the biggest CO2 producing fuels are coal, oil and natural gas in that order. We know that 40% of the electric power is produced using coal. With the hybrid we are using less oil and more coal and this is self-defeating.
The third mistake is the unwillingness to consider nuclear power, which not only produces energy without CO2 it would make the use of hybrids more sensible.
The reasons for these mistakes are purely political and have to do with turning more power over to the government and thus we have environmentalist determining policy. Many of the people in the environmental movement used to be the pro Gorbachev, anti Reagan people who prefer a more socialist type government. They feel that the US is the root of many of the world’s problems and would like to bring us more in line with other countries especially in the area of economics and military. That is why the phrase “the new red is green” is popular. It is the reason for the somewhat dubious claims of the global warming group and the push for green jobs by using cap and trade. Combine these changes with giving control over them to some international group as was attempted in Copenhagen and the US will be brought down to size.
The people who are concerned about jobs realize that when it comes time to produce the equipment needed for the new green industries that most of this will be done overseas where labor is less expensive. The US will innovate and China and India will produce as this has been going on for some time now and will only be accelerated with new industries. One example to illustrate my point.
Germany, The United States, Spain, India, followed by China are the top 5 manufactures of wind turbines. However China is expected to become the world's largest wind turbine producer by 2009 with 40 manufacturing plants within the country. By 2010 two major Chinese companies, Goldwind and Sinovel, should be exporting wind turbines. Although wind energy is one of the fastest growing methods for clean energy production, with a average annual growth rate of over 28% in the past ten years, it still only provides a small fraction of energy for our total energy consumption needs.
John aka Jack Novick
Thursday, December 23, 2010
GM
Something I wrote for my brother
General Motors is in the news because it bas taken government money to survive and is now owned by the government and the union but OM is in sotne ways typical of other large corporations in that they all have large legacy cost. Legacy costs are the commitment made to employees in the fonn of retirement benefits which include among other things pensions and health insurance. Today GM has unfunded legacy costs of about 200 billion and the 600 million shares of outstanding stock can be purchased for
1.5 billion dollars. This is the culmination of 50 years of mismanagement. Many years ago the company president had a long term plan usually 10 to 20 years and his strategy was developed on that basis but in the early 60's things begin to change. The president's horizon shortened and over the next ten years it dwindled to planning for the next quarterly dividend. The pressure on CEO's mounted and they had to show a good dividend to keep investors happy. If the value of the dividend fell then investors looked for other vehicles in which to place their capital and the CEO's job was in jeopardy. This was highlighted when it came time to negotiate a new contract with the union and the result was to pacify the union members with increased benefits instead of increased salaries. This allowed the CEO's to avoid a strike and pushed off payment into the future and thus preserving the current dividend. By the time payments came due this CEO was on his way to either a higher paying position or to retirement. So here we are today with a company that has committed payments to its retirees that are worth 130 times more than the entire company is worth. What idiot would ever purchase a company in that position? Only the federal government could be that stupid.
James Roche CEO 1967 to 1971
During Roche's tenure, public opinion about automobile companies was changinfiI ftom
praise for producing cars which allowed freedom and mobility to dissatisfaction.
He ignored early warning signals that customers were not happy with the quality. As an anecdotal example in the early 60' s I lived in Hamilton, Ohio where there is a large Fisher Body plant, the company that made doors for OM cars and I had a friend who was a production supervisor there and he told me that the quality of the doors they were shipping to assembly plants was so poor that he could not believe that they could fit the cars together.
Thomas Murphy CEO 1974 to 1980
He is credited with saying "General Motors is not in the business of making cars. It is in the business of making money."
So while he was making money and paying dividends to the investors, Japan was making cars.
Roger Smith CEO 1981 to 1990
By 1989, the year before the last of the OMIOs were launched, OM was losing $2000 on every one of the cars it produced. When asked by Fortune why OMIO was such a
c~tastrophe, Smith replied, "I don't know. It's a mysterious thi':§.. I've said I'll take my
share of the blame on all those things. I was part of the team. "
General Motors is in the news because it bas taken government money to survive and is now owned by the government and the union but OM is in sotne ways typical of other large corporations in that they all have large legacy cost. Legacy costs are the commitment made to employees in the fonn of retirement benefits which include among other things pensions and health insurance. Today GM has unfunded legacy costs of about 200 billion and the 600 million shares of outstanding stock can be purchased for
1.5 billion dollars. This is the culmination of 50 years of mismanagement. Many years ago the company president had a long term plan usually 10 to 20 years and his strategy was developed on that basis but in the early 60's things begin to change. The president's horizon shortened and over the next ten years it dwindled to planning for the next quarterly dividend. The pressure on CEO's mounted and they had to show a good dividend to keep investors happy. If the value of the dividend fell then investors looked for other vehicles in which to place their capital and the CEO's job was in jeopardy. This was highlighted when it came time to negotiate a new contract with the union and the result was to pacify the union members with increased benefits instead of increased salaries. This allowed the CEO's to avoid a strike and pushed off payment into the future and thus preserving the current dividend. By the time payments came due this CEO was on his way to either a higher paying position or to retirement. So here we are today with a company that has committed payments to its retirees that are worth 130 times more than the entire company is worth. What idiot would ever purchase a company in that position? Only the federal government could be that stupid.
James Roche CEO 1967 to 1971
During Roche's tenure, public opinion about automobile companies was changinfiI ftom
praise for producing cars which allowed freedom and mobility to dissatisfaction.
He ignored early warning signals that customers were not happy with the quality. As an anecdotal example in the early 60' s I lived in Hamilton, Ohio where there is a large Fisher Body plant, the company that made doors for OM cars and I had a friend who was a production supervisor there and he told me that the quality of the doors they were shipping to assembly plants was so poor that he could not believe that they could fit the cars together.
Thomas Murphy CEO 1974 to 1980
He is credited with saying "General Motors is not in the business of making cars. It is in the business of making money."
So while he was making money and paying dividends to the investors, Japan was making cars.
Roger Smith CEO 1981 to 1990
By 1989, the year before the last of the OMIOs were launched, OM was losing $2000 on every one of the cars it produced. When asked by Fortune why OMIO was such a
c~tastrophe, Smith replied, "I don't know. It's a mysterious thi':§.. I've said I'll take my
share of the blame on all those things. I was part of the team. "
Saturday, September 4, 2010
solutions
Often times when someone complains about the government, the retort is what are your solutions, and I have some suggestions. If I were magically put in charge I would do the following:
Reverse the health care bill
Reverse the financial reform bill
Make the Bush tax cuts permanent
Eliminate capital gains tax
Reduce regulations on small business
These things could be done in short order and cost nothing.
Next I would set up a group of five venture capitalist experts and give them the 400 billion left in the stimulus and tell them to accept ideas from around the country for new business opportunities. There are some Steve Jobs and Bill Gates’ out there and we need to find them.
On a more long term basis like the two years I would take care of the social security short fall by:
Raising the retirement age to 72 reminding people that you can still retire at age 62 but at a lesser amount.
I would phase out benefits to single people whose other income exceeds $150,000 per year and $200,000 for couples.
I would deduct social security payroll tax from all income like is currently done with Medicare.
I would resolve the health care problem by:
Leave the 85% of people who have health care alone.
Of the 48 million that remain, about 25% are people, mostly young, who can afford insurance but don’t think they need it. Another 25% are people who are eligible for Medicaid but don’t buy it since is has a small cost and they can sign up after they get sick.
25% are illegal aliens and they will continue to use the emergency rooms until we resolve the problem of illegal immigration.
Finally 25% who need help? For those whose income is 4 times the poverty level the government will pay 25% of the cost, 3 times the level the government will pay 50% of the cost, 2 times the level 75% of cost and 1 times level 100%. This will cost about 60 billion per year.
This will be paid for by using medical savings accounts for everyone. This will eliminate 90% of all claims and thus most of the administrative cost (paper work) which will save over 500 billion per year.
The solution to the Medicare and Medicaid problems are to ration health care, something we have been doing for many years but not talking about it.
Before you get all upset with death panels ask some questions. For example should a 95 year old patient with a bad liver qualify for a heart transplant and then work your way down to less obvious situations and start making tough decisions.
The only thing getting in the way of these solutions is politics.
Reverse the health care bill
Reverse the financial reform bill
Make the Bush tax cuts permanent
Eliminate capital gains tax
Reduce regulations on small business
These things could be done in short order and cost nothing.
Next I would set up a group of five venture capitalist experts and give them the 400 billion left in the stimulus and tell them to accept ideas from around the country for new business opportunities. There are some Steve Jobs and Bill Gates’ out there and we need to find them.
On a more long term basis like the two years I would take care of the social security short fall by:
Raising the retirement age to 72 reminding people that you can still retire at age 62 but at a lesser amount.
I would phase out benefits to single people whose other income exceeds $150,000 per year and $200,000 for couples.
I would deduct social security payroll tax from all income like is currently done with Medicare.
I would resolve the health care problem by:
Leave the 85% of people who have health care alone.
Of the 48 million that remain, about 25% are people, mostly young, who can afford insurance but don’t think they need it. Another 25% are people who are eligible for Medicaid but don’t buy it since is has a small cost and they can sign up after they get sick.
25% are illegal aliens and they will continue to use the emergency rooms until we resolve the problem of illegal immigration.
Finally 25% who need help? For those whose income is 4 times the poverty level the government will pay 25% of the cost, 3 times the level the government will pay 50% of the cost, 2 times the level 75% of cost and 1 times level 100%. This will cost about 60 billion per year.
This will be paid for by using medical savings accounts for everyone. This will eliminate 90% of all claims and thus most of the administrative cost (paper work) which will save over 500 billion per year.
The solution to the Medicare and Medicaid problems are to ration health care, something we have been doing for many years but not talking about it.
Before you get all upset with death panels ask some questions. For example should a 95 year old patient with a bad liver qualify for a heart transplant and then work your way down to less obvious situations and start making tough decisions.
The only thing getting in the way of these solutions is politics.
DC
I just returned from Washington DC where I attended the gathering at the National Mall sponsored by Glenn Beck. I need not comment on the crowed as you likely saw that on the news. By my count there were more women there than men and all age groups were covered with those in the 40’s most common. There were very few people of color, I would estimate less than one percent. The conversation was mostly about government run amok. More than half had religious leanings in their reasons for being there.
When everyone left I looked around and the place was clean with the only mess surrounding garbage cans that were overflowing. Everyone was civil and expressed their disappointment in the government in articulate ways describing specific thoughts. Much of what I heard was repeats of what Beck has said on his show. A large number feel that Obama is a socialist but when I questioned them they were not sure what is meant by socialist. I think what they mean is that he has socialist tendencies as exhibited by the take over of GM and his cry of the liberals to spread the wealth. Most of the attendees were further left from where I sit but most were well informed citizens. That was the thing that caught my attention, the knowledge that these people have. They obviously pay attention to what is going on and they don’t like what they see. If I had to describe in a nutshell their complaints it would be that the elected officials are not listening. They see the leadership as people who have their priorities mixed up. They see politicians whose first concern is getting re elected, second Party loyalty and third Country. What they want is to reverse these priorities and using the old real estate adage as a metaphor they want Country, Country, Country. That is what I also want so while I differ from them on the importance of many Issues I agree with the major premise of lets get our priorities straight.
I can tell you this that went a huge crowd begins to yell, USA, USA, USA it sounds like thunder and certainly gets your attention.
When everyone left I looked around and the place was clean with the only mess surrounding garbage cans that were overflowing. Everyone was civil and expressed their disappointment in the government in articulate ways describing specific thoughts. Much of what I heard was repeats of what Beck has said on his show. A large number feel that Obama is a socialist but when I questioned them they were not sure what is meant by socialist. I think what they mean is that he has socialist tendencies as exhibited by the take over of GM and his cry of the liberals to spread the wealth. Most of the attendees were further left from where I sit but most were well informed citizens. That was the thing that caught my attention, the knowledge that these people have. They obviously pay attention to what is going on and they don’t like what they see. If I had to describe in a nutshell their complaints it would be that the elected officials are not listening. They see the leadership as people who have their priorities mixed up. They see politicians whose first concern is getting re elected, second Party loyalty and third Country. What they want is to reverse these priorities and using the old real estate adage as a metaphor they want Country, Country, Country. That is what I also want so while I differ from them on the importance of many Issues I agree with the major premise of lets get our priorities straight.
I can tell you this that went a huge crowd begins to yell, USA, USA, USA it sounds like thunder and certainly gets your attention.
Tuesday, August 24, 2010
Banks
The Federal Deposit Insurance Corp. issued its quarterly report on the U.S. banking industry Thursday, saying the group earned $18 billion during the first quarter of 2010, with more than half of banks and thrifts reporting year-over-year improvements.
Now looking at this you might assume that these bankers must be very smart earning this much in a down economy but upon further inspection their secret is revealed. You see the government loans money to these banks at zero percent interest and then these banks turn around and purchase government bonds that pay three percent. This gives the banks automatic profits with no risk and allows the government to have money to spend on other things.
I want to give everyone the benefit of the doubt but when the senator responsible for all of this, Chris Dodd, has decided not to run for re-election I wonder if he will receive a nice retirement gift from these banks. Call me cynical
Now looking at this you might assume that these bankers must be very smart earning this much in a down economy but upon further inspection their secret is revealed. You see the government loans money to these banks at zero percent interest and then these banks turn around and purchase government bonds that pay three percent. This gives the banks automatic profits with no risk and allows the government to have money to spend on other things.
I want to give everyone the benefit of the doubt but when the senator responsible for all of this, Chris Dodd, has decided not to run for re-election I wonder if he will receive a nice retirement gift from these banks. Call me cynical
tax cuts
With the expiration of the Bush tax cuts set for the end of this year, congress is trying to decide on whether or not to extend them and this has given us an opportunity to examine just who benefited from these cuts, as the Democrats have proposed retaining the tax cuts for those earning less than $200,000 per year.
Democratic plan is neither cheap nor paid for. Making permanent all tax cuts for the middle class will cost the Treasury $2.7 trillion over 10 years, according to the Joint Committee on Taxation, at a time when Washington has already added trillions
Keeping all of the tax cuts in force will cost 3.7 trillion.
Making permanent the 2001 and 2003 tax cuts and AMT relief would have a direct cost of $3.7 trillion over the next ten years (fiscal year 2009 through 2018),
This shows us that 2.7 divided by 3,7 or 72% of the tax savings went to those earning less than $200,000 per year leaving 28% for the so called rich. Now if we investigate who pays taxes we find that those earning more than $200,000 pay over 50%
Nationally, taxpayers earning under $50,000 collectively earned 22 percent of the nation's total AGI, but paid just 8 percent of all federal income taxes at an effective rate of 5 percent. Those making over $200,000 collectively earned 29 percent of total AGI but paid more than half of all federal income taxes at an effective rate of 22 percent.
To summarize the rich people (those with family incomes over $200,000 received 28% of the cuts under the Bush tax cuts and those same people still paid over 50% of all income tax. Since the inception of the Bush tax cuts they have been described as favoring the rich but I am not so sure that was accurate
Democratic plan is neither cheap nor paid for. Making permanent all tax cuts for the middle class will cost the Treasury $2.7 trillion over 10 years, according to the Joint Committee on Taxation, at a time when Washington has already added trillions
Keeping all of the tax cuts in force will cost 3.7 trillion.
Making permanent the 2001 and 2003 tax cuts and AMT relief would have a direct cost of $3.7 trillion over the next ten years (fiscal year 2009 through 2018),
This shows us that 2.7 divided by 3,7 or 72% of the tax savings went to those earning less than $200,000 per year leaving 28% for the so called rich. Now if we investigate who pays taxes we find that those earning more than $200,000 pay over 50%
Nationally, taxpayers earning under $50,000 collectively earned 22 percent of the nation's total AGI, but paid just 8 percent of all federal income taxes at an effective rate of 5 percent. Those making over $200,000 collectively earned 29 percent of total AGI but paid more than half of all federal income taxes at an effective rate of 22 percent.
To summarize the rich people (those with family incomes over $200,000 received 28% of the cuts under the Bush tax cuts and those same people still paid over 50% of all income tax. Since the inception of the Bush tax cuts they have been described as favoring the rich but I am not so sure that was accurate
talk shows
I often hear people question why conservative shows have more appeal than liberal shows and I believe I have an answer or at least a plausible opinion. If you want to talk for several hours about a subject it has to be something that you can be completely honest about. If you are a conservative you believe in the individual’s ability to succeed but if you are a liberal you feel that many people need the help of government to be successful and there in lies the problem. As a liberal you are convinced that because of past real or perceived mistreatment many people need to have a leg up from the government in order to level the playing field but you cannot let them know you feel that way. If you don’t handle this carefully you come across as telling people they cannot take care of themselves and they don’t believe that and don’t want to hear that. They think they are perfectly capable of caring for themselves but they have been victimized by society which leads you as a liberal to confirm their status as victims. You must convey the message to them that their lack of success is not because they are not capable but because of circumstances beyond their control. I maintain that you can do this in a normal conversation but if you have to talk for one, two or three hours your true feelings will slip though and while your audience will not turn you off in anger they will just drift away from you because the true message will come through and they do not want to hear it.
While we all live in the same environment the news is replete with examples of individuals who have faced adversity and won. I don’t need to list names as everyone can think of Horatio Alger stories. I personally know at least a dozen people who succeeded against tremendous odds.
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While we all live in the same environment the news is replete with examples of individuals who have faced adversity and won. I don’t need to list names as everyone can think of Horatio Alger stories. I personally know at least a dozen people who succeeded against tremendous odds.
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