THE AMERICAN ECONOMY

 

Why it sucks and what to do about it!

 

Many of you have asked me to discuss jobs and the economy. Of course, I understand how important this is and have personal experience with the difficulties we all face. Over several months, I have noted a few of what I believe to be the main problems and offer the following; 

 

America used to have the most vibrant economy in the world. A work force of 143 million had less than 5% unemployed, many of whom were chronically without work and many indeed had stopped looking. Today, the American economic engine is slowed to a crawl and in danger of stopping altogether. To fix the problems, we have to understand the underlying causes and do whatever is necessary while we still can.  

Seventy percent of our private workforce, some seventy–five million, are employed by small businesses, meaning companies with under a hundred employees. However, there was and is a dark lining to this otherwise bright picture. The slow but steady growth of public employees is reaching a tipping point. 

A tipping point, in this case, means that point wherein the number of public employees supported by the private sector becomes unsustainable. To better understand this, let’s define a ‘public employee’. The field of public employees is easiest and best defined as all those whose compensation is 100% paid from tax revenues, meaning money confiscated from the private sector. 

Public employees include federal and state workers, members of congress, teachers, bureaucrats, loafers, drones and make-workers. Of course, the military, police and firefighters are necessary as are teachers and postal workers, etc. The risk and danger to society concerns their numbers compared to those who support them and their inordinately high pay due to public sector unions. With the busy lives most of us in the private sector lead we, for many years, didn’t have much time or interest to bother watching what goes on in government. Those happy days are long gone! The growth of these grey public masses however has been steadily increasing over the last 100 years and now- we know it.  

Today, there are an unbelievable 700 different federal departments and agencies. (Check http://www.libs-stink.us/evil_democrats.htm) Each of them with furnished offices and highly paid staffs. These agencies and departments employ an unimaginable 20 million workers (including contract workers) placing an unsustainable financial and regulatory burden on those of us scratching away in the private, dog-eat-dog, real-world arena.  

Today, no one (and I mean not one person) has any idea how many millions (yes, I said millions) of overlapping, unnecessary, burdensome and ridiculous regulations and laws the feds have generated over the last 100 years. The pages of these insane job-killing measures, if laid end- to- end ,would easily reach the moon and back with a few left over to encircle the globe several times. The mindless federal drones like the Lilliputians have finally tied down Gulliver- Gulliver, of course, being the capitalist engine!  

Compounding this burden, there are, across the land, some 14.5 million state and local employees which brings the number of those sucking on the private sector to 32 million or 23% of the total work force. This means that for every 3 of us slaving away, trying to make a taxable profit, we are supporting one public employee who’s total compensation package is far greater than those dong the same work in the private sector.  

To give you some perspective on this growing problem, back in 1945 there were only 63 government agencies employing some 1.5 million federal workers. (a list of these agencies can be seen at the above libs-stink reference) Of course, the population was only half what it is today, about 150 million with a workforce of perhaps 75 million and a ratio of one public worker for every 50 toiling away in the private sector. Of course, this arrangement, at this level, was tolerable and we hardly noticed the cost and growth of government. But, like a mindless cancer, government, continues to grow- slowly, but inexorably, killing it’s host and, of course, itself.. 

Today, obama has increased the size of government tremendously adding thousands of public workers. To enforce obamacare, he has mandated an increase of 15,000 new IRS agents whose salaries and benefits (vacations, medical insurance, retirement, etc.) will, of course, be 100% laid on the backs of the shrinking numbers of private workers.  

With the enormous growth of the public work force, came the public sector unions which have hugely augmented the cost of government manpower at every level. How do the unions get away with this? Well, imagine you’re an elected official, like a mayor of some town, and the school teachers union asks for a 12% raise and free tickets to every Broadway play. If you say “no,” thousands will vote against you and you’ll be out of a job. If you say “yes,” they will all love you and, in any case, who cares, it doesn’t cost you anything. You get the money to pay your salary from the same place they do- the beleaguered homeowners and private sector tax payers. How different this is from the private business owner fighting the unions for every last dime! 

Augmenting our problems are the numbers of the unemployed. At 9%, this is today some 12 million, leaving only 96 million remaining employed in the private sector. You will notice that I don’t subtract the 12 million unemployed from the 140 million total work force but instead, the 12 million is subtracted from 108 million which is the actual number of private workers after subtracting the 32 million federal, state and local employees.  

I apologize for the confusing methodology employed here but my reasoning is as follows; first, taxing government (public) employees is a form of financial sophistry- meaning that the government takes tax money from us (those employed in private business) and gives it to public workers as salary and then, withholds a percentage, claiming it as income tax. Of course, this is just a shallow shell game, taking money from one pocket and shifting to another. The result clearly is that, in actual fact, public employees pay no real taxes whatsoever as 100% of their salaries come from taxes confiscated from us anyway! Every dime the feds, state and local authorities get comes 100% from us.  

Of course, horribly exacerbating the problem is the terrible national debt which grows exponentially because, even with the massive amount of money taxed from us, the feds aren’t satisfied and borrow another .43 cents of every dollar they spend, signing our names to the tab. Of course, this debt can’t be paid by our generation, even if they took every dime. The debt today is so massive that our grandchildren’s children will still be paying for it. This is the gift of obama and the forces of the collective! 

Small business owners, who account for 70% of those employed, or about 67 million of us, are facing a vast array of new obama-regs. These comprise a frightening swamp of new laws and regulations making it dangerous for any business to expand. Indeed, even by hiring a single employee such that the company reaches 50 workers, new laws can impose penalties destroying the company completely. 

The Dodd Frank financial bill, with 4,200 new regulations plus obamacare, a 2,700 page nightmare, that no one really understands and Lisa Jackson, obama’s minion, at EPA, with her cap and trade agenda, wiping out jobs at an astounding rate, along with hundreds of other job killing executive and regulatory attacks on the private sector, have together created a nauseating atmosphere of fear and uncertainty, resulting in the slowest rate of growth in our history. Last quarter, the economy grew at a reported 1.4% which, with federal expenditures and borrowing, is, in reality, a minus figure. 

Compounding the current climate of despair are the actions of the federal reserve which, by unlawfully and stupidly handing out billions (quite possibly trillions) in fake money (quantitative easing), has reduced the value of the dollar to about .17 cents from a 1970 valuation. This, of course, has driven up the prices of everything from food to gasoline. Gold is approaching $1900 an oz and becoming again an accepted medium of exchange.  

No one can predict where all this will go. There is serious talk around the world of getting rid of the dollar as the reserve currency. This probably would have happened already if the Euro wasn’t in worse shape. The EU economy is crashing and the billions transferred to Spain, Greece, Ireland and Portugal aren’t helping. The socialist experiment has utterly failed. The Europeans don’t like to work and don’t like to pay taxes. They have (had) 4 day work weeks, 30 day vacations and retire after 20 years at full pay. Of course, this experiment in ‘social justice’ has totally failed. Just as Thatcher said, “the problem with socialism is that pretty soon you run out of other peoples’ money!”  

The UK today is trying to curtail its public largess at the hands of past labor governments and the youth are rioting. Imagine, now they have to pay for their own educations! We see the same throughout Europe, huge masses screaming and burning cars in the streets, enraged that they might have to actually work and pay for things the failed socialist governments used to give them. Germany, one of the strongest economies in Europe, is tired of giving money to Greece and, in fact, has stopped. The 60-year joy ride is over but, with American banks being closely tied into the EU financial system, the danger of a world depression looms on the horizon. 

We have today something like 9% or 12 million unemployed receiving extended benefits. Some have been paid not to work for going on 3 years. Congress, for exactly the same reasons the mayor gives in to the teachers unions, doesn’t have the incentive or guts to stop this insanity. After all, it’s not their money! In addition to the unemployment checks (about $200 a week) many of the long term unemployed receive food stamps and in some cases, subsidized housing and medical care.  

Let’s say that the total for all this averages $2000 a month for every long term unemployed worker. The figure I come up with is $24 billion a month that the feds are paying from the money they confiscate from us and, of course, borrow from the ‘nice’ Chinese. This means that, one way or another, each of us in the private sector is paying about $250 a month (plus interest) for each of the 12 million unemployed. 

I don’t know how the federal budget office plays with these numbers but, the way I see it, we are heading into financial oblivion. Go ahead and calculate the numbers yourself and see what you make of it. It looks to me that the captain of the ship is blind drunk and steering us, at flank speed, into unchartered waters filled with treacherous perils. As a former airline pilot, I’d recommend we get him the hell off the bridge ASAP and get someone up there who knows how to run a ship.  

There are thousands of baby boomers every day enrolling in social security and Medicare. Entitlements, if you want to call them that, make up one of the  greatest financial problems we have. The old coots in congress voted for Medicare because it was popular- not because it could work! They were again, doing what they do best, pandering! For the program to actually work, payroll deductions would have had to have been about $1,000/ month from everyone from the day the program passed into law with no one receiving benefits for the first 20 years. As it is, the feds contribute almost $50.00 of the tax-payers money for every $1.00 in payroll deductions paid out for medical care- a 100% unsustainable, purely socialist program that has predictably failed - as they all eventually do! 

Social Security; today, we have millions of high-wage earners retiring and leaving the tax rolls while fewer and fewer, earning less and less, remain employed to support them. When SS first started, there were something like 14 to 22 wage earners paying into the system for each beneficiary- today, there are less than four. If you assume that each SS beneficiary receives $1000 a month and look at the figures for 2010, there are about ten million recipients with something like a total of $10 billion being paid out every month.  

This works out to each of the 96 million private workers paying $104 per month to each of those on SS. This isn’t as bad as it will soon get. The numbers of beneficiaries is increasing and will double very quickly. The current private workforce is aging and many high wage earners are soon going to retire. Their replacements, many in low paying service related jobs, are never going to pay into the system the kind of money the boomers did and, over a period of 20 or less years, the system will become defunct.  

In our computations, we posited a private work force of 96 million (after deducting public employees and the unemployed) but, you and I know that the actual tax burden is not distributed equally. In fact, fully half these numbers pay no taxes at all, leaving the entire weight of government to fall on about 48 million. This means that only 48 million not 96 million are supporting the entire state, local and federal tax burden.  

Now, we know that these remaining taxpayers also file tax returns, figuring the greatest number of deductions, trying desperately to pay the lowest possible amount. In fact, we also know that the top 10% of those who actually write a check to the feds pay 90% of all taxes collected. This means that about 5 million high-wage earners are paying 90% of all income taxes, which is about $1.2 trillion annually or $240,000 on average from each of the 5 million taxpayers. This is what progressive taxation looks like when you lay it out.  If all 140 million American workers shared equally in the $1.4 trillion federal tax burden, each of them would pay $10,000 in annual taxes. Of course, if you only make $20,000 a year that isn’t too good….. 

Considering the problems we have discussed; it’s not too difficult to figure out what we have to do. Here’s my suggestions; 

First, let’s throw obama and his ilk the hell out of our government. Unless and until we do that,  there’s no hope! 

Then; increase the age for qualifying for SS to 70 and means test those applying.

Any who are too wealthy will receive every cent they have paid in a lump sum settlement plus 5% interest. SS will continue to be funded but, from a national sales tax rather than pay-roll deductions. All workers, including public employees, will provide for their own retirement, using SS as a supplement with personally adjustable contributions.  

Cancel Medicare completely and replace it with an affordable, catastrophic private one million dollar policy costing not more that $200 a month with the government subsidizing any deficiency in the premiums and open the program to every citizen regardless of age. Turn Medicaid over to the states to run as they see fit. 

Eliminate collective bargaining for all public sector unions. The administrators of all government departments (state federal and local) have no logical reasons to ever oppose union demands for more money. Indeed, on the contrary, they have every reason to acquiesce. After all, it’s not their money. 

Eliminate the IRS completely, replacing it with a national sales tax that everyone will unavoidably contribute to. The states will collect this tax as they do now at the point of sale. Food will not be taxed. This sales tax (federal and local) would be about 25% with the states retaining 5%. This has been suggested by many and it is a workable and fair solution distributing the cost of government on every citizen. Libs hate the sales tax idea because they think it doesn’t punish the rich enough. Of course, when Mr. Gotrocks buys a $55 million private jet and pays a $13,750,000 tax, perhaps they’ll think differently? Ya’think? 

Unemployment insurance will be limited to six months and funded solely by the states from their portion of the sales tax. No deductions will be made from paychecks and the federal government will have nothing more to do with it. 

Eliminate the federal tax on all fuel. This will stimulate travel and business. The revenue difference will be made up for by the national sales tax and the fact that a far smaller federal government needs far less money. 

Close half the federal agencies and departments, starting with the Dept of Education and Dept of Energy, which have utterly, by any measure, absolutely failed. Our schools are a disgrace with a 50% drop-out rate and many of those actually graduating are illiterate. The Dept of Energy has had absolutely no ideas at all how to increase our energy independence and, in fact, has done nothing but impede and damage the private energy sector.   

Reduce all remaining federal departments by half. This will reduce the cost of government by half. 

Close our borders. Send our military to the southern border and use whatever force necessary. Jail and fine all employers hiring illegal aliens. Bar illegal’s from sending their kids to our schools. Keep them out of our hospitals. Arrest and deport them when caught. This will guarantee that they will all go home voluntarily. Give them free bus tickets out of town. 

Shut down the food stamp program completely. This will save over $40 billion a month. With the extra money generated by eliminating payroll deductions, people will have more than enough to buy food, which isn’t and won’t be taxed. With the 20 million illegal’s gone, there will be lots of jobs to be filled by those who were waiting for us to buy them lunch. 

Get our troops the hell out of all foreign bases. We don’t need to be the world’s policemen. Let the other nations figure things out on their own. If we’re not there, they can’t hate us - can they? If we’re attacked, let the military deal with it. That’s their business and the politicians need to butt out!  We need to continue to develop advanced weapons and support a powerful military. This guarantees that we will remain free and peaceful.  

If China, or any other country, sees this as a chance to “expand” at the expense of others, let our military warn them once and then stop them by whatever means necessary. Publish this position widely so everyone understands! War is almost always caused by one side being perceived as weak. America will not be weak and we will make sure that the world knows this. A few painful examples will keep this fresh in the minds of potential enemies. 

Get out of the UN and throw them out of our country. Why are, and why were, we paying 30% of the costs for this ridiculous anti-American organization? Stop sending one dollar of foreign aid anywhere. The more we pay the more they hate us. Let them get by on their own dime. 

Shut down the Federal Reserve Bank. It’s bad business to allow any institution to control our nation’s currency. Lenin said “let me control a nation’s currency and I will control that nation.” We should go back to the gold and silver standard. This will stop the printing of ‘counterfeit’ money by the government and result in fiscal responsibly. Any paper money that can be redeemed in gold will have tremendous and lasting value. If you don’t think this works, look at Switzerland where 40% of all Swiss Francs are backed by gold. 

Pass and enforce a balanced budget amendment at the federal level. All the states live within a fixed budget, so can the feds. 

Pass term limits for congress- two terms and out- no retirement period, no oversize paychecks. We do not need or want professional political hogs swilling at the public trough for decades. Most of our problems regarding bloated government have come from the old coots who thought they owned their seats. 

Make all forms of political lobbying illegal- no lobbyists period! That should result overnight in about half the office space in DC becoming available. 

Make two years of military service mandatory for everyone- no exceptions! Kids will enlist after high school. No deferments, no parents pulling strings. The result will be better a disciplined population and fewer gang members. University and college, after the reality based discipline of the military, will develop a far more serious graduate. 

Stop taxing homeowners for schools. Make parents pay tuition for every kid they send to school. This will result in fewer kids and higher grades. People tend to value what they pay for and de-value what’s given them- human nature! 

Bring home all our overseas factories and companies. Offer them a tax amnesty to repatriate their overseas holdings. Let’s get manufacturing back in America. All the stupid federal regulations keeping industries out of America will be eliminated starting with obamacare and the Dodd Frank bill. The so-called global economy was never meant to make Americans compete with $2.00 a day labor. 

Place tariffs on any countries product that places similar taxes on American products. Free trade is not a one way street! 

Energy; Allow drilling anywhere the oil and gas companies want to. Let’s set a ten year date when we never again have to buy a drop of foreign oil. That, in itself, will shut down much of the terrorist funding and, once in place, will reduce the cost of gas. 

Stop subsidizing so-called ‘green energy’. Not one taxpayer cent for wind or solar. If they are such great energy sources, then let them prove it in the private market place like everyone else. 

Of course, I could go on for pages thinking up things that would improve our economic conditions.  Give the above some thought and let me know of any you think of or any you disagree with? 

Robert Firth

 Sunday thoughts