Monday, October 31, 2011

Corporations vs. People.

The Supreme Court seems to think that corporations get the legal rights that people do.

Let's talk about the implications of corporations having the same rights as people.

First, they should clearly have the same duties as people do.

  • People have to sign up for the draft.   
  • People can go to jail and even be executed for their crimes.
  • People get nationality at birth - which they can not easily change.
  • People have to pay into social security and other taxes.
  • People can marry
  • People vote.

That last one makes it obvious - if we declared corporations get all the rights that people do, it would include the right to vote, which makes for obvious problems with rich people creating multiple corporations and getting extra votes.  But that's not the end of it.   Obviously, if you let corporations 'marry', then two gay men could make corporations and they could marry their corporations.

Some people like to 'translate' things and use that as an excuse.  They say things like the people in the corporation have to sign up for the draft, can go to jail (or be executed), have nationality, pay into Social Security and other taxes, can marry and can vote, and that is good enough.

If that is true, by that same logic, the people in the corporations have free speech even if the corporation does not

To me, the biggest one is the possibility of jail.  Corporations have their own goals and they can structure themselves to encourage the pursuit of those goals.  Most of the time, that goal is to earn a profit.  Usually the corporations structure themselves so as to pursue those goals legally.  But not everyone is ethical.  Sometimes people break the laws to get that profit.   And sometimes the corporations structure themselves to encourage people to break the laws.

In those cases, the corporations need to be punished, not just the person that broke the law.   If the crime that was committed was just theft, that's one thing.  You can punish the corporation financially.  If the crime resulted in a single death, that's a whole other story.

But lets talk about the single specific way the  SCOTUS said corporations count as people:  Free Speech.    Not all speech is protected.   There are types of speech that is illegal:

  • Obscenity (usually applied to pornography)
  • Fighting words "I had sex with your mother and you can't do anything about it."
  • Imminent Threat (yelling fire in a crowded theater)
  • Commercial speech has some restrictions.  Trying to sell something means you give up certain rights - which is how the government can prevent cigarettes from advertising to children.
  • National Security 
  • Lies
  • Public Employees.  If you work for the government, the government can restrict what you say as a government employee.  On your off time, you can say what you want.
  • Corporations can punish employees or customers for saying things - that is, Free Speech protects you from the government, not your boss.
  • For School discipline purposes.
Of those, the one we punish most severely is probably National Security.  If a person violates National Security, they can be killed for treason.  We can't arrest a corporation.  We can't execute it.   We can dissolve it and arrest some of the employees.  We can take the money, but that still leaves the information and the methods to continue on.   If you can only arrest the people in the corporation than only the people in the corporation should have free speech.

    Saturday, October 29, 2011

    Optional flat tax = a limit on how much tax you pay.

    It's not that hard to understand.  An optional tax is in effect a tax cut but only for the wealthy people.  If using it you pay more, you stick to the current tax.  If using it, you pay less, you use it.  So in effect, people only use it to lower their taxes, never raise them (except for the stupid - but we tax the stupid enough already).  Worse, it makes it harder to raise taxes - as you have to raise both.  Which I am sure the GOP likes - they act like taxes are an incredible evil instead of the reasonable cost of freedom, security, and safety.

    The question is - is it a good idea?  Nope.

    Let's discuss why the GOP claims we need it.  At heart, taxes are complicated.  Could they be simpler?  Yes, they could.  There are certainly parts of the tax code that are way too complicated.  But a very simple tax code takes a reasonably good, working tax code with a few flaws and turns it in to an incredibly bad one.

    The world is NOT simple.   If it were, problems would not exist  and people would not argue about it.  We need a tax code that can not be expressed in one sentence to deal with these complexities.

    A key example is the complex problem of how you treat married couples.   Do you treat them as a single tax entity with a single income and a single set of deductions, or as two individuals.   If you treat them as a single entity, then you in effect are tremendously hurting the two income people.  All the various deductions they get are not doubled.   Their combined income pushes them up into a higher tax bracket.

    But now try treating them as two people.   This works great for the double income families, but screws the single income families.   A man (or wife) trying to support his wife ( or her husband) and four kids on one salary has it pretty tough.  They family should not be forced to have both parents work, they need the help.

    So the tax code gets complex because we want to be fair and life is COMPLEX.

    When you simplify things, in effect you are saying "we don't care about your special circumstances."

    Some of the special circumstances built into the tax code probably should go away.  But all of them?  Without even bothering to look at them?  No.  Bull crap.

    The simplest possible tax code will by definition screw over (and that four letter word should really be spelled with an "f") some people.  The flat tax is designed to screw over the poor, the home owners, and families, among many others.

    As I have said before, if simplicity is your only goal, then you should go after my "flat wealth tax", which taxes you on what you own, not what you make (income tax), or buy (sales tax).  But the 'simplify' people don't like that, because the flat wealth tax is good for the poor and the middle class, while treating the wealthy the same way their flat tax treats the poor.

    Thursday, October 27, 2011

    Complicated Ethics

    Ethics are a lot complicated than people think.   Lets look at so called ethical vegetarianism.  I never liked the idea in the first place, because it assumes that it is more ethical to eat plants than it is to eat animals.  Why?  What about a sponge?  Most people think of it as plant like, but technically it is an animal.  Worse, all animals eat - which means they kill to survive, while most plants photosynthesize, so they don't kill anything at all.   Ethical vegans choose to eat peaceful, non-violent creatures as opposed to the violent, mass murders that kill other creatures to live.  The distinction between plant and animal is more emotional than it is logical. 

    But lets move on to the big objection.  As many have begun to point out, eating a purchased plant kills more animals than eating a purchased steak.   Commercial harvesting is ... violent.  Read this quote (Source):

    "[A] conservative annualized estimate of vertebrate deaths in organic rice farming is ~20 pound. … [T]his works out a bit less than two vertebrate deaths per square foot, and, again, is conservative. For conventionally grown rice, the gross body-count is at least several times that figure. … [W]hen cutting the rice, there is a (visual) green waterfall of frogs and anoles moving in front of the combine. Sometimes the “waterfall” is just a gentle trickle (± 10,000 frogs per acre) crossing the header, total for both cuttings, other times it is a deluge (+50,000 acre)."

    When cows (or sheap, or veal, etc.) eat plants, they are selective.  They leave the frogs and anoles (a small lizard) alone, eating just the grass.    When we farm vegetables we leave a path of death behind.  This is not even counting the many insects killed by pesticides used to protect the precious vegetables.

    To make it even worse, you can raise livestock on marginal lands.   Mountains?  No problem.   Growing vegetables (and many grains), requires you to use prime land that normally teems with natural wild life.   You kill them and steal their natural habitat to grow  plants    Cows, etc. can live on marginal lands that doesn't support much wildlife and they can share it.  You don't have to kick the prairie dogs out to raise beef.   Oh, you do have to get rid of the larger predators, but they are relatively rare - and are more likely to be saved in parks and preserves.

    As you can see, ethics requires more than just a principle.  It requires thought, research, and the will to do what is right, as opposed to simply what seems right.

    That is my problem with the many politicians.  They don't think through their own principles. Take Herman Cain's recent abortion blunder.   He said:

    "What it comes down to is not the government’s role or anybody else’s role to make that decision. Secondly, if you look at the statistical incidents, you’re not talking about that big a number. So what I’m saying is it ultimately gets down to a choice that that family or that mother has to make. Not me as president. Not some politician. Not a bureaucrat. It gets down to that family, and whatever they decide, they decide. I shouldn’t try to tell them what decision to make for such a sensitive decision."

    That is at heart, the pro-choice position, if said using the GOP's new 'faux-libertarian' language.  It's clear to me why he said it - he was sticking to the talking points about government regulations being bad.  He applied it fairly and honestly, without realizing that is not what the GOP does.  As such, he came to the oh so logical conclusion that abortion should be legal.   Too bad another of the GOP's prime principles is pro-life, and that over-rides lesser principles such as regulations being bad.  Later he realized his mistake and tried to fix it. 

    Too late.  At the very least he revealed that the GOP is lying about being anti-government.  That is simply an excuse the GOP uses to explain why it wants the government to do nothing about issues they don't care about.  On anything the GOP does care about, they are tremendously pro government regulations.  Abotion, sex education, gay marriage?  Regulate away.

    It's not just the GOP, it happens with Democrats too.   Less often recently, in part because currently, we have a wider base of politicians (with more varied goals) and better leadership.  The wider base means we can allow people to differ a bit without being kicked out of the party.  In other words, we let people hold opinions that violate core DNC goals and still be part of the Democratic party.   For example, if we had a politician that believed strongly in the power of regulation, we would allow him to use that principle to be pro-life, without kicking him out.  Note, as a general rule few (if any) democrats are pro-regulation as a principle, but instead see it as a necessary evil.  

    In addition, we have a strong leader.  Obama's has clear goals and priorities, which can shape the party.   He leads and gives direction to the entire party, but the base allows for differences.  As long as the other Democrats follow his lead for most things, the party will not adopt principles that at heart go against deeply held core party beliefs. 

    The GOP lacks leadership.   If Cain did in fact become the GOP president, he could make a choice - either abandon the principle of 'anti-regulation' as a core theme, or abandon the core principle of pro-life.   I think we all know that if he did become president, the anti-regulation theme would vanish against the unbreakable rock of pro-life.      Because in real life, principles almost always lose out to core beliefs.

    Tuesday, October 25, 2011

    Regulations vs jobs.

    I have said before, regulations create jobs.

    There are three things we regulate:

    1. Processes
    2. Products
    3. People

    When we regulate a process, it can either be movable or immobile.  An example of a process regulation is requiring the manufacturer not to pump lead and arsenic into the air.  Similarly, requiring that a pharmacologist see your ID before selling you Sudafed is a process regulation.    Immobile processes are hard to out-source, while movable ones are relatively easy to outsource.  Examples of immobile process include sewage treatment, electrical generation, bridge building, tunneling, etc.   Movable process are more common, as most products can be built anywhere and moved.   In either case, regulations create MORE jobs, not less.  If the process is immobile, the manufacturer hires new people to do the required process.  However, if the process is portable, the new jobs MIGHT be transportation based, as the process gets outsourced to an area that does not have the regulation and the net change is someone else gets those jobs while only a few more transportation jobs are created.  Net net, the world benefits, even if the country suffers a bit.  But in both cases regulations decrease the profits of the existing corporations while creating new jobs.

    An example of a product regulation is requiring the end product to have extra features.  Cars must have seat belts, tobacco must have warning labels, dangerous medicine must have child-proof caps, are all product regulations.   Unlike a mobile process regulation, you can't move production overseas to avoid the regulation.   Here new jobs are created and in the same country that passed the regulation.  

    There are two types of people regulations:  limitations and verifications.   An example of limitation regulations are requiring doctors, barbers, and taxi drivers to have licenses.  This is the ONLY form of regulation that actually decreases jobs.   But businesses usually don't complain about these regulations.   Usually they like them.  Existing businesses do not wants the competition in the case of of licenses.  Verification is another story. Here, government requires the business check to see if the employee is appropriate (sex offenders from teaching at schools, or requiring businesses to check immigration status).   This does not decrease jobs, it increases them (they need to pay someone to do the checks).  But businesses don't like doing the government's job for free.

    When the GOP claims that government regulations kill jobs, they actually mean that a regulations on mobile processes that don't kill jobs, it just moves them over seas  (which actually adds transportation jobs to the world job market).    But then they use that as excuse to destroy many job creating regulations - such as the ones requiring power plants to clean up their pollution (cleaning up pollution costs money - which goes to pay people to do the cleaning or to build the devices that do the cleaning).

    Some regulations are short sighted.  Maybe we don't need to be too strict.  But I know one thing - the world is not clean.   Cancer rates, autism rates, attention deficit disorders, allergies, they are all on the rise.   Human health is impaired as compared to what it 1,000 years ago, let alone 100,000 years ago.  Some of it may be due to greater medical care allowing for greater life spans and propagation of genes that might once have been eliminated by harsh methods.  But I bet some of it is caused by all the pollution that the GOP is not at all concerned about. 

    But here are some facts the GOP does not like to admit:

    1. Every single power generation and utility regulation INCREASES jobs.
    2. Every single regulation that requires features on a product INCREASES jobs.
    3. Business by a far majority, love regulations that prevent other people from competing with them.
    Businesses do dislike regulations that require them to  do the government's job, nor do they like regulations that prevent them from dumping pollution into the air, water, and ground that we breath, drink, and grow food on.  But funny how they don't do that on property the owners live on.

    Sunday, October 23, 2011

    Healthcare Costs

    This post is not about the high cost of healthcare.  Instead it is about the way we lie about the costs. 

    I have health care.   In fact, my employer does a pretty good job when it comes to benefits.  It offers multiple plans and lets us choose.  I have in fact chosen the more expensive, pick your own doctors plan.  

    When I get healthcare bills, I pay them.  Usually I just look at the "You Owe" column.   The rest of it is pretty complicated and hard to understand.

    Today, I am going to look at the rest of the columns  The most interesting thing, is the differences between the "amount billed", "Paid by XXX", and the "You Owe" column.   In most businesses, you would expect amount billed to be equal the paid by + the owe column.  Not in healthcare.  None of my health care bills for the past 12 months add up like that. 

    In health care bills, there are two more  columns: "Discount" and "Amount not Covered"

    You see, insurance companies make two kinds of deals with healthcare providers.  The first is a straight "discount", of say 29%.    There, they pay the healthcare provider 29% of what they bill.  The other is a set fee, where they pay a certain amount of money for certain types of procedures, regardless of what the provider normally charges.  Hint, it is usually a LOT less - as in much less than 50%.    

    That 29% is spot on accurate (to the penny) example, used by my insurance company for all payments to that particular provided.  The negotiated amounts have dramatically different billing percentages.  But a typical set fees vary a lot.  One was covered $110.27 out of $295, or about 37% of the bill.    Another was $39.27 out of $177.96, or about 22% of the bill.

    Add to that a small copay, usually under $50, which I personally pay.

    Wow, those providers must be going bankrupt!  They are getting ripped off!  But wait, they have been doing this for a long time.  More than long enough to go bankrupt.  At the very least, why don't they all go to the discount method.   Another thing, clearly, those inflated prices are wrong.  They are overcharging.   What is going on?

    First, the amount of inflation in medical prices varies depending on location.  That is, while that provider may charge$295 in Manhattan, the same procedure may only cost  $155 in Detroit.   For a national provider, the set discount may make a lot sense in one location, but make no sense in another.Clearly the negotiated 29% discount is a good deal for the Manhattan doctor, giving him about $200, but a horrible deal for the Detroit guy who would get his full $155.
     Second,  not everyone has insurance.  And sometimes, even with insurance, you can't go to a provider 'in plan'.  I try to save money by going to in plan, but if I get a brain tumor, I may have to go out of plan.

    So those providers keep their high "inflated prices" for use with relatively rare non-participating people, while at the same time accepting the massively lower prices for most of their clientele.  Note, I am not special, most people try hard to go with providers 'in plan', most of us get the lower prices.

    It is VERY rare that someone with money goes to a provider "out of plan", for anything significant.  The main case is emergency room visits.   More often, you get poor people that have no insurance getting hit with large bills, that they more often than not, can not pay.

    Third, the providers can get tax benefits for having those high prices discounted away. They are business losses - "I charged X, but only got paid X/2"   This is particularly used by 'non-profit' entities that make a lot of money, but to avoid paying taxes, have to find ways to claim they are not-profitable even when they really are.

    Fourth, it lets the insurance companies pretend they are getting a good deal.  They can claim they saved you money, as opposed to simply costing you more than the doctors, just spread out over time.

    The truth is quite simple.  No reasonable person ever pays the "billed price" for helathcare, given sufficient time to prepare for the charge.  If we have insurance, we go to in plan providers.  If we don't, we get insurance first, hunt down charity, or simply don't pay it.

    So why do we allow the deceitful business practices created and maintained by the providers and  insurance companies for their benefit.

    Medical care is hard to price.  Particularly emergency medical care.  The providers have you over the barrel - pay or die.  Usually it is agree to pay NOW or die.  Worse, they don't tell you the price before service.

    Lets talk about a world where these practices are not going on.  No 'discounts', no massively lower secret "negotiated prices".

    Three rules to make this happen.  Why treat healthcare special?  Because I am not.  Most of these rules are designed to do to hospitals and other providers what existing laws and capitalism have required other businesses to do for years.

    1. No Price Gauging.  Emergency room visits to a hospital, by law would have to use the lowest negotiated/discount prices a place has, regardless of with whom they negotiated services.  If they have no negotiated prices, they can't provide those services anywhere else.   We don't let people raise the price on water or gasoline to 3x normal because of a emergency (hurricane, etc.), don't let them do it because of a car accident/heart attack.
    2. No Hidden Prices.  Any service provider must post all regular prices and negotiated prices online, for every single insurance company.   If this is too hard to do, then perhaps the provider should consider simplifying their pricing.  No other business gets away without listing prices beforehand.  If they negotiate discounts, they must list the un-discounted price and the set discount.   Every other business in the world has to list their prices before you pay, so should the hospital.  The negotiated prices must be listed so that people can tell before hand what they will actually pay, and which insurance companies they should consider joining.
    3. No Secret Profits.  Anyone non-profit provider can not charge more money to the uninsured than their lowest negotiated price.  That should be what non-profit is all about. Any for-profit provider can screw the uninsured all they want to.
    P.S.   I am talking about providers, not just doctors here.  More importantly, the doctors are not the ones in charge.  Corporations are.  Medical providers are not just doctors and hospitals, but also businesses doing medical tests, selling drugs, braces, etc. In general, it is the big corporations that are in control, creating this system, not individual doctors.   Individual doctors have to go along with the system.

    Friday, October 21, 2011

    Campaign Finance

    There are many theories about campaign spending.   Many (if not most) say it is relatively infective.  (Erickson & Palfrey, 2000) Others claim that it does have an effect, but small: one percent increase for doubling the spending.  Some claim that it differs for incumbents vs challengers, usually stating that incumbents spending is less effective, while challenger spending more so - in large part because challengers have to do more.  Incumbents have a large advantage particularly in simple name recognition. (Abramowitz 1988, Gergber 2004.)  But almost all of them state that the higher the election, the less effective money becomes.   At the presidential level, if money does anything at all, it takes an awful lot of it to get any results.

    I personally am of the opinion, that cause and effect are being reversed.  Money does not buy winning votes for in an election, instead winning candidates attract money. Campaign finances are not shady, despicable things, but instead the best polls you get for free.  People vote with their wallet before they vote at the booth.   The most popular guy gets the most money and then goes on too win, as opposed to the other way around.

    In any case, Obama clearly has a lot more money than the GOP candidates.  ( The NY Times says Obama has raised almost $100,million, as compared to Romney's, $32.6 million. The entire Republican field has raised a total of $90.1 million.  That is still 10% less than Obama and that includes the Ron Paul people and the Cain people, neither of whom are likely to give freely to any other candidate but their own.

    Best of all, Obama raised 52% of his money from small donations (under $200), as compared to Romney, who got 61% of his cash from maximum donations ($2,500).  Romney got less than 10% of his money from small donations and Obama got only 22% of his from maximum donations.  But not that 20% of $100 million is still more than 61% of $33 million

    Last year, at this same time period, Clinton was the rich woman at $62,7 million, vs Obama at $58.6, Romney at $43.5, Giulani at $34.4 and McCain at $25.9.    Romney did better 4 years ago than he is doing now and lost the Primary, to McCain, who lost the general election. 

    Obama, despite his poor showing in the polls, is going to win the 2012 election.   Not because he is going to buy the election, but simply because so many people want him to win.  The voters are voting with their pocketbook and giving him money and LOTS of it, mostly in small batches of less than $200. 

    The Republicans are caught up in pandering to the far right, ignoring the moderates that are essential to win the presidential election.   The T-Party won't let them pick anyone that can beat Obama, their strategists are ignoring the needs and desires of the majority of the citizens of the USA, and blaming Obama for everything bad, while it sells well to their base, just angers the undecided.

    Part of the problem is that blaming the other guy does not win you votes, ever.  Politicians have a bad reputation.   We don't like them.  To quote South Park:   "But Stan, don't you know, it's always between a  giant douche and a turd sandwich.  Nearly every election since the beginning of time has been between some douche and some turd."  The fact that Obama is hated by the far right means nothing, the fact that the left is angry with Obama for not doing enough, means nothing.  The fact that our opposing choice is WORSE is what matters.

    Another issue is the plan. People vote for a guy with a plan, not the guy that says the plan sucks.   For the GOP to win, they need to shift the rhetoric away from how bad Obama is, and about how good their plan is.  Too bad their only plans are rehashes of old stuff that people don't believe in.  To shift the rhetoric, you need not just a plan, but a NEW plan.   Which is something they have not had in 10 years.

    Wednesday, October 19, 2011


    I have some good news for us - unemployment has really only risen by about 3%.   But some bad news - the length of time people remain unemployed has doubled.

    Part of the problem is that people usually quote the Unemployment numbers, which only count the number of people looking for work.  It ignores everyone that has given up.  More importantly, it also ignores all retired people, college kids, the military, infants, and a bunch of other things.    Unemployment numbers are really about how many people are unhappy with being unemployed.  It is important for politicians seeking to get re-elected, but not that much for economists.

    A better statistic is the Civilian Participation Rate.  That number is pretty inclusive - it includes stay at home moms, senior citizens and college kids.  But it still does not include kids under 16, prisoners or military personal.  It doesn't really matter if your unemployment number is 1% or 80%, what matters is how many people are working to support the unemployed.  If you have a Civilian Participation rate of 10%, then every 1 working person is struggling to support 9 other people - and you are in deep trouble, tax wise.  If your Civilian Participation rate is 75%, then 3 people are supporting 1 person, and you are fairly flush tax wise.  Even if you have an unemployment rate of 15%, it won't matter. 

    (Source for this article)

    The Civilian Participation Rate has fallen from a high of 67% (Good old Bill Clinton) to a low of 64%, the lowest since the 1980's (Ronald Reagan presided over this dark time in US history).  That means that only 64% of the working age, non-military US population has a job.   But note that's only a fall of 3%.  So honestly, this recession is not as bad as some would think.  During that same time, unemployment has rose from about 4% to a 10% high.  Note the unemployment rate change is twice as much as the participation rate change - in part because so many people in our culture never had a job.  About half the population never was looking.   It also means that no, the unemployment numbers are not being affected by a large increase in the number of people who gave up.

    On the other hand, the length time people are being unemployed has skyrocket.  Before the recession, people usually were unemployed for about 10 weeks.  The highest it had ever averaged was about 13 weeks back in the early 1980's.  But now it hit 25 weeks as the average.  That's about twice as much as the previous high.  That is a big change.

    The difference between this recession and the good times is 3 more unemployed people out of every hundred.  So this recession does not really have a lot more people out of work - what it has is a lot more people that want jobs that can not get them.   Honestly back in the evil old Ronald Reagan recession (which to be honest was probably as much about Carter's mistakes as the current one is about George Bush's mistakes.), there were just as many people working.  A major difference is who is unemployed - gender wise.  Back under Reagan, women stayed home and liked it.  Now, the men are staying home and not liking it.  Not liking it for half a year.

    Contrast this with corporate profits and you understand why the unemployed people are upset.    Corporate profits are continuing on their same path of ever increasing profits.  Oh, they got hit in 2008/2009 but are fully recovered.  And the CEO's are getting paid more.  CEO's pay increase is better than inflation, better than the corporate profit increase, and even better than the Stock Market.   (Will someone let me buy options on my CEO's salary?  Please?)  But regular wages have dropped.  Why?  Because business men know that the unemployed people are REALLY desperate, even if there are not all that more of them.

    Monday, October 17, 2011

    Economic Structure

    Currently America has a 4 tier economic structure:

    1% (TW) Truly Wealthy (Yacht/Full time Servants Don't have to work, owns multiple homes)
    9% (UMC) Upper Middle Class (speedboat/luxuries - many have a Graduate degree, always owns their home) 
    50% (MC) Middle Class (two cars, graduated from college, - sometimes owns, sometimes rents )
    40% (LC) Lower Class (one used car, at best - did not graduate college, usually rents)

    There used to be a Lower Middle class (LMC) that consisted of clerical/blue collar workers, but that class has dissappeared.  They typically had the 2 year "Associate's Degree"  but not the four years B.A.  Computers and robots took a lot of those jobs and the pay dropped for the rest, making them clearly the lower class. Oh, a few managed to make the jump to Middle Class, but not many.  Now a days a n Associate's Degree won't help you that much.

    At the same time, the Upper Middle Class has shifted upwards a bit.   They don't like to be called the "Upper Class" for several reasons.  Chief among them is that often the Upper Middle Class works sides by side with the Middle Class - in fact sometimes U.M.C. people work for a MC boss.

    This is because children can turn an Upper Middle Class family into a Middle Class family.  If your boss has a family, he may not live as well as you do - particularly if his wife is a stay at home mom.  Children cost a lot of money and often the mother (and rarely the father), have their employment changed because of the child.  The second most common reason why an UMC becomes a MC family is disease.  A single sick person in a family (parent, worker, or child) can  cost huge amounts of both time and money.

    This happens because the main difference between UMC and MC is that the UMC has luxuries.  The main difference between the MC and the LC is not luxuries, but steady employment, with benefits, and a bit of a safety net in the bank or home equity.

    The same effects (child, sickness) can turn Middle Class into Lower Class, but this is a little bit bit rarer.    The movement is generally caused by someone stopping a lucrative job to help out and give personal, loving care to someone (child/ sick parent).  The Middle Class does not have the luxuries afford to do that - so the child/sick person often just has to make do with what they can afford because both mommy and daddy have to keep working to keep them out of the dreaded Lower Class. 

    I don't think we will ever regain the Lower Middle Class.   Computers do what they did much very well.   In addition, the push to get more people with a full bachelor's degree is a wise thing.  If you are smart enough to graduate High School, you should get a full Bachelors Degree, not settle for an Associates Degree.

    Being in the Lower Class is often the result of illness in a family without two strong, skilled workers.  Drug use is also a contributing factor.   To pull people out of the Lower Class we need better education and better free healthcare (Obamacare is a good start).  What we really need is a new education system.  And that won't happen without removing local control.

    Now to discuss the big one.  The move, everyone dreams about.  Moving into truly wealthy is practically impossible.   Social mobility beyond the UMC is practically gone.  The top 1% likes their position and does what it takes to stay there.    It's no enough to be better than 99% of the population.  Bill Gates' children - who may be smart but not as smart as he was - fight to keep their position.

    (Source for rest of article)

    The telling problem is the drop in mobility.  In the 1940s and 1950's, the chances of changing social class were from a low of 5 to as high as 12%.    But since the 1990s, it has held solid at about 3.8%  That means less than 4% of the top 1% will ever stop being rich.   You just can't become wealthy (or lose your wealth) the way we used to.  Not unless you do something spectacular.  Everyone hears of lottery tickets wasting their wealth.

    In truth if you have to be 1 in 2,500 to fight your way into the top 1 in 100 position.   As for the rich slowly descending into the Upper Class - that usually only happens to the arrogant ones that pissed off their parents.  Again, less than 1 out of 25 rich people somehow blow it and end up living in just a million dollar condo instead of a $10 million dollar mansion.

    Part of the issue is that corporations got bigger and better.  We created national chains, so new businesses have to compete against huge businesses - that can sell at a loss in a small area.   It used to be that small business could relatively easing establish dominion over a 3-10 town area without fear of competition form a national chain.  You were only competing with other local businesses.  But now we have huge national chains.  This makes it much harder to turn your family business into a state wide corporation.

    The internet helped out a bit - but try to compete with Google/Apple/Amazon/PayPal now.  We have new large corporations, not many medium ones competing with each other.  In the end, it was a one shot infusion of new blood to the upper classes, not a continuous engine.

    Saturday, October 15, 2011

    Easy Tax Reform

    It is very hard to raise taxes.  Much easier to close loopholes.  So here are bunch of expensive loopholes we can close, all of which make little sense to keep open.  Some are tax deductions that seemed like a good idea, but turned out to be easy to abuse.  Others are simply government give-a-ways that never made financial sense - even if they made political sense.

    1. Payroll tax limits 
    2. Mortgage deductions for second homes/yachts (yes YACHTS)
    3. Real estate Tax deductions
    4. Business deductions for SUV over 3 tons. 
    5. Capital Gains tax (buffet rule)
    6. Oil
    7. Agricultural

    Payroll tax limts.  You only pay social security tax on your first  $106,8000 of income.   So someone that makes $107,000 and someone that makes $5,000,000 a year, both pay the same amount into social security.    If we eliminate this limit, so that everyone pays the same 6.2% (and their boss pays another 4.2% - which may be the same person if you are self-employed), that solves our Social Security funding problem without cutting benefits a single penny or raising the retirement age, ever.

    Mortgage Tax Deductions.  You get a tax deduction for all mortgage interest you pay for anything that qualifies as a home. That includes a second home as well assuming you live in it 14 days a year / 10% of the days you rent - whichever is greater.  Even if one of your home is a houseboat - or a 200 ft yacht with a bed, kitchen and bathroom in it.  If we limit this to a single home and also limit it to no more than $30,000 tax deduction a year (adjusts for inflation) and the IRS gains a lot of cash.  I am being very generous with that $30k deduction, you

    Real estate tax deductions.   Property tax you pay to the state is also tax deductible.  Why? We don't let the poor deduct that taxes they pay on food?  We don't want to affect the main housing market, so, again, make it only for your primary home (6 months+/year), and again a limit of  no more than $30k a year.  

    SUV deductions.  Here we give a tax deduction for any SUV that is purchased for business purposes if it is over 3 tons.  The idea was to let business deduct their business related expenses.  But it got abused by a lot of small business owners for vehicles they use personally.   The problem was they made a category too big and let people buy the low weight (6,000 lb vehicle) and get the tax deduction that would be appropriate for the high weight (14,000 lb vehicle).  Keep the deduction, but scale it.   $1,000 deduction at 6,000 lbs, + another $1,500 deduction per 500 lbs. lbs base vehicle weight above the 3 tons. Still tops off at the $25,000 deduction for a 7 ton vehicle, but to get that they need to own a real truck, not just a heavy SUV that they once used for business purposes.

    Capital Gains Tax.   Here I propose a simple rule.  You can pay the 15% capital gains tax - but only on the first $50,000 of capital gains you make.  After that, it jumps up to the same tax rate you pay for regular income.  Put in an exception for selling your primary home at the 15% rate as long as you have lived in it for at least 40% of the time you owned it.

    Oil Loopholes.  They get a lot.   Tax credits for 'enhanced oil recovery' -  needs the newest, expensive, tech to get = tax break.   Production credits for marginal wells - poor well with little oil/gas = tax break.  Intangible drilling costs - you get a bad reputation for spills = tax credit for propaganda.  Plus a bunch of weird accounting rules that only they (no other business) gets.  Remove all of that crap and make them play by the same rules everyone else gets.

    Agricultural tax benefits fall into two types - direct subsidies for corn based ethanol and the classic pay people not to farm.  Neither of these make much sense.  Ethanol is perfectly profitable - if you limit it to waste agricultural products as Brazil does.  Then the fuel is cheap - the leaves, stalks, etc. that would otherwise be thrown away.  But it makes zero sense to put perfectly edible corn into the mix.   Same goes for the paying people not to farm.  We don't need to socialize farming, it has become a big business - the payments get rid of ALL risk for farming and it has in fact KILLED the family farm.  Because of the lack of risk, all gets done by big corporations.     In 2005, the government spends more on farm aid than it pays to families that receive welfare.  "The cash comes with so few restrictions that subdivision developers who buy farmland advertise that homeowners can collect farm subsidies on their new back yards." (Source of quote and data = Washington post )

    Thursday, October 13, 2011

    Great idea for the IRS

    Here is a simple suggestion for the IRS:

    Whenever a corporation declares less federal taxes than it pays for it's top executives, board of directors plus dividends paid to stock holders, for three or more years in a row, that should automatically trigger a full field Audit of all their finances.

    It's based on the simple idea that no sane corporation could possibly pay more than it is earning, and that doing so is evidence of fraud.

    Strangely, such actions happen often.  Corporations routinely find ways to declare no or minimal taxes while declaring banner years and paying dividends and bonuses.

    Perhaps they are doing really well manipulating the tax laws.  Or maybe, just maybe they are pretending to do really well.  Maybe their business is a fraud.  Maybe they are simply cheating the government.  Maybe

    At the very least, if they are not willing to pay their fair share of taxes, they should get extra scrutiny.

    Monday, October 10, 2011

    Science and Politics

    First, let me state that there are just as many anti-science democrats as there are anti-science republicans.  For every creationist, there is an anti-vaxer.   For every anti-climate change lunatic, there is an anti-nuclear fool.

    But that's the individuals.    They don't matter.  Their are lunatics in all social groups.   The problem is the Party Leadership and the political platform.

    The left does not carve their anti-science message into stone as core party beliefs.  The left doesn't have major candidates endorsing the anti-science views.  It doesn't have litmus tests for candidates, demanding they repeat a viewpoint that is patently false.  The democrat presidential party candidates avoid those issues, as opposed to bring them up.

    That is not a minor difference.  It is a major difference between lip-service for bullcrap and actual laws.   More importantly, by not promoting it, we enable our own growth.   In 10 years, the anti-vax movement will have to be taught in history schools because it won't exist anymore.   Some day, with a bit more advancement, we can make nuclear power safe enough that even the paranoid masses will accept it (it is already far safer than coal.).

    That can't happen to the GOP.  Their anti-science movements have gotten stronger and stronger, and have stood the test of time.  Evolution is proven science, it hasn't been controversial for 50 years, but the GOP keeps promoting Creationism.   The same goes for Climate Change.  In fact it has gotten so bad that moronic politicians point to the left's pro-climate change stance as proof we are anti-science.  Climate change is accepted science, not something you can dismiss and claim is controversial (not among scientists at least).

    That is why the GOP gets the anti-science rap.  Not because liberals are more scientific than conservatives, but because the Republican party embraces anti-science movements while the Democrats are ashamed of them.

    Saturday, October 8, 2011

    What the Wall Street Protestors Should Demand

    There are a lot of people mad at Wall Street.  Right now they have a growing protest (it just gained the Unions).  

    All they lack is a solid message.    First of all, forget about solving the issue completely.  If it were that easy, it would have been done already.    What we need to do is to make a single solid step in the right direction.

    The problems Wall street has are three fold:

    1. Excessive concentration on the short term.  Short term profits can always be achieved by taking long term risks.  It's not that hard to create gambling strategies that pay off a reasonable profit 9 times out of 10,but one time out of ten bankrupts you.   Stock prices pay attention to short term profits, and often ignore long term risks.
    2. Unethical treatment of customers.   American corporate law is at heart a "Buyer Be Ware" process.  IT  lets corporations sell things by focusing on the main benefit while ignoring the small print. 
    3. Unemployment.  When the business doesn't off shore their business, then they get beaten by foreign based companies.  
    These three problems can not be completely solved without doing horrible things to the economy.  But they can be ameliorated.   I see two solutions.  (Sorry, could not think of anything to help out with unemployment - in part because the more you fix #2, the greater a problem you get for #3 - we need a balance))

    Solution #1:  More some of the focus of corporations to the long term  via bonus rules.   Three rules to do this:  
    • Any public corporation based in the US can not pay any person more than $200,000 unless at least half of the amount over $200k is in the form of a corporate bonus. You can pay them $500k a year, as long as $150k of that $500k is in the form of the corporate bonus. 
    • All corporate bonuses must "vest" over a period of at least 4 years.  If you earn a bonus in one year, your get no more than 25% one year after you earn it, 25% the next year, etc. etc.   If you leave the company, you still get the bonus.  No bonuses can vest in any year unless the corporation declares a taxable profit to the US government.
    • All un-vested corporate bonuses are, by law, forfeit to the the government if the corporation receives a bail out or to creditors if the corporation goes bankrupt.    If a corporation is in talks about a bailout or is considering declaring bankruptcy, then the bonuses must be delayed for up to 3 months or until the talks/considerations are over.  If they can delay completing the bankruptcy/bailout, then they get that extra year's worth of bonuses.
    Note, this does not  actually lower the amount anyone gets paid, unless their business goes bankrupt..  Instead it time shifts some of the money.

    Solution #2:   Grant more power to the newly created Federal Trade Commission.  Specifically, grant it a rating power.  It can review any and all contracts for major corporations and rate them - from A to an F.   This rating, by law, must be prominently displayed at the location where people sign the contract  - and in large, readable,  type whenever any web site requires you to click to accept.    Failure to do so invalidates the contract completely.

    Thursday, October 6, 2011

    Republicans STILL looking for a winner

    Chris Christie yet again repeated that he will not be running for president.

    That is not the news - he has repeatedly said it.   What is news is the fact that republicans kept begging him to run, this late in the game.

    The GOP does not like their own candidates.  It's not like they are limited.  They have their 4 major candidate types:

    1. Libertarian that still believes the bull crap lie that the GOP wants small government (Ron Paul)
    2. Populist Tea Party candidate  (Bachmann)
    3. Moderate Conservative that most of the GOP thinks is a R.I.N.O.  (Romney)
    4. Religious Right guy  (Perry)
    What more can they possibly want?

    Oh yeah, someone that can win against Obama.  That is simply not available.

    So how could the GOP actually beat Obama.

    Well, they could get a miracle - some incredible bad scandal that breaks just in time to crush Obama.  Sex won't do it, I'm talking major crimes
    They could try to steal the election - they are trying their best to stop college kids from voting throughout the country.

    But lets' talk about reasonable actions they could take.

    1. Nominate Cain - a black man - to give them a chance to get some black votes.  Without him, they got nothing.     But that won't happen because too many of the far right won't vote for a black man at all.
    2. Have Cain get sane.  Stop talking about ridiculous plans to do major changes to our tax plans.
    3. Come right out and say you want to cut the military - and by a large amount.  Specify a 50% cut to the military budget..  
    4. Pick a side - either deficit cutting or tax cutting.   Can't do both.   Use the military cuts to fund one of those choices to a LARGE amount.   I suggest starting with the Deficit cut and stating when it gets down to 5% of the budget, we will automatically start a tax cut.
    5. Come out with a major immigration reform bill - with the US consulates offering cheap 4 month immigration visas just to men or women that provide a blood test indicating no drug use or pregnancy.   UNLIMITED numbers of these visas would be available - but anyone caught without one can never ever get one - and deportation begins (with regular court rules, not special deportation court rules).  This can get them the hispanic vote.
    6. Ignore abortion, gay rights, Obamacare cancellation and any other issue you don't have a 60% or greater support for.  And that has to be a real 60% favorability not a 60% dislike Obamacare when 30% dislike it because it did not go far enough.   Push issues you get more than 60% to win.
    7. Stop defending the rich.   Look at whatever Obama plans and negotiate it down, then call it victory.  You can NOT win by defending 1%, or even 9% of the population's wealth.   You need to concentrate on the 40% that are poor and the 50% that are true middle class.   More importantly, the rich already hate Obama.  They will vote for you anyway.

    Sunday, October 2, 2011

    Who are the 50% that don't pay taxes

    The GOP has begun talking about half of all Americans that don't pay tax.  First, lets clarify that when they say "don't pay tax", they mean they don't pay federal income tax.  They still pay payroll taxes (social security and medicare, etc.) directly to the federal government.  In addition they pay state tax, local income tax, and sales taxes.    Lastly, the number is actually 46%, as per the Tax Policy Center.   But lets talk about that 50% that don't pay 'federal income tax'.

    (My source)
    First of all, about a one third  of the "no taxers" made $20,000 or less a year.  That is less than 1700 a month.   The issue should not be that many Americans don't pay tax, it should be that 15 % of Americans make less than $20,000 a year.  That is families making less than $20, not each parent.  About 6% of Americans don't even make $10k a year.

    Second, it's not quite as bad as that sounds - because about a lot of those people are not working and we don't expect them to be working.  Some are elderly and some are students.  Specifically, 44% of the 'no taxers' get the various Elderly credits in the code.  That is, they are retired or mostly retired senior citizens, getting social security.

    Another 5.6% of the 'no taxers' get education credits, so they are most likely full time students or paying for kids in college..  Another 30.4% of the 'no taxers' are getting the credits for Children & Working poor.  That is, they are making very little money - about $20,000 a year or less, and/or have children.

    That leaves about 20% of people that are not elderly and not poor, but manage to pay no taxes.  Some of that is from severe health issues - often temporary.  You can avoid paying taxes for workers comp, disability, etc.  That works out to about 6% of the 'no taxers'.

    You end up with a about 15% of no-taxers doing it the hard way.  Remember, no- taxers are about 50% of the entire population, so that is about 7.5% of Americans paying no taxes without being old, very poor, paying for school, or getting disability.   They use itemized deductions, such as mortgage interest, charitable contributions, business losses, gambling/stock losses, and tax-exempt bonds to avoid paying federal income tax. 

    Of these 15%, two thirds (about 10% of the 'no taxers, about 5% of the entire population) are middle class (making between $50-$100k). The $50-$100k group is harder to define, as it includes seniors that invested wisely and people with large families barely making it and not paying taxes because they have 7 children.    It may also consist of people paying no tax in one particular year because of special circumstances.  I am talking about - business upsets, theft, etc.  If you normally make $100k a year, but this year your house gets destroyed by flood and you have no insurance, that can eliminate your tax bill.    Or if your long term business, which used to make $200k a year did horribly and you earned only $75k, then business losses could eliminate your tax bill.

    Only 1/3 (5%) of 'no taxers' make more than $100,000 a year. Again, that is 1/2 the entire population, so about 2.5% of Americans make more than $100,000 and are not old/poor/paying for school/or getting disability.  These are the people that it is truly surprising that they don't pay federal income taxes.
     The statistics show they tend to use the same methods as the middle class. The two biggest cause for "rich people paying no taxes" appears by far to be most of their income being Tax Exempt (municipal bonds, foreign earnings etc.) and Itemized Deductions.  In the Itemized Deductions, the biggest one by far is the mortgage credit.

    Full disclosure: I own a home and take full advantage of the Mortgage credit and it does lower my federal income tax a lot - but not to zero.  I still pay significant federal income taxes.  But if I were to have four children with a stay at home wife (or worse, a wife going to school part time), plus take some capital losses in stocks then I might be able to avoid all federal income taxes.  Or if I were 65 living off of my savings plus social security, with the same mortgage I have now, I could see not paying any federal income tax.

    Honestly, entirely removing the deductions that those 2.5% of Americans use - Mortgage and Tax Exempt interest - would be a bad idea.  It would affect a lot of the middle class, destroy housing prices, and hurt a lot of people.  But if you start to phase them out, with limits of no more than X dollars, that would be reasonable.
    We tried that already it's called the "AMT" and most people consider it a failure. 

    Even if we re-vamped the AMT to make it work right, don't expect a huge benefit from limiting the mortgage deductions or reducing the tax exempt status of bonds.  The blow to high end real estate and to states trying to raise funds with bonds would probably more than offset any gains.