The US Economy, and why it might not improve
I of course never want to be the bearer of bad news, but without very different leadership, I really do not believe that the US economy will greatly improve until the leadership changes. Perhaps no one is doing anything intentionally wrong, but as some of us know quite well, some subjects cannot simply get a passing glance, or a hunch, but must be studied and reviewed quite closely while reviewing both numbers, models, and history. Not much of that is happening - at least for my tastes.
WHY NEWS IS BAD
First of all, some of us have noticed that news is bad. Not just the news reporters, the politicians also and the commentators. But why? Well some have already guessed that there can be bias. For my tastes for example, the formerly great CNN only now seem to cover half of the stories in the US and world. Are they prejudiced? They do not tell me. I have even written to them. And some of their stories only give half the facts. I am not hoping they die. I hope they fix that -otherwise I would not write and waste my time. Even Democratic Congressman Anthony Wiener just made a CNN joke where he joked that he was on C-span with its giant audience of "tens" - but that CNN was in the audience trying to figure out how C-Span was doing so well and at least getting an audience of "tens". Yes the kingdom of world news was once CNN's to hold - if they wanted it - but are losing.
But I find that if all you care about is truth and are an independent, and feel you do not have to explain either party, the news situation is even worse. Since I had been in charge of P and L for several businesses, including huge, small, and the middle, I am enough of a nerd to want real financial answers. The good news is that the US Department of Commerce publishes just about anything you want to know via their group BEA, Bureau of Economic Analysis - online. The bad news is that some days I wonder if I am the only person reading that info, or thinking about it, applying logic, graphical extensions, and looking for logic correlation. News people, or at least news commentators and politicians should all be doing that - before they speak, but I find errors are the norm and I am almost surprised when someone tells something that is factual history. My younger son who is deeper in computers and servers for a living says something similar for his field - such as every time news people get near some complex server issue, such as Wikileaks and that Private that supposedly leaked the information, he says the news gets into fiction and is not even close to what is real in the real world.
So there is still more than just bias. While in industry we were highly suspicious of our sources - that the speaker has both the education and experience to know their subject, we seem to turn on TV and assume the person knows that they are talking about. But let us think about it. Many news people and commentators are journalists. So where in the study of journalism, or political science for politicians, did they learn complex financial issues? science? mathematics? history? diplomacy? negotiations? and more? The answer is that they likely have zero education and zero experience in any of that. Watch the next panel discussion on TV - and yes, it might take three of them to get the point. Take a look at the people responding. Have they been educated in that field? Have they ever worked in it? Have they had both success and failure in it? If not, you and I are wasting our time listening to them.
Would you accept complex financial info from someone who cannot even balance their checkbook? Would you accept science judgments from someone who used to say that they cannot even stop their VCR from blinking? Would you accept military strategy from someone who never studied it nor was in a battle or the service? If so, then news is what you want, and any channel will work. At this time I am so frustrated by news on ALL channels, that in my mind, it only gives the subjects. And then the wise people should look up the history, the numbers, use logic, make tie points and do the hard work themselves - since the news people will never do it. So, sorry, getting real news is much more than turning on the TV - it takes research and more and time.
WHY THE US ECONOMY IS UNLIKELY TO IMPROVE
Well, based on the above, if they are not very very careful, politicians are not going to get the right information to even know the right direction. Our US founders knew that no one person could know everything, so at least for the president they allowed a cabinet. If the president chooses correctly and chooses diversity, such a cabinet could help guide the president on what they need to know. But even that can be a failure. If a president brings everyone into a cabinet who thinks exactly like they do, and does not purposely seek diversity that they tell others they must do, then it does not work. I could give George W Bush 10 points for honesty when he said during his recent book signing that he knows nothing about finance. Okay. I agree. The average he ran up the deficit per year was $450 billion a year, says Dept of Commerce Records. While Bush's figures are three times better than Obama's average yearly deficit of more than 3 times that figure of $1580 billion a year and Obama says he is the second coming of the Messiah, well, just being better no longer does it for me. Both of the last presidents have been very bad for our economy. I no longer like the political argument of "of course I am a bozo and a thief, but the other is worse than me". That no longer works for me. Well, last two presidents - you screwed up the country and the system. We all know that no one person can know everything. The correct choice and working relationship with a cabinet was how it was supposed to work.
But the problem of late in the economy is still worse. What has occurred to me is that the main reason is that politicians and news commentators to a large extent are using the wrong model for the US. The US was originally based on freedom. While several have tried to change that for money and power, it still mostly is a land of freedom. Yet some seem to model the US as a dictatorship - thinking that whatever THEY the politicians say, is going to work immediately. Nope. Not even close. Not as long as people have choices. The US at this time, like it or not, is much better modeled as a business, where people need to be enticed and not commanded.
Some examples. If you model the US as a dictatorship, as I believe is currently being done by too many, then the following would likely be true:
Taxing the Rich will Always work and get you the money you need
The way to get more IRS income is simply to raise taxes
Outsourcing can be stopped by government controls
The above would be true if not only the US was a dictatorship, but also the rest of the world must have a one world government which is also a dictatorship. And here you may now see the reason why some are pushing for a one world government - a dictatorship - by them of course, with you as the people with no freedoms. You see, until there is world united dictatorship, there is CHOICE and some FREEDOM, and those will stop the modeling of the US as a dictatorship.
LOGICAL PROOF OF WHY CURRENT US MODELING WILL FAIL - ALWAYS
Why Claiming to Tax the Rich Will Never Work - CHOICE
Let us just take recent history. It has been said (I did not verify) that GE for 2010 taxes paid in 2011 will pay ZERO US taxes on $14.2 billion of profit, $5 billion of it made in the US. So then, the US is certainly not a dictatorship or that could not happen. What did happen if this was true? Well, first of all the US tax code is extremely complex. That might be to help special interests who can get a break by this or that, or it might be just a bad idea. Either way, taxing the rich does not work since they all have choice. They can hire more and better tax nerds. Or if things get to be a bad deal in the US, they can outsource jobs or even themselves and their companies to someone who gives a far better deal. CHOICE. The Rich have choices, the poor often do not. So raising taxes will seldom harm the rich, but more often damage the poor or middle class who have no options. Will you pay $0 IRS tax in 2011? GE we are told by some will pay $0.
Why Increasing Taxes does NOT always mean more IRS income - It may be less
The problem here again, is the same as in the above. Where there is at least some freedom, there is choice. You can raise the taxes on people but they can then choose to not invest in America. They can choose to outsource. They can choose to leave the country - with their business, their creativity, and their jobs they had been giving to Americans. If there is freedom at all, people have choice. And also history shows this idea that raising taxes doe NOT always increase IRS revenue. It is a matter of US public record with the US department of Commerce that when taxes were DECREASED including to the rich by Bush in 2003, that IRS income ROSE by over $1 trillion dollars from 2003 to 2007. Why? Simply because the US is not yet a dictatorship, it is still land of the free. I did offer an explanation of Laffer curves here, but for those that find it complex, there are even much simpler ways of showing that. If one believes that raising taxes will always increase IRS taxes, then that same person would believe:
Store sales can never work - they are just give-aways
If a store wants more income, just raise prices
We know as shoppers that the above two items are nonsense. So it is nonsense that raising taxes will always increase IRS revenue. Picture four stores side by side, and let us say that they sell hot dogs world wide - and of course the one offering the best deal will get the most sales and the most revenue:
Now these are all approximations. But in perhaps 1950, the US encouraged industry, tried to have low taxes, low regulation, and Americans also seemed to have better innovation than most of the rest of the world. So the US economy did very very well, and grew with perhaps the best quality and also a reasonably competitive price. But lately it seems that some say that all that is wrong in the US is US industry! We have to tax those people! Give them millions of regulations ! and treat them like scum ! And we have to raise the minimum wage to the highest in the world making it impossible to compete in the new world economy !! So with that attitude, you would likely get something like the below, as Europe followed the same direction (or more honestly, Obama copies Europe) while China, and India say "no way" and put customers first, and actually also get innovation going in South Korea, Taiwan, Japan and other places, while China graduates many engineers going for the future:
As cost, regulations, taxes employment costs, and overall just hatred to US industry abounds in the US, its prices logically have to rise, and perhaps its quality falls a bit as entrepreneurs are now called names instead of being encouraged. Meanwhile, those countries trying to build their economy, reduce regulations, provide cheap energy and employment and try to make their products look better. And there you have it. Raising prices in the US did not help, nor increasing regulations. Our GNP growth is far lower than China's for example. And I for one claim that IRS revenues have fallen as regulations and therefore prices have gone up, as you can see here from official US Dept. of Commerce figures. Now industry leaders also look at the same models and that is why there is more outsourcing - the US has decided to offer very bad deals to investors while China and India offer better deals. But I think if you think of the US as a business, as a store, you will find it quite easy to believe that raising taxes and regulations (the same as "price" in a store) does not always mean more business and hence more revenue. Sometimes it means less if you price yourself out of the market, maybe much less.
In order to predict and fix the US economy, one must use the right model for that economy and also be willing to look up history - and see what really happened.