Relevant and even prescient commentary on news, politics and the economy.

Tax breaks for dogs?

Here’s a little fun one for you. Should pets, in this case dogs, be tax deductible like children? That’s right. From a person comes up with this proposal:

My husband & I have no children because we cannot afford to have children living on Long Island. But we do have 2 dogs – 2 very expensive dogs – and they are our kids. If I should mistreat, neglect, abuse or deprive my dog of health care in any way, I can be arrested for animal cruelty. But yet, here we are, spending thousands and thousands of dollars each year giving my dogs the best care in emergency and non emergency situations, what do we receive? My proposal is to be able to declare my dogs as dependents on my taxes at the end of the year.

Just to put this in perspective, page 13:

The number of families with children under 18 is projected to increase minimally from 32.6 million in 1995, peak at 33.2 million in 2001, and then slowly decrease to 32.2 by 2010

Google Answer presents:

New figures just released from APPMA’s 2005-2006 National PetOwners Survey (NPOS) show pet ownership is currently at its highest level, with 63 percent of all U.S. households owning a pet which equates to more than 69 million households. That’s up from 64 million in 2002 and 51 million in 1988 when APPMA’s tracking began.

There seems something odd about these numbers for a nation that professes to be pro children.

If you would like to read more letters for or against you can go here. There are 2500 already with 49% running in favor.
If you would like to send your own letter go here.

Click on either the dog should be or should not be letters. At the bottom of the page is a letter that starts with should or should not be depending on which you clicked.

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Has Jacob Marley been visiting?

After reading Stormy’s post on global warming posted Thursday, 3/12, I heard on NPR’s Market Place today, Thomas Friedman’s solution to the problem – Greed. (Green with a D) Now, there is something wrong I think when a negative character trait is professed as a good thing and a necessity to solve a community problem. It’s to bad he did not stop at this:

that basically argues that green is the most strategic capitalistic — and I think progressive — ideology now for rebuilding America’s future. By confronting climate change, by taking the lead in doing that, by setting really high standards for our industries and businesses, we are gonna stimulate, we can stimulate an enormous amount of innovation. Innovation that will really strengthen our companies to compete globally in what is clearly going to be the next, great, global industry

Is this the work of the ghost of Marley?
But, then I read PGL’s post on a review of a book that challenges the Church of Global Trade. In the interview of Gomory at The Nation, and the author notes:

Public investment in new technologies and industries, I would add, may not achieve much either, if there is no guarantee that the companies will locate their new production in the United States

Mr Gomory’s solution:

He wants to re-create an understanding of the corporation’s obligations to society, the social perspective that flourished for a time in the last century but is now nearly extinct. The old idea was that the corporation is a trust, not only for shareholders but for the benefit of the country, the employees and the people who use the product. “That attitude was the attitude I grew up on in IBM,” Gomory explains. “That’s the way we thought–good for the country, good for the people, good for the shareholders–and I hope we will get back to it…. We should measure corporations by their impact on all their constituencies.

You think old Marley’s bones got to him too?
Which leads me to Bruce Webb’s comment (comments I agree with) in Stormy’s post:

Any changes that don’t ultimately cut costs or boost productivity are in that light a violation of his charter.

Charters are granted by “we the people”. They are a privilege. They are not a right. We have the ability to solve the destruction of the environment. We just have to remember that the economy functions for us. What do we want it to do?

I think Lee Iacocca had a visit too. He has a new book out. It begins:

Am I the only guy in this country who’s fed up with what’s happening? Where the hell is our outrage? We should be screaming bloody murder. We’ve got a gang of clueless bozos steering our ship of state right over a cliff, we’ve got corporate gangsters stealing us blind, and we can’t even clean up after a hurricane much less build a hybrid car.

But it is this bit, almost at the end of the excerpt that made me chuckle:

We didn’t elect you to sit on your asses and do nothing and remain silent while our democracy is being hijacked and our greatness is being replaced with mediocrity. What is everybody so afraid of? That some bobblehead on Fox News will call them a name?

Yup, Marley’s been a very busy ghost. Can’t wait to see the results after they all get their visits from the past, present and future ghosts.

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More info for saving Michigan and Ohio

This is a continuation of my previous post on what to do to help out Michigan and Ohio. (or the rest of the nation for that matter). I suggested that there is plenty of money in this country, we just need to find a way to reduce a trend that has lead to the top 1% gaining a larger percentage. Currently at almost 22%, up from 8.8%. We have been living under the theory that high tax rates (personal or otherwise) have harmed the entrepreneurial spirit and thus harmed growth. We as a nation have prided our self on the free spirit industrialness of our character. We bragged about the small business being the engine of our economy. Jobs, jobs, jobs is the answer we’re told. But consider this by Harold L. Wilensky, U of C , Berkeley, written in July of 1991:

“Not only is job creation unconnected to unemployment but it is
unrelated to economic performance generally. Take real GDP growth per capita
for 18 countries (exclude Israel):
In the pre-shock period, the more job creation, the less growth but the relationship is insignificant (r – -.14).
In 1974-79, the relationship is positive but insignificant (r = .33).
Only in 1980-84 is job creation significantly and positively related to real growth (r = .57); the more job creation the more growth. But in the three years after that the relationship disappears (r = -.07 for job creation 1985-87 and growth 1985-88).
Further evidence of the ambiguous meaning of job creation is the absence of any relationship to inflation (r = -.23 in the pre-shock period; r = .13 for 1975-79;r= .13 for 1980-84; r = .13 for 1985-88).
The statistical picture for 18 countries from 1965 to 1988 is consistent. There are no statistically significant correlations between job creation and the index of economic performance for any period.”

Dr. Wilensky at the end of his paper writes: If employment is expanded by the rapid creation of low-paid service jobs, an increasing number of them part-time or temporary jobs taken by people looking for fulltime work; a steady drop in real wages; and increases in the rate of family breakup (forcing single parents to work with grossly inadequate childcare arrangements), while productivity increases fade and international competitiveness and trade balances deteriorate, we can ask, “Is this progress?”
He then goes on to predict based on the resultant low wages: we incur all the costs of mass insecurity, industrial conflict, ungovernability, and unproductive welfare spending evident in my analysis of economic performance and party decline…
And here we are in 2007!

That’s the job issue. Concern about the types of jobs are always voiced when we discuss the numbers. I believe Cr. Wilensky has qualified that concern. We need to consider what we are creating. But, what about the actual creation that has gone on? Is there more entrepreneurial activity if we free up the money? We have allowed faster depreciation, cut corporate taxes and the top income tax rates along with capital gains tax. All things that effect the upper income earners. Using Piketty and Saez data which looks at the top 10% of income earners and then breaks out the subgroups within, I have graphed three groups: 90 to 95, 95 to 99 and 99 to 100. This posting is looking at each of the three groups make up of income. I will post each type of income in the next posting.

At AB we look at GDP over time and job growth as indicators of how well one time is doing compared to another. I did not think there was a need to post graphs of these, especially considering the above. But, we are trying to determine if all this freedom from taxes has benefited us. Is the money going back into the country in a manor that raises all boats? So, lets also look at capacity utilization (BEA does not go back further than 1967 for this number).
And Net Non-Residential Investment

And Export % Change

What follows are the 3 graphs of subfractions of the top 10%. The income for each group is:
90 to 95% $110,424
95 to 99% $176,925
99 to 100% $812,497
At 90% $96536, at 95% $130,373 at 99% $310,062.
It appears that the lower part of the top 10% is not much out of the range for what would be middle class had wages kept pace with GDP and productivity.
Note that each group is benefiting from rising wages and not so much from the passive incomes of interest, dividends and rents. Interestingly, interest income starts to decline after 1930 and doesn’t see a real bump until the 80’s ending in the mid 90’s. The largest increases in share of income from wages is the 95 to 100% crowd. Rent’s and dividends just seem to be going down. But the real line to look at is entrepreneurial income (self-employment, small businesses, partnerships). Is this what is referred to in the supply side theory/ownership society? Every time this line is going up, income from wages is going down. Only the top 5% are showing any real initiative. Yet, before the big crash, even the lower half of the top 10% had an increasing share of their income from personal initiative. Some say that the Clinton years were do to the luck of the computer age reaching a critical mass. When you look at the entrepreneurial lines, there appears good reason to believe so. The only other time when everyone was rushing to be an entrepreneur was WW2. Funny that we are in a “war footing” now and entrepreneurship is rising?
The first graph is what I would expect considering the income levels. Is not the middle class looked at as being the class who goes to work every day for the business owners?
The second graph suggest that this is the level of income at which people will consider moving toward self sufficiency. What we would expect from our upper middle class?

The third chart is where the big payday is. If the theory is correct would we see a somewhat similar curve in the rise of entrepreneurship as we see in wages? Is this what we would expect from the supply side, tax cutting crowd?

Lets put it all together. We sense that it is about quality of jobs and not quantity and have correlations from 1991 that suggest such. We seen a decline in capacity utilization over time, a peak in net non-residential investment that coincides with the computer age along with similar peaks in entrepreneurship. But, non of it shows the activity of WW2. And, none of it puts a dent in the fact that everyone is basically just going to work and earning a living. With these charts, the better the quality of the job, the better the income. I don’t think these charts support that we need to keep freeing up capital. They certainly do not bode well for the idea that everyone is independent and just needs to apply themselves to get be more financially secure. Instead it is more like that feeling that everyone just wants a “good” job that will allow them to have the American dream. A home, couple cars (used even), college for the kids, vacation and freedom from fear of financial ruin. The charts suggest to me that our economy needs a real, new to the human race event to spur growth via investments. Like say an industrial revolution, or a war or electronics revolution. Something where an existing core technology reaches a critical point in development that then creates a new sector of an economy. Something where there are no established players (think the failure of Tucker, DeLoraine, Bricklin, etc). I would say maybe energy could be the next biggy. Certainly anything related to environment; like getting rid of garbage.

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Answering the Vicious Cycle

Well, Save the Rust Belt inspired me to make my first, self posted posting.

Save the Rust Belt appears to be asking for help in his posting about the downturn of Michigan and Ohio. So, I thought this is a good post to jump on to start a line of solutions as oppose to just looking at data and trends. Let’s put that knowledge to work on his question: is there anything anyone can do, …?

I answer: Yes, there are things that could be done. But it means reversing years of rhetoric about what the purpose of an economy and a government are. I mean, what is a company’s only purpose, only reason to exist?
Is an economy truly an entity unto it’s self?
Is government us or not?
Who or what is serving whom here?

I’ll start. Lets produce policies that reverses the rise of income to the top 1%. Letting them have all that money has not caused the economy to grow any faster than in the past. It certainly is not being turned into investment in this country in an amount equal to their acquisition.

We’ll take it back to 1981 the beginning of St. Reagan. From 21.83% (2005) to 10.02%. Using BEA’s table 2.1 total national personal income and Saez-Piketty’s data we free up $1209.27 billion in 2005. That leaves 1025.97 billion to the top 1%. Or $2.578 million to each of the 397, 900 tax units that make up the 1%. Using the labor force for 12/05, that gives $8055.73 dollars to all those potential workers.

To much you say? We’re being to hard on the top? Ok, how about we go to the end of St. Reagan’s time and let them have 14.49%? We free up 751.56 billion and leave them with 1483.66 billion or $3.728 million each. This gives those potential workers another $5006.52. I’ll even be progressive in this top 1% being that the average income goes from $370,887 for the top 1% to $695,764 for the top 0.5% to $2,316,353 for the top 0.1% to $14,027,614 for the top 0.01%.

Remember, these are numbers just for 2005.

So, there is the money. Now, how do we want to get this extra $5K to $8K each to the labor force? I assume it will not all be give as a direct payment. Anyone?

Divorced one like Bush

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