I was watching Jehmu Greene, a liberal commentator, on a Saturday morning show on Fox News. She kept saying that the Tea Party and other conservative groups should be thoroughly reviewed, because they were trying get a funding subsidy from the government. That's how she views their 501(c) tax exempt status applications, but is that right. Well 501(c) tax exempt status would allow donors to these organizations to claim a tax deduction for their contribution dollars.
I have never viewed my charitable contributions to my church as being government subsidized. You know, I never gave money to the church and thought about the tax deduction as being a "matching" contribution to the church. I never thought to myself, I was going to donate $100, but I will save $15 in taxes, so I'll write the check for $115. This concept of the government funding a charity through the tax deductions, just didn't register with me at all. It still doesn't.
All of that being said, does that have anything to do with the scandal at the IRS? In my opinion, no. The scandal is all about disparate treatment under the law. Did the IRS scrutinize left leaning organizations as closely as these organizations with the words "Tea Party" or "Patriot" in their names? Evidence would tend to say that they did not. Many of these left-wing groups are overtly political in their activities, although they may not support a particular candidate. They already have tax exempt status.
The Tea Party is an organization that promotes fiscal responsibility. I've been to a number of their meetings, and before the election last fall, a number of candidates spoke at the meetings. Some were Republican, some were Democrat, and others were non-partisan local candidates. As I have viewed the reaction of the Tea Party meeting attendees, I didn't see that they were supporting or opposing a particular party. It was ideology that was either supported or opposed. A candidate that supported growth of government, especially in healthcare, was called to task after speaking. The Tea Party folks aren't bashful about pointing out a candidate's folly. This didn't happen behind their backs, but right there at the meeting. That often happened with Democrats, but not exclusively. They passed out information that compared the voting records of all members of congress, and some Republicans didn't look so great. The Tea Party is primarily a Libertarian organization that promotes the US Constitution and freedom and fiscal responsibility. Are the Democrats really afraid of an organization that promotes these things? If so, why?
I would venture a guess that most Americans that voted for Barack Obama for president would say that they believe in freedom. I bet they like their constitutional protections for freedom of association and freedom of speech. If you ask them, I'll bet they prefer having a strong constitution. Would they have voted for a president or law maker that wants to tear down these protections of the people?
This MessAPolitico in Washington wants to stop the political dissent of the Tea Party. They don't want you to have as much freedom as the constitution allows. They want the power to control you. They don't want you donating to any cause that opposes their agenda. In fact, they would prefer to take your money and use it to buy enough votes to maintain their power and tyrannical control over the populace.
Hey IRS, free these groups from your tyranny. Give them the tax exempt status they deserve. Or give us a fair tax and no one will have any deductions. That will make it all fair. Then the government will NOT be guiding our decisions on what to do with our money.
Monday, June 17, 2013
Friday, June 14, 2013
Why Do We Need Obamacare?
Obama has been saying since before Obamacare was passed that we needed the Affordable Care Act to reduce healthcare costs. He promised that our insurance and healthcare costs would all be reduced, but there was a special emphasis on the savings to the federal government because of the wasteful way we provide healthcare for people without insurance.
Barack Obama said that people showed up at the emergency room to get care that would be more economically done in a doctor's office. That's not wrong. It's also the reason that private insurance companies make you pay a much larger out-of-pocket cost for emergency room visits to encourage using other resources unless there is a true emergency. By contrast, the government encourages emergency room visits by legislatively forcing hospitals to never turn anyone away in an "emergency." Just another example of a MessAPolitico to be cured by another piece of legislation.
Barack Obama also talked about how a lot of young people think they won't need insurance, so they choose not to buy it. Then, when they end up with a major illness or injury, the government is left "holding the bag." That also is true. These young people are willing to "roll the dice," because the odds are definitely in their favor, AND they know the government won't leave them high and dry when the unthinkable happens. Isn't the government encouraging this behavior? If the unlucky young person ends up with a $100,000 bill and goes into debt to stay alive, then so be it. That's the chance he or she took. The chance should be taken with their own money though, not our tax dollars.
The young person that's at low risk for a medical problem should pay correspondingly very low insurance rates. If they did, that would be more reason for them to buy insurance. It would be inexpensive, and they would be covered in case of that rare, catastrophic occurrence. Isn't the MessAPolitico just encouraging more bad behavior when government bureaucrats decide that a young, single person needs all sorts of coverages that run up the price? These are coverages that the insured will likely not use until they get older, and their health is slipping.
If it wasn't for the government dictating the rules and then paying out money when you make bad decisions, I believe people would be more likely to take the right actions on their own. If the government wasn't stepping in and paying for our medical bills, they wouldn't need to tell us how to live our lives, what to eat, how often to exercise, etc. etc. either. The more responsibility you give to the government, the more control it will exercise over your life. You aren't free to live your life now, because the government is trying to force all of us to do what they deem is right. Are they really concerned about your well-being? Or are they just trying to save a buck any way they can? Or do the liberals just want more power concentrated in the hands of government?
I can't take much more of this MessAPolitico? End Obamacare. Obamacare is gradually destroying the greatest medical system the world has ever known. We don't have better care for the poorest people in America; we have just made the care for everyone else worse and more expensive. Vote the Democrats out of the Senate in 2014. Make Barack Obama veto the bill to repeal Obamacare. Defund Obamacare. It can't move forward without money.
Barack Obama said that people showed up at the emergency room to get care that would be more economically done in a doctor's office. That's not wrong. It's also the reason that private insurance companies make you pay a much larger out-of-pocket cost for emergency room visits to encourage using other resources unless there is a true emergency. By contrast, the government encourages emergency room visits by legislatively forcing hospitals to never turn anyone away in an "emergency." Just another example of a MessAPolitico to be cured by another piece of legislation.
Barack Obama also talked about how a lot of young people think they won't need insurance, so they choose not to buy it. Then, when they end up with a major illness or injury, the government is left "holding the bag." That also is true. These young people are willing to "roll the dice," because the odds are definitely in their favor, AND they know the government won't leave them high and dry when the unthinkable happens. Isn't the government encouraging this behavior? If the unlucky young person ends up with a $100,000 bill and goes into debt to stay alive, then so be it. That's the chance he or she took. The chance should be taken with their own money though, not our tax dollars.
The young person that's at low risk for a medical problem should pay correspondingly very low insurance rates. If they did, that would be more reason for them to buy insurance. It would be inexpensive, and they would be covered in case of that rare, catastrophic occurrence. Isn't the MessAPolitico just encouraging more bad behavior when government bureaucrats decide that a young, single person needs all sorts of coverages that run up the price? These are coverages that the insured will likely not use until they get older, and their health is slipping.
If it wasn't for the government dictating the rules and then paying out money when you make bad decisions, I believe people would be more likely to take the right actions on their own. If the government wasn't stepping in and paying for our medical bills, they wouldn't need to tell us how to live our lives, what to eat, how often to exercise, etc. etc. either. The more responsibility you give to the government, the more control it will exercise over your life. You aren't free to live your life now, because the government is trying to force all of us to do what they deem is right. Are they really concerned about your well-being? Or are they just trying to save a buck any way they can? Or do the liberals just want more power concentrated in the hands of government?
I can't take much more of this MessAPolitico? End Obamacare. Obamacare is gradually destroying the greatest medical system the world has ever known. We don't have better care for the poorest people in America; we have just made the care for everyone else worse and more expensive. Vote the Democrats out of the Senate in 2014. Make Barack Obama veto the bill to repeal Obamacare. Defund Obamacare. It can't move forward without money.
Wednesday, June 12, 2013
Who's the Boss?
I saw some of those congressional hearings last week about the IRS scandal. There were some members of Congress that don't seem to realize their place. They work for us. We elected (hired) them to represent our views in congress. This is a representative republic where we don't individually vote on every law or bill that is brought up for consideration. We hired these folks to take care of that business on our behalf. Yes, we gave them a job, and that job is to vote in accord with our desires. These politicians aren't free to vote their mind; they're supposed to vote our collective mind.
This very simply illustrates why more and more Americans have a serious dislike and distrust of politicians. I abhor politicians that try to twist reality so that they appear to be doing us a favor, when they are doing something that hurts us and hurts America. Either we've elected idiots that don't know they're hurting the constituents or they are selfishly doing it to further their political ambitions without regard for the constituents. Is that leadership?
The check and balance is supposed to be freedom of the press. The press should investigate the statements of our leaders. They should study the ramifications of new laws. The things learned in these investigations should be reported to the American people in an unbiased way so that we can decide. There absolutely shouldn't be favoritism either. The driving factor in a news story should be getting a "scoop," not deciding whether this story should be squashed to protect their favorite politician and further the reporter's personal political agenda. Would a politician spew disingenuous crap and political spin if he or she knew the press would reveal the truth?
The people not only have no trust in politicians, but they also have no trust in the media whatsoever. We have created a situation in the American media where all news is nothing but an editorial. The editorial pages of the newspaper have expanded to include everything but the want-ads. The result is that Americans have left the traditional media outlets in large numbers for the Internet, non-traditional sources.
What's the answer to this MessAPolitico? It's time to throw them all out of office. It's time for term limits. We need to end politics as a career path. There are too many slick talking lawyers in politics too. America needs more statesmen and stateswomen leaders. We let the press select our leaders for us by vilifying politicians they disagree with. The dirt they dig up, or make up, prevents a lot of smart, good people from running for office at all. Why would good, smart people want to put themselves through the hassle? It's time to wake up America. We are the only ones that can end this MessAPolitico. Let's replace it with common sense and humility. I hope it's not too late.
This very simply illustrates why more and more Americans have a serious dislike and distrust of politicians. I abhor politicians that try to twist reality so that they appear to be doing us a favor, when they are doing something that hurts us and hurts America. Either we've elected idiots that don't know they're hurting the constituents or they are selfishly doing it to further their political ambitions without regard for the constituents. Is that leadership?
The check and balance is supposed to be freedom of the press. The press should investigate the statements of our leaders. They should study the ramifications of new laws. The things learned in these investigations should be reported to the American people in an unbiased way so that we can decide. There absolutely shouldn't be favoritism either. The driving factor in a news story should be getting a "scoop," not deciding whether this story should be squashed to protect their favorite politician and further the reporter's personal political agenda. Would a politician spew disingenuous crap and political spin if he or she knew the press would reveal the truth?
The people not only have no trust in politicians, but they also have no trust in the media whatsoever. We have created a situation in the American media where all news is nothing but an editorial. The editorial pages of the newspaper have expanded to include everything but the want-ads. The result is that Americans have left the traditional media outlets in large numbers for the Internet, non-traditional sources.
What's the answer to this MessAPolitico? It's time to throw them all out of office. It's time for term limits. We need to end politics as a career path. There are too many slick talking lawyers in politics too. America needs more statesmen and stateswomen leaders. We let the press select our leaders for us by vilifying politicians they disagree with. The dirt they dig up, or make up, prevents a lot of smart, good people from running for office at all. Why would good, smart people want to put themselves through the hassle? It's time to wake up America. We are the only ones that can end this MessAPolitico. Let's replace it with common sense and humility. I hope it's not too late.
Monday, June 10, 2013
They're Watching
The reports have surfaced first saying that Verizon phone records have been monitored by our government for almost a year now. Then it came out that a lot more phone companies than just Verizon were watched. On Friday we learned that the government is monitoring what web sites we are visiting. Of course, various members of Congress, the department of justice, and the administration have said over and over that this was "legal" and "lawful." It was all done for our safety. It thwarted terrorist attacks. Don't worry, they didn't listen in like a wire tap on your phone call. They just wanted to know who was calling whom.
Well, there was a terrorist attack at the Boston Marathon, and that wasn't thwarted. Did the Tsarnaev brothers visit any radical websites? Did they visit any bomb making websites? Did they call any Islamic radicals? Even after the Russian government warned the FBI to watch these guys and with mass monitoring of telephone and Internet patterns, they still weren't stopped. Maybe the problem is information overload.
Could it be that paying more attention to this family after a tip would have been more productive than watching little old ladies with a Verizon phone? With our law enforcement officials so afraid of offending some group, they can't really look at a radical without wasting their time on the whole cross-section of our population. The result is having our law enforcement people spread too thin monitoring a lot of people that are obviously not dangerous, when they could be doing a very comprehensive review of people that are much more likely to cause a problem. That's how a MessAPolitico works. That's just stupid.
I'm a little worried about all of this monitoring. Am I going to be audited by the IRS now? Did the monitoring of website visitors turn up that my IP address has visited conservative blogs? Did they notice that I write a conservative blog? Does the Department of Justice figure I'm a dangerous radical now? Am I a threat to the conversion of America to a Fascist, Marxist, police state? Is it possible that I might hurt the liberal cause of transforming America into the president's vision of government control? What if my phone records show that I called a Tea Party member? What if I visited the local Tea Party website? Am I public enemy #1?
When a known terrorist sympathizer is investigated, law enforcement is supposed to go to a judge for a warrant or a court order. If law enforcement can show probable cause, the judge will allow more intrusive investigation of this person. Checking their phone records and Internet habits would likely provide good intelligence that could lead to other associates that are involved in a potential plot to kill and injure Americans. The "shotgun" approach of monitoring half the people in the country from high school cheerleaders to ministers to your grandmother yields mountains of information that take many, many hours of analysis to sort through. Is it any wonder that law enforcement doesn't have time to investigate the real threats because they're so busy sorting through billions of telephone and Internet usage records?
Will we ever replace this MessAPolitico with common sense? I doubt it. (Don't forget that these are the same people that are tightening their grip on our healthcare system.) Am I a thoroughly dangerous conservative, right-wing radical? I didn't know that I was dangerous, but maybe I am. The MessAPolitico knows best.
Well, there was a terrorist attack at the Boston Marathon, and that wasn't thwarted. Did the Tsarnaev brothers visit any radical websites? Did they visit any bomb making websites? Did they call any Islamic radicals? Even after the Russian government warned the FBI to watch these guys and with mass monitoring of telephone and Internet patterns, they still weren't stopped. Maybe the problem is information overload.
Could it be that paying more attention to this family after a tip would have been more productive than watching little old ladies with a Verizon phone? With our law enforcement officials so afraid of offending some group, they can't really look at a radical without wasting their time on the whole cross-section of our population. The result is having our law enforcement people spread too thin monitoring a lot of people that are obviously not dangerous, when they could be doing a very comprehensive review of people that are much more likely to cause a problem. That's how a MessAPolitico works. That's just stupid.
I'm a little worried about all of this monitoring. Am I going to be audited by the IRS now? Did the monitoring of website visitors turn up that my IP address has visited conservative blogs? Did they notice that I write a conservative blog? Does the Department of Justice figure I'm a dangerous radical now? Am I a threat to the conversion of America to a Fascist, Marxist, police state? Is it possible that I might hurt the liberal cause of transforming America into the president's vision of government control? What if my phone records show that I called a Tea Party member? What if I visited the local Tea Party website? Am I public enemy #1?
When a known terrorist sympathizer is investigated, law enforcement is supposed to go to a judge for a warrant or a court order. If law enforcement can show probable cause, the judge will allow more intrusive investigation of this person. Checking their phone records and Internet habits would likely provide good intelligence that could lead to other associates that are involved in a potential plot to kill and injure Americans. The "shotgun" approach of monitoring half the people in the country from high school cheerleaders to ministers to your grandmother yields mountains of information that take many, many hours of analysis to sort through. Is it any wonder that law enforcement doesn't have time to investigate the real threats because they're so busy sorting through billions of telephone and Internet usage records?
Will we ever replace this MessAPolitico with common sense? I doubt it. (Don't forget that these are the same people that are tightening their grip on our healthcare system.) Am I a thoroughly dangerous conservative, right-wing radical? I didn't know that I was dangerous, but maybe I am. The MessAPolitico knows best.
Friday, June 7, 2013
Obama Has Fixed the Stock Market!
For some reason, I was watching the "lame stream" media the other day. Some Obama supporter or reporter or whatever you want to call him was talking about how great the stock market is doing under Obama's watch. He noted how much the stock market was up since the low point that occurred in early 2009 when the Dow Jones Industrial Average slipped to $6,547.05. On May 31, 2013, the same index was at $15,115.57 for increase of 131%. Most people would be impressed and say that this is a huge increase in just over 4 years. This is really a disingenuous take on the stock market though.
Let's go back to 2007 when the stock market hit it's last peak before the great recession of $14,164.53. When you look at how much ground we've gained in less than 6 years, it is only up 6.7%. That's not 6.7% per year, but a total increase over the entire period of 6.7%. The compounded annual growth rate is just a little more than 1%.
You could really take this back even farther. Let's go back to boom at the end of Bill Clinton's second term in 2000. The Dow Jones Industrial Average hit $11,722.90 in early 2000. Since then, the stock market is up a total of 28.9%, which is a compounded annual growth rate of less than 2%. If you've saved religiously over the long haul and put your faith in the blue chip stocks of the Dow Jones, over the past 13+ years you haven't kept up with inflation.
A lot of us have been saving because we don't expect the politicians to stop the Social Security MessAPolitico. I personally was saving as though there is no Social Security. Now, the stock market has failed to make the gains I had expected. My base of savings that was built up in my first 20 years of employment has only made small gains in the past 13 years. The only saving grace is that I continued contributing to my 401K plan, and during the past decade the market has spent a lot of time at low levels. The purchases during those years have grown significantly, because the purchases were made at low prices. The only unknown is what to expect in my last 10-15 years before retirement. They are critical in the final tally of retirement savings, and I'm not a bit more confident that Social Security will be around when I retire.
Does the government cause these big increases in the stock market? Did Obama's bailout programs turn this thing around? Should he take credit for the big stock market gains in the past couple of years? I don't think so. In fact, I believe firmly that the recession would have been a minor correction that would have ended several years ago if the business cycle had been allowed to run its course. The interventions by the federal MessAPolitico have run up our national debt to unbelievable heights. The endless regulations designed to protect us all from any harm have instead protected us from employment. The government can't make good things happen in the economy; that is done by a boom in the private sector. The best way to have a boom in the private sector is to get the government MessAPolitico OUT OF THE WAY. The government can't make business boom, but it surely can kill a boom.
Let's go back to 2007 when the stock market hit it's last peak before the great recession of $14,164.53. When you look at how much ground we've gained in less than 6 years, it is only up 6.7%. That's not 6.7% per year, but a total increase over the entire period of 6.7%. The compounded annual growth rate is just a little more than 1%.
You could really take this back even farther. Let's go back to boom at the end of Bill Clinton's second term in 2000. The Dow Jones Industrial Average hit $11,722.90 in early 2000. Since then, the stock market is up a total of 28.9%, which is a compounded annual growth rate of less than 2%. If you've saved religiously over the long haul and put your faith in the blue chip stocks of the Dow Jones, over the past 13+ years you haven't kept up with inflation.
A lot of us have been saving because we don't expect the politicians to stop the Social Security MessAPolitico. I personally was saving as though there is no Social Security. Now, the stock market has failed to make the gains I had expected. My base of savings that was built up in my first 20 years of employment has only made small gains in the past 13 years. The only saving grace is that I continued contributing to my 401K plan, and during the past decade the market has spent a lot of time at low levels. The purchases during those years have grown significantly, because the purchases were made at low prices. The only unknown is what to expect in my last 10-15 years before retirement. They are critical in the final tally of retirement savings, and I'm not a bit more confident that Social Security will be around when I retire.
Does the government cause these big increases in the stock market? Did Obama's bailout programs turn this thing around? Should he take credit for the big stock market gains in the past couple of years? I don't think so. In fact, I believe firmly that the recession would have been a minor correction that would have ended several years ago if the business cycle had been allowed to run its course. The interventions by the federal MessAPolitico have run up our national debt to unbelievable heights. The endless regulations designed to protect us all from any harm have instead protected us from employment. The government can't make good things happen in the economy; that is done by a boom in the private sector. The best way to have a boom in the private sector is to get the government MessAPolitico OUT OF THE WAY. The government can't make business boom, but it surely can kill a boom.
Wednesday, June 5, 2013
Do Tax Incentives & Rebates Work?
If you've been to business school, you know that all those different classes for various business subjects are interrelated. For instance, micro economics is certainly related to marketing. Generally, prices are set in the marketing department in a corporation. How are those prices determined? If you are a Marxist and don't believe in the laws of supply and demand, then your answer might be that "the manufacturing and production costs are simply marked up to provide a fair profit." On the other hand, a capitalist would say that "the price is determined by the intersection of the supply curve and the demand curve to create equilibrium." So, which is right?
Seeing that I'm a capitalist, I've got to go with the latter. What's wrong with the Marxist point of view? Well, what happens if you set the price too low and create a demand that is greater than the available supply? The answer is a shortage. You go to the store to buy an item, and it's not there. You place one on order, and it doesn't show up for weeks or months. Can the price be set too high? Absolutely. If the price is too high, the volume of sales won't be great enough to use up all of the production. Inventory will grow, and production will likely need to be reduced. Since there are fixed costs that occur regardless of the production volume, the cost per unit will go up and reduce the profit margin for the manufacturer or the retailer or the service provider.
This talk of fixed cost brings up an issue with the Marxist idea for pricing. When you are trying to decide how high to set the price of your product, what is the cost? You have the variable costs of labor hours and material required to make the item, and those are relatively easy to attach to a unit of production. However, the fixed costs can't be allocated per unit unless you know how many units are going to be sold. Of course, Marx solved this issue by advocating that investments in machines and buildings and many of the sources of this fixed cost shouldn't be considered in the cost. Those investments should be made by the rich people out of the goodness of their hearts.
By the way, a lot of people who believe that price is somehow a simple mark-up of production cost don't consider themselves Marxist or socialist or communist. They simply think that the laws of supply and demand are just things in a text book, but they aren't actually put into practice in the "real world."
OK, let's get back to setting the prices. Those marketing guys are out there trying to figure out where to set the price in order to match demand with the available supply. They are taught to do this in a way that maximizes profit. Before you liberals have a cow, let's consider if this is a good or bad thing. This market pricing is determined by a number of factors. First, how do the consumers value one particular product? Do they all value all products the same? They do not. Different features have different values to different consumers. Just thinking of cars, do soccer moms value a 2 ton pick up the same as a construction worker? No. Do young males value a fancy sports car the same as your average retired woman? Probably not. The trick with marketing is to set the price at a level that captures enough consumer demand to sell all of the units being built. The demand can vary with economic conditions and interest rates and other things, so sometimes rebates or incentives are used to help move excess inventory.
Where does cost come into the picture? The manufacturing costs simply determine how much profit you can make when selling at the market price level. If your profit is too low, it is likely that you will do something to bring profit up. That might be done by purchasing equipment that produces more items per hour. You might develop a new technology that eliminates material cost. You might even design an alternative, similar product with fewer features and a lower cost to drive volume up and reduce the fixed cost per unit. Unfortunately, you might reduce labor costs by moving production to a low cost country. (I really don't like this one. After all, I'm an American. I have worked in manufacturing all of my life, including my summer jobs in high school and college.) The other alternative is to simply exit the market and use the resources freed up to invest in something else that returns an acceptable profit.
Now let's consider the situation that seems to worry liberals so much, high profit margins. In fact, business is accused of making too much profit far more often than it actually happens, but that aside, what happens if a product is producing a very high return on investment? Obviously, the company will want to increase production to make even more profit. Other companies that see the prosperity opportunity will also enter the market, increasing competition. As the increased supply from this company and others comes on line, the supply curve will shift up or to the left. That's kind of technical sounding, but what it really means is the price will need to come down to entice more consumers to buy the product. The equilibrium between supply and demand will occur at a higher unit volume and lower price. Additional production will continue to be put into service until the excess profits have been driven down to just that fair or acceptable level.
Does all of this benefit the consumer? Absolutely. The prices of the things they want are driven down as low as possible. The manufacturers will continue to try and out perform the competition until the consumer gets excellent quality with energy and material efficient production. Consumers also have the option of choosing a higher priced American product if they value patriotism. If production is driven out of the country by low cost, off-shore competition, it is only because the consumer made the choice for price over patriotism. I'm not one to judge you, but look in the mirror and think back to a time when you had this choice. Which did you choose? Are you one of the people that caused manufacturing to move out of the country?
What does all of this have to do with the subject of this post? Do tax incentives really work? Do they do anything? They do have an effect, but I suspect it isn't what you expected. When the government offers you a tax credit for buying a high efficiency furnace or heat pump, does that encourage more people to buy them? The laws of supply and demand would say no. The equilibrium point between the supply and demand curves doesn't change. If the tax credit really reduced the price by 10%, then demand would increase, but the supply wouldn't be there. So the manufacturer or dealer or both would have to raise the price before the tax credit. That will make the price exactly the same with the tax credit as it had been without it. Will that help get more people to buy energy efficient furnaces and heat pumps? Yes, but indirectly. You see, the manufacturer will be making more profit at the higher price created by the tax credit. That will incentivize them to increase production until the profit margin is back down at the acceptable level. Of course, tax credits like this could go away at any time. So, what if the credit goes away next year, and you have increased manufacturing output? You will end up laying people off or making lower profits. Most likely, the manufacturer will just take the windfall profits to the bank until the tax credit goes away.
What is the end result? The manufacturer makes extra profits. The government collects less tax dollars. All the liberals feel good, because they supposedly did something to help mother Earth, and they can complain about excess profits. And most important of all, the MessAPolitico just keeps rolling along.
Seeing that I'm a capitalist, I've got to go with the latter. What's wrong with the Marxist point of view? Well, what happens if you set the price too low and create a demand that is greater than the available supply? The answer is a shortage. You go to the store to buy an item, and it's not there. You place one on order, and it doesn't show up for weeks or months. Can the price be set too high? Absolutely. If the price is too high, the volume of sales won't be great enough to use up all of the production. Inventory will grow, and production will likely need to be reduced. Since there are fixed costs that occur regardless of the production volume, the cost per unit will go up and reduce the profit margin for the manufacturer or the retailer or the service provider.
This talk of fixed cost brings up an issue with the Marxist idea for pricing. When you are trying to decide how high to set the price of your product, what is the cost? You have the variable costs of labor hours and material required to make the item, and those are relatively easy to attach to a unit of production. However, the fixed costs can't be allocated per unit unless you know how many units are going to be sold. Of course, Marx solved this issue by advocating that investments in machines and buildings and many of the sources of this fixed cost shouldn't be considered in the cost. Those investments should be made by the rich people out of the goodness of their hearts.
By the way, a lot of people who believe that price is somehow a simple mark-up of production cost don't consider themselves Marxist or socialist or communist. They simply think that the laws of supply and demand are just things in a text book, but they aren't actually put into practice in the "real world."
OK, let's get back to setting the prices. Those marketing guys are out there trying to figure out where to set the price in order to match demand with the available supply. They are taught to do this in a way that maximizes profit. Before you liberals have a cow, let's consider if this is a good or bad thing. This market pricing is determined by a number of factors. First, how do the consumers value one particular product? Do they all value all products the same? They do not. Different features have different values to different consumers. Just thinking of cars, do soccer moms value a 2 ton pick up the same as a construction worker? No. Do young males value a fancy sports car the same as your average retired woman? Probably not. The trick with marketing is to set the price at a level that captures enough consumer demand to sell all of the units being built. The demand can vary with economic conditions and interest rates and other things, so sometimes rebates or incentives are used to help move excess inventory.
Where does cost come into the picture? The manufacturing costs simply determine how much profit you can make when selling at the market price level. If your profit is too low, it is likely that you will do something to bring profit up. That might be done by purchasing equipment that produces more items per hour. You might develop a new technology that eliminates material cost. You might even design an alternative, similar product with fewer features and a lower cost to drive volume up and reduce the fixed cost per unit. Unfortunately, you might reduce labor costs by moving production to a low cost country. (I really don't like this one. After all, I'm an American. I have worked in manufacturing all of my life, including my summer jobs in high school and college.) The other alternative is to simply exit the market and use the resources freed up to invest in something else that returns an acceptable profit.
Now let's consider the situation that seems to worry liberals so much, high profit margins. In fact, business is accused of making too much profit far more often than it actually happens, but that aside, what happens if a product is producing a very high return on investment? Obviously, the company will want to increase production to make even more profit. Other companies that see the prosperity opportunity will also enter the market, increasing competition. As the increased supply from this company and others comes on line, the supply curve will shift up or to the left. That's kind of technical sounding, but what it really means is the price will need to come down to entice more consumers to buy the product. The equilibrium between supply and demand will occur at a higher unit volume and lower price. Additional production will continue to be put into service until the excess profits have been driven down to just that fair or acceptable level.
Does all of this benefit the consumer? Absolutely. The prices of the things they want are driven down as low as possible. The manufacturers will continue to try and out perform the competition until the consumer gets excellent quality with energy and material efficient production. Consumers also have the option of choosing a higher priced American product if they value patriotism. If production is driven out of the country by low cost, off-shore competition, it is only because the consumer made the choice for price over patriotism. I'm not one to judge you, but look in the mirror and think back to a time when you had this choice. Which did you choose? Are you one of the people that caused manufacturing to move out of the country?
What does all of this have to do with the subject of this post? Do tax incentives really work? Do they do anything? They do have an effect, but I suspect it isn't what you expected. When the government offers you a tax credit for buying a high efficiency furnace or heat pump, does that encourage more people to buy them? The laws of supply and demand would say no. The equilibrium point between the supply and demand curves doesn't change. If the tax credit really reduced the price by 10%, then demand would increase, but the supply wouldn't be there. So the manufacturer or dealer or both would have to raise the price before the tax credit. That will make the price exactly the same with the tax credit as it had been without it. Will that help get more people to buy energy efficient furnaces and heat pumps? Yes, but indirectly. You see, the manufacturer will be making more profit at the higher price created by the tax credit. That will incentivize them to increase production until the profit margin is back down at the acceptable level. Of course, tax credits like this could go away at any time. So, what if the credit goes away next year, and you have increased manufacturing output? You will end up laying people off or making lower profits. Most likely, the manufacturer will just take the windfall profits to the bank until the tax credit goes away.
What is the end result? The manufacturer makes extra profits. The government collects less tax dollars. All the liberals feel good, because they supposedly did something to help mother Earth, and they can complain about excess profits. And most important of all, the MessAPolitico just keeps rolling along.
Monday, June 3, 2013
How Big Is the Atmosphere?
I have looked up a few facts:
A complication is that the facts on CO2 produced per automobile per mile is listed in mass or weight rather than volume. The EPA says that the average car gets 21 mpg. (I guess that's the US average, because Europeans generally drive smaller, more fuel efficient cars.) With that average mpg, the average car produces 423 grams per mile of travel, based on a gallon of gasoline producing 8887 grams of CO2 when it is burned.
The density of the air in pounds/cubic foot varies with the altitude. When the CO2 leaves the tailpipe of the car, what happens to it? Does it mix in throughout the atmosphere with the earth's rotation creating centripetal force that pushes is out into the atmosphere? If it is strewn throughout this entire huge volume, 75 miles thick all over the surface of the planet, how can this small amount of CO2 emissions make a significant difference?
If it is significant, why not convert the CO2 to oxygen? How? Trees. Use the billions of dollars spent by our government trying to convince us to stop burning fossil fuels, and grow and plant trees. I've written it before, and here I am writing it again. It's time to do something productive for a change. Stop the MessAPolitico that is killing our economy.
- The Earth's atmosphere that can support life extends up about 36,000 feet
- The air gets thinner at increasing atmosphere, and the transition from atmosphere to outer space is gradual and uncertain
- When a spacecraft re-enters the atmosphere, the effects become noticeable around 75 miles up
- The diameter of the Earth varies from about 7926 miles at the equator to 7900 miles at the poles
- You can calculate the volume of the portion of the atmosphere that can support life at 1,343,534,989 cubic miles (which is a whopping 197,765,598,800,000,000,000 cubic feet)
- If you add in the volume of the atmosphere up to the onset of outer space, the volume increases dramatically to 15,034,881,520 cubic miles (or 2,213,103,768,000,000,000,000 cubic feet)
- The number of cars worldwide is just over 1 billion
A complication is that the facts on CO2 produced per automobile per mile is listed in mass or weight rather than volume. The EPA says that the average car gets 21 mpg. (I guess that's the US average, because Europeans generally drive smaller, more fuel efficient cars.) With that average mpg, the average car produces 423 grams per mile of travel, based on a gallon of gasoline producing 8887 grams of CO2 when it is burned.
The density of the air in pounds/cubic foot varies with the altitude. When the CO2 leaves the tailpipe of the car, what happens to it? Does it mix in throughout the atmosphere with the earth's rotation creating centripetal force that pushes is out into the atmosphere? If it is strewn throughout this entire huge volume, 75 miles thick all over the surface of the planet, how can this small amount of CO2 emissions make a significant difference?
If it is significant, why not convert the CO2 to oxygen? How? Trees. Use the billions of dollars spent by our government trying to convince us to stop burning fossil fuels, and grow and plant trees. I've written it before, and here I am writing it again. It's time to do something productive for a change. Stop the MessAPolitico that is killing our economy.
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