How Does the Government Kill the Economy?

Maybe the question should by "why does the government kill the economy."  I guess the answer to that one is that our government is either run by idiots or by folks that don't care about the economy.  I believe that too many politicians would do things that hurt the economy if they could be blamed on the other party.  If that isn't the case, then maybe we should get these folks some training in macroeconomics.

In any case, I would like to discuss how the government can have a very negative effect on the economy.  Firstly, I would like to talk about excessive taxation.  Many of us remember when Ronald Reagan talked about supply-side economics.  Supply-side economists believe that eliminating impediments to production in the market will support economic growth.  An economist named Arthur Laffer has had his name attached to a theory that states, in essence, that there is an optimum level of taxation.  More specifically, raising tax rates will only raise revenue up to a point.  If the tax rates are set too high, people and businesses will see a disincentive to earning more profits and the economy will slow down.  Therefore, if tax rates are raised beyond the optimum level, the revenues will actually be lower.  "Supply-siders" believe that taxation is a huge impediment to economic growth.

Of course, there are a lot of other impediments to growth, most of which ultimately raises the cost of producing a good or service.  The law of supply says that raising the cost of production reduces the amount that will be produced.  If you look at corporate taxes, there is a more common sense way of understanding their effect.

• When capital is invested in a business, the investors expect to get a return on their investment that is commensurate with the level of risk they are taking.  Taxes reduce the return on investment, thus making some borderline investments losers.
• If businesses really pass the taxes on to their customers in the form of higher prices, then that causes inflation.  The higher prices reduce the demand, so there won't be as many machines or workers employed in producing the products.
• If taxes raise the cost of domestically produced goods relative to imports, the trade deficit will grow and unemployment will grow.
• If consumers pay more in taxes, they will have less money to spend in the economy.  This is true whether the consumer is rich, middle class, or poor.

Besides taxes, our government loves to pass rules and regulations that raise costs of businesses.  This is true of doctors that must fill out mountains of paperwork to justify the care they have provided to their patients.  It is also true of businesses that must install burners to burn off paint fumes from the paint booth exhaust fan or study mountains of regulations to insure that they are providing medical insurance that complies with the PPACA.  In many metropolitan areas, special gasoline formulas are required by the EPA in the summer months, and that requires refineries to shut down and change the production process twice a year.  The government tells auto companies how much gas mileage their cars should get, or they set minimum standards for performance in crashes.

Now the government is stopping a privately funded pipeline that is to be built on private land from Canada to the Gulf Coast.  That is limiting the supply of oil from our neighbor, Canada.  If the pipeline isn't built, the oil will be transported by rail car across the same areas at higher cost.  Why?  Because our government wants the cost of fossil fuels to rise, reducing demand.  Of course, the demand has been reduced over the past five years, because of the higher energy costs.  Today, fewer people are driving to work.  Also, fewer manufacturing facilities are located in the U.S. and using energy.  Does the EPA really think that this will clean up our planet?  Will the new factories in China or Mexico have low emissions like the U.S. plants?  Do you remember the views of Beijing from the summer Olympics a few years ago?  How clean did that air look?

The big problem with the MessAPolitico is that everything they do hurts the economy and, ultimately, all of us that participate in it.  We all participate in the economy as workers, consumers, and often as investors.  The economy is damaged and the political goal is never even reached.  Generally, the problem to be solved by government intervention only gets worse.  Then the MessAPolitico loves that, because they can blame the other side for making things worse and run for re-election on a new, undefined fix.  What's the fix?  It's another MessAPolitico that makes things just a little bit worse again.

Is the Congressional Leadership Really Looking Down Their Noses at Us?

The Congressional leadership on both sides of the aisle have displayed extreme arrogance lately.  They are acting like we are too stupid to see what is going on.  They figure they can decide how the members of their respective parties will vote, and the American people won't even notice the difference.  They think we are unable to comprehend what is good or bad for us.  It is my belief that too many of them don't really even care what is good or bad for their constituents.  They only care how they can work together with the press to spin everything to get re-elected.  This infuriates me, and I'm not alone.

The press is not supposed to be in cahoots with politicians.  The press should be watching every move the politicians make.  They should be looking for a scoop.  A scoop is big news, and it makes them money when they get it first.  It should raise their standing in the eyes of their readers or viewers, regardless of which politician or political party is incriminated by their story.  Today, our media has a political agenda.  They aren't watching out for the American people anymore;  the press is very simply watching out for politicians they support.  Fortunately, there are quite a few Americans that can see through the ruse.  The rest are subject to the misinformation coming out of most of the media outlets that are viewed by the largest audiences.

I just wrote an email to my Senator explaining that I am watching his votes on defunding Obamacare.  If he doesn't vote to defund this health care MessAPolitico at every opportunity, I WILL NOT EVER VOTE FOR HIM AGAIN.  I told him that I will vote for his Tea Party challenger in the primary, unless he gives me a reason to vote for him.  If I can't see a difference between the Republican and the Democrat, especially on a very, very important issue like health care, why bother voting at all?  Please tell your elected politicians what they need to do to earn your vote.  I don't care which party of which they are a member.  They are elected to do the job of representing their constituents.

Obama: The Spoiled Brat

I've heard Barack Hussein Obama on the radio and on TV one time too many today.  I keep hearing the insolent, spoiled brat saying that the Republicans are trying to appease the Tea Party folks and are willing to shut down the government to do it.  Mr. President, THE AMERICAN PEOPLE DON'T WANT OBAMACARE!  THE REPUBLICANS ARE TRYING TO APPEASE THE AMERICAN PEOPLE STUPID!  DO YOU NOT REALIZE THAT YOU AND ALL OF THE OTHER ELECTED OFFICIALS IN AMERICA WORK FOR US?  WE ARE THE BOSSES, AND YOU WILL NOT BE RE-ELECTED UNLESS YOU DO WHAT IT TAKES TO STOP THIS MESSAPOLITICO.

Maybe shouting this at the President will get it through his thick skull.  Republicans, please move forward without fear.  Let the President veto the continuing resolution.  Let the Senate vote it down and send it back altered.  If they do, just let the government shut down.  The Democrats, along with a lot of us out here in the heartland, don't believe you have the stones to stand up to this MessAPolitico.

Yesterday, I read an article in the Washington Times that was very interesting.  The author was suggesting how the House should respond when the Senate sends the altered spending bill back to the House.  They said that the House should pass a bunch of individual bills to fund all of those things that the Democrats love to talk about whenever any spending cuts are discussed.  Pass a spending bill to fund Social Security first.  Then pass one that funds the military.  Follow it up by funding Medicaid.  Make the Democrats refuse to fund these individual programs that they know are emotional to a lot of Americans.  They have fueled this emotion in the folks.  Turn this thing around and make them either fund the programs or become the "party of no."  Play political hard ball for a change.

Of course, the press will allow the Democrats to make the Republicans out to be the bad guys.  That's a given.  They will give Democrats credit where it isn't due or Republicans blame for anything that isn't good or can be spun to be bad.  REPUBLICANS, PLEASE DON"T LET THE DEMOCRATS INTIMIDATE YOU, AND DON'T FEAR THE PRESS.  FEAR THE IRE OF THOSE WHO VOTE FOR YOU!  FORGET THE FOLKS THAT WILL NEVER VOTE FOR YOU!  Remember your history from the 1990's.  The Republicans were blamed for shutting down the government when they were in a dispute with Bill Clinton.  How did the American people respond in the next election after that?  The Republicans picked up a few seats in Congress.

Any Republican that doesn't stand up until the bitter end in this fight, will never get my vote again.  If the Republicans don't learn how to get the job done, then there is no point in voting for them.  The Republican party will have left the people and they will never have control of anything again.  We will be a one party country for years to come, and our freedoms will be ripped away from us.

Public Education = No Choice Education

What scares the NEA and public schools?  Answer:  choice.  Why do some schools fear comparison to other schools?  What will we find out if we study the outcomes the students are receiving?

Now I would say that a lot of the blame for poor outcomes belongs in the homes of students.  Parents that don't care about education for their children will not inspire success in school.  When they don't encourage the kids to do their best and don't demand that they get up and go to school, those kids are likely to have high rates of absenteeism.  These kids are the ones that show up without doing their homework.  They are also much more likely to drop out of school before graduation.

The schools have been used for everything but education for years.  Desegregation was initiated in the schools.  The end result has been very good, but the school system was in turmoil for years in the process.  It led to a huge waste of time and money hauling kids back and forth across town, and that is money that could have been spent on actual education instead.  Then there has been the man made global warming indoctrination.  Our government schools are reinventing the history of our country in books and curriculum.  The liberals that run the public schools are creating a bunch of little walking and talking (and voting) liberals.

First, we have our tax dollars confiscated to run the public schools.  Then amazingly, we have no choice about which school our child attends unless we pay out money for private school tuition.  Of course, you still have to pay school tax either way.  We pay the school tax even if we have no children at all.  We have little say in the curriculum either.

If grocery stores worked like schools, here's how they would work:

• The government would decide where you can buy your groceries.
• You would pay a monthly fee for your groceries that is determined by a very complex formula that is difficult to figure out and expensive for the store to administer.
• The grocery would need to hire several people to keep track of how much each person must pay, and that will drive up costs to the consumers.
• If you choose to go to another store that you like better, you can buy groceries there, but you still have to pay your monthly fee to the other store mandated by the government.
• The assigned store will decide what groceries to stock, and they won't care what you want to buy.
• If the government decides that you should be a vegetarian, then the store will only stock vegetables.
• Your grocery bill will depend on how much your home is worth.  If your home is worth $250,000, then your groceries will cost twice as much as your buddy that has a home worth $125,000.  Of course, you will both get the same groceries.
• The grocery stores will have no incentive to improve service or stock the things you want or even to be open in the evening or on weekends.

Why would anyone oppose school choice?  Wouldn't it be great if you could shop for the best possible school?  How would you like to choose a school that offers an excellent math and science program for your future engineer or chemist?  If your child is interested in vocational or agricultural education, why shouldn't they get to choose a school with that curriculum?

Our MessAPolitico consistently opposes any school choice or competition.  They need to get out of the education business.  Our outcomes and our costs per student would both improve if education was privatized.  Too many politicians are in the back pockets of the NEA.  Schools need to serve the students, not the teachers.  Let your politicians know that you want freedom in education.

Will the House Stand Their Ground?

I was pleasantly surprised and cautiously optimistic when I heard that the house has passed a continuing resolution that doesn't fund Obamacare.  I honestly thought they would back down without any fight whatsoever.  They have listened to their constituents.  There's only one problem -- the Senate.  I hear that they won't pass this CR.  It's time that everyone that wants to stop Obamacare calls his or her Senators and House member.  TELL THEM THAT THEY WILL LOSE THE NEXT ELECTION IF THEY VOTE AGAINST A CONTINUING RESOLUTION THAT DE-FUNDS OBAMACARE.  TELL THEM THAT VOTING FOR ANY FUNDING OF OBAMACARE WILL GUARANTEE THE END OF THEIR POLITICAL CAREER AT THE NEXT ELECTION.

I'm ready for the House to stand their ground.  Tell them to shut down the government if that's the only way to stop the PPACA.  Remember how bad the sequester was?  Did you notice the cuts?  Don't give in -- ever!

Our federal budget can't take the high cost of Obamacare.  Our personal budgets can't take the 80% increase in premiums for health insurance starting in 2014.  The US economy can't survive the recession that will happen when all the money being sucked up by high insurance premiums is removed from the rest of the economy.  When more manufacturing jobs move out of the USA with the high cost of benefits, high taxes, and expensive regulations, this recession will kick back in harder than ever.  When the brilliant financial minds in the Obama regime finally quit propping up the economy with "quantitative easing," the stock market will be devastated.  The coming inflation will be curbed by drastically raising interest rates, and that will kill the capital markets and any industries that live on credit purchases.  That would include homes and cars.

Call or write your legislators and tell them that their political futures depend on the proper votes to kill Obamacare.  Don't fear the press or the MessAPolitical leadership.  Fear me, a conservative that might not be able to see the difference between a Republican and a Democrat.  Protect my freedom.  Don't make this the former Land of the Free.

Corporate Profits = Greed?

Is it somehow immoral for a corporation to earn a profit?  Too many people think that it is these days.  I don't see much evidence that anyone in America or anywhere else thinks that high profits are a good thing.  Is that right?  What are the benefits of high profits?

• Employees' jobs are secure
• Employees' are more likely to get a raise and good benefits
• The corporation has generally got good cash flow, and that provides
• cash to invest in new products and R&D
• cash to invest in new equipment for better quality and lower cost products
• cash to pay the obligations and prevent bankruptcy
• The corporation pays more taxes to keep the government solvent (or at least it will help delay national bankruptcy)
• When the corporation invests in new plants and buildings and equipment, other companies sell more of these things and become more profitable, leading to
• lower unemployment
• more taxable profits

What determines how profitable a company can be?  I know you've been told that they earn excess profits because they are jacking up the sell prices of their stuff.  Of course, it's not quite that simple.  We have all heard earnings reports from various large companies saying that they "lost millions or billions of dollars last quarter or last year."  If excess profits are as easy as jacking up the price, why don't the morons running these other companies just jack up their prices and rake in the dough?  The next time you hear someone complaining about some corporation making too much profit, think about how illogical that concept is.  You could try explaining it to them, but you are likely to just get in a big argument that neither of you can win.  Why bother getting all worked up in a pointless effort?

Anyway, let's get back to the subject at hand.  What determines profitability in a corporation?  The profit is very simply the value delivered to the customer minus the cost of delivering it.  That is a fairly simple concept to grasp, although there are some intricacies you may not have considered.

• A product isn't valued the same by all consumers.  Does a soccer mom with three kids value a 4-wheel drive pick-up truck the same as a construction worker?
• Some people see products as having high or higher value than the sell price, yet they don't have the means to afford something that expensive.  For example, you might think a Mercedes Benz is well worth the $60,000 it costs, but you only earn $30,000/year.
• In most industries, you have multiple similar products to choose from, and they are made by multiple competing companies.  If you want to buy a sedan, think of all the makes and models available.  There are also multiple dealers from which to purchase the car.  They may have similar features and prices.  All the competition and choices in the marketplace help the consumer develop a value for a particular product relative to the other alternatives.  For instance, you might like the features of a Honda and a Chevrolet about the same, but you value the Honda a little more highly because of reliability.
• There are many attributes to consider when a consumer decides on the relative values of the choices available.  With cars, there is styling, power, luxury features, reliability, initial quality, handling, roominess, warranty, and dealer service and reputation.
• Sometimes there are competing technologies.  For instance, cars can be purchased with a standard gasoline powered internal combustion engine, a diesel powered internal combustion engine, a plug-in electric vehicle, or a gasoline-electric hybrid.
• There are generally choices between whole competing markets.  If you live in New York City, you don't need to buy a car.  You can probably take public transportation around the city.  With that you have a choice of a bus, a subway train, or a taxi.  If you go out of the city, you can ride on Amtrak, a bus line, an airplane, or you can rent a car and drive.

Most people have at least some understanding of the laws of supply and demand.  Let's look at the demand side first.  If some people value a product being sold at least as much as the sell price, they will want to buy it, and that is demand.  Looking at the supply side, if the sell price is higher than the cost of production, manufacturers will want to supply the product because it earns them a profit.  If profits are really high, companies already making the product will be happy to invest in more equipment and increase their production rates.  Also, other companies may want to develop their own competing products to participate in this profitable market.  Of course, as supply of the product increases, more consumers will need to be induced to make a purchase.  Since different consumers value it differently, reducing the sell price will induce more consumers to purchase it, because more will find that the value they see in the product is at least as high as the price.  Thus, shifting the supply curve up will reduce the price in order to ride up higher on the demand curve.  What causes the supply curve to shift up?  That's right, high profits -- you know the ones that are considered excessive.

The intersection of the supply and demand curves is the point of equilibrium where the quantity being supplied equals the quantity demanded.  Setting the price higher than equilibrium will lead to excess inventories.  Setting it too low will result in shortages, and the consumer will find that it is out of stock.

Maybe you're thinking that this is a little more complex than you thought at first.  There's a lot more to the story than just this though.  For example, most people think that manufacturing cost is a simple sum of the materials and the labor hours x hourly wage rate of the workers required to make the product.  That would only take the direct cost into account though.  There is also indirect cost, which is sometimes referred to as burden or overhead.  Generally, most of these costs are fixed costs that occur whether you make one or one thousand of the items.  For instance, you have to pay rent on the factory every month, regardless of production rates.  What are some other fixed costs?  Here are a few:

• Lighting, Heating
• Management Salaries
• Sales Salaries
• Cost of Various Support Departments like Human Resources, IT, Accounting, Product Development & Engineering, Warranty & Repair
• Mowing the Grass, Clearing Snow from Parking Lots
• Depreciation of Equipment

These fixed costs must be allocated per unit of production.  That means you take all of the fixed costs and add them up, and then divide that number by the number of units you built.  The answer is the fixed cost/unit.  If you don't make very many parts, the fixed cost per unit is much higher than if you make a whole lot of them.

If you think about it, just raising the price won't necessarily make profits go up at all.  Raising prices will drive down the number of units sold, so the fixed cost/unit will rise.  At least that is true unless you can shut down a plant and shed those fixed costs.  There is a price that will maximize profits, and business schools train their students to figure out what price will lead to the sales volume that will maximize profits.

I learned this in a state supported university.  So why were these government employees training me to maximize profits, while the MessAPolitico and the media and all the little liberals out there are calling business people greedy for doing it the best it can be done?  Of course, if the MessAPolitico would just stay out of the way, the market will always drive profits back down to minimum acceptable levels.  If there are excess profits in an industry, businesses will be enticed to raise production rates until the excess supply drives the price down and profits are just acceptable.  So let's get off this kick of knocking businesses that are successful.  After all, they provide good jobs, quality products that are in demand, and most of all, good value.  If you get a great product that satisfies your needs at an acceptable price, who cares how profitable the manufacturer is?

OMG, Global Cooling!

The U.K. Daily Mail is reporting that the Arctic ice pack has increased by 920,000 square miles since 2012.  2012 was a record low year, but the Arctic has made a major rebound, increasing in size by 60%.  Have we really cut our greenhouse gas emissions by that much in only one year?

NASA’s Goddard Space Flight Center quoted one of their glaciologists, Walt Meier, as saying “even if this year ends up being the sixth- or seventh-lowest extent, what matters is that the 10 lowest extents recorded have happened during the last 10 years.”  Goddard is intent on downplaying the massive recovery the ice pack has made in just 1 short year.  Of course, if glaciers don't turn out to be a problem, what will a glaciologist do for a living?

In 2007, the BBC News made a prediction that the "Arctic summers [would be] ice-free 'by 2013.'"  A while ago, Al Gore predicted that the sea level would rise by 10 feet, swamping New York City and Washington.

Last October 14th, Simon Kent in the Toronto Sun wrote that "Antarctic sea ice has expanded to cover the largest area recorded since satellite mapping began a generation ago."  That doesn't stop Goddard from continuing their fear-mongering.  They say that the extra ice is caused by winds that were caused by climate change.

What is wrong with all of these predictions?  In my opinion, they are disingenuous.  They are self-serving for those that make their living off of the bad news.  Everything they predict is based on their infamous climate change models.  These models try to mathematically represent all sorts of things going on simultaneously on Earth.  These include emissions of a multitude of greenhouse gases, ocean temperatures, ice pack level, solar activity, etc. etc.  These extremely complex models are considered by many to be above reproach.  They are created by PhD's, so they must be accurate.  We just don't know enough to question these folks.

One of the numerous things that makes a drastic difference on the results predicted by these models is cloud cover.  You know, water vapor is considered a greenhouse gas by these scientists.  However, clouds, which are made of water vapor, have opposing effects on global warming.  According to some scientists, low, thick clouds block the sun from reaching the ground and creating warming.  They also say that high clouds let enough sun through to heat up the Earth, and they trap this heat below the clouds, producing the greenhouse effect.  So, to get an accurate read on how much heating will occur due to water vapor, one must make an accurate prediction of cloud cover.  Recently, there has been some cooling, and scientists are saying that the deviation from many models is due in large part to poor predictions of cloud coverage.

Has anyone ever thought about what creates water vapor and clouds?  Remember the water cycle that we used to learn in grade school?  I have no idea if this is still taught in school, because they may spend the time on global warming indoctrination instead.  In any case, the water gets heated by the sun and evaporates.  This causes clouds to form.  The clouds produce rain, and the water falls back to earth, filling our lakes and streams.

Could it be as simple as understanding that global warming is a self-limiting effect?  Might a slight increase in temperature produce higher evaporation rates?  Wouldn't that increase in evaporation produce more cloud cover, thus shading the Earth and dropping the temperature?  Additionally, the higher temperatures, coupled with increase rain, would produce a longer growing season with faster growth rates of plants and vegetation.  The increase in vegetation would convert more CO2 to Oxygen, reducing that one greenhouse gas that seems to be of utmost importance to tree-huggers.

I wish the MessAPolitico would use a little logic.  I also wish they would quit rewarding people with grants only when they produce the one outcome in their research.  If you pay grants for proving that global warming exists, but not for debunking it, the scientific evidence is guaranteed to prove that we are all going to die from global warming.  The same folks that complain when anyone makes a business profit are pretty silent about hypocrites like Al Gore profiting from fear-mongering.  The best way to screw up anything is to get the government interested in fixing it, especially when there is room for crooked politicians to make a profit.