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Sunday, August 7, 2011

Getting Our House in Order

      America is in deep doo-doo.  Is their a way out of it? Yes there is.  It requires getting our house in order.  The first thing that requires is acknowledging we have a house and with that comes the reponsibility to keep it liveable.  If you buy or have a house it is not enough to just make the payment and pay the taxes.  You have to maintain it.  If you do not, buy the time you pay it off it will not be liveable.  That is not a problem if you are hoarding your money and have some other place to go which is better.  However when there is no other place to go and you are broke with a falling down house you have a problem.  Especially if you are in debt up to your eyeballs. Having creditors creates a problem.  You have to make a dollar to pay them, but then you still have to make another dollar for you to actually live on.  You can live on the borrowed money and put off facing the problem, but sooner or later you do not have enough money to make ends meet.  That is the predictament America is in today.  We are accumulating debt at the rate of 1.2 Billion dollars a day.
     Debt is something I definitely know about.  Four times in my life I was in a situation where my debts exceeded my income.  Only once did it become a problem I could not handle.  Bankruptcy really sucks, especially when you are playing the game by the rules.   Playing by the rules does not matter when forces you have no control over take away your means of making a living.  When that happens it is twice as hard to deal with.  The movers and shakers that make things happen screw up and the consequences fall on the average individual.   Mr. Joe Average contends he had nothing to do with creating the problem he is facing.  However that is not totally true.  If he did not vote or did not actively express his views through the political process he is partially at fault.  The fact that America is in debt to the tune of around $40, 000 for every man, woman and child in America did not just  happen overnight.  Mr. Joe Average's indifference allowed the system to get in the condition it is in.
      The only way it is going to get better is when all the Joe Averages's get together and realize the status quo is not working.  America needs a third party that is focused on solving the problems facing America.  A party that demands government runs the same way the Average American has to live.  That is within their means.  That demands government follows the Constitution.  That demands the government does not mess with programs that every American pays into.  The first priority is protecting our country and military payroll should be the first payroll paid.  Next should be those who have already paid their dues.  If we need to fix that system and make it more solvent so be it, but it is not part of the budget money.  Third comes the people on disability.  After these are taken care of the government can spend the rest of it funds as it sees fit.
     The medical system does need repaired also.  Every citizen should be entitled to health care.  It should not just be 80% of the bill either.  It should pay all of the bill.  As I approach 65 and daily recieve junk mail from all the companies who want to insure me for that 20% not paid I realized something.  Insurance companies are definitely part of the problem.  We need to modify the system so Doctors, Nurses and Hospital do not need malpractice insurance.  Exempt those who are in business to save lives.  If they fail to perform safely remove them from the system by pulling their license.  Institutions sworn to save lives should not be liable.  Is their a risk?  Yes just like their is of crooked cops and politicians and bankers.  However those just mentioned do not have to have malpractice insurance.  It is time to kick the lobbyists off of Capitol Hill and return it to the people.  Lobbyists do nothing that is not going to benefit them in some way or another.  It is usually at the cost of the taxpayers.  Time to get back on track.
     The recent budget debate solved nothing.  It just wants to kick the problem down the road.  Of every dollar America spends 40 cents is borrowed.  While Congress is making token payments and wants to show their good faith by paying a few billion over ten years.   It has not addressed the problem.  With fourteen trillion dollars in debt we have to pay off over 5.6 Trillion dollars over ten years,  Please note that, that amount only keeps us even.  It would take close to 600,000 billion a year to reduce it any at all and that is presuming they make no new debt. Yes it will take almost 6 Trillion in cuts over ten years to make a difference. Cuts of that magnitude are more than America can absorb and remain a viable country.  That means a way of generating income has to be created.  Having bailed myself out of debt several times I know cuts alone do not do the trick.  You need to make more money to defeat the problem.  Just like the old business adage, "You have to spend money to make money"   The trick is how do you get the money you spend.  Certainly not from borrowing more.  You can not borrow your way out of debt.
      Once you have created a way to get the money you have to keep it out of the hands of those who created the problem in the first place. That requires that the Federal Government can not have access to the money.  They have proven their incompetence beyond the shadow of a doubt.  The states do not do much better.  What is needed is a program where the money goes straight to the states and they manage it.  The Feds role would be only to make sure the money is used for what it is designated for. That would be repairing infrastructure.  It should not be used to pay state debts and salaries.  That would defeat the purpose.
      So how does this work?  As I said earlier we need to get our house in order.  A permanent program to fix America's infrastructure needs to be put in place.  How do you pay for that?  Why  taxes of course, but not one that is handled by the Fed.  It needs to come from a measurable source and provide sufficent revenue to do the job.  America uses fourteen million barrels of oil a day.  That equals roughly five hundred eighty-eight million gallons a day.  Over the period of a  year that would be over a couple hundred billion gallons.  If it was taxed at one dollar a gallon it would create a fund to pay for the infra-structure repairs.  The jobs it would create would generate taxes on payroll that would go to the federal government.  This solves two problems it creates lots of jobs. In just a couple of years it should get almost everyone of the unemployed Americans back to work.  All the jobs would not be construction.  Their would have to be steel for bridges and reinforcement, machines to prepare the sites and do the work.  This creates factory jobs and as those people spend their wages it pushes things forward.  Secondly it creates payroll taxes that generate income for the Fed to pay its debts.
     While a balanced budget amendment sounds nice, it does not necessarily solve the problem.  What is needed is additional income to pay off the debt.  That is not addressed by balancing the budget. You can have a balanced budget and still be broke. 
     Is it to simplistic? Maybe.  However it addresses a perpetual problem, with a real solution.  Taking care of infrastructure is a long term and on going problem.  It is one that needs to be addressed.  If you agree with this idea forward it to a friend and do not forget to send a copy to your favorite politician.  Your comments and opinions are apprecitated.  Both positive and negative.  Thanks for taking the time to read my blog.

Thursday, August 4, 2011

Where is the Bottom?

    As much as I rant on the market I do not really want it to collapse.  At least not like in the Great Depression, but it sure is not looking good.  The next couple days should tell the tale.  If it keeps sliding we may be seeing the price of Procrastination by Congress.  China's downgrade of American credit surely is not the cause of all the problems. The Japanese and European Central banks actions definitely helped get things sliding.  In the "Big One" the market slid 89%.  In todays market that would put a bottom at around 1596, but in my opionion the bottom, bottom would probably be between 3500 and 4000.  I base that on where the market was at before it took off  around 1972 or 73 when we went off the Gold Standard.  Also the time involved between the Big One and the market reaching the 1000 level.   Looking at all the improvements and fixed assets in America to me that would be realistic.  Hope I am wrong.
    Regardless what it does, if there is no program to develop jobs,  it will be hopeless.  The government can not keep spending the way it is and survive.  If America can not borrow billions and billions of dollars it can not make ends meet. As many of the commentators were saying today, people are scared and they are taking their money out of the markets and sticking it in there mattresses.  If that is true it will get worse not better.
    The deal worked out by Congress gets rid of 2 Trillion over ten years.  Well that would be nice but at that rate and the rate America spends we will only be 2.5 Trillion more in debt than when we started.  The U.S. Governement spends 1.2 Billion a day on interest.  Which is only 438 Billion dollars a year.  For the ten year period that would equal 4.38 Trillion more debt.  To make a dent in the debt the number paid on the debt has to be about 1.53 billion per day.  That only breaks us "even."   If on Monday as I suspect the markets tank and inerest rates go up the price of breaking even will be even more.  America needs a plan that will generate no less than 1.53 Billion a day and 2 Billion would be nicer.  Cutting spending is not going to get it done.
     Having been through bankruptcy myself I understand the process.  The main thing that pushes you over that cliff is your financial resources dry up and no one will extend you credit.  That is probably the boat America will be in on Monday.  The only way to beat it is to generate additional income.  Whether it is a second job or creating a product the world can not live without.  You have to make more money.  When I went through bankruptcy I only had about $45,000 in depth and only about $10,000 of it was credit card debt.  After bankruptcy you will still own student loan debt and any taxes you owe.  You can not get rid of debt to or insured by the government.  I did manage to get a break though and started my own business and twenty years later I was over $300,000 in debt and over a $100,000 was credit card debt.  Yet I paid it all off and came out ahead, because I learned to use the system.  I constantly rolled credit card debt from one card charging no interest to another keeping the debt interest free.  I figured out how long I wanted to take to get out of debt and paid almost two thousand a month till it was gone.  When I paid one off I made that much bigger of a pyment on another card till it was gone.  What it took was a plan and a job that had the cash flow to do it.  Trucking generates large sums of money  and it flows through your hands and you look good on paper but the reality is most of the time you are technically bankrupt, but you learn how to play the game.  Had I understood the system when I filed bankruptcy it would not have happened.  Instead I would have diversified my business and done something else during the seasonal slow periods, but at the time I did not know how to do that.  However I learned and survived till I retired.  Did I get rich? No, but I live comfortably and I have virtually no debt compared to back then.  It is time for America to figure that out and get their house in order.  Unfortunately it may be to late.  Only time will tell on that issue.  Yes there is a way to get out of debt, but most Americans will not like it.

Tuesday, August 2, 2011

One for America...A Job Plan

      Now that the debt ceiling is behind us.  Hopefully things will get better. All the news was bad news the last few days.  Now China has lowered our Financial Rating.  It does not mean they can raise interest.  At least I do not think so, but they can stop lending to America and that would be just as bad.  America depends on loans for the 5.6 Trillion dollars we spend above what we take in.  Just the daily interest on that amount is over 1.2 Billion dollars.  That amount could create 30,000 jobs that pay $40,000 a year.  Over a year that would be around 10,900,000 jobs.  Just two years of that money would create more than the 14,000,000 jobs that need to be made just to get the unemployed working.  That is why we need a balanced budget. We need the money spent here.  Not paid out in interest and foreign trade deficits.  Especially to oil countries that not only hate us, but that support the terrorist that attack us.  We use 14,000,000 barrels of oil per day.  That works out to about 588,000,000 gallons of oil.  If oil was taxed at $1.00 a gallon it would be enough money if spent on infrastructure to create 14,700 jobs at $40,000 a year every day.  Over a year it would create 5,365,500 jobs which would creat tax revenue to help the government balance the budget.

       I know these are rough figures but this program would be moving America toward a solution.  This program does two other things.  It creates a permanent infrastructure fund and a permanent job program.  It   does not require government funding as it is self supporting from the fuel tax. The tax would be paid by those who use the oil.  Those who use little, pay little.  Those who use more, pay more.  That is a fair way to do it. The ones who drive gas guzzlers would pay more.  A person driving a vehicle that gets twelve miles per gallon and drives 50,000 miles per year would pay $4166 dollars.  A person driving a forty mile per gallon car for the same 50,000 miles would only pay only $1250 dollars. That equals about a $100 dollars a month and it puts America back on its feet.  Raising the minimum wage 62 cents and hour would make the cost neutral for a person driving a forty mile per gallon car. A small price to pay.  That is quite a savings.  As America changes to the high mileage cars our dependence on foreign oil would fall tremendously.  That money staying here, could create jobs here.  Anyone driving a 60 mile per gallon car could be made exempt from the tax.  Of course the people driving alternative fuel vehicles would be exempt till a method of making a fair tax on renewable energy can be developed.

      The trick is making sure the money goes to the states for infrastructure repairs and salaries to do the work. Keeping Federal and State fingers out of the money in the important part.  Rules have to be put in place that the money can not be used to pay for other state and federal programs.  At leat I am thinking on the issue.  I have a half dozen or so other energy saving ideas that can work and are proven to work.  As for me I prefer and air powered car.  They already make them in France.  Just put in air powered cars in France and  a site will come up.  You got ideas I would love to hear them....

Monday, August 1, 2011

Balanced Budget?

       What would it take to balance the budget.  Well at this point in time it would take 5.6 Trillion dollars to reduce the debt to a level that our government could live on what it is taking in.  Who or what are they going to take that 5.6 Trillion dollars from?  If they do it all from spending cuts something or somebody is going to be hurting.  It seems to me to have hope of working additional taxes have to be raised.  That does not mean we have to raise taxes.  How can you do that?  Well all the business's and individuals who get unfair tax breaks need to start paying their fare share. That would not increase the burden on those now paying the bills.  It would simply make the tax dodgers and cheats pay their fare share.  Many tax breaks for the wealthy need to be totally eliminated.(i.e. Corporate Jet Exemptions) One way would be to let the Bush Tax Cuts expire and charge those who benefitted an extra 10% on their taxes till they have payed up all they owe in back taxes. 

      The Republi-can'ts would scream that, that is unfair.  Well during the Bush Administration they doubled the National Debt and never appropriated a penny to pay for it.   So actually it would be totally fair to make them pay.  Why should it be done with spending cuts.  The only way I will go along with that is if they eliminate all the positions and programs they created to make that debt.  Since most of it was spent on war debt, they need to tax all the contractors who supplied the jets, bombs, and other systems of destruction.

      Also a few priorities need to be established.  Active duty payroll is the first debt to be paid in event if of a government default. Second is military retirement and disability pensions.  Third is Social Security as it was paid for by the people receiving it and their employers.  It is their money.  Everything else can be paid in any order they see fit.  Well with one exception.  Congressional Salaries should be the last payment made.

    Just paying the daily interest on the National Debt takes over 1.2 Billion dollars per day.   Just to put that in perspective.  You could buy 26,666 Linclon Continentals that cost $45,000 each for one days interest.or you could get just over thirteen Peyton Mannings for that sum.  One days interest could fix all the highways in some of the smaller states.  It could create 30,000 jobs that paid $40,000 a year.  It is a huge waste.  One years interest could create ten million nine hundred and fifty thousand jobs.  Two years interest could create jobs for all the unemployed in America with plenty left over to send kids to college or feed the poor.  Sorry about the ranting, However if they do not pass the debt ceiling bill you can easily double that interest payment over night.  Not only Congress, but most of the American people do not get it.  Congratulations if you do.