We look forward to a great new year!

~Travis

All around me the souls of those waiting to depart, waiting to exit, waiting to do anything, walk around like those lost without a map. Booming voices are calling from over head but the muffling static prevents any audibility. These souls look to the sky for direction but only longer lines await. I get behind a mass of others; one by one looked over by demons, swiped by their seeking tails, searching for anything that’s not right. And there it is; the gate. As you pass through it makes a sound, permitting you to your final destination. If it beeps, you’re sent back. This electronic Minos only lets those pass who have committed their sins to a large, plastic bin. As I pass through the gate with no instance, it’s nice to think that I have a destination but this is just an illusion. I walk though endless corridors, heckled by other demons, hocking pretzels, sunglasses…and foreign language cd-rom’s. I pass through these passage ways, lights flickering and there it is. The vestibule.

Filled with rows and rows of seats for its unlucky patrons it calls me towards it. Amid animated signs and roped off doors lies the ultimate punishment, the waiting room, Here hundreds of souls unsure of their future come and sit and worry. Sitting next to strangers in small uncomfortable gray seats only adds to the pain. As I look around at my fellow passengers I hear a scream… “NO IN-FLIGHT MOVIE?!” and to myself “oh the humanity” the journey now seems longer than ever.

But soon, Salvation! A voice from above calls me, “Zone 4” At last…my journey is able to begin. I pick myself up and rush to beat others who want to take my space in deliverance. I go through a dark and shaky hallway towards my transport with a breath of freedom in my lungs. I follow the signs to my place and finally start to relax. As the rest of the souls pile in I realize this is just a mirage, my journey has just started. Hours of pain look me in the face, this eternal punishment will never end and lucky me….I have a center seat.

Fasten your seatbelts.

Charon's New Ferry

Trickle down economic theory has a lot in common with your old fashioned Mr. Coffee drip coffeemaker. Each must go through a filter before the output can be captured and utilized. Unfortunately, the filters applied in the economy do not assist the average Joe in the manner that your cuppa joe machine does so reliably each morning.

The incentives for corporate America have changed. Whereas in the past, an influx of cash uncommitted to taxes could be used to hire, promote, reward, expand and invest, today’s corporate America uses the cash towards other ends. While CEO salaries may be the first thought that comes to mind, that is only one drip in the cup. Mergers, acquisitions, partnerships, outsourcing, financial vehicles on Wall Street, and the ever popular new way of showing one’s corporate prowess – whose quarterly revenues are bigger!

Trickle down cannot work in an economy where the corporation increasingly is focused on Wall Street, outsourcing, and short term revenues over long term investments and slow but steady growth. In a world where employees (and all their benefit, training, and retirement baggage) are viewed as costs to be eliminated, the filter directs the trickle down drip into various coffers displayed in the annual report to shareholders.

Small businesses reflect the best chance for trickle down to work, however in more and more instances, internet commerce is replacing the store front sale. Service providers and local shops rely on customers to spend their wages, thereby allowing an increase in hiring and growth in the business. When customers find their income stagnated (due to the corporate filters), the sales decrease, leading small business owners to use those trickle down tax breaks to pay the bills, and look to online customers in a more widely distributed market to bring in that revenue. The trickle down cash can help the business owner grow their business, but the effects are not as clear in the local economy or in the local job market as once expected.

To make trickle down effective in this environment is a tricky situation. Perhaps we need a combination of trickle up and trickle down… recognize that corporations view employees as costs and incentivize the trickle towards those areas. Don’t increase taxes on employers with good healthcare plans, reward them with tax breaks to have them. Offer greater tax breaks for employee training / continuous education. Reward re-investment in companies through tax breaks to alleviate some of the fallout from quarterly revenue lust.

The game has changed – the theory can still work, but it has to be applied in the context of the environment.

Drip...Drip...Drip

The less cynical, and more analytic critique of the tax code that I posit is this: we have a very unequal distribution of wealth these days, so why not have a very UNEQUAL tax code? Why not let the tax code reflect the society’s extreme inequality, and use it as an engine to fix it? Why do we stop creating tiers at a measly 350 Grand mark, and extend it up to 1, 5, or even 100 million in income?  The income tax has been MUCH higher in the past, around 90%!  That is unimaginable today, only because we are forced to believe this will dampen economic growth.  That is nonsense, and borderline propaganda.  It is time to tap one of America’s greatest Natural Resources:  Millionaires.

The current tax system greatly favors the Rich and lets the ever-shrinking Middle gnaw on what’s left.  It is unfair and crippling our economy and polity.   Higher tax rates for the rich does not constitute socialism.  Quite the contrary, it’s a return to our American roots and history.  It is time for a more sane tax regime, that reflect reality, not the interests of the Rich.

Wouldn’t it be nice to have a president who was an asshole? Unfortunately the foresight of mid-term elections and re-elections prevents this from ever happening. Looking at the current budget deficit, which according to the deficit commission staff amounts to $13.7 Billion, an asshole is exactly what we need.

Politicians from both sides of the fence including President Obama realize that we need massive budget cuts, but they fail to ever mention specifically where they will come from. Since this is where they fail, let me be the bearer of bad news; every dollar that is cut is going hurt at least someone. The sooner Washington realizes that they cannot be everyone’s friends, the better. Before the GOP begins cheering me on, realize that this is a two-way street. So just for sake of keeping things fair, if we take away some of the left’s toys we have to take some of the right’s toys as well. In the words of Kentucky Senator Rand Paul as quoted from the Wall Street Journal Article from today, “There’s not enough money just in welfare to cut to balance the budget, You have to look at the entire budget, and approximately 40% of that budget is military”.

So now that we know everyone is going to be mad, it is time for Washington to suck it up and be the bad guy. This involves a complex political strategy called thinking ahead. By ahead, I mean more then four years down the line (I know right? Who thinks that far ahead?). That means worrying about results that might not show on your resume come re-election time, and yes, that could cost you. Not to undermine America or promote a nanny-state (this metaphor is not going to help), but just like with parenting you can’t always be friends. We will however, thank you later.

Sarah Palin : Is a genius. Why you ask? TOMA – Top of Mind Awareness. A key principle in any marketing plan. TOMA runs under the assumption that before a buyer picks up to a marketing message, they must be hit with it at least seven times. It could be a TV commercial, then a flyer, then a radio commercial, ect but people don’t buy on the first try. Marketing – meet politics. A quick aside, thank GOD all of the political ads are finished – that’s muck not marketing. Sarah Palin (or more likely the people she has hired to handle this sort of thing) however are taking an interesting and very smart route.

Take this new TLC show “Sarah Palin’s Alaska” – har har har a show about a bumbling pseudo–politician mother, tromping around Alaska with a funny accent. But the beauty is – people are watching it… A LOT of people….nearly 5 million people, and THAT is marketing. Though there are no direct political tones in the program, the TOMA is still there.

Let’s take SNL. Again, perhaps mockery is the greatest complement. I’m fairly sure; and Tina Fey has acknowledged that her career wouldn’t be the same without the spoof of Palin. The genius here, again is TOMA disguised in laughter. Love her or hate her, you were still watching something about her.

So my personal opinion is that she’s on the fast track to obtain a presidential nomination, but under the radar. Pretty smart if you ask me. So the next time you tune in to laugh, you may have just cast your vote.

Before you slavishly spew the neo-con psychobabble they taught you in a second-year Econ course, let me quickly defend “protectionist” industrial policy. It promises new jobs. It presents a targeted method to stimulate new industries with positive externalities for all of society to enjoy (e.g. clean energy). Industrial policy aimed at “green” jobs and industry is not “as” protectionist since there is a very weak global green industry presence to begin with. Sure, the Chinese and Europeans are in the race, but the race just started. There is real potential here, and all industries can be considered “infant” at this stage. Give the baby a goddamn bottle already!!!

It is time for the US to stop the weak subsidies at the backend (buyer credits) and start a more comprehensive, and incentivizing, approach. The Feds should use carrots to get States to get their act together with a local green movement, use public universities as incubators, etc. It’s not really a question of how, but how much: a ROBUST package of policies should be implemented that energizes and strengthens this pathetic industry. The private market (gasp!) is too slow; putting a few hybrids on the roads and a smattering of solar panels on American roofs will not do.

To all ye who think government is incompetent: the US Military is the most socialist organization in the United States, and the most advanced military in all of human history. If the US can contract with Boeing and others to build the best jets in the world, why can’t the US government contract with green technology firms to build a new future for the US? Shame on you.

the current state of affairs

Spirit airlines finally took the plunge, charging up to $45 per carry-on. Now I know, here it comes the OUTRAGE from passengers, but before you start picketing, Spirit said they lowered most fares about $40, so in reality they are charging an excise tax to prevent you from taking on your bag, which seasoned travelers will love. In addition, diaper bags, books or a small bag that can fit under your seat is exempt (you can calm down power users)

Excise taxes are great. Much like taxes on booze and cigarettes, they persuade you to use less of a product or service by making it more of a financial burden. If the risk of cancer wont make you quit, perhaps a shocking price tag will.

So what does this mean for air travel? I hope every airline does this. Lower the ticket price by the cost of the “tax” and force people to prioritize their needs and check that bag. Let’s keep those overhead bins wide open, and if I get the opportunity I will certainly fly Spirit airlines.

Yeah..Keep Stuffing. THAT will work.

The average spending by OECD countries (Europe/USA/Japan…) was $2,966 per person in 2007 (the USA was at $7,290). In 2007 Canada spent $3,895; France $3,601; UK $2,992; Japan $2,581.

I truly do not understand how the USA continues to subsidies those special interest in favor of the current obviously broken system. How
people can possible claim the USA is so bad at health care we can’t possible just pay say 20% more per person to get results no better than other countries. We are not comparing the USA to some idealized dream system. We are comparing it to government run programs that are amazingly cheaper and have at least equal (often better) performance measures.

Do these special interests really expect us to accept that the USA system requires us to pay 243% of the OECD average for no better outcome measures? And even then, tens of millions of people’s lives caused great distress due to the lack of health care or financial ruin due to health care costs they must pay out of pocket? The apologist for the special interests have had decades to fix this system. We can’t afford to keep letting them distort our economy for their benefit. They have had decades to make gains. We need to stop letting the special interests delay and start adopting sensible
solutions now.

Their are many paths to improvement that can be taken at the same time. We need structural reform. We also need performance improvement for health care organizations. The recent health care bill primarily sought to deal with the lack of coverage for tens of millions of people. The bill is also filled with many good test efforts of real improvement that can lead to savings. The time for accepting those that have run a system that costs far too much and delivers far to little should be over.

Guest post by John Hunter of
Curious Cat Investing
and Economic Blog.

Karzai, whatever his motivations, can either gain BIG or lose BIG here. His assertion of autonomy over Afghanistan could lead to greater bargaining power with the US. OR, quite differently, it could cost him his seat at the helm. I think it is more likely Karzai will benefit from this little spat with the White House, since they know removing him could destabilize the whole country. They also know removing him would be step backwards.

No matter what happens, this incident highlights the game puppet governments play with their imperial masters. Like pubescent teenagers, they must rebel just enough to assert their authority and independence. But if they go too far, and crash Dad’s car, out comes the belt, or the Navy SEALs, as the case may be.