Sunday, February 23, 2014

Why are we so fallible

Why are we fallible?

Why do we have this never ending need to want more? We are never satiated with what we possess; we always see what our neighbor has and want it and more.

Why such attachment to the material when it's all temporal? Are we at the limit of our evolution? Is this as far as we advance?

I have so many questions about the human condition...

Monday, December 17, 2012

Tax hikes or cuts?

Having tax cuts or hikes is not a simple issue to deal with. Factoring the socio-economic impact either method will have, not to mention the political firestorm that would result, is significant. The pending sequestration coming up in January demands urgency from Capitol Hill. I believe a combination of spending cuts and temporary tax increases would be a good starting point in dealing with the ‘Fiscal Cliff’.

The media hypes about the impending Fiscal Cliff (scheduled tax hikes and spending cuts) taking effect on January 1st, if Washington does nothing other than the usual political posturing. Does raising taxes or sustaining tax cuts help the economy?

One of my main concerns is how tax hikes or cuts will affect market demand. We need to first focus on increasing demands for goods and services, then  get consumer spending back up to pre-recession levels.

Tax Increase On Small Businesses/Job Creators.
Small businesses will only create jobs when they can reasonably and profitably meet increased demand for goods and services.  Jobs are a company's way of creating value for consumers, which in turn creates profit for a business.  Labor costs are deducted from taxable income; any increase in labor costs must be compensated elsewhere to maintain target income levels or break even points.  Any increase in income taxes must also be offset. If after-tax income would fall 'x' percentage points, as a result of a tax increase, a business would need to find alternatives to grow sales or cut expenses by some offsetting amount. How do we create demand in the market? How do we encourage business to expand and create jobs with the looming increase in taxes hanging over their heads?

Tax rates affecting the very wealthy are currently at their lowest levels since the end of World War II. Restoring the prior 2001 taxes on the top 2% won't affect their ability to expand their businesses. The tax rate for the affluent was at 70% in 1980, 28% in 1988, 39.6% in 1995, 39.1% in 2001, and currently at 35% since 2004. I haven’t found any empirical evidence that savings, innovation, and entrepreneurship suffered as a result of higher taxes for high-income taxpayers, between the years of 1988 and 1995. A stronger market demand and an improved consumer confidence would stimulate business growth.  Therefore, the government and private sector should work to change that. Businesses need growth incentives. We do this by increasing demand for their goods and services in a sustainable fashion.

The Poor Will Spend.
Lower-income earners tend to spend significantly more additional dollars than their wealthy counterparts. The rich (earning $200,000-filing single/$250,000-married, filing jointly) will save any tax savings received. In a weak economy we need to increase demand and encourage consumer spending. In my opinion, shelling out more stimulus money won't solve the problem in the long run, nor its economic multiplier effect last. So, we need an alternative, which is an effective balanced approach. Note that over a 10-years period, increasing taxes for top earners will only save $680 billion from a $3.7 to $3.0 trillion deficit.  In order to focus on deficit reduction for the long run we need to do more adjustments.  It’s important to increase the tax base first, cut or cap certain entitlement spending, and then temporarily increase taxes to prior 2001 levels or reform the tax code for additional revenue. Therefore, I support tax increase for the wealthy coupled with Bush tax cuts for the middle class in the hopes of phasing out or even capping certain deductions over time.

Tax Loop Holes.
There are proposals I heard for tackling, or probably eliminate certain tax breaks, in order to increase the tax base. The American Opportunity Credit and the Mortgage Interest Credit are just a couple of those tax breaks that are now on the chopping block for Congress and the White House to grapple. So how does fixing these tax loop holes create jobs, and how much additional revenue will this add to the government? I don’t have an answer to that. What I can say is I think it will add revenue but I don't think it will encourage job creation.

Medicaid & Medicare.
Consumers are in the mode of deleveraging their debt in a fragile economy; drastically cutting government spending would do more harm than good. I agree we should take a look on entitlement spending and get that house in order. We have to be careful on what programs should be cut. Medicaid and Medicare spending cuts will greatly affect the Healthcare sector, including the 27% cut in Medicare payments to doctors scheduled for January. I suggest things to be done in phases, based on the economic conditions and outlook. The whole entitlement issue is a very sensitive socio-economic subject that should not be ignored any longer. The longer scheduled cuts are staved the pricier the fix.

The Cue To Cut Federal Spending.
When consumer spending and confidence are at an acceptable level, coupled with a 6% or below unemployment rate, then the government should initiate budget cuts. Spending cuts must take place the question is, when and how? How shall the government increase revenues to reduce the cumulative deficit? These are important questions that are very difficult to answer, due to the social and economic implications. There’s also a lot of talk for decrease federal spending and increase revenues. My question is, “How”? If you think on it long enough you’ll see it’s not an easy thing to attack.

The Final Outcome.
I believe we should cut spending and temporarily increase taxes in a gradual and balanced approach. The aim in the long run is to get federal revenues back to it's historical level of 18.5% of GDP, and to eventually reduce the deficit to 20% of GDP. The reality is that we need revenue to reduce the deficit. We need a temporary increase in taxes, and we also need a reduction in federal spending. I probably wouldn't increase corporate taxes but instead reduce it encouraging companies to bring revenue back to the US. Small business owners may want to restructure their company into corporate status for my aforementioned tax benefits. Tax reform is touchy, since the one thing the government doesn't want is to encourage companies/individuals to evade taxes. Yet, we have to address the elephant in the room called ‘national debt and spending’. I'm not sure of increasing the Capital Gains and Dividends tax is wise move at this moment however, who are the real benefactors? How much of the population is benefiting from this? I understand having it in the 15% or lower tax bracket will ease the tax burden for one-time capital-gain realization transactions, but what about those who do it on a regular basis. I think companies can find other creative ways of compensating their executives. I leave with this caveat, extending all these tax cuts comes at a cost and must be offset by financing, that means more borrowing...from China.

Saturday, March 31, 2012

The Cost Of Being A Vegetarian

Change for the better?
A vegetarian diet is the consumption of plant-based foods, which may or may not include dairy products or eggs, but excludes meat - like seafood, poultry, and mainly red meat. My wife has been on a vegetarian diet for about 3 1/2 years going strong. Her lifestyle has affected my change, but our reasons for going green differ. For us both, we are making a personal statement to the world; for me it's cutting costs globally, but for her it's the ethical and environmental concerns.

Am I a 'Tree Hugger'?
I don't go around hugging trees, but I do believe knowledge of ecology and its applications will lead to a sustainable economy. It has been over 2 months now since I started this type of dieting; seeing how it is absorbed into and supports my set of daily precepts. Fitness, the Golden Rule, temperance are just a few of my self-regulating laws I live by to control my thoughts and behavior. My Christian background has shaped my belief system and is the main reason why I adhere to the principle of stewardship.

What's the cost?
Since my wife and I are vegetarians we've noticed the cost-saving benefits of a healthy diet. Here are the 7-key contributing factors to attribute to our savings on food:
  • Eating out reduced to the bare minimum, sometimes zero for a month.
  • No meat consumption!
  • Significant reduction in the consumption of processed food.
  • Sticking to the list!
  • Snacking on fruits or homemade snacks
  • Drinking water - no sodas, no sugary/sugar-free drinks, no bottled juices (only homemade smoothies).
  • Planning our meals.
A typical grocery list for a couple would conservatively be $220 to last for 2 weeks. My wife and I spend typically $150 on groceries to sustain us for 2 weeks.

What's my statement to the world?
A grand reduction in meat consumption will solve a lot of issues the Earth faces and will give rise to a sustainable global economy. Issues such as global warming, deforestation, public health, energy consumption, drinking water supply, waste disposal, etc. are items that will be affected positively if the Earth's population greatly reduces its meat consumption. A significant portion of land used to grow crops for livestock in the U.S. towers over 56 million acres. The mere 4 million acres of land set aside for crops, intended for human consumption, makes me ask: Is this economically sustainable? Take a look at the site for statistics in regards to land use for crops. I can picture a lot of land being freed up to be used for other more sustainable purposes.

The Final Outcome
To conclude, I continually encourage myself to be consciously aware about the things I do on a daily basis. I question what can be done to make a difference, regardless of how small it may seem. The hope for a better world and a stable global economy is the cost I will continue to gladly pay for being a vegetarian.

Friday, March 30, 2012

Recovery In Sight?

Is economic recovery on the horizon?
I certainly believe so! The U.S., like their northern neighbor Canada, will recover more quickly than their troubled European allies. The 2006 subprime crisis and subsequent 2007 global systemic fiasco caused a lot of credit to dry up in the capital markets - like water in the Sahara Desert. We can see signs of recovery, due to the Federal Reserve doing their best to stimulate some sort of fundamental economic reestablishment to the economy.

Signs of activity.
The political landscape has labelled small businesses as job creators. So, why not take a look at Main Street to see if any sign of growth/recovery is occurring? Some has stated, like the government analyst Robert Longely, that small businesses - firms with 500 and less employees - provide jobs for more than half of the U.S. private workforce. That by itself should say something. Now, what is a good indicator of increase activity? Evidently, new capital is what we need to look at, more specifically small businesses loans being generated. This would indicate signs of growth and possible expansion.

SBA loans.
Private sector lenders facilitate loans that are backed by the Small Business Administration (SBA) federal agency. Firms, that cannot obtain credit through regular channels may qualify for these special programs to jump start their company. Large and regional banks, like Huntington National Bank - subsidiary of Huntington Bancshares Inc. (HBAN) - are providing more commercial and industrial loans as of last year than in 2010 (CIBOARD).

Changes for the better?
The SBA  agency decided on March 26, to change the size limit - in terms of annual revenue - for some companies to be classified as a small business. The affected industries are the Professional, Technical, and Scientific Sectors (CFO Magazine). Due to the revised standards, these affected firms could receive federal funding under the 7(a) and 504 loan programs (SBA loans). This modified standard brings a lot of help, since it provides, these 'other than small' companies, an opportunity to grow before leaving the 'SBA nest'.

The Final Outcome.
Upon graduating from Main Street, these firms would be able to compete with the 'big boys' on Wall Street, due to the revision. However, before that can take place more needs to be done to ensure solid sustainable economic stability across the board. Incentives need to be placed in the market to stimulate firms to want to grow, to want to expand, and to want to hire. Hopefully we can see more signs of that in 2013.