Mine...mine...IT'S ALL MINE! *cue the scary music*

Did you see the roll-out of the new Trump Tax Reform Plan yesterday?  Have you actually read it?  If you have, it probably didn't take you more than a minute or so as it's really not a "plan", but just a few bullet points.  Here it is if you're interested:

That's it.  This is what The Prez and his Team have been working on for the past 98 days.  Honestly, it looks like something I might have whipped out at 2am the night before a college paper topic outline was due.  I give it a half hour effort, max.

In short, it's insulting.  It seems at first glance to give a break to the middle class by increasing the Standard Deduction, but also seems to take away some possible deductions, too, most notably property TAX deductions.  Property INTEREST deductions appear to be left intact.  What will the middle-class bottom line look like?  Probably either "revenue neutral" (Gubment speak for "no change") or maybe a slight tax cut, just enough to give the incumbent Congressman a good shot at re-election, which is all he cares about.

On the other side, corporations, notably including privately held corporations like Trump, Inc, will make out like absolute bandits!  It will result in tax cuts, on paper at least, to small businesses like mine, but it will be a drop in the bucket compared to what the ultra-wealthy will get.  Let's face it, this is simply another wealth transfer to the rich.  They haven't even made much of an effort to disguise it.  We reportedly already have approx $1.7 TRILLION +/- parked in short term investments looking for a better place.  Another trillion dollars isn't needed....there is NO shortage of investment capital.

The bean counters say the tax cut will leave the Treasury short by approx one TRILLION dollars, to be offset by the ever popular "future growth" somewhere in the future.  Maybe.  Hopefully.

The one possible good thing in there:  The one-time opportunity for corporations to bring back earnings from overseas that they haven't before now because of the higher taxes that would be due here.  This has been done before (so much for "one-time") with minimal success, as it didn't create the new jobs it promised.  Instead companies used their windfall for stock buy-backs and dividends, which *big surprise* went primarily to the already wealthy.

Those who read my protestations will again probably accuse me of being a pinko anti-capitalist, but nothing could be further from the truth.  I am an ARDENT capitalist, one who understands it is the middle class that is truly the goose that laid America's golden egg, and who is trying to see to it it isn't slaughtered.  Right now, in Washington at least, words like mine are like a lonely voice in the forest.

When you stiff the middle class and concentrate too much wealth in the hands of too few, you get Czarist Russia 1917 (revolution), America 1929 (Great Depression), TWA under Carl Icahn, (bankrupt), Eastern Airlines under Frank Lorenzo (kaput), etc.  When companies share their wealth, you get wildly successful stories like The Staubach Companies (Roger Staubach), Broadcast.com (Mark Cuban), Ford (after Henry Ford doubled employee wages), Southwest Airlines, Yahoo, Google, Facebook, Microsoft, and more.  The owners actually made MORE money thanks to the efforts of their grateful employees than they EVER made before. Come on people....this ain't rocket surgery!

*sigh*

Rough landing ahead.  Hold on.

S

Be afraid, a__holes. Be VERY afraid!

Have you heard the funny saying, "Some people are alive only because it's against the law to shoot them"?   I think they were referring to bankers.

Now and then I tend to get off on a vitreol-laced rant about The Banksters.*  Some have asked me why I get my panties in such a wad over them?  Fair question.  Here's why:

Back during the Great Depression thousands of banks went broke, with depositors losing their life savings in the collapse.  The misery was unimaginable.  To restore confidence in the banking system, FDR/Congress did things like create the FDIC (to insure that even if banks go broke in the future, the depositors will still get their money back), and passed the Glass-Steagall Act.  This separated the commercial banks (like the First National Bank of Gooberville) from the investment banks (think Shark Tank in a 3-piece suit).

Commercial banks were regulated, only allowed to loan to solid, credit-worthy borrowers, usually for things like homes or cars or small businesses.  These were usually to locals, and the borrowers were well known to the banks.  It was safe, but not all that lucrative for the bankers. Investment banks could gamble big on just about anything, but with their higher risks (they weren't covered by FDIC insurance) came much higher rewards, too.  This separation worked well, but by the 1980's the banks were wanting to be unshackled, and finally, after intense lobbying, Glass-Steagall was repealed in 1999, and off to the casino they went.

They began an intense home loan campaign, and they had many well-qualified takers.  But after a while all the well-qualified borrowers who wanted a home had a home, so the banks lowered their standards and kept throwing out money.  Not long after, they ran out of even marginally-qualified borrowers, so they just kept loaning to anyone who could fog a mirror.  

If borrowers couldn't afford to make payments based on a 6% interest rate, they gave them a 2% loan....for 4 years, then it skyrocketed to make up for the early-years rate-break.  The banks frankly didn't care if the loans were paid back or not, as they had devised a way to pass along the risk to investors downstream.  They took all their loans, sliced them and diced them, and repackaged them as "derivatives".  These were essentially packages of 10,000 little pieces of 10,000 separate home loans.  

Problem was, the investors they sold them to (often employee pension funds, etc) couldn't easily figure out which homes they had an interest in or who owed them, which is exactly what the banks were hoping for.  The banks LOVE working in the dark!  The senior banksters made literally $$$BILLIONS of dollars for themselves personally with this fraudulent scam!

By 2008 the House of Cards collapsed, and investors worldwide were holding worthless paper.  But....haha....the banks were, too!  They still had BILLIONS in their loan portfolios waiting to be sliced and diced, but the collapse happened before they could get them all out the door.  Oops!

Here's where it gets personal for me:  In their typical bureaucratic knee-jerk over-reaction, the banking regulators pretty much told banks to say "NO" to any real estate loans.  Unless the borrower was solid gold and had a HUGE down payment...NO!  This applied coast-to-coast, regardless of whether an area participated in the fraud or not.  WTF?

Many in my industry were forced to close their doors, losing everything.  (We managed to stay afloat because over the years we had developed nice relationships with many affluent professionals who didn't need any bank financing.)  Plumbers who might once have had 20 employees could then only afford to keep 3 or 4.  The same with electricians, insulation and drywall contractors, etc.  It was to them like Armageddon.  Then it spread to our neighbors who might have needed to sell their homes for whatever reason, but couldn't because there was little mortgage financing available.  They were all defaulting on their homes and cars left and right, EVEN THOUGH THEY HAD NOTHING AT ALL TO DO WITH THE BANKSTER'S FRAUD!

Meanwhile, while millions of middle-class families were being devastated, the guilty bankers still had their ranches in Montana, their estates in the Hampton's, and their penthouse apartments on Fifth Ave.  They still vacationed in Europe, still bought Bentley's, still had their hundreds of millions of dollars hidden away from possible angry plaintiffs. AND  NOT  ONE  EVER  WENT  TO  PRISON!  Their lives didn't suffer one twit!

And they're still at it today.  They still put together fraudulent deals, pricing in a few hundred million bucks to cover the fines they know the Feds will slap on them....not bad considering the few $$$BILLION they scammed in the process!

I truly believe a day of reckoning is coming. At some point in time fed up middle class Joe's and Jane's will invade the Ivory Towers and haul these well-scrubbed criminals off in chains.  And there will be rejoicing in the streets.  :)

S  

*  Not all bankers are Banksters.  The little guys and gals at the local corner bank are NOT who I'm speaking of here.  I'm talking about the BIG BANKS....B of A, JP Morgan Chase, Wells Fargo, Citibank, Goldman Sachs, Capital One, Morgan Stanley, etc.

Chameleon Man

It's funny to me how everyone today wears a label of one sort or another, usually "liberal" or "conservative".  I'll write one thing, and my conservative friends will scream, "He's a raving liberal".  Then a few weeks later I'll give another of my unsolicited opinions and my liberal friends will yell, "Oh no, he's sipped at the Tea Party well."  Truth is my opinions are usually based on a longer ranged, common sense, outcome based models.  Consider this:

I saw this in a recent online business journal....

Our income is grossly unequal and needs to become more balanced.

*I knew it.  He's gone raving liberal.*  Look carefully.  Look at the dates of the last time things got this skewed.  1928-1932, the beginning of The Great Depression.  When the massive, consuming middle class is held down, our economic system bursts under the strain.  We almost saw that in 2008, but were saved (temporarily?) to see stock market highs again today grow into the stratosphere.  Can this go on forever?  Does anything?

Look at our most stable period, 1948-1970.  Our largest employer was GM, and their average pay/benefits adjusted to 2014 dollars was over $50 an hour.  Today our largest employer is Walmart, and their average store employee makes $8.81.  Figuring in their executives and salaried workers, their average pay packet is still only $12.78 an hour.  Numbers like those don't have the buying power to keep our economy going indefinitely.

Beginning in about 1970 (see chart) we became enamored with the idea of "trickle down economics"....giving breaks to the more affluent so they can accumulate even more wealth and use it to create new jobs for an expanding middle class, or so the theory went.  As we now see, many of those new jobs were often bottom-feeding jobs, but *big shock* the 0.1% began their rapid rise to controlling 22% of our wealth.  Again, this can't go on indefinitely.  Never worked, never will.

Change tack:

We need to approve the Keystone pipeline ASAP.  *Oh Jeez....now he's a card carrying Tea Partyer.*  Why?  Because the oil will make it south anyway, only more and more will come here via railroad tank cars, traveling through towns and cities, where accidents and terrorism can bring down havoc on us all.  Common sense says moving oil by rail is NOT ideal.

Plus this is just one more component in some day making us energy independent.  That means more US dollars staying at home vs going overseas to countries that do NOT have our best interests at heart.  It will make us STRONGER, and it's at a time of economic strength that we can begin to phase out all the tax breaks, subsidies, and other perks the wealthy have used since the 1970's to gain a strangle-hold on the middle class.  Over time income will begin to level out, and in the long run we'll all be better off for it.

Is the US going downhill?  Unless we do something, yes, we probably are.  But does it HAVE to be this way?  NO, not at all!  We need to sit together, liberals and conservatives, look at things from a longer ranged perspective and not just from a "what's in it for me now" position, dust off our 'common sense' gene, and make some tough decisions.

It's the start of a new year.  Let's begin it with a new, can-do attitude.  Anyone have the guts to give it a try?  Think we can get any politicians to compromise for our common good?

S

"Starving to death in the Land of Plenty"

Have you heard that saying before?  It means while some are holding on for dear life, others are doing very well.  And it's a topic that polarizes like no other.

It's more commonly known as "income inequality".  The "have's" say they deserve their privileged position as they went to school, studied hard, and have diligently worked their way up "the ladder".  But over the past 20 or so years the "have not's" haven't seen a pay raise after factoring in inflation, and they are the ones that make up the consumer base that drives 2/3 of our economy.

Here's the problem:  This situation can't go on forever.  Eventually the system will implode, just like it did back in 1929 leading us into the Great Depression.  When we kill the goose that laid the golden egg, we're screwed.

They say we have a HUGE public deficit that requires us to cut spending, and at the same time the well off want their taxes cut, which would leave the deficit essentially unchanged.  The wealthy justify their requested tax cut by saying this tax saving would enable them to create more jobs.

That argument makes sense on paper, but in the real world it just isn't so.  Case in point:  Today I read a piece originally published in INC magazine that states large corporations can't find enough good projects to invest their $1.64 TRILLION cash cushion in that they're currently sitting on.  Even more money in a "job creation" fund won't create any more jobs.  More demand for goods and services will create more jobs, but until consumers have more money, they aren't in any position to buy.  It's a giant Catch 22.

If we're ever going to make a meaningful dent in our massive accumulated debt we're going to have to raise taxes on the wealthy because they are the only ones with any excess money.  Note I'm not saying it's "fair", or "right", just "necessary".  These are just pragmatic facts.  And "raising taxes" doesn't necessarily mean raising the tax rate.  It can also mean eliminating special tax treatment, and that just might be politically possible.

Wonder what the Vegas odds would be on that?

S

The blogger that almost wasn't

My dad, like many people of his generation, lived a very interesting life.  I've always found one era of his life in particular to be special.  

For many Texas boys of that time, due to the still-raging Great Depression, there weren't many career choices after high school outside of farming, and my dad had no intention of becoming a farmer.  Instead he became a soldier.

At only 17 my dad had to get his parents permission before he could enlist in the Army.  After his basic training he was assigned to the 1st Cavalry Division.  Today the 1st Cavalry Division arrives in battle by helicopters or in tanks or humvees.  In the late 1930's they arrived in battle on horseback.

No joke, my dad was a horse soldier.  They still had horse-drawn chuck wagons and caissons.  Mechanization was just being introduced into the US Army and therefore horses were still in use.  As weapons of war they were probably pretty useless, but they still existed.  He served under soon-to-be famous commanders such as George S. Patton (dad said he was one mean SOB).  They went on maneuvers all over the Southwest....once he rode a horse from San Antonio to El Paso (about 550 miles).  

After dad's horse was "requisitioned" by a Colonel to be his new polo mount dad was transferred to Troop Headquarters for a more agreeable job.  When his enlistment was almost up dad's commanding officer approached him and said he had received orders to go overseas on a new assignment.  He wanted his staff, including dad, to re-enlist and go with him to this exotic new post.

Dad, while tempted, had other plans.  He wanted to go back home and marry his sweetheart, my mom.  He reluctantly told his commanding officer he was mustering out of the army, thanks anyway.

Turns out that exotic overseas assignment was the Philippines, and the commanding officer was Colonel Jonathan M. Wainwright.  The same Jonathan M. Wainwright who eventually surrendered American forces to the Japanese at Corregidor after the three-month-long Battle of Bataan.  

The few survivors of that siege were sent on a horrific 80 mile forced march known as the Bataan Death March to a prison camp, and even fewer of them survived to see the Allies victorious in WWII.

I'm lucky to be here.  Thanks, dad, for your fateful decision. I'm REALLY glad you got to be my dad.  Happy Father's Day.  :)

Tomorrow I'll say a bit more about dad's involvement in WWII.  

S

Bidness History 101

Not that I expect anyone to actually read this....


Here's how our economy went over the cliff:  Historically banking was a fairly mundane business.  Banks paid depositors a small percentage interest, charged borrowers a higher rate of interest, and the gap in the middle was their profit.  They matched up those who had an excess of money (depositors) with those who needed money (borrowers).  It was called 3-6-3 banking...they paid depositors 3%, charged borrowers 6%, and were on the golf course by 3pm.  Every small town had their own bank and everyone knew the banker and the banker knew all the townspeople.  They knew who was a good credit risk and who wasn't.  They thought long term, hopeing to help you start and grow a business and become your banker for life.  Banking was NOT a "get rich quick" profession.


Occasionally they strayed and began bankrolling speculators in exchange for higher returns for themselves, but things usually ended badly.  (Think:  The Great Depression)  After that fiasco the government passed all kinds of new laws hopeing to prevent a recurrence, the big one being the Glass-Steagall Act.  It said commercial banks (the ones where you put your paycheck) were given FDIC protection, but were limited to the very mundane types of banking ONLY (see above).  Investment banks such as Goldman Sachs, Bear Stearns, etc were NOT given FDIC protection, but were allowed to gamble with their "investors" money with the hope of hitting a home run....higher risks, higher returns.  Brokerage firms could buy and sell securities, but could not do what commercial or investment banks could.  These firewalls kept our financial system out of serious trouble for the next 50 years.


With the wave of deregulation begun by Jimmy Carter and Ronald Reagan these various types of financial service companies began eyeing and envying the others.  The firewalls began to spring leaks.  Commercial banks wanted to be able to gamble like the investment banks hopeing for a home run for themselves.  The investment banks thought if they had the HUGE piles of depositor's money to play with like the commercial banks did they could before long own the world.  With individual investors, mutual funds, and pension funds, etc, seeing the potential for nice returns on Wall Street, the volume of stocks traded went from a few million to eventually several billion a day.  And remember, brokerages are paid by the number of shares traded, NOT whether the market goes up or down.  The banks wanted some of that, too.


Little by little they were allowed to stray a bit farther from their roots.  The small town banks were largely bought up by the regional "downtown" banks, who were in turn absorbed by the "money center" banks such as Citi and Bank of America.  Their power became enormous and they learned how to exchange "campaign contributions" for Washington favor.  Finally, in 1999, Congress passed the Gramm-Leach-Bliley Act which killed off Glass-Steagall.  The firewalls were removed.  Banking became a highly desirable "get-rich-quick" profession.  Banks became less focused on helping their neighbors establish and grow businesses and more focused on devising new products to sell (such as "derivatives") which could generate almost unimaginable profits for their stockholders and immense commissions for themselves.  There was little reason to make "prudent" loans (well, they had to look prudent at least long enough to sell them) as the risk was passed on to those who eventually bought these new financial products.  


Greed ruled.  And then the wheels came off.  Some other time I'll explain what happened next.


S


NOTE:  I would welcome any feedback correcting this post if I have gotten something wrong.  Factual constructive criticism would be appreciated.