Monday, September 19, 2011

Random Thoughts With No Conclusion

As a general rule of thumb I believe that massive cutting of government spending now will put is in, or nearly in, a death spiral of layoffs, reduced tax revenues, cost cutting, layoffs, reduced tax revenues ... and so on.

So, I further believe that the cutting that is obviously absolutely necessary needs to be planned for a time when tax revenues are rising and jobs are increasing.

The Economist has a report in last week’s issue that names the biggest employers in the world. The US Defense Department is number one with 3.2 million employees, followed by (I’m not kidding) the Chinese Army with 2.3 million. Wal-Mart has 2.1 million.

I think that the Defense budget is between 400 and 500 billion (dollars).

I heard a guy from the Washington Post this morning who has written a book called – I think – Top Secret America. The book reveals a number of disquieting things about a shadow government/defense department that has risen up since 2001. Among the more disquieting, the author says that if this shadow were to be accounted for the defense budget would be 1.4 trillion (dollars).

But who knows.

I live on Social Security and IBM retirement. I fund special things with IRA distributions. Those distributions cost me 25 – 30% in taxes depending upon their size. I’m not a millionaire. But I am paying a rate that we all know would amount to class warfare if any of our poor millionaire brethren were asked to pay at a rate anywhere near similar to that.

But then they haven’t had any government provided bonuses in the last couple of years, either, so I guess times are really tough for them. So I guess it makes sense for me to pay and for them not to. Holding back their government provided bonuses is surely all the class warfare that they can be expected to tolerate.

But back to cutting.

So where do we cut? For example,does anybody really know anything about the – apparently – off the books 600 billion (dollars) that our annual defense costs in addition to the on the books 400 –500 billion (dollars)? Or does anybody really know anything about that on the books half trillion (dollars)? If they don’t know about it how can they cut it? If they do know about it and they can cut it do they know how many jobs in how many industries that cutting will eliminate?

Does anybody really care?

I think it’s just too much fun for them all to dance around their various campfires shouting cut, cut cut, prior to heading off to their government provided dining rooms and athletic facilities to expect them to know or care about anything that fringes the edges of reality.

I heard an interview on To The Point this morning between two differently view pointed people about Social Security. Net net, one of the guys said that with rational and minor adjustments the program is solvent for now and beyond. The other guy said it was just a Ponzi scheme with a safe full of IOUs. The first guy pointed out that the so called IOUs were really US Treasury Bonds. The second guy said that you could call them what you want to but they are worthless. If I had been the first guy I would have asked the second guy if he thought that we ought to keep that fact – the worthlessness of US Treasury Bonds - a secret from the Chinese.

But he didn’t think of it. And Warren Olney hadn’t asked me to be part of the interview.

The second guy also thinks that today’s young people should be allowed to put their Social Security money in an IRA managed by financial professionals. I have most of the pittance that I possess beyond Social Security and IBM in one of those.

Its track record had made Social Security look pretty good.

I guess the kids need to learn that not all Ponzis are created equal.

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