Let’s speak plainly

After watching a few newscasts with politicians using words that sound nice, but lack substance, I am in the need of some plain spoken comments. Here are a few to start the conversation. Please let me hear some of yours.

The US President and Congress are speaking of Tax Reform, but what I am hearing are tax cuts. We have a debt of $20 Trillion and an annual budget deficit. There is no way in hell to reduce either with lower tax revenue. We need spending cuts and tax increases, but no politician has the stomach to do what is needed.

Steve Bannon is the latest White House departure to say the President likes for his direct reports to compete for his attention and favor. People say this is how he likes to run his businesses. Two comments. First, I have witnessed this model as an employee, manager and consultant and it is a highly unproductive model. Second, biographers and financial reporters have all said Trump’s business record is spotty. He is a great salesman, but the word great is rarely used to describe his management style. It shows in the level of chaos and incompetence in the White House. General Kelly has helped, but it is a tall hill to climb.

While I understand the reasons for Brexit, I have been very concerned by the consideration and vote to exit the EU. From the outset, financial experts forewarned of the British leaving the EU. They spoke of EU headquarter movement, less investment, and less collaboration. This is already occurring in plans of the exit. I understand Former PM Tony Blair has an idea to govern immigration better without leaving – my strong suggestion is to hear him out.

Along these lines, those who want to retrench from global markets need to know a truism – it is very hard to shrink to greatness. I understand middle income workers in flourishing economies feel the brunt of globalization, but a large part of that is due to and will continue to result from technology gains. Retraining is a must. Shoring up wages is a must. But, we need to be careful about retrenching from global markets, that also add jobs here.

What are your thoughts? Do you agree with these comments? If you do not, let me know why?

 

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Expansion of the Chris Rock Solution

One of the funniest, yet provocative routines performed by the comedian Chris Rock is his proposal to solve gun violence. Price the bullets at $5,000 per bullet. He goes on to describe, as only he can, that shooters will become very judicious with how they use ammunition at that price point.

I was thinking of his idea today and thought it might be a good strategy on other things that are causing problems in America. Civil protest need only require a permit, yet if you bring a weapon that will cost extra. Bring a bat, baton or stick and that will be $5,000 per weapon per person. Bring a knife, sword, dagger, etc., that will be $10,000. Bring a hand gun or rifle that will be $25,000. Someone has to pay for the police cost.

If Congress wants to fund raise on our tax dollars, that will be $5,000 for two hours worth of calling payable by the political party. In person fund raising will be $10,000. If a lobbyist wants to talk with you, they must pay Treasury $25,000.

As for making people tell the truth, if a news agency tells a falsehood and doesn’t visibly retract a story, $100,000 fine. If a President or member of Congress tells a falsehood without a visible retraction, $25,000. If a story is repeated, the fine is tripled. If the politician hits ten lies, the fine is tripled, as well.

The job to collect national fines will be imposed on the Secretary of the Treasury. Local fines can be collected by the City Tax Collectors. Failure to pay, will double the fine and require public disclosure by name and party. This may cause folks to think about how they use their time. It would also help with our deficit and debt.

Big Issue #1 – Dealing with our Debt

A topic that was discussed very little during the campaign and debates is our ticking time bomb problem of US debt. At almost $20 trillion and growing, it deserves its ranking as Big Issue #1 as it will impact everything we do as interest cost becomes an even greater part of our annual budget.

Let’s start with a few quick numbers in our 2015-16 fiscal year for context:

Current Debt = $19.8 trillion
Annual Revenue = $3.267 trillion
Annual Expenses = $3.854 trillion
Annual Deficit = $0.587 trillion
Annual Interest Cost = $0.284 trillion

Note, the annual interest cost is included in the expenses. If we did not spend one cent outside of paying the interest cost, it would take almost seven years to pay down the debt. But, we do have major and minor expenses, so it will take a concerted effort that will need to include some revenue increases, as cost cutting will not get us there unless we are prepared to make significant cuts to defense and major programs like Social Security and Medicare, the top three cost items.

What is troubling is our President Elect’s economic and tax plan has been measured by two non-partisan groups – The Committee for a Responsible Federal Budget and The Tax Foundation – to increase our debt by $5.3 trillion over the next ten years. Quite simply, we cannot afford to do that.

So, we must be smart about what we do it or we will make the problem much worse. The President Elect has said we will make it up in an expanded economy, but several  economic modeling firms, such as UK based Oxford Economics and US based Moody Analytics, project his plans as creating from malaise to recession in our economy.

We are at the point where we must set campaign rhetoric aside and govern off real data and analytics. There are things we can do to decrease the debt. Two non-partisan organizations – The Concord Coalition (www.concordcoalition.org) and Fix the Debt (www.fixthedebt.org) – have good exercises where you can value the impact of certain changes on the expense side and revenue side.

It should be noted, like Corporations, there are areas where we need to increase spending such as on infrastructure investment, while we make cuts in others. Also, as we are an aging country that is the most obese country in the world per the World Health Organization, there will be upward cost pressures on health related programs.

This is not an easy exercise, but one we must do. Cutting revenue through less taxes is an easy thing to promise during the campaign season, but we are at the point where we must make tough decisions and decreasing revenue is one we probably should avoid. And, the longer we wait, it will become even tougher to solve this problem.

Millennials have more at stake

While this title is painfully obvious, it cannot be overstated in this election. Everyone will be impacted by this election, but millennials will feel the brunt.

While both major party Presidential candidates are flawed, there is a clear light of day between Clinton and Trump, with her experience, competence, global relationships, temperament and toughness. On this latter point, Trump is a seventy year old petulant child when things don’t go his way or he is criticized, while his opponent weathers the storm.

Yet, three definitive comparisons need highlighting for all, but especially millennials – environment, economy and equality, the three E’s. The impact will have a lasting effect on our country and planet.

Environment: HRC and the Democratic Party have firm stances and policy positions consistent with the United Nations and every major science organization on climate change and man’s influence thereon. Trump is acquiescing to the fossil fuel industry with the rest of the GOP, going even further saying climate change is a hoax invented by the Chinese to steal our jobs. He plans to tear up the Paris Climate Change Accord and roll back environmental regulations. Both actions should scare all of us, but especially our younger voters.

Economy: HRC has detailed plans about keeping the economy percolating and investing in our infrastucture, which will create jobs. UK based Oxford Economics joins other economic forecasters in saying Trump’s economic plans will likely cause a US recession, while Clinton’s will be neutral to positive in impact. Further, the nonpartisan Committee for Responsible Federal Budget and nonpartisan Tax Foundation model that Trump’s economic plan would increase our $19 trillion debt by $5.3 trillion in the next ten years, while Clinton’s would only increase it by $200 billion. Note both of these are in the wrong direction, but there is a 27x difference between the two candidates’ plans.

Equality: With aggravated hate speech and fear mongering, Trump has tapped into the worst part of the American psyche. No American has more rights than another and no less either. Yet, too many are being demonized and their rights and opportunities are being stepped on. Plus, their voices are not being heard. We are better than this and must be or we will harm our future. Clinton has fought for the rights of the disenfranchised here and abroad, especially those of women and children. And, her plans on investing in infrastructure jobs and education, improving Obamacare and increasing the minimum wage are representative of her focus on those who are disenfranchised.

To me, this election reveals a stark contrast to where we need to go. We cannot retrench on fighting climate change and environmental protections. We cannot avoid investing in our infrastructure and new technologies. And, we cannot forsake the rights of all of our citizens. It is my strong belief, that Clinton will also be a collaborative leader as evidenced by her work as a Senator and will work with both parties to get things done. Our millennials will bear the brunt if we don’t address these issues.

Questions and more questions

I have written before that we do not ask enough or the right questions of our leaders and candidates. Why, what, how, when, where, how long and how much? If we would just ask the why questions more, we would be far better off.

Here are a few to ask:

Why have we not made changes to gun governance since the significant majority of Americans want certain measures?

What do you plan to do about our $19 Trillion plus debt problem, especially with the interest burden becoming such a big part of our $4 Trillion annual budget?

Why are we not doing even more to combat climate change (or in the case of some, why are you blocking climate change actions)?

Why are we not funding Planned Parenthood even more, when they help reduce unwanted pregnancies through education and birth control thus reducing abortions and healthcare costs based on actual data?

What do you plan to do about retraining people for jobs that have been reduced due to technology, declining markets, offshoring, outsourcing, etc.? 

Why do some people feel they are more American than others based on race, religion, ethnicity, sexual preference, etc.?

Why must you be against something because your opponent is for it?

When did collaboration become a dirty word?

What data do you have to support your contention or plan or better yet, when did using actual data become a negative?

When did we start tolerating bigotry in our national leaders, especially since this has been a reason to not vote for racist candidates in the past?

There are many more to be asked, but we could start with these few.

Quick comparison of Trump and Clinton Tax Proposals

The Urban-Brookings Tax Center has provided two excellent comparative write-ups on the two proposed tax plans of Donald Trump and Hillary Clinton. I will provide the links below. They also used three tax experts, whose credentials are noted below, that grade the two proposals on four key factors. Those factors and the average of these grades is noted below:

Factor                          Trump      Clinton

Legislative Feasibility         D                C

Economic Growth             C-               D+

Fiscal Responsibility          D-               B-

Impact on Tax Payers        D+              B-

Overall Average*                D+             C+

*My composite calculation using a four point scale (A = 4, B = 3, etc.) with 0.3 modifier for +/ – like colleges do in grading. Note, the articles did the composites of each factor.

The Urban-Brookings Tax Center found that the Trump plan was disproportionately beneficial to the wealthy, and would greatly increase the national debt.

“His proposal would cut taxes at all income levels, although the largest benefits, in dollar and percentage terms, would go to the highest-income households,” the TPC analysis found. “The plan would reduce federal revenues by $9.5 trillion over its first decade before accounting for added interest costs or considering macroeconomic feedback effects. The plan would improve incentives to work, save, and invest. However, unless it is accompanied by very large spending cuts, it could increase the national debt by nearly 80 percent of gross domestic product by 2036, offsetting some or all of the incentive effects of the tax cuts.”

“Looking at economic growth, Wiiliam Gale (see below) said that the Clinton plan “will probably be close to a wash in terms of economic growth over the medium term.” Gale also said that the increase in tax rates might hurt growth in the short-term. But he said that a reduction in debt under the plan “should help growth in the long-term.” However, the Tax Policy Center analysis of Clinton’s plan used by Gale doesn’t address Clinton’s long-term spending proposals and the effect they might have in raising the long-term debt.”

This is consistent with the measurement of the nonpartisan Tax Foundation that showed Trump’s plan would increase the $19 Trillion debt over the next ten years by approximately $12 Trillion. Clinton’s plan would reduce the debt over the next ten years by about $500 Billion. In my view, neither of these numbers is enough to reduce the debt, but at least Clinton’s is in the right direction.

Truth be told, there are not enough spending cuts to make up for Trump’s increase in debt and we need serious discussion on reducing the debt from both. And, per the Simpson-Bowles Deficit Reduction Plan and ideas shared by Fix the Debt and The Concord Coalition, we will need both revenue increases and spending cuts. To say otherwise, is misleading the American people.

 

http://www.msn.com/en-us/money/taxes/experts-weigh-donald-trumps-tax-plan-and-find-it-wanting/ar-BBtatQD?ocid=spartandhp

http://www.msn.com/en-us/money/taxes/grading-hillary-clintons-tax-plan/ar-BBtatQL

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The Fiscal Times convened a panel of experts in tax and fiscal policy to analyze the Clinton and Trump tax plans. Details of each plan were reviewed by three well-respected policy experts: William G. Gale, the Arjay and Francis Miller Chair in Federal Economic Policy at the Brookings Institution and co-director of the Tax Policy Center; Doug Holtz-Eakin, President of the American Action Forum and a former Congressional Budget Office Director; and G. William Hoagland, a vice president of the Bipartisan Policy Center and a former Republican Senate budget official.

Wednesday’s child is full of woe

I think most of us are familiar with the poem regarding the attributes of children born on each day of the week. Here is the poem for those who have not.

Monday’s child is fair of face,
Tuesday’s child is full of grace,
Wednesday’s child is full of woe,
Thursday’s child has far to go,
Friday’s child is loving and giving,
Saturday’s child must work for a living,
But the child that’s born on the Sabbath day,
Is fair and wise and good and gay.

As I sit here on a beautiful Wednesday afternoon, I am reminded how shortsighted we are, but especially our leaders. The trouble is we need leaders and wanna-be leaders to think longer term as very few problems can be solved short-term and some are growing in magnitude as we are doing precious little about them. So, by failing to do our job, we are creating more Wednesday’s children.

My greatest concern relates to how we are slow to fully address the impact of climate change on our planet. The World Economic Forum noted in their 2015 Global Risks Report that inaction on climate change is one of the two greatest risks to the planet over the next ten years.

Yet, we look to countries like Denmark who are now 100% powered by wind energy. Why? Their leaders understood it would take years to do this and needed buy-in from everyone, as the plan needed to be executed after some would leave office. Coupling that with the sense of urgency of a country beneath sea level, can spur folks to action.

In the US, we have made great strides, but we still have the heavy hand of the fossil fuel industry who has too great an influence on too many elected officials. This prevents them from looking at the real problems facing us. I wrote last time about the alleged misleading of shareholders by ExxonMobil on the impact of climate change on its business being investigated by the New York Attorney General. If found guilty, this would be a fraudulent crime.

Yet, the sister environmental issue is the declining availability of fresh water, which is the top issue of concern by the World Economic Forum. This concern predates and is beyond the Flint Water crisis, although that is important. We have increasing areas of drought which are exacerbated by climate change around the globe and in the US. In one of the great ironies, the Middle East is oil rich, but water poor. And, one of the greatest symbolisms of this concern is the religious leaders in Saudi Arabia allow their people to pray with sand and not waste water.

Another concern that will impact our children is leaving them with our debts. In the US, we have a $19 Trillion debt problem that seems to get forgotten about. This debt will increase even more with our aging population with fewer workers for each retiree. This is a key reason the labor participation rate has declined as we are aging with fewer workers. Yet, this is happening in other places at a greater pace causing problems in Greece, Spain, Japan, etc.

We cannot pay this debt down by ignoring it. And, we cannot cut expenditures enough, so we will need to look to higher taxes. With that said, the two leading GOP candidates tax plans will increase the debt by $12 Trillion and $3.7 Trillion over the next ten years. And, the leading GOP candidate said he will get rid of the debt in eight years, but we should be asking how when you will be increasing it by over 60%? The leading Democrat candidate’s tax plan will slightly decrease it by about $500 Billion over ten years, while the second place candidate will also increase taxes, but offer more benefits and services  (such as national healthcare) which will increase the debt as well. This is in the wrong direction – each candidate should have plan to significantly pay down the debt.

I recognize fully we have poverty issues, income inequality issues, terrorist issues and corruption issues. These must be dealt with. But, at least we are talking about these issues. We must address these other issues or our children will be screwed. It is that simple. And, they will be more than full of woe. They should be angry that we did not address our problems and left them holding the bag.