Category Archives: Government

The global attack on productivity

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I often wonder–as the debates rage on about government budgets, deficits, and taxation–how many people realize that most taxation is an assault on their productivity.

You see, all you have available to you in life is your time and your effort, collectively referred to as your productivity. You choose to invest your productivity in a certain way, then along comes the government who says that a certain amount of that productivity–quantified as income–belongs to them off the top. Then, they say another amount belongs to them if you take your quantified productivity and do anything with it–that is, spend it. Finally, the government says that they are going to spend the productivity they took from you on infrastructure, products, and services it is now going to force you to use–literally force you, as the government has engineered a near monopoly on the use of force–and they’re going to take even more of your productivity in the form of fees for the privilege.

As far as I can tell, this system of robbing people of their productivity means that people, in general, have become less productive. Why should anyone work hard and apply themselves if the government is just going to come along and take what you’ve done, especially since it takes more as you are more productive.

So, the reason that local, state, and federal governments are going broke, and are taking all the rest of us down with them, is that they have effectively capped the amount of productivity their citizens can produce even as they demand more of it to pay for their infrastructure, products, and services they are going to force you to use by taking even more of your productivity.

This is a self-defeating system and can only result in collapse. What’s ironic about this whole mess is that this is not the first time in the history of the world this very thing has happened, nor will it be the last. People think that letting the government force them to do something certain ways in return for giving up their productivity seems like an easier way, but it always fails. There is no such thing as something for nothing, and as the number of people to cease to be productive goes up, it’s not possible for those who try to continue to be productive to make up the difference. The system collapses into an tragic, entropic heap, usually a lot of people die, and those who worked the hardest–that is, those who were most productive–rebuild on the ruins.

The manifestation of this condition in 2011 is massive global budget shortfalls. The US federal government alone has spent $14 trillion more productivity units than it managed to collect since the end of World War II, or 280 million household-years worth of productivity. That means that, even at full employment (unemployment around 4 percent, or about 68 percent of the total population working), it would take all of the salary of all of the households two years to pay off the debt, and that would not provide a dime to the government to maintain anything.

So, what’s the solution? It’s easy: stop penalizing people for being productive. How do we do that and still keep all of our pet programs? In short, we can’t do that exactly. The pet programs will have to change, get cut back, go away altogether, but that reality cannot help but be offset by the benefit most people will gain from having access to more or most of their own productivity.

In real terms, this probably means some sort of flat or “fair” tax, probably in the form of a transaction (sales) tax on things regulated by the government. And, no, I do not believe such a scheme would penalize the poor more because, frankly, the poor would be less so as wages rose because businesses could grow because they would have more money being spent by people who have more of their productivity back.

Of course, these sorts of things rarely resolve themselves by way of reason, dedication, and hard work in any kind of mutually beneficial way. Again, history tells us, they usually resolve themselves by bloodshed and hardship, but there is always a first time for everything. What this first time would take is the people demanding their productivity back at the ballot box.

DLH

An open letter to farmers big and small, sustainable or not

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Dear farmers,

I’ve read a lot about how none of you want cuts to federal farm subsidies or programs. I’m betting no one whose federal budget is on the chopping block right now wants their funding to go, but the extreme nature of the budget crisis means that something is, by definition, going to have to go.

My proposal to all of you is that we be the ones who stand up and say, “We don’t need the money.”

You see, from my point of view as a small farmer just getting started on the sustainable agriculture journey, the reason we have such a hard time making money and getting our message out as farmers is because so much of the money and so much of the message is controlled by the government. Because the government controls the money and the message, we farmers have very little control over how the money gets spent and what gets said.

For those of us who have decided to go it alone, the experience is quite different. I know from first hand experience what kind of money can be made and what kind of message can be put out there by a single farm. People are hungry–literally and figuratively–for what we are doing and they want more. In the next few years, unless something dramatically changes for us, our farm will be paying for itself without the benefit of a single government subsidy or program.

How is this possible? Because I, and those who work on and support my farm, understand that farming is a calling and a lifestyle, not just a job. I am my farm, and because of that, I care very deeply about what happens to it. Therefore, I am willing to put in the kind of blood, sweat, and tears that a mere job could never demand.

Now, is that kind of commitment for everyone? Of course not. Yet, I cannot help but notice that, if your’re not willing to make that kind of commitment, then what are you doing?

For those of us who are willing, the path leads away from the government. We don’t need government sponsored local food programs. We don’t need government price supports for commodity crops. We don’t need government rules telling us what, when, where, and how to plant.

What we need is our own determination and perseverance, and in a few years using those things, we would be free to do the thing we have come to know and love.

So let’s stop this dependence on the government and start our own independence based on the merits of our own effort.

DLH

It’s monumental news, but we need to keep it in perspective

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The news that Osama bin Laden has been killed is certainly monumental, incredible news, especially since he managed to evade capture for such a long time. Yet, as important as his death may be, it marks but a single event in a much larger, longer conflict.

To a great degree, bin Laden was a figurehead, a rallying figure for the millions upon millions of people around the world who use their interpretation of Islam to justify violence, oppression, hatred, and fear. While his death removes that figurehead, it does not remove the justification.

This conflict is not and never was going to be won by simply killing bin Laden any more than Iraq was secured by simply capturing Saddam Hussein and killing his sons. This conflict is not even going to be won by the application of military force alone. Instead, this is a conflict over the hearts and minds of people held in tyranny for generations, and it is going to take conviction and diplomacy as well as force to win.

Because of this fact, we must resist the powerful urge to conclude that we have won and that it is now time to wind things down. There may yet be a time when that reaction is appropriate, but it must be a time when the future of Afghanistan is as secured as it ever will be. Yes, it has been a long war, and many of us who have been paying attention to these things all along have said it was going to be, but we cannot quit before the job is done, because the consequences of quitting will be worse than those of outright failure.

So, we should celebrate the victory bin Laden’s death represents, but we should do so with the caution born of the knowledge that a rough road still lies ahead. And, we should resolve ourselves to walk that road until its end.

DLH

How I would fix the government and, therefore, the economy

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Anyone reading this weblog knows by now that I blame the government for most of what is wrong with the economy. It spends way too much, arbitrarily regulates, makes promises it neither funds nor keeps, yet continues to grow in size and scope on an almost daily basis. None of these claims are to say that other elements have not contributed to the problems our economy faces, yet I cannot help but notice that everywhere there is a problem in our economy, there is also a government presence.

That said, I have been asked–more than once now–how I would fix the problem. Given that my ideal of a constrained-to-the-original-and-intended-limits-of-the-Constitution government would be almost impossible to implement in a meaningful way any time soon, I have tried to give the idea of a fix thought with the intent solutions that could be implemented now. Here is what I have come up with to date:

Replace the income tax with a national sales tax

One of the Constitutional mandates of the federal government is to regulate interstate commerce. Taxing individual income–that is taxing productivity–does nothing to fulfill that mandate. A national sales tax would, and would also function to fund the government in a way that could not be evaded by anyone. I agree that some amount of money should be exempted from such a tax to avoid the immediate impact it could have on lower income earners (in the form of a rebate, probably), and I think allowances should be made for certain kinds of wholesale business, but on the whole I would tax all sales at a nominal rate with targeted higher taxes on certain kinds of goods and services.

Abolish the IRS

With no income tax, there would be no reason to have an Internal Revenue Service, and it should be abolished.

Abolish the Fed

In my opinion, the Federal Reserve and the Reserve Bank system is one of the worst ideas ever conceived by modern man. Giving the government the ability to manipulate currency for its own gain, to control banks, and therefore to control every citizen’s money is immoral and unethical. Kill the Fed, and that action by itself could right the economy.

Institute an independent, judicially managed federal audit service

Our federal government is crooked. Anyone who has spent any time working for, studying, or being afflicted by our government knows this is true. It spends trillions of dollars every year, yet is constantly broke, fails to deliver promised services, constantly cuts back the services it does offer, even as those who fund it and maintain it continue to give themselves raises, make money from their positions, and pat the backs of their cronies. I would implement a quadrennial governmental review that would alternate with the presidential election cycle and that would deliver its report to the public before it delivers it to Congress as part of the budget cycle.

Thrift Social Security

Contrary to the claims of mafias like AARP, the current Social Security scheme is broken and cannot be fixed by mere tweaks. To fix the program, perhaps permanently, I would implement something very similar to the Thrift Savings Plan into which federal government workers invest as part of their retirement plans. If the system works for and has remained solvent for the government, why not for the rest of us?

Invest Medicare

I would replace the current Medicare scheme with individual medical savings accounts funded by pre-tax dollars with a government guarantee against most risk. Some sort of federally guaranteed catastrophic care insurance might be appropriate, but I think it would be rendered unnecessary by other reforms.

Abolish all federal subsidies

Yes, I mean all of them. Abolish everything from agriculture subsidies to student loans to unemployment, and instead focus on encouraging the growth of local and state entities to tackle any problems that might remain once the billions and billions of dollars currently tied up in handouts return to the economy.

Tort reform

I would reform and simplify our chaotic and unmanageable civil justice system so it favored justice over income for lawyers, especially with regard to medical, patent, and copyright lawsuits.

Reform the national incorporation system

Without an income tax, a lot of corporate law would no longer be necessary, but for what remained, I would implement a system that allowed for more categories of corporations in an effort to differentiate between small companies and the monstrous ones responsible for most of the abuse. I think I would make the consequences for breaking the law categorically far worse for larger corporations, and I would constrain the way larger corporations are allowed to function within the political and legal systems.

These are just several ideas that I think could go a long way toward improving our national situation in a short period of time, mostly by returning trillions of dollars to the economy. I am sure there are many people who would disagree, but then again, maybe they could offer their own solutions.

DLH

Readiness advisory

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I advise everyone to pay close attention to the economic news over the next several days. From the reading I have been doing over the past 24 hours, the S&P downgrade of the government’s credit rating has the potential to be just the first of several hammer blows to the economy over the next week. This news is coupled with drastically rising wholesale inflation numbers, significantly rising commodity prices,  the specter of rising interest rates, and the potential that S&P may only be the first to downgrade.

The potential outcome of this toxic brew of circumstances is that it could trigger yet another recession (or the second dip if the existing recession). This potential becomes most threatening in that a second recession will further reduce the revenue being collected by the federal government, increasing the size of the deficits at current spending levels just at the time when it became harder for the government to borrow money because of higher interest rates and more credit restraints. In the most extreme circumstance, the government may find itself unable to borrow sufficient amounts, forcing it to defund or reduce funding on programs in mid cycle.

Be ready before it is too late.

DLH

 

26 random things that could cease to function during a government shutdown

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Most people pay no attention to how many areas of everyday life our federal government is involved in. Many people believe a government shutdown will not affect them even as they depend on federal services almost every day of their lives. Granted, many of these things may not happen right away, as many federal agencies maintain capital reserves by federal law, but those reserves can be measured in days. I suspect a shutdown of more than 3 days could result in severe and, in some cases, permanent disruptions to federal functions.
  • A- Archives: the National Archives, Library of Congress, and the US Copyright Office would be forced to close.
  • B- Banks: all of the banks still dependent on TARP funds will lose their lifelines and FDIC insurance guarantees will become null because no one can disburse the money.
  • C- the Capitol: operation of the US capitol would cease and the capitol area would be forced to close down.
  • D- The Drug Enforcement Agency: the DEA will no longer be interdicting supplies of illegal drugs entering the United States.
  • E- Education: student loan disbursements and student loan rate guarantees will no longer function.
  • F- The Federal Bureau of Investigations: the FBI will no longer be available to assist in investigations of bank robberies and kidnappings. Domestic intelligence operations may cease or be cut severely back.
  • G- Governments: State and local government programs dependent on Federal money will be forced to reduce activities or shut down altogether.
  • H- Hospitals: medical programs dependent on federal grant money will cease to function.
  • I- IRS: the IRS will not be able to collect taxes, disburse refunds, or process returns.
  • J- Judges: the federal court system, including the Supreme Court, will be forced to shut down.
  • K- Khalid Sheikh Mohammed: KSM and the the other detainees at Guantanamo Bay will suddenly be guarded and cared for by people who are not being paid.
  • L- Land: farmers utilizing government land, especially for grazing, may discover that land is no longer accessible.
  • M- Medical: Medicare and Medicaid disbursements will cease, even for individuals undergoing treatment.
  • N- The National Aeronautics and Space Administration: NASA will not be able to fund its ongoing missions, including the International Space Station.
  • O- Open Skies: US enforcement of the Open Skies treaty would cease.
  • P- the President: While Barack Obama will still be our duly elected president, he will cease to have quite a bit of executive power because that power is derived from the authorization of Congress as part of the budget process.
  • Q- A government shutdown Q&A. And another.
  • R- Research: federal research grant money will cease.
  • S- Social Security: eligible recipients be able to apply for benefits and, if a shutdown goes on long enough, checks may not be issued.
  • T- Taxes: the federal government will not be able to collect taxes while it is shut down.
  • U- Unemployment: Federal unemployment benefits will cease.
  • V- The Veteran’s Administration: VA hospitals may not be able to see new patients and may have to discharge patients.
  • W- War: we have combat troops in harms way, but those troops will not be paid and they will have to depend on supplies already available because resupply will stop because those moving the supplies can no longer be paid.
  • X- X-rays: the TSA will no longer function.
  • Y- Yemen: the US embassy in Yemen, and all other US embassies, will have to cease providing services.
  • Z- Zoos: national parks will shut down, such as the National Zoo in Washington D.C.
This is hardly an exhaustive list, and the devil is always in the details. Some of these events could unfold differently than I describe here or not at all. But isn’t that part of the point: no one really knows what will happen, yet we will all be affected by whatever does happen.
DLH

Orders of magnitude

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$40,000,000,000,000 -- the total government indebtedness as of 2011
$25,000,000,000,000 -- the total state and local debt as of 2011
$14,590,000,000,000 -- the US GDP
$14,184,254,500,000 -- the total national debt as of 5 March 2011
 $3,550,000,000,000 -- the federal budget in 2011
 $2,300,000,000,000 -- the total federal tax revenue collected in 2010
 $1,300,000,000,000 -- the national deficit for 2011
   $695,000,000,000 -- total Social Security spending in 2011
   $663,700,000,000 -- total defense spending in 2011
   $528,000,000,000 -- total Medicare spending in 2011
   $500,000,000,000 -- expiring all the Bush tax cuts for 2011
   $125,000,000,000 -- the projected state deficits for 2011
    $90,000,000,000 -- expiring the tax cuts on income over $250,000
    $63,200,000,000 -- total local budgets in Ohio in 2011
    $46,300,000,000 -- total local indebtedness in Ohio in 2011
    $68,961,315,845 -- Ohio's total outstanding debt in 2010
    $56,600,000,000 -- Ohio's budget for 2010-2011
     $8,000,000,000 -- the projected deficit in Ohio in 2011
     $1,000,000,000 -- savings from SB5 in Ohio in 2011
           $400,000 -- presidential salary in 2010
           $286,686 -- average CEO salary in 2010
           $174,000 -- Congressional pay
            $46,326 -- average household income in the US

It’s all about magnitude.

DLH

My indictment against unions and the politicians trying to take their bargaining rights away

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I have maintained all along that both sides in the growing debacle over union collective bargaining rights are wrong, and as the situation continues to develop, I believe each side becomes more wrong than they were to begin with.

The unions have forgotten that, at some point, they need their employers to exist in order to have jobs to bargain over in the first place. The problem many public sector unions face is that their employers are broke, so even if they manage to win the collective bargaining fight, they may not have jobs because they have been laid off due to budget cuts. Nowhere is this problem more dramatically illustrated than by what is happening in public school districts, police departments, and fire departments around the United States. Districts and cities are laying off workers and eliminating positions rather than continue to pay then because the simple fact is that they cannot afford to continue to pay them what their contracts demand. Continuing the status quo with regard to collective bargaining will only ensure that this situation will continue and accelerate.

The politicians, on the other hand, have taken advantage of a turbulent time to score points with their base while also effectively failing to deal with the problems that created this mess in the first place. I think most Americans would agree that teachers, police officers, and firefighters are among the most important employees of the state, yet because of their importance they are also the most visible, and therefore the most vulnerable. While attacking the unions, especially because of some of the ridiculous benefits they have negotiated into their contracts over the years, seems like a way to deal with the problems facing the states, the politicians fail to realize those ridiculous benefits exist because they allowed them to. If politicians want to fix that kind of problem, they need to fix themselves, what motivates them, and what they think they’re supposed to be doing in their various offices.

Instead of fighting over collective bargaining rights, both sides should be focusing on how to survive the real problem: the budget is broken and cannot be fixed without cuts. Unions and politicians alike must face the fact that there is no more money. They cannot continue to spend, negotiate, and demand as they have in the past because there is noting to spend, negotiate for, or demand. Without reform, this whole debate will not even matter, because everyone involved in it will be unemployed anyway.

The first step in this process is to deal with reality:

  • The federal, state, and local budgets must shrink before the deficits riding on them overwhelm them. This means cuts–substantial cuts. If the unions want their bargaining rights, they should concentrate on working with the politicians to make the cuts as smart as they can be.
  • Politicians need to focus on getting rid of all the waste that seems to be endemic of modern government. The best money any government could spend right now would be to employ independent auditors with the authority to make cuts to review government spending and to get rid of duplication and waste.
  • Politicians must eliminate the ridiculous unfunded mandate. Unions must stop demanding laws their employers have no capacity to enact.
  • Unions should fight for a return to local control, especially where it involves school districts, police departments, and fire departments. Large scale standardization is an industrial lie that has saddled far too many localities with mandates that neither apply to them nor help them.
  • Ultimately, both public sector unions and politicians must realize they work for the people. If the people demand something should be done a certain way, then that is the way it should be done. Unions and politicians are not the people’s care takers, they are the people’s employees, and they can be fired at the people’s pleasure.
The second step is for everyone–the people, unions, and politicians alike–to realize things have changed. The same old tired processes that got us all to this point will not produce any other result than they already have. If we are going to solve these problems as a people and a nation, we have to do it by abandoning the things that got us here and by adopting approaches that work for the circumstances at hand.
The third step is for everyone to get ready for whatever happens next. Even if we solved every one of the problems we face today, there are still going to be consequences, potentially big ones, that may last for years, even decades. The milk is already spilled, now it’s just a matter of what the cleanup looks like.
Unless we deal with the problems we now face in all their complexity and reality, they are going to sweep us away whether we like it or not. There are only two solutions: stand and face reality or be swept away by it.
DLH
UPDATED: Fixed the spelling mistake in the title and in the body.

The cost of reality means sacrificing until it’s fixed

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One of the costs of putting one’s thoughts out in a public forum like a weblog is that one’s readers often expect both an opinion and a solution if the issue at hand is a problem that needs solving. The issue of budget deficits, most recently brought forward by the collective bargaining debates in Indiana, Ohio, Tennessee, and Wisconsin, is no exception.

Again, as I have stated several times now, I think the whole collective bargaining debacle is a tempest in a teacup that distracts everyone–legislators, governors, citizens, and union members alike–from the real and far more pressing issues our communities, states, and nation face.

And, chief among those issues is that we and our communities, states, and nation face a nearly insurmountable debt if we continue to spend the way we have until this point.

So, how do we solve this kind of a problem? From my point of view, not cleanly or easily. We have to face the fact that we cannot afford to continue to pay for the things we are doing the way we are doing them, even if we want to, because there’s simply not enough money to do it.

I know that many people will now shout a raft of ideas: tax the rich more, increase taxes in general, change the rules for how people access social programs, etc. And, I say, fine, do that, and it still won’t solve the problem. Increasing taxes beyond a certain point merely drives the rich away, puts those who can’t leave in greater need of social services, and decreases the amount of money in the economy creating tax revenue. Changing access to social services, especially in conjunction with increased taxes, only causes more people who need access because they can’t afford to do things on their own anymore not to have access to what they’re paying taxes to theoretically have. They’re all bad ideas if that’s all that’s going to be done.

In order to fix these problems, we have to start cutting: real, meaningful cuts that may very well force millions of people to change how they live their lives. Yes, this means cuts to Medicare, Medicaid, and Social Security. Yes, this means cuts to education and environment. Yes, this means cuts to the military and intelligence programs. It probably also means at least marginally higher taxes, at least at the local and state levels, until the issues at hand resolve themselves.

How these cuts and higher taxes come about is what this whole debate should really be focused on, not whether or not public employees have collective bargaining rights. We’re expending all of our effort as a nation around the edges without dealing directly with the heart of the problem. Until we reach the heart, we can’t kill the beast, and it still may just devour us.

DLH