Government Can be Great -but not when Stupidparty Governs

Without Government – Just how would the economy have been salvaged from economic Armageddon, a catastrophe created by unfettered capitalism, the asset strippers mooching off everything and every one else? Let’s simply look at the auto “bailout” (which was hardly a bailout – but stupid loves inflammatory misleading language) that so infuriated the Stupidparty. Would we even now have an auto Industry? Would America now have a new Auto Company that is on the cusp of turning the world wide Auto Industry on it’s head, with the USA hosting the technological brains? But first let us fact check some statements Bill Clinton made at the 2012 Democratic convention regarding the Auto Industry.

Clinton stated: (The Bailout) It saved more than a million jobs, and not just at GM, Chrysler, and their dealerships, but in auto parts manufacturing all over the country.

TRUE

The Center for Automotive Research estimates the auto bailout saved 1.5 million jobs.

Clinton stated: So what’s happened? There are now 250,000 more people working in the auto industry than on the day the companies were restructured.

 TRUE

The companies were formally restructured in July 2009, with GM, for example, being reorganized on July 10. Since then, auto industry employment is up by 233,800 workers, according to BLS.

Clinton stated: Now, the agreement the administration made with the management, labor, and environmental groups to double car mileage, that was a good deal, too. It will cut your gas prices in half, your gas bill . . . according to several analyses, over the next 20 years, it will bring us another 500,000 good, new jobs into the American economy.

TRUE

The new mileage standards will double fuel efficiency which, in principle, should halve fuel costs. A study by the Blue Green Alliance, a joint Labor–Environmental group, estimates the standards will create 570,000 new jobs. That’s hardly an independent source, but it shows Clinton’s not pulling the number out of thin air.

As The Washington reports, every so often, we ought to celebrate our victories. The auto bailout is a case in point. Six years ago, it was wildly controversial, with the fate of General Motors and Chrysler hanging in the balance. Now, it’s clear that the bailout was a solid success.

The revitalized auto industry has been a pocket of strength in a lackluster economic recovery. Motor vehicles and parts have provided 25 percent of the recovery’s gain in manufacturing, despite representing only 6 percent of manufacturing’s value added. Since mid-2009, the number of manufacturing jobs increased by 256,000, up 41 percent from the low of 623,300. Dealerships and parts stores added another 225,000. (All gains are as of mid-2014.)

The Auto Bailout is all but a small fraction of what the Government achieved

Taxpayers have made $350,000,000,000 (Yes 350 Billion) from the bailout – and this number is increasing all the time. How come?

1) TARP 15.6b.  The Troubled Asset Relief Program is a program of the United States government to purchase assets and equity from financial institutions to strengthen its financial sector

2) Fannie and Freddie  37.5b*

*Once they have made the latest payments in December, the two companies will have returned $225.5 billion to taxpayers, in exchange for about $188 billion in taxpayer aid they received after being placed under the government’s wing at the height of the financial crisis

3) Interest income out of thin air caused by quantitative easing. This interest is pure profit to the Fed — and the Fed, by law, turns over its surplus profit to Treasury. Hence the following graphic:Picture

Stupidparty Disciples (voters) actually love big governments.

They love having a bloated military.

They are happy with Social Security.

They are happy with Medicaid.

I have also established that Stupidparty states benefit disproportionately from federal spending.

Stupidparty disciples do not understand that only 30% of the Budget is discretionary – i.e. only the following programs can be cut

Picture

Who is really against the Military’s 57% of 30% (we will get back to this), Public Education’s 6% of 30%, and the Veterans’ 6% of 30%? Now we are left with about 30% of 30% = i.e., about 10%.

But what do we get from the government for this?

  1. Clean air, clean water, safe food.
  2. Housing to keep people off the streets.
  3. Public transportation, easing congestion, mobilizing workers, & job seekers.
  4. Business regulations that prevent insurance companies from reckless investments and profiteering—so that your claims can be paid. Or bank regulations to prevent people from walking away with all your assets, or job-retraining programs, etc.
  5. Investments in scientific research.

Putting investments in science aside for the moment, that leaves the favorite Stupidparty targets:

Foreign aid 3%.

Okay, let’s cut that. Let China bribe themselves into the hearts and minds, furthering their trade and security interests. Or let’s start by cutting security of overseas representatives; you can always blame someone else for Benghazi.

The post office.

It should be noted that the finances of the post office are misrepresented and generally misunderstood: 1) reforms are hampered by Congress, 2) losses are in fact being reduced, and before even thinking about closing down the service, 3) retirees should be shifted to Medicare and 4) other healthcare economies made.

The post office now has to prefund its retiree health costs, maybe up to 75 years. Darrell Issa is investigating, but we have already established Issa’s credentials. His opinion is not worth the dust sitting under the paper it is written on. According to Josh Barro in a Bloomberg article, 75% of private firms do not prefund their retiree healthcare obligations. Until 2006 the post office did not prefund its retiree healthcare benefits. In 2006 Congress forced the post office to prefund (some lawmen suggested up to 75 years, including liabilities for people not even born yet) these benefits to the tune of $8 billion a year—when their actual annual costs are less than $3 billion. Consequently, they are taking an accounting hit of $5 billion a year—a remarkably similar amount to what the post office is actually unable to pay; thus, the calls for closing it down.

But regardless, those debts have to be paid and the taxpayer is on the hook. Therefore, when analyzing the viability of the post office today and going forward, one should assign that additional $5 billion to paying off past debts; it should be put to one side.

The post office recently reported (November 2013) that they had reduced losses by about 67%, down to around that magic $5 billion number, and had actually increased revenue.

The post office is an easy target, whose demise can only help its competitors increase their monopoly and margins. Closing down post offices—who gets hurt? Think about rural communities that lack easy access to alternatives. The post office provides local jobs; it is a fabric of the community, a staple of a diminishing High Street. The postman, a person we might see on a day-to-day basis, can act as a friendly local watchdog over a barely visited neighbor.

Who lives in rural communities? Yes, these communities are disproportionately represented within the Stupidparty power base, another clear example of Stupidparty Disciples acting against their best interests. Virtually all rural districts are Red.

Keynesian Economics

How could capitalism ever need government assistance in creating economic growth? First, one should bear in mind that up through the Second World War, the capitalist system had had pretty mixed results. In the sixty-year period 1880 to 1940, the economy grew by 100%, or about 1.15% a year. In the next sixty-year period, the economy grew by about 400%, or almost 2.5% a year.

Picture

Bear in mind the 1880–1940 period included the so-called Gilded Era: a time when the few, the Robber Barons, pillaged society—gaining staggering wealth—while evidently the rest of society progressed very slowly. A period that Stupidparty now harkens back to. There are perhaps two huge factors for this improvement of the capitalistic economic report card, both of which Stupidparty and Disciples cannot fathom.

Picture

In the 1930s, Keynes spearheaded a revolution in economic thinking, overturning the older ideas of neoclassical economics that held that free markets would, in the short to medium term, automatically provide full employment, as long as workers were flexible in their wage demands. Keynes instead argued that aggregate demand determined the overall level of economic activity, and that inadequate aggregate demand could lead to prolonged periods of high unemployment. According to Keynesian economics, state intervention was necessary to moderate “boom and bust” cycles of economic activity. (Wiki)

In short, this means that when the free market leads us into a swamp, it is at these junctures that governments can pull us out of that swamp. They can invest in those big ideas (such as a space program, medical research, or national defense), which are too expensive, too indirect, or too risky for the private sector. The private sector needs to be confident of a high likelihood of a profitable return within a fairly short window. Venture capital is similarly averse. Also, it is clear (to everyone but Stupidparty) that profit should not be the motivating factor behind war, crime prevention, incarceration, deadly disease, education, basic safety, etc. This may appear to be a damning statement, but any confusion, which clearly exists, is subliminally exacerbated by the Benefactors—playing into the lack of clarity as to what caused the debt and how serious the issue is, and the methodology and timing for debt reduction.

 Who Does Bad Government?

Picture

Who Does Bad Government?Picture

Who Does Bad Government?

Picture

Who Does Bad Government?

Picture

Who Does Bad Government?

Picture

 

What Unknown Stuff Does Government Do?

I am sure the very notion of the government creating anything, is beyond the scope of Stupidparty Disciples.

Hardly anyone, of any party, appears to understand one of the key aspects of what lies behind economic growth. When one asks a person, “Who is responsible for the technological advances that have fueled improved productivity leading to economic growth?” everyone will come up with Bill Gates or Stephen Jobs or Google, and so on.

Steve Jobs was obviously a remarkable innovator—especially in designing very appealing consumer products. Look at the technologies in the iPhone. These smart phones tap into a number of things: a) the Internet, b) the GPS, c) touch screen technology, d) the HTML common language, and e) many other ideas coming out of Silicon Valley. Before taking a closer at why Steve Jobs could be so successful, I just need to insert some brief historical context.

The U.S. government—yes, that same consistently denigrated entity—has additional if somewhat indirect tools at its disposal to stimulate private-sector growth. There are massive side benefits (ripple effects) to simply keeping the nation safe. When the Second World War began in earnest, on September 1, 1939, with the German invasion of Poland, the U.S. Army ranked seventeenth in size and combat power. This ranking placed the U.S. just behind Romania.  http://www.fpri.org/footnotes/1415.200905.atkinson.usarmywwii.html

It was not the private sector or capitalism that stepped in. With extraordinary speed the government turned that situation around. Having secured military preeminence, it then also realized that to ensure the U.S. remained strong and secure, it had to keep investing in ideas. To win, the government had to take risks. It had to run risks in ways the private sector is not capable of. A rule of thumb is that the greater the risk, the greater the potential reward. The government had to invest in what with hindsight may have been some pretty crazy ideas. Most failed, but that was not the point. The point was not about making profits for investors but about ensuring that the United States could not be beaten by Russia or China—or today by radicalized Islamists. Since the stakes are higher, there must be a greater tolerance for risk. Armed Forces personnel and CIA operatives routinely put their lives at stake.

So within this context, let’s now go back to Steve Jobs. Before Apple even went public, it received a $500,000 loan from an obscure government agency. Let’s take another look at that ever-so-smart iPhone:

  1. The Internet.

The Internet was created by a slew of government agencies and a wide range of academic research organizations, freely collaborating and sharing the fruits. The Internet was perhaps born in 1962:

“In October 1962, [J. C. R.] Licklider was hired by Jack Ruina as Director of the newly established IPTO within DARPA, with a mandate to interconnect the United States Department of Defense’s main computers at Cheyenne Mountain, the Pentagon, and SAC HQ. There he formed an informal group within DARPA to further computer research.”

http://schools-wikipedia.org/wp/h/History_of_the_Internet.htm

The U.S. Congress during the Cold War—fearing for the very existence of the United States as a consequence of nuclear proliferation—authorized the funding of GPS:

“GPS was created and realized by the U.S. Department of Defense (DOD) and was originally run with 24 satellites. It became fully operational in 1995. Bradford Parkinson, Roger L. Easton, and Ivan A. Getting are credited with inventing it.”

http://en.wikipedia.org/wiki/Global_Positioning_System

  2. Touch screen technology.

Academic scientists in publicly funded universities and labs developed the touch screen and the HTML language.

http://www.emergingmarketsoutlook.com/?p=2174

  3. The HTML common language.

See a) and d) above.

 4.Voice-activated “virtual assistants.”

This technology was created by government funds for the armed forces:

“Speech recognition technology made major strides in the 1970s, thanks to interest and funding from the U.S. Department of Defense. The DOD’s DARPA Speech Understanding Research (SUR) program, from 1971 to 1976, was one of the largest of its kind in the history of speech recognition.”

http://www.techhive.com/article/243060/speech_recognition_through_the_decades_how_we_ended_up_with_siri.html

 5. Many other ideas coming out of Silicon Valley.

The government provided much of the early funding for Silicon Valley:

“The entity that built the Valley and gave birth to its culture of collaboration and experimentation was none other than Uncle Sam. In other words, the creation of the hub of American entrepreneurship and innovation was a federal project.”

http://www.inc.com/eric-schurenberg/inconvenient-history-of-silicon-valley.html

So Steve Jobs came into a world of government-created inventions, of government-supported business. So why do the founders and the shareholders of Apple get all the profits—and do everything they can to mitigate their taxes?

Likewise, the research that produced Google’s search algorithm, the fount of its wealth, was financed by a grant from the National Science Foundation.

http://www.economist.com/news/business/21584307-new-book-points-out-big-role-governments-play-creating-innovative-businesses

As for pharmaceutical companies, they are even bigger beneficiaries of state research than Internet and electronics firms. America’s National Institutes of Health, with an annual budget of more than $30 billion, finances studies that lead to many of the most revolutionary new drugs.

http://www.economist.com/news/business/21584307-new-book-points-out-big-role-governments-play-creating-innovative-businesses

Economists have long recognized that the state has a role in promoting innovation. It can correct market failures by investing directly in public goods, such as research, or by using the tax system to nudge businesses towards doing so.

http://www.economist.com/news/business/21584307-new-book-points-out-big-role-governments-play-creating-innovative-businesses

 The Entrepreneurial State: Debunking Public vs. Private Sector Myths (Mariana Mazzucato) argues:

The entrepreneurial state does far more than just make up for the private sector’s shortcomings: through the big bets it makes on new technologies, such as aircraft or the Internet, it creates and shapes the markets of the future. At its best the state is nothing less than the ultimate Schumpeterian innovator—generating the gales of creative destruction that provide strong tailwinds for private firms like Apple.

http://www.economist.com/news/business/21584307-new-book-points-out-big-role-governments-play-creating-innovative-businesses

Stuff That Came from the Space Program  | NASA.

Better, smaller digital cameras; flexible, insulating aerogels; environmentally friendly lubricants; medical-exam LED lights.

http://www.consumerreports.org/cro/news/2011/07/5-consumer-innovations-that-came-from-the-space-shuttle-program/index.htm

Or what about scratch-resistant glasses, comfy sneaker insoles, enriched baby foods, ear thermometers, smoke detectors, protective paint, better cardiac pacemakers?

http://www.cnn.com/2007/LIVING/worklife/10/04/nasa.everyday/

The Large Hadron Collider | CERN.

Picture

One realizes that Stupidparty Disciples are happy to think that Jesus rode around on dinosaurs—but the rest of us have a thirst for knowledge, a thirst for answers, for solutions. It is not just us: Ancient Greeks, Egyptians, Persians, Romans, et al., created better education, literacy, medicines, irrigation, etc.

These cultures also created or promoted Philosophy, History, Theater, the Olympics, and of course Democracy. They were asking, “Where do we come from? What is our place in the universe?” It turns out that even though many questions have been answered, many tough questions remain. Not even the Asset Strippers can afford the time and money to help humanity understand its existential place—and once again, the government steps into the abyss. And as they explore, they discover. A side benefit of all this additional knowledge will be new potential products that consumers will demand, presenting opportunities for the private sector.

So next time Stupidparty moans about non scandals such as Solyndra (a government investment that did not lead to profit), you might just want to ask why they do not appreciate the many ways the taxpayers have profited from government investments or actions, including not having been invaded by Germany or Japan in 1940—a time when the USA was  extremely vulnerable—or Russia since 1940. Or on the other hand, ask them about Tesla—a car company built on the back of government assistance—because the government can be a lot smarter than Stupidparty Disciples, in that it clearly has a better understanding of the importance of the technologies behind Tesla (zero gas) or Solyndra, for that matter (solar panels). As we speak Tesla now has a sports car sedan  that can do 0-60 in 2.8 seconds – an SUV like vehicle that will be able to do 0-60 in 3.2 seconds. The cars look beautiful, and the Model S was voted best car of the year for two yeas in a row by Consumer Reports and Time and Best Car of the Year by Motor Trend.

Picture

The days of the Lamborghini, Ferrari, Porsche and the rest – they are over. As these high end drivers make the switch to Tesla -they are realizing that they are fast losing interest in their older, noisier, dirtier, hard to maintain out of date toys that required them to mingle at gas stations with the rest of us. Tesla grows more affordable and practicable by the day – with less expensive models not so far from being launched.

Next Big idea?

 It could be anything. It might be extremely cheap energy from nuclear fusion, a decades-old project, with a recent breakthrough that many governments are working on (see link below).http://www.bbc.co.uk/news/science-environment-24429621

It is also clear that the U.S. infrastructure is somewhat suspect when it comes to international comparisons. One way to leapfrog over everyone else

The economy is a bag of multiple factors, which relies on many things. the countries economy is like an individual’s finance management, when there is something wrong in one corner, the whole thing drops in value. So, go to this site, to manage your finances better and never fail in earning better in life.

might be the proposed Hyperloop. If venture capital finds the logistics too complicated, perhaps this is a potential job for the government. I do not know how feasible it is. I am certainly no engineer. But if anyone says that this is daft, you only need to evaluate one thing: how does that person (the cynic)’s résumé compare to the résumé of the person proposing the idea, a man by the name of Elon Musk? Ignorance of such matters is ever more inexcusable because of that government invention—the Internet.

The Hyperloop. San Francisco to LA in 30 minutes.

Picture

 

The best way of cutting the size of the government – i.e. discretionary spending would be to ask: Does the USA need an army larger than the rest of the World’s combined? Do we really have to start another illegal war? Or attack Iran, bomb some indefinable group in Assad’s Syria . . .do we want his stay or want him out -all quite complex stuff ?

Perhaps we could cut discretionary spending if we lowered the crime rate by changing gun culture, or reduced the absurd incarceration rates, closed tax loopholes; reduced subsidies to factory farms, subsidies to Oil Companies; had cheaper access to birth control (which leads to reduced poverty); and, yes, went after those 4% of moochers in a bipartisan fashion.

But suggest any of this to Stupidparty Disciples—they would then revert to one of their favorite slogans: U-S-A! U-S-A! U-S-A