Archive for the ‘Economy & Finance’ Category

Challenge Accepted: Obama Wants Specific Spending Cuts

Today, the President stated that “getting control of spending” is too general and challenged the Tea Party to come up with specific places to cut spending.

If so, then I accept! I will list a few that may not be mentioned as much by others.

Social Security
Step 1: gradually raise the retirement age to 70.
Step 2: reform Social Security to allow investment in higher-yielding securities (currently, Social Security can only invest in Treasuries which, at time of this writing, was yielding 2.7% for 10 years).
Step 3: provide an opt-out for those who are absolutely sure they won’t need the benefits in the future.
A lot of people in Louisiana are going to be upset with me here, but end subsidies targeted to specific industries. According to Jim Rogers in his book Adventure Capitalist, instead of continuing the subsidies to sugar farmers, it would be cheaper to give every sugar farmer $1 million and a sports car if they promise to never again farm sugar.
Executive Departments
Lots of conservatives will say “Cut the Education Department.” Yeah, that’s a popular one, but here’s one that may upset some conservatives: Department of Defense. I think the first step should be to make sure the Defense Department actually passes a financial audit.
In addition, review all bureaus and agencies to see what can be eliminated or consolidated due to duplicated or outdated directives.
AIDS funding
AIDS is nearly 100% preventable. Cancer, heart disease, Parkinson’s, etc. are not as preventable. In fact, the government should be promoting the science (ie making the R&D tax credit permanent), not funding it. The private sector can do a better job of finding a cure with a profit motive than the government can.

Tax Cuts Explained with Dinner

[repost from my Facebook note]

Let’s put tax cuts in terms that everyone can understand. Suppose that every day, ten men go out for dinner. The bill for all ten comes to $100. If they paid their bill the way we pay our taxes, it would go something like this:

The first four men (the poorest) would pay nothing.
The fifth would pay $1.
The sixth would pay $3.
The seventh $7.
The eighth $12.
The ninth $18.
The tenth man (the richest) would pay $59.

So, that’s what they decided to do.

The ten men ate dinner in the restaurant every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve.

“Since you are all such good customers,” he said, “I’m going to reduce the cost of your daily meal by $20.”

So, now dinner for the ten only cost $80. The group still wanted to pay their bill the way we pay our taxes.

So, the first four men were unaffected. They would still eat for free. But what about the other six, the paying customers? How could they divvy up the $20 windfall so that everyone would get his ‘fair share’?

The six men realized that $20 divided by six is $3.33. But if they subtracted that from everybody’s share, then the fifth man and the sixth man would each end up being ‘PAID’ to eat their meal. So, the restaurant owner suggested that it would be fair to reduce each man’s bill by roughly the same amount, and he proceeded to work out the amounts each should pay.

And so:

The fifth man, like the first four, now paid nothing (100% savings).
The sixth now paid $2 instead of $3 (33% savings).
The seventh now paid $5 instead of $7 (29% savings).
The eighth now paid $9 instead of $12 (25% savings).
The ninth now paid $14 instead of $18 (22% savings)
The tenth now paid $50 instead of $59 (15% savings).

Each of the six was better off than before. And the first four continued to eat for free. But once outside the restaurant, the men began to compare their savings.

“I only got a dollar out of the $20,” declared the sixth man. He pointed to the tenth man “but he got $9!”

“Yeah, that’s right,” exclaimed the fifth man. “I only saved a dollar too. It’s unfair that he got nine times more than me!”

“That’s true!!” shouted the seventh man. “Why should he get $9 back when I got only $2? The wealthy get all the breaks!”

“Wait a minute,” yelled the first four men in unison. “We didn’t get anything at all. The system exploits the poor!”

The nine men surrounded the tenth and beat him up.

The next night the tenth man didn’t show up for dinner, so the nine sat down and ate without him. But when it came time to pay the bill, they discovered something important. They didn’t have enough money between all of them for even half of the bill!

And that, boys and girls, journalists and college professors, is how our tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up at the table anymore. There are lots of good restaurants in Europe and the Caribbean.

Things explained with two cows…

To err is human. To moo bovine.

American Bureaucracy
You have two cows. The government takes both, loses one while moving it to a farm in Puerto Rico and forgets to milk the other.
You have two cows. You sell one and buy a bull.
You have two cows. They develop opposable thumbs and milk you.
You have two cows. They outvote you 2-1 to ban all meat and dairy products. You go bankrupt.
You have two cows. You create a website for them and advertise them in all magazines. You create a Cow City or Milk Town for them. You sell off their milk before the cows have even been milked to both legitimate and shady investors who hope to resell the non-existent milk for a 100% profit in two years’ time. You bring Tiger Woods to milk the cows first to attract attention.
Cap and Trade
You have two cows. The government develops a quota system that “limits the gas emissions from flatulent cows.” You sell your carbon allotment, not the milk.
You have two cows, that you revere. But they end up in Bangladesh as steaks. So you outlaw cattle exports, announce a cow-licensing system and issue cows with photo IDs. Unfortunately, many conclude that India can not stop this illegal moogration because “beef is very delicious.”
You have two cows. You dissect them both and figure out how to build a milk-factory instead.
You have two cows. You patent “cow” and claim license fees from all the milk of the world. (“All your milk are belong to us.”)
You have two cows. You sell both to the rich. The government then taxes the rich one cow and gives it to the poor.
Go away. What I do with my cows is none of your business.
Political Correctness
You are associated with (the concept of “ownership” is a symbol of the phallocentric, warmongering, intolerant past) two differently aged (but no less valuable to society) bovines of nonspecified gender.
How many cows do I have? Why?
This cow is a heifer. You can help Wikipedia by milking it.

You have two cows.

John Paulson borrows one cow so he can sell it for $100. He gives you $10 as collateral.

You buy your neighbors cow for $100, which you finance by taking out a $90 loan from the bank and use John’s $10 to make up the rest.

You brag to everyone about your financial health. You have assets–two cows you own, plus one Paulson owes you–worth $300, and liabilities of just $100.

A third of the country goes vegetarian.

You thought your two cows were worth $200 and now they are worth $140.

You express confidence in your financial health. Your assets are now worth only $200–your two cows plus the one John owes you–but your liabilities are still only $100. If necessary, you could sell the assets at this distressed price and pay off all your loans.

You hold onto your cows because you are sure the market is “dislocated.” Some day someone will want to eat beef again.

The rest of the country goes vegetarian. Your two cows are now worth $2 each to guys who want to make dog food.

John Paulson buys a cow in the market for $2 and he gives it to you as repayment of the loan. You now have three cows worth six bucks.

John wants his $10 back.

The bank calls. It wants its $90 back.

You call the Federal Reserve and ask for a bailout.