Perry Glasser

Archive for September, 2011|Monthly archive page

GOVERNMENT MOTORS

In Business, Economics, Economy, Finance, Political Economy, Politics, TAXES, Wall Street on September 16, 2011 at 11:01 am

Citizen

US Citizens still own 33 percent of the new GM, a corporate entity that was sustained by TARP money. In a non-lead front page story today, The Wall Street Journal notes that GM’s expansion plans  include the construction of several auto plants in China.

More jobs for the Chinese.

China requires foreign companies to partner with Chinese firms, in GM’s case, Shanghai Automotive Industry Corp (Shanghai GM). That arrangement has existed since 1997, more than a decade before the bailout.

More wealth creation in China.

The typical deal in China is that the technology, capital, and expertise being brought to the table by a US company is being matched by a grant of access to Chinese markets.

The temptation is great: Chinese markets are currently growing ay 9.4 percent per year. There are more cars and trucks sold in China than in the United States.

GM’s Chinese investment will probably make the company a lot of money, but after its split with Shanghai Automotive Industry Corp., GM will never bring what’ left of its profit back to US shores for domestic investment. They’d be crazy to do so: repatriating overseas profits will cost GM 35 percent in US taxes.

The Chinese investment in bailing out GM: $0.

GM can’t bring the profits home to Detroit, so what GM will do is plow its profits back into China.

Daniel Akerson, the CEO of GM, and was named to the Board of Directors in 2009 by the US Treasury in July 2009.

To sum up:

  • YOUR money saved General Motors from bankruptcy.
  • GM’s reorganization maintained union contracts but dissolved stakeholder claims–that would be your retirement fund’s investment;
  • CHINESE participation in the bailout = $0
  • YOU still own 33% of GM;
  • YOUR profits are building factories and creating jobs in China.
  • GM’s CEO is a US Treasury appointee representing YOUR interests.

TARP—a great deal for the Chinese, a great deal for GM.

Citizens?

Screwed.

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SNAPSHOT OF A NATION

In Business, Economics, Economy, Finance, MILITARY, Personal Finance, Political Economy, Politics, TAXES on September 14, 2011 at 9:53 am

It’s official. Those of us not yet in the poorhouse are on the way.

Yesterday’s US Census Bureau annual report will not surprise anyone who works for a living. For the third year in a row, adjusted for inflation, the average household income fell, more people are living in poverty, more children are living in poverty, and gains have been made been women, though not in any way the make anyone should for joy.

No matter how you slice and dice the data, the news is grim. The story is that same for all ethnic groups, pretty much the same for every state and region.

If you’ve been feeling the pinch, that’s because your household income is off more than 7% since it peaked in 1999. Welcome to the land of opportunity.

That’s 11 years of decline.

Dollar$ is glad you asked why.

In a world of rising population, economic activity has to increase, right? Babies get born and cribs get made, diapers get consumed, houses build additions, food is produced. It goes on and on and on, the basic driver of all economic activity. Oh, sure, on the short term, people might pull in their belts a bit, maybe borrow a used crib, dress the kid in hand-me-down to save a few bucks, but in the longer term population pressure has to spur economic activity.

Dollar$ is sorry for your shallow understanding, but seeks to illuminate.

Alas, an increase in economic activity does not guarantee equal distribution of the fruits of that activity.

Economic policy is an umbrella term that suggests we have some control over the distribution. We do. That’s called Political Economy. Economists disagree on the political economy’s components, but they agree on two things:

  • Politics is the power to make others do one’s bidding; and
  • The power to tax is granted to the US Congress by the Constitution.

Some will champion monetary policy as the key to all policy decisions. Others believe that tax policy is a tool to right social injustice. Chief Justice John Marshall in 1819 in McCulloch v. Maryland noted that “the power to tax is the power to destroy,” when the state of Maryland decided to tax only banks chartered outside its own borders. Some will claim the key to the Political Economy is fiscal policy, the national budget and such. Others will point to  the realities of the Global Economy and claim that foreign policy is the key to the Political Economy. NAFTA? Tariffs?

Dollar$ is no Solon, and like most ordinary Citizens is sure the key to the Political Economy is a mix of all of these.

Citizen

However, he notes that with the ongoing, persistent, pressure of population growth, these matters should take care of themselves. Things reach equilibrium if left alone.

All bets are off, however, when Foreign Policy includes a money pit into which a nation throws wealth it does not have into wars on shepherds and goatherds.

It costs the average opium farmer in Afghanistan a few cents each year to wage war on the US. It costs the average US Citizen $30,000 in a decade to wage a war against people with bombs in their underwear.

That’s money sucked out of the economy that returns nothing to us. We are no more secure, no wealthier, no richer for it.

What we are is screwed.

WAR WASTE

In Economics, Economy, Finance, MILITARY, TAXES on September 1, 2011 at 10:27 am

Dollar$  urges readers to note that yesterday the bipartisan congressional Wartime Contracting Commission has released a 240 page report about widespread waste, fraud and abuse by the US Defense Department. It’s a good thing we don’t have a War Department, bcause everyone knows war is even more expensive than defense.

Your Tax Dollars at Work

The story has yet to be picked up by American media, probably because the War Between Weasels about airtime for speeches and whether the President of the United States dares piss off the NFL predominate American consciousness.

Though Dollar$ knows we will be debating whether caring for old people and educating youth is what is bankrupting America, he p[resent this material in hopes that Citizen might awaken.

Here are some passages from the Executive Summary:

At least $31 billion, and possibly as much as $60 billion, has been lost to contract waste and fraud in America’s contingency operations in Iraq and Afghanistan. Much more will turn into waste as attention to continuing operations wanes, as U.S. support for projects and programs in Iraq and Afghanistan declines, and as those efforts are revealed as unsustainable.

This sobering, but conservative, estimate flows from nearly three years’ work by the Commission on Wartime Contracting in Iraq and Afghanistan, an independent and bipartisan panel created by Congress in 2008 to examine waste, fraud, abuse, accountability, and other issues in contingency contracting, and to make recommendations for improvement. Much of the contingency-contract waste and fraud could have been avoided. Unless changes are made, continued waste and fraud will undercut the effectiveness of money spent in future operations, whether they involve hostile threats overseas or national emergencies here at home requiring military participation and interagency response. Responsibility for this state of affairs lies with Congress, the White House, federal departments, the military services, agency leadership, contractors, and individuals who abuse the system.

Criminal behavior and blatant corruption sap dollars from what could otherwise be successful project outcomes and, more disturbingly, contribute to a climate in which huge amounts of waste are accepted as the norm.

In Afghanistan, for instance, carrying out stabilization-and-reconstruction projects in insurgent-contested areas with contractor employees has led to deaths, delays, and waste.

The use of private security companies can present especially sensitive risks, because their armed employees can become involved in incidents that injure or endanger innocent civilians. In addition, their use for convoy security in parts of Afghanistan invites pay-for-protection extortion that diverts taxpayers’ funds to local warlords and insurgents.

The Commission’s conservative estimate of waste and fraud ranges from $31 billion to $60 billion based on contract spending from FY 2002 projected through the end of FY 2011.