Thursday, July 31, 2014

Four Stories: Four Worrisome Signs That Our Economy Is In Trouble

When it comes to measuring the state of the economy, we know that 70-to-71% is driven by what you and I spend.  Therefore, in order for it to remain healthy and growing, the consumer must be increasingly active.  That activity, first and foremost, must come from increases in their incomes.  That brings us to the first story.

Just recently, the Bureau of Labor Statistics reported that real worker incomes -- incomes adjusted for inflation -- actually fell in June of 2014 when compared to June 2013.  While the drop is small -- 40 cents per work week or about $21 per worker per year -- the impact is fairly large when rolled up against 155 million workers; equaling a loss of a total of $3.2 billion in consumer buying power.  In other words, $3.2 billion that won't be spent to drive the economy.  More importantly, the economy could suffer even more by the "psychological" impact of lower wages.  That loss of $21 per year is an average.  So, some workers had a much larger loss of buying power.  If even a small percentage of employees feel they are behind the eight ball on salary and, as result, cut back a lot of discretionary spending, it could seriously hurt the economy.

Proof of the lack of consumer spending comes from another story.  Our major retailers are expected to close hundreds of stores in the U.S. as their retail sales continue to fall.  CNBC even called it a "Tsunami" of store closures. This is a sure sign that the shopper is backing away from spending.  Also, these closures mean a loss of jobs and, eventually, higher unemployment.

Then, there is this concern.  Last month's employment report showed an overall increase of 404,000 workers.  Of this, 275,000 temporary help jobs were created.  Simply, that means that almost 70% of the jobs created in June were low paying and temporary.  Whether this fact was because employers are making adjustments to cope with low business activity or because of their attempts to circumvent the 2015 mandates of ObamaCare, it is possibly another reason why wages have fallen. Again, there is a negative psychological impact when a worker can only find part time work.  It results in a lack of confidence and, more likely, another reason not to spend money on non-essentials.

Lastly, a recent report from the Urban Institute showed that 35% of American's face debt collection.  A fact that proves that they have been living beyond their incomes for quite some time. To put it simply, 35% of Americans could have their credit ratings adversely impacted.  As a result, it could affect their chances of getting or holding a job when wage garnishment is threatened. It could also mean that millions may not be able to buy a house or rent an apartment; or, purchase an automobile; or, get any further credit cards or loans for emergency situations.  Having a third of the population in financial trouble, is a formula for disaster which could greatly impact economic growth.

Of course, just yesterday, the economy was said to have grown by 4% in the second quarter.  However, this is a preliminary number; subject to 3 more revisions.  The question then becomes whether or not that 4% will hold or fall in the same way that the first quarter had positive growth in its preliminary number; only to go negative and stay negative after that initial number's release. As far as consumer spending was concerned, non-big ticket items matched the growth of the first quarter at 2.5%.  But, understand that much of that growth was due to extremely high prices for food; driven by the drought and bad weather. Energy prices also drove up spending, but consumer spending for services fell by half from the first quarter.  What really drove that supposed 4% growth in the second quarter was the fact that imports fell (normally, a higher import number is a negative drag on our economy).  But, a drop in imports may be a sign that consumers aren't buying much of the goods we normally get from China, Indonesia, Mexico, etc. and, that business upped their inventory of products in anticipation of future sales.  Whether or not those replenished inventories will sell in the future with what appears to be a cooling of buying activity seems to be unlikely. In essence, the consumer didn't really contribute to the growth of the economy in the second quarter.

References:

Real Incomes: June 2014: http://www.bls.gov/news.release/realer.t01.htm

A 'tsunami' of store closings expected to hit retail: http://www.cnbc.com/id/101353168

June 2014: Employment Situation Report: Table A: http://www.bls.gov/news.release/empsit.a.htm 

Study: 35 percent in US facing debt collectors: http://hosted.ap.org/dynamic/stories/U/US_DEBT_STUDY?SITE=AP&SECTION=HOME&TEMPLATE=DEFAULT&CTIME=2014-07-29-00-12-33

U.S. Second-Quarter GDP Expands at 4.0% Rate: http://online.wsj.com/articles/second-quarter-gdp-expands-at-4-0-rate-1406723867?mod=asia_home

Q2 GDP Surges 4%, Beats Estimates Driven By Inventories, Fixed Investment Spike; Historical Data Revised: http://www.zerohedge.com/news/2014-07-30/q2-gdp-surges-4-beats-estimates-driven-inventories-fixed-investment-spike-historical

Wednesday, July 30, 2014

Why Obama Won't Be Impeached and Why He Could Be

Normally, Democrats are totally dismissive of everything Sarah Palin says or stands for.  After all, she's one of those wacko Tea Party people and a former losing V.P. candidate of John McCain's.  So, it was interesting that, all of  a sudden, the Democrats and the White House are taking her seriously when she said Obama should be impeached. The only reason that her words have resonated with Democrats is because they think that her they can be used as a campaign and fund raising tool.  As a result, there is a concerted effort to convince America that Palin, is somehow, speaking for all Republicans.  What better way to get Democrats out to vote in the fall, or to stimulate fund raising to defeat the Republicans in November, than to make them think Republicans are poised to impeach their beloved President?

Of course, all this talk is just that: Talk.  There is no way that the Republicans are going to put themselves on record as attempting to impeach the country's first Black President.  That is the very reason that Boehner is trying to sue the President instead. Further, America doesn't want Obama impeached.  A recent poll by ORC/CNN revealed that only about a third of those questioned believe he should be impeached.  Not anywhere close to a majority.  This is despite the fact that 45% thought this he has exceeded his powers.  But again, most said, not enough for that extreme action.

What could result in this President's impeachment is if Democrats start calling for it.  Only then should Republicans even think about proceeding.  This could happen "if" there is a substantial loss for the Democrats in the Fall and "if" they, in general, believe that Obama could seriously hurt them or their next Presidential candidate in 2016.  But, these "if's" have about as much of a chance of happening as  lighting striking thrice; not just twice.


References:

Sarah Palin: 'It's Time to Impeach' President Obama: http://www.breitbart.com/Big-Government/2014/07/08/Exclusive-Sarah-Palin-Time-to-Impeach-President-Obama

Poll: One-third Say Obama Should Be Impeached: http://www.politico.com/story/2014/07/poll-impeach-obama-support-33-percent-109369.html

Dems pump up impeachment talk in appeal for support, campaign bucks: http://www.foxnews.com/politics/2014/07/28/dems-pump-up-impeachment-talk-in-appeal-for-support-campaign-bucks/

Tuesday, July 29, 2014

Billion Dollar Plus Jury Awards: A Legal System Out Of Control

Just this year, there have been 3 separate jury awards to a single individual; each in excess of a billion dollars.

In February, a woman by the name of Carolyn Whittaker was awarded $1.6 billion dollars after claiming that her insurance company defrauded her.  In April, Terrance Allen was awarded $9 billion after having taken the diabetes drug Actos and contracted bladder cancer.  Then, just this week, a woman by the name of Cynthia Robinson was awarded $23.6 billion dollars after her chain-smoking husband died of a smoking-related cancer.

Up until this year, awards of $10 million dollars or more to a single individual were quite rare.  But, now, to have three awards at more than 2300 times that amount has to be sending shock waves through corporate America.  Awards in the billions of dollars can literally put companies out of business and all their workers out of jobs.  More importantly, if drug manufacturers are driven out of business because any of their drugs, on a likely chance that on rare occasion can cause death or injury, then what?  Millions of people will no longer have access to medications they need to keep themselves alive.  And, for what?  A legal system that is now valuing peoples lives at well beyond any amount of money that any average person could make in a lifetime.  For example, the average college degreed worker is only expected to make 2.27 million in their lifetime.  An award of $23.6 billion dollars is the equivalent lifetime incomes of more than 10,000 college degreed workers.  Or, to look it another way. Just a single billion dollars equals more almost $37,000 a day -- every day -- over a period of an average person's lifetime of 75 years.  For, $23.6 billion, that daily average would be almost be a million dollars a day at $862,100.

The jury system for malpractice and personal injury suits has to be reformed.  Juries, today, have no concept of the amount of money they are awarding and what the overall consequences of those awards are.  We are creating a society where companies and corporations will be less likely to take risks if they think they will be hit with just one jury award in excess of a billion dollars.  And, for that, we will all be pay.

References:

Florida jury awards $23.6 billion to widow in smoking lawsuit: http://www.cnn.com/2014/07/19/us/florida-tobacco-verdict/index.html

Louisiana Jury Hands Down $9 Billion Actos Verdict: http://www.recallcenter.com/jury-hands-down-9-billion-dollar-actos-verdict

Woman Awarded Billion Dollar Verdict: http://www.wsfa.com/story/1633554/woman-awarded-billion-dollar-verdict

How Higher Education Affects Lifetime Salary: http://www.usnews.com/education/best-colleges/articles/2011/08/05/how-higher-education-affects-lifetime-salary

Monday, July 28, 2014

Billions In Taxes Lost as U.S. Corporations Park Money or Leave The U.S.

There is a little reported fact that a number of  large U.S. companies are leaving the U.S. to be headquartered in other, more tax-favorable countries. The trend is increasing with 5 major companies announcing their plans to relocate in just this year so far: Chiquita, Abbvie, Medtronic, Walgreens and Mylan.

The mechanism by which they are doing this is called corporate inversion; whereby, a foreign company, with as little as 20% ownership in a U.S. company, is allowed to relocate that U.S. company's headquarters to their country of origin.

In doing so, the U.S. company being relocated would no longer be subject to the U.S.'s 35% corporate tax on all it's corporate profits, both foreign and domestic; and, the highest among all industrialized countries.  Further, redomiciled companies could then avoid the absolutely stupid U.S. tax policy of   double taxing any foreign profits returned to the U.S. -- after foreign taxes had already been paid on those same profits.  We are are the only major industrialized country that does this, and, this stupidity has resulted in nearly $2 trillion of accumulated profits just sitting overseas with that money not benefiting us one iota.  Money, that could very well have been brought back to this country to expand manufacturing facilities and create jobs. Or, to lower prices. Then, too, to simply retire corporate debt; which, in turn, would take away a major tax deduction that corporations use every day to lower their overall taxable profits. Or, money that could be paid out as a dividend and thus injecting it into the economy without one taxpayer dollar being involved.

Now, the Obama Administration doesn't like corporate inversion.  They refer to it as a lack of "economic patriotism"; as if corporations, and all of us, only exist patriotically to pay taxes to the U.S. government.  In this country, only half of the population pays any taxes.  Are those who don't pay taxes, also, economically unpatriotic?

The simple fact is that our current tax laws are driving companies offshore; and, talk by Obama to kill any remaining corporate tax benefits -- which he calls loopholes -- is only going to aggravate the situation.  That is probably why the trend of inversion has accelerated under Obama.  And, what is Obama's solution to the problem and a potential 10 year loss of  $20 billion in taxes?  Certainly not to fix the corporate tax laws.  Instead, he wants Congress to act immediately to raise the inversion ownership requirement by overseas companies from 20% to 50%.  This, too, is stupid.  Remember that $2 trillion parked out there?  Well, a smart U.S. corporation could just have a foreign buyer take on more debt to satisfy the 50% ownership requirement. Once, the deal is done, that excess debt could be retired with the money that is sitting offshore and the total combined company would still be better off than remaining domiciled in the U.S. and paying high taxes.

Right now, Obama is using corporate inversion as another campaign tool by demonizing those companies who are moving out of this country.  Calling them deserters and unpatriotic.  He knows that, if the Republicans don't act by the Fall elections to raise the inversion ownership requirement to 50%, he can use that fact to hammer the GOP for being too "in bed" with big business.  That's exactly what he did in Los Angeles last week in another one of his campaign style rallies at a technical training school. Of course, he also knows that there isn't enough Congressional session time to bring the "50%" rule to passage; given their current preoccupation with all the other crises that keep occurring under Obama's stewardship. Crises that he seems to have no time for while he's out campaigning against corporate inversion. 

References:

Corporate Inversion: http://en.wikipedia.org/wiki/Corporate_inversion

Jack Lew pushes Congress to crack down on tax ‘inversions’: http://www.cnbc.com/id/101840373

US could lose $20B from corporate tax inversions: http://www.cnbc.com/id/101838177

U.S. Firms Move Abroad to Cut Taxes: http://online.wsj.com/news/articles/SB10000872396390444230504577615232602107536

GE, Pfizer, Microsoft, Apple And Other Major US Corporations Are Parking More Cash Abroad To Avoid Paying Taxes: http://www.ibtimes.com/ge-pfizer-microsoft-apple-other-major-us-corporations-are-parking-more-cash-abroad-avoid-paying

Cash Abroad Rises by $206 Billion as Apple to IBM Avoid Tax: http://www.bloomberg.com/news/2014-03-12/cash-abroad-rises-206-billion-as-apple-to-ibm-avoid-tax.html

Los Angeles Rally: Obama seizes on 'corporate deserters' of U.S.: http://www.politico.com/story/2014/07/obama-corporate-deserters-taxes-109357.html

Friday, July 25, 2014

Except For U.S., Global Warming Compliance Is Cooling Down

President Obama, Al Gore, and many others such as billionaire Democrat Tom Steyer, would have us believe that we need to do more to fight global warming.  They like to claim that 97% of scientists "agree" that climate change is man-caused and needs to be controlled.  However, that theory is based on only 79 scientists who responded to an online poll in 2009.  But, when it comes to priorities Americans wants our government to tackle, climate change finds itself just one-up from the bottom:


With none of the doomsday predictions coming true, it is becoming increasing difficult for Americans and others around the world to believe that fighting global warming is worthwhile.

Just last week, Australia became the first industrialized country to dump its emission tax; and, South Korea seems poised to delay its 2015 implementation of their carbon taxation system.  Both of these countries may just be the tip of the proverbial iceberg when it comes to cooling attitudes on global warming.  For example, earlier this year, the European Union signaled that it may relax its compliance with its own carbon reducing mandates.

So this begs the question.  Why is President Obama so hell-bent on controlling carbon when the rest of the world seems to be going in the opposite direction?  Controlling carbon is not a go-it-alone option.  Even if we reduced all of our emissions, the rest of the world would easily make up for it with their increased activity.  This is especially true when you look at the massively increasing carbon output of countries such as India and China as they attempt to become more affluent.

The simple fact is that many are no longer buying into the climate change hysteria and wildly predicted disasters that just aren't happening.  Apparently, the alarmists have never heard about "Chicken Little".  And, in this country, we have a President who is now siding with a minority by still treating climate change as a national priority.

References:

The Myth of the Climate Change '97%' - Wall Street Journal: https://www.google.com/search?q=The+Myth+of+the+Climate+Change+%2797%25%27&ie=utf-8&oe=utf-8&aq=t&rls=org.mozilla:en-US:official&client=firefox-a&channel=sb

Australia abolishes tax on carbon emissions: http://www.ft.com/intl/cms/s/0/d852822a-0d67-11e4-bcb2-00144feabdc0.html#axzz37vNhvKsL

S.Korean finmin says planned carbon market flawed, wants delay -paper: http://af.reuters.com/article/commoditiesNews/idAFL6N0PT3CZ20140718

Europe, Facing Economic Pain, May Ease Climate Rules: http://www.nytimes.com/2014/01/23/business/international/european-union-lowers-ambitions-on-renewable-energy.html?_r=0

Thursday, July 24, 2014

Harry Reid's Disingenuous Comments On The DC Court's Ruling On ObamaCare Subsidies

After two separate, but equal, federal courts ruled at odds with each other over the expansion of the ObamaCare subsidies to include those states that refused to establish their own exchanges, Senate Majority Leader Harry Reid felt obliged to go to the microphones and admonish the DC court which had just ruled against the expansion.   Reid, arguing that the DC ruling was a partisan effort by two "activist" Republican judges, seemed to be blind to the fact that one could argue that the very same activism took place in the Virginia court where 3 Democrat Judges (Davis, Gregory, and Thacker) unanimously sided with the Obama Administration over the expansion of subsidies.

Reid also continued his admonishment by declaring that ObamaCare was lawfully passed by Congress and upheld by the Supreme Court.  However, what he is completely ignoring is the fact that the the constitutionality or the legality of the ObamaCare law was never at issue in those two court rulings.  What is at issue is whether or not the IRS had the right to re-write the law and, thereby, expand subsidies to those 36 states who elected not to provide their own exchanges.  Section 36b of ObamaCare clearly mandates that, in order to receive a subsidy, you must enroll “through an Exchange established by the State under 1311.”  The words "established by the State" obviously doesn't imply any exchange established by the Federal government like "healthcare.gov".  Otherwise, why even be so specific by using such wording?  And the reason for the IRS re-write is simple.  Too many states had refused to set up their own exchanges; leaving millions of the enrolled ineligible for subsidies.  In fact, only 14 actually did create their own exchanges. So, the Obama Administration knew the law would die on its own if millions avoided signing up for healthcare without those subsidies. Once again, it is the lawlessness of the Obama Administration that is really at issue here. 

Sadly, these opposing decisions by our courts does expose political activism in our judicial system.  If there wasn't, at least one of the 4 Democrat judges involved in these two decisions crossed party lines and would have ruled differently in what is an obvious wording intent of the law.  And, that activism is the very reason that Reid went "nuclear" in the Senate; thus, allowing federal judges and other political candidates to be appointed with a simple majority and not the previously required two-thirds vote.  This way Harry, with a majority control of the Senate, could load up our legal system with as many far-left, activist justices as he and the President could see fit. So, if Reid wants to make claims of political activism in our courts, he need only look in a mirror.

References:

Video: Harry Reid Admonishes DC Court Decision: https://www.youtube.com/watch?v=HMsOvOgxzoA

The statutory text of Obamacare and the Halbig and King cases: http://lawprofessors.typepad.com/law_econ/2014/07/the-statutory-text-of-obamacare-and-the-halbig-and-king-cases.html

U.S. Appeals Courts Issue Conflicting Decisions On Obamacare Subsidies: http://www.npr.org/blogs/thetwo-way/2014/07/22/334034284/u-s-appeals-court-deals-blow-to-obamas-health-law

Judge Andre M. Davis: http://en.wikipedia.org/wiki/Andre_M._Davis

Judge Roger L. Gregory: http://en.wikipedia.org/wiki/Roger_Gregory

Judge Stephanie Thacker: http://en.wikipedia.org/wiki/Stephanie_Thacker

Upholding ObamaCare—as Written An appeals court's remedial civics lesson: Laws mean what they say: http://online.wsj.com/articles/upholding-obamacareas-written-1406070280

Why the Halbig Decision Should Be Taken Seriously: http://www.realclearpolitics.com/articles/2014/07/23/why_the_halbig_decision_should_be_taken_seriously_123421.html

Senate Nuclear Option: http://en.wikipedia.org/wiki/Nuclear_option

Wednesday, July 23, 2014

Three Reasons Why The Downing Of MH17 Will Go Unpunished

First of all, the Ukrainian government should be leading the charge against the separatists for the downing of the Malaysian airliner MH17.  However, their army is in no position to take any military action.  They can't even secure the crash site. While the separatists are receiving weapons and training from Russia, the Ukrainian army is receiving no such support from either NATO/Europe or the United States.  To date, the U.S. has only supplied peripheral support such as sleeping bags, some medical supplies, meals-ready-to-eat, and night vision goggles.  Obama will never supply weapons because he is, first and foremost, an anti-war President.  To supply the Ukraine, as silly as it seems, would be to promote war in that country.  This is the reason he hasn't provided the non-ISIS rebels with weapons in their fight against Bashar al-Assad.

Secondly, Europe and NATO won't act to assist the Ukrainian government because, to do so, might cause Putin to take economic action against Europe by cutting off oil and gas supplies.  Russia supplies nearly 40% of their natural gas and a third of its total oil requirements.

Finally, The United Nations and its Security Council are impotent in their ability to take action against either Russia or the Ukrainian separatists because Russia (Putin) has veto power and that power would effectively kill any resolutions or military actions that may be proposed by other members of the Council.

The bottom line is that Putin is in the catbird seat when it comes to the Ukraine.  He knows that Obama and the Europeans won't act against him and his goal of reconstituting the U.S.S.R.  Ultimately, he will annex the Ukraine; just as he was able to annex Crimea.  Unless, the world wakes up and takes decisive actions, his ambitions of a stronger and larger Russian superpower will resurface.
Reference:

Russia in the European energy sector: http://en.wikipedia.org/wiki/Russia_in_the_European_energy_sector