Monday, March 28, 2011

Size Matters

When discussing the isues of the day it helps to keep the relative size of events in the forefront of one's mind. As an example, consider corporate tax rates, and whether or not US corporations are paying their "fair share". The CBS program 60 Minutes tackled this issue last Sunday night.

Our government is in knots over ways to lower the federal budget deficit. Well, what if we told you we found a pot of money ... that could be used to help out?

That bundle is tax money not coming in to the IRS from American corporations. One major way they avoid paying the tax man is by parking their profits overseas. They'll tell you they're forced to do that because the corporate 35 percent tax rate is high in relation to other countries, and indeed it seems the tax code actually encourages companies to move their businesses out of the country.
I placed those ellipses in the first quoted paragraph to hide the size of the pot of gold. Later the story discusses the pot of gold in other terms:
The total amount of money U.S. companies have trapped overseas is $1.2 trillion.
Wow, $1.2 trillion with a 'T' in US corporate profits are parked overseas where the IRS can't get at them. This looks like a huge problem, and it is in many ways. But if one looks at it as a problem of government revenues it isn't much of a problem at all.

Consider it this way: If the entire $1.2 trillion in overseas corporate profits were repatriated this week and taxed at the current 35% US corporate tax rate, that would generate $420 billion in tax revenue. That sounds like a lot. And from the view of the corporations (and their officers, board members, share holders, bond holders, etc) it is a lot. In fact by every reasonable standard that is a lot of money.*

But looked at in relation to the US government that $420 billion would only eliminate about 25% of the 2011 fiscal budget deficit (estimated) of over $1.645 trillion. And those corporate profits have been accumulated over several years since the last profit repatriation holiday in 2005. So several years of corporate taxes that we haven't gotten would still only kill off one-quarter of this year's deficit. THAT is how big our government has grown.

So even if the corporations were paying their "fair share", it would still only add about $60 billion a year to the coffers.

It's small potatoes, just like the dueling Republican and Democratic budget cut proposals currently being discussed.

I realize that these issues appear small in relation to what is happening in the Middle East and Japan. And these kinds of budgetary matters do not have the immediate lief-and-death impact of those situations. But they are very real, and very important. The death of an empire can be precipitated by financial crisis, and that is what we are facing. And when studying our options we need to remember what is significant and what isn't. So don't let people of either party distract you with talk of fat corporations parking their money overseas. The problem is MUCH bigger than that, and it relates to how much the government is spending, not what some companies are (legally) doing to lower their tax burden.**

* And I remember a time when spending $420 billion dollars could bring another superpower to its knees trying to match US military spending.

** That said, corporate tax rates are important - but they're part of a much larger problem with our tax code and industrial policy.

Saturday, March 19, 2011

I was right again - not that it will do me any good.

Well, technically I'm not proven correct yet. But now the CBO has released a report analyzing the President's budget, and they've come to a similar conclusion to mine: Namely that the President's revenue projections will overstate revenue going forward. That means that the President's deficits will be larger than projected. Which shouldn't come as a surprise to anyone who has paid any attention at all. I was way ahead of them.

The worst part is that I am certain that a not-very-detailed analysis of the CBO's numbers would show that they too are underestimating the size of the deficit.

I would do a similar look-see at the old CBO numbers from a couple of years ago and see how their projections matched reality, similar to what I did to the President's budget in the earlier post,but I don't see the point. I was thinking (and had stated in an email to at least one friend) that 2011 was going to be an epochal year. I give it a 50-50 chance that when the historians write their PhDs in 60 or 70 years they will look at 2008 as a minor shock before the major crises hit in 2011. And I thought this before the earthquake, tsunami and nuclear crises hit Japan. That just adds more strain to the system. I'm seeing a whole lot of "downside" risk this year, and no "upside" risk. And given that our economy still hasn't really recovered from the recession of TEN years ago, I think it won't take much to push us right over the edge of the cliff. So analyzing CBO budget projections just seems pointless.

And in case you don't believe me about not recovering from the recession at the start of the Bush II Presidency, just read the numbers and weep.

Friday, March 18, 2011

Nearly 1 in 5 Florida homes sit vacant.

Read it and weep.

On Thursday, the Census Bureau revealed that 18% -- or 1.6 million -- of the Sunshine State's homes are sitting vacant. That's a rise of more than 63% over the past 10 years.


The inventory overhang has sent home prices plunging. The median price for homes sold in January was just $122,000, according to the Florida Association of Realtors. That was down 7% from 12 months earlier and less than half the price at the peak of the market.

Winzer thinks prices in Florida will drop even more, another 5% in 2011 and 3% in 2012. "Even after that, they're not going to rebound, they'll just sit on the bottom," he said.

Celia Chen, a housing market analyst for Moody's Analytics, is also downbeat in her forecasts for Florida. Not only will prices fall another 11%, she said, but the bottom won't hit until mid-2012, about a year later than the nation as a whole. Some metro areas won't get back to their pre-recession peaks until long after the present owners are old and gray.
And this is 20 months into the "recovery".

"Recovery" my ass.

Thursday, March 10, 2011


I'm planning on writing an actual post to tie the links together. (It probably won't get written, but what the Hell.) But I'm going to try an experiment. I'll publish the links now and see if anyone wants to provide their own commentary. Not that anyone reads this site anymore.

Links for later

Several at

Most notably the one about jobs growing at 700 per month for Florida from January 2010 to January 2011. I know, I already mentioned that story in the prior post, but still!

About the lousy jobs that are returning in this "recovery".

Concerning the terrible problems rich people have, like deciding who picks up the check at the restaurant.


about the growing number of homeless children.

There really are two Americas now. Those last two links give a good indication as to the differing concerns.

ADDED: And then there's this:

So, to recap, there aren't enough jobs, and the ones that exist increasingly don't pay enough. Our Lords and Masters in Washington and NYC continue to turn the country (on hesitates to call it a nation anymore) into one of the Third World variety.

More from the Economic Recovery

The state of Florida released the January unemployment numbers. They're pretty much unchanged from December. Interestingly, the state has added 8,400 jobs from January 2010 to January 2011.

That averages out to 700 jobs a month.

That for about 1,100,000 unemployed people in Florida, not to mention all the underemployed people. All this after 18 months (as of the time of January) of economic recovery. The state now forecasts that we will return to 6.0% unemployment in 2018.

Recovery my ass....

Wednesday, March 02, 2011

Friday's Unemployment Report - A Prediction

Friday the February UE report comes out. I'm predicting that somehow they will manage to get U-3 down between 8.6% and 8.8%. Mostly this will be achieved by stating that another few hundred thousand people have "dropped out" of the labor force. Which is to say it will be bullshit. More later this week if I can find the time.

UPDATE: Well, I was closer than the consensus, which had the rate rising to 9.1%. But it came in at 8.9%, and surprisingly only 87,000 people were disappeared from the roles. All in all a pretty dismal report.