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Showing posts from November, 2012

No Time Like The Present

Sooner or later the harsh realities have to be faced.  Why not face it now?  Obama thinks Republicans will be blamed.  Maybe....maybe not.  Obama is in the White House and his party controls the Senate.  Why not fight the good fight right now.  Go over the cliff and do not raise the debt ceiling.  Force the country to come to grips with the debt situation while it is still possible to do something about it.

By coming to a fictitious agreement that may seem politically advantageous in the short run, such an agreement gives up on the country.  Letting the national debt spiral out of the control, which is the Obama plan, destroys the American economy and potentially it's political fabric.  Why not tackle the issue now while Republicans control the House and can block any further madness by the Obama Administration.  The future isn't very bright either way, but there is no hope for the future if Republicans cave in here.

The time is now.

The Geithner Plan Bares All

According to Geithner, the President has no interest in reducing spending at all.  In fact, he proposes major spending increases for infrastructure.  As for taxes, the sky is the limit, apparently, to the President.  So much for the economy.  This is all about "revenge" after all.

As noted in a journal op-ed two days ago, the unfunded liability in social security and medicare increases by over $7 Trillion every single year.  This $ 7 Trillion is not in the budget or under discussion.  So, raising $ 1.6 Trillion in taxes over the next ten years does what?  The only purpose of the Obama tax cut is to punish enemies.  That's it.  And if the American economy is condemned to stagnation for a generation or two, who cares?  Certainly not the President.

Going over the cliff looks so much better than this.  Let's hope the Republicans think of country first, strap on their seat belts, and take us over the fiscal cliff.  Only in this manner can we ever hope to deal openly with th…

Buffett Should Study the Numbers

Warren Buffett opined today that a minimum tax of 30 percent should be placed on incomes north of $ 1 million, jumping to 35 percent for those with incomes above $ 10 million.  In the same interview he seemed to be either (1) unaware of how Berkshire Hathaway pays corporate taxes; or (2) intent on misleading his audience about the taxes that Berkshire actually pays.  You wonder if Warren is really doing his homework these days.

Buffett argues that the fiscal cliff is easy to avoid.  Simply move tax revenues up to 21 percent and hold federal spending at 21 percent.  Thanks, Warren, but that won't even come close to getting it done.  The entitlements are on a trajectory to consume 40 percent of GDP within the next two generations (that 40 percent rises to over 100 percent eventually).  What's the plan, then, Warrren -- raise rates to a minimum of 60 percent and 70 percent on the way to 100 percent?

Making tax revenues chase entitlement spending is a losers game and ends up with mo…

ETP update: 10 Key Achievements (Nov 2012)

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Below is the 10 key achievements highlighted by CEO of Pemandu, that demonstrates the positive inroads of the ETP:
Projects will be implemented within the 12 focused National Key Economic Areas (NKEA) and also implement 51 Strategic Reform Initiatives (SRI) to ensure competitiveness will flourish.
Whilst Malaysia's GNI per capita was only US$6,700 in 2009, it grew dramatically by 45% in 2011. (Target is US$15,000 by 2020)
GDP grew by 5.3% year-to-date. This is significant, considering Singapore's growth of only 1.3% while neighboring countries recorded the following GDP growth:Thailand 3.0%South Korea 1.6%Taiwan 1.0%Hong Kong 1.3%
Economy continues to grow to reach new GDP and GNI records in 2011, with Government achieved its highest revenue in history with RM185 billion in 2011, allowing the Government to implement many programmes, including those under GTP such as BRIM1 and BRIM2.
Private investment continues to achieve robust growth. As of Sept 2012, private investment grew by 2…

Giving Up on Economic Growth

Growing the economy is no longer an American policy objective.  The Obama Administration rarely mentions the topic.  They talk about the economy but do not seem to think that eononmic growth is really all that important.  Somehow, according to Obama, you can get jobs and full employment with little or no economic growth.  There are no prior historical examples of job creation without economic growth, but maybe Obama knows something that we don't know.

The main focus of the administration is to figure out how to put the economy into a straight jacket.  The political rhetoric that garners support for this absurd economic program is to demonize the rich and successful.  The media helps, of course.  When was the last time you watched a television program where a businessman was anything other than a sleazy crook.  The anti-business mentality not only infects the White House, it permeates our entire culture.

If business is the enemy and economic growth is irrelevant, then the future is c…

Walmart and the Free Market

Walmart has provided low wage jobs for hundreds of thousands of Americans.  None of those employees were promised a living wage, guaranteed health care, and a plethora of fringe benefits.  If an employee did not want the low wage job that was offered, they could look elsewhere.  That is still true.  Nothing has changed.

Now the big unions want a new deal.  The new deal is all about the living wage, health care coverage and host of other goodies not normally available to low-skilled, low wage employees.  So, now Walmart is the bad guy, in the eyes of the unions.

Walmart should be free to offer whatever jobs they want to offer and if people don't want those jobs, then they can work somewhere else.  This is an economic transaction, not a religious order.   Any Walmart employees, unhappy with existing working arrangements, can leave and work somewhere else.  That's what disgruntled employees of Walmart should do, instead of inconveniencing customers of Walmart with demonstrations.  …

Redistribution Economics

Casey Mulligan, an econ prof at the University of Chicago, has provided a fascinating analysis of why so many people have given up looking for work in the Obama economy.  His new book, "The Redistribution Recession," lays out the "high marginal tax rates" that the unemployed and the poor in general face in the Obama economy.

Here's an example you might not have thought about.  Under the Obama mortgage loan foregiveness rules, the amount of loan forgiveness depends upon your income.  The higher your income, the less you can receive in loan forgiveness.  This functions like a tax: if you work and receive income you lose the ability to receive loan forgiveness.  So, why work?  The same kind of disincentives are in place with food stamps, unemployment compensation and host of government programs to help the needy and the middle class.

The result:  people rationally choose to leave the labor force and live off of the various pecuniary benefits that one can receive if …

EPF Flexible Age 55 Withdrawal

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As all of us know, Employees Provident Funds (EPF) is meant for our retirement savings which helps us go through our golden years. However, statistic shows that most of the contributors opted for full withdrawals at age 55 and finished it all within a period of 10 years.

In addressing this issue and encouraging contributors to keep their savings longer, EPF has launched a campaign to promote awareness on their "Flexible Age 55 Withdrawal Scheme". How flexible is it? If you're one of the to-be-retiree, then this post more than relevant to you. Read on and share this with other contributors if you think that this might be useful for them.
How does "EPF Flexible Age 55 Withdrawal Scheme" works?
By opting the scheme, contributors could withdraw part of their savings at any one time or make monthly withdrawals or a combination of both options. This is how flexible it is where you can vary the frequency and withdrawal amount anytime. In other words, withdraw only when y…

More Big Government Needed

Another economist for big government.  We don't seem to run out of these guys.  This time Eduardo Porter is in the spotlight.  His article in today's NY Times argues that the middle class is losing ground because government isn't big enough! 

No, that is not a joke.  Porter really said that.

I guess he must think government has been shrinking over the past few decades.  What rock has he been hiding under?

As government in the US at all levels has expanded without any apparent limit, the position of the middle class has deteriorated.  Yes, that is true.  Guess why?

The government is not the friend of the middle class.  It is the government that has taken away the incentives that the middle class once had to save and provide for their future and the future of their children.  Now, the middle class presumes, incorrectly it turns out, that the government is doing the saving for them and will provide for them in their old age.  Wrong.

The government and the Democrats are simply tra…

Are Their Limits?

Who should decide whether or not a driver, alone in his/her car, should wear a seatbelt?  The government?  Why?

What if the driver feels that they can drive more safely without the encumbrance and annoyance of a seatbelt?  Does that count for anything?

The usual answer to this question is that if the driver sustains an injury the rest of society may have to pay for his/her injury.  But, why is that?  Why isn't the driver alone responsible for their own injury?  Why is this the responsibility of someone down the street?

But what if the driver is correct?  The driver may be a safer driver without the imposition of the seatbelt.  What then?  Aren't other people less safe if the driver becomes more, not less, accident prone because of having to wear a seatbelt?

It is not unreasonable to suppose that some people drive better when not encumbered by a seatbelt.  Should we ignore that?

The requirement that a lone individual driving without passengers must wear a seatbelt or face the crimin…

The Price of Redistribution

Progressive taxation, income maintenance schemes, food stamps, public housing, and other redistribution schemes determine priorities.  Given the level of redistribution in the US and Europe, there is no room left to provide for infrastructure rebuilding.  Uwe Reinhardt's article in today's NY Times is another example, as if anymore were needed, of an economist off the rails.

Reinhardt laments the fact, undeniable, that US infrastructure is crumbling.  Guess what, Uwe, there is no money available for infrastructure.  Current tax revenues are mostly transfer payments going from one part of the US population to another.  There is no room left to provide for basic needs like infrastructure, national defense, the court system, the schools, etc.  Instead we need our tax revenues to provide things for people that they should be providing for themselves -- lunches for their own children is just one example.

The price of redistribution is that you will not have money available for basic …

It's All About Revenues

As a percentage of GDP, revenues are at a lower level than they have been for years.  Why is that?  Because of the Bush tax cuts?  No.  The reason is that the recession of 2008 is still with us.  The economy is in slow motion, so revenues have never recovered (as a percentage of GDP).

So, how do you get revenues up?  That is where the rubber meets the road.

The democrats answer to that question is to raise tax rates.  If so, why not raise them to 90 or 95 percent?  That should raise revenues easily enough to solve the current deficit, if you take the democrat logic literally.  A good beginning would be to tax Congressional pay at a 90 percent rate. I like that one.

Heck, 100 percent sounds even better.  We could begin to make progress on reducing the national debt if we just confiscated everyone's income above $ 1 million.

Democrats believe that folks are indifferent to tax rates and will pay whatever the Congress decides without changing behavior.  Thus, 100 percent rates really make…

Obama and I Agree

President Obama was quoted today at his news conference:

"Raising rates will not break the backs of the wealthy."

I agree.  The wealthy are uniquely able to avoid these higher rates.  The net effect of raising rates will be to lower the taxes paid by the wealthy, because they will take measures to reduce taxable income and pay less in taxes.

We are in agreement, Mr. President.

Higher rates will discourage investment, increase the ranks of the unemployment and inhibit economic growth.

What you should have said, Mr. President, and what is true is the following:

"Raising rates will break the backs of the middle class, not the wealthy."

The Obama "Grand Bargain"

Obama proposes a $ 1.6 Trillion tax hike to solve a $ 66 Trillion unfunded liability.  He then proposes another $ 2.8 Trillion in Spending cuts.  This is the "Grand Bargain" that Obama seeks to strike.

Is this some kind of joke?  Besides not making a dent in the entitlement disaster that looms ahead, the tax hike virtually guarantees an economy that will join the European race to the bottom.  Why not cut to the chase?  France just raised marginal rates to 75 percent.  Why don't we follow suit?  We will get to that point anyway, in time, with the President's logic.

Instead of fixing the spending imbalance that is causing our national debt to explode, the President has a temporary fix that makes the situation look better on paper for a few months.  After a few months, the "Grand Bargain" will become the "National Straightjacket" as it becomes apparent that the higher tax rates reduce economic growth and dramatically lower tax revenues. 

Since very litt…

A "Balanced" Approach

"Balanced," according to whom.  With federal and state marginal rates in excess of 50 percent in many locales, how is more taxation "balanced?" 

Most Americans do not pay any federal income tax at all.  Many Americans, off-the-books Americans, not only don't pay income taxes, they don't pay payroll taxes either, much less medicare taxes.

So raising federal income tax rates targets the dwindling minority of Americans who pay taxes.  So this is balanced?

Instead of trying to develop government programs that help the truly needy, America has developed entitlement programs that make no distinction between Warren Buffett and his yardman.  They both get social security and they both get medicare.  I guess that is balance.

Over time Americans have grown accustomed to the idea that they need not pay for their retirements, health care, education, food -- frankly, much of anything.  So, it is no surprise that American spending habits are incredibly reckless.  Why not?

So…

Take the Plunge

It is time to take a ride "over the fiscal  cliff."  Any compromise is only likely to make matters worse by pushing the problem down the road.  It will not be long before the only solution to our fiscal woes is the kind of economic and political chaos that is modern day Greece.

Far better to take the poison pill now.  Yes, the economy will suffer.  But, what happens in five years when the so-called compromise or grand solution unravels because it never had any substance anyway.  Politicians will find a way to "extend and pretend."  Why bother?

If we plunge over the fiscal cliff, then the implications of the entitlement state will be front and center for the body politic.  Better to face it now than later.  It is fixable now, if we see it as an emergency, which a plunge over the cliff will provide.

This Administration intends to insist on higher rates that will imperil our economic future and lead to a 1970s style economic stagnation or a 1930s style depression.  Since…

In The Spirit of Compromise

Obama and Boehner have made post-election comments stating forthrightly that they are both "open to compromise."  The President insists on higher "tax rates" for everyone whose incomes are in excess of $ 250,000.  The vast majority of such taxpayers have incomes well below $ 1 million per year, but the President labels them "millionaires and billionaires."  You wonder why  he doesn't lower the threshold to $ 100,000, since the label doesn't match the reality anyway.

Boehner has offered a true compromise. He will agreed to tax changes that promise "higher revenues."  That is a significant change in the Republican position.  Alas, there is zero change in the Obama position.  Higher "tax rates" for "the wealthy," as Obama puts it, will lower tax revenues and stunt economic recovery.  That doesn't bother the president, so long as he wins the rhetorical war.  The election shows that you can, in fact, fool (a slim majori…

What is US "Fiscal Cliff" actually?

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When everyone thought that US and the world will be better if Obama won his presidential re-election again, world equities markets today declines with US being the most serious market by dropping more than 2%. What's the reason? Answer: Fiscal Cliff ?

Hmmm... Then, what is fiscal cliff actually which many of us on the street do not even heard about this new term before. No worry, Finance Malaysia blog did his homework over here. Share this out if you like.
Understanding Fiscal Cliff... The US fiscal cliff refers to the effect of a series of enacted legislation which, if unchanged, will result in tax increases, spending cuts, and a corresponding reduction in the budget deficit. With Obama retaining the presidency, it sends the signal that it's US government policies will pretty much stay the same as previous 4 years. Ben Bernanke will stay as Fed chairman, which also meaning that the open-ended liquidity and bond buying programs will continue, fueling risk taking appetite of equit…

Oh Well

The election shows that a slim majority of Americans seem to think that either: 1) Europe is an appropriate destination for America; or 2) Somehow, we are not headed that way.  There is, of course, the possibility that a majority of Americans are simply not paying attention.

The heart of the US problem is really no different than that of Europe -- can someone work for 30 years without saving anything and live comfortably for 85 years?  That is the real issue.  Social security and medicare assume that the government is doing the saving.  But, as we all know, the government is always a dis-saver not a saver.  So, in reality, no one is saving.

If none of the squirrels gather acorns, what happens in winter?  That is the American dilemna and that is the current nightmare in Europe.

The debate about free markets is important mainly because only free markets permit savers to participate in the broader economy -- something threatened in the US by the Dodd-Frank legislation. Current government po…

171,000 is Pitiful

The Obama Administration is doing high fives over Friday's employment report reporting 171,000 net job additions in the month of October.  I recall Bill Clinton accusing George Bush of "running the economy into the ditch" at a time when the economy was routinely producing in excess of 200,000 jobs per month.  Maybe we would be better off if the Obama Administration would run the economy into the ditch instead of over the cliff.

Leave it to the NYTimes to celebrate the new normal.   Cheering the October numbers, Catherine Rampell of the NY Times argues in today's business section that the economy "is looking a little stronger than had been feared just a few months ago." Rampell sees these numbers as helpful to Obama's re-election chances.  That seems to be all that really matters to the NY Times these days.

In an otherwise enthusiastic endorsement of Obama policies, even Rampell was forced to admit the dismal truth:  "The United States has now posted …