Auto Bailout

In 2008 President Bush arranged (from TARP funds) for a $13 billion bail out of Chrysler and GM. Then President Obama's added funding, bringing the total to over $50 billion. Then and now the moral hazard* argument is raised by opponents of government intervention in spite of the apparent success of the action.

Within two years Chrysler had repaid it's smaller loan of $6 billion and the company under new ownership has prospered.

It took two more years for GM to regain it's financial footing and repay the bulk of its loan. The government will have to absorb a $10 billion loss from the deal that included concessions from unions, creditors, suppliers and dealers.

Was it worth it? Some people maintain that the companies might have survived in some other form arising out of bankruptcy. The operative words are might have.

What is fact is that GM currently has 88,000 directly employed workers as well as causing their suppliers to create or maintain hundreds of thousands of jobs. The annual government revenue from the wages of these workers have probably far exceeded the $10 billion loss.

Precedent: In 1983, Chrysler paid off the loans that had been guaranteed by US taxpayers in 1979 and the Treasury was also $350 million richer. http://uspolitics.about.com/od/economy/a/chryslerBailout.htm

*The expectation that a company will make risky decisions if it feels that the government, in this case, will rescue them. 

The Amateur Economist

Don't throw Keynes* out with the bath water of failed economic systems. 

*John Maynard Keynes, 5 June 1883 – 21 April 1946) was a British economist whose ideas have fundamentally affected the theory and practice of modern macroeconomics, and informed the economic policies of governments. He built on and greatly refined earlier work on the causes of business cycles, and is widely considered to be one of the founders of modern macroeconomics and the most influential economist of the 20th century His ideas are the basis for the school of thought known as Keynesian economics and its various offshoots.

http://en.wikipedia.org/wiki/List_of_recessions_in_the_United_States

List of economic panics* and depressions throughout U. S. History

1807; 1815; 1857; 1873; 1893; 1896; 1907; 1910; 1920; 1929. Enter Keynesian economics and 60 years of controlled buisness cycles, In the year 2000 exit Keynesianism, and the resulting great recession of 2007

*panic, crisis in financial and economic conditions, marked by public loss of confidence in the financial structure. Panics are characterized by a general rush of investors to convert their assets into cash, with runs on banks and a rapid fall of the securities market. Bank failures and bankruptcies naturally follow.

In my opinion Keynes would have approved of the recession prompted tax cuts in in 2001 and 2003 to increase consumption and prime the economic pump. The cuts emulated the successful policies of John Kennedy and Ronald Reagan. The problem with the Bush cuts were, that unlike previous stimulative cuts that they were untargeted and untimed. The economy recovered and the reduced tax revenue caused an increase in budget deficits.

The Bush administration was also the first modern one to wage not one but two wars without increasing government revenue to pay for them. This further exacerbated the deficits and national debt problems.

When the inevitable recession hit the economy, there was no room for tax cuts to be applied and a growing deficit and debt problem mandated that the only approach was to unleash monetary and fiscal stimulus measures that helped bring about a recovery but added to the debt problem.

In hind sight if the Bush administration had ended the tax cuts at the peak of the recovery and increased taxes to cover the cost of the wars, a lower cost of recession recovery could have been employed.

Business cycles and resultant recessions are an integral part of any capitalist economic system. The time tested and proven way to reduce the severity the cycles is to increase consumption via temporary and targeted tax cuts and deficit spending. The Clinton tax increases during the highs of the 1990s handed Bush a tool that was squandered,

If we tax the economic highs and spend in the lows the cycle can be controlled in a less severe way.

Any good farmer knows that one good season with good profits is not a reliable indicator of future years. The farmer will save a portion of one years earnings to use in the bad years when the weather and prices are down.

Paul Hunter paulhunter45177@gmail.com

Stop Individual Mandates Now!

If a poor uninsured driver T bones you at an intersection, that's just the luck of the draw. Pay for your own repair and medical costs. That's the American way. Don't tread on me.

If you do decide to drive illegally you can lose your driving privileges and pay a reinstatement fee. Drivers’ fees range from less than $200 in some cases to thousands of dollars as costly penalties increase for repeat offenders, making it harder for them to pay their totals and become a legal driver, BMV administrator Tim Fisher said.(see below for details)

If a poor uninsured Ohio resident breaks a leg or catches pneumonia and goes to the ER your insurance premiums and taxes will pay for his or her care. That's the American way. Don't tread on me.

The minimum tax/fee/fine for being without health insurance in 2014. will be $95.

Section 4509.101 of the Ohio Revised Code prohibits an individual from operating a motor vehicle in Ohio without maintaining proof of FR continuously throughout the registration period with respect to that vehicle, or in the case of a driver who is not the owner, with respect to that driver's operation of that vehicle. The law requires financial responsibility in the minimum amount of $25,000 for bodily injury to or death of one individual in any one accident, $50,000 for bodily injury to or death of two or more individuals in any one accident, and $25,000 for injury to the property of others in any one accident.

Coverage set to double: In 2014 Ohio drivers who carry the minimum amount of insurance will have to boost their coverage the next time they renew their policies, to $25,000 per person, $50,000 for a multiperson accident and $25,000 for property damage.

Average annual cost for minimum coverage in Oho s over $600.

If you decide to forgo insurance and still be legal: A certificate issued by the BMV, after proper application and approval, indicating that money or government bonds in the amount of $30,000 is on deposit with the office of the Treasurer of the State of Ohio.

Pay Now Or Pay Later

Ohio’s minimum wage going up

Ohio’s 330,000 minimum wage workers will see their pay climb 10 cents to $7.95 an hour beginning Jan. 1 when the automatic hike takes effect.

http://www.epi.org/publication/wage-workers-older-88-percent-workers-benefit/

Exposing a myth. Low-wage Workers Are Older Than You Think

88 Percent of Workers Who Would Benefit From a Higher Minimum Wage Are Older Than 20, One Third OR 110,000 in Ohio Are Over 40

The Economist a free market centered magazine offers that “some studies indicate no harm to employment from federal or state minimum wages, other studies see a small effect. None of the studies find any serious damage.

Compiled by Paul Hunter

On Freedom of Speech

Freedom is not free:

...Sarah Palin, Louisiana Governor Bobby Jindal, and droves of fans among his [Robertson] supporters.….......Palin took to facebook Wednesday night in defense of the Duck Dynasty star. “Free speech is an endangered species,” she wrote............ ….......a statement from Gov. Jindal, who discussed First Amendment rights when defending Robertson’s comments. “Phil Robertson and his family are great citizens of the State of Louisiana.............
On Thursday, Sen. Ted Cruz (R-TX) said those who believe in freedom of speech and religious freedom should be "dismayed" over the indefinite suspension of Duck Dynasty patriarch Phil Robertson.In my opinion:These vote chasers should be ashamed of themselves. Freedom is not free. Too many of our citizens have paid with life and limb to protect our freedom. In comparison, losing a part time job is a small price to pay. Speak to your heart's content but don't pretend that your words will not have consequences.
Paul Hunter paulhunter45177@gmail.com

Jobs Ohio Update

Ohio lagging behind the nation.

A report released by the Bureau of Labor Statistics (BLS) shows that Ohio continued to fall behind the other states in November.

All those jobs Kasich promised to create by privatizing Ohio’s business development activities under Jobs Ohio, and giving billions of state dollars to the secret, non-transparent, unaccountable organization?

Last month Ohio lost 12,000 jobs. The most of any state in the country.

Level the Retail Playing Field

When Governor Kasich vetoed the Ohio internet sales tax this past June, part of the rationale included, “This item attempts to mandatorily apply the collection of Ohio sales and use tax to transactions between out-of-state internet retailers and Ohio residents. Similar items enacted in other states have resulted in extensive litigation 

Since that veto, the playing field has been changed by the U. S. Supreme Court's rejection of Amazon's appeal to overturn a New York state law. That law requires internet sales to New York residents to be taxed. In effect the litigation issue has been addressed.

The fallout from this decision could result, if acted on by the state legislature, in a significant increase in Ohio's sales tax receipts. Hard pressed counties would also gain from a change in tax law. Clinton County, for example, receives 1.5 cents from each dollar of sales.

The court's decision will be of increasing importance as internet commerce increases its sales while sales from brick and mortar stores decline, resulting in less tax revenue. Small local businesses are, anfd have been at a disadvantage because of having to add sales taxes to their prices.

Ask Representative Cliff Rosenberger and Senator Peterson for their view on this matter

Paul Hunter paulhunter45177@gmail.com

Health Care Update

National Health Rankings

Is Ohio becoming a deep south state?

http://www.americashealthrankings.org/rankings

See web site for criteria

Mississippi 50

*Arkansas 49

Louisiana 48

Alabama 47

W. Virginia 46

*Kentucky 45

Oklahoma 44

S. Carolina 43

Tennessee 42

Indiana 41

                       *Ohio 40 (Down from 38 last year)

*Accepting Medicaid expansion for 2014

Wealth Distribution Revisited

Although the term, Wealth Distribution has a bad political connotation, the impact of a faulty distribution system on a consumer economy is a real life issue. If the consumer has little or no discretionary income, who will consume the products and in turn produce a return on investment in manufacturing and services?

Henry Ford instinctively realized the importance of wealth distribution on consumption in the early 20^th century. He posited that,” Workers are paid higher "living" wages, so they can afford to purchase the products they make”.

At base this is not a fairness issue. That subject can be taken up by social system designers.

Globalization and multinational business has taken it's toll on the U. S. working class's standard of living (reduced non credit consumption) in recent years. A much bigger challenge to the conventional model awaits in the near to mid term time frame.

Item: Amazon is within a few years of connecting automated distribution centers with automated delivery vehicles. Where will the money come from to purchase the services and products that now comes from the wages of warehouse and delivery workers.

Item: Google is making a huge investment in automation, concentrating on machines that replace humans in the manufacturing process and “replacing people that walk around factories, pick up and sort goods in distribution centers and work in the back rooms of grocery stores.

To quote a Google founder,”technology should be deployed wherever possible to free humans from drudgery and repetitive tasks”. That's a noble concept but what will those drudges do for financial resources?

Paul Hunter paulhunter45177@gmail.com

Electric Aggregation Update

DP&L Energy Resources, the electricity provider for aggregation customers in Wilmington, the unincorporated portion of Clinton County and the village of Midland, gave a presentation to the Clinton County Commissioners recently. The provider gave a similar briefing to Wilmington City Council a few months ago.

Some highlights follow:

Number of county enrollments = 4,483

Estimated annual customer savings based of first six moth experience = $1,594,659

Wilmington customer savings = $1,156,000

City owned buildings = $70,000

Street light operating costs = $55,000

Total Savings city and county = 2,875,659

Midland data unavailable,

I'm proud to say that I played a major roll in bringing this program to both the city and county.

Paul Hunter paulhunter45177@gmail.com

The Amateur Economist

Lesson unlearned

http://www.austincc.edu/lpatrick/his2341/tragic.html
….............President Hoover's confidence campaign,[during the depression] while well intentioned, simply did not work. The economy continued its downward spiral-workers cut back on consumption, more workers were laid off, workers cut back further on consumption, etc., etc.
A fiscal conservative, he fought desperately to maintain a balanced federal budget. This was extremely difficult given the demands placed on the government to launch various relief programs and a shrinking revenue base because of unprecedented deflation. Hoover however said: "The course of unbalanced budgets is the road to ruin". The logic of this position was that the business community would be discouraged and delay reinvestment if the government were unable to operate in the black. As McElvaine points out: "The President therefore devoted much of his energies in 1931 and 1932 to the goal of a balanced budget, which was hopeless under the circumstances. Yet, as Hoover himself had recognized in less frantic times, cutting spending and raising taxes diminished purchasing and made the situation worse".
In the name of restoring business confidence, President Hoover also rejected ever-louder demands by Americans that the currency system be inflated. Many Americans reasoned that since the economic disease the country suffered from was unprecedented deflation (as hundreds of millions of dollars were withdrawn from circulation and investment) then the appropriate prescription was inflation. They urged the government to abandon the gold standard and flood the economy with printed currency. Hoover rejected such demands arguing that a stable or "hard" currency system had always been a prerequisite for business investment. If the currency system was inflated by the government, businessmen would refuse to reinvest their funds in the economy. This would simply delay the day when economic recovery could begin. Thus, Hoover refused to give in to the demands for inflation.

Paul Hunter writes:
Enter Lord Maynard Keynes and 50 years of growing prosperity, uninterrupted by major economic down turns.
Given that the body politic often suffers from historical amnesia it should not surprise us that the economic nation went astray in the new millennium. The government's untimed and untargeted tax reductions meant to temper a recession in 2000 was maintained after the recovery and during revenue sapping wartime spending. The result was growing government debt and budget deficits leading up to the financial sector collapse.
Fortunately the lessons learned the had way in the1930s were applied and a great depression was avoided*. The recovery was hampered by the deficits and debt at the time of the crisis.



*Unemployment rate 23.6% in1932 9.6 in 2010

City Council Election

What do the recent council election results tell us?

In this single party controlled city council, members cannot say in all honesty that the people have spoken or that they represent the majority of the residents. They can only say their party has spoken and even saying that is ambiguous when eighty two percent of registered voters stayed home. One incumbent member was reelected by winning less than 14% of his wards possible votes. That is hardly a mandate. This being the case, a special burden is placed on the elected members. In my opinion they should reach beyond personal and political beliefs when considering legislation affecting all of the people.

In any case it is what is.

-------------------------------------------------------------------------------------------------------------

Council members of the more conservative wing of the ruling party have often stated that the city has a spending problem and not a revenue problem I would posit that we had both back in 2010 but through much budget cutting and trimming the spending part has been pretty much solved. That leaves the revenue problem that has been exacerbated by significant reductions in revenue sharing from the state, loss of the estate tax, stagnant income and property tax receipts. Another threat to revenue is looming in the state legislature as they plan to force de facto income tax reductions on the cities.

The problem with focusing only on the spending side is that we are forcing the city work force to carry the majority of the burden of austerity while we residents get a short term free ride.

A couple of examples:

Who are the hardest working city employees that toil in the early hours of rainy, windy and wintery days? If you think it's our trash collectors you are right. We set out trash, yard waste, tree limbs, recyclables and even bedding in the evening and voila, the next morning it's gone. Every week of the year.

Tell the collector that was hired in 2008 for $13.63 an hour and now makes an adjusted $12 an hour that he is responsible the city's budget woes.

Michelle Horner who works in the building and zoning department was hired as an assistant in 2009 for $13.66 per hour. Since that time she has taken over many of the duties of the former building official who was making almost $40.00 per hour. Michelle is now making an adjusted 12.30 per hour for her part in making a significant reduction in the spending side.

As I have opined on several occasions, the voters should be given a choice in the revenue issue. The best measure of the voters thinking is for the council to offer a non partisan – non council sponsored property tax levy choice in next spring's primary.

I ask the conservative wing of council, what possible objection could they have to letting the underrepresented residents make the decision to tax themselves a few dollars a month to prevent an exodus of experienced city workers as the economy recovers.