OT - Jobs Lost

Ed, I lived through the drop of the yen to the dollar many years ago. I had several inbound containers on the sea when the yen went from 300 to the dollar to 100 (later 95) to the dollar overnight. I still have the scars from that particular currency transaction. I know about arbitrage.

I realize that the drop is intentional, but I had planned to vacation in Europe this summer and that will probably have to be put off until I can get a better bang for my buck.

As for job creation, I would imagine that even WalMart and McDonalds can absorb only so many workers.

Driving down the dollar will create as many jobs as Mr. Bush's incredibly effective tax cuts. Zero.

Regards,

Marv

Ed Huntress wrote:

Hedge it. Buy your euros now.

Why do you say that, Marv?

Ed Huntress

I hope you really do not believe that the tax cuts created new jobs. Or that the retraining initiatives will create new jobs by election time.

If I am not mistaken, a weak dollar domestically means a weak economy domestically. Forty years ago, a weak dollar meant US made goods were cheaper on the world markets and people were employed to make those goods. However, we produce very little domestically now, so what do we make that we could sell cheaper on the world markets and start ramping up our employment. Airplanes? Wheat? Cosmetics? Magazines? Those industries are "right sized" - no increased employment. Hamburgers, generally, do not travel well.

Regards,

Marv

Ed Huntress wrote:

Oh, they probably did, Marv. There just weren't enough of them.

But the tax cuts that have been implemented, and that have had some effects, are small compared to the longer-term ones which have not yet gone into effect. When talking about Bush's tax cuts, it's important to separate the two. The long-term cuts accrue much more to the wealthiest people (40% to the top 5%, by most accounts). How much job-creation that does is problematic.

One economist who opposes the tax cuts (I forget which one) said recently, "If you CAN'T stimulate an economy and create some jobs with $1.7 trillion worth of deficit spending, you're in the wrong line of work."

I doubt if they'll create *any* new jobs.

Firstly, people mean different things when they say "weak economy." Our economy's per-capita output is extremely high. But structural unemployment is a problem. Is that a weak economy, or a strong one? If our per-capita output dropped by a small amount but there was a rise in employment and a halt to structural unemployment, would that be a weaker or a stronger economy?

And your comments reflect a common misconception: Relative to 40 years ago, we don't "produce very little domestically now." We produce more. A lot more. In fact, even the employment in manufacturing from 1960 to 2000 hardly changed; it went up a bit, if I recall correctly. From 2000 to 2004, we're feeling a decline in manufacturing employment, but it remains to be seen what the long-term trend will be. It could rise a bit again (I think it will), and then flatten for a while before starting a slow, historically logical decline.

We export FAR more now than we did 40 years ago. A weaker dollar will mean we'll export more and import less -- within limits. It's like taking poison to rid yourself of a parasitic worm. You have to know how much is too much.

The big problem that results from a weaker dollar is that we'll have to learn to live with less foreign capitalization and less of a foreign transfusion of money into our Treasury. That will be very painful, although the pain can easily be hidden until after November 2nd, in all likelihood.

Ed Huntress

In your place.

When I don't see cars in some curves that means there is 1/2 mile or so without a car in front or back. I call that 3a.m. traffic or a federal holiday.

Remember - over 65000 people drive over my hill (so it is said) a day - we feed multiple universities, State, Federal and Banking centers in the South Bay.

Taking lanes away from existing roads jams up roads. Have had it done to me. One of my degrees is in Math - so 15% is a drop in the bucket. Just doesn't apply here.

Martin

I would disagree with you on the manufacturing side - what I think you are counting is the importation of semi-finished goods from our 51 and

52 states (Mexico and Canada) and assembling these goods into something complete that can be exported. I will buy your argument when I can go into a store and buy a made in the USA DVD machine or color tv or go to Home Depot (or Lowes) and buy made in USA copper plumbing fittings or electrical panels. Read the labels on the packages - our large firms have gotten smart - instead of "made in the USA" labels - most say: "distributed by...".

As for job creation, hark back to the Depression (I was born just after the Depression and my parents made sure I have a Depression "mentality") and see how long that took (plus a war) to straighten out. I am afraid this administration has run out of the ability to dazzle us with the smoke and mirrors.

Regards,

Marv

Ed Huntress wrote:

Giving credit to the education system for the "Tech Rev" is like crediting the "Rooster" for the sun rise....... The "Tech Rev" was fueled by the "Freedom" in the United States and the entrepreneurial spirit of Americans...... Pat Landy

No, that's not it. Except for the car industry, it's actually the other way around. Mexico assembles parts we make in the US and Canada. That's what a maqueladora is -- an assembly plant for consumer products.

I have to produce some graphs that illustrate this, for a talk I'm giving next week. If I think about it I'll try to post them to the dropbox next week.

It isn't an argument, Marv. It's a fact that you can see for yourself if you go to the US Dept. of Commerce website and download tables of manufactured goods, imports and exports. It's very hard work. But that's the price of knowing.

That was a depression. This is not a depression. The economy is *expanding*, not contracting. The problems we're facing are problems in specific industries. Economists call it "displacements." That's us in metalworking manufacturing...economic displacements.

Well, I'm glad to hear that. They do know how to rig the show for the sake of an election, however. They know how to pump air into a tire so fast that you won't notice the leaks. Expect plenty of pumping between now and November.

Ed Huntress

Yeah, I'm sure that all of the math, science, and English just got in the way. If those kids were home-schooled by wolves, our economy would really be singing now, by cracky.

BTW, why do you put "Freedom" in quotation marks?

Ed Huntress

Well, every bit of the tax law is as available to you as it is to Cisco or GE. So you *could* work your books the same way they do theirs. But you may choose not to take advantage of all of the provisions available to you because you might consider it more trouble than it would be worth at your level of income.

In other words, $10 here, $10 there, might not seem like enough money to bother with all the paperwork and specific actions you'd have to take to save them from the grasp of the tax man, but $1,000,000 here, $1,000,000 there, *is* real money, and worth the bother to a big company.

That said, I'm a strong proponent of a simpler tax code, with fewer arcane provisions. In other words, a uniform flat tax with very few, if any, deductions available to anyone for any purpose. Ideally, it would be in the form of a sales tax, so it hits imports equally as it hits domestic production. That would grossly simplify the paperwork, provide virtually no way to avoid paying it, and produce a level playing field with respect to shouldering of social costs between the import and the domestic product.

Gary

As I just said to Joe, every provision of the tax law is as available to you as it is to the largest company. If you *choose* not to take advantage of every one of them, that's on you.

Gary

The current unemployment rate is hovering around 6%. An unemployment rate of 3% is considered by economists to be *full employment* (in other words, an irreducible minimum). So for the 3% who would gain jobs, it is a benefit. But for the 97% who are already employed (or retired, or otherwise out of the workforce), it is effectively a pay cut, because everything they have to buy costs more, but they aren't earning equivalently more.

In other words, lower prices benefit everyone, while higher prices only benefit a select few. Some unemployed workers, yes, but also some very large and otherwise uncompetitive companies get a windfall while the rest of us take it in the neck.

The people who are working would actually come out ahead by simply paying those who aren't working to remain unemployed. At least they wouldn't also have to be lining the pockets of uncompetitive companies the way they would with the kinds of protectionist trade policies being touted here to get unemployment down.

Gary

There is a Tax Plan now being considered "HR25" that if put in place would create "Zero" unemployment and do away with all current Fed Income Tax, Social Security Tax, Medicaid Tax...... Business would be able to reduce their prices by 20% and all companies that left the US for more favorable tax "havens" would return....... Go to this site for a brief out line.... (the "read more" link at the end explains the effect on all current business areas)

Landy

There are a couple of problems with a sales tax. The main one is that it is not equal. The guy making $30/year (about half the population) has to spend 90% of his money on taxable merchandise and transactions just to stay alive. The guy making $500K is going to spend maybe

40%-50% on taxable transactions unless you put the tax on all investments, interest payments and services.

The second is that a sales tax or VAT raises prices which reduces consumption and as Ed pointed out slows the ecconomy.

The problem with a single rate no deduction income tax is that it would be a MAJOR tax increase on 80% of the population. In 2001 80% of the population (up to $56K/year) earned 40% of the income and paid 15% of the tax. If that were leveled out, the top 20% would get an average 50% tax cut and the bottom 80% would get an across the board 266% increase. Also, because it accelerates the concentration of wealth, it is an inherently unstable system that feeds on itself. I don't believe you will find any politician Republican or Democrat that would vote for that.

Didn't take much reading to find the holes in that idea. One base assumption is that as producer cost goes down the price will go down. Prices are set by demand. Not cost of supply. If a homebuilder can sell a house for $200K and his costs, including taxes, drop by 5%, why would he sell the house for $190K when he can get $200K?

Same thing for the cost of credit. Adding up the cost of money, administration costs and bad debt, the actual cost to provide credit card debt is less than 7% yet there are many consumers out there happily (or maybe not so happily) willing to pay 22%. That is not going to change just because NBNA's cost goes down by a half a point.

While it would remove some of the reasons for going offshore the real shift would be to increase the used market at the expense of new production. That would hit big ticket consumer products like automobiles very hard. If the differential between a new and a slightly used car increased by 23% demand would shift from new to used and Detroit starts hollering.

Because his competitor would force a lower price....... There are plenty of "budding" home builders out there..... people with the drive to build their own business...

That's a silly argument..... if you are credit worthy you can get a credit card today for 9% or less..... If the Credit Card Company extends credit to someone who has trouble paying their obligations they have to charge more to compensate for "losses".....

You didn't follow the logic of the plan..... the cost of the New Vehicle will be 20% less than now, and you will be paying 23% tax on 80% of the "Old" price and you will be using 100% DOLLARS..... because the government did not take out Withholding, Social Security Taxes, and Medicaid tax.......

The plan works..... read the whole link.... the only downside is for the politicians..... Pat Landy

By "anyone" do you include corporations in that catagory as well? If the answer is 'yes' to that then I could get on board with your plan.

Corporations are people too....

Jim

================================================== please reply to: JRR(zero) at yktvmv (dot) vnet (dot) ibm (dot) com ==================================================

Well I can see now why you would favor a flat tax, no exceptions or deductions where everyone and every corporation would pay a fixed percentage of their income.

Jim

================================================== please reply to: JRR(zero) at yktvmv (dot) vnet (dot) ibm (dot) com ==================================================

No, no, no. That's *corporate* taxes.

Ed Huntress