About Me

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Los Angeles, California, United States
The blog 'Breaking Bread' is for a civil general discussion, like you might have at the dinner table with guests. The posts 'Economics Without the B.S.' are intended for a general audience that wouldn't have to know the difference between a Phillips Curve, a Laffer Curve, or a Cole Hamels Curve. Vic Volpe was formally educated at Penn State and the University of Scranton, with major studies in History, Economics and Finance, and Business; and, is self-educated since by way of books and on-line university courses. His practical education came from fifty years of work experience in the blue-collar trades as well as a white-collar professional career -- a white-collar professional career in production and R&D. In his professional career and as a long-haul trucker, he has traveled throughout the lower forty-eight. From his professional career alone he has visited many manufacturing plants in the United States, Europe and China. He has lived in major metropolitan areas and very small towns in various parts of the United States. He served three years with the U.S. Army as an enlisted man, much of that time in Germany.

Saturday, January 19, 2013

Public Interest and Corporate Responsibility?

Economics Without The B.S.**:

[**  Double entendre intended.]


Shareholder Value vs. Stakeholder Value


I have an MBA from a long time ago.  And, what I was taught by the Jesuits a long time ago has been completely revamped in 'modern' learning.

When a company relocates a U.S. manufacturing facility to a foreign country for costs considerations, that adds to shareholder value.  When a second company does the same thing for the same reason, that adds to their shareholder value.  But after a decade or two of this by one corporation after another, it becomes a foreign policy -- one conducted by private enterprise and not by our government.  AND, there are defense implications when we loose our industrial base of operations and become dependent on foreign sources of supply.  And, when we off-shore our industrial capability we also off-shore the technical skills and know-how that go with it -- a knowledge base that our military depends on for their own capabilities.

There was a time, not in the too distant past, when this was a concern for us.  A time when we judged success by our productivity and not by the price of a stock or the direction of the stock market.







John F. Kennedy visit to Philadelphia 1960



How did we ever do it?

Economics Without The B.S.**:

[**  Double entendre intended.]


A Society That Builds Things

How did we ever get anything built without the help of EPA and OSHA?



Brave workers on the outstrecthed arm of the William Penn statue, above Philadelphia 1920s (no safety harness, hard hat, safety glasses, etc.)


Two brave construction workers stand on a steel girder above Kensington Avenue, near Lehigh Avenue, during construction of the Frankford Elevated Line. Notice the worker on the right only has one arm, he lost it during an accident at another construction site about 3 years before this photo was taken - June 10th 1919.

Sunday, January 13, 2013

Stagnation or Leadership Failure?

Economics Without The B.S.**:

[**  Double entendre intended.]


Stagnation or Failure in Leadership?

     There is much written among the academics about the U.S. entering a period of economic slow growth, as if this is something we can do nothing about and just might as well accept the status quo.
 

     The charts show us leveling off in our industrial capacity since 2000 and utilization below our average of over 80% (85% is considered near full capacity).
     Some 'experts' attribute this to us coming to a point in time where full resource utilization of technological breakthroughs are reaching their limit.  Or that technology improvements by way of capital investments are displacing labor inputs in productivity growth rates.  I do not accept this.  There have always been trade-offs between capital investments and labor inputs.  Sometimes one is a greater factor than the other in productivity gains.  Sometimes both contribute to the productivity gains.
     I think what these charts show is the result of decimation of the manufacturing sector of our economy (by off-shoring it) and its after effects on the rest of the economy because of the manner in which manufacturing interacts with so many other sectors of our economy.  Even if manufacturing were so productive that it now needs fewer workers for overall productivity gains, that would not account for the impact that it has in other sectors which interact with manufacturing.
     Give up your manufacturing capability and trade it for a consumer economy and this is what results -- slow growth.  Are we to accept a status quo society?  Hardly!  The leveling off we see in these charts is from a failure in leadership to inspire creativity in our economy -- like we had in the 1950's and 1960's.  We can do a lot better.  We do not have to accept this.

See my other posts with regard to leadership and manufacturing.  Also take a look at the data charts for the 1960's -- a very productive time for our economy while we ran one deficit after another and inaugurated much of our social welfare programs of today while still fighting the Vietnam War.

Friday, January 4, 2013

Thought for the day


Kenneth Clark - Civilization -- Concluding Remarks/Summation

From his thirteen part series, Civilization.  Search on You Tube.  Link to first program --

http://www.youtube.com/watch?v=PNGzoJFj9g8


Thought for the day



                                        In God's Creation,
                                             Man doth dwells.

                                        Here on Earth,
                                             Make thy home.

Casual Friday's -- Dress Code

Dress for Casual Friday's?

For me, dress for Casual Friday's was when I didn't have to wear my tin pants when I went in to brief the Boss.

Thursday, January 3, 2013

Leadership That Inspires

Economics Without The B.S.**: Leadership That Inspires

[**  Double entendre intended.]


Leadership That Inspires

Productivity drives an economy; AND, innovation drives productivity. 

Productivity is making things.  It is not asset inflation –  the value of stocks, bonds, and financial derivatives.

Today we have “experts” and knowledgeable people who will tell you the importance of human relationships, gaining somebody’s trust, confidence for a business to succeed.  While these traits are desirable, I’ll bet these “experts” never worked in a manufacturing environment, never had to make a tangible product that needed to be shipped out the door, or never had to work in a creative environment for a specific product.  When you work in a manufacturing environment it not just who you know, it’s what you know.  Your knowledge has to be based on the sciences, math, engineering, technical know-how.  This is true throughout the workplace, white-collar and blue-collar.  Emphasizing manufacturing will get us refocused on education in the sciences, math, engineering, and technology.  People educated as such will place value on scientific inquiry rather than belief systems.  These values do not get the proper emphasis in a consumer economy which is more attuned to a sales pitch, engendering warmth and relationships.  Will it take another “Sputnik” to wake us up.
And mentioning Sputnik reminds me, in our $3.8 TRILLION budget, what does NASA get…$18 billion.  Not to mention that the financial industry got bailed out in one year with several trillion dollars.  NASA hasn’t spent that in its existence in over forty years.  Do I have to listen to some cynic say, “We spent billions of dollars on space and what did we get?  Tang!”    Just what has NASA done with that $18 billion in any year? – a space station, the Mars Rover, or how about research that furthered cures for breast cancer, MRI’s and CAT scans, dialysis, artificial limbs, virtual reality.  And in forty years they have barely been able to get beyond the earth boundaries of space because of the paltry funding and lack of leadership in our society.  In the 1960’s NASA was visionary and that is why people went into the sciences, math, engineering, and technical fields.  Their discoveries affected our daily lives.  We have lost our vision.  And NASA is only one discipline that I could mention.  How about ocean exploration, at its depths, or medicine and biology?  There is so much more that we could do.  We are listening to the wrong people for leadership.  We need the inspiration that we had in the 50’s and 60’s.  When we pick up a newspaper the first page should be filled like it was in the 60’s, with rockets going into space.  The Wall Street Crowd should be relegated to the back of the paper with the Business Section and Society News.  We need to stop listening to accountants and find leaders that will turn our visionaries loose.

Burt Rutan
Burt Rutan is an aerospace engineer and entrepreneur.  He spoke on space innovation and exploration at a forum hosted by the World Affairs Council of Jacksonville and the University of North Florida.  He discussed the history of manned spaceflight and contrasted today’s space program to the pioneering days of space travel.  Rutan is the designer of “SpaceShipOne” which launched the era of commercial space travel.  He also designed the Voyager aircraft, which  became the first airplane to fly nonstop around the world without refueling in 1986.  Rutan is currently working with Microsoft co-founder Paul Allen on a new project known as the Stratolaunch. It's part airplane and part spaceship and scheduled to fly by 2016.  Rutan has some interesting comments on leadership, motivation, etc.

Today’s Federal Budget is approximately $3.5 Trillion.  The NASA part of that budget is approximately $18 Billion – less than 1% of the Federal Budget.  In 1960's NASA budget was 3% of the Federal Budget during the race to the moon.

Dr. Neil deGrasse Tyson
Dr. Neil deGrasse Tyson is Director of the Hayden Planetarium, and best-belling author and host of COSMOS.


President John F. Kennedy
At an off-the-record meeting held on November 21, 1962 with NASA Administrator James Webb, NASA Deputy Administrator Robert Seamans, and Special Assistant to the President Jerome Wiesner, President Kennedy states clearly that his administration's priority is for the United States to land on the Moon before the Soviet Union. This conversation is a part of "Listening In: The Secret White House Recordings of John F. Kennedy," available in stores now: http://bit.ly/RcGzgP
In this tape you will hear President Kennedy trying to emphasize to a bureaucrat (Mr. Webb) and his own advisor (Mr. Wiesner) the prime importance of the mission.  He is trying to light a fire under their asses so that they understand the importance of the mission.  He makes some cryptic remarks, “I don’t care about Space.  I just want to be first!”  Listen as a leader tries to motivate subordinates.



Now do you know why our economy, and society, is in the tank and nobody knows how to get it moving again?



Dance Video

This gal put together a nice composite of dance in America.



Wednesday, January 2, 2013

Manufacturing: Reviving Our Economy

Economics Without The B.S.**:

[**  Double entendre intended.]

Manufacturing: Part I - Reviving Our Economy

A Growth Strategy

What we need to get out of our economic and fiscal doldrums is a growth strategy to propel the economy – a growth strategy that will revive our manufacturing sector to be the standout in our $16 trillion economy.  If we want to reduce our indebtedness, the best way to do this is not by reducing spending but by initially reinvesting in America to get the economy growing.  Once the economy is growing, spending can be curbed and the increase in tax revenues from the growth in the economy can offset the indebtedness.  The best way to encourage reinvestment is not by cutting taxes, but by increasing public/private expenditures in our infrastructure – manufacturing, research and development, energy, transportation, utilities, and education.  Right now there is over $2 trillion in cash sitting in the coffers of corporate America and approximately $1.4 trillion available for reinvestment at our Federal Reserve.  These possible expenditures await resolving the uncertainties in the business climate with regard to taxes and regulation, to name a few.  And tax reform is needed to make our system more equitable and fair so that incentives are not misdirected.  A comprehensive growth strategy will put us back in business in a competitive position to meet the future.
But aside from fixing our economy an even greater reason for a resurgence of manufacturing is the impact it would have in emphasizing our knowledge of science, math, engineering, and technology.  Manufacturing is a key component of not just our economy, but of our culture.  Unlike the service sector, a manufacturing capability relies on good technical educational skills, based on science, not just for engineers and scientists but also the blue-collar technicians that do the gritty work.  Manufacturing, making things, is a creative process.  People who make things think differently than people whose main occupation is selling something – a different skill set.  People who work in a manufacturing environment, even if they are in the accounting department or personnel department, acquire the manufacturing thought process for creativity and technical issues because of the interplay of factors affecting the success of the enterprise.

The Advantages Of Manufacturing
            We have sacrificed manufacturing jobs for service jobs and this is a mistake.  Investments in manufacturing have a better payoff/multiplier effect than all other sectors in our economy.  Each dollar of manufacturing output supports approximately $1.40 in other sectors of the economy.  This is more than twice the payoff of the wholesale/retail trade, which is less than sixty cents.  [Source: The Manufacturing Institute:  The Facts About Modern Manufacturing, 2009; computed from U.S. Bureau of Economic Analysis, Input/Output Data Tables] The payoff for manufacturing has approximately a twenty percent advantage over the next closest sectors of the economy – the information sector, the agriculture/forestry/fishing sector, and the construction sector – with the transportation sector trailing that and the sectors related to professional and business services and educational services/healthcare/and social assistance being half the payoff of the manufacturing sector.
            Even if modern day manufacturing plants employ few workers there is still a derivative effect for the automation that is in modern plants today.  Automation means that there are electrical controls in the building.  Electrical controls require maintenance – calibration and
 re-calibration.  This may be done by plant employees for operator maintenance but for more complex maintenance which is required periodically an outside service company (like Johnson Controls or Siemens) is called into the plant to do the work.  Manufacturing plants, whether they are automated or not, require re-design every so often – changing the layout, adding/subtracting processing lines, rerouting processing lines.  This requires the input of an assortment of engineers (industrial engineers, electrical engineers, mechanical engineers, sometimes civil engineers, etc.), technicians/draftsmen, as well as skilled and unskilled labor (millwrights, electricians, ironworkers/pipefitters, carpenters, etc.).  When the plant is in China, it is not doing the U.S. workforce any good, even if you send high skilled workmen overseas to fix a problem.  Buildings require maintenance also; but, this is true regardless of whether the building is a manufacturing plant or an office building or a retail outlet.  And there are good jobs related to this for roofing, air-conditioning/heating/ventilation, painting, upkeep of the grounds outside the building, etc.  All of these employees, be they engineers, technicians, blue collar tradesmen, require tools of the trade – computers, software, instruments and test equipment not to mention ordinary coveralls, work shoes and gloves, safety glasses, etc.   Do you want this money spent in China or your hometown?
            In addition, the manufacturing sector has a much higher multiplier effect than other sectors because of the nature of manufacturing.  It uses a lot of other resources in other sectors of the economy; e.g., energy, raw materials, business services, engineering, research and development, educational services.  These resources can be cost drivers in the manufacturing process, like energy for example.  So manufacturing facilities with high energy costs are always on the lookout for ways to reduce these costs and look to the energy sector and service sectors of the economy for innovative ideas, which affects R&D in energy development, distribution, and technology.  Also, some of the functions of manufacturing are linked or out-sourced to other sectors, like transportation and logistics.  In the case of transportation, with long-haul trucking in particular, fuel costs are the number one cost driver for these companies, outranking capital costs and labor costs.  So trucking companies, like manufacturing enterprises, are initiators for cost reduction efforts concerning energy.
Manufacturing employs people at all tiers of income, from high and middle incomes to lower income levels.  For middle income and lower income jobs, which can be tied to skill level or even a minimum skill level, manufacturing jobs generally pay better than what most of these employees would earn in other sectors.  And this impact stretches into other sectors that work with manufacturing.  Other sectors of our economy just do not have the vast outreach into related sectors like the manufacturing sector.
Look around a town that has manufacturing facilities.  It has a bustle to it.  People eat at local eateries during the work day.  Shop for needed supplies at local stores.  They use the local dry cleaners, sometimes just for getting their uniforms cleaned.  They get married.  Raise their families there.  Kids go to the local schools.  Families do their shopping locally.  Now look at a town that has lost its manufacturing.  It is hollowed out.  It becomes depopulated and strips self-sufficient livelihoods from communities.  If people find work in the retail trade or service economy the wages are for thirty percent less.  What happens to a community whose income is reduced by twenty-five to thirty percent?
We have had a short-sighted view of business enterprises by emphasizing share holder value over stake holder value.  What is good value for an individual business is one thing; but, when many businesses react in the same way, especially when it comes to locating manufacturing facilities overseas, it becomes a foreign policy for a nation and an industrial policy for our defense establishment.  Do we want isolated business decisions to affect our foreign affairs and our defense policy in addition to our national economic competitiveness?  I am not asking for an establishment of the National Planning Committee, but business leaders that emerged out of World War II certainly had a viewpoint of their business that took into consideration the community they were in and the nation they were serving while still engaging in international trade.
Let’s fix our economy with a growth strategy – annual growth rates of 3-1/2 to 4% for real GDP (real GDP growth is minus the inflation rate) – and some fiscal restraints in lieu of an austerity budget that hacks into our social safety net that has been in place for many, many decades and let’s stop the monetary tinkering around that has created one bubble after another.  Let’s get back to making things and providing ‘real’ services.  We can get back to a full employment economy and national debt at no more than 60% of GDP  in ten years.  It does not take decades of tinkering or hacking.  That will take care of a lot of the problems we currently have.  And if all who work in the economy, regardless of their station, could share in the productivity of the economy (and I did not say equal share) we would all be better off.  And if the tax code were fairer that would be a big help also.  Let’s unlock and unbridle the creativity in our people to propel the economy.
I will continue this discussion in other articles – follow the links.  I look forward to any comments but I will tell you right now I do not buy the present argument that the manufacturing segment of the future will be staffed by few in our population much like agriculture was transformed one hundred years ago.  By the way, I live in a county next to Los Angeles that still depends on agriculture and when things are going well our local economy is quite balanced between agriculture, government services (including the military), manufacturing, export/import, and high tech industries.  Check my bio for my background.

Emphasizing manufacturing in our economy

Economics Without The B.S.**:

[**  Double entendre intended.]


Manufacturing: Part II - The case for emphasizing manufacturing in our economy
The Transformation Of The Economy
The economy we have did not fall from the heavens.  It is man-made.  We made it.  And we can change it.  Manufacturing used to comprise forty percent of our economy in the 1950’s and 1960’s.  Through the decades it has comprised less as our manufacturing capacity has been off-shored for one reason or another.  This was accelerated in the 1990’s as globalization and private equity for foreign investment had much greater impacts.  Even so, the United States with all its manufacturing problems is still the world’s leading manufacturing country in total dollar value of goods produced.  The ranking would change if the comparison were made by some other measure, like value of goods per capita (which I believe makes Japan Number One) or exports per Gross Domestic Product (GDP) (which I believe makes Germany Number One). 
I believe we are capable of increasing our manufacturing, where it is presently about nine percent of our GDP, to somewhere around twenty-five percent of our GDP – and not just increasing it in high tech sector goods requiring highly skilled workers but also increasing our output in what is perceived to be low skilled jobs.  We still have a lot of capacity for manufacturing in the U.S. regardless of high skilled labor or low skilled labor.  We have a very competitive workforce at all skill levels.  The idea that the long-term trend of U.S. manufacturing’s decline as a part of our modern, global economy is irreversible is sheer nonsense.  This economy we have was made by us; and, it can be changed and improved by us.
The restructuring of our economy to fit an “efficiency model” that resulted in the denigration of manufacturing only served to benefit a few in our society and not the greater community.  This model achieved its efficiency by hollowing out corporate structures that were hierarchal and flattening them, resulting in a corporate mentoring system that was vanished and passed on to educational institutions to train, and a corporate institutional knowledge base that got lost without its historical bearings.  These “efficiency models” only benefited investors and senior executives.  They did not benefit the broader workforce whose efforts also contribute to make enterprises productive and profitable.  Not to mention the harm that comes to communities when such restructuring occurs and affects families that reverberate on the small businesses that help to provide constancy.  This “efficiency model” promoted by investors enhances the flight of capital which is euphemistically called the “free flow of capital globally”.
There is another aspect to this problem of why the manufacturing sector of our economy has been in decline for several decades now.  And that is that manufacturing has been looked at as dirty, noisy, and a blight upon our communities and neighborhoods during an era when white-collar jobs were proliferating in comparison to blue-collar work, safety in the workplace was receiving more emphasis than before, environmental concerns were being addressed like never before, and suburbanization of our nation was displacing the industrial urbanization we had known with resulting homogenizing of living communities that were by-and-large displaced from where you actually worked and where housing developments more nearly reflected income status.  This negative outlook on manufacturing has a bit of a moral dimension to it because many of the products we use come from a manufacturing process which can be harmful to the health of workers or even the immediate community where the manufacturing plant is located.  With OSHA and EPA regulations in effect in this country, off-shoring manufacturing facilities and processes can circumvent the regulatory environment in more stringent nations by placing them in countries where requirements are either non-existent, more lax, or altogether not enforced.  And when this goes on out-of-sight, then it is out-of-mind.  It is like sending your dog over to your neighbor’s yard to defecate.
So trying to make the manufacturing sector the star of our economy when it has such a dim luster in our outlook is quite a challenge.  But we do have huge fiscal deficits to overcome, a social safety net that needs to be rectified, and income inequality in our society that has not been seen for over one-hundred years and needs to be put in balance to restore a middle-class political economy.  And the best way to do this is by an accelerated growth strategy for our economy.  And the best way to get this acceleration in growth is with emphasis on increasing the manufacturing sector of our economy.
Increasing our manufacturing sector as an overall part of our $16 trillion economy is important right now because of the concerns we have with our fiscal affairs and what effect federal budget considerations will have on our society, our national security, and our national standing and competitiveness in the world.  Right now we are a consumer economy based on service sectors, which have multipliers of half that and less than the manufacturing sector.  Real wages for working people have not kept up with the national productivity gains over the decades and many working people have high consumer debts.  Middle class and low income wage earners are tapped out on debt and the housing recovery will take several more years to benefit these consumers.  Cutting taxes will not have the stimulus effect needed to propel the economy forward because of the hallowing out of the middle class and an income tax burden that is mainly on upper income individuals.  President Bush 43 found that out with his tax cuts resulting only in a mild recovery – eight million jobs created compared to over twenty million during the 1990’s under President Clinton.  During the Clinton years, with his tax increase and holding the line on federal spending showing some discipline for handling the deficit, this helped private investment because we went from a high interest rate environment to lower interest rates.  We had an accommodating Fed, making money available, and private investment swelled.  During Bush 43 and Obama we were never in an interest rate environment where the change acted as a stimulus to investment on a large enough scale to propel the economy forward.  After the 2008 financial crisis, the $700 billion stimulus under President Bush, with another one under President Obama, had little effect other than to put a halt to the downward slide in GDP but a failure to propel growth like we had in the 1980’s under President Reagan or the 1990’s under President Clinton.  Increasing our exports and jiggering trade policy does not do much when only nine percent of the economy is manufacturing.  Providing tax incentives for investment will help, but will not propel our economy forward.  We need to get beyond status quo politics and policies.  We need transformation.
Go to the next link, Manufacturing Part III, for more on transforming the economy.

Manufacturing: Elements Of The Transformed Economy

Economics Without The B.S.**:

[**  Double entendre intended.]

Manufacturing: Part III - The case for emphasizing manufacturing in our economy…continued
Elements Of The Transformed Economy

To propel growth by way of increasing the manufacturing sector we need a growth strategy that will provide investment in infrastructure, an energy policy to promote efficiency and renewable energy sources, full employment incentives to lessen the burden of the increasing costs of our social safety net and meet the employment needs of a rejuvenated economy, and finally tax reform which promotes equity financing over debt financing and promotes fairness and equity in our society.
Infrastructure investment is to be financed by government and private investments.  Initially the government financing will add to our national debt; but, putting controls on overall spending and raising productivity to annual increases of four percent growth rates may allow us to achieve a balanced federal budget within ten years, considering that Federal Government revenues would approximate twenty percent of GDP – it has averaged around eighteen percent of GDP since WWII.  After ten years we should be back to having budget surpluses if we can have political leadership that exercises self-discipline, something that has been in short supply since 2000, our last submitted balance budget, in this case for FY2001.  Infrastructure investment is needed in manufacturing (all types), research and development, the energy network, utilities, transportation (roads, interior waterways, and harbors, as well as rail and air), and education at all levels, similar to the Sputnik response of the late 1950’s and 1960’s.  These are not decisions that need to be made by a Central Planning Committee.  Let the free enterprise system work, the same way it was unleashed in the 1980’s.
Take modernizing the national energy grid as an example.  We need to upgrade our national energy grid if we are going to take advantage of the newer technologies for wind, solar, and ocean waves.  These newer energy sources are produced in more isolated areas of the country and need to be distributed to population centers far away from the original source of energy.  Since it is costly to store electrical energy, we need a more modernized distribution system.  The cost for upgrading our energy grid was estimated at over $600 billion by Jim Rogers, the CEO of Duke Energy out of North Carolina.  The $600 billion figure is a multi-year investment to be made by government and the private sector.  In 2009, the Obama Administration allocated $60 billion for energy infrastructure investment as part of the stimulus bill.
There is plenty written on the fact that income for working people has not kept up with the productivity gains of the American economy and that this is due to a loss of bargaining power in the workplace.  I will not add anything to that except to say that I think all income of the average employees (and I include engineers in that category), the managers, the executives, and the investors should be tied to the productivity and financial health of the enterprise, its profitability, gains or losses.  Workers should not be judged by one productivity index and management and investors by another.  Judge all by the same and compensate appropriately.  Judge productivity by profitability and earnings, or the lack thereof, and not by some inefficacious barometer.  To make my point I often like to draw from literature, Melville’s Moby Dick.
When the young Ishmael and the more experienced ‘savage’ Queequeg went out to find a whaling ship for employment, they come upon the Pequod with two Quakers as the representatives of the ownership of the whaling enterprise.  Ishmael inquires about sailing on the vessel and the reply from the Quakers is, “Dost know nothing at all about whaling, I dare say.”  To which Ishmael replies, “Nothing, Sir; but, I have no doubt I shall soon learn.  I want to see what whaling is.”  Ishmael is hoping he can sign on for a 275th part of the ship’s proceeds.  The Quakers are trying to bargain his share down.  They haggle over whether a 777th part would be too much for Ishmael.  One Quaker is willing to be more generous and give him a 700th share.  The other says that they should not shirk their responsibility to the community that has a stake in the bounty of the voyage and that the community has widows and orphans dependent upon the profitability of the voyage.  They all haggle some more and finally present the book for Ishmael to sign on declaring, “Mend that pen.  Down ye go here for the 300th part.”  Ishmael signs.  He knows this sum, while not much, will still have his provisions provided for while on-board for the voyage and that he will have a modest sum in savings when it is over.  When Queequeg shows up, the Quakers will not have a “cannibal” on-board the ship.  “Son of darkness, art thou a Christian?  Having been baptized?”  Queequeg jumps upon the bulwarks with a harpoon, points to a small tar drop some considerable distance away and says, “Spse him one whale eye.”  Takes aim with his harpoon.  Heaves it across the ship’s deck, and strikes a bull’s eye.  “Quick” says the Quaker and he shoves the book in front of Queequeg, “Sign here or make your mark for the 19th part of the net proceeds.”  Has anything changed since Melville?  When do we learn?
We need tax reform to restore fairness in our society.  I have worked for almost fifty years and over that time I have listened to experts from the Right, Left, and Center discuss equity in the tax code – graduated rates versus flat rates, various incentives, deductions, and credits.
I no longer know what equity is!  But I think I can recognize inequality.  And when upper income individuals can get lower tax rates (15%) on income derived from investments when lower income people are paying 25% to 28% on “ordinary” income earned trying to make an enterprise successful and productive, or when investors can shelter income in businesses derived from executive positions that classifies ordinary income from salaries and “fees” as “carried interest” taxed at a 15% capital gains rate, I think I can infer that something is not right.
When I was a small kid growing up in a blue-collar neighborhood of Philadelphia we played baseball on a dirt lot without adult supervision, before any of us had TV’s to watch how the game was actually played.  We made our own rules as we went along during the day and would check back later in the day with our dads to see if we had it right.  Not everybody had a glove because we could not afford one.  We shared.  We did not have enough boys to make up two teams so we had to bribe the girls to play with us.  Since there were smaller kids maybe two and three years younger than others and girls (This is before women’s lib, now.), the two teams had uneven skill levels and were manned unevenly – five on one side, eight on the other.  If one team was made up of weak players, the stronger team might give them four strikes for an out and four outs in an inning.  Anything to keep the game going for the rest of the day.  One time a kid from a nearby neighborhood asked us if we wanted to play them at the neighborhood playground.  When we showed up, the other team had an adult for a coach.  He was hitting ground balls to the infield.  Everybody had a glove.  And everybody had a uniform.  We couldn’t even afford hats for everybody.  They may have looked like the 1955 Phillies, but that was a big improvement over us.  Do I have to tell you who won?  You can learn rather young that the world is not fair.
I have my own ideas about tax reform.  They are not that important, but I will give them to you so you know where I am coming from.  I would propose one flat rate tax on ALL income – individuals, businesses, and corporations, and even non-profits, religious organizations (churches), and universities – on gross income (minus “real” expenses – depreciation of equipment does not count (I’ve never seen anybody write a check to ‘Depreciation’.), no deductions for anything (not charities – which have existed back in the 19th Century before we had income taxes – not home mortgage interest).  Everybody pays.  Even poor people.  Everybody has a stake in their country.  Maybe we can include a National Sales Tax or a Value Added Tax of just couple of percentage points (2, 3, or 4%).  What is important is to get the Federal revenues equal to 17% of GDP – 17% would not be pernicious.  That was the goal under Reagan.  Right now we need to freeze the Federal budget, not cut it, and get revenues up to 20% or more of GDP until we can get the budget in balance and back to producing surpluses.  With annual growth rates of 4% for GDP we can achieve this goal within ten years.  All people in an enterprise contribute to the productivity of that enterprise.  They should be compensated accordingly.  Like the Pequod, everybody has a fair share, not necessarily an equal share, that is tied to the productivity of the enterprise and taxed appropriately.
The only other thing I would mention for tax reform would be to favor equity financing of ventures rather than debt financing.  It seems like we are doing the reverse.  We need to favor manufacturing interests over financial interests.  I think that is why the financial sector has grown so disproportionate to the rest of the economy the last couple of decades.  I do not think that globalization alone would account for this.  A tax policy that favors debt financing incentivizes speculation and that is why we have some of the problems we do in the misallocation of our national resources.
Restoring our manufacturing sector in our economy to where it has a greater presence has national security ramifications also.  Like President Eisenhower warned us, we do have a defense-industrial complex.  And it functions best when the defense industry is right here in our backyards rather than having our military depend on foreign sources for defense readiness.  There is another factor in this argument that is very important.  Our military depends on a knowledgeable citizen base for the military to function at a high level, not just people who wear the uniform but also the civilian workforce both from government and industry.  Technology is a driver for the military, not just for costs but also for capability.  We have this edge and we need to keep it.  An educated populous is necessary for military readiness and education in technology is a necessity.  In addition, the military is a big spender in R&D for technology, education, and very basic research (in health, medicine, etc.).  A depleted manufacturing sector is a detriment to national security.
Today we have “experts” and knowledgeable people who will tell you the importance of human relationships, gaining somebody’s trust, confidence for a business to succeed.  While these traits are desirable, I’ll bet these “experts” never worked in a manufacturing environment, never had to make a tangible product that needed to be shipped out the door, or never had to work in a creative environment for a specific product.  When you work in a manufacturing environment it not just who you know, it’s what you know.  Your knowledge has to be based on the sciences, math, engineering, technical know-how.  This is true throughout the workplace, white-collar and blue-collar.  Emphasizing manufacturing will get us refocused on education in the sciences, math, engineering, and technology.  People educated as such will place value on scientific inquiry rather than belief systems.  These values do not get the proper emphasis in a consumer economy which is more attuned to a sales pitch, engendering warmth and relationships.  Will it take another “Sputnik” to wake us up.
And mentioning Sputnik reminds me, in our $3.8 TRILLION budget, what does NASA get…$18 billion.  Not to mention that the financial industry got bailed out in one year with several trillion dollars.  NASA hasn’t spent that in its existence in over forty years.  Do I have to listen to some cynic say, “We spent billions of dollars on space and what did we get?  Tang!”    Just what has NASA done with that $18 billion in any year? – a space station, the Mars Rover, or how about research that furthered cures for breast cancer, MRI’s and CAT scans, dialysis, artificial limbs, virtual reality.  And in forty years they have barely been able to get beyond the earth boundaries of space because of the paltry funding and lack of leadership in our society.  In the 1960’s NASA was visionary and that is why people went into the sciences, math, engineering, and technical fields.  Their discoveries affected our daily lives.  We have lost our vision.  And NASA is only one discipline that I could mention.  How about ocean exploration, at its depths, or medicine and biology?  There is so much more that we could do.  We are listening to the wrong people for leadership.  We need the inspiration that we had in the 50’s and 60’s.  When we pick up a newspaper the first page should be filled like it was in the 60’s, with rockets going into space.  The Wall Street Crowd should be relegated to the back of the paper with the Business Section and Society News.  We need to stop listening to accountants and find leaders that will turn our visionaries loose.

Summation
A nation’s wealth should come from productivity increases, not from asset inflation (stocks, bonds, real estate).  People who are creative, people who make things, have good self esteem, self fulfillment, self improvement, self involvement, and make contributions to the greater society.  What we do, is what we are.  Manufacturing addresses these values like no other sector and impacts the other sectors that are providing a service based on the manufactured product.  We need to do more manufacturing.  Need I say more?
We need to change.  But change does not come easily.  While we need leadership, we also need to look within ourselves.  Sometimes great movements start from humble beginnings.  Rosa Parks, a seamstress, refuses to give up her seat on a segregated bus in the 1950’s and today we consider her the spark that ignited the civil rights freedom movement.  If I may be allowed one other literary reference, let me pick the opera Tosca by Puccini.  When Tosca is confronted with the tyrannical, dictatorial police commissioner of Rome, Scarpia, who is not only trying to seduce her but is deceitful in his pursuit, and she finally erupts.  The small, feminine Tosca plunges a sharp object into Scarpia, mortally wounding him.  As the tyrant of Rome lies dying, at the hand of a woman no less, she taunts him, “E avanti a lui tremava tutta Roma!”  Loosely translated: “And to think all Rome trembled under his rule!”  It’s all in the doing.

Economic Historical Data 1974 to 2012

Economics Without The B.S.**: 

[**  Double entendre intended.]

You are entitled to your own opinions, your own data; but, not your own facts.  In the Army, we used to say, "Opinions are like ass-holes.  Everybody's got one!"  My opinions are on the other posts.  Here are the facts.  Sources for this data are listed below.
Fiscal Year

President who Submitted FY budget

Federal Government Revenues  (in Current Dollars, billions)

Budget +Surplus/    -Deficit  (in Current Dollars, billions)
Real GDP Growth Rate (%) Positive or Negative (Deflation)

Total Debt held by Public          (in $ Billions)


    GDP            (in Current Dollars, billions)


Rate of Inflation (%)  Positive or Negative

1974
Ford
$263.2
$6.1
0.6
343.7
1,499.5
11.0
1975
Ford
$279.1
$53.2
0.2
394.7
1,637.7
9.1
1976
Ford
$298.1
$73.7
5.4
477.4
1,824.6
5.8
1977
Ford
$355.6
$53.7
4.6
549.1
2,030.1
6.5
1978
Carter
$399.6
$59.2
5.6
607.1
2,293.8
7.6
1979
Carter
$463.3
$40.7
3.1
640.3
2,562.2
11.3
1980
Carter
$517.1
$73.8
0.3
711.9
2,788.1
13.5
1981
Carter
$599.3
$79.0
2.5
789.4
3,126.8
10.3
1982
Reagan
$617.8
$128.0
1.9
924.6
3,253.2
6.2
1983
Reagan
$600.6
$207.8
4.5
1,137.3
3,534.6
3.2
1984
Reagan
$666.4
$185.4
7.2
1,307.0
3,930.9
4.3
1985
Reagan
$734.0
$212.3
4.1
1,507.3
4,217.5
3.6
1986
Reagan
$769.2
$221.2
3.5
1,740.6
4,460.1
1.9
1987
Reagan
$854.3
$149.7
3.2
1,889.8
4,736.4
3.6
1988
Reagan
$909.1
$155.2
4.1
2,051.6
5,100.4
4.1
1989
Reagan
$991.1
$152.6
3.6
2,190.7
5,482.1
4.8
1990
Bush 41
$1,032.0
$221.0
1.9
2,411.6
5,800.5
5.4
1991
Bush 41
$1,055.0
$269.2
0.2
2,689.0
5,992.1
4.2
1992
Bush 41
$1,091.2
$290.3
3.4
2,999.7
6,342.3
3.0
1993
Bush 41
$1,154.3
$255.1
2.9
3,248.4
6,667.4
3.0
1994
Clinton
$1,258.6
$203.2
4.1
3,433.1
7,085.2
2.6
1995
Clinton
$1,351.8
$164.0
2.5
3,604.4
7,414.7
2.8
1996
Clinton
$1,453.1
$107.4
3.7
3,734.1
7,838.5
3.0
1997
Clinton
$1,579.2
$21.9
4.5
3,772.3
8,332.4
2.3
1998
Clinton
$1,721.7
$69.3
4.4
3,721.1
8,793.5
1.6
1999
Clinton
$1,827.5
$125.6
4.8
3,632.4
9,353.5
2.2
2000
Clinton
$2,025.2
$236.2
4.1
3,409.8
9,951.5
3.4
2001
Clinton
$1,991.1
$128.2
1.1
3,319.6
10,286.2
2.8
2002
Bush 43
$1,853.1
$157.8
1.8
3,540.4
10,642.3
1.6
2003
Bush 43
$1,782.3
$377.6
2.5
3,913.4
11,142.2
2.3
2004
Bush 43
$1,880.1
$412.7
3.5
4,295.5
11,853.3
2.7
2005
Bush 43
$2,153.6
$318.3
3.1
4,592.2
12,623.0
3.4
2006
Bush 43
$2,406.9
$248.2
2.7
4,829.0
13,377.2
3.2
2007
Bush 43
$2,568.0
$160.7
1.9
5,035.1
14,028.7
2.8
2008
Bush 43
$2,524.0
$458.6
0.3
5,803.1
14,291.5
3.8
2009
Bush 43
$2,105.0
$1,412.7
3.1
7,544.7
13,973.7
0.4
2010
Obama
$2,162.7
$1,293.5
2.4
9,018.9
14,498.9
1.6
2011
Obama
$2,303.5
$1,299.6
0.8
10,128.2
15,075.7
3.2
2012 *
Obama
$2,468.6
$1,326.9
1.8
11,578.1
15,600.0
1.7
2013 *
Obama
$2,633.7
$1,354.2
2.6
12,636.7
16,241.4
1.5

*  FY 2012 and FY 2013 are estimates.

XXXX  or XXXX Gray colored areas are FY years (not calendar years) where official recessions were declared – but I had to approximate exactly which year they lie in because of differences between calendar year and fiscal year.  Officially there are ten recessions since WWII.

Source of Data:              
            1.  Federal Government Revenues, Budget Surplus/Deficits, and Total Debt held by Public data are from
Office of Management and Budget, see link: http://www.whitehouse.gov/omb/budget/Historicals
Total Debt held by the Public does not include debt held by the Government itself, that is the debt owed to the Social Security Account.  The Social Security Account itself is in surplus until the 2030’s.  Our Government borrows against that surplus and has to pay it back when needed by Social Security,

            2.  Real GDP Growth Rate and GDP data are from Department of Commerce, Bureau of Economic Analysis tables. See link: http://www.bea.gov/iTable/iTable.cfm?ReqID=9&step=1  Use Options Tab to construct your data.

            3.  Rate of Inflation Data is from Department of Labor, Bureau of Labor Statistics.  I used the CPI, which may not be the most accurate to use as an inflation guide when measuring productivity.  Perhaps the Producers Price Index would be better; but, most average folks are more familiar with the CPI rather than the PPI.  The main point I want to make is when measuring productivity increases from year to year one should factor out inflation.  We want to measure real productivity gains (goods and services), not inflationary gains (from prices).  ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt