Rex and Steve’s Blog

I saw this article about flooding with a picture taken just down the street from where I grew up. It’s got to be a mess there. And here I am in Houston where it’s been in the mid 90′s with no rain for 20 days now.

Last week, there was a tornado at the other end of the street!

I read this editorial, “Could it be we’ve been in a recession since ’75?”, by Robert Costanza from the Los Angeles Times. I’ve been trying to form an argument that our obsession with the DJIA and GDP are poor indicators of our economy (and, to a lesser extent, are CPI and “opinion polls”). This editorial has some ideas that are worth pursuing. I’m wondering if Republicans will instantly denounce the concepts presented (because they were articulated by an obvious environmental group), even though the concepts are not anti-free market at all, simply because they’re against one measurement of a free market. [Go to the site for the Genuine Progress Indicator:]

My
niece (Kristin Hartmann) is a senior in High School and a soccer
player. The Houston Chronicle watched her game last night and wrote an article and even mentioned her. I’m such a proud uncle.

Steve and I are back from another cruise vacation. This time it was on the Radiance of the Seas out of Ft. Lauderdale to San Juan, US Virgin Islands, Antigua, St. Maarten, and the Bahamas. It was quite fun: our tablemates were especially interesting. See our pictures on Picasa Web.

Many Republicans toss around the term Free Market as the solution to almost everything. However, what they’ve forgotten is that we don’t actually have free markets. IMHO, the closes we have to a free market is eBay.

A free market requires a number of things: no barrier to entry for suppliers; suppliers who do not lie to the customers; customer who have access to accurate information about all suppliers; and customers who make rational decisions.

IMHO, none of these exist in general society:

Barrier to entry

For example, air transportation has huge financial and governmental barriers to entry; auto industry is the same; steel manufacturing; gasoline exploration and refinement; hospitals; becoming a lawyer or doctor have barriers. Everything has barriers, so there can never be a truly free market.

Suppliers deceive customers

IMHO, the whole point of advertising is to deceive customers: this pill will make your sex life great; this car will make you hip; this toothpaste will make your teeth cleaner and get you a date; this shampoo is will get you a date; this vacation will make you happy. The argument is that suppliers are just providing information – if that’s true, have you ever seen an advertisement that told you the disadvantages of a product in the same manner as the advantages – rather than in tiny text or sped up voices in 5 seconds after a 55 second commercial?

Customers have accurate information

There are about 30 brands of toothpaste, each with at least three different varieties: there is no way a consumer could get complete and accurate information on all of them; there is no way to find out how many passengers died in-flight on a given airline (or cruise ship); there are hundreds of different makes and models of cars; there are no “lists of ingredients” in restaurants.

Customers are rational

48% percent believe aliens have visited earth.
37% percent think that it should be illegal for two men to have sex.
In this poll from the 2004 election, half (50%) rightly name Bush as the candidate who favors giving parents tax-funded vouchers to help pay private or religious school tuition, thirteen percent attribute the plan to Kerry, who actually opposes it, over a third (37%) admit they don’t know. From an AP story after Katrina, nearly one-third of young Americans polled couldn’t locate Louisiana on a map and nearly half were unable to identify Mississippi.

My Conclusion

So, IMHO, since none of the basic premises of a Free Market exist, confidently claiming that the Free Market can do anything is a subjective statement, completely unsupportable by any economic theory that includes supply and demand as any part of its premise.

A friend of mine argued with me about the share of taxes that the richest Americans pay. My gut feeling is that they don’t pay the highest percentage. My friend was adamant that the richest Americans pay 39%. That there was no way they could possibly pay less (she’s a CFO of a multi-million dollar company, so I deferred to her opinion – until I could do research on my own.

At the same time, there was the big hub-bub about how the AMT was going to affect 17 million “middle class” Americans. My sister’s father-in-law insisted that the AMT was really the bane of his life (obviously, he’s above middle class, since he’s been subject to the AMT in the past.)

Then the Laffer (he of the Laffer curve) in the Wall Street Journal expounded on how the richest 1% of Americans are basically the only reason America even exists and their taxes should be cut even more. (Note: not once in his article does he talk about the income of the richest people – everything is about the taxes they pay – as if their income has been fixed over the last 25 years and the fact that they are paying more taxes is based on higher tax rates rather than on increased income). (As an aside – Laffer’s theory is that lowering taxes increases revenues – to a point. At some point lower taxes will lower revenues, too. Thus the “curve” portion of the “Laffer curve”.)

I did a little bit of research and saw that our president doesn’t pay 39% income tax: he pays 26.4% (basically AMT). I looked at our vice president – he, too, pays 22.7% (that’s less than the minimum that anyone is supposed to pay – something’s fishy – who does the AMT affect?). Then I went to the IRS to see the actual numbers for everyone.

It’s fascinating – as is clearly spelled out in column S, rows 22 through 29, the richest Americans only pay 23.4 percent in income tax: it turns out that Americans who make between $500,000 and $2,000,000 are the ones who pay the most – around 27%.

If you add in social security (13% for people who make $100,000 or 6.5% for $200,000 or 2% for $500,000), we can see that people who make $75,000 actually pay a higher rate of income + social security tax that people who make $10,000,000.

Another note: Personally, I’d call the “middle class” everyone who earns the middle 50% of income ($15,000 – $70,000). Poor is the bottom 10% (between 5 and $10,000) and rich is top 10% (somewhere over $100,000). Interestingly, the official poverty rate is 12% (somewhere between $20,000 and $25,000).

My conclusion – income + social security tax is regressive and the richest Americans pay a smaller percentage than someone making only $75,000/year.

One of my concerns with allowing the “free market” to function without any regulation is that since “Corporations” control things, rather than a single human being (who might have feelings and morals), we daily hear a story about some egregious corporate bureaucracy’s failing: today I read about a man who died after he was bumped from an Air France flight and missed his kidney dialysis. Of course, I don’t have all the facts (and I tend to wonder what really went on since the lawsuit was filed a year after his death), and there is no guarantee that if a human being was held responsible, rather than a faceless corporation, that the results would be any different. Nonetheless, I do believe that if Jean-Cyril Spinetta were personally held responsible, that the chance of Air France-KLM becoming more “moral” (humane/compassionate) would be a possibility.

An example of this, in my opinion, is WalMart. When Sam Walton was alive, he considered himself to be the corporation: the company seemed focused on both customers and employees. However, since his death (and the subsequent anonymity of the CEO/Board), the company became focused on only a single thing: lowest prices – and lost its overall moral compass of insuring that Americans (consumers, employees, suppliers) were part of the focus of the company, rather than stock prices and company revenues.

I’m hoping I’m not alone in this, but I strongly disagree with Mitt Romney’s reason for becoming president (as told to the Wall Street Journal): to “… allow us to remain the world’s military and economic superpower for an indefinite period of time”.

I’m pretty sure the reason the United States came into being was so that the people would have “life, liberty, and the pursuit of happiness”; not so that we could be the military and economic superpower for all time. Our president should always have, as his/her strongest driving force, these goals – that all people (rich and poor, Hispanic and white, gay and straight, Christian and atheist) are guaranteed the right to pursue their lives as they see fit, without interference.

While it’s true that we need to protect ourselves from realistic military threats to our lands, and that a sound economy are required – there is no need, nor is there any rationale, for us to be a “superpower” forever.

As a side note, the author of the article gives Romney a pass for his seemingly politically expedient position changes by saying “… what was a flip-flop becomes an openness to reconsider former positions”. It’s interesting that Kerry was pilloried in 2004 when he reconsidered his former positions. Here – Romney is praised or it.

I had surgery on my back again (on October 8). The surgery was pretty successful – my leg and foot are not in pain all the time and I can actually move my ankle now. Overall, I’d been feeling okay, but the pain from the incision was a lot more than the first surgery. Our friend Jimmy invited us to dinner and we had a good time. However, when I saw the pictures of me, I looked so tired! No one said how bad I looked – I never realized I looked like a zombie.

I ran across this short questionnaire to match you with your candidate. I surprised myself by matching to a Democrat: those social issues seem to kick me out of ever being part of the Log Cabin.