Saturday, April 9, 2016



If you have a short attention span skip to the third paragraph for an essay demonstrating the maxim that "those who ignore history are bound to repeat it."


With some helpful editing by Nancy I wrote the following.


          Not knowing all the answers tends to free one from some of the errors that creep into the thinking of those in charge.  The animal behaviorist, Tinbergen, noted the ability of those new to a field to find solutions to problems the well-versed do not find.  Those well-trained are often stuck in a rut of thinking that only leads to the things already discovered.  The teacher is often exposed to new ideas by students unencumbered by past thinking.  Listening to new ideas carefully will give the experienced a chance to either help the novice grow and avoid an error, or, enable both to grow along with the subject under discussion.

          As one who knows so little about so many things I have found it has the drawback of finding anyone to take what I have to say seriously.  The right answer is often in the middle of a controversy.  Both sides have some truth on their sides.  Somewhere between the extreme views is where the optimal solution is usually found.  Solutions to our economic problems have been victimized by allowing extreme positions to be alleged as proof the other extreme is right.  It happens every day on talk shows of both sides.

          Higher taxes on the billionaire, made one by defrauding workers of their pensions funds or stockholders from reasonable dividends, is neither undemocratic, robbing the rich to pay the poor, socialistic, nor unfair.  It is justice for the crook, and fair repayment to the country which made their success possible, and owed to surviving families of workers and soldiers who worked and died for their country.

          It is unlikely that any proposal adopted for reviving the economy will be the best possible proposal, but it may be the best practical proposal if it is instituted in time.  Tossing out the CEO’s and their staffs that have been in charge would leave a chaotic void with its own problems for us.  Letting them do their own thing without enforceable guidelines could mean more self-serving decisions than proper oversight would allow.

          The current situation is worse than the usual recession and may require more drastic action than usual for many reasons.
1.  Extreme amounts of capital have apparently been lost in leveraged positions by banks and investment vehicles on nearly fictitious investments with borrowed money involving many times the dollar value of the underlying assets.  Clearly, oversight and transparency is needed.
2.  Enron’s energy scam increasing natural gas prices was apparently repeated by part of the financial community using control of oil futures so great profits could be made by making oil four times more expensive than otherwise.
3.  Jobs disappear, interest rates drop for investors, interest rates increase for debtors, and home prices drop along with retirement accounts.
4.  It’s an environment where no one wants to spend money or pay takes, even if one can.

          All told, it will take some fancy dancing on the part of our government to walk the line between a growing depression and runaway inflation.  In such an environment the policies will have to change drastically then gradually, perhaps back and forth repeatedly in both directions to dampen the swing to one least damaging to all concerned.  Don’t worry if it rocks the boat a little; it has been rocking for quite a while.  If the analogy holds, let’s pray and hope it can shift the balance before it tips over from too extreme a position.

          A seven hundred billion dollar bailout amounts to over $2000 for every individual in this country; or, $10,000,000 for each of the 70.000 wealthiest people in the country; or, $100,000 each for the 7,000,000 poorest families in our country.  Which group would be most effective in getting the money back into the economy?  Yes, some balance would be better.

          The hated gas tax Ross Perot favored in his run for the presidency a few years ago could have paid for maintenance of our highway system.  It would have kept the automakers feet to the fire and given us gas efficient cars.  National deficits and decline of our auto industry would have been lessened.  De-regulation of the banking and investment industries in hindsight was an obviously bad move.  Rather than subsidies for domestic industries, a cautious, wisely constructed, federal system more generous than Medicare for physician reimbursements could benefit employees and make companies more competitive exporters.

          Workers deserve a portable retirement program funded by employers and themselves on the model of the TIAA-CREF program available to educators and some other non-profit employees.  It would reduce the incentive for mergers and spin-offs used to raid pension funds by schemers among the corporate and financial insiders.

          Rather than limiting profits, wages, and capital gains use sensible tax policy to remove incentives for blatant rip-offs.  Make companies pay a 10% tax for all total compensation over $300,000 and 50% for all over one million and 90% for all over one billion.  Do the same for sale prices of companies and assets exceeding the rate of inflation: refund half at a rate of five percent of the tax amount to be released each year stock values and employment do not decline during the following ten years.

          Such policies would obviously benefit from careful and fair design.  Even the extremely wealthy would benefit from seeing their wealth maintained rather than declining by market disasters and the inflation that will come to pay for our growing debt.  Most multi-billionaires who lose half their wealth are still multi-billionaires.  Most home owners who lose half their wealth are in bad financial shape, even if they can keep their homes.

          Tax time is coming.  I won’t grumble if I have to pay.  I’m thankful if I can pay.  I’ll spend some time thinking about the security, education, and good things paid for by my taxes.  I won’t spend too much time worrying about the benefits someone else gets, especially if they are poor, they will spend it and help keep our income coming to us.

If you skipped the first two paragraphs, read them now.  The seven year old journal entry had only one change, a comma was moved to make a sentence make better sense and a typo was corrected.  I also [on 10/23/17] substituited "increasing" for "producing" in describing Enron's scam.

Joseph G. Engemann   Kalamazoo, Michigan    April 9, 2016

1 comment:

  1. Just ran across your Christmas letter 2015 with you blog address. I knew I had come here before, but lost the address. Looks like you are enjoying solving the world's problems. Great!
    My take on God and evolution is very simple. Evolution is a wonderful process, and really, God can create and provide the process of evolution if He wants too. Who are we to tell Him how to run things. He can do it any way He wants!
    Happy Spring!