This article came out of the Wall Street Journal a few days ago. Apparently, with the state of California bankrupt, government officials are looking at all their failed policies and trying to figure out what to do. At the top of the list seems to be a flat or at least more fair tax code to keep the wealthy business owners from leaving the state and to increase the tax base and make it more stable. Henry S. Rowen reports in a WSJ op-ed piece in the July 8th issue that "The state's tax system desperately needs reform. Revenues in 2009 are down 27% from a year earlier largely because 1% of taxpayers pay 50% of income tax and their capital gains have evaporated. These taxpayers have a clear incentive to leave the state - and they are." No wonder officials are looking for a better tax system.
This is just what we need, more federal stimulus spending! These failed policies are not working. One amazing piece of news comes from California where Democrats are looking at a bankrupt state and trying to figure out how to balance the budget. They have come up with a novel idea...a flat tax. No kidding, this is gaining traction. Apparently, it was noticed that relying on taxing the "few rich" is a bad policy. They are leaving the state in mass and taking their businesses with them. Many of the ones that have stayed their tax revenues they generate have been affected by the economy. People are now noticing it is better to tax a larger base that is stable. It will be interesting to see how this plays out and if it passes. If I can find the article in the Wall Street Journal I will post it above. It was very interesting.
Here is another post that highlights the newspaper industry's inability to face the facts and change the way they do business. I have followed this for the past year posting many articles here on this blog. They continue to want to stick their head in the sand and build walls around their business and fight the way their customers want to view the news instead of facing the facts that the landscape has changed and that they need to adapt to this new world. Everyone understands that web 2.0 is in full effect and that most businesses are trying to find a way to ride that wave. In my next post I will highlight a number of businesses and leaders that understand this and are doing a great job using this mechanism to reach their customers. Do you have any examples you would like to share?
I was reading the other day that with the large tax increases that will soon take place many of the nations top income earners living in high cost cities will be looking to move to areas where their dollars go further. The article called this a talent relocation in the US where people on the coasts move to the interior where the economy is has not been hit as hard. For example, did you know the city of Little Rock, Arkansas has according to the experts weathered the financial storm better than most cities in the US? I found that very interesting. We are also seeing a great deal of our foreign talent in IT and the sciences who have been working for companies here in the US go back home for better opportunities in India and China. This will hurt a very important economic sector in this country as we currently lead the world in those departments but countries like India and China are quickly catching up. During this time we will witness a massive shift in talent location both in the US and around the globe. This article in the Wall Street Journal highlights one reason people will be moving...to avoid high cost of living areas and most importantly high taxes.
This was an article in the Wall Street Journal opinion section yesterday. This is very interesting. Apparently what is good for Hollywood isn't good for the rest of us. They enjoy an industry that gets states to compete to obtain their business asking for HUGE tax breaks to film in those states. Since they have the ability to pick up and shoot movies anywhere they go where they get the best rates. Unfortunately, for most business we don't have the ability to pick up as easily. However, it does show you that those that can, will always go where they have the best tax rates. I love the facts that Alec Baldwin shares in this piece. Don't you think the very same data he shares proves that lower taxes helps business and the creation of jobs around the country? These facts are not just true for Hollywood but on main street throughout the heartland of America. Yet, many of Alec's friends these very same people will vote and publically champion higher tax rates for America so we can solve the world’s problems and continue to fund social programs. Hummmm let's see....they can escape high tax rates with their business but most Americans can't. I wonder what they would say if they didn't get those special tax rates for their business? Alec Bladwin gives us the answer in this piece.
This is an interesting opinion piece in the Wall Street Journal today from the Prime Minister of New Zealand talking his view of the world economy and the steps he is going to take to make things work in New Zealand. What are your thoughts?
The Markets Need Hope! Enough of the drum beat of doom and gloom from all corners of Washington and the media. Where is the message of hope and change the was incessantly talked about during the election? We need that message now more than ever or should I say the markets need that message. Yesterday the markets closed at 50% from the high water mark from a few years ago with no end in sight of where the new bottom might be. The markets and consumers need a positive message and hope to get things turned around. The constant message of “things are going to get worse” only exacerbates the problem. MOST important we need fiscal restraint and balenced budgets in Washington that promote small business growth. This is what the markets want to see and what will help get people back to work.
It is easy to understand why the President is not as positive right now. If he says things will get worse and they do…he was right. When they get better…he is able to take credit to pulling us out of this depression. He protects himself on both fronts with a win-win outcome. However, if he preaches that things are going to get better and things don’t turn around or take longer to pull out of this dive people will hold him responsible and he is not willing to walk out on that limb. Leaders are dealers of hope! Our country needs a strong message from the White House and a unified message from Congress that they are working together, putting party differences aside, and putting our country first. This message needs to be loud and clear to the public to put everyone at ease. Then and only then will the markets stabilize, the lemming investors will stop running off the cliffs, and people will come out of their self imposed bomb shelters and resume normal American life of consumption. Okay, maybe not the conspicuous over consumption everyone was accustomed to a few years ago but at least sales of cars, durables, and other items will pick back up. Investors will stop fleeing the market. We need to take the break off the economy and right now Washington and the media have their foot squarely on it with the constant negative message.
Leaders have to make tough calls and unfortunately walk out on limbs from time to time. JFK did when he announced to the world we would put a man on the moon in under 10 years. He sparked hope and confidence in a nation that needed it. President Reagan did when he spoke in Berlin demanding the USSR tear down the Berlin wall. Prime Minister Winston Churchill did during WWII as he inspired a nation with the will to fight Hitler and win. Our markets don’t need more money…they need Washington to work together to a form a UNIFIED message of hope and optimism for the American public and the world at large. Everyone is watching and waiting for this moment. It can’t come soon enough.
For those of you who enjoy this article and would like to learn more investment options in a down economy I think you will enjoy a book I have just started reading. The Little Book of Bull Moves in Bear Markets by Peter D. Schiff is excellent.
Peter D.Schiff was right in 2006 when he forecasted a major recession coming. All the "experts" thought he was crazy. Watch the following video clips as Peter told everyone on all the major news programs what was coming. It is nine minutes long and he was spot on the money! This is worth watching.
Five Trillion more in government spending might be needed according to this Princeton Nobel Prize winning economist? We have Keynesian economics on steroids! The economic principles that most Americans understand in their daily lives should remain the same at the national level. If your friend is going bankrupt and comes to you for advice how likely are you to say, "Well Joe, what you need to do is max out all your credit cards, assume more debt and keep spending your way out of this situation. Sooner or later things will get better." It doesn't make sense for your neighbor and it doesn't make sense for our government at the national level. Our government can get away with it because they can legally print money to cover the cost where Joe can not. However, sooner or later WE have to pay that debt. The problem is the people writing these checks today know they aren't going to be on the hook to pay for it. They will be long gone and our children and grandchildren will be left to clean up this mess.
The Japanesse went through a massive real-estate crash in the 90's which showed more devastation than a normal stock market crash. We missed the warning signs or thought that somehow it couldn't happen to us. They tried the same approach of massive government spending to "spend their way out of the problem" and but according to the experts, "ended up with a mountain of debt and a lost decade of little or no economic growth." (George Melloan, WSJ)
As long as we have people like Paul Krugman of the New York Times saying that the Great Depression lasted 10 years because the government didn't spend enough and we have a government listening to Keynesian economists we are going to get massive deficit spending for years to come.
What we need is personal responsibility and fiscal restraint from our neighborhoods all the way to Washington. The sound economic principles that most people understand on main street need to be adopted by those residing on Pennsylvania Avenue. I remember an old saying, "If the people will lead, the leaders will follow."
One of my favorite books is Atlas Shrugged by Ayn Rand. I really think this is a must read for anyone wanting to gain insight into our current economic situation. This article comes from the Wall Street Journal and is written by Stephen Moore. I am sure you will enjoy it and for those of you who have not read Atlas Shrugged I am sure this will tweak your intrest further.
'Atlas Shrugged': From Fiction to Fact in 52 Years
Wall Street Journal
By STEPHEN MOORE
Some years ago when I worked at the libertarian Cato Institute, we used to label any new hire who had not yet read "Atlas Shrugged" a "virgin." Being conversant in Ayn Rand's classic novel about the economic carnage caused by big government run amok was practically a job requirement. If only "Atlas" were required reading for every member of Congress and political appointee in the Obama administration. I'm confident that we'd get out of the current financial mess a lot faster. To read the rest of the article click this link.