Consumer prices fall for third straight month

[Ridgerunner]

I’m not convinced yet that deflation is upon us. Could be, but it’s not here yet. To this point, it’s disinflation. Still, we could get there if, indeed, unemployment has eliminated too many people from the “demand side” of things. Government people do focus on the “demand side”, but usually through transfer payments, which is all government is really capable of doing.

At the same time, it has to be recognized that disinflation can be due to increased productivity, the “supply side”. There is no question that productivity has increased over the last year and a half. But that always happens when companies cut back on the cost side, and a big part of any company’s costs are labor. That’s why many corporations are reporting increased earnings notwithstanding that their actual business activity is down and they’re laying people off.

But the harsh reality of the situation is that both things are happening. Demand is low, largely due to both unemployment and fear. Supply is not increasing, but is actually decreasing. Corporate profits are up in some sectors, but it won’t last.

And the government continues to oppress small business (60% of all employment) so they’re not hiring, not replacing workers, not investing, not borrowing, not expanding. And why? Because they’re afraid of this government, and with good reason. Small business is being targeted in a lot of ways by this government, and small businesses know it. Business necessarily deals with uncertainties. But there is a level of uncertainty that is simply unacceptable, and we’re there. I talked to another small businessman just this morning. What’s he doing? Building his capital and sitting on it. Paying down debt as fast as he can, not hiring, not expanding. But worse, he’s not making those very forward moves business people typically make; investing in potential that can’t be realized today but which they figure will follow within a given time frame. I have talked to businessman after businessman after businessman, and they’re all starting to just let those “investments in potential” go, no matter how good those opportunities might have seemed three or four years ago.

That’s really serious. You see, in the depression, that’s what happened. Business people just adapted their “future vision” to what they could see on a day-to-day basis coming in the door, and went no further. Because of this government’s hostility to business, particularly small business, the economy is slowly adapting itself to a higher unemployment rate than was previously thought tolerable. The longer it goes on, the more embedded it will become. It’s very difficult to change peoples’ minds about such things, and past opportunities missed seldom return.

This government really is daring a depression to happen. Perhaps it actually wants it. After all, an impoverished proletariat jumps at promises of government benefits, taken from someone else. It would be comforting to think otherwise about this government, but so far, that’s what I’m seeing.****

 

[CatholicGerman]

Small business is being targeted in a lot of ways by this government, and small businesses know it… That’s really serious.

Well, the poor don’t have any money, the government is employed by Big Business, and the shockingly rich have methods of hiding their money. So… whose left but the middle class, the upper class, and small business? Nobody else has any money to steal. We were actually planning on doing some major renovations to our home next year, but now we’re thinking that it might be wiser to hold onto our cash instead.

This government really is daring a depression to happen. Perhaps it actually wants it. After all, an impoverished proletariat jumps at promises of government benefits, taken from someone else. It would be comforting to think otherwise about this government, but so far, that’s what I’m seeing.

Oh, that’s probably what they want. Even if the government changes hands, the cure would be so horribly distasteful that they won’t implement it, so things will continue to worsen. Then the Dems can ride in to save us with income transfers.

But it looks less and less likely that our nation’s creditors are going to go along with this plan for very much longer. We should all be praying that it ends soon actually, because the end will become increasingly chaotic and dramatic as time passes and the debt accumulates further. As the Germans say, “It is better to have a horrible end, than to have the horror never end.”

 

[CatholicGerman]

From the Washington Post:

Broadly speaking, there are two big things we need to do. The first, put well (if not in a sexy slogan) by economist Michael Spence in the Financial Times recently, is “to create capital-intensive jobs that have labor productivity levels consistent with advanced country incomes.”

The second big thing is to make sure Americans have the skills to perform these jobs.

 

[Ridgerunner]

Well, the poor don’t have any money, the government is employed by Big Business, and the shockingly rich have methods of hiding their money. So… whose left but the middle class, the upper class, and small business? Nobody else has any money to steal. We were actually planning on doing some major renovations to our home next year, but now we’re thinking that it might be wiser to hold onto our cash instead.

Oh, that’s probably what they want. Even if the government changes hands, the cure would be so horribly distasteful that they won’t implement it, so things will continue to worsen. Then the Dems can ride in to save us with income transfers.

But it looks less and less likely that our nation’s creditors are going to go along with this plan for very much longer. We should all be praying that it ends soon actually, because the end will become increasingly chaotic and dramatic as time passes and the debt accumulates further. As the Germans say, “It is better to have a horrible end, than to have the horror never end.”

The absolute first thing this government SHOULD do is back off its laying burdens on business, particularly small business, and somehow make it credible. Unfortunately, it’s not likely to do the former and probably can’t do the latter.

Even a massive Democrat defeat in November won’t end this, though it would help. The whole tribe of statist-elitists has to go.

 

[josephdavid]

The absolute first thing this government SHOULD do is back off its laying burdens on business, particularly small business, and somehow make it credible. Unfortunately, it’s not likely to do the former and probably can’t do the latter

.
Small business and the middle class are taking a beating with the past and current administration. They seem to pay the brunt of the taxes and regulations. However large trans-national corporations are escaping paying taxes (e.g. GE, Haliburton, Oil Companies) and yet they continue to import goods (adding to our national debt) and exporting jobs.

I believe the corporate tax rate should be looked at and fixed but I also say punish those who export jobs when things can be made here effectively and with quality. People seem to forget that when you export a job it does not affect one person it affects a whole host of different people. Take away their income, you take away their purchasing power and tax revenue.

Even a massive Democrat defeat in November won’t end this, though it would help. The whole tribe of statist-elitists has to go.

Nope, Republics are no different than Democrats on this issue.

 

[josephdavid]

If American had kept up it’s education system, supported the trades, kept wages low (by preventing systemic inflation and reducing wage-related taxes), and streamlined the beauracracy, the companies would never have left in the first place. There are few places that provide a better manufacturing base than America. Our own government has been working to make us appear less productive and efficient than we really are.

We need to fix our education system and fund it. Even our founding fathers warned against “dumming up society”.

But I must ask how low should wages go? Wages have been stagnant and on the declain for the past 3 decades.

Again, Germany as an example. Their labor costs are very similar to us. However, their labor laws are far stricter there than here. Environmental regulations again much more strict than here along with safety laws which are equal. How are they able to compete if that is the case?

Americans are very productive, more productive than ever however the wages have not kept up with production. Consumption for at least 20 years has been fueled by cheap credit, which has created the biggest bubble economy in 70 years.

 

[CatholicGerman]

We need to fix our education system and fund it. Even our founding fathers warned against “dumming up society”.

Our founding fathers homeschooled. Just saying…

If most married women with children were again at home, school would only be necessary for the remainder. Even if the parents feel “out of their league” with that, there are great correspondence schools, online schools, and co-ops that could make up the difference. We’re in a co-op that meets twice weekly for a full day, with homework assignments for the other days. All of the families involved have to pay a fee (less than $150/month) and help out at the school (I teach, others monitor the playground, or help out at lunchtime, etc.)

Private and religious schools could fill that gap, and be funded through vouchers. It would be crazy-cheap, completely fair, and put parents back in control of their children’s education. Things are moving this way, anyway, as the public schools go slowly broke.

But I must ask how low should wages go? Wages have been stagnant and on the declain for the past 3 decades.

As low as they have to go to justify people being hired. That is the economic reality of a globalized world, and a broke government. If we don’t want wages to decline to basement-level, then we have to reduce the over-all supply.

But don’t forget that wages and prices will decline in lock-step. We are already seeing that. You may end up earning $5/hour, but then rent will only be $350/month. The important thing is that men are able to earn enough to afford a decent living for their families (which might not reach today’s levels, unfortunately), without being a burden on the state.

Again, Germany as an example. Their labor costs are very similar to us. However, their labor laws are far stricter there than here. Environmental regulations again much more strict than here along with safety laws which are equal. How are they able to compete if that is the case?

Higher-value production.

Their labor laws are no longer very strict. They reformed quite a bit. They are stuck with the same problems we have: a tax burden of elderly, long-term unemployment, unemployed young men, sinking native birth rate, and the breakdown of the family. Most of the apprenticeships are being taken by the better students, not the weaker ones.

The Germans haven’t really dealt with it. Their government is also piling on debt and their economy will becoming strained eventually, as well. They’ve just put on a bandage, not a mere band-aid. But they are continuing to buy worthless Euro-denominated debt. That will come back to bite them, soon.

 

[josephdavid]

Our founding fathers homeschooled. Just saying…

If most married women with children were again at home, school would only be necessary for the remainder. Even if the parents feel “out of their league” with that, there are great correspondence schools, online schools, and co-ops that could make up the difference. We’re in a co-op that meets twice weekly for a full day, with homework assignments for the other days. All of the families involved have to pay a fee (less than $150/month) and help out at the school (I teach, others monitor the playground, or help out at lunchtime, etc.)

Private and religious schools could fill that gap, and be funded through vouchers. It would be crazy-cheap, completely fair, and put parents back in control of their children’s education. Things are moving this way, anyway, as the public schools go slowly broke.

As low as they have to go to justify people being hired. That is the economic reality of a globalized world, and a broke government. If we don’t want wages to decline to basement-level, then we have to reduce the over-all supply.

But don’t forget that wages and prices will decline in lock-step. We are already seeing that. You may end up earning $5/hour, but then rent will only be $350/month. The important thing is that men are able to earn enough to afford a decent living for their families (which might not reach today’s levels, unfortunately), without being a burden on the state.

Higher-value production.

Their labor laws are no longer very strict. They reformed quite a bit. They are stuck with the same problems we have: a tax burden of elderly, long-term unemployment, unemployed young men, sinking native birth rate, and the breakdown of the family. Most of the apprenticeships are being taken by the better students, not the weaker ones.

The Germans haven’t really dealt with it. Their government is also piling on debt and their economy will becoming strained eventually, as well. They’ve just put on a bandage, not a mere band-aid. But they are continuing to buy worthless Euro-denominated debt. That will come back to bite them, soon.

Just curious who’s economic theories do you read?

Also another question what is Germany’s ratio of debt to the GDP in percentage? What is U.S.?

 

[Suudy]

But I must ask how low should wages go? Wages have been stagnant and on the declain for the past 3 decades.

This is not true. People keep repeating this, but the statistics do not show this.

cbo.gov/publications/collections/tax/2009/average_after-tax_income.pdf

This is from the CBO. These are real (i.e. inflation adjusted) after-tax incomes. In 1979, the average after-tax income was $47,900 (2006 dollars). In 2006, it was $71,900. In all quintiles it went up over that period.

And looking at the before-tax income (which would better demonstrate wages):

cbo.gov/publications/collections/tax/2009/average_before-tax_income.pdf

It went from $61,600 to $90,700 over the same period (in 2006 dollars). This is not stagnant, nor declining. Yes, there were periods where it went down, but overall the trend is up.

The fact is, wages are up, and on balance, have been going up. There is not stagnant or declining wages.

 

[CatholicGerman]

I follow the Austrian school, mostly.

This is not true. People keep repeating this, but the statistics do not show this.

cbo.gov/publications/collections/tax/2009/average_after-tax_income.pdf

Median wages have been stagnant, but not average income. That is a sign of growing income inequality, as more income comes from “alternative sources” and those reliant upon wage income become increasingly poorer. That is a good point though, and an important clarification. From your link:

Comprehensive household income equals pretax cash income plus income from other sources. Pretax cash income is the sum of
wages, salaries, self-employment income, rents, taxable and nontaxable interest, dividends, realized capital gains, cash transfer
payments, and **retirement benefits **plus taxes paid by businesses (corporate income taxes and the employer’s share of Social
Security, Medicare, and federal unemployment insurance payroll taxes) and employee contributions to 401(k) retirement plans. Other
sources of income include all in-kind benefits (Medicare, Medicaid, employer-paid health insurance premiums, food stamps, school
lunches and breakfasts, housing assistance, and energy assistance).

We also have to be careful with assuming that “inflation-adjusted” means that purchasing-power remains the same. It usually doesn’t. That metric does not tell whether the average worker is more able to afford a modest home, or to send their children to college, for instance.

And a lot of the “income” is from stocks and bonds, which have now lost a lot of worth. Income is declining accordingly.

 

[Suudy]

Small business and the middle class are taking a beating with the past and current administration. They seem to pay the brunt of the taxes and regulations.

I’m not sure this is true either.

irs.gov/taxstats/bustaxstats/article/0,id=96293,00.html

From the IRS, in 2004 all businesses paid $153 billion in taxes. Of those businesses with $500k or more in assets (which I think would qualify one as a bigger than a “small” business) paid $145 billion of those taxes. Even if we limit it to those with more than $2.5M of assets, it is $140 billion.

The large businesses are paying the lion’s share of business taxes.

As for individual tax rates:

irs.gov/pub/irs-soi/08in21id.xls

Those making $200k or more a year pay more than 50% of all income taxes. They paid $518 billion in taxes out of total receipts of $833 billion, or 62% of all taxes. The middle class (those above the poverty line and below $200k) only paid only 38% of the taxes.

Sorry, but big business and the rich are not getting off cheap. They pay more than everyone else in taxes.

However large trans-national corporations are escaping paying taxes (e.g. GE, Haliburton, Oil Companies) and yet they continue to import goods (adding to our national debt) and exporting jobs.

On balance, the US is manufacturing more now than 20 years ago.

csmonitor.com/Money/new-economy/2010/0401/US-manufacturing-export-orders-hit-20-year-high

“New export orders for US manufacturers in March rose to their highest level in more than 20 years, according to data released Thursday by the Institute of Supply Management (ISM). It was the ninth straight month its index of export orders signaled growth and part of a strong overall report that showed industrial activity rising at the fastest pace since July 2004.”

While employment numbers aren’t good, it isn’t because our manufacturing ability is down. It is because we are more efficient. It takes less human bodies per unit of export than it did 20 years ago. We can thank computers, robots, and other mechanized improvements for this.

 

[Suudy]

Median wages have been stagnant, but not average income. That is a sign of growing income inequality, as more income comes from “alternative sources” and those reliant upon wage income become increasingly poorer. That is a good point though, and an important clarification. From your link:

I don’t think this is true either. From the CBO again:

cbo.gov/publications/collections/tax/2010/medians.pdf

In 1979 the median, pre-tax adjusted income was $32,600. In 2007 it was $41,700. After-tax it went from $26,500 to $35,700.

Even the median wages have been going up.

We also have to be careful with assuming that “inflation-adjusted” means that purchasing-power remains the same. It usually doesn’t. That metric does not tell whether the average worker is more able to afford a modest home, or to send their children to college, for instance.

But how else do we compare wages then with wages now? Inflation is measured using the CPI, which tries to account for these things.

And a lot of the “income” is from stocks and bonds, which have now lost a lot of worth. Income is declining accordingly.

The stock market has tanked before. It will recover. And no doubt it will tank again. The point being is that while investment income was high in say 2007, it wasn’t as high as 1997 or 1987. The point is that income has gone up, even adjusted for inflation.

 

[Ridgerunner]

.
Small business and the middle class are taking a beating with the past and current administration. They seem to pay the brunt of the taxes and regulations. However large trans-national corporations are escaping paying taxes (e.g. GE, Haliburton, Oil Companies) and yet they continue to import goods (adding to our national debt) and exporting jobs.

I believe the corporate tax rate should be looked at and fixed but I also say punish those who export jobs when things can be made here effectively and with quality. People seem to forget that when you export a job it does not affect one person it affects a whole host of different people. Take away their income, you take away their purchasing power and tax revenue.

Nope, Republics are no different than Democrats on this issue.

As to your first point, you’re simply recognizing that it’s “pay to play” with this administration. Nothing can be done about that as long as it’s in power. Repubs will likely have their own version of it, but never has it been this grotesque.

When it comes to small business, Repubs and Dems have been very different, and there’s little reason to expect Repubs to take up the Dem war against small business, which is a big part of the Repub constituency.

It would be nice to think there is a solution to the export/import imbalance. I’m not sure I could come up with a solution other than at least minor trade wars. We have made a lot fo trade concessions without reciprocation. But if we don’t get people employed again, which is largely a small business issue, it isn’t going to matter a whole lot because the potential purchasers of both foreign and domestic goods are going to be greatly reduced.

 

[Bob_Aliano]

“Consumer prices fall for third straight month”, huh?

We’re at the point in our house that we don’t even dare walk by the meat counter at the grocery store; tough-as-leather steaks running around $10/lb, hamburger running around $5/lb, even chicken is $4-5/lb and I can’t find a cheapo corned beef for under $15 a chunk; pork is still reasonable but I’m sure it will catch up.

 

[Ridgerunner]

From the IRS, in 2004 all businesses paid $153 billion in taxes. Of those businesses with $500k or more in assets (which I think would qualify one as a bigger than a “small” business) paid $145 billion of those taxes. Even if we limit it to those with more than $2.5M of assets, it is $140 billion.

The large businesses are paying the lion’s share of business taxes.

Interesting to read, but I don’t think it tells us very much about the “bigs” and the “smalls”. It is very common for a small business to have assets exceeding $500k, and there are all kinds of small businesses with assets of 2.5 million. Around here, a 500 acre farm with eight chicken houses and a herd of 100 cattle would be worth more than that. It would be a nice farm and would provide a nice living for a farming family, but it wouldn’t be “big business”, by any means. A 700 acre grain farm in the Missouri or Mississippi River bottoms, with suitable equipment, would be worth more than 2.5 million. So would all kinds of small manufactories.

I’m not sure where “big business” properly starts, but I would not think of anything with assets less than half a billion to be “big business”. Maybe not even that.

 

[Suudy]

Interesting to read, but I don’t think it tells us very much about the “bigs” and the “smalls”. It is very common for a small business to have assets exceeding $500k, and there are all kinds of small businesses with assets of 2.5 million. Around here, a 500 acre farm with eight chicken houses and a herd of 100 cattle would be worth more than that. It would be a nice farm and would provide a nice living for a farming family, but it wouldn’t be “big business”, by any means. A 700 acre grain farm in the Missouri or Mississippi River bottoms, with suitable equipment, would be worth more than 2.5 million. So would all kinds of small manufactories.

(BTW my previous post I said 2004. The numbers are from 2002.)

Fair enough. but even if we went with companies with more than $5M in assets, we get $137 billion in taxes. And those with $25M or more in assets paid $95 billion in taxes, or 62% of all business taxes.

But there is another table to look at–total receipts (2007 numbers):

irs.gov/pub/irs-soi/07co05ccr.xls

For those with $1M or more in receipts, they paid $323 billion in taxes. And just looking at the largest category, those companies with $250M or more in receipts paid $282 billion in taxes, or 85% of the business taxes.

(Now, this spreadsheet takes into account more industries than the last, including agriculture, hence the bigger tax number.)

I’m not sure where “big business” properly starts, but I would not think of anything with assets less than half a billion to be “big business”. Maybe not even that.

Me either. But it seems that assets and receipts are good data points. And even in both categories, big business pays a significant chunk of the taxes.

 

[Ridgerunner]

“Consumer prices fall for third straight month”, huh?

We’re at the point in our house that we don’t even dare walk by the meat counter at the grocery store; tough-as-leather steaks running around $10/lb, hamburger running around $5/lb, even chicken is $4-5/lb and I can’t find a cheapo corned beef for under $15 a chunk; pork is still reasonable but I’m sure it will catch up.

A bit off topic, but my advice to you is to find a rancher who will sell beef to you on the hoof. Lots of ranches in Colorado. Surely, surely there are small, family-operated slaughterhouses there as well. And, you’ll know what you’re getting. Same is true of pork. You need to find a hog farmer. That’s where my entire extended family buys its pork. I raise beef cattle, and a well-tended steer is a lot better beef than what you buy in the store. And it’s not all full of growth hormones, either. There’s a rancher out there who will sell you the best beef you ever had, and a small slaughterhouse that will butcher and package it for you. You just need a big freezer.

I advise you to get to know somebody who works in a poultry processing plant as well. They always have “overruns” and sell them cheap to workers, who will resell them to you for very little. Some of the processors will just let anybody walk into the “factory store” and buy. Sometimes you have to buy something that’s not on the top of your list, but I think the best deal I have ever gotten was six cents/pound for leg quarters (leg and thigh)when the Russians embargoed American poultry (which they do from time to time). Americans like white meat and processors have a tough time getting rid of the dark meat. Think about it, virtually all fast food chicken is white meat. That leaves a lot of leg quarters for the processors to get rid of. I have a friend who operates a couple of pet food plants, and I have seen tons of perfectly good, USDA inspected leg quarters just go into pet food. Chicken livers too, by the tank car load.

Hope it helps.

 

[Suudy]

A bit off topic, but my advice to you is to find a rancher who will sell beef to you on the hoof. Lots of ranches in Colorado. Surely, surely there are small, family-operated slaughterhouses there as well. And, you’ll know what you’re getting. Same is true of pork. You need to find a hog farmer. That’s where my entire extended family buys its pork. I raise beef cattle, and a well-tended steer is a lot better beef than what you buy in the store. And it’s not all full of growth hormones, either. There’s a rancher out there who will sell you the best beef you ever had, and a small slaughterhouse that will butcher and package it for you. You just need a big freezer.

I second this.

My wife and I have been buying “organic” (not certified, but assured to us by the farmers) beef by the whole cow (we split it with another family) for $1.50/lb. Now, this doesn’t include the butcher’s overhead (cutting and packaging), but the butcher we know charges us a flat fee of $200 for the whole cow. I’m not sure what that works out to per pound, but the bigger the cow, the cheaper it gets.

We have been considering doing the same with pork. Chicken is a whole different issue. So thanks for the tip Ridge! We’ll have to look into that one. (I’m partial to dark meat anyways!)

 

[Ridgerunner]

I second this.

My wife and I have been buying “organic” (not certified, but assured to us by the farmers) beef by the whole cow (we split it with another family) for $1.50/lb. Now, this doesn’t include the butcher’s overhead (cutting and packaging), but the butcher we know charges us a flat fee of $200 for the whole cow. I’m not sure what that works out to per pound, but the bigger the cow, the cheaper it gets.

We have been considering doing the same with pork. Chicken is a whole different issue. So thanks for the tip Ridge! We’ll have to look into that one. (I’m partial to dark meat anyways!)

Your beef probably is organic, and grass-fed besides. All you have to do for the latter is “finish” with alfalfa instead of corn. It’s not at all difficult for a rancher to raise “organic” beef either. Now, they’ll all vaccinate for various diseases if they have an ounce of sense, but that doesn’t make it non-organic, and so what if your steer has been vaccinated for, e.g., Blackleg?

Do the deal with pork. You’ll never regret it. My family prefers non-cured pork for the most part. Uncured hams make the best pork roasts anybody ever saw. I greatly prefer it to ham. I prefer “fresh side” to bacon, even though I like bacon too. (you can do it half and half or whatever you prefer, and you can get whatever thickness you want) And sausage without all the spice in it (they just call it “fresh pork”) is beyond delicious with eggs in the morning!

 

[CatholicGerman]

Sorry, but big business and the rich are not getting off cheap. They pay more than everyone else in taxes.

This is true (if by “rich” you mean “high wage”). But big business gets an insane amount of subsidies and other kick-backs. They’re not hurting. They do best if business tax rates are high and regulation is dense, because that chokes their smaller and nimbler competition, and they can still bargain for individual deals.

On balance, the US is manufacturing more now than 20 years ago.

This is true, but we are increasingly putting together parts that have been produced someplace else. We are best off if the entire manufacturing chain is in the US.

While employment numbers aren’t good, it isn’t because our manufacturing ability is down. It is because we are more efficient. It takes less human bodies per unit of export than it did 20 years ago. We can thank computers, robots, and other mechanized improvements for this.

It is true that we are very efficient now, but if efficiency is freeing up skilled workers, why aren’t there additional manufacturing companies that can hire them? Why the current-account deficit (which is, thankfully, shrinking now)?