Think by Numbers

Numbers cannot lie. A world without disease, starvation, violence, and suffering is the ultimate destination of humanity. Getting there will require voters to base their decisions on statistical cost-benefit analyses instead of irrational emotions. The power of numbers can make utopia a reality.

The financial sector receives more of the average paycheck than any other sector of the economy.  Its share of the economy totals $2 trillion dollars. From 1973 to 1985, the financial sector earned less than 16 percent of domestic corporate profits. In the 1990s, it oscillated between 21 percent and 30 percent, higher than it had ever been in the postwar period. This decade, it reached 41 percent.  in the 1960s, finance and insurance accounted for only 4% of GDP, whereas in 2007 finance and insurance accounted for 8% of GDP. The purpose of the financial services industry is basically to transfer money from savers to entrepreneurs. It primarily consists of using a computer to shift money from one bank account to another. This service requires virtually no physical labor and very few material resources. Yet, this relatively simple service cost our country more than $2 trillion in 2007. That was more than the country spent on health care, construction, food, utilities and transportation. It's clearly unreasonable for this financial paper shuffling to cost us more than the construction of the skyscraper where the paper shuffling will then take place. How does this industry get us to spend such an inordinate amount of money on their services. Through smoke and mirrors as the recent crisis has shown us. The free market system automatically optimizes resource allocation to satisfy society's wants and needs. The current problems in our financial sector can be seen as our economy's attempt to reduce the excessive size of the financial sector and redirect those resources to more productive purposes. Yet, the government is doing everything in its power to counteract this process. The feds have taken or committed to take over $12 trillion from the other sectors and given them to financial institution to maintain this imbalance. This works out to $42,105 for every man, woman and child in the U.S. The financial sector is at a historic high as share of the overall economy. Graph Source: https://en.wikipedia.org/wiki/File:NYUGDPFinancialShare.jpg Note another year in history when it peaked, 1929.  At that time, many of the country's resources were shifted to this low-employee, unproductive sector.  It was followed by a decade of unemployment and economic stagnation.  This would suggest that it may be unwise for the government to fuel this bloating if they wish to avoid another lost decade. This begs the question "Why is government taking money from the paychecks of working people and giving it to AIG and Goldman-Sachs?" They claim that their failure will result in the collapse of our entire economic system.  This would, of course, eventually lead to a dystopian Mad Max scenario. However, the presented choice between government bailout and complete financial collapse is a false dichotomy. In reality, if the government allowed these irresponsible actors to fail, they would enter a bankruptcy process and be sold off to more smaller, more responsible companies. Correlation doesn't necessarily imply causation. However, the reason the government is so set on using tax dollars to prop up these insolvent companies (as opposed to taking the bankruptcy route) might be related to campaign contributions. For instance, AIG executives gave more than $630,000 during the 2008 political cycle even as the company was falling apart. President Obama collected a total of $130,000 from AIG in 2008, while McCain accepted a total of $59,499. Last year AIG and its subsidiaries spent about $9.7 million on federal lobbying, or about $53,000 for every day Congress was in session in 2008. Additionally, Obama's top presidential campaign contributor was Goldman-Sachs. McCain's was Merril-Lynch. For all the awful investments AIG made, this political investment has produced a 1730000% rate of return.

GOP Candidate Ron Paul has produced a detailed budget containing over $1 trillion in first-year reductions. Mitt Romney, Rick Santorum, and Newt Gingrich have only indicated that they would attempt to repeal Obamacare saving an average of $20 billion a year. Why Do the Candidates' Budget Plans Matter? The only way that a president can noticeably affect the everyday lives of all Americans is by raising or lowing their standard of living.  This is accomplished through their influence over the real tax rate.  The real tax rate encompasses all normal forms of taxation, but it also includes a hidden tax known as inflation. All of the Republican candidates have detailed plans for modifying the tax code.  But saying you're going to cut taxes without cutting spending correspondingly is sneaky. If you cut taxes, but maintain the same level of spending, then you have to either borrow or print the resulting budget shortfall.  Borrowing the money is worse than paying with taxes immediately, not only because we'll have to pay it back in a future when the government's fiscal situation is predicted to be far worse than is today, but we'll also have to pay a bunch of interest on top of that. The alternative to borrowing is to have the Federal Reserve fire up the printing press.  The FED creates trillions of new dollars out of thin air and give it to the government through the purchase of treasury bonds.  The effect of this is identical to the effect of criminal counterfeiting.  If one doubles the money supply without a corresponding increase in GDP, the long-term result is that everyone's paycheck can only buy half as much. So using the magical money machine to pay the bills just shifts the tax burden to an inflation tax.  According to the Consumer Price Index, inflation is only about 3.5%. However, the real rate of inflation is currently almost 10%. The inflation tax, while largely ignored, hurts middle-class and low-income Americans the most.  This is because inflation is flat tax which doesn't tax the poor at a lower rate the way our progressive income tax system does. In fact, it's somewhat regressive because the loss in value is delayed.  When the new money is initially created, price inflation hasn't set in yet.  The first people who get to spend the new money are generally giant financial institutions.  By the time it filters down the average Joe, it's already lost a lot of it's value. So the only way a president can change the real tax rate is by increasing or decreasing government spending.  Therefor, the only thing about a candidate that's guaranteed to significantly impact your life is not whether they think gay people should have the right to suffer through the institution of marriage. It's not whether or not their religion's doctrine includes magic underwear.  It's not even their tax plan. It is only the candidates' positions on spending that is guaranteed to directly affect your everyday life by increasing or decreasing your standard of living. But does a president really have any control over spending? After all, isn't the level of spending set by the congress?  This is generally true, but the president does have a number of very powerful means of controlling the budget: 1. The Power to Appoint the Chairman of the Federal Reserve - This power enables the president to choose a chairman who would refuse to monetize the debt.  In this case, the government wouldn't be able to print new money out of thin air. Then congress couldn’t spend any more than tax revenues or borrowing permits. 2. The Power to Veto - The president has the power to veto bills containing spending which he opposes.  Congress would then have to override this veto with a two-thirds majority both houses. The Candidates Compared We know that President Obama stands shoulder to shoulder with our nation's drunken sailors on spending, but what about the potential Republican nominees?   Mitt Romney (a.k.a. Mormobot 5000)

Lightning. Over the last decade it has stricken more Americans than terrorists have. It will stop at nothing to destroy our way of life. Yet some politicians in Washington don’t see lightning as a threat. Barack Hussein Obama doesn’t. In the Senate, he voted to allocate hundreds of billions of dollars to the so-called war on terror, while spending absolutely nothing on a threat which has taken far more American lives. He just doesn’t get it. Barack Obama. Wrong on lightning. Wrong for America.

From medicalnewstoday.com: The way some people talk, you'd think that a flat tax system - in which everyone pays at the same rate regardless of income - would make citizens feel better than more progressive taxation, where wealthier people are taxed at higher rates. Indeed, the U.S. has been diminishing progressivity of its tax structure for decades. But a new study comparing 54 nations found that flattening the tax risks flattening social wellbeing as well. "The more progressive the tax policy is, the happier the citizens are," says University of Virginia psychologist Shigehiro Oishi, summarizing the findings, which will be published in an upcoming issue of Psychological Science, a journal of the Association for Psychological Science. Oishi conducted the study with Ulrich Schimmack of the University of Toronto at Mississauga and Ed Diener, also at University of Illinois and the Gallup Organization. The researchers analyzed the relationship between tax progressivity and personal well-being in 54 nations surveyed by the Gallup Organization in 2007 - a total of 59,634 respondents. Well-being was expressed in people's assessments of their overall life quality, from "worst" to "best possible life," on a scale of 1 to 10; and in whether they enjoyed positive daily experiences (such as smiling, being treated with respect, and eating good food) or suffered negative ones, including sadness, worry, and shame. Finally, the analysis looked at the participants' satisfaction with their nation's public goods, from schools to clean air. The degree of progressivity was measured by the difference between the highest and lowest tax rates, corrected for such confounding factors as family size, social security taxes paid, and tax benefits received by individuals. The results: On average, residents of the nations with the most progressive taxation evaluated their own lives as closer to "the best possible." They also reported having more satisfying experiences and fewer discomfiting ones than respondents living in nations with less progressive taxes. That happiness, Oishi says, was "explained by a greater degree of satisfaction with the public goods, such as housing, education, and public transportation." Higher government spending per se did not yield greater happiness, in spite of the well-being that was associated with satisfaction with state-funded services. In fact, there was a slight negative correlation between government spending and average happiness. "That data is kind of weird," Oishi says. He guesses that the misalignment might indicate national differences in the efficiency with which those services are delivered or in people's relative ability to access them. For example, the U.S. spends more on education and health care than other developed countries, "but its international standing in those areas is not so great." Such puzzling findings may be illuminated in further research. The study, like others Oishi has done looking at connections between economics and personal life, has important social implications. "If the goal of societies is to make citizens happy, tax policy matters," he says. "Certain policies, like tax progressivity, seem to be more conducive to the happiness of the people." http://www.medicalnewstoday.com/releases/234017.php  

15% of Likely U.S. Voters think the federal government should continue to provide funding for foreign countries to buy military weapons from U.S. companies. Seventy percent (70%) oppose this funding to promote U.S. arms sales. Fifteen percent (15%) are undecided about it.  (To see survey question wording, click here.) Voters are more closely divided on the topic of farm subsidies. The U.S. government typically provides more than $20 billion a year in crop and farm subsidies, and 37% of voters feel those subsidies should continue. But a plurality (46%) thinks those subsidies should be ended, while 17% more are not sure. Similarly, the federal government’s Export-Import bank provides billions of dollars in loans and loan guarantees to companies like Boeing and General Electric. The stated purpose is to sustain American jobs by financing U.S. exports.  But just 29% of voters believe the government should continue to provide loans and loan guarantees to help finance export sales for large corporations. Again, a plurality of 46% opposes loans and loan guarantees for this purpose. Twenty-five percent (25%) are undecided.   - Rasmussen Reports™

At least 100,000 civilians have been killed. That's the equivalent of 35 September 11th attacks, but I don't like to brag. Another interesting factoid is that the war will end up costing at least $3 trillion.  With that much money, you could end world hunger for 100 years or end American hunger for 100 minutes! Over 4 million Iraqis have lost their homes a result of the war.  That's equivalent to the population of Maine, Idaho, and New Hampshire combined. Sorry, guys. You cannot all crash on my couch. U.S. SPENDING IN IRAQ It's all about the benjamins WMD's. Yeah, that's it! WMD's! Spent & Approved War-Spending - About $900 billion of US taxpayers' funds spent or approved for spending through November 2010. Lost & Unaccounted for in Iraq - $9 billion of US taxpayers' money and $549.7 milion in spare parts shipped in 2004 to US contractors. Also, per ABC News, 190,000 guns, including 110,000 AK-47 rifles. Missing - $1 billion in tractor trailers, tank recovery vehicles, machine guns, rocket-propelled grenades and other equipment and services provided to the Iraqi security forces. (Per CBS News on Dec 6, 2007.) Mismanaged & Wasted in Iraq - $10 billion, per Feb 2007 Congressional hearings Halliburton Overcharges Classified by the Pentagon as Unreasonable and Unsupported - $1.4 billion Amount paid to KBR, a former Halliburton division, to supply U.S. military in Iraq with food, fuel, housing and other items - $20 billion Portion of the $20 billion paid to KBR that Pentagon auditors deem "questionable or supportable" - $3.2 billion U.S. 2009 Monthly Spending in Iraq - $7.3 billion as of Oct 2009 U.S. 2008 Monthly Spending in Iraq - $12 billion U.S. Spending per Second - $5,000 in 2008 (per Senate Majority Leader Harry Reid on May 5, 2008) Cost of deploying one U.S. soldier for one year in Iraq - $390,000 (Congressional Research Service) Graph Source: http://awesome.good.is/transparency/013/transparency013trilliondollarwar.html TROOPS IN IRAQ Support Our Troops... By sending them to a Middle Eastern hellhole. 47,000 U.S. troops. All other nations have withdrawn their troops. U.S. Troop Casualties - 4,444 US troops; 98% male. 91% non-officers; 82% active duty, 11% National Guard; 74% Caucasian, 9% African-American, 11% Latino. 19% killed by non-hostile causes. 54% of US casualties were under 25 years old. 72% were from the US Army Non-U.S. Troop Casualties - Total 316, with 179 from the UK US Troops Wounded - 32,051, 20% of which are serious brain or spinal injuries. (Total excludes psychological injuries.) US Troops with Serious Mental Health Problems - 30% of US troops develop serious mental health problems within 3 to 4 months of returning home US Military Helicopters Downed in Iraq - 75 total, at least 36 by enemy fire Graph Source: http://www.wallstats.com/blog/us-troop-stength-in-iraq-and-other-data/ IRAQI TROOPS, CIVILIANS & OTHERS IN IRAQ I'm sure you've never seen one on TV, but there are actually people who live in Iraq. Private Contractors in Iraq, Working in Support of US Army Troops - More than 180,000 in August 2007, per The Nation/LA Times. Journalists killed - 146, 97 by murder and 49 by acts of war Journalists killed by US Forces - 14 Iraqi Police and Soldiers Killed - 9,889 as of Jan 31, 2011 Iraqi Civilians Killed, Estimated - On October 22, 2010, ABC News reported "a secret U.S. government tally that puts the Iraqi (civilian) death toll over 100,000," information that was included in more than 400,000 military documents released by Wikileaks.com. A UN issued report dated Sept 20, 2006 stating that Iraqi civilian casualties have been significantly under-reported. Casualties are reported at 50,000 to over 100,000, but may be much higher. Some informed estimates place Iraqi civilian casualties at over 600,000. Graph Source: http://musingsoniraq.blogspot.nl/2011/01/2010-ends-with-slight-drop-in-iraqi.html Iraqi Insurgents Killed,

More upward wealth redistribution from the good folks at the Obama administration! Now starving doctors will finally be able to afford an iPad thanks to your generous tax contribution! With the increased efficiency of electronic record keeping they'll probably even be able to fire some of their fat cat administrative staff!  (It's ironic that taxes were being taken out of the paychecks of these ~$25 per hour employees in order to provide subsidies for doctors who are 0.2% highest income earners in the world. This is compounded by the fact that the changeover will enable the doctors to save even more money by laying off administrative staff after the new technology renders them redundant.) The Obama administration strongly desires that all medical records be electronic. There's an app called Drchrono for the iPad which can make that transition happen. Logically, the government will give up to $44,000 to any doctor willing to use it. The funding will come through the Health Information Technology for Economic and Clinical Health Act (HITECH Act) in which the government allocated $19.2 billion dollars to help move U.S. doctors to electronic medical record systems.  President Obama signed HITECH into law on February 17, 2009 as part of the American Recovery and Reinvestment Act of 2009 (ARRA), an economic stimulus bill. Thank goodness we were able to raise the debt ceiling! Now the government can afford to help these destitute medical professionals climb from the impoverished depths of the 0.2% highest income earners in the world to the 0.1% highest earners. I don't mean to imply that I oppose the adoption of electronic health records. I wholeheartedly support this goal. However, it’s important that middle class taxpayers know that they are subsidizing the top 0.2% richest Americans.  

About $59 billion is spent on traditional social welfare programs. $92 billion is spent on corporate subsidies. So, the government spent 50% more on corporate welfare than it did on food stamps and housing assistance in 2006.

The average household in America had to shell out around $2000 to make sure that AIG's counter-parties wouldn't have to accept the risks they took.  Would the world really have ended if we let AIG declare Chapter 11 bankruptcy? Infograpghic Source: http://nicolasrapp.com/?p=347 To answer this question, we have to understand why was AIGFP (American International Group's Financial Products) division in financial trouble.  To understand this, we have to know what a credit default swap is.  The answer to that is illustrated here. Image by Scott Pollack: http://www.scottpollack.com/ So what caused AIG to fail? Allegations of accounting irregularities, caused AIG to be downgraded from a AAA to A credit rating. This downgrade triggered provisions in some of AIGFP's credit default swaps which required AIG to provide billions of dollars in collateral to their counterparties. (Counterparties are companies like Goldman Sachs which bought credit default swaps from AIGFP to insure against mortgage defaults within their mortgage backed securities.) Government "Loans" Since AIG didn't have the money to put up this collateral, the government loaned them $170 billion. This was called a loan but there is almost no chance that the loan will ever be repaid. This is because the AIGFP division has no intrinsic worth and the has no prospects for significant future income since the real estate bubble on which it thrived on has burst. As of 2011, $11.4 billion has been repaid. AIG recently released a list of their counterparties who received the bailout money. Most of this American taxpayer money went to European banks. Was the Bailout Really Necessary? On April 2nd, Hank Greenberg, former CEO of AIG, testified before congress that the taxpayer would have been much better off if the government had allowed AIGFP to file Chapter 11 bankruptcy. (Video of Testimony) Greenberg Congressional Testimony on AIG Bailout Bankruptcy Option Through this process, AIGFP would be broken up and sold off. The proceeds would go to their creditors. If this were to occur, the counterparties would have only received maybe 20% or 30% of the money that AIG owed them, but Greenberg said it definitely would not have led to systemic failure of the entire financial system. It makes sense. For instance, Goldman Sachs received $12.9 billion in counterparty payments. That's far less than the $18 billion that they spent on executive bonuses in 2007. So the receipt of only $3 billion through an AIG bankruptcy settlement would not have broken them, but it would certainly have brought down executive compensation. What Was the Real Motivation? Numerous congressmen have requested the Treasury Department's explicit explanation of how AIGFP division's bankruptcy would destabilize our county's entire financial system. Naturally, the Treasury has failed to provide a description of this scenario. This, in conjunction with the fact that Goldman Sachs was President Obama's number 1 campaign contributor, should make anyone suspicious of our government's motives. In fact, Goldman Sachs has spent over $43 million on political contributions. This is a paltry sum when compared to the tens of billions they made off of the AIG bailout. How Much Did The Bailout Cost You? The bottom line is that the average household in America had to shell out around $2000 to make sure that AIG's counterparties (giant financial institutions) wouldn't have to accept the risk which they made when they allowed a private entity, AIG, to insure on their behalf with a public statement that they were able to evaluate. Losses are socialized and profits are privatized. I can guarantee that each household would not have received $2000 from AIG had these investments turned out to be successful. Infographic Source: http://www.insuranceproviders.com/aig-bailout-timeline/

This is the only clear examination of the true costs of the bailouts that I've seen. These ideas are so simple, yet so rarely ever expressed in the mainstream media.

This study by the Federal Reserve examines the effects of government intervention and the absence thereof in two similar financial crises which occurred simultaneously in Chile and Mexico. Chile liquidated the insolvent banks and instituted a new regulatory system to prevent future abuses. Mexico nationalized the entire banking system keeping the insolvent banks on life support at the expense of the taxpayer. This is what happened. Over the next 25 years, Chile's per capita GDP grew 100% while Mexico has exhibited an impressive 0% growth rate.  This means the average Chilean is twice as rich as he was 25 years ago, whereas the average Mexican stayed just as poor as he was before. The lesson is clear. If the government subsidizes bad behavior you get more of it. If the government taxes good behavior you get less of it. Yet that's exactly what were doing. We're taxing successful, competently run businesses to subsidize irresponsible, poorly run businesses. Until we realize this simple fact, the previous trend of increased productivity and standards of living will only be a memory.

Those defending the huge budget deficit incurred by the massive federal stimulus package often say, "These are extraordinary times. We can't afford to worry about the national debt now. We'll be in a better position to deal with that later." The falsehood of dealing with the government debt like that is best illustrated by the following chart. Graph Source: http://www.gao.gov/financial/citizensguide2008.pdf http://en.wikipedia.org/wiki/United_States_federal_budget