Hillary is a Chamaleon

Chamaleons change their skin color to blend with the surface they stand on. They can go from green to brown (or viceversa) in seconds.

Hillary Clinton supported TPP and TTIP (The Asia and Europe Free Trade Agreements, respectively, that Obama has been pushing through,with their contents kept secret from the public) as Secretary of State and after. Then, under attack from Bernie, she switched to a NO position about two months ago. But have no doubt she will reverse to YES if nominated, when it becomes convenient. I am certain she will claim to have “reconsidered”.

TPP and TTIP will further decimate American manufacturing, deplete good paying jobs, and thin labot unions. They will increase the GDP with the money going to the multinational corporations and the 1%.

We all know HRC is the favorite puppet of Wall Street. As Bernie Sanders put it, “She talks to Wall Street in the morning and to labor unions in the afternoon.” She is an uprincipled opportunist.

Speaking of labor unions, their myopia is enough to make one weep; most of them have shunned the only candidate (Bernie) who would stand for them. Endorsing somebody who already won is a worthless proposition. Endorsements that count and are never forgotten are those that happen during the contest, when there is risk in them.

If Clinton becomes the nominee, the unions will sheepishly line up to endorse her, she will accept the endosements with her plastic smile, and go on to thrown them under the bus at the first moment it is expedient.

Elizabeth Warren has missed a historic opportunity – so far – to participate in this battle for the soul of the Democratic Party. Well, too bad for her because sitting by the sidelines is the direct path toward irrelevancy and oblivion. Ideologically she seems akin to Bernie but has decided not to help him while it can have an impact.

I hope Bernie does well today. His campaign is a historic opportunity that won’t repeat itself. He is an extraordinary man, above all for his decency and integrity. I am proud of supporting him.


Tax Proposal Aims to Reward Domestic Manufacturers

Tax Break for Manufacturers Offset Elsewhere – NYTimes.com.

This mirrors a portion of my tax reform plan for New Jersey: Shifting tax liability from in-state employers and investors and increasing taxes on dividend and capital gains that do not originate in the state nor are earned from in-state activity.

Missing from the Obama plan is any measure to increase aggregate demand. Without an increase in demand, employers will not have much reason to expand domestically even if the tax code favors such expansion. Only greater demand leads to greater supply and consequently, more employment. The only exception to this rule, and it is a temporary exception, is when supply has been disrupted by an extraordinary event and shortages have disrupted the economic balance. In such an event, demand is artificially high. But that is not the case here. What applies here is that aggregate demand is directly proportional to the standards of living of the majority. In other words, most people have to make more  money.

Liquidity achieved through leverage fueled an artificial expansion that has brought us to the current crisis. That is why monetary easing has not yielded the fruits that the Federal Reserve anticipated. The liquidity has to be genuine. People have to truly own the disposable cash.

But I have come to believe that both parties in power are rather unimaginative when it comes to policy or they are hindered by their principal priority which is to stay in power. Party before nation seems to be the slogan: Or party before New Jersey.

“It is time to stop rewarding businesses that ship jobs overseas, and start rewarding companies that create jobs right here in America,” Mr. Obama said in a statementannouncing the plan.

Geez, it only took 30 years. And Obama’s plan may not be bold enough.

Of course governor Christie is terminally deaf to this type of call. He is marching blindly through the already beaten path of an ineffectual tax cut in the face of a dismal fiscal picture.

There is little chance that the Obama proposal will see life this year, with a congress divided and the lurking election. However, at least it signals that the administration is focusing on what I call “Geographic Taxation” – meaning, where you put you money makes a difference at tax time.

Neither the White House nor the republicans, who quickly responded to the plan, offered many details. The republicans responded that the plan should not be a campaign instrument but a mechanism to stimulate growth and the creation of jobs. There is no shortage of people figuring out what the problems are. In fact, I find no less than 100 articles every day describing the difficulties that America faces and offering general descriptions of what must be done.

But a recovery plan that does not describe the smallest nut and bolt of its mechanism, detailing the how’s, when’s, and where’s, does not deserve the name of “plan”.

I tend to believe that the recovery of New Jersey, or America for that matter, will involve either a reform of great complexity or a very long time of stagnation, similar to Japan’s lost decade. In our case it may be much longer than a decade because we lack some elements of the Japanese economy – theirs is more exports-oriented and most of the Japanese creditors are themselves Japanese. Most of the interest that the Japanese government pays for its sovereign debt stays in Japan. That is not the U.S. case and New Jersey has this bloated government whose political class devours everything; where the Japanese have ethics, we exhibit greed and selfishness. With the two political parties hugging power and petrified at the prospect of far-reaching reforms, chances are that is it the long tern sluggishness which will become the avenue of our future.

Re-surging Manufacturing Will Face Shortage of Skilled Workers

U.S. manufacturing sees shortage of skilled factory workers – The Washington Post.

This is a third and last of an education series.  First of all, I must clarify that there is no measurable manufacturing re-surgence in New Jersey but it appears to be happening in other states. Second, I must also emphasize that numerous employers prefer to entice experienced workers already employed to join their shops rather than train new, inexperienced workers – a very myopic policy in my opinion. Third comes the fact that automation has changed the nature of many manufacturing operations and the new employees must be computer literate and  must meet higher academic standards overall.

This is what has happened: As the manufacturing sector moved overseas, the actual industries were liquidated, and their old manual lathes and metal presses sold out. As labor and fuel costs entice some manufacturers to return to the United States, they equip their new shops with state of the art machinery which, more often than not, is computer controlled.

This is called is some disciplines “The Hamburg Factor” – from Hamburg when it was razed by allied bombing in WWII. When the city and its factories were rebuilt after the war, they installed state of the art machinery while the victors, in this case the United States and Britain, both of which had not seen such degree of destruction – the U.S. saw none – had their factories equipped with older, less efficient machinery. That effect was particularly damaging to Britain’s economy because it lacked the resources to modernize.

That effect will be playing here and the new industrial workers will have to know more. Dedicated schooling is needed.  And here enters the possibility of preparing some students – those less inclined to pursue an academic college-bound path – to follow this alternative.

It is unlikely that we will see any revival of manufacturing in New Jersey under the current political system. Some structural changes must happen first. But if elected and all the reforms I propose pass, there is a substantial likelihood that manufacturing will return to New Jersey. However that will only happen if the prospective employers see a readily available, qualified work force.

Thereof the importance of setting up a linkage between schools and current N.J. employers in order to create apprenticeships and enhance the scope and number of trade schools in the state.

Unfortunately, although I would like to expand and give more details on this plan, it is impossible because we can not foresee what the prevailing economic conditions will be in 2014 and 2015 . There could be a massive return of manufacturing to the U.S. or not. But the policy of New Jersey should be to plan ahead for an eventual return of significance and competing with other states for those businesses. To compete effectively, a number of conditions must be met and one very important is offering high quality workers.

U.S. Lost 25% of Its High-Tech Manufacturing to Asia During Last Decade

U.S. losing high-tech manufacturing jobs to Asia – The Washington Post.

Thus is not only the old industries that have fled. We are losing the high-tech sector too. It was once considered the core of our post-industrial  economy; not any longer: 50% of the projected job creation in the U.S will be health related by 2018. That is an scary prospect.

Asian governments, notably but not only China, are providing all kinds of incentives for American capital to migrate. Add to that lower labor costs and a well educated work force. The Obama administration, to its credit, is trying too but it is falling short in almost every element. Above all, the administration is not even attempting to correct the tax laws to make capital flight less profitable.

Federal taxation policy encourages capital migration and that is not going to change any time soon because those benefiting from the current capital flight also control the government. Our corporate and even popular culture tends to be permissive in that regard as well. Steve Jobs was and still is considered a hero by many but he moved every single manufacturing facility of Apple Inc. to Asia, leaving a trail of unemployed Americans behind him. He is just one case.

Recognizing that New Jersey has limited capabilities to stop that tide when the federal government is pushing on the other side in opposite direction, I am confident that we can do a great deal to improve the situation here.

1. In education: Beginning with longer school periods, days, and years, more ambitious state-wide curriculum and creating or expanding polytechnic schools for those kids that are not bound for the typical college education. In the case of those students who deliberately and consistently sabotage the classroom, expulsion from the conventional public school system must be the ultimate option – but that option must be available. The issue of having a competent, well educated work force is vital.

2. In Taxation: I have already presented this issue in my economic program: We must reward investors who put their money in New Jersey while the normal tax rate for dividends will be much higher. We are not punishing those who invest overseas; we are rewarding those that invest at home.

3. Either we make all corporate tax zero  state-wide, or we have at zero in some portions of the state preferred for industrial activity and slightly above zero elsewhere. But we must understand that money is the only talk that corporations listen to and that we can not force them to relocate here. We must persuade them. When we think of a corporation we must remember that description of the Terminator in the first movie of the same title:  “They feel no pain or fear or pity or remorse.”

4. We must look long-term in infrastructure and renewable energy because those two factors will be decisive well after I am gone. New Jersey must excel in both to attract capital.

There is much more to be added to this topic but I will stop here today. I am pleased the the number of new unemployment claims fell to 352,000 nationwide this week – the lowest since 2008. Let’s hope that is a trend.

The China Juggernaut: We Must Outdo It to Revitalize New Jersey

China City Woos Apple Supplier With Workers, Low Wages – Bloomberg.

The article quoted is a must-read.

Getting the manufacturing facilities of a corporation such as Apple or the one mentioned in this article, Foxconn Technology Group, could turn around the fortunes of New Jersey. The question is how to attract them here.

Notice that Foxconn is not alone in its eternal quest for margins. Intel, Apple, Ford, GM, etc are all already in China, but even the relatively low wages of the China coast seem too high for them and they are now contemplating relocating to Vietnam, or Bangladesh. What the the city of Zhengzhou is trying to do is what we must do here in New Jersey.

But of course we can not bring down wages here to the levels of hinterland China – or Vietnam and Bangladesh for than matter. So we must be more creative in our approach. That is why I have presented in my political/economical/taxation plans what may seem an extraordinary overhaul of everything at first impression but happens to be absolutely indispensable unless we accept descending to Third World standards of living.

The fact is we must overhaul our tax and political systems if we want to turn the tide to our favor. We can not count on the federal government so we must do our own reform here in New Jersey. Do not count on the two dominant political parties either. They are the ones that have created this mess and they live well regardless of what happens around them.

It is not only about attracting new corporations; it is also about retaining those we still have here.

New Jersey Adds 10,400 Private Sector Jobs in November; 75% in Retail. Unemployment Anchored at 9.1%

New Jersey added 10,400 private sector jobs in November | NJ.com.

Unemployment remains anchored at 9.1%, according to official figures. State chief economist Charles Steindel interpreted the increase as a signal that employers are expecting increased consumer activity. But the right barometers to predict the consumption picture in 2011 are prevailing wages in different sectors, median family income, per-capita income, and the number of full-time workers in the state.

Those are among the main factors that can energize the state economy. Cheap credit and ever-increasing home equity were also factors prior to the recession. However home equity disappeared for the most cases when the housing market was inundated by a wave of foreclosures caused by the sub-prime crisis. Further depreciation occurred as homeowners lost their properties due to unemployment. With increased leverage of the typical New Jersey household and underwater mortgages, monetary policy by the Feds (low interest rates) has little positive effect on consumption. The situation is compounded by government inefficiency, size, state debt, and a very regressive tax policy in New Jersey.

This situation will not change much throughout 2012 and 2013 and the current Christie administration will not implement the necessary structural changes – nothing sort of a bloodless revolution – needed to set New Jersey on the right fiscal and economic path.

Spanish, French Bonds Recover After Auctions. Stocks Drop in U.S. Due to Bank Loses

Spanish, French Bonds Climb After Auctions – Bloomberg.

The yield on French 10-years notes went down to 3.11% and the Spanish dived to 5.29% signaling greater confidence among investors. By comparison, the U.S. 10-year note yielded 2.10%, Japan’s 1.07% and the German 2.18%. Yields are inversely proportional to price.

Banks loses in the U.S. damped any positive reaction to a favorable manufacturing report. Manufacturing is up as companies replace inventory.

New jobless claims went up to 402,000 last week. The dollar strengthened which is not a good thing for U.S. exports.

Massachusetts sued five lenders including JPMorgan Chase & Co. and Bank of America Corp., claiming deceptive foreclosure practices.

A contraction in China’s manufacturing could be caused by Europe’s situation.