Public works projects versus bailouts and bonuses

Let me explain bailouts to you. By no means do I agree what is being said. But this should certainly shed light on what bailouts are supposed to do. We Americans do not like change. We like living on a straight path, even if it is going into a brick wall. That being said, we will begin our discussion.

The concept of a bail out is simple. Give money to the banks to loan out to businesses. That money gets paid back at say, 30% profit. And maybe 2% of that goes back to the businesses. Since a lot of businesses are unable to post positive profit margins until certain seasons, then the money that they get from loans helps make payroll. In other words, those who work for toy factories during the summer are still able to get paid because of these loans. In return, a percent of the profit margins that come from, say Christmas, gets paid to the banks. The money is then return to the government, and blah blah blah. Bankers get bonuses, etc. And supposedly people get to keep their jobs year round. Bail out is merely a temporary measure where we bet that the economy will get better down the road, and improve the survivability of said companies.

The thing is that somehow, this money is returned to the government, and the bankers make even more money. I understand the conservation of mass. This does not make sense. But none the less, this is the basic thought. In concept, it makes a lot of sense, and almost seems like a noble cause. But the truth of the matter is that this is merely the best path through a recession for banks to continue making sick profit. Bail outs increase liquidity, which is good. I think.

Public works projects on the other hand, are something that I personally agree with. I say we allow these large banks to fail, and instead pay money for public works. These can be anything, such as building bridges, building aircraft carriers, and so forth. Why is this path more desirable? Well for one, bailouts only allow companies to keep their jobs. Public work projects create new jobs, create new services, and in my opinion, greatly increases liquidity. Oh, and did I mention, we have pretty things? Not to mention that you still have the ability to increase liquidity, due to the fact that unemployed people will have a new river of income.

However, probably the most important thing about running the public works project verses bailing out the banks is the entire pitchfork argument. One of the things that irks many Americans is that while we suffer from a poor economy, those who run wall street are still bringing in an deplorable amount of money. Cut a wall street bonus in half, and you still have ample money to pay for 3 families for a year. If you cut the CEO's paycheck to about 250,000 dollars a year, that money alone could probably fund the building of a new school.

In terms of building political image relating to the people, a public works project is far more beneficial than bailing out these banks. For example, with one, you work through the strange gears of the financial system that few people actually understand. In fact, given how badly the last financial crisis was, I'm pretty sure there's maybe a hundred people who really know what's going on. That being said though, the common man isn't going to understand why he lost his job because his company couldn't make payroll and how the government giving money to Goldman Sachs helps. But what he is going to understand is that there's a freaking new power plant across the street which gives the area a new source of power. Oh right, and it upgrades the power grid. Somehow, this is more understandable than this entire trickle down effect.

Yes. I said it. Bail outs are nothing more than a trickle down effect. But the big winners to any bail out are the people who are up top. By the time that the money gets to the bottom, half of us are happy to just keep our jobs. The other half lose them. We have repeatedly stated that Reaganomics does not work. It never stimulates spending quite the same way as giving money to the lower end of the pyramid.

Truth is this. The government panders towards those with money, not the general public. The money given to the major banks could have just as easily been given to those of us without jobs in a far more direct manner. However, because of our unwillingness to change our course of action, we are stuck here with these now even wealthier bankers.

A major public works project will be big. It will affect a lot of lives, far more than a bail out. But this is a path that the government just doesn't want to finance.

Toyota

Toyota's recent recall woes have been a serious blow to the company. As many models of its cars have been found to have faulty brakes, they have been forced to engage in a massive recall of millions of their vehicles. As a  result, a sterling reputation that had been built over 50 years has been so tarnished as to force Toyota to go on the defensive. Part of this is unjustified. However, Toyota could have had a better response, and there were many areas where it was intentionally negligible.

Toyota's first major problem was its inability to correctly identify what was causing its cars to accelerate out of control. They initially claimed that the problem was merely the floormats beneath the brake pedals. Eventually, however, they concluded that the problem was the brake pedals themselves. Now it has come to light that the real problem might even be the electronic software in charge of the brake system. In short, Toyota was unable to come up with a clear and simple solution to the problem, not realizing that it was the entire brake system that needed to be replaced in a recall. This inability to identify the problem quickly led to public mistrust.

Moreover, Toyota's attempts to win back its customers were ineffective. It was obviously going to be difficult even if Toyota had handled the recall effectively. However, as it dragged the problem on, sometimes even denying outright causes that they knew to be probably true, Toyota made it that much more difficult to actually  regain consumer confidence. In short, advertisements cannot make up for a poorly handled recall that seemed to be either dismissive of customer warnings or willfully ignorant of them.

Toyota will definitely be able to recover in the long term. Its fundamentally sound and still has a product that people want. However, as a car company there is obvious room for improvement. They could make their recalls more transparent and act more quickly in the future. They need to be more thorough in testing their cars for problems. But even if Toyota did all of these things it has likely suffered some permanent damage as a result of this botched recall. It won't go out of business, but it has likely lost significant ground to both Honda and its American competitors that it is not likely to regain for a decade. This one bad mistake might prove to be the most costly one of Toyota's entire history.

The way to fix health care that no one is mentioning

When we look at health care, one must come to realize that half the stuff that we are getting we quite frankly don't need. Most of us from day to day will not need to worry about getting a torn ACL. Most of us will not have to worry about getting cancer or AIDS. Most of us won't have to worry about half the super scary things we get from day to day health care. But what do most of us need? Usually vaccinations, some generic medicine to get us through the day. Minor coverage over broken bones. And of course, just that little bit more to pay for ambulances and stuff.

The answer isn't forcing everyone to have insurance companies. Or even that we should pay for a percentage as outlined by the Mass health plan. The answer is something that no health insurance company wants you to hear. And that's a plan similar to the post office.

All the government needs to do is provide a basic line of health insurance to the people. Obviously several things cannot be covered without placing too much strain on the taxing system, such as AIDs coverage or Chemotherapy. While I do find that these people should be in the hospital, it's not feasible under the current conditions. That being said though, the coverage will give the prescription drugs to things that many of us will need, such as Lipitor, Cephaxtem, and Rifapim. We will get flu vaccines. You get the point? A baseline health insurance covers nothing exotic, but is still enough for most of the common folks. This is reasonably cheap. You can run this however the way the government wants. And this shouldn't cause a very major tax hike. A good comparison of this would be FedEx vs the US Postal Service. Or even BlackWater vs US. ARMY

So if it's this simple, how come no one is thinking about this?

For one thing, most people only need the baseline insurance. Prescription drugs, broken bones, and emergency room. Personally, I'd be fine if my insurance covers just that because...well quite frankly, I don't need to worry about surgery at the moment. Most people don't. And since the government can offer basic coverage at the fraction of the cost from that of the insurance companies, most people would jump over to government-run insurance. At least, between the ages of 16-35, where people are healthy.

The people who would need private health insurance on the other hand, are people in dangerous professions, or people with serious health problems. And of course, cosmetic surgery. But that being said, the fact of the matter is that by the pool of people who require better than basic health insurance is a fraction of the people who just need basic. In other words, the health care insurance companies would shrink.

When we look at the current health care plan, no insurance company is going to agree to the inability to deny coverage. This just doesn't maximize their profits. So for this part to pass, the next best business plan would be to insure everyone at a lower price. At the very least, they would be getting more people at smaller profit margins. They still make profit, but certainly not at the percentage as they do now. And if they were unable to deny coverage? Hell, if I ever tear a tendon, I'd be going with the top of the line surgery, and the insurance companies would be making less money. The truth is that insuring everyone is making sure the insurance companies maintain a wide profit margin.

Key word, profit. Government run health insurance will always be cheaper because that doesn't have to make money. A profit margin that is just large enough to cover the growing population is sufficient.

Government run health insurance deals the biggest blow to insurance companies. Even without any changes to policy, the fact is that their customers will just leave for a cost-effective plan. This is one option that they will ALWAYS lobby against, more than anything else, and will probably never pass. Even government run health insurance it is far more cost effective than anything we're planning now just because it hits the health insurance industry with a shock and awe campaign that has never been seen before.

On the plus side? Health insurance would attain the one most sought after aspect that we as a nation need to look for on a moral basis. Affordability. Quality of life would improve. Everyone is happy. Except big business. But you know what? I'm fine with that.

American deficit

It is no surprise that the United States is running a huge deficit. Ever since the Reagan administration the United States has decided to follow a policy of deficit spending, and with the exception of President Clinton, every president since has run up the deficit and with it the national debt. Regardless of the purpose, deficits have been on this rise. This policy can no longer continue.

While the ability to run a deficit is not in question, the policy is likely to hurt the long term fiscal health of the United States government and economy. Yes, because the trust in the stability of the United States is unlikely to run out any time soon, the government could in theory always continue borrowing indefinitely. And there are legitimate economic reasons and times for the federal government to borrow money, either as part of one time capital expenditures for big national projects or naturally running a deficit as a result of a recession. But because the debt must be paid back with interest, an increasingly larger and larger part of the U.S. budget is devoted to nothing but interest payments. This, combined with the legally required payments for Social Security and other related services, threatens to strip the federal government of its ability to act in any capacity other than as a debt paying machine.

Of course, a policy of simply reducing federal expenditures isn't enough. If that is done by itself, the people would simply demand tax cuts, and we would be back at where we started. Instead, a policy of actively raising taxes so as to raise a fund to pay down the national debate is needed. Without a decrease in the actual national debt, the problems of interest payments simply won't go away. We would just be punting the problem to future generations.

The political willpower to reduce the national debt simply isn't there. Despite a consensus that the debt run up through the Bush and Obama administrations is too unwieldy, neither political party can come up with the one solution that would work: a decrease in expenditures combined with an increase in taxes. Both are politically unfeasible. Unfortunately, or fortunately for those interested in fiscal responsibility, the financial state of the federal government might soon force the issue. Within this half of the decade, Social Security is likely to run out of money, and the United States will, sooner or later, be forced to make the cuts and tax increases necessary to pay down the national debt. Perhaps the politicians will act before that. Don't count on it.