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Taxes, Secret Deal with Iran, Solar Power, New American Revolution, Real Inflation, GINI index and more   (week of April 15, 2008)

For more stimulating ideas, please visit the Of Two Minds blog and Readers Journal.

Paul M.

RE: Curing a Schizophrenic Immigration (Non) Policy (April 17, 2008): I wanted to add something, which I think is very consistent with your comments. First, I wholeheartedly agree that the availability of cut-rate jobs, being the cause of the undocumented immigration problem, should be targeted as the focus of solution. But is implementing another bureaucracy (Department of Homeland Employment Verification and Endless Due Process for Allegedly Unwitting Employers) really going to change anything? Probably not.

But, you are talking substantial fines for violators. I like that, if the fine is split with the employee who turns in his employer and turns in himself and his family to a repatriation center, so he can go home and pick up his "reward" at the local, country of origin, Western Union office. That twist could make every case against the employer a "slam-dunk", not to mention actually remove the undocumented worker and his dependents. Fingerprinting or DNA recording of the soon-to-become exiles would help insure the repatriation is a one-shot opportunity; unlike what we have now, which basically appears to be a revolving door of explusion and reentry.

Jim S.

Yours is one of the finest websites around. Political Correctness, espoused by both our parties, obviouosly legitimizes the very insanity you write about in todays' piece. Therefore, few politicians are qualified for office, and, the electorate is increasingly unqualified for the duties of citizenry. Much of the US public, 'are they really voters?', has embraced insanity without any insight, of course. Among the remaining sane, your readership deserves more growth, and is probably getting it. Not enough good items are on our cultural forefront.

In addition, I have appreciated your continual reference to the Pareto Principle when you have considered it appropriate. It is conspicuously missing from 6th grade arithmetic, and, it appears to be low in the national consciousness when it is so obviously useful. Thanks again to you and your friends for supplying a great deal on a daily basis of what is generally missing from the embarrassingly vacant media. I pass your website on with good reference when I can...

John M.

RE: The U.S.A.: The Third World's First Superpower (April 16, 2008):

You may want to add the fact that we have had the same political pattern that has long been common in third world countries i.e. thinking we are a democracy when in fact we keep creating and electing political royalty in a quasi-feudal manner.

Barry S.

In spite of the tone of many of the essays written by your more pessimistic bloggers, many areas of the USA are still reasonably safe and sane places to live, even where housing prices have slid 10% or more.

Building on ideas proposed by others, I have conceived a way to make a sizeable dent in the mortgage crisis, a win/win proposition which has been informally endorsed by an expert at the Federal Reserve, and which I have proposed to members of Congress.

I think that this zero-cost idea could easily provide more housing market stimulus than any proposal put forth by anyone thus far.

Silver Visa

A significant number of wealthy foreigners are interested in retiring to the United States, without expectation of receiving Green Cards or other government services.

I propose that we start a trial program to for a Silver Visa program as follows:

- each individual who buys an additional $250K home in depressed US real estate markets becomes eligible for a Silver Visa (strictly for himself)

- the home must be paid for in cash or nearly all cash (20% loan to value MAX)

- individuals who buy additional $250K properties for cash can "get credit" to enable Silver Visa access for other people

- the Visa shall be renewable every 5 years, according to normal rules applicable to most foreign visa holders in the US

- the cost of the program shall be entirely financed by application and renewal fees paid by the applicants

The program also has the added benefit of providing depressed areas with a growing group of well-heeled "permanent tourists". Only areas that have depressed real estate markets (i.e. 10% or more decline in the median home price) would see an influx of Silver Visa holders.

Peter R.

I noticed in today's essay The U.S.A.: The Third World's First Superpower (April 16, 2008) that you linked to an article stating that the Gini coefficient for the USA was 0.82. However the UN and CIA lists cited on Wikipedia show much lower figures of around 0.45.

(I note however that relative to other "developed" nations 0.45 is still high and puts the USA in the company of the likes of China, Iran, Kenya, Nigeria, Rwanda etc!)

Keep up the great work! You are amazing.


I enjoyed your article but you scared me about overhauling prop 13. Are not property taxes high enough already? Should not taxes be based on what one earns instead? Property taxes are very regressive. If one is laid off or is forced into a lower paying job the property taxes may destroy them. I can understand a one time tax when property is purchased like a tv. If paid off you own it. A property tax is a like a rent. Should one have to pay rent on property that one owns? A property with an exemption of $600,000.00 might be acceptable indexed to the wholesale inflation rate. Perhaps the municipality could receive a cut of a sales tax and or income tax.

A property tax is not right. The state and federal government have to make due with uncertain future incomes as most working people do. Why shouldn't the municipalities and their employees be subjected to the same? No one even children do not have the absolute right to anything.

Trey S.

I find yesterday's entry on 1/3 of Americans who pay no taxes but still vote to America further into debt very similar, though inverse to, point #1 of today's entry about the richest 10% owning most assets.

The major stockholders can push around (i.e. largely ignore) middle class workers who happen to own a couple hundred shares. Thus corporations can act in the best interest of upper management at the expense of the worker-peons. Give it a few decades to perpetuate and you're left with today's social conditions.

For example, in many coprorations the execs get ungodly bonsuses while every decent-paying job that can be done with an Asian accent has been shipped to India. Why is this? Because the little guys are not proportionally represented at shareholder meetings and can't stop the plurality owner from slashing costs to boost profits.

What's the solution? An unlikely one, I think. Maybe a new Henry Ford will come along and see the benefit of paying low level employees good salaries: they become customers. Or, maybe, shareholders should be organized like Congress where the House gives big states a bigger voice and Senate keeps the little ones from being left out.


"Milton Friendman's Legacy" would be a good title for what you write about in your latest post. I am happy I'm in the top 5%, and benefitted from the still reasonably priced CSU university system here in the 1970's.

Robert Roth

Charles: Thought this might interest you. Besides the items below, I also bought a cow, two goats & six chickens for everyone in the world who makes less than $2 a day. That put me slightly over the $3 Trillion but I put the rest on my Uncle Sam's credit card. Go on your own spree at 3trillion.org. It's fun!

P.S. Rice for all is for 5 years. Hopefully by then we'll have worked something out for the future.

The main point is the website, and the experience of "shopping" with $3 Trillion. On the site, there are messages alongside some of the "items" that add to the impact. It really impresses one with the staggering size of that amount of money, and the alternatives are totally real. Even if we just put the amounts indicated TOWARD the cost, whatever it turns out to be, of each of those projects, the impact would be truly awesome, and wonderful, yes?

Robert bought 25 items 2 minutes ago.

finish repairing the damage done by Katrina
1 for $200,000,000,000.00 ea

Switch to Solar
1 for $420,000,000,000.00 ea

Achieve Universal Literacy
1 for $5,000,000,000.00 ea

Universal Health Care for Every American (300 million of us)
1 for $920,100,000,000.00 ea

Rice for All
5 for $60,000,000,000.00 ea

Social Security Pay Back w/interest
1 for $1,000,000,000,000.00 ea

K-12 Arts and music education
1 for $6,000,000,000.00 ea

Housing for America's homeless
1 for $74,000,000,000.00 ea

100 New Libraries
5 for $5,000,000,000.00 ea

Fight AIDS in Developing Nations
1 for $15,000,000,000.00 ea

Malibu beach compound on 7 acres with stables
1 for $75,000,000.00 ea

Provide Permanent Homes for Unwanted Horses
1 for $2,500,000,000.00 ea

Help Rebuild Iraq
1 for $20,900,000,000.00 ea

Full Funding of Amtrak Passenger Service & Expansion
1 for $2,500,000,000.00 ea

Buy the Beatles' Back Catalog
1 for $1,488,820,000.00 ea

College Education for All Family Members
1 for $2,500,000.00 ea

Plant 1,000,000 trees
1 for $10,000,000.00 ea


This is a note in response to your latest post on taxes.

Politicians would like us to think otherwise, but corporations do not really pay taxes at all. The collect taxes for the government from their customers. People ultimately pay all taxes.

If the corporate tax rate was drastically increased, corporations would raise prices in order to cover this new cost and still provide a competitive return to their shareholders. Any corporation that did not would eventually cease to exist. If all corporations are taxed at equal rates, to a corporation a tax is merely another element of the cost of production.

I am surprised that our politicians have not taken more advantage of this. They could raise corporate taxes, in which case the taxes get passed on to the citizens through higher prices and at the same time the politicians could look like heroes.

Thank you for your wonderful site.


I'd like to let you know that I have started a time line of the credit crunch on my blog that I will continue to update. My intention is to have a place people can go to and see the salient highlights from all the major financial institutions as it relates to the credit crisis: Ed's Forum. I would love to get your feedback or comments on my blog articles as I continue to flesh it out.

Michael S.

"42 million out of 130 million filers pay zero Federal tax."

I think this statement's a bit wide since the gas tax, which is 18.4 cents per gallon, is paid by everyone. Additionally, federal taxation-- if a corporation actually pays it, and/or accounting fees, are ultimately paid off by the consumer.

i.e. as Ron Paul noted, "federal income tax" only accounts for the last 7 years, or so, of federal government budget increases. thus, the rest of it is paid off with other forms of federal taxation and debt.

J. O.

You've made a slight error, or at least not been clear in a way that sort of gets my goat. There are people who pay no federal income tax, but do pay social security, FICA, medicare and other taxes. There is a big difference between paying no "federal income tax" and paying no tax.

My taxes take years to file (really) but I've generally made around a million buck a year the last few years. Because it's usually capital gains, if I did owe taxes it would be at the low 15% rate. Because of Bush tax cuts and my losses in the nineties, I haven't pay a penny of federal income tax, social security, FICA or medicare.

As a percentage of income paid, I still think the poor are getting screwed.


I am a regular reader of your blog and usually enjoy it. It looks to me that you are often right on the mark. The first part of today's was, in my opinion. In fact, it reinforces my long held contention that voting in our country should be on the corporate model. I would have a person's number of votes, instead of just one, be directly related to the amount of personal income taxes he or she paid. Possibly one vote for every $1000.00 paid in personal taxes that particular year. That way those who contributed the most would have the most say in our "Democracy".

You and most others who complain about corporations not paying enough taxes are way off in my opinion. I'm sure there are "tax shelters", but it seems like these are always only unclearly defined, with no specifics. Many corporations pay little or no taxes because by the end of the corporate year the income has moved to the employees. This is very common with smaller corporations. The tax rate on individuals is much higher than on corporations. For instance, most employees pay at least 14% of their income, if I remember correctly, just for Social Security, which we all know is just another tax. Why have the corporations throw money down the rat hole of the government when it could be used more productively in R&D or other forms of exploration and advancement?

Bill Murath

I do agree with the lower class having to pay something. But the approach I like is would a poll tax of say 300.00 (if you paid no federal income tax). Then people would have to decide if it was worth it to fork over the dough for the federal benefits they receive. The downfall of Democracy's and Republic is when the realize they can vote for largesse at the expense of the few.

I would also like to see about a 75% tax rate for hedge fund people making over say 250K a year. Such a worthless (to society) form of income and horrible use of capital. The recession/depression we are in is really a good thing. When the middle to lower folks you spoke of yesterday realize there are no more bubbles for the illusion of prosperity they might not be so mollified. They will have to retrench and decide where to spend their scarce resources. With better more prudent choices will come positive business growth. They might even demand more money at work to make ends meet.


RE: Did the U.S. Cut a Deal with Iran? (April 11, 2008):

Your latest article has voiced exactly what I have been thinking since mid last year. The surprising thing is, among even the internet antiwar press I have not seen anybody else say this but you.

It is quite obvious that the US cut a backroom deal with Iran middle of last year. It is also quite obvious that they only did this once they realized the surge was not going to work and we would eventually get rolled with 100+ casualty figures per month.

At that same time I saw military bloggers claim they had stopped patrolling altogether in the volatile areas. This was backed up by some Arab news reports where Iraq’s civilians claimed the Americans had just disappeared from their neighborhood.

Also notice that as soon as this deal was done the Pentagon’s anti Iran press statements dropped off considerably. Sure they still had their weekly Iran condemnation, but the venom just was not there compared to early 2007.

Ominously, the venom has now returned and I do not know why. What are your thoughts? Perhaps with the new Iraq security gains the US military feels it can go on the offensive against Iran and break the backroom deal.

Steve M.

Great scoop! Maybe? Hope you are right although you are probably attributing wayyy toooo much intelligence to the current administration and I do not see how this fits with their agenda at all unless Cheney really has been sidelined and destined to do pictures of himself fishing for now.

Anyways the real reason that I am wiring is it is so interesting that your viewpoint pops up now when we have the great piece at Day of Infamy: The March 20, 2008 US Declaration of War on Iran and Gerorge Friedman’s report yesterday (via John Mauldin) “A Mystery in the Middle East”. From these points of view it appears that things are escalating.

All I guess a person can say is weird! On the one you hand you have the convincing evidence that you suggest and the great research and speculation from these other sources based on other concrete events. This world is an interesting place.

Grant P.

I always enjoy (although not always agree with) your daily blogs. It's one of the first things I do every morning. I read your recent entry on a suspected deal between Iran and the U.S. While some people might be horrified at such a deal, I've always thought that "making a deal" shows leadership. If Saddam Hussein had the foresight in 2001 to make a deal with the U.S. he would still be in power. If it's true that the Bush administration made a deal with Iran, I would take that as a step forward from their usual saber-rattling and damn-the-torpedoes attitude.

Harun I.

I agree that there was probably a back room deal (the Madhi Army standing down). However, from a historical perspective the down turn in US troop deaths appears to be nothing more than cyclical and therefore I caution against viewing them as permanent.

We've seen from the violence in Basra and the spike in troop deaths that any agreements are tenuous. The power struggles will continue.

Al Sadr has shown his influence once again. In my opinion, his recent remarks about the government having no say in the disbanding of his militia but that he will do so if the senior clerics give the order suggests that the government is perceived illegitimate and that a government centered around the clergy (religion) may arise in the aftermath of our departure.

It may be cynical (so be it) that this is more about the election cycle than anything else. McCain needs to be able to show improvement in Iraq or his campaign is finished. If this is true, the real Iraqi power brokers realize their ability to influence our political process.

Admiral Mullens said that no reinforcements could be sent to Afghanistan because we are tied down in Iraq. While presenting these facts to the public may keep us "informed", strategically it is a blunder. Our enemies now know by our own hand that our position is inflexible. Our enemies know they are at liberty to ratchet up the pressure as they please. They are in control of the fight.

Our enemies are in control of the fight and are exerting undue influence in our politics. It is hard to make the argument that we are winning.

second email:

I agree on Iran. In my opinion there was a time corridor in which military action was feasible. Perhaps Admiral Fallon's job was to prevent any military action during this corridor. Having contained Thing 1 and Thing 2, at least for now, he resigned. The election cycle put an Iran attack off the table if a Republican candidate is to have a reasonable bid for the White House.

How Iran and the Shiite militias conducts themselves may be determined by what happens in the Democratic party. If Hilary, then essentially there is no advantage over McCain. Hilary very likely will not bring the troops home and she most likely will not negotiate with Iran ("Bush/Cheney Lite" was an accurate evaluation of Hilary). If Obama wins the Democratic nomination Iran may see someone with whom they can negotiate and therefore ratchet up pressure in Iraq to make McCain look bad.

If Obama wins the presidency and can negotiate accords to end the power struggles and effectively transition our military presence out of Iraq then even in a down economy he may be able to pull off a second term. Because of this, who he picks as Secretary of State will be critical.

On that note, many feel that Dr. Rice has not done a very good job. To some degree that may be true. However, perhaps we should consider that she has had her hands full stopping Dick Cheney from moving his agenda forward (attacking Iran). She cannot be all places at all times.

The chaos till exhaustion theory has something to it. It was the theory behind the Iran/Iraq war intervention. But we must assess the reasoning. Is it to our benefit? A positive argument could be made.

When we discuss oil we must understand that strategically military consumption comes before national general consumption. Without access to oil war fighting capacity is severely limited. The history of modern warfare supports this. If Iraq is pacified there would be no reason for US military presence and there is no guarantee that Iraq will sell us oil after should we depart.

The rather overt grab has undoubtedly made Russia nervous. Add placing a missile system near their country to the mix and they are really nervous.

The cold war over ideals may have ended as GWB has said. But the cold war over resources may have quietly begun.

Dennis G.

I think you are wrong on this one.

I believe the US bought off Sunni militias with money and/or weapons during 'The Awakening' (excuse me I have to wipe vomit from my lips) to arm them against Shiites. The newly beginning assault on the Sadar militia stokes civil war amongst the Shiites to weaken them. No one must be allowed to survive without US approval. All will be betrayed over and over again as always.

I think chaos continues to serve the West in Iraq (creative destruction). At least better than defeat.

Love your economic post. Deep stuff.

Jim Twamley

Cost of Iraq War: $3 Trillion;
Cost of Solar Plants to Power all 105 million U.S Households: $500 Billion

(April 10, 2008)

OK, I nominate you for a Nobel Peace Prize for this article and the idea. Tremendous!

Thanks - Jim Twamley, Professor of RVing (RV Now blog)

(We RVers are obviously partial to solar power)


I sent your today's article on solar vs. OIL WAR to everyone, even my conservative parents who will send back a two word response referring to bovine excretion. (They did send me a Rush L. message this week and I have to balance it.) Your comparison is powerful and indisputable! Keep up the good work!

2nd email:

One reason I was so pleased to read your essay about the cost of the WAR FOR OIL, was a comment I put on a yahoo group: Come to find out Saddam Hussein was JUST THE GUY to run an unstable country like Iraq. He kept the Taliban in check, Iran at bay, a civil war down and murdered a heck of a lot less people than Bush has.

Saddam- 250,000 Bush 604,000 (4,000 our own young people) The numbers are fuzzy but the range and ratio about the same. Saddam took 20 years to kill that many and Bush about 5 years. Diplomacy would have kept the oil costs down, saved the lives of roughly 354,000 human beings, trillions of dollars, and world World respect for USA.

Michael F.

I am an occasional reader of your blog and find your analysis of a wide range of issues penetrating, witty and full of useful information.

I thought I might throw out one key issue that could help in evaluating electricity generation. The money quote from the SF Gate article: "A one-megawatt power plant running continuously at full capacity can power 778 households a year, according to the U.S. Department of Energy."

True – if continuously running. The problem is that PV Solar, at best, has a capacity factor of 30% - and in most parts of the country substantially less. Capacity factor is the percent of time the plant is up and operating, generating electricity. For coal, this is usually around 60% - 70%, for nuke over the last decade or so it has been 90% (93% over the last few years) – up from 60% back in the early 1980’s.

The numbers vary for hydro, natural gas, etc. but you get the point. So you would need to that 250 MW number by 0.3, at least, to get the true net power output. Now, that still gives you roughly $1.5 trillion in outlays as opposed to the $3 trillion for the war, but we are still way ahead.

Solar Thermal, especially using liquids with excellent heat transfer characteristics like Na-K (first developed for sodium-cooled nuclear reactors) or molten salts looks quite promising. A key issue is getting the costs to scale with the power output. Spending $1 billion for 250 MW of output with a limited capacity factor (maybe they can get it up to 50% if you believe some of the research) is a lot of bucks for relatively little bang. Another issue is the costs for power distribution on our creaky grid from sunlight rich areas to sunlight poor areas – but we should be pursuing it as well.

I don’t mean for this email to sound nit-picky, it’s just more of a heads-up. I strongly believe we need to be pursuing solar, wind, landfill methane, and new nuclear to balance out the energy production mix.

Thanks for your time and your ongoing excellent work.

Michael W.

Only briefly skipped through it but did not notice you taking into account the following:

Turning all solar would definitely bring about huge reductions due to cost of scale and progress through injected money.

On the other hand the figure of 3 trillion is used a little loosely as I'm sure it does not look at what part remains or is invested in the US and US jobs. The Iraq war may have a bill of 3T but that includes paying servicemen who get paid in times of peace too, defence contracts that create jobs and keep money at home, US companies and employees live off that 3T too.

Would enjoy some more articles on the price we pay for things, even comparing the ridiculous pricing of everyday goods we consume or buy, might help people to realise they should think about what happens to their $.


I have just read your essays that were picked up on LATOC. Truly excellent. Pareto Principle: Triggering the New American Revolution (April 8, 2008)

I agree that the formerly middle class will be pissed when their sense of entitlement is compromised and they join the working poor. However, without a sense of camaraderie with the rest of the working poor, I fear that they will band together and just be more ruthless and self-serving. Somehow, their anger needs to be focused on the real perpetrators of this global rip-off.

For those who council "Write to your congressmen" or "protest in the streets against the war/Bush/etc. I have a standard reply:

"Demand change, or "write our congressmen." Yeah, right. The polls have shown them repeatedly that the public wants the war to end. Have they ended it? No.

I write and have written to my congressmen repeatedly for years. It has virtually no effect. We have a congress that has almost 200 million of their own dollars invested in the war machine. So, you think us whining about it will help? Think again.

The only tactic remotely effective would be to end our complicity in the whole set up. Don't like the corporate controlled fascist mind machine? Cancel your subscription to cable or satellite. Rent movies on Netflix. Put up an antenna and watch PBS if you have to. I've done it, so can you.

Don't like the way the banksters are robbing us blind? Use a credit card only to order things on line and pay it off each month. Don't pay interest. Period. I've done it for several years. Don't invest in a 401K, don't buy stock. Save your money or purchase gold with it. My gold has doubled in value. The silver has gone up x3.

Object to the outsourcing of our manufacturing jobs? Buy stuff at thrift stores or from locally produced tradespeople or artisans. Never enter a Walmart. I have not been to one in almost ten years.

Don't like Frankenfood? Grow your own in your backyard. We have a garden and six chickens. I live in a small town in central Oregon in the mountains where it is not freezing only 30 nights a year. But, we grew all our own veggies and have 3 dozen eggs per week coming from our backyard. Next we are going to raise rabbits for meat. We're planting switch grass now for feed.

This country runs on money. MONEY. It's the only thing that matters to these greedy miscreants. Period.

So, unless you put your money where your mouth is, you are wasting your (and our) time.

Want a revolution? It is simple:

End your complicity with what is going on. We don't need militias and Molotov cocktails. Shun them and watch them brought to their knees.

Craig M.

RE: Will Delinquencies Trigger a New American Revolution? (April 7, 2008)

As Disraeli commented many years ago "there are lies, damn lies, and statistics". As any well-read person in economics knows the USG is a tremendous liar in regards to its CPI data series. To use the USG's CPI numbers as a basis of your Fibonacci analysis I believe significantly distorts your analysis.

I assume you are familiar with the work of John Williams in his Shadow Government Statistics report (www.shadowstats.com)? John is a retired analyst from A.M. Best and has been taking USG data and restating them to historical methodology for close to 20 years. In his latest newsletter Mr. Williams calculates M3 growth at about 17% and CPI at roughly 10%.

Using John's SGS CPI Inflation Calculator (see below), your $175,000 in 1996 USD's becomes about $433,700 in 2006 USD's. On a going forward basis your may wish to use 9% - 10% for future inflation.

While not a frequent reader, I find your commentary interesting. As we all struggle in this Kafkaesque world, the difference between real and nominal changes becomes increasingly important. I hope you take my comments as constructive criticism.

Peter N.

Good blog today…the only thing that struck me reading it is this: given the righteous anger of the middle class which is coming ( and maybe former upper middle class ), will their anger be legitimate? I suspect you won’t be one of them, because, like me (self-employed, with employees ), you know that the ultimate truth is we all make our own bed, and must learn to lie in it….whose fault is it that I feel entitled to upper middle class status and perqs? Whose fault is it that I will rant and rave and fume when this comes? Isn’t it really our fault? We gladly drank the koolaid when the getting was good, and we got the govt. we deserved…we took the loans out, we overspent beyond our means, including via our govt…we allowed our public schools to rot, we allowed ourselves to be intimidated into being the only advanced nation with totally out of control borders, with millions of illegals pouring in yearly…fighting a war with a voluntary army which is predominantly fought by the lower class? now we cry for our mommies? we have only ourselves to blame…when the anger comes, it will be hypocritical…the party that began after WWII, ushering in the United States’ golden economic era, is finally over….this time it will really hit the fan.

Thank you, readers, for such thoughtful contributions.

For more on this subject and a wide array of other topics, please visit my weblog.


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