Sunday, November 23, 2008

Finance/Engineers

Referencing my old post here. I saw a great graphic today through Paul's blog that shows the historical graduation totals of Finance majors vs. Engineering majors. Notice the large shift in the late 1980's.

engineers

Should have listened to Peter Schiff

So I'll be honest, until earlier today I had no clue who Peter Schiff was. However, after watching the video below, I can easily make the decision that if I needed an economic/financial opinion, he would be the first one I would go to.

Arthur Laffer and Ben Stein would probably not be those guys. And as for Ben Stein, this video although not a full indicator of his intelligence or knowledge, does make him look a bit bad in hindsight.

Easily the best historical finance related video I have seen thus far.

Wednesday, November 5, 2008

Moving On

Imt's done. It's finished. Now we can turn around and get back to what we are supposed to be doing. I want to touch on a few points in regards to the mass amount of believers that this election essentially means a turn for socialism. As the most important point of disclosure that I can give you, I voted for Bob Barr. There is a list of reasons I chose to vote for Bob Barr, which we can dive into at another time, but at the least when reading the following just keep that in mind.

Let's start with the Presidency and the non-stop 'historic win' that this election has been categorized with. I agree with the historic, however, I want to remind the readers of the initial blog post I wrote in regards to expectations. My parents moved our family to this country for the purpose of us having better opportunities in this lifetime and a fair shot to achieve our dreams such as our neighbors and friends would have. The US is not perfect by any means, but perfection does not exist in this world, therefore in my view and my opinion the US is the greatest country in the world. That being said, yesterday's election was exactly what this country was about. In my mind, sooner or later, the expectation of someone other than a white male holding the highest position in this country had to happen. We constantly plow into our heads, that diversity and anyone achieving what they wish for is why this country is around. Remember we are mostly immigrants here from around the world, the best compilation of immigrants that are driven, motivated, passionate and fueled with a hunger to better our lives in this generation than from the generation before. Yesterday was simply a wake-up, a quick kick in our tuchus to remind us that this is why we are all here. I congratulate President-elect Barack Obama on achieving that, in today's world we should expect victories like that!

Now, let's move on to the Senate. As it stands right now, it is 56-40 according to CNN. By the looks of the other elections in Oregon, Georgia, Alaska and Minnesota they should all go towards Republicans, however, the race in MN is fairly close to call and may need a recount. Let's just assume its 56-44. I put together a table below of the historical Senate Congressional seats

Year
Republicans
DemocratsCommentsPresident
1992
44
56

Clinton
1994
52
48
Party changes made it 54-46, then a resignation made 53-47
Clinton
1996
55
45

Clinton
1998
55
45
Became 54-46 after death of R-Coverdell (GA) and D-Miller (GA) was appointed
Clinton
2000
50
50
51-49 for Democrats after a caucus switch
Bush
2002
51
49

Bush
2004
55451 Independent w/Dems
Bush
2006
4951
2 Independents caucus w/Dems
Bush
2008
44
56
Not Official
Obama
So it looks like after the split in the Senate will be about the same as it was during Clinton's first two years. After I write this, there may be a change and MN could have democrat along the numbers to move slightly to 57-43. As long as it doesn't hit 60 I believe everything will be fine. I am strong advocate of checks and balances, in my view so long as there is a balanced and fair way to decide legislation than things should be alright. However, when one party gets an advantage to 60 and passes whatever it wants, then there is a bit of a worry.

I would post the House numbers, but they pretty much mirror what the Senate looks like. I want to point out the 1992 election. We can see right off the bat that Clinton came into office with a 56-44 Democratic edge in the Senate and 258-176 edge in the House. Without a doubt the administration quickly went to work on a fair amount of Democratic agenda. If we remember, Hillary Clinton made a staggering effort to achieve universal coverage via a national health care plan for the US. Although originally the country and administration liked the idea, ultimately due to the conservatives, the AMA and health insurance industry it failed. This was two months prior to the 1994 election. It became a killer for the democratic party in the House (lost 54 seats) and the Senate (lost 8 seats). It showed what democracy was made for. If you don't like the way something is going, you have a right to change it. From there President Clinton worked with a predominantly Republican House and Senate for six years. As far I see it, the 90s turned out to be quite a decent decade.

The way I see this administration shaping up is fairly straight forward. We have a terrible economic situation at hand for the next couple of years. Our government's main focus will be the economy. After that there will be a focus on Iraq and energy independence. I do not believe (and I can be wrong) that after all of the immediate issues that they have to work on, they will be able to at the same time throw together a universal coverage health care plan. I have a hard time seeing exactly where the money for that would come from (we are spending close to a trillion dollars on TARP). Now if they can work out these issues in a fairly bipartisanship matter, than the 2010 elections may allow the democrats to keep control. However, if they decide to move too far to the left on a lot of issues, health care included, then without a doubt they will lose the House and Senate to the Republicans. In my mind, that's great as well! Nothing better than a Democratic executive branch working with a Republican Congress.

I will consent to one thing, taxes will go up. That's inevitable. I believe they will eliminate the Bush tax cuts and go back to the Clinton numbers from the 90's. Take a look at this table:
YearIncome Brackets
First Bracket
Top Bracket
Source
1971-198115 brackets14%70%IRS
1982-198612 brackets12%50%IRS
19875 brackets11%38.5%IRS
1988-19903 brackets15%33%IRS
1991-19923 brackets15%31%IRS
1993-20005 brackets15%39.6%IRS
20015 brackets15%39.1%IRS
20026 brackets10%38.6%IRS
2003-20086 brackets10%35%IRS
Honestly, we are talking about a movement of 3-4% points for the top bracket, which isn't the end of the world. In fact the movement of taxes to a higher level will be irrelevant to innovation and production. Never has a potential entrepreneur decide not to build a business because the tax bracket was too high. Heck, based on that idea, Sweden, Finland, Norway, France, Israel, and Australia would not even have entrepreneurship, but they do and it's as thriving as ever!

If you are familiar with Hauser's Law, then you would know that no matter the amount of different tax levied on individuals, we have consistently had our tax revenue around 19.5% of our GDP. That leads us to a conclusion that the only reasonable way to raise the amount of tax revenue the government has is to focus on raising the GDP. Let's hope this administration does that.

Anyway, I'm not a political consultant or analysts, so a lot of these thoughts although may be my own, may not be right. Time will tell. From my personal opinion, I hope the administration works on the following issues (this isn't a conclusive list):
  • A finite table to leaving Iraq.
  • Tackling energy independence in the following manners: 1) Significant capital expenditures to update our energy grid, 2) Extending federal [wind] credits for more than 1 year at a time, 3) Working with states to encourage them to give additional state level credits to using renewable energy
  • Fix the nation's air traffic control system, it needs an update like our energy grid.
  • Allowing stem cell research and use to become more available.
  • Reworking the immigration system, in particular the H-1B visas, we need the best and brightest in the world in US! That is what built this country.
  • Our primary education system needs help as well. Not sure how much I want the federal government involved in this, but nevertheless the initiatives need to happen. And maybe more organizations like Teach for America are the answer.
That's just a start. At the same time, I hope the Republican party sits down and figures out how they can find some new invigorating candidates that they can be proud of. They also need to start embracing the power of the internet and how useful it can be in fundraising, this was clearly a huge help to President-elect Obama.

I am an eternal optimist. Life is good and life will continue to be good. You choose how you want your life to be, that's the American Dream.