But those words are just silly. The really harmful ones are ones like “empowerment,” “excellence,” “quality black belt,” “employees are our greatest assets” and the like.

THere is no lack of pure BS in American business.

Jeff

Thanks for the compliment. That means a lot, coming from you.

I’ll think you’ll note a common thread in my posts that most issues are systemic, and require systemic interventions. I cannot count the number of times I’ve been asked to do something for an organization that was just downright harmful because all the factors weren’t aligned. I’ve been through every buzzword phase of the past 25 years and fought, usually unsuccessfully, for a measure of sanity in managing very large organizations without resorting to buzzwords.

Hmmm. Buzzwords. We were talking about MBAs, weren’t we?

JS: The consulting business sounds pretty good, having no inventory and costs of carry. I’ve read your other posts describing your business, will admit that you know your stuff.

I get offers all of the time to work on trading desks, and turn them down, as I freeze if I trade money that’s not my own. I’d never be able to be a consultant as everybody expects trading advice for free…I laugh at that one.

Jeff

I’ve been fortunate to work with some damned fine ones. But I have to say that the smart MBAs I know are badly outnumbered by the monkey-with-a-briefcase crowd. The worst is working in a company where people automatically assume that only MBAs are competent to make important decisions. Worse, not only are non-MBAs not qualified to have business opinions, but MBAs are automatically assumed to know more about communication issues than people who’ve been doing it their whole careers.

Yeah, that was a bad professional experience….

My business is pretty simple, since it’s consulting: cash in, cash out. Some years ago, I got into trouble on the FLSA regarding overtime pay and classification, but I won that one. But, really, the IRS doesn’t come after me because it’s so easy to prove expenses, and that’s really the only issue. No inventory, no capital gains (other than investments), no tax credits.

BTW, I wasn’t asking you to actually bring a coalition together. I just wanted you to explain how you were going to cut the big items with a plan. Frankly, I see no way to do this.

We both share the same need for looking at things that work, The nature of my business requires me to find things that work, all the time. What you are asking me to project is like asking a woodcarver to perform brain surgery because he knows how to use a knife.

As far as not buying what I say….I’m pretty used to that over here.

You said that you don’t like the IRS…..what’s the worst thing they ever nailed you on. I’m sure you’ve spilled some blood before.

Jeff

Thanks for the honesty. I, too, pay quarterly taxes. I have owned my own business for more than 10 years. Part of my business consists of cleaning up other people’s messes, usually caused by ill-considered “concepts.” Do I like the IRS? No. Do I like the paperwork? No. I don’t know of anyone who does.

Jeff, I’m not going to buy anything you say on this matter until you provide a detailed plan, complete with defensible economic projections, and including (and most important, here) a plan to bring together a political coalition to make your plan actually work. Until then … excuse me … it’s only so much pipe-dreaming.

Sorry. I’ve just been burned too many times by “concepts” and “values.” I tend to look for things that actually work.

Just a little history – my dad ran companies for a living until age discrimination caught up with him, but he was trained as an accountant. He was never a CPA, but knew more about accounting after not having done it for 15 years than most CPAs with 20 years of experience, and he caught his company’s CFO(s) in errors (and in falsifying the books too – that was his last full time job before going to consulting) more than once. He now lives on Social Security and Medicare (which, if it were up to me, he probably would be too wealthy to qualify for) plus income from his investments. I’m proud to say that he taught me more about how to be a good manager via osmosis sitting around the dinner table as a family than most MBAs I know.

That last fact scares the hell out of me, when I realize that an MBA is pretty much required to work as a manager these days. If I, an introvert with good coping skills and no management experience, know more about managing people than most MBAs, that can’t bode well for the future.

First off, I think that the size of the government should be drastically reduced. Government should limit itself to the things it does better than what the private sector could do, such as military and the space program. Cut out the welfare, the entitlements, the subsidies of both rich and poor, the pork, the no bid contracts, most of the civil service, half of the agencies. Privatize, privatize, privatize. Cut the government’s size in half…….eliminating redundancies will accomplish much of this.

Why does the government grow bigger even in poor economic times? That makes no sense to me. If we have to suffer, so should the government. If there’s a depression, the government should shrink. As you see, I have an adversarial relation with the government, mainly from a tax point of view.

As far as your question of whether I can provide you with a well-considered tax plan….No, I can’t do that, but then again nobody in Washington can either. I can say that our current tax structure stinks, and that’s quantifiable, not anecdotal. It rewards debt, punishes thrift, success, and stifles economic growth. Our tax code costs people a sizable precentage of their income just to comply, and get all the paperwork done. I have to defend myself every year to the IRS, and that costs me a lot of money even though I report 100% of all income. They nickel and dime me on deductions, and don’t even have the faintest understanding of how to tax some of the income I earn from some of my more exotic trades. The IRS rules by fiat, and I end up going to tax court to fight on a yearly basis, even though I’m right. I don’t know about you,but taxes for me are a gut wrenching burden. I have to pay estimated quarterly taxes, in which they always say I’m lowballing and attach an underpayment fine to that. I have to file my April return and reconcile all of my financial activities. Then I end up writing a huge check on the 15th, and get a deficiency notice about 6 months later….after I’ve already written two huge estimated quarterly checks for the next year. Right now, the IRS still hasn’t finished with my 2005 return(with 06 and 07 waiting in the wings),and I will still end up having to pay more and more.

I would actually like to see the government adopt a VAT, and eliminate the income tax all together.

As far as how much debt is managable, I think that our current debt is a little high, but expressed as a percentage of GDP, isn’t too bad. I don’t know how much debt is managable(The central bankers don’t know either), but when I find that the debt is unmanagable, I’ll short bonds, bills, the dollar, and go long hard assets.

Have you ever gone through a full blown audit, found deficient, and told that you had 29 days to cough up a million bucks and change? It’s not a good feeling.

Jeff

You answered pieces of what I was asking, but not the big picture stuff about which I should have been more explicit. And the Ford thing wasn’t useful, because I was simply using Ford as an example of how cost cutting in low-budget areas isn’t useful.

Here’s my problem with the pie-in-the-sky tax cutters, Jeff: They never seem to actually have a plan that has a snowball’s chance of working. The questions I asked were meant to elicit some sort of workable plan from you, and that didn’t happen.

So, let me try again.

If we can both agree that a budget deficit that eats up 100% of all tax dollars in debt service is a bad thing, then the question becomes: “How many tax dollars should be spent in debt service?” I believe the current number is somewhere in the 33% range, so one out of three tax dollars are spent on paying debt.

Now, it seems to me that, if one is going to propose any sort of tax reform, the first question would be, “How much money do we need to run the government, and will this tax plan provide those dollars?” There are issues of “fairness” (whatever the #@$% that is) in the tax code, as well, but that question, to my mind, must come after the basic one I just put forward.

To answer the first part of the question, one has to have broad agreement from the electorate on how the government should spend money. To the best of my knowledge, there are only three large pots that are material to the conversation: Social Security, Medicare, and the military. Debt service is a fixed and given cost. So far, we have no such political agreement. Until there is one, we can’t even figure out how much money we need.

The second part of the question, then, must start with the current budget. In other words, will any tax scheme yield enough to fund current programs, pay debt, and keep the debt within manageable bounds.

Then, and only then, if we are to cut spending, the pie-in-the-sky guys need to explain exactly, and I mean exactly, how they intend to build a political coalition that will allow them to cut either or all of SS, Medicare, and the military, AND they need to explain exactly how such cuts will affect the economy in the short- and long-terms.

Finally, what amount of debt is manageable? For instance, a depresssion might reduce tax revenues to the point that 50% of all dollars go to debt service, leaving nothing for stimulus without, you guessed it, increasing the debt even more, and maybe even drastically. When does the debt make it impossible for the US to remain a world power, let alone a superpower, with all the benefits that status brings to American business?

So, let me rephrase this: Can you provide us with a well-considered tax plan that has a chance of working?

I like the model of Singapore’s tax structure. That being said, I don’t believe in not paying taxes. I believe that everyone should pay tax at the same rate. I’m being discriminated against by having to pay taxes at a higher rate. than others Even though I derive much of my income from capital gains, I still have income highly taxed as earned income. I believe that social security and medicare should be taxed at the present rate.

I would like to pay a flat tax of 10% and have everyone else pay the same rate. I would like the elimination of estate taxes, as that money has already been taxed when it was earned. I would like to see the capital gains tax eliminated. The earned income credit should be eliminated as it’s a forced transfer of wealth. Progressive tax rates punish success.

As for a balanced budget, I have never embraced one. Government isn’t business and should be run at a loss. Government debt has a very important place in the scheme of things. Business, especially insurance companies, banks, and pension funds need to lend their money to the government and get a guaranteed return in the form of T-Bonds, T-Bills, and T-Notes. Government debt is a kind of barometer, and is the safest investment there is.

As for a coalition to lower taxes, there’s a plurality of businessmen(the people who pay the taxes) in this country who will sign on.

As for making Ford profitable,that would be pretty easy to do. Since the market cap is so low on F(today’s close $6.31, market cap 12 billion and change), sell off the company’s hard assets to Toyota(and have them assume the pension liabilities), and invest the proceeds in US treasuries. Ford would then turn into a giant savings bond, but would earn a profit.

Describing something using the exact science of economics would be difficult, as economics is a grey area somewhere between an art and a science. I’m not an economist, as I just trade for a living. When I need a real economic opinion that matters, I hire a specialist to answer my question. Even then, I take the advice with a grain of salt.

Hope that helps answer your question.

Jeff

Would you vote for a candidate who promised to cut taxes to zero? If not, why not? If not, how much … exactly … should they be cut and in exactly what manner?

Also, please describe exactly how the budget would be balanced now and into the future with a new tax cut. If you are projecting revenue increases because of the tax cut, please use the exact science of economics to predict this increase within $500 million. If you are counting on spending cuts, please provide the following:

1. Exactly how would you go about cutting one or all of the big three budgetary items, Social Security, Medicare, and/or military spending? (As you know, trying to find sufficient cuts in other areas would be like trying to make Ford profitable by cutting free coffee in the break rooms.)

2. In order to cut in any of those three areas, you will need a political coalition, since the President doesn’t get to declare tax cuts on his/her own (at least not yet). Explain how you would forge this coalition, and the interest groups that would comprise this coalition.

Thank you.