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Not All Scenarios/Ideas Will Lead To Inflation.

Friday, April 8, 2011 - 9:44 AM
I'm not suggesting that the author's ideas will be implemented.  But, if they were, wages would stagnate or go down.  Corporate expenses would decrease (in taxes, anyway)...  States, Cities, etc would have less expense.  Even property taxes could decrease in this scenario.



Alternative Mish Proposal

I am all in favor of reducing the deficit. Indeed Ryan's plan falls way short of what is needed. However, if the goal is to create jobs, the way to do that is fix structural problems. Rand Paul has the right idea with right-to-work laws. We also need to scrap Davis-Bacon and all prevailing wage laws.

Those proposals would allow cash-strapped cities and states to rebuild infrastructure at less cost or (and this is key), hire more workers for the same cost and get more work done.

My four proposals for creating jobs are
  • National right-to-work laws
  • Scrap Davis Bacon and all prevailing wage laws
  • Set corporate tax rates substantially lower in the US than overseas
  • Eliminate entire bureaucracies such as the department of education and the department of energy

My proposal is far better than Ryan's proposal in terms of creating incentives for bringing jobs back to the US and for helping cash-strapped states rebuild infrastructure.

However, there is no chance what I suggest would come close to lowering the unemployment rate to 4% in 4 years either.

Let's see what if anything the Heritage Foundation has to say about those ideas.

Mike "Mish" Shedlock

MikeMike327 posts since
Feb 22, 2010
Rep Points: 876
1. Friday, April 8, 2011 - 2:21 PM
Mish makes a good case that unemployment is going to stay high for quite some time. That should put some downward pressure on inflation and unfortunately downward pressure on interest rates.

Ken TuminKen Tumin5,471 posts since
Nov 29, 2009
Rep Points: 125,634
2. Saturday, April 9, 2011 - 6:37 PM
I have 2 examples and could give you many more of non union jobs that turned into a disasters in our area. My husband was business manager of a union. A bid came in for a college building. The bid between the lowest two were a union and a non union contractor. There was $100,000 difference between the bids. Of course the non union as low bidder got the job. Just as the building was done it was discovered that the contractor was not paying prevailing wages (average of wages in the area) to all employees and even falsified payroll sheets.  After a state investigation back wages were paid that totaled over 3 million dollars on this multi-year project.  Who do you think was pocketing the money? That original $100,000 difference was a lot smaller than over the millions that the workers were not originally given.

The second example was a bank job that was by invitation only. The bank had expanded to the city north of us and wanted only contractors that were not customers to bid on the job even though the job was going to be done in our town 60 miles south. Of course my husband transferred the pension money out of the bank because they were not allowed to bid on the project even thought they banked with the bank. The project was finished. The computer room had pipes beneath the cement floor. The computer room has to be temperature and humidity controlled and there were many leaks and it ruined many of the computers. The union was called in to fix it. It took 3 weeks of working 24 hours a day and it cost it a lot of overtime money and a lot of more money to move and replace the computers. 

A non-union contractor won the bid for a big drug company in our town. The union was called in when the drain pipes for the chemicals to connect the two buildings were 4 foot below the other one  when it came time to connect them. Of course the union was called in to fix the leaks and rerun the drainage pipes. I could go on.

Another large pizza chain hired a non union contractor for their building and within 3 weeks after opening they had a huge fire. It was something about built up grease in the sheet metal oven venting that was not put in properly.

I worked at the above bank and we had a very old heating system that they called non union people in to service it several times a year when it broke down. I finally told my boss to call in some union guys. They fixed it in one trip and it worked for 3 years. The union contractor told them to think about replacing it soon as it was in bad shape. When they replaced it they got non union contractors and they even used not sheet metal duct work  but that flexible pipe that wears out in just a few years, usually under 10 years. Also when they hired non union employees to remodel and put in a new bathroom the drain pipe in the basement for the toilet had a 90 instead of a Y and of course it plugged up all the time. Not sure if inspections were done or not. We had to go to the basement to get the night deposits out of the safe and of course being a plumbers wife I saw it right away and told my boss. They did not have the pipe rerun but paid to have the pipe unplugged all the time.

When non union employees are tested to join the union during open enrollment, even though they have journeyman licenses most do not test beyond a second year apprentice and have to go to school for 4 years to pass the union journeyman test. Most plumbers can pass the state test to get their license after 2-3 years but still have to go to school for the 6 year program to pass the union journeyman test.

Union employees go thru constant schooling to upgrade their skills, even after they are union journeymen whether in welding on various types of metals, glass, cast iron or inconel etc. They up grade their skills even in CPR, blue print reading, ordering supplies in a cost efficient way for a job they are running, learning how to bid a job, running a job, learning the new codes, laying out piping. They go to these classes on their own time with no pay to upgrade their skills and the classes are paid for by their union dues which also pays for their certified instructors.

I could give you many more examples of non union contractors that stole money from their employees 401K's and bought paintings for their office, one that was in trouble with the IRS and used an off the shelf tax ID number of a restaurant to stay in business until his accountant got frightened and went to the law when the contractor would not turn himself in.

I have a cousin who was in World War 2 and when he got out moved to our city and moved in with us. He taught him self engineering while working. Took the test and past it. Went to work for a big firm and taught himself to be an architect got his license then worked for another firm and designed our town library that had the only planetarium around  and then taught himself to be an electrician and took the state test and went to work for a union contractor was tested and joined a union but had to go thru part of their apprenticeship program. He ended up running the job when the library was built. After that was done he and his brother in law bought an electrical company.  They had the employees tested and then  turned it into a union shop so that the employees would get more training. My cousin came to live with us when I was very young and I had not started school yet. He died many years ago and the shop is still union and I am retired.

I am not sure what some people have against union employees but it is like going to a doctor that is not certified in his specialty.  

Ally6770Ally6770937 posts since
Jan 16, 2010
Rep Points: 2,727
3. Sunday, April 10, 2011 - 12:07 AM
Ultimately, I find most conversations in the union vs non-union debate, come down to people being frustrated and fed-up with corruption, work ethic, and/or incompetence/ignorance, regardless of the debater's side/position. I have heard sound arguments from both sides.  And I have worked on both sides.
MikeMike327 posts since
Feb 22, 2010
Rep Points: 876
4. Sunday, April 10, 2011 - 1:39 AM
I have worked as a union steward and actually reported my manager when I discovered he was stealing. He was fired. Worked in a bank and turned them in to the FDIC and SEC also when I saw wrong doing. Worked as a township treasurer and turned them in to the state when I saw  supervisory shenanigans. I have had my tires slit, had the bolts taken out of the big satellite dish so that it fell to the ground when it was moved from Galaxy 5 to Satcom 3.  Have received intimidating and threatening phone calls all hours of the day and night but only when my husband was out of town and they would come and shine lights in the windows in the middle of the night trying to scare me. It all stopped one night when my husbands trip was cancelled they came to the house and they were caught. But in 45 years of working have never worked with a union employee that was stealing or doing things that were illegal not even cheating on a time card. No one is perfect and am sure it can and has happened only I never have seen it. I believe employees and co-workers are like your children. You let them know what is expected and what will not be tolerated and there are no problems. And also remember to say thank you and give extra recognition for a job well done.  I actually supervised 15 high school employees at a part-time job I had while I was in 10th grade and even made out the schedule. Management could not handle all the Friday night games or Saturday night dances that different kids wanted off for. I took over and we had no problems.

 Not sure that the lowest road builder is the best for the job either. We took the lowest bid in the township when I was on the board. He lived in the township and they wanted to keep the job local. When the road in front of my house was rebuilt and paved it was a that non union shop of the man that lived in the twp that bid and won. They did a horrible job and in fact when it came to paying their personal property tax for their equipment they did not pay it. I did not know it was their equipment. I called to Indiana where the bill was sent and they told me who rented the equipment and they told her that the piece of equipment was used to scrape top soil off this road contractors field and that it was used for farming and was not to be taxed. I told her that the piece of equipment was used to shave dirt on the side of ditches and it was used in the front of my house and one of the workers actually got it stuck in front of our house and my husband pulled him out. I told her she had 2 weeks to settle the bill with the road company or I would attach the piece of equipment for an auction for non payment of taxes. It was the last road that this company built. When we were through with them no one would hire them.  They were able to build low because they would not pay taxes on their equipment and we found later was paying their employees as independent contractors. The IRS got them later for non payment of several years of back taxes. Guess this confirms your comment above. I cannot stand corruption of any kind. Two of my husband's cases were taken to the state supreme court and he won them both. As for Rand Paul ask him about his toilet that won't flush.

Also when 2/3 of the corporations don't pay taxes how can we have the highest taxes? When small business that deals mostly in cash does not pay taxes how are they taxed so highly?
Ally6770Ally6770937 posts since
Jan 16, 2010
Rep Points: 2,727
5. Sunday, April 10, 2011 - 2:11 AM
rosie43, your examples are compelling.

MISH's views, and the case he makes above, are tied into the inflation/deflation debate.  How that issue (inflation/deflation) plays out, will show which choices in investing made sense, and turned out to be wise or unwise.

Whether or not a long term CD makes sense, hinges on the results of this issue.
MikeMike327 posts since
Feb 22, 2010
Rep Points: 876