The other day I was on the phone with my friend Shannon and we got into a pretty heated discussion about a few issues regarding the current state of the economy and the harm it is bringing to the middle class. At this point in time, there is no doubt whatsoever that, if this is a recovery, it is jobless. Just last Thursday, the weekly initial claims for unemployment went up over 450,000 again. Most economists agree that jobs are being created when that number is about 300,000. We are not anywhere near that number yet.
Unemployment currently stands at 9.6% nationwide with a number of states well over 10%. In fact, Nevada now has the dubious distinction of leading the nation at 14.4%. Go Michigan! You are no longer the worst. Of course, Nevada is where I and some partners have purchased investment property. Needless to say, the property is upside down and my partners and I are not in a position to give it back to the bank. This partly explains why Harry Reid is in the fight of his political life.
So, we have a “jobless” recovery. No arguments there. However, the real debate with Shannon started when she made the comment that businesses that ship jobs overseas should be penalized by the Federal Government. She seemed to indicate something akin to a tariff was in order. I immediately explained to her it is not that easy a thing to do and I used the motion picture industry as my argument. (Fortunately or unfortunately, it is what I know the most about).
Over the past ten years, I have produced more than ten films. Of that amount, only three have been shot in the United States. And, none of those have been shot in Los Angeles. The economic three as I call them were shot in Spokane, Washington, Miami, Florida and Shreveport, Louisiana (“Mad Money”). Other than that, I have had the pleasure of working in Romania, Brazil, Thailand and India.
On none of these occasions was my first choice to shoot outside of the United States. I would love to shoot here all other things being equal. However, the cost of shooting here and the small margins in the independent film industry make it virtually impossible. You cannot make a movie for more than you expect the revenues to be. If you do, your investors will lose money and you will be seeking gainful employment elsewhere. At my age, approaching 50, other employment will not be easy to find.
It is the same in many businesses. I have a relative who recently lost his job of more than 25 years in the die casting industry. (Don’t ask me what it is, I don’t have a clue). When I asked him what happened. It was real simple. You cannot make the product in America for less than it can be made for overseas.
So, to put it simply, and for a strong patriot like me this is difficult, we cannot compete either in the film industry or in many others. Manufacturing costs in the United States are just too high. Maybe it is because of organized labor. Maybe there are other reasons. But, that is the point of other columns completely.
Is the answer as Shannon suggested that we should penalize companies who go overseas? That will not solve the problem. It will just cause the penalized companies to go bankrupt. Remember, you cannot make a product for more than you can sell it. And, these companies still do employ people in this country, just not in manufacturing sectors. So, do we lose all of the jobs still here or accept that manufacturing is leaving and not coming back. As I told Shannon, the answer is not simple whether you are on the left or the right.
We then started debating Social Security. Shannon stated that many of the Tea Party Patriots advocated abolishing it. She simply could not fathom the idea. She felt the Tea Party was way out of line. I again told her. The answer just isn’t that easy. Yes, we have all paid into Social Security. Yes, we are all expecting it to be there for us when we retire. Yes, our parents need it or we may have to support them in their golden years without it. But, what is the answer? How do you save the biggest Ponzi Scheme in the history of mankind?
Social Security is now approximately 75 years old. According to the September 24, 2010 edition of The Tidings:
The Social Security Administration says that about one-third of recipients depend on it for more than 90 percent of their income, while another third rely on the program for more than half of their money. The agency estimates that about 13 million would fall below the poverty line without Social Security.”
However, for the first time in its history in 2009, Social Security revenues were outstripped by payouts. And, projections into the future just have it getting worse. It is broken. And, by 2041, it will be broke unless some drastic measures are put into place such as cutting benefits or raising the Social Security tax even further.
The current employee pays a maximum of about $6,500 per year into it. The self-employed pay a maximum of $13,000 per year. Is it even feasible to raise these numbers more? You can eliminate the cap, but then you would be giving high income earners a 6.5 to 13% raise in their income taxes. That is not pennies my friend. Further, if you do that, you may kill jobs by the hundreds of thousands, because employers pay the other 6.5% that the self-employed pay themselves.
So, there is no easy solution here. Eliminating it is not that answer. And, privatizing it is not the answer. How can I say this simply? Does anyone on the right or the left have an answer? My own party believes that the correct way is to privatize it. However, just imagine you were a senior living on your privatized retirement plan when the Dow went down to 6,500 a few years back. What would you have done? Maybe commit suicide?
Unfortunately, I do not have the answers for these two issues. I would like to open a discussion and see what other people have in mind. Thoughts?
© 2010 by Frank DeMartini. Permission to copy will be freely granted upon request.