Stimulus Package, Part I

There has been a great deal of coverage of the proposed economic stimulus package in the news for the last week or so. Today's news is that the bill that passed the House will not pass quickly through the Senate, largely because the esteemed Senators do not think there is enough being done. From my admittedly superficial research, it looks like the Senate wants to load on a whole bunch more giveaways onto the plan. This is because handing out $150 billion is not enough to satisfy the Solons of the Beltway.

If you're going to give a bunch of politicians a chance to hand out other people's money, you better be prepared to jump back quick to avoid getting trampled. Now, I don't want to seem as if I object to getting handed envelopes full of money. I love a windfall as much as the next guy, and my household's share of the swag would be about $1200. But frankly, I don't think this stimulus is going to work. To paraphrase Tennessee Ernie Ford: "You load $150 billion, and what do you get? Another day older and deeper in dept...I owe my soul to the Chinese government." After all, where do you think the money is going to come from?

The stimulus plan won't work for two reasons:
1. The current ecomomic malaise is being caused by structural problems in the financial services and banking industries, which in turn were triggered by the collapse of the housing bubble. Six hundrred dollars per person ain't going to reinflate the housing market. It is only enough to cover the increased mortgage payment on a subprime loan that resets this year. For a month. The next month, that home owner (sorry, that mortgagee; it's actually the bank that owns the home--poor bastards) will be unable to make the higher payment and then he starts to slide into default.

2. The other problem with the proposed stimulus is that since the US is already running a massive government deficit, another deficit piled on top of that will have little to no effect. For a Keynesian stimulus to work, the assumption is that government spending is in balance with revenue. The burst of deficit spending in a stimulus package jumpstarts economic activity, leading to a virtuous circle of economic growth. I'm going to say a little more about Keynesian theory in my next post.

How is a Ski Vacation Like Valhalla?

In the old Viking religion, the highest honor was to die in battle. For those warriors "fortunate" enough to meet their end this way, they were rewarded by getting to spend the afterlife in Valhalla, which was the residence of Odin, chief of the Norse gods.

In Valhalla, every morning the warriors would wake up, don their armor and weapons, and march out into the snow covered fields surrounding Odin's hall. Then they would do battle against each other all day long. At the end of the day, Odin would come forth and miraculously heal all of the wounds suffered during the day of combat. Then all of the warriors would march back into Valhalla, and spend the evening drinking and feasting before falling asleep. The next morning they would awaken to begin the process over again.

The modern ski vacation is something like that. In the morning you get up and put on your gear for the day. Then you go out, get on the ski lift, and spend the day doing battle against the slopes of the mountain in the cold and the snow. At the end of the day, through the power of modern analgesics, you are healed of your aches and pains. Then you go out for dinner at a three star restaurant. And the next morning you do it all over again.

Tax Preparation for Fun and Profit

So tonight I went to a meeting of the local APICS chapter (American Production and Inventory Control Society). The speaker was the head of the local H&R Block office. What does tax preparation have to do with production and inventory control, you may ask? Nothing, but like many professional associations that have regular meetings, they need to find speakers for the meetings, and the H&R Block people offered to talk about taxes for free. Usually there is a sales pitch associated with the talk, but the good speakers will give out about 80% useful information, 20% sales pitch.

I've been using TurboTax for about 7 years now, and the program walks you through your taxes pretty thoroughly, so I wasn't interested in hiring a tax prep service. The presenter did have some interesting war stories, however.

Anyway, after the presentation, I sat down with the presenter, who was the manager of the local H&R Block office, and inquired about becoming a paid tax preparer. To get hired on, you have to take their tax prep course, follow that with follow on training in December and agree to work a minimum of 12 hours per week from late December to April 16. The class only costs about $200, but the classes require 100 hours of classroom time, and you have to pass tests at the completion of each class. You pass the tests, they'll put you to work.

The compensation plan works as a draw against commission. The first year you don't have many clients, so you'll probably be stuck with the draw. According to the office manager, that works out to be about $7.50/hour. On the downside, that is not much money for a pretty big investment on training time. On the upside, they market heavily and bring the clients to you. Over time you can build a base of clients, and with experience you learn to handle progressively more complicated tax returns that are more highly compensated. Also, although the money is not good, it beats putting on a hairnet and practising "You want fries with that?"

Most personal finance blogs focus on cutting costs, reducing expenses. This would be a way of playing offense, increasing my income. Not an availible option for this year, however.

And so it begins...

For a couple of years now, one of my New Year's resolutions has been to start my own blog. At one point I was going to name it "Everybody deserves my opinion," but even I have some small reserve of modesty. Seriously, I do think that sometimes I come up with stuff that is worth writing down and sharing, and a blog is the perfect way of doing that.

Although I expect this on-line journal to evolve over time, I'm going to start out with a focus on business issues and finance. I make my living as a manager at a samll manufacturing firm, and I have always been fascinated with business stories and the interaction of business and the wider world in which we live.

I have been reading a number of other finance blogs recently, just to see what is out there. I think I'll have a different spin on things than most of them. I was a little surprised at how much focus there is on frugality and saving. I was absolutely astonished to see how many members of the finance blogging community are carrying negative net worth. I've never had a negative net worth.

Not only do I have positive net worth, but my emergency fund has six months worth of cash, I invest regularly in my retirement funds, and I pay off my credit cards in full every month. (God, I sound full of myself, don't I? I can hear you now, dear reader: "What's this SOB want, a medal?")

My personal finance issues are more in the vein of how do I accelerate the process of increasing my net worth. Instead of reducing my spending (playing defense), I intend to struggle with the problem of increasing income (playing offense). But I also want to write about my reactions to the bigger business issues in the news these days.

So I intend to do a drunkard's walk of topics at first. After awhile, we'll see if a sharper focus arises out of my random musings.