Tuesday, August 10, 2010

How Complicated is stimulating the Economy?

Just how complicated is it to help the economy? We know the service industries have been growing over last decade. But service industries require an affluent society that wants these services. The essence of an economy must be product. PRODUCING. You have to create and produce product.

We can safely ignore the economy and focus on more simple models such as business environment. To simplify it further we can eliminate service businesses.

The arguments are this.

Other large parts of the economy such as finance rely on a healthy business environment where people are working, can borrow money and invest in stocks bonds commodities and other instruments of finance.

Service business results when the cost/effort of hiring these services represent the best use of your dollars because your own earning power exceeds the cost of these services.

I think we can agree that heavy and light manufacturing, energy production, and commodity production will drive the rest of the economy.

Core economy is:

1) Commodities such as food, iron ore, gold or diamonds.

2) Energy discovery and production.

3) Manufactured goods starting with primary products such as working machines like bulldozers and automobiles. Then accessories such as air conditioners and wash machines.

In order to produce these products you must be competitive. Today competitive means on an international scale because corporations are very fluid and willing to move manufacturing to other shores.

So how do you become competitive?

Lets take a typical heavy manufacturer such as an auto manufacturer and look at their costs.

What is the list of major costs?

Pennies from Category
each sales

.10 Energy
Heat, Air conditioning, equipment.
.01 Property Taxes.
.01 Maintenance.
.03 Equipment.
.02 Financing.
Mortgage interest
.03 Insurance
Property Insurance.
Liability insurance
.02 Support

.02 Product Liability Insurance.
.30 Material

.10 Salaries
.02 FICA taxes
.05 Health Insurance
.02 Pensions, 401K etc.
.01 Advertising
.02 Consulting
.01 Consulting (Import, Export etc)
.06 Transportation (deliver product)
.01 Travel
.06 Income taxes
.10 After Tax Profit

So that is a general list of categories which a normal corporation must deal with. If we want to encourage production to stay in USA we need to enable an increase in the AFTER TAX DOLLARS.

So what can we legitimately do as a country to accomplish that?


Cut the cost of energy in half. This can be done building Nuclear plants, opening up all natural gas reserves and many oil reserves. Low cost financing with contract/agreements to control the cost of energy.

Remarkably energy is one area we can justify Government control. There are strong arguments energy resources belongs to the citizens. Nuclear is naturally cheaper so they can be profitable with lower costs, as can Natural gas if it is plentiful.

.05 per sale dollar cutting energy in half

.03 Cutting energy in half will reduce the cost of material .03 per sale dollar.
Raw material companies need to be controlled because these resources also are inherently
partly citizens so raw material companies need to pass energy savings on to
manufacturing companies.

.01 Cutting energy in half will reduce transportation. Normal competition will do this.

This one move doubles the after tax profits of light and heavy manufacturing, without lowering taxes or salaries. Providing a cheap guaranteed energy is a good way to supercharge the economy. Cheaper GAS prices will stimulate travel and leisure spending.

Obama and crew are ANTI energy. Costly energy will do the exact opposite and put these companies out of business or out of USA.

Lower taxes would also stimulate, but energy policies are COST FREE.


I own a big house my energy costs are $7000 a year. Cutting that in half gives me $3500 to spend on something else. On the average each household will have $1200 to 10,000 a year for other uses.

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