Day 21 of the Government Shutdown

How did we get into this situation, where on the 21st day of a partial government shutdown, the congressional constitutional power of the ‘purse strings’, appears to be being run and in control of the executive branch under President Trump?

The current partial government shutdown is the result of The House of Representatives passing a continuing resolution legislative bill on December 22, 2018 to fund part of the government without the $5.7 billion requested by the administration, under President Trump, for a border wall or border barrier with Mexico. (Apparently, border barrier sounds a lot nicer than the phrase border wall.) Since then no progress has been made on passing the funding and the effected parts of the government are still shutdown with only essential personal working, for no pay. It is bad enough that 800,000 government workers are not getting paid; it is worse that about 420,000 of those have been deemed essential and have to work without pay.

This is about to become the longest government shutdown due to a no funding bill. At the moment it looks like no progress is being made towards a resolution of the situation. While there was a meeting a few days ago with House Speaker Nancy Pelosi, Senate Minority Leader Chuck Schumer and President Trump on Wednesday, January 9, 2019; the meeting apparently lasted only a few minutes and ended with President Trump walking out of the meeting after being told by the other two that there would be no deal on a border wall. Of course, if a proper budget had been passed along with debt ceiling increase at the start of the fiscal year, then we would not be in this situation.

The possible outcomes are, assuming there is a resolution to the situation and it does not drag on indefinitely are:

1: Congress gives in to President Trump and passes a funding bill that includes the $5.7 billion in funding for a border wall. At the moment it does not look like this will happen because of the fact it would make the Democrat party look very bad politically. This is a big problem for the Democrat party, especially with since it was only just last week that the Democrat party took control of the House of Representatives.  To end up giving in to President Trump and passing funding for a border wall after vowing not to would make it look like the party was unable to get anything done.

2: Congress passes a funding bill with enough of a majority that they are able to override any veto by President Trump. In order to do this, both houses of the 116th Congress would need to pass such a funding bill by two thirds or more; meaning that it would require all of the Democrats plus independents plus get a number of the Republicans in each house to go along with the funding bill. This means that 54 Republicans in the House of Representatives and 20 Republicans in the Senate would need to vote with the Democrats to override any potential President Trump veto.

At the moment, between the two options, I see the only possibility of any funding passing is that the Democrat party decides to fold and pass the $5.7 billion in funding. For whatever reason, there appears to be absolutely no progress on any front with the pressure on individual congressional representatives growing every day. This is the case, especially with today being another day that a number of government workers were not paid plus all of the other problems and fall out from the partial shutdown.

I think it would be best for the Democrat party is they agree to fund the $5.7 billion in exchange for something of equal political value in order to resolve this situation and get all parts of the government open and working again.

One thought that does occur to me is that if a proper budget had been passed before the start of the current fiscal year on October 1, 2018 along with any needed debt ceiling increase, that we would not find ourselves in this situation.

Hopefully, before another week passes and the effected 800,000 government workers miss another paycheck, there will be a resolution and everything will be back to normal.

Good Luck and Take Care,

Louis J. Desy Jr.

Friday, January 11, 2019

LouisDesyJr@gmail.com

Universal Basic Income – How it can come about and what it will be? Part 1 of a series

Recently I have been reading AI Superpowers (2018) by Kai-Fu Lee. While reading this work there is considerable discussion as to what happens to people and work as AI systems and/or robotics take over large parts of the work that people do now. While the estimates are all over the place as to what jobs and how many jobs are at risk, there is the concern that as computers, AI and robotics improve in the coming years that there will be a large displacement of people as jobs simply disappear for humans. While in the past these things happened, where one set of jobs disappeared, it was always accompanied by a new set of jobs being created that needed to be done with the overall net effect of the workforce ending better off after a while.

The concern is that a combined AI and robotics could result in the demand for work by people overall dropping over time as more and more of the workforce becomes computerized and not as many people are needed to do the same amount of work.

One thought that does occur to me is the recent discussions about Universal Basic Income, sometimes referred to as UBI, could help with this situation. As far as I understand the thinking, the idea is that everyone would be given some level of basic income every month to do as they wished with it. The criticism of such efforts is that at the moment no government entity can really afford such plans on a large scale, plus it is not clear what the benefit of doing such a thing would be for anyone, especially if the government entity making the payments has to borrow to make them meaning that eventually such payments would have to come to an end as said government entity was no longer able to tax and borrow to continue the payments. In order to properly do a UBI system, government entities would need to be funding such payments out of current tax revenue and probably really need to pay off most or all of any outstanding government entity borrowings.

My hope is that there is a path forward where once robotics and AI reach the point where the firms using such a workforce would be able to make the tax payments necessary to start UBI programs that were sustainable. At some point if the UBI amounts were large enough, which I believe is possible decades from now, people would be able to chose if they wanted to work or not or do whatever they felt like doing, without worrying about how they were going to make enough money to live on. I hope to shortly write a book about this and how I see we could transition from the current system to one where most of the workforce was computer AI or robotics and how UBI would allow people their part in the system.

While some people in a UBI system might simply do nothing all day, there are other people that even if they didn’t have to work, would still want to work and create things. There are also some things that even with a full computerized AI or robotics workforce may still be too hard for such systems and needs a person to do the work.

As an example of something that I think would take a long time and maybe never be able to be done in a cost efficient manner by robots is something simple like cleaning up the trash that is all over the place. Today, while driving to my friends business from my Worcester apartment to The Citadel in Groton, CT, along I-290 and then I-395, I noticed that just about every single foot of highway has some kind of trash on it! All 70 miles or so of my trip had trash on the side of the road. From my car I could see sparkles of plastic, glass, bottles, pieces of paper, plastic bags and all kinds of assorted trash. While I can see a robot doing that kind of clean up, I can’t see that it would be anywhere near cost effective and would really need a person to do that kind of work. While some people may think of picking up trash as not glamorous work, it is something that will need to be done at some point if we are to keep pollution out of the ecological system and the water supply.

Last night my friend Bob sent me a link about a group with special ship and boom who are cleaning up some of the floating trash collections that are in the Pacific Ocean:

https://www.cnn.com/2019/01/02/us/ocean-cleanup-system-breaks-pacific-garbage-patch-trnd/index.html

The article mentions the group hopes to clean up half of one of the two trash groups that has formed in the Pacific Ocean within five years. If they can do that I would consider it to be incredible. The group is Ocean Cleanup and the device is Ocean Cleanup System 001. I noted that it looks like no government seems involved in the effort which I find strange considering the amount of money all of the various government agencies spend every year. To me It seems like some agency would be interested in such an effort and doing what they could to assist. From looking at the web suite, it looks like they have one prototype of their system working and a staff of around 80 people. https://www.theoceancleanup.com/  My expectation is that the entire organization is operating on something like less then ten million USD per year, which makes me wonder why no government organization is not participating in the effort? (i.e. Wouldn’t it be worth it for some agency like the EPA to fund this effort in order to clean up the plastic trash that has collected in the worlds’ oceans? )

Apparently, there are two large areas of trash that have collected in the Pacific and probably another one in the Atlantic Ocean. I remember one account from one of the people that did a crossing of the Atlantic Ocean in a rowboat or maybe bathtub (that crossing was like a publicity event) talking about how he ran into trash and pollution in the middle of the Atlantic in places that were hundreds of miles from land; places that I would have normally expected to be clean and pristine, not filled with trash floating all over the place.

Hopefully, as computer AI and robotics are implemented more and more into the workforce, UBI for people displaced by such technologies will follow and turn what could have been a disaster for people into one of a utopia where a person’s minimal material needs are taken care of. While such an effort and transition will take decades of work, it is something that should be worked towards and achievable over the coming decades.

Good Luck and Take Care,

Louis J. Desy Jr. – Thursday, January 03, 2019

LouisDesyjr@gmail.com

Windows XP vs Windows 7 vs Windows 10 Migrations

Many people over the years agonize over how and when to migrate computers and/or versions of Windows. Within the past decade or so, the popular Windows operating systems on desktops are Windows XP, Windows 7 and Windows 10.

I myself, must confess that I have a primary laptop that is still a Windows XP system but have supplemented it with a Windows 7 desktop. My expectation is that when time permits I will migrate and consolidate everything to a new Windows 7 laptop or upgrade the current laptop to Windows 7.

While Windows 10 is the most recent operating system from Microsoft for desktops, I do not see a real need for it at this time since Windows 7 will do everything that I need, and has most of the problems all worked out of it from the years of updates and service packs available for it. There also seems to be a ‘problem’ with the consumer version of Windows 10 where it is setup to constantly send data back to Microsoft about what the machine is being used for plus all kinds of telemetry from your machine about what you are doing online in an effort to target the machine for better internet ads. As you can imagine, a number of people do not like their Windows 10 machine being slowed down for all this advertising.

The easy way to migrate versions of Microsoft operating systems is to prepare a new machine with the operating system you want to go to, and then use PCMover to migrate from the old system to the new system. If the existing system is going to be the computer with the new operating system, then you can installed a new hard drive with a clean install of the new operating system, and then connect the old drive with all of your data to the computer and migrate everything from the old drive to your computer with the new operating system. I have done this on several machines and it has worked very well with only a few minor problems. In one case I migrated a Windows XP computer to a new computer with Windows 7 and the migration fixed a lot of the operating system problems that the older Windows XP system had. Specifically, in that situation it looks like the machine had gotten ‘mangled’ with a virus at one point plus one of the prior migrations, before I started to support the machine, made some kind of strange Window 98 or Windows NT upgrade that had taken place since I saw directories for Windows NT on the drive C plus the Windows XP was not installed in the typical folder where it would be normally installed. There were also strange problems where when I tried to do a repair install of Windows XP that the installer did not see any existing installation to repair plus some of the icons in the control panel did not do anything; i.e. you would click on the icon and nothing would happen. When I migrated that system to a Windows 7 system, none of the operating system problem could migrate, only programs and data, so once everything was migrated everything worked fine except for two old 16 but programs. That problem was solved by downloading Windows XP mode for Windows 7 and running them from that.

While PCMover has a few unusual problems at times, and sometimes you have to redo a migration, I have always been able to work through the problems and been very happy with the end results.

Hopefully, any of you doing a migration will have things go as well as I have.

Good Luck and Take Care,

Louis J. Desy Jr.

LouisDesyjr@gmail.com

Sunday, December 30, 2018

Would Economic Development Be a Better Use for Mexico Border Wall Funds?

            As I write this, 2pm on Saturday, December 29, 2018, parts of the US Government are still shutdown from since December 22 due to not passing a Continuing Resolution (CR) to fund all of the government, that includes funds for a border wall with Mexico. While the House of Representatives did pass a CR with some border wall funds, there has been no vote in the Senate, plus the President has said that he would not sign any bill that did not have the border wall funds of around $5 billion. At the moment, it does not even look or sound like there are any negotiations even going on to resolve the impasse between the administration and Congress.

            While this has all been going on, it occurred to me that maybe a better use of boarder wall funds would be a program of development for the areas of Mexico that are next to the border with the US so that people would be able to find work in Mexico and not want and/or need to somehow get into the United States to survive. A border wall with Mexico, if and when built, will not really do much to help anyone get a job or develop anything and even cost money to maintain for the decades to come. Economic development on the border areas has the possibility of making the areas in Mexico much better off than they are now, and the program could even turn some kind of a profit if done properly. In some quick research on the internet, it looks like the cost of a border wall is on the order of about $21 billion USD and expected to take 3.5 years, but some sources seem to think the total boarder wall would be around $75 billion USD in total.

            It seems that with all of the money spent on various government programs, that maybe spending $20 billion per year to improve the areas of Mexico that boarder the United States would be a good program to try. The hope is that at some point people arriving in Mexico or in Mexico would be able to make a decent living in those areas, plus maybe once the areas are improved there would be demand for good and services from the United States to those areas at some point. I also expect that spending money in Mexico to improve the areas in Mexico would get a lot more purchasing power and benefit from the money than building a boarder wall with much more expensive labor and material sourced from the US side.

            While this may all take a while to see how it works out, I expect the end results would be worth the effort and settle the arguments on the issue instead of having  the current budget and legislative grid lock with nothing getting done by anyone.

Good Luck and Take Care,

Louis J. Desy Jr.

LouisDesyjr@gmail.com

Saturday, December 29, 2018

US Government Shutdown – as of 4:15pm on Saturday, December 22, 2018

Well, at the moment there is a partial shutdown of the US government due to the failure to pass a continuing resolution (CR) for the budget prior to midnight last night. Apparently, as I listen to C-SPAN yesterday and this morning, the problem is that the President will not sign a continuing resolution for the budget unless it included five billion in funds towards building a board wall between Mexico and the United States plus the Senate has not passed any legislation yet.

The CR bill did pass the House of Representatives, but has not passed the Senate so there is nothing for the President to sign yet. While it was originally thought that if a continuing resolution was not passed prior to midnight yesterday that nothing could be done until after New Years Day since members of Congress were expected to leave Washington due to the Christmas holiday.

I am surprised to see and hear that the Senate appears to still be in session right now. Efforts appear to be being made to pass some kind of bill and end the partial shutdown of the government this weekend.

At the moment it is 4:20pm so if any continuing resolution does get passed before Christmas Day I will not only be surprised but somewhat amazed since it had been originally thought that it would be impossible to get any bill passed once the day ended on December 21.

It will be interesting to see what the next several hours bring and if any bill is passed, what exactly is in it.

One thought does occur to me is the possibility that the administration is really only using the boarder wall as a ‘wedge issue’ or ‘negotiating chip’ to get other things from Congress. I find it hard to believe that with all of the money spent by the government, that the administration really could not get five billion or even fifty billion dollars if it really wanted to for a boarder wall with Mexico. It seems to me for the relatively small amount of money involved, that something else must be going on or some other kinds of deals are being made, with the boarder wall being used as something that the administration ‘rolls out’ when it wants to get other things done. In this line of thinking, the administration says it wants a boarder wall with Mexico, but then at the end gives that up to get something else legislated that it really wants. The problem is that without reading all of the legislation passed, or someone confessing to what was negotiated, it is hard to tell what those other items were that the administration got passed.

Good Luck and Take Care,

Louis J. Desy Jr.

LouisDesyjr@gmail.com

Saturday, December 22, 2018 4:26pm

Update: Apparently, Congress adjourned for the day with no action being taken. While there will be a shortened session on Monday, Dec 24, Christmas Eve, it is not expected any legislation will be taken up so the shutdown is in effect until at least Thursday, December 27 when Congress will reconvene.

I also took a look at the total cost for a border wall with Mexico. From what I can see and alluded to by internal reports that some reporters have been allowed to view, the best estimates are that a border wall with Mexico would cost about 22 billion and take three years to build. Some people indicate the correct amount is really about three times that or as much as 70 billion dollars, but even that higher amount spread out over three years would be less than 25 billion per year. I think the fact that the amount is such a small amount overall of government spending on a per year basis lends more credibility to the possibility that the administration uses funding for a border wall with Mexico as a negotiating chip to get other legislative items instead of making a real effort to build a border wall with Mexico. Fact-checking Kamala Harris’ claim about cost of Trump’s border wall: https://www.politifact.com/california/article/2017/aug/29/fact-checking-kamala-harris-claim-about-cost-trump/

Is There a Problem with Stock Buy Backs?

Is there a problem with stock buybacks or are stock buy backs always bad?

The standard answer is no, there is a place and time for stock buybacks. The problem with a lot of recent stock buybacks is that a lot of them were not done following what I would call the ‘old standards’ on when to do them and were mainly done with the objective of boasting the stock price by reducing the number of shares to boast the earnings per shares. i.e. Less shares for the same amount of earnings means higher earnings per share. The hope was that would cause the price of the stock to rise as a result.

A typical company, especially large ones that have been in business for a long period time, are usually profitable. The company then has to decide and see what to do with its profits. In the past there was an expected order or priority as to what to do with the profits in the following order of logical priority:

1: Save enough cash to last through the next expected downturn.
Companies would make sure there would be enough of a combination of cash plus available borrowing to make sure the company would be able to survive the next recession. Some companies, especially cyclical companies like car companies or heavy industry concerns, would have a plan in place as to what to do when sales started to drop in order to be able to ride out the next economic downturn.

2: Make sure all needed capital spending needed to maintain sales and profits is made. After the company has enough cash saved or available to make it through a recession, a company needs to repair and replace all equipment needed to maintain sales and profits. Without such spending, the companies’ tools, equipment and machinery will simply wear out and their employees will be unable to do the work needed. While companies can put off replacing equipment for a few years, eventually all machinery will break down and be unrepairable, equipment will wear out and completely break leaving workers unable to do work the company needs done. As such, while capital spending can be put off for a few years, it does not ‘go away’ and will eventually have to be spent, maybe in an emergency situation after revenue is lost.

3: Expand operations, invest in new products, research and development for the future; in short, investments in future revenue and profit. Once a company has taken care of a reserve of cash to survive a downturn, and made sure that its equipment is all in order and working, the company can take a look at expansion for the future. As long as the expected long term return on new project, no matter what it is, exceeds the long term cost of financing, then the company should take on and fund new opportunities to increase revenue and profit.

4: Return funds to the shareholders.
Once all of the above three items are done; cash saved for the next economic downturn, done needed capital spending, invested in new opportunities that the profit will exceed the cost of financing; THEN the company should look at distributing PROFITS to the shareholders and decide how to do it. One very important item to note, is that this distribution to shareholders should only be done with PROFITS from the company, NOT from borrowing.

There are two methods to deciding how to distribute profits of the company to shareholders; share buybacks or dividends.

The more ‘tax friendly’ option is a share buyback since the profit on shares held for more than one year would be typically taxed at the lower capital gain rate instead of the margin income rate for the shareholder. The disadvantage of a share buyback is that for a shareholder to get any cash they would need to sell some of their shares, which if done all the time, would result in the shareholder having no more shares. The company could partly offset this problem by doing a stock split from time to time, especially if the price of the shares are rising. In this way, the shareholder could sell a few shares from time to time to get cash but would get more shares that would enable them to sell off a little every once in a while. (It is also possible that a shareholder could use the shares for a margin loan but that is not a good idea since now you have to make sure the shares do not lose their value or you will have to repay the loan.)

The other option is that the company can pay dividends to the shareholders from the company’s PROFITS. Note that I put profits in capital letters since if a company is not generating a profit it should NOT be paying out dividends or doing share buybacks since it would need to be borrowing to make the payments. Borrowing to make payment does not make any sense. People are investing in companies because they want to invest in a business for the future, they are NOT looking to be repaid with, in effect, their own money that put into the company to finance it. i.e. If there are no profits, the company is paying out money borrowed from everyone financing the company, which is NOT the reason people invest in companies.

While a number of companies in recent years are having problems because they made large share buybacks with borrowed funds, most of these companies can work their way out of their situation over the course of several years. As long as they are making a profit, and stop payments to shareholders that are not made from profits, these companies will improve as time goes on, be able to build up a cash reserve, do all needed capital spending, invest in new opportunities and then start to make distributions to shareholders from profits.

It will be a long road for many companies, such as GE, GM or IBM, but it can be done as long as they are making a profit and over time things will improve dramatically.

Good Luck and Take Care,

Louis J. Desy Jr.
LouisDesyjr@gmail.com
Wednesday, November 28, 2018