Former textile mill owner blasts crazy tax notions and other popular nonsense about the economy

Where has this guy been all these years? Or more to the point, where have we all been, not to have been aware of him? He's a former textile mill owner, trade association president, and hard-headed business guy – not exactly a raving lefty seeking "gifts" as that yutz Mitt Romney put it.

Instead, Roger Berkley talks no-bullshit, no-punches-pulled common sense about the economy, what's wrong with it, and how company owners and managers in his own business can survive.

Last Spring he gave a speech at the National Press Club in Washington D.C. at the Second Annual Conference on the Renaissance of American Manufacturing: Jobs, Trade and the Presidential Election. And if you think he was going to start spouting some Republican party line blather, un-think the thought. Here are excerpts of what the former Chairman of the National Textile Association had to say, as reported in the trade newspaper Fabrics and Furnishings, and entirely missed, I fear, by the mainstream press.

Corporate taxes not the boogeyman

"I have boots on the ground manufacturing experience.  I’ve dealt with cost increases and tax increases and economic cycles of boom and bust. I’d like to answer one question that’s been raised today about taxes.  My company and my competitors never made a decision based on taxes.  They made decisions incorporating what the tax structure is because we can’t change it. If you want to do something about taxes, if taxes are an issue, remember that Japan may cut its corporate tax rate, but it has a value added tax, which we don’t have in the USA.

"American disadvantage in export is related to VAT. When the American product gets sold to France, I have all that American tax on it and then my French customer has to apply the French value added tax which is about eighteen percent in France today.  That’s a real tough nut.   

"So if you’re going to cut corporate taxes that’s not really going to help me that much in my exporting efforts. You must do something about that [foreign] value added tax."

 Want to see something stupid? Look at a bank.

"I fought against the incredible stupidity and finality of banks which took billions of taxpayer dollars in bailouts and then kept it, rather than lending it to the people who needed it.  I lost that fight. I really did.  I saw my business killed by the stupidity of a bank.  They just didn’t like what they saw.  That bank hadn’t lost a penny on us.  They just didn’t like what it looked like.  

"What did they know?  They knew nothing. Over the years I’ve learned that bankers… are   generally lying bankers (and) really stupid.  They’re asked to look at all different kinds of fields and areas and understand them. That means   they look at all kinds of things and they understand none of them.  Then they make decisions based on their lack of knowledge."

But...but...as Walmart shows us

it's cheaper to make stuff abroad

I wrote a cranky rant on products made abroad back in 2007. It ranged from poisonous toys made in China to missile rocket cones made in Pakistan. Now Berkley goes me one better, by calling out pressure in Congress to "save the taxpayers money" by making military uniforms more cheaply abroad.

"...we have the Berry Amendment, which says that anything used by the military, and now the TSA - you know those nice blue shirts - those are made in the United States because the Berry Amendment says that all has to be made here in the United States.  And every time the Berry Amendment comes up for renewal there’s a group in Congress that says, you know, we could get it for less if we bought it in China.  Yeah, but, what are your soldiers going to wear when the Chinese get pissed off at you?  You’re going to have a whole bunch of naked soldiers running around the field.  I mean, that’s what it’s all about."

For more of Berkley, check out his entire speech here. And while you're at it, ask yourself this. Why is it we can get useful stuff like this only from a quarterly fabrics and furnishings trade newspaper? Where the hell are CNN, and ABC, NBC, CBS, and the regular daily print press?

Oh, I forgot. They're consulting the usual suspects: talking heads, loudmouths, and airheads.

Yo! U.S. Supreme Court, listen up! We may have a lap dance coming your way and we’re wondering if you’ll find it taxing.

I hate to repeat a tired cliche, but hey, you can’t make this stuff up. There’s a lawsuit brewing in Albany, New York’s state capital, where hookers and strippers have been doing their stuff ever since legislators from other cities in the state discovered that Albany was “out of town" – the legislative equivalent of a business trip with a high potential for mischief.

Seems that an exotic dance, umm, club named Nite Moves has been trying to get itself, and its admission fees, drink sales, tips, and whatever other revenues it takes in declared tax exempt. The reason, you see, is that New York State doesn’t tax “dramatic or musical arts performances,” and the pole and lap dancing that goes on at Nite Moves is, you know, artistic.

The state’s Court of Appeals split four to three in favor of falling off the bench and rolling around the floor, belly laughing. In other words, the court’s majority told the strip club to take their claim of tax exemption in the name of art and go stuff it in a G-string. The club owes the State of New York $125,000 in taxes and that’s that, said the majority.

That decision had at least one member of the minority choking, and not without cause.

“The people who paid these admission charges paid to see a woman dancing,” thundered judge Robert Smith. (Well, he thundered it in writing, but this is a story about the, uh, arts, so I’m taking a little artistic license here.) “It does not matter if the dance was artistic or crude, boring or erotic. Under New York’s tax law, a dance is a dance.”

He added that tax collectors shouldn’t be charged with deciding what’s a meritorious dance and what’s a … well, whatever a lap dance is that isn’t dancing. The judge has a point. Otherwise, the next supremely bored New York tax collector whose wife drags him to a performance of Les Sylphydes is likely to get so irate, he’ll slap the New York City ballet with a tax bill that’ll sink them and the tutus then danced in with.

The lawyer who argued the strip club’s case, Andrew McCullough, said he’s considering appealing to the U.S. Supreme Court, but I don’t think so. The legal cost of a Supreme Court case is likely to run several multiples of Nite Moves’ tax bill, and in any case I'm not persuaded there's a Federal constitutional issue here. If the Nite Moves folks have any sense, they’ll follow the principle of law explained in an ancient vaudeville routine: Pay the two dollars.

P.S. I wrote this piece because last night was the final Obama-Romney debate. Every other blog in the universe is writing about debates and politics and polls and spinmeisters, and who’s lying. I can’t stand it any more.

Hide-And-Go-Tax mayor socks New Yorkers with a killer water bill.

Water bill?

No, not for bottled water. I’m talking about the “free” stuff that pours out of the faucets in New York.

In a town fed by one of the planet’s best reservoir systems, with rainfall in excess of plentiful for the past few months, with no forseeable likelihood that New York is going to run out of the stuff in the next 100 years, New Yorkers are about to get socked with what is likely to be yet another staggering increase in their water bills.

The price of drinking tap water, brushing your teeth, taking a shower or flushing a toilet is going up by double digits once again. Said a blog called DMI Blog last year:

Compounded annually, the 54% increase in water and sewer rates in New York City that the Water Board is projecting over the next four years will mean more maxed-out homeowners going into foreclosure, more affordable housing managers struggling to keep their buildings afloat, and (since all costs trickle down) higher rents for the millions of rent stabilized tenants, many who already pay half of their income on rent.

And that was a year ago!

What’s behind the increase?
Follow Mayor Bloomberg's failings.

It turns out that behind two years of average double-digit increases is Mayor Bloomberg, picking his citizens’ pockets as they bend over the water cooler. And at the same time he's failing to do a proper job of collecting on water bills the city is already owed.

Hey, I don’t begrudge the mayor money to run the city. But how about a straightforward fairly graduated income tax hike and some city hall management efficiency, rather than a sneak attack on citizens who, regardless of income, suddenly have to pay through the nose to pee – least if they want to flush?

Another expose of the Mayor’s attempt to quietly pick his fellow citizens’ pockets appeared last Friday in the New York Post.

New York City Comptroller, William C. Thompson, who no doubt now finds himself inhabiting the Mayor’s Snit List revealed:

The Water Board leases the water and sewer infrastructure from the city. The board's rent payments to the city are based on a formula that until recently simply reimbursed the city for water-related debt service on bonds issued before the Water Authority was created.

But, since 2005, rental payments under that formula have exceeded the amount needed to pay down this old debt. This "excess rent" will total $77 million in fiscal year 2008 and grow to over $175 million by fiscal year 2011. This cash flows into the city's general fund, to be used as any other general revenue.

In other words, the Mayor is jacking up the city’s water bill and siphoning the excess into his general revenues. It’s a hidden tax, and its purpose is plain:

Pickpocket Mike wants to fund his city without having to raise income or real estate taxes.

An honest tax hike only looks bad
if you’re running for something.

An equitable income tax hike will make you look bad – despite its probable legitimacy – if you decide to run for office. Say, for Vice-President. Or for Governor of New York State next year. Or for senator to fill Hillary Clinton’s seat if she gets elected to the presidency. (Given the Mayor’s penchant for switching and abandoning parties, it’s a bit difficult to say which party’s principles he stands for or what ticket he would run on.)

Oh, and then there’s the matter of getting the mayor do his job. Part of that job is collecting monies already owed the city so he doesn’t have to raise the ante for honest people who do pay on time. The DMI Blog article pointed out that there’s a…

…plethora of billing errors that prevent the Department of Environmental Protection (DEP) from enforcing collections resulting in more than $600 million in unpaid water bills…

This is a mayor who has traveled to Beijing in search of “new ideas” and around America last year in search of – well, who knows what, but at the time it looked like electoral votes.

Meanwhile, nobody in City Hall was minding the store. Which may account for everything from that uncollected $600 million to death-dealing crane collapses that resulted because Mayor’s building inspectors weren’t really inspecting.

The price of mayoral negligence is death

That crane collapse – a killer of seven people – was just the tip of the iceberg, Scott Stringer, the Manhattan Borough President revealed.

"We've had partial building collapses; we've had fires in buildings," said Stringer, "we've had cranes pummeling down shafts in buildings; we've had loss of life injuries. This incident is just the latest example of needless people dieing because we do not have proper safety protocols in this city."

Hey, it’s worth your money and your life to trying to survive in New York City when you have a mayor sniffing around everybody’s job in everybody’s city but his own. As for you folks who think you can save costs by conserving water, fuhgheddaboudid.

Said the DMI blog: "…they still need to collect a certain amount, so the more water we conserve, the more they'll charge us for it!"

How to keep the whacked-out Bush Administration's free enterprise purists from plunging us into the next Great Depression

Suppose you went to the bank to take out some of your money and learned that you couldn’t get it. Not today. And not ever again because the bank was broke.

That’s what happened in the Great Depression of 1929, and it’s one of the factors that helped make the Great Depression so “Great.” Thousands of people lost not only their jobs and their homes, but also their savings.

Could it happen here again? Before you answer, consider this appalling tale:

The brat who destroyed a bank

In 1995, a 27 year old whiz kid with too little supervision and too much responsibility brought down an international London merchant banking company that had been doing business since 1762.

The bank was Barings and the whiz kid was a too-smart-for-his-own-good trader named Nick Leeson. Before he got tangled in his own elaborate financial knitting, a bizarre scheme involving markets in London and Singapore, a bit of arbitraging and a bit of financial fudging, he had managed to lose $1.4 billion of the bank’s trading capital. Another bank snatched up the chaff that was Barings for about two bucks.

The Bank of England tried a rescue attempt but failed. Employees around the world lost their bonuses, their livelihoods and in some cases their ability to retire with any degree of security.

As for Leeson, he did okay. After doing six years in the clink, he wrote a book called Rogue Trader that sold to the movies. Hey, it’s hard to keep a good story down.

So what’s this got to do with
your future? Pal, take a deep breath,
bite hard on a stick and listen up.

This country used to have a law called the Glass-StiegelAct. It was one of those laws that closed the barn doors after the horse got out, but at least it kept the barn door closed against future financial disasters.

Glass-Stiegel, signed into law after a long string of bank failures, prevented banks from doing stock brokerage business, or stock brokers from doing most forms of banking business. What I’ve just said is admittedly something of an oversimplification, but the principle of this law was to compartmentalize America’s financial institutions.

Think of it as a giant ship called The U.S. Economy. If the ship springs a leak and there’s only one huge compartment below, the ship is going to sink. But if there are lots of little compartments in the ship and one of the compartments springs a leak, the ship still will be able to make it back to shore.

Poking holes in the life boats

Alas, starting in the 1970s Congress started undoing Steigel Glass, essentially taking the compartments out of the ship’s hold, and poking holes in the life boats while they were at it. This was initiated by people who knew more about Ayn Rand’s brand of free enterprise fiction than they did about real financial history, and by bankers and brokers with influence, who saw a short term opportunity to make a bundle through mergers that would put them in two or more businesses instead of one.

The result is a banking system that’s a disaster waiting to happen. You don’t even need a super subprime mortgage meltdown. All you need is the next Nick Leeson, suffering from the same kind of gambling fever that drives people to keep plunging quarters into Las Vegas slot machines until their pockets are empty. When an event like that does happen to an American bank, it will bring down not only banks, but also the U.S. Economy.

Imagine being insured by
a bankrupt insurance company

How can a giant bank’s failure impact the U.S. Government and all of us taxpayers? Here's how:

Bank deposits up to $100,000 are insured by the Federal Government. If a bank with deposits of, say, $500 billion goes down, it’s the taxpayers who have to pay off the depositors.

That’s the kind of money the U.S. Government doesn’t have on hand, thanks to the insane Bushonomics theory that you can start a war, cut taxes at the same time, and drive the deficit into the trillions without horrible consequences. It’s like being insured by an insurance company that’s essentially broke

When a giant bank failure eventually comes, the U.S. Treasury will be forced to print money even faster than it’s printing it now to cover the insurance payments. When that happens, the value of your money will shrink, and the government will be forced to raise interest rates to attract borrowers. This will result in a cost of everything that’ll make today’s prices look like chickenfeed, followed by a national economic collapse.

In pre-Nazi Germany, inflation of this kind literally led to people taking a wheelbarrow full of money to the grocer for a loaf of bread, and eventually led to the rise of the Nazis.

Hiding the disaster potential

The potential disaster in the United States is masked by the fact that the government hasn’t hiked the FDIC insurance rate in decades. Today, that $100,000 limit is the equivalent to only $10,000 a few decades ago.

So if you can’t stash your cash in the bank, and you want to keep it safer, what can you do? Some people are buying gold, which has inflated in price nearly 300 percent in less than 10 years.

But there are risks in buying gold, too, not least of them the risk that I’m wrong about all this.

At any rate, the purpose of this post is not to encourage you to buy gold, but to encourage you to demand financial reform. The USA needs to bring its finances under control by ending the war and by restoring tax brackets that deserve to go into the 50- or 60 percent bracket for individuals with incomes in the millions and above, and into the 90 percent bracket for individuals with triple-digit millions in annual income.

And once that happens, we’ll need FDIC insurance up to $1 million per depositor, not a paltry $100,000.

Duh!

Republican appointee Ben Bernake displays his financial wizardry to Congress:

"'Crucially, whatever size of government is chosen, tax rates must ultimately be set at a level sufficient to achieve an appropriate balance of spending and revenues in the long run,' Bernanke said.

"Bernanke said advocates of lower taxes would have to accept lower spending on entitlement programs. Likewise, proponents of more-expansive government programs must recognize the need for higher taxes brought about by higher spending, he added."

Perhaps this genius ought to explain Economics for Dummies to the dummy who appointed him.

Only a suggestion.

You'll find the entire laughable account here:

http://news.yahoo.com/s/nm/20070228/bs_nm/usa_fed_bernanke_dc