12 January 2009

There Goes The Neighborhood

Imagine your neighborhood as an economic system. Every year, some rich dude gives your neighborhood about $2,600 per household, seemingly a good deal since the average household makes about $18,400 a year.

Now imagine that your neighborhood gets hit with a 7% tax on purchases, which ends up eating an extra $940 from your yearly take. Without a raise or tax cut, you have essentially lost 5% of your income. The gas prices go up 260% for a while and that takes an extra 3% from your annual income. You're down 8%...and other prices are going up.

Now a new guy comes in and says he wants to--hold on to your hibachis--increase your gas prices by 24 cents a gallon, tax your cell phone minutes at a penny a minute and make you pay more for liquor and cigarettes... but no tax relief for making the same amount of money.

A gas tax of 24 cents a gallon ends up costing the average household an extra 2% of their stagnant income, if gas prices don't rise like they did in 2007-2008. There are more cell phones in use in Puerto Rico than landlines, and though Our cell phone market is the true definition of dog-eat-dog competition, an additional penny per minute tax hits the local household at almost 2% a year. Now throw in booze and ciggies and you can see some households losing 2-4% more.

To summarize: Your income stays the same, the rich dude's money comes in at the same level, but your income could now be 5% + 3% + 2% + 2% + 3% = 15% less than it was in 2006.

Fifteen. Percent. If you're lucky. Could be as high as 20-22%. Woo-hoo.

This is what passes for economic stimulus in Puerto Rico, with a program that governor Luis "The Larva" Fortuño is proposing that merely throws another 7% (at least) upon the 8% We've shouldered this past year.

And how the hell is this crapfest supposed to stimulate the economy?

It doesn't. It's single purpose is to allow the government to maintain itself.

Let Me repeat that: It's single purpose is to allow the government to maintain itself.

That's it. This does nothing to stimulate the local economy, for only in the minds of greedy sycophantic idiots (I'm talking about everyone involved in this dungheap plan) does taxing a and reducing the avialable monies of a recession-trapped populace equal "growth."

And why do I toss in the rich dude's money when it's impact per household is quite low? Because it serves to show just how negligible it is where it's supposed to matter. When shown at the household level, you can see that Uncle Sam's pity cash isn't that big a boost, and with waste, politicking and outright theft reducing its limited impact even more.

Is The Larva already crumbling under the strain of trying to be what he isn't, a leader? Could be. If his nominations for the three key cabinet posts (Education, Health and Treasury) and this economic "stimulus" plan are any indication, The Larva is as far from being a leader as I am of being a Martian.

The Jenius Has Spoken.


The Insider said...

Very important analysis Gil. Too bad Fortuno's team had not done something similar. Single level economics (i.e the Checkers model) is very dangerous when the economy (and really every economy) needs the multi-level, Chess model.

He did one strategic thing very good here (perhaps). That is, he introduced all this right out of the gate. Translation: Let's do the really heavy stuff now, so that we have a few more years to make them forget about it, and make re-election a possibility.

What is Rogelio saying about this? Great time to leverage some PR/party building now, no? :)

GCSchmidt said...

Thanks for the support! I have no idea what Rogelio has said, but if he were in the Senate, it would mean more (whatever he said)...

Now, a comment. Have you dropped your blog forever, or does it just seem that way to Me? With Don Dees cutting back along with you, I'm feeling kinda lonely.

The Insider said...

No, it's not terminated, although the blog was certainly neglected over the holidays, and I am now focusing my early 2009 activities on growth in our business *despite* the market conditions!

However... I do have several upcoming articles. The holidays allowed me to compile no shortage of disappointing situations ranging from business process failures at Berrios, El Conquistador, Melaleuca MLM, Jeep Triangle Dealers, MAPFRE insurance, Cabo Rojo Emergency Services, and also what I consider (in my opinion, of course) some overwhelmingly negligent actions by the local animal hospital that ended with the death of an animal!

These all deserve and will receive some blog treatment, and will be published as soon as I clear up my biz task list a bit.

Don't be lonely. I can't speak for Don Dees, but I still plan to float around out here in the ether for some time to come. ;)