A Disconnect

The straight skinny coming out of the run-up to the World Economic Forum in Davos, Switzerland is that five million jobs will be lost in the developed world by 2020 due to the rapid advances being made in artificial intelligence and robotics ... see: Breitbart Story. Compound this with the vast migration of cheap labor and hanger-ons from the third world into the developed world ... this creates an employment disconnect that will be very difficult to reconcile both structurally and politically.

One of the reasons that China has had such dramatic economic growth over the last twenty-five years has been its vast supply of cheap and effective labor. Developed nations, in order to counter this economic advantage, have been (possibly somewhat unconsciously) opening their borders to the underdeveloped nations for immigrant labor ... with the result of reducing their national average personal incomes ... striving for wage and productivity parity with China.

Back to the Davos forecast ... a distinction needs to be made in the forces that are being pointed to for these expected employment reductions. Artificial intelligence mainly is of the mind ... allowing quicker and more effective decisions to be made. This does not necessarily remove the need for labor. (except when these decisions make robots or workers more effective.) It just improves the quality of generic decision making. However, robots in fact do replace physical laborers and thus will reduce actual employment (yet improve productivity.)

If in fact these Davos predictions are accurate, what does it mean for the American economy? Well, clearly the current administration will likely not back off its packing this country with immigrants. And if jobs are indeed drying up, this suggests an even higher percentage of these immigrants receiving government assistance ... with even fewer taxpayers funding these doles for the unemployed ... resulting unfortunately in much higher government deficits. Ouch!

There is only one possible solution in my mind ... start collecting taxes from the robots ...

Screw Job #3

This blog entry started out as a recognition of another screw job on the American public as a result of the $43 billion spending sequestration that took effect on March 1^st.  Homeland Security chief, Janet Napolitano seems to be in the vanguard of sticking it to the U.S. public … first by releasing thousands of illegal immigrant criminals (see: Screw Job #1) and now by cutting back on TSA agents at key airports (see: Nattering Napolitano).  As I read this article, I thought to myself, “Wait a minute, furloughing TSA agents won’t do anything to save money.  Furloughed workers will still be paid their lost salaries when they return to work.”  In other words, accrued expenses should still be counted against what the government spends … no?

This led me to the bigger question … and the much, much bigger screw job when I researched the subject of whether our government accounting is run on an accrual or cash basis.  As it turns out, like many other things in our dysfunctional Washington, it depends … see the following reference on this subject: Accounting Smart Pros.  When asked this question our ever-alert government bureaucrat responded,

"I don't think there's a way to answer that question in such a broad sense of the term," she said. "For any given report, it depends. There are reports that refer to obligations made or funds that have actually been paid out. The question depends on which line (of the budget) you're referring to, basically."

What?  Are we nuts?  If any company or individual mixed accounting methods, the IRS would put them on the CPA rack and then send them to Leavenworth for the rest of their natural lives.  See this comment from the previous reference:

It's the kind of answer that seems to upset many economists and politicians. Just last March, Rep. Todd Platts, R-Pa., and chairman of the House's Government Organization Subcommittee, held hearings to see why the real 2010 federal deficit was possibly $800 billion more than the $1.3 trillion reported. One reason they investigated: The government still mixes the two accounting methods, which may produce a rosier bottom line.

So, now we see that even the officially published numbers for the deficits we have been running up are suspect.  Depending on the trustworthiness of our various government agencies, we may be much further under financial water than we have been led to believe.  So now I ask the $64 trillion question … do we trust our government agencies not to cook the books?  I think I smell some acrid smoke and hear the alarm bells going off ...