The Complex US Economy

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The Complex US Economy

Thursday, June 27, 2019

As I listen to many people speak about the US Economy, I wonder how many understand it before they wish to change it. After almost 40 years in US industry, I knew a bit, but had to even think more myself to really understand it. The US Economy is most often misunderstood since some mislead us on purpose. The second reason is far more subtle. The US economy is very intertwined, meaning it is hard to just take or change one thing without the whole system becoming worse.

News Gave Better Answers Long Ago

We could ask what happened to US News lately, but perhaps that is a separate subject. Let me simply say that US news 20 years ago seemed to be closer to the truth about the US economy, or capitalism if you will, than today. And what did the US news often say years ago? As I recall, the news at that time warned that 2 out of 3 new companies go out of business. And they said that even those companies that made it, it often took 3 to 5 years before they reached profit, which I would myself instead simply call, "the ability to pay your bills without further investment". Long ago, I thought the news only referred to small businesses going out of business often. As I became more experienced, I found that no, not at all, big companies can fail as easily or sometimes even faster than small companies. One time when I was trying to get a small business loan from a bank, I talked to a very nice bank lady. She told me, among other things, that perhaps the main reason some businesses fail is that they expand too fast. Of course expanding, might even include starting in the first place. But at the time I knew enough to believe her and even be thankful for being that straight forward about it.

So, was the news right 20 years ago about how hard it is to get to profit (ability to pay your bills) in a business. After almost 40 years in industry, I concur. I might even be more cautious than that. As we have seen, if large companies do not continue making themselves interesting places of value, they also go under. Altogether, a lot of businesses go under. I was once sent from the US to help a division in Europe that had one billion US dollars a year in sales. It was losing 100 million a year at the same time, even though all employees and all bills were paid. Can someone point to the windfall profits and trickledown economics in a business losing 100 million US dollars a year? A startup company I went to later as a senior Vice President had never made money (ability to pay its bills), still was not, and furthermore had already lost 200 million US dollars from its investors. Same question. Can someone point out the windfall profits and trickledown economics at that company also? A company in Florida who had offered me a job as head of Manufacturing has now gone out of business. The startup company I just referred to above where I was with may still be in business, but that is after scaling down 90% of its employees. A CEO from another company in California was meeting with me, thinking of offering me his manufacturing. We never closed that deal. But it would not matter. They went out of business about a year later. When my family started their own small business, 2 stores that sold cellular products, we did last 5 years before going out of business at a large loss. However, we were not the only ones. This was after the 2008 recession. So many middle class owned stores went under at the same time as ours that I know of at least 3 shopping plazas that failed and changed owners since too many of their middle class owned stores failed. The largest, nicest looking store business near us with two large stores also went under. The store in its best location was taken over by a company selling used goods, I believe for charity. This was the reality I saw. I knew one store near us run by a wonderful Chinese immigrant lady. She told us she could pay her workers and her bills, but not herself. She worked for free. Well, in the stores we had, I worked for free for 5 years. I suspect many others do.

Economic Simple Rules

There would seem to be several simple economic rules that intelligent, caring people should follow. The first is that a government should not tax people more than they can pay. The second is that people, unions, or government should not demand higher wages unless the businesses in question can afford them. If either of these items are not done, well then, some citizens are going to lose everything who owned the stores, and some employees may be out of work, and likely more people go on welfare and no longer pay taxes.

How US Economy is Intertwined

But there is more. As I like to say, there is often more. I also hear too many people in the media saying that we should take money from Wall Street or from rich people, whomever they are. Is that okay? The answer I now believe is "no" since much of this is entwined too deeply in our economy. And the quick answer is that while it may look like money, it is often not sitting around but invested in companies. So if someone takes the money, the businesses may shrink or shut down, they stop paying taxes, the employees can lose their job in part or all of them, and go on welfare, and also stop paying taxes. This helps who?

Wall Street

While some people seem to claim that they hate Wall Street, what is Wall Street? Wall Street is where people invest in America. The money often goes to the larger companies and corporations who then employ many people and pay much in taxes. And their employees pay much in taxes. Taking money from them would shut down businesses, or shrink them, and again employees go from working to welfare and also stop paying taxes.

Getting Money from The RICH

In order to avoid being stoned to death, which could ruin my day, let me say that I am not rich myself and have no reason to stick up for them. And there is at least a part of me that would like to take money from the rich, if that were to work well. However, in looking at this closer, there are two issues why taking money from the rich may not be so great. They are (1) there is not much money there, and (2) most of it is not in a form where it can be taken without damage to our economy and jobs. And so again, taking something is at our own peril of causing us perhaps a nightmare somewhere else.

Rich have Little Money

What? Well, let me begin this discussion with talking about myself. I learned early in industry not to just believe the first thing that I hear, but to verify it. And so, when I heard people say they wanted to take money from the rich, I simply shrugged my shoulders and decided to check it out. And so I took records from Forbes or others on US billionaires. It said how much each person had. It then gave total amounts. And so I said to myself, "Self? If we take ALL of their money, how much is that?" And so I added up money from our US billionaires and came to about 2.5 trillion US dollars or less. I heard that a person Neil Cavuto on Fox Business News did the same thing I did and the number he said came to even less. Well, how much is US debt? About $22.5 trillion. And so taking all the money from US billionaires would not reduce it much at all. So, let us say that this money is now larger since I did it a few years back and is $3.5 trillion, even though I did not add it. And let us say that if we take money from the high up millionaires and take it all again, we could get to $6 trillion US dollars. Wow. That sounds like a lot. That would only be about a quarter of the US debt, and would leave zero money for new programs such as free college. Worse yet, since that money may well have been invested in companies, those companies must shrink or go away and no longer pay taxes. Their employees are now out of work, and instead of paying taxes now might get welfare. Was this a good bargain? Not to me.

The Money is not easily gotten to

Worse, the money as we say above is not easily gotten to. When we say a person is "worth" billions or millions, that money is often not sitting around on sacks of money on their bed. Much of that money is likely invested in stocks, private businesses, mutual funds, US bonds or other, in an attempt to grow it and make more money. Okay, you likely did not like the last part about it trying to make more money, but let us go back to the first part. If the money is not sitting around, and why would it be? - then taking the money is likely to shut down businesses. And here we go again. The businesses stop paying taxes, the employees lose their jobs and stop paying taxes and may go on welfare. This is the problem I tried to state at the end of the above paragraph. Before one takes money, they should ask what format that money is in? Is it invested? Do we wish to damage that investment? Those jobs? That tax revenue?


If I am reading the numbers correctly, the value of US industry currently is about $34 trillion in capitalization and produces over $19 trillion of revenue for the US each year.


And so, the more I look into this, how our economy and people's wealth is entwined, the more it appears that our economy in the wrong leader's hands could be a house of cards. Right now money to our government comes in from industry, capitalism, if you will, a giant machine that employs many Americans and makes clothes, food, goods and more for the world. And in return for making those things, the company and employees are paid money for their goods and services. And then a percentage of that money goes to the US government to pay the salaries of politicians, teachers, the Military and safety for our country.

This situation is not so different perhaps than the story of the goose that laid the golden eggs. If one gets tired of waiting for eggs, and instead kills the goose to find eggs inside faster, well, there might go the whole show. The problem with US wealth is that it is not often sitting much in bags of money on the beds of people. It is invested in our economy. And taking money out of our economy WILL in fact lower jobs, revenue, and taxes coming into the US government.


As I said above, Wall Street is where people invest in America. US industry evaluation I said above appears to be $34 trillion. However, if someone said the government was going to take it over, that $34 trillion could also become zero. That is because $34 trillion of the stock market is the estimate about the earning potential for those companies on the free market. If the government now owns it, why would anyone invest in it if the government just takes over their money? And the other issue is, who is now going to run it if the people with the know how get angry and decide to leave and let someone who knows little try it on their own? While many people on TV claim that they know everything, a few of us tend to doubt it.


Forget the pocket change. Go for the gold. US billionaires may only have about $3 trillion US dollars. Pocket Change. But our US Economy rolls along at much more, at almost $20 trillion a year. Now THAT is real money. Some of that money can go for taxes... and not a onetime thing like taking money from the rich... but money every year. And so, grow our economy. Allow more jobs for US workers instead of less jobs. Let us get our exports up so we can send food and goods to other countries. And at the same time with a larger economy, there would be more taxes for politicians, teachers and more.

Ronald J. Plachno


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