This post is basically a marker for two pieces of information I find compelling.  The teacher part comes from a study by the globally respected business consultant McKinsey Co.  Basically it says if we closed the education gap between the lower performing students vs the higher performing ones in our own schools, we’d add 3-5% to Gross Domestic Product (GDP).  If we closed the gap between our schools and the world’s top performing schools, like those in Korea, we’d add 9-16% to GDP.  We should be investing in more teachers and in training them to be better teachers.  It does add to GDP and the economy.

The second marker is of a CNBC interview recently with Robert F. Kennedy Jr.  Kennedy does a good job of giving the rationale for our continued investment in alternative, sustainable energy.  Kennedy has put his money where his mouth is.  He’s an investor in Ivanpah, a huge solar power installation.

BrightSource’s LPT solar thermal system is currently being deployed at the Ivanpah Solar Electric Generating System (ISEGS) in California’s Mojave Desert. Ivanpah, which started construction in October 2010, is the first project that will deliver power to serve the company’s signed contracts with PG&E and Southern California Edison. The project – which counts NRG Solar, Google and BrightSource as equity investors – is currently the largest solar plant under construction in the world. The project is being constructed by Bechtel.

A 377 megawatt net solar complex using mirrors to focus the power of the sun on solar receivers atop power towers.

• The electricity generated by all three plants is enough to serve more than 140,000 homes in California during the peak hours of the day.
• The complex will reduce carbon dioxide (CO₂) emissions by more than 400,000 tons per year.
• Located in Ivanpah, approximately 50 miles northwest of Needles, California (about five miles from the California-Nevada border) on federal land managed by the Bureau of Land Management.

The complex is comprised of three separate plants to be built in phases between 2010 and 2013, and will use BrightSource Energy’s LPT solar thermal technology.

Beezer here.  These are two areas, teacher quality and solar energy, where our national discussion has been intentionally hijacked by campaign funding from the fossil industries.  We are being inundated by this massive propoganda effort and, as a result, we aren’t rationally discussing what really needs to be done for our future health, economic and personal.  At least President Obama sticks to his promise of supporting more teachers and supporting alternative energy.  But they are minor points in our current discussion which almost solely revolves around more drilling and more tax cuts, especially tax cuts for the wealthy. 

Eric Spiegel, US CEO for Siemen’s, the German equivalent of General Electric, yesterday explained how Siemen’s invests in training to insure they get exactly what they want when they hire.  Currently, Siemen’s has 3,000 job openings in the US, almost all of which require high quality manufacturing skills that are not easy to find in the US, according to Spiegel.

“…… these are modern high-tech very sophisticated digital manufacturing kinds of facilities and require people with computer skills, math skills and understandings of some engineering. And so when we go out to the market and we just interview people, only about one in ten people that we’re interviewing have the requisite skills for these jobs, so we’ve had to put our own programs in place to start to develop people who can actually work in these facilities…”

When asked why only one in ten people interviewed qualified, Spiegel said most had out of date skills.

“I think a lot of people who have been displaced maybe have skills that were in manufacturing or in other jobs, have skills that were adaptable to these kinds of facilities 10, 15, 20 years ago, but they no longer apply. Only part of what they know applies.  So for example at our new Charlotte plant, we had to bring a lot of employees in and spend a year getting them ready for the opening of the plant a couple weeks ago.  We had to put them side-by-side with people who we have working at plants here in the U.S. or we brought over from Germany for example to learn the trade and learn how to run these automated manufacturing. process manufacturing….

Over in Germany at any one time we have about 10,000 apprentice employees.  We hire those people right out of high school.  They work for us three to four years, work part-time in the plants and go to school part-time. Then we hire them when they come out.  In the U.S. they really don’t give you the in depth skills that are required for a lot of the digital manufacturing and things that we want.  And I think there’s a real opportunity here to reinvigorate manufacturing in this country.  We have about 137 manufacturing plants in this country and we’ve added a few more….

Beezer here.  This sounds very straightforward.  Siemen’s recruits at the high school level, giving students part time jobs and then sending them to the local college part time when they are hired.   For three to four years!  In the US, Spiegel said, Siemens is partnering up with local community colleges and four year colleges in order to develop a generation of graduates, many of whom will already be employed at the local Siemens facility.  Pay isn’t bad either.  According to the company the average wage for these types of employees is currently $89,000, not including generous benefits and vacation plans.  This type of private initiative is what’s needed and local post high school institutions need to get involved so the right kind of skills are there for manufacturing.

Former CIA Director, Air Force General Michael Hayden, asks if it’s wise that only 1 percent of Americans serve in the military.

In a CNBC interview this morning now retired Gen. Hayden said the nation needs to reconsider this lopsided distribution when it comes to military service.  By asking the question, Gen. Hayden strongly implies what he considers the right answer to the question of whether it is ‘wise.’  Obviously he believes it isn’t wise at all.

Hayden said he believes the 99% honor those who serve.  But honoring those who serve, and actually participating in military service are quite different things.   Not serving means not putting oneself in harm’s way.  If there is no such frightening exposure to the 99% then a major restraint on the urge to make war is weakened. 

Beezer here.  A continuous military draft for men, even if being drafted doesn’t require immediate service or training but would expose those drafted to immediate service if called, would improve this situation.

Here we have a good chance at entering recession again as demand continues to slumber and may decline even more as the government withdraws from its role as ‘stimulator of last resort.’

Meanwhile the talking heads at CNBC warn of money growth, the soon to come dramatic rise in inflation and soaring interest rates resulting.  What’s needed, these dimbulbs all parrot as if reading from a script, is to cut government spending now and to de-regulate business so the private economy can start creating jobs again.   

The most ideological of this ideological bunch is one Rick Santelli who reports from the Chicago Mercantile Exchange, a major trading platform for the Treasury market.   Santelli sounds like the press secretary for Tea Party Republicans Paul Ryan and Eric Cantor.  When anyone mentions the political logjam in Washington Santelli blames President Obama, who recommends using both spending cuts and increasing revenues to balance budgets, as being the stubborn one compared to Ryan and Cantor, who want only cuts and refuse to even talk about raising revenues.  Santelli is so ideological he has long ago stopped realizing he’s channeling Andrew Mellon. 

You’d think that being totally wrong on every call he’s made about the markets would cause Santelli to take a second look.  For almost four years he’s warned that rates are going to rise soon, that inflation is going to gallop out of control soon, that interest rates are going to rocket upward soon.  For almost four years the markets have done precisely the opposite.  If anyone listening to Santelli had actually put some skin in the game based upon Santelli’s predictions they’d have lost money.  Lots of money. 

Of course we have a lack of demand problem, which is measured by unemployment.  The less demand, the higher the unemployment.  The longer the government waits to apply the right cure–to hire directly and to fund said hiring by raising taxes on the wealthiest Americans who are currently hoarding cash as a store of value–the quicker demand will recover.   But this real world cure contradicts Santelli and, well you must understand, Santelli is supremely confident in his viewpoints.  It seems he becomes even more confident the more wrong his predictions.  He’s become a joke, an irritant who should simply limit himself to reporting price moves rather than promoting economic viewpoints that are precisely the opposite of the truth.

The irony about Santelli’s theories is that they only come into play when we’re close to full employment and don’t have any demand or output problems, situations which will never happen if we actually follow Santelli’s recommendations.  In Santelli’s world even the eagle eyed squirrel won’t find a nut, never mind the blind one.

The truly sad aspect of all this is that these folks are misleading their viewers and, as a cable channel for all things financial (in Santelli’s case all things Tea Party),  you’d assume by this time the audience is probably tired of being given very bad advice, investment-wise. 

Oh well, waiting for the laissez fairy, or the confidence fairy (excepting PT Barnum’s ‘there’s a sucker born every minute’ confidence game CNBC plays), or the invisible hand, or the tooth fairy–whatever–is becoming a very dangerous game to play.

Billionaire Warren Buffett, in a New York Times opinion editorial, says the rich are being coddled and need to pay more taxes as part of any deficit/debt reduction plan.  This of course flies in the face of what Tea Party-led House Republicans believe.  Republicans have been united in the belief that raising taxes on the rich, who Republicans have re-branded as ‘job creators,’ will hurt job creation and stall the nation’s recovery.

Having one of the nation’s investment icons disagree isn’t going to help that belief.  And Buffett minces no words.

OUR leaders have asked for “shared sacrifice.” But when they did the asking, they spared me. I checked with my mega-rich friends to learn what pain they were expecting. They, too, were left untouched.

While the poor and middle class fight for us in Afghanistan, and while most Americans struggle to make ends meet, we mega-rich continue to get our extraordinary tax breaks. Some of us are investment managers who earn billions from our daily labors but are allowed to classify our income as “carried interest,” thereby getting a bargain 15 percent tax rate. Others own stock index futures for 10 minutes and have 60 percent of their gain taxed at 15 percent, as if they’d been long-term investors.

These and other blessings are showered upon us by legislators in Washington who feel compelled to protect us, much as if we were spotted owls or some other endangered species. It’s nice to have friends in high places.

Last year my federal tax bill — the income tax I paid, as well as payroll taxes paid by me and on my behalf — was $6,938,744. That sounds like a lot of money. But what I paid was only 17.4 percent of my taxable income — and that’s actually a lower percentage than was paid by any of the other 20 people in our office. Their tax burdens ranged from 33 percent to 41 percent and averaged 36 percent.

If you make money with money, as some of my super-rich friends do, your percentage may be a bit lower than mine. But if you earn money from a job, your percentage will surely exceed mine — most likely by a lot.

To understand why, you need to examine the sources of government revenue. Last year about 80 percent of these revenues came from personal income taxes and payroll taxes. The mega-rich pay income taxes at a rate of 15 percent on most of their earnings but pay practically nothing in payroll taxes. It’s a different story for the middle class: typically, they fall into the 15 percent and 25 percent income tax brackets, and then are hit with heavy payroll taxes to boot.

Back in the 1980s and 1990s, tax rates for the rich were far higher, and my percentage rate was in the middle of the pack. According to a theory I sometimes hear, I should have thrown a fit and refused to invest because of the elevated tax rates on capital gains and dividends.

I didn’t refuse, nor did others. I have worked with investors for 60 years and I have yet to see anyone — not even when capital gains rates were 39.9 percent in 1976-77 — shy away from a sensible investment because of the tax rate on the potential gain. People invest to make money, and potential taxes have never scared them off. And to those who argue that higher rates hurt job creation, I would note that a net of nearly 40 million jobs were added between 1980 and 2000. You know what’s happened since then: lower tax rates and far lower job creation.

Since 1992, the I.R.S. has compiled data from the returns of the 400 Americans reporting the largest income. In 1992, the top 400 had aggregate taxable income of $16.9 billion and paid federal taxes of 29.2 percent on that sum. In 2008, the aggregate income of the highest 400 had soared to $90.9 billion — a staggering $227.4 million on average — but the rate paid had fallen to 21.5 percent.

The taxes I refer to here include only federal income tax, but you can be sure that any payroll tax for the 400 was inconsequential compared to income. In fact, 88 of the 400 in 2008 reported no wages at all, though every one of them reported capital gains. Some of my brethren may shun work but they all like to invest. (I can relate to that.)

I know well many of the mega-rich and, by and large, they are very decent people. They love America and appreciate the opportunity this country has given them. Many have joined the Giving Pledge, promising to give most of their wealth to philanthropy. Most wouldn’t mind being told to pay more in taxes as well, particularly when so many of their fellow citizens are truly suffering.

Twelve members of Congress will soon take on the crucial job of rearranging our country’s finances. They’ve been instructed to devise a plan that reduces the 10-year deficit by at least $1.5 trillion. It’s vital, however, that they achieve far more than that. Americans are rapidly losing faith in the ability of Congress to deal with our country’s fiscal problems. Only action that is immediate, real and very substantial will prevent that doubt from morphing into hopelessness. That feeling can create its own reality.

Job one for the 12 is to pare down some future promises that even a rich America can’t fulfill. Big money must be saved here. The 12 should then turn to the issue of revenues. I would leave rates for 99.7 percent of taxpayers unchanged and continue the current 2-percentage-point reduction in the employee contribution to the payroll tax. This cut helps the poor and the middle class, who need every break they can get.

But for those making more than $1 million — there were 236,883 such households in 2009 — I would raise rates immediately on taxable income in excess of $1 million, including, of course, dividends and capital gains. And for those who make $10 million or more — there were 8,274 in 2009 — I would suggest an additional increase in rate.

My friends and I have been coddled long enough by a billionaire-friendly Congress. It’s time for our government to get serious about shared sacrifice.

Warren E. Buffett is the chairman and chief executive of Berkshire Hathaway.

Beezer here.  Much the same was said this morning by Alan ‘Ace’ Greenberg, former CEO of Bear Stearns, on  financial news cable channel CNBC.  Greenberg agreed with Buffett’s conclusions that raising revenue has to be an important component of efforts to reduce deficits and debt.   And like Buffett he’d start with $1 million in taxable income, and then raise rates again for those with $10 million in taxable income.   If the additional income is used to pay for hiring directly, it will boost the economy and get us out of the danger zone of falling again into recession–something warned about in the previous post via economics guru Nouriel Roubini.

Nassim Taleb, mathematician extraordinaire, philosopher and author of best selling ‘The Black Swan: The Impact of the highly Improbable’ was on CNBC this afternoon.  It’s been about a year since Taleb was a guest at the cable station that covers securities markets, investment banks and other aspect of the economic world. 

It’s not surprising Taleb is an infrequent guest.  He’s been among the most severe critics of the banking industry–an industry the cable channel devoutly protects and defends.

Nothing’s changed with Taleb.   He told the CNBC hosts bank executives at the helm when the recession hit should not only have been fired, but their fortunes confiscated.  And that goes for the Board of Directors too, Taleb said.  “The best way to get rid of the problem is the captain goes down with the ship—every captain, every ship.”

The whole point is that without this sword above their heads, Taleb said, bankers will continue to gamble with bank funds because they know they’ll suffer little in the way of punishment if the banks fail, and the bank losses will be borne by taxpayers. 

Frankly, the panel was at loss as to how to address Taleb’s comments.  Such a point of view is almost never allowed to sit at the CNBC table.  Here was the revolutionary in their midst.  His ideas were being broadcasted nationally.

Uncomfortable might be the best word to describe Taleb’s hosts.  One even tried to get Taleb to comment on QEII and it’s likely effect.  No succor there from Taleb.  He blasted rising debt and said America is in worse shape than Europe, which Taleb said at least is addressing the painful choices of spending reductions and/or tax increases.

But Taleb sometimes stumbled, or at least seemed to.  At one point he cited Reagan as being the first President to cut spending (Uh, that would be a no Taleb), but then later blamed Reagan for starting the trend of bailing out banks with taxpayer money, citing the bailout of Continental Bank.  Mixed reviews for Reagan from Taleb, apparently.

The truth is that Taleb counsels a strict understanding of risk:  Something he’s certain bankers and Federal Reserve Chairmen don’t understand.  As an expert in understanding risk, Taleb knows there will always be surprises.  There will always be unexpected shocks to any economic system.  The best defense is to understand what the effects of surprises could be, and to plan accordingly.   That’s a major theme of Taleb’s.  “You don’t want to be a sucker.” he says.

Beezer here.  We’re a big fan of Taleb and take every opportunity to see him on Television.  He’s always entertaining and has a flair for the metaphor.  Plus he takes delight in jabbing the famous and powerful, particularly if they are bankers, heads of government, or economists.

That said, we don’t agree with him always.  Taleb’s dim view of debt assumes growth often cannot pay it off.  I strongly disagree.  The austerity method of debt reduction makes it more difficult and less likely debt will be paid down.  It increases the likelihood that collapse and bankruptcy will be the only techniques applied as a cure.

His cure, in other words, will insure the results he wishes to avoid.   It’s like (this is a Taleb aphorism) the stoic with an illness who decided starvation would cure his illness.  He died, and thus was cured.

By the way, Taleb has a new book out entitled ‘The Bed of Procrustes.’  Which was why he was once again on CNBC.  As for Taleb’s performance on CNBC, we’ve seen him be better.  But that’s probably because the CNBC hosts had no real idea what to ask of him.   There was the revolutionary in their nest.  The best course was to listen, ask little in the way of questions, and get on with the day’s work.   Forgotten minutes after Taleb left the studio.  Until he writes another book, of course.