Sequestration And The Enormous Implications For The U.S. Economy [View article]
Reducing government spending this year does not reduce the individual tax burden in the year or potentially years ahead. Also, the "transfer payments" you refer to are still services the government provides to our citizens. With spending from the federal government coming in at 22% of U.S. GDP I think it is impossible to seperate government spending from the U.S. economy. The activity of the federal government is not designed to improve the economy, but indirectly benefits the private sector and drives additional economic activity.
Perhaps in a world where there were no government and no taxation all of that money would flow back into the economy, but that is not the world we live in. In the real world, we pay taxes and those taxes support federal services and obligations. The government distributes the tax revenue to purchase services from private sector companies, pay wages, and provides services to the citizens.
I would argue with you that the idea of the government building aircraft carriers does not improve the economy is patently false. The number of jobs supported by that kind of activity is enormous. A contract agency procures all of the materials, pays wages to the workers, and sells the aircraft carrier to the federal government at a profit. In the case of many defnese contractors, such as NOC, some of that profit is then returned to shareholders via dividends, buybacks, and capital appreciation.
Sequestration And The Enormous Implications For The U.S. Economy [View article]
However, we are taxed by the government for services they provide to us as citizens. We "purchase" these services, granted these purchases may not all be what we would spend that money on; however, they are services none the less. Similar to purchasing a coke at a local convenience store, some portion of that money, no matter how small, is transferred to the service providers (employees) who then use that money to purchase service providers.
The real issue with government spending is that of that $50 dollars they may tax you, $10 or more is going to debt service. Obviously reigning in the budget is a top priority. We need sensible fiscal policy to reduce the nation's debt burden and strengthen the economy for the long-term. I just feel there are much better ways to do it than via sequestration.
Ben Bernanke suggested tapering the cuts with shallower cuts on the front end, and much steeper cuts in the years ahead. I thought that kind of policy makes sense given the current economic state, and it provided the appropriate time for agencies to effectively plan and implement the savings and efficiencies to meet their goals.
Sequestration And The Enormous Implications For The U.S. Economy [View article]
Much of the cost of federal spending now is being past along to future generations via the enormous debt burden of the nation; however, I would contend that based upon the statement "commerce is the exchange of services, and money is the medium exchanged for dissimilar services" the federal government purchases more services in a year than any corporation. Corporations purchase goods and services from businesses.
Employers pay wages to staff who use those wages to purchase goods and services. The federal government is the US's largest employer.
I find it difficult to believe that an event of this magnitude, (3 million federal workers directly impacted, and countless others indirectly) will not have a significant impact.
Sequestration And The Enormous Implications For The U.S. Economy [View article]
Isn't the essence of commerce the transfer of money from one body to another? Spending from the government, like that of any other organization or individual moves money into the hands of others which can drive additional transactions. Revenue in companies is "re-invested" in the economy through Capital Expenditures and the salaries of their workforce.
Sequestration And The Enormous Implications For The U.S. Economy [View article]
Again, perhaps my perception is driven solely by location. The $109 billion in prescribed spending reductions is not unreasonable or unattainable. The uncertainty put in place by congress, and the timing of the cuts (halfway through the fiscal year) make the challenge all the more daunting. While the cuts are manageable, it is the indirect effects of the cuts that, I believe, could disrupt an already fragile economy.
Sequestration And The Enormous Implications For The U.S. Economy [View article]
Rose,
I do understand the challenges that the private sector has faced. In fact the company I am working with now is in fact "restructuring" to be more competitive and save the money needed to remain profitable. Difficult choices are a part of business, and to reduce federal spending to manageable levels they are part of government as well. Congress's failure to produce a budget, and penchant for pushing problems down the road, is making difficult decision that much more difficult as the savings identified as part of sequestration for FY13 must be achieved by Sep 30.
Projections for government spending in 2013 have called for an increase versus spending levels in 2012, however, since no budget exists at this time, it is impossible to say what federal spending in 2012 will truly be.
Sequestration And The Enormous Implications For The U.S. Economy [View article]
It appears that many of the readers strongly disagree with the opinion I have put forth on the sequestration situation. Perhaps my view is tainted by my proximity to the activity. Living in the D.C. area, I am squarely in the center of the action, and am constantly bombarded with opinions on how entering sequestration is a nightmare, or a "net positive" for the U.S.
While I believe and recognize that government spending is out of control, and there is significant room for improvement and efficiency in the federal government, I feel the economy is not in a state at this time where we as citizens can truly afford and absorb the costs associated with the prescribed cuts. Unemployment remains high and growth in the U.S. economy has been tepid at best. Based on much of the legislation associated with the sequester, the majority of the $109 billion cuts from the programmed budget for FY13 would be done at PPA (Program-Project-Activ... level, where the majority of the funds are appropriated for staffing. It is highly likely that the savings must come from reductions in staffing or pay for federal workers, likely driving unemployment up even further.
The effects of sequestration would, again, extend beyond simply the federal workers to all areas touched by the federal government. There have been a number of predictions on the impact of sequester on GDP, and these predictions have called for sequester to knock anywhere from 0.2-1.0 percentage points off of GDP in this year. Additionally, many predictions have estimated the longer term impact of sequester as nearly $200 billion annually, due to the reductions in "investments for the future".
The impact extends far beyond simply the dollar value however, and into the "productive capacity" which is reduced as the staffing is restricted across the government. Fewer air traffic controllers means fewer flights, which hurts airlines, oil companies, etc. Reductions at the FDA extend timelines for drug applications, which could hurt the bottom line for pharmaceutical companies. Reductions in spending for education could cause teachers around the nation to be laid-off, and this list of potential impacts goes on and on.
While perhaps I have taken a gloom-and-doom perspectve on the issue, and perhaps sequestration will be a long-term success for the economy and congress but I find that difficult to believe. The true impact remains to be seen, and it likely lies somewhere between my belief that sequestration will cause a significant economic down-turn for the U.S., and the belief that this will be a relative non-event.
I hope for all of us, that their is relatively little impact. I find myself hoping for the best, but preparing for the worst.
Sequestration And The Enormous Implications For The U.S. Economy [View article]
Bob,
I appreciate the sentiment, and I think it is an important factor that many are truly overlooking. It seems many overlook the true breadth of services provided by the federal government, and the impact that the loss in work/income can create. The government extends far beyond the beltway. Think of all the civilian employees supporting military bases and security activities around the country, TSA, FAA, SEC, IRS, FDA, etc.. All of these agencies are impacted, and the reach of these agencies is nationwide.
3 Dividend Stocks For The Months Ahead [View article]
Agreed. Personally, I bought in to GE after the cut. I think they are building a nice streak of dividend increases, and will be a great DGI stock for years to come.
3 Defense Contractor Dividends To Watch Over The Next Month [View article]
I actually like General Dynamics a lot, but I chose to leave them off of this list. Similar to RTN they are a more diversified provider, and have a low debt load. The big earnings miss in Q4 has me a bit hesitant, but I would keep watching them in the years ahead.
I also have to say that I do not have the same level of familiarity with HRS, as I do with the other stocks. However, after glancing over some of the financials, HRS looks to be another strong company. Trading at a TTM P/E of 9.5 versus the five year average of 11.5. Earnings are expected to grow very slowly for HRS over the next five years though (<3%), and that could limit the upside for the stock over that period of time. The company only pays out 28% of earnings as dividends, and has grown the dividend nearly 20% annually over the past five years. I think the dividend can grow without pressuring the company's financials, but the growth will need to slow as EPS growth slows. As an income stock, HRS looks to be sound; however, I would anticipate significant capital appreciation over the next five years.
3 Defense Contractor Dividends To Watch Over The Next Month [View article]
RR, I agree that there are opportunities for significant "lean"-ing of operations. However, a large portion of this is self imposed by the federal government. When I was working for a defense contractor, I saw a time where an office was trying to order a tv to project presentations and documents. Instead of ordering from Best Buy, and having the tv delivered and installed for $800, the TV had to be ordered from GSA and cost $4000, plus they had to pay another team to install and a separate team to hook up the tv.
I am not saying contractors are free of blame, they obviously are making money off the federal government, but they aren't the only source of waste and wasteful spending. Long term, contractors play an important role in national defense, and will continue to do so.
More on CSX Corp. (CSX): Q4 comes in-line on a slight beat to the revenue side, despite a slight 2% slip in total sales Y/Y. Net earnings also declined 3.1% as coal shipments slumped by 19%, largely due to a reduction in demand from utilities, though intermodal volume improved by 3.6% and automotive volumes climbed by 10%. Shares +1.4% AH. [View news story]
More strong performance from CSX. Undervalued for far too long
For Dividend Growth Investors, YOC Is Not A Trap [View article]
While you can, yield is generally assessed on an annual basis. A stock yielding 4% annually (at a given price) yields 1% on a quarterly basis. Generally, you'll look at the quarterly dividend amount and just multiply by 4 to assess the annual yield for the stock.
I hope this helps. If you have more specific questions I would be glad to try to address them as well.
Sequestration And The Enormous Implications For The U.S. Economy [View article]
improve the economy, but indirectly benefits the private sector and drives additional economic activity.
Perhaps in a world where there were no government and no taxation all of that money would flow back into the economy, but that is not the world we live in. In the real world, we pay taxes and those taxes support federal services and obligations. The government distributes the tax revenue to purchase services from private sector companies, pay wages, and provides services to the citizens.
I would argue with you that the idea of the government building aircraft carriers does not improve the economy is patently false. The number of jobs supported by that kind of activity is enormous. A contract agency procures all of the materials, pays wages to the workers, and sells the aircraft carrier to the federal government at a profit. In the case of many defnese contractors, such as NOC, some of that profit is then returned to shareholders via dividends, buybacks, and capital appreciation.
Sequestration And The Enormous Implications For The U.S. Economy [View article]
The real issue with government spending is that of that $50 dollars they may tax you, $10 or more is going to debt service. Obviously reigning in the budget is a top priority. We need sensible fiscal policy to reduce the nation's debt burden and strengthen the economy for the long-term. I just feel there are much better ways to do it than via sequestration.
Ben Bernanke suggested tapering the cuts with shallower cuts on the front end, and much steeper cuts in the years ahead. I thought that kind of policy makes sense given the current economic state, and it provided the appropriate time for agencies to effectively plan and implement the savings and efficiencies to meet their goals.
Sequestration And The Enormous Implications For The U.S. Economy [View article]
Employers pay wages to staff who use those wages to purchase goods and services. The federal government is the US's largest employer.
I find it difficult to believe that an event of this magnitude, (3 million federal workers directly impacted, and countless others indirectly) will not have a significant impact.
Sequestration And The Enormous Implications For The U.S. Economy [View article]
Sequestration And The Enormous Implications For The U.S. Economy [View article]
Sequestration And The Enormous Implications For The U.S. Economy [View article]
I do understand the challenges that the private sector has faced. In fact the company I am working with now is in fact "restructuring" to be more competitive and save the money needed to remain profitable. Difficult choices are a part of business, and to reduce federal spending to manageable levels they are part of government as well. Congress's failure to produce a budget, and penchant for pushing problems down the road, is making difficult decision that much more difficult as the savings identified as part of sequestration for FY13 must be achieved by Sep 30.
Projections for government spending in 2013 have called for an increase versus spending levels in 2012, however, since no budget exists at this time, it is impossible to say what federal spending in 2012 will truly be.
Sequestration And The Enormous Implications For The U.S. Economy [View article]
While I believe and recognize that government spending is out of control, and there is significant room for improvement and efficiency in the federal government, I feel the economy is not in a state at this time where we as citizens can truly afford and absorb the costs associated with the prescribed cuts. Unemployment remains high and growth in the U.S. economy has been tepid at best. Based on much of the legislation associated with the sequester, the majority of the $109 billion cuts from the programmed budget for FY13 would be done at PPA (Program-Project-Activ... level, where the majority of the funds are appropriated for staffing. It is highly likely that the savings must come from reductions in staffing or pay for federal workers, likely driving unemployment up even further.
The effects of sequestration would, again, extend beyond simply the federal workers to all areas touched by the federal government. There have been a number of predictions on the impact of sequester on GDP, and these predictions have called for sequester to knock anywhere from 0.2-1.0 percentage points off of GDP in this year. Additionally, many predictions have estimated the longer term impact of sequester as nearly $200 billion annually, due to the reductions in "investments for the future".
The impact extends far beyond simply the dollar value however, and into the "productive capacity" which is reduced as the staffing is restricted across the government. Fewer air traffic controllers means fewer flights, which hurts airlines, oil companies, etc. Reductions at the FDA extend timelines for drug applications, which could hurt the bottom line for pharmaceutical companies. Reductions in spending for education could cause teachers around the nation to be laid-off, and this list of potential impacts goes on and on.
While perhaps I have taken a gloom-and-doom perspectve on the issue, and perhaps sequestration will be a long-term success for the economy and congress but I find that difficult to believe. The true impact remains to be seen, and it likely lies somewhere between my belief that sequestration will cause a significant economic down-turn for the U.S., and the belief that this will be a relative non-event.
I hope for all of us, that their is relatively little impact. I find myself hoping for the best, but preparing for the worst.
Sequestration And The Enormous Implications For The U.S. Economy [View article]
I appreciate the sentiment, and I think it is an important factor that many are truly overlooking. It seems many overlook the true breadth of services provided by the federal government, and the impact that the loss in work/income can create. The government extends far beyond the beltway. Think of all the civilian employees supporting military bases and security activities around the country, TSA, FAA, SEC, IRS, FDA, etc.. All of these agencies are impacted, and the reach of these agencies is nationwide.
3 Dividend Stocks For The Months Ahead [View article]
Apple: A Dividend Growth Stock For The Next Generation [View instapost]
3 Defense Contractor Dividends To Watch Over The Next Month [View article]
I also have to say that I do not have the same level of familiarity with HRS, as I do with the other stocks. However, after glancing over some of the financials, HRS looks to be another strong company. Trading at a TTM P/E of 9.5 versus the five year average of 11.5. Earnings are expected to grow very slowly for HRS over the next five years though (<3%), and that could limit the upside for the stock over that period of time. The company only pays out 28% of earnings as dividends, and has grown the dividend nearly 20% annually over the past five years. I think the dividend can grow without pressuring the company's financials, but the growth will need to slow as EPS growth slows. As an income stock, HRS looks to be sound; however, I would anticipate significant capital appreciation over the next five years.
3 Defense Contractor Dividends To Watch Over The Next Month [View article]
3 Defense Contractor Dividends To Watch Over The Next Month [View article]
I agree that there are opportunities for significant "lean"-ing of operations. However, a large portion of this is self imposed by the federal government. When I was working for a defense contractor, I saw a time where an office was trying to order a tv to project presentations and documents. Instead of ordering from Best Buy, and having the tv delivered and installed for $800, the TV had to be ordered from GSA and cost $4000, plus they had to pay another team to install and a separate team to hook up the tv.
I am not saying contractors are free of blame, they obviously are making money off the federal government, but they aren't the only source of waste and wasteful spending. Long term, contractors play an important role in national defense, and will continue to do so.
More on CSX Corp. (CSX): Q4 comes in-line on a slight beat to the revenue side, despite a slight 2% slip in total sales Y/Y. Net earnings also declined 3.1% as coal shipments slumped by 19%, largely due to a reduction in demand from utilities, though intermodal volume improved by 3.6% and automotive volumes climbed by 10%. Shares +1.4% AH. [View news story]
For Dividend Growth Investors, YOC Is Not A Trap [View article]
I hope this helps. If you have more specific questions I would be glad to try to address them as well.