Page 1 of 40

On Treating the Government as a Business

Study of The Clinton Budget Surpluses The Law Relating Government Receipts and Outlays and

The Law Relating Surpluses and Receipts

§ 1. Summary

It is widely believed that the government should be treated as a business and US

Presidential candidates often tout their business credentials as fitting qualification

(most notably the 2012 Republican nominee, Mitt Romney). Accordingly, we treat

the US government here as a business and analyze its budget receipts, outlays, and

surplus (or deficit), using the fundamental equation, Surplus = Receipts – Outlays.

This is exactly analogous to the equation, Profits = Revenues – Costs, governing

the financial performance of a company. The government receipts are exactly

analogous to the revenues of a company and the budget surplus (or deficit) is

exactly analogous to the profits (or losses) of a company.

It is shown here that a simple linear law y = hx + c can be used to describe the

financial performance in both cases with x being revenues or receipts, and y being

profits (losses) or surplus (or deficits). The data for the Clinton years, which

revealed both a deficit and a surplus (for four consecutive years), is compared with

the financial data for two successful companies, Google and Southwest Airlines.

The latter has reported a profit for every single year since 1973. Both these

companies reported a loss very early in their growth and then a profit, as revenues

increased. We see exactly the same pattern in the US government surplus-receipts

data. As receipts increased during the Clinton years, the deficits decreased and

eventually turned into a surplus for four consecutive years. A review of all of the

historical data (going back to 1901) shows that the Clinton terms are indeed unique

in revealing this perfectly linear tandem growth in the receipts and the surplus.

Page 2 of 40

The study of the historical data also reveals that the more recent trend of an erratic

rise and fall in the government receipts, starting in 2000, is unprecedented and is

worthy of serious study by professional economists. The receipts peaked in 2000

and dropped rapidly (2000-2003) before rising briefly (2004-2007) and then falling

again rapidly (2007-2009) with a brief recovery now in 2010 and 2011.

There are limits to the adage of government being treated as a business. If the US

government were indeed as business, it would have been forced into a bankruptcy,

or into merger talks with willing countries. If this sounds ridiculous so does the

extreme direction taken by the current political discourse on the long term

implications of the soaring deficits (now exceeding a trillion dollar for each fiscal

year, since 2009) and the national debt (just crossed $16T on August 31, 2012).

The unique role of the government, and its power to carry the immense burden of

annual deficits and the cumulative national debt, must be recognized as we seek

innovative solutions to a new era of prosperity amid growing despair.

Page 3 of 40

Table of Contents

§ No. Topic Page No.

1. Summary 1

2. Introduction 4

3. The Measure of Efficiency 5

4. The Clinton Budget Deficits and Surpluses 6

5. Comparison with the financial performance of a company 10

6. Erratic Performance of the US Government “Engine” 16

7. Concluding Remarks 20

8. Appendix I: The marginal tax rate and tax equations 26

9. Appendix II: List of references 28

10. Appendix III: Bibliography list of related articles 32

Page 4 of 40

§ 2. Introduction

The government, we often hear, should be run like a business. There is too much

waste in government, too much mismanagement and too much corruption. And so

it is that the government procures $450 hammers and $600 toilet seats, Refs.[1-3].

The main purpose here is not to get into discussions about waste and inefficiencies

in government but to study the data on government receipts, outlays, and surpluses

(or deficits). This data can be analyzed just like the profits and revenues data for

any company. As we will see shortly, there is a remarkably simple relationship

between government receipts (which is akin to the revenues of a company) and

surpluses (which is akin to the profits, or net income, of a company).

Equations 1 and 2 describe universal inviolable laws that describe the financial

performance of ALL companies and the government, respectively. These equations

are also very similar to equation 3 which describes the performance of a “heat

engine”, or equation 4 which describes what is known as the photoelectric effect.

Surplus = Receipts – Outlays, or S = R – O …………(1)

Profits = Revenues – Costs, or P = R – C …………(2)

Work done = Heat in – Heat Out or W = Q1 – Q2 …………(3)

Kinetic energy of electron = Energy of photon – Work function ……..(4)

The first two equations above describe how we account for “money” in economics,

finance, and business, while the latter two equations describe how we account for

“energy”. Equation 3 is the basic equation used to analyze the performance of a

heat engine, like the engines used in modern automobiles, aircrafts, locomotives, or

rockets. Equation 4 is the statement of Einstein’s photoelectric law, Refs.[4-5] and

relating the energy of a photon to the energy of the electron produced with light

shines on the surface of a metal. The implications of this equation have been

discussed in other related articles on the US national debt, unemployment rates

(see bibliography).

Page 5 of 40

§ 3. The Measure of Efficiency

When the steam engine was invented in the 18th

century, Refs. [6-10] very few

actually knew how it really works. The University of Glasgow (UofG), in

Scotland, used to own one of these early steam engines, called the Newcomen

engine. It was used to demonstrate the working of an engine to students of the

natural sciences, or natural philosophy, as it was then called. The engine worked

erratically. It would start up some days, huff and puff and quit, especially when

students were gathered (all with their ties on!). A young James Watt, who had

completed his studies and was looking for something to do with his life, was given

this engine to study and see if he could improve its performance. Thus began the

Industrial Revolution.

Equation 3 is also the basic equation used by a young French engineer and noble

man named Sadi Carnot to derive the mathematical formula for the efficiency of a

“heat engine”. The efficiency of the engine, denoted by the symbol η, is the ratio

W/Q1. It is also called the thermal efficiency since it is a measure of how well the

engine uses the “heat in” to produce useful “mechanical work”, such lift a weight

(water from flooded mines, where Watt found the first application for his steam

engines, horses were used before that to draw water from the flooded coal mines).

The thermal efficiency η is exactly analogous to the profit margin for a company,

which is equal to the ratio P/R. The profit margin measures how well a company

converts its revenues into profits.

Carnot derived an amazingly simple theoretical formula for the efficiency η, using

very simple and general arguments, without making any assumptions about how

the engine itself was constructed, or even about what was being used in the engine

to produce the “useful” work W. The efficiency is given by the formula below

where T1 is the temperatures of the heat source (adding heat to the engine) and T2

the temperature of the heat sink (to which the heat “out” is lost).

η = W/Q1 = 1 – (Q2/Q1) = 1 - (T2/T1) …………(1)

Page 6 of 40

Carnot’s engine could work just as well with steam, as it could with air, or any

other “working substance”. It was such studies, empirical (by Watt, and later Joule)

and theoretical (notably Carnot, Clausius, and Lord Kelvin) that led to the

formulation of what is known as the two laws of thermodynamics in the middle of

the 18th

century. (The first of these two laws is the law of conservation of energy.

The second law leads to an important concept known as entropy, first enunciated

by Clausius. The entropy S = Q/T, or dQ/T where dQ is the heat added at T.)

Several recent articles, available at this website (see bibliography list), describe the

theoretical studies by the present author to understand how companies, big and

small, work, using the above simple equations. Thus, it appears that we can deduce

simple and universal laws regarding the performance of a company by studying the

profits and revenues data that are being reported on a quarterly (10-Q filings with

the US Securities and Exchange Commission) and annual basis (10-K filings) by

all public companies. For some companies, we see profits y increasing with

increasing revenues x. But the profit margin, the ratio y/x, can either increase or

decrease. For some companies, revenues increase but profits decrease and the

profit margin is going down. The apparently conflicting observations can be

understood in terms of simple “law” that relates revenues x and profits y. The

reader is referred to the articles cited in the bibliography (notably articles on

Microsoft, Google, Apple, the new General Motors and Kia Motor Company).

In what follows here we will compare the financial performance of the US

Government and some private companies, using equations 1 and 2 above.

§ 4. The Clinton Budget Deficits and Surpluses

Let us consider the budget data for the Clinton years, when government reported

both a deficit (1993-1997) and a surplus (1998-2001). The data is summarized in

Table 1 and was obtained from the Historical Tables for each fiscal year in the

document entitled the Budget of the US Government (click here), Ref.[11]. The

document for the 2013 budget includes the historical data going all the way back to

1789 (when George Washington’s first term started). However, the annual receipts,

outlays, and surplus (or deficit) are only available from 1901 to the present.

Page 7 of 40

Table 1: US Government Budget during the Clinton years

Year Receipts, x

$ billions

Outlays, (x- y)

$, billions

Deficit/Surplus, y

$, billions

1994 1257.7 1460.9 -203.2

1994 1258.7 1461.9 -203.2

1995 1351.9 1515.9 -164

1996 1453.2 1560.6 -107.4

1997 1579.4 1601.3 -21.9

1998 1722.0 1652.7 69.3

1999 1827.6 1702.0 125.6

2001 1991.4 1863.2 128.2

2000 2025.4 1789.2 236.2

Source: Fiscal Year 2012 Historical Tables, Budget of the US Government (click

http://www.whitehouse.gov/sites/default/files/omb/budget/fy2012/assets/hist.pdf,

http://www.whitehouse.gov/sites/default/files/omb/budget/fy2013/assets/hist.pdf

The two slightly different values for receipts and outlays 1994 (the deficit is the

same) are from the budget reports for two different years. The data has been sorted

here for increasing receipts. Notice how government receipts (akin to the revenues

of a company) were increasing from year to year (the exception being 2000 and

2001 where the chronological order is reversed). Correspondingly, the deficits also

decreased and crossed into the positive territory for the years 1998-2001.

A more careful analysis of this data also reveals another interesting pattern. Let x

denote the receipts and y the surplus or the deficit. Between 1998 and 2000, the

receipts increased by “Delta x”, ∆x = (x2 – x1) = $303.4 billion with subscripts 1

and 2 being used to denote any two points in the data set. Correspondingly, the

surplus increased by “Delta y”, ∆y = (y2 – y1) = $166.9 billion. The ratio h =

∆y/∆x = 0.550. Likewise, if we consider the years 1998 and 1999, ∆x = (x2 – x1) =

$105.6 billion and ∆y = (y2 – y1) = $56.3 billion. The ratio h = ∆y/∆x = 0.533 is

roughly constant. The same applies for the years with the negative surplus or

deficits. For the years 1994 and 1997, the ratio h = ∆y/∆x = 181.3/321.7 = 0.563, is

roughly the same. The x-y graph is thus a nice straight line, with a positive slope,

as seen in Figure 1. The mathematical equation of this straight line is y = hx + c =

Page 8 of 40

h(x – x0) where the slope h is the fixed rate of change of the deficit or surplus as

receipts increase. (This is similar to the marginal tax rate encountered in tax law.

The US code is actually is a series of straight lines, with increasing slopes h and

therefore more negative values of intercept c, or increasing x0, see discussion in

Refs. [4.5]. As applied to the tax problem, x is the taxable income, y the tax owed

and h is the marginal tax rate and c or x0 defines the range of income for which the

fixed tax rate h applies, see also Appendix I of present article.)

Figure 1: The US last enjoyed a budget surplus, for four consecutive years, under

President Clinton. As the government receipts increased during the Clinton years,

surpluses also increased, following a simple linear law as shown here.

The constants h and c in the linear law, for the Clinton years, were deduced using

the well-known linear regression analysis. When a number of points on a graph lie

approximately on a straight line, as we see here, the “best-fit” line through the data

points is determined by minimizing the square of the vertical deviation of each

point from the best-fit line. If yb is the value on the best fit, the vertical deviation

-300

-200

-100

0

100

200

300

400

0 500 1000 1500 2000 2500

Receipts, x [$, billions]

Su

rplu

s,

y [

$,

bil

lio

ns

]

Clinton years y = hx + c = h(x – x0) = 0.5845x – 945.04

= 0.5845 (x – 1616.93)

r2 = 0.998

Page 9 of 40

equals (yj – yb), where the subscript “j” means we are considering the y value for

the “jth” point in the data set. Some points will lie above the best-fit line while

others will lie below it. Hence the sum of all the deviations ∑(yj – yb) = 0.

However, the square of the individual deviation (yj – yb)2 is always positive and

hence the sum of all the squares ∑(y – yb)2 is a positive quantity. Using the

methods of calculus, the French mathematician Legendre developed the formula

for h, in 1805, which minimizes the sum of the squares of the deviations. Hence,

the best-fit line is also called the least squares line; see articles on Air Tran and

Google, cited in the reference list, for more discussion on this point.

However, it is also important to remember, as Legendre himself emphasized, that

there is nothing sacrosanct about the best-fit line. It is just as good as any other line

that can be used to join the points that lie approximately on a straight line.

The best-fit line has a slope h = 0.5845. This is higher than the slopes deduced by

considering three (x, y) pairs in the data set. There are other pairs which yield a

higher slope, example, 1996 and 1997 with h = 0.677 and 1995 and 1997 with h =

0.625. The best-fit line thus represents an “averaging” all possible slopes that can

be deduced if we consider all the combinations of (x, y) pairs. With nine data

points (two for 1994), we can actually calculate 36 different slopes! The linear

regression coefficient r2 = 0.998 tells us that there is indeed a very strong positive

correlation between receipts and surpluses or deficits. For a PERFECT positive

correlation, when all points lie EXACTLY on a straight line, the regression

coefficient r2 = + 1.000.

This is indeed remarkable and does not seem to be widely recognized to date. An

examination of the historical tables (and the introductory discussion provided by

the President with each budget) shows that prior to the Clinton years, the US had a

budget surplus for an uninterrupted period from 1920-1930 and for eight other

years, in an interrupted manner, 1947-1949, 1956-1958, 1960, and 1969. (The

annual budgetary data is only available through 1901.) However, the perfectly

linear relation between receipts and surplus that is observed in the Clinton years is

NOT observed in the earlier eras, including the 1920s which are often called the

“roaring” years when the stock market boomed. Then followed the crash and the

Great Depression.

Page 10 of 40

§ 5. Comparisons with financial performance of a company

Just like we can learn about the “laws” that govern the operation of a “heat

engine”, by making careful empirical observations (James Watt) or by indulging in

theoretical speculations (Clausius, Carnot, Kelvin), we can learn about the “law”

that governing the functioning of the economy or an individual company by

studying the budget data, or the financial data of individual companies.

The revenues of a company are just like the receipts of the US government, and

vice versa. Profits (or losses) of a company are just like the surpluses (or deficits).

We expect profits to increase as revenues increase. Let us therefore consider the

performance of Google, in its early years, Ref.[12]. As we know, Google, which

was founded in 1998, has done very well and is considered to be one of the

successful companies of the modern era.

In 1999 and 2000, Google reported a loss. However, as its revenues increased, it

moved into the positive territory in 2001 and 2002. The data is summarized in

Table 2 and is presented graphically in Figure 2.

Table 2: Profits-Revenues data for Google (Early years)

Year Revenues,

$ millions

Costs,

$, millions

Profits/Loss

$, millions

1999 0.220 6.296 -6.076

2000 19.108 33.798 -14.69

2001 86.426 79.441 6.985

2002 439.51 339.854 99.66

Source: Data may be found on page 19 of the Google Annual Report for 2004

(click here), filing with US Securities and Exchange Commission for FY ended Dec

31, 2004; see Item 6, Selected Financial Data. The 1999 data is from Google’s

Registration Statement (S-1) with the SEC (click here). Since Profits = Revenues –

Costs, the costs in the third column are the deduced from the profits (net income)

and revenues values. Google reported a loss in 1999 and 2000 and has since

reported a profit (see more detailed analysis presented in Ref. [12], click here.)

Page 11 of 40

Figure 2: The profits-revenues graph Google during the early years (2000-2002).

Google reported a loss in 2000 (the only loss reported) when revenues were low.

Once revenues exceeded a minimum, or cut-off, level x0 profits appeared and

Google has reported profits ever since. The data for the first three years again

reveals a nice linear relationship, y = hx + c, relating revenues and profits. An

exactly behavior, when profits and revenues following a linear law, has been

observed with the post-bankruptcy new GM, see Refs. [16-18].

An exactly similar pattern is also revealed by Southwest Airlines. This low-cost

airline is remarkable in that it has reported a profit, year-after-year, for 39 years,

ever since it first “turned the corner” in 1973 (see Refs. [13,14]). The airline was

founded in 1971 and reported a loss for the partial year of operations in 1971 and

the full year of operations in 1972 but went into the positive territory starting 1973.

With increasing revenues came increasing profits but the “law” relating profits and

revenues is again a same simple linear law, y = hx + c = h(x – x0), see Figure 3.

Profits appear when the revenues exceed the minimum, or cut-off, level x0 = - c/h.

-40

-20

0

20

40

60

80

100

120

140

0 100 200 300 400 500 600

Revenues, x [$, millions]

Pro

fits

, y [

$,

mil

lio

ns

]

Google (2000-2002) y = hx + c = h(x – x0)

= 0.272x – 19.89

= 0.272 (x – 73.12)

Page 12 of 40

Table 3: Profits-Revenues for Southwest Airline (1971-1978)

Year Revenues, x

$, millions

Profits, y

$, millions

Costs (x –y)

$, millions

Comments

1971 2.129 -3.753 5.882 Data from

1972 5.994 -1.591 7.585 1973, 1975

1973 9.209 0.175 9.034 and 1978

1974 14.852 2.14 12.712 Annual

1975 22.828 3.40 19.428 Reports

1976 30.92 4.939 25.981

1977 49.047 7.545 41.502

1978 81.065 17.004 64.061

Figure 3: Profits-revenues data for the first few years of

operation, obtained from 1973, 1975, and 1978 Annual Reports

reveals even more clearly the significance of the intercept c. The nonzero c is

clearly related to the “fixed” costs of operation. When revenues were low (below

the fixed costs of operation), a loss was reported in both 1971 (partial year of

operations) and in 1972, the first full year of operations.

-10

-5

0

5

10

15

20

0 20 40 60 80 100

Revenues, x [$, millions]

Pro

fits

, y [

$,

mil

lio

ns

]

A B

Page 13 of 40

The solid blue line A, with the equation y = 0.5548x – 4.934 connects the 1971 and

1973 data. The dashed line B, y = 0.2245x – 1.194, connects the 1974 and 1978

data. (Linear regression could be used but is not deemed necessary at this point.)

The loss in 1971 means revenues did not exceed the “breakeven” level. The first

“breakeven” revenue calculated from the equation of the line connecting the 1971

and 1973 data is $8.893 million (x0 = - c/h = -4.934/0.555 = 8.893). The revenue

for 1973 was $9.209 million and hence a small profit was reported. However, as

revenues and profits increased further, the slope h decreased and, correspondingly

the intercept c also changed (to become more positive). Nonetheless a nearly

perfect linear relation between profits and revenues is still observed.

Table 4: Annual Profits-Revenues data for General Motors

Year Revenues x

$, billions

Profits, y

$, billions

Profit

margin,

100 (y/x)

Change

∆x

Change

∆y

Slope h=

∆y/∆x

2009 57.474 -4.428 -7.7

2010 135.592 4.668 3.44 78.13 9.1 0.116

2011 150.276 7.585 5.05 14.7 2.92 0.198

2009-2011 Overall change 2009 to 2011 92.83 12.01 0.129 Data sources:

http://www.gm.com/content/dam/gmcom/COMPANY/Investors/Corporate_Governance/PDFs/St

ockholderInformationPDFs/Annual-Report.pdf 2010 Annual Report

http://www.gm.com/content/dam/gmcom/COMPANY/Investors/Stockholder_Information/PDFs/

2011_GM_Annual_Report.pdf 2011 Annual Report

The example of two very successful companies, Google and Southwest Airlines, is

presented here first to illustrate how “good” companies work. An exactly similar

linear relation between profits and revenues is also observed if we study the data

for other successful companies like Microsoft and Apple and also emerging and

struggling companies. In this context, it is also of interest to note the new General

Motors, which is emerging from its bankruptcy, also shows the same behavior,

although data is available for only one partial year of operation (2009) and two full

years (2010 and 2011). This should be pointed out since the US government still

has a stake in the new GM. Indeed, the quarterly revenues data for the new GM

seem to show aspects of the same behavior observed with Microsoft. The new GM

data has been included here in Table 4 and is presented graphically in Figure 4.

Page 14 of 40

Figure 4: A Type I line is deduced by considering the overall change in profits and

revenues between 2009 and 2011. The new GM moved into the positive territory

when its revenues exceeded a critical level, which corresponds to the “fixed” costs

of operation (see Appendix I for brief discussion). Another Type I equation can

also be deduced by consider the first two data points (partial year 2009 and full

year 2010), with a slightly lower slope h with a slightly higher cut-off revenue, x0.

The general equation of a straight line, y = hx + c, which seems to describe the

profits-revenues behavior of a company (and also the surplus-receipts for the

government) suggests at least three possibilities.

1. Type I: Positive slope and negative intercept (h > 0, c < 0), both profits y

and profit margins y/x, increase with increasing revenues, x.

2. Type II: Positive slope and positive intercept (h > 0, c > 0), profits y

increase with increasing revenues x, but the profit margins y/x decrease with

increasing revenues.

3. Type III: Negative slope and positive intercept (h < 0, c > 0) both profits

and profit margins decrease with increasing revenues.

-15

-10

-5

0

5

10

15

0 20 40 60 80 100 120 140 160 180 200

Annual Revenues, x [$, billions]

An

nu

al P

rofi

ts,

y [

$, b

illi

on

s]

Type I line y = 0.129x – 11.87 = 0.129 (x - 91.7)

x0

Page 15 of 40

All the examples considered here are examples of Type I behavior and were

chosen to illustrate the similarity with the surplus-receipts data for the Clinton

years. Although the slope h (rate of increase of profits with revenues, or the

marginal rate of profits, MRP, like the marginal tax rate) decreased for Southwest

after it started turning a profit, it remained a Type I company. Examples of all

three, Type I, Type II, and Type III can be found if we study the profits-revenues

data for various companies, large and small (see bibliography list).

Transitions from one type of behavior to another are also observed, as revenues

increases (or decrease) with the passage of time. These transitions imply a more

general nonlinear law relating revenues and profits, of the type:

y = mxne

-ax + c …………(2)

and, dy/dx = (n – ax)(y – c)/x …………(3)

This nonlinear law implies a maximum point on the profits-revenues graph. The

maximum point will occur when the derivative (slope of the tangent to the curve)

dy/dx = 0. Thus, the maximum point is at x = n/a. For x < n/a, the graph is a rising

curve with profits increasing with increasing revenues. For x > n/a, the graph is a

falling curve, with profits decreasing with increasing revenues.

Indeed, such a maximum point is which is also observed with several companies,

most notably General Motors, before its bankruptcy. GM was operating for several

years in the Type III mode, or past the maximum point of the profits-revenues

graph and was eventually forced into bankruptcy. A maximum point has also been

observed on the profits-revenues graph of Ford Motor Company, Air Tran,

Southwest Airlines, to name just a few. Indeed the change from Type I to Type III

behavior, positive slope to negative slope, implies the existence of a maximum

point. A company in the Type III must take corrective action to become a Type II

or Type I company.

Page 16 of 40

§ 6. Erratic Performance of the US Government “Engine”

The US government, sadly, is showing the characteristics of the old Newcomen

engine that students at the University of Glasgow used to gather around (yes, with

their ties on!) before James Watt started his studies on why it just huffs and puffs

and quits most of the time. The data for 1994-2011 is plotted in Figure 5 without

any trend lines and in Figure 6 to illustrate the various “chaotic” trends.

Figure 5: Overview of the surplus-receipts data for the US Government for the

period 1994 to 2011. The apparently chaotic pattern seen here can be decomposed

into a series of straight line segments, as revealed in Figures 6 to 8.

The US budget trends over the last three presidencies (1993-2011), see Figure 5,

reveals several combinations of the Type I behavior. The Clinton years take it into

the positive territory. This is followed by three interesting periods of Type I

behavior with interesting properties, as summarized below.

-1,600

-1,400

-1,200

-1,000

-800

-600

-400

-200

0

200

400

0 500 1000 1500 2000 2500 3000

Receipts, x [$, billions]

Su

rplu

s,

y [

$,

bil

lio

ns

]

Deficits

US Budget Data 1994-2011

Page 17 of 40

Figure 6: The US Budget data, receipts and surplus (deficits) move following a

chaotic crisscrossing path along line A, B, C, and D; see description in text.

1999-2004: Inverse Type I with ultra-steep slope (h > 1, with c <0)

This is illustrated by Line B with the equation y = 2.527x – 4.882, with x and y in

trillions of dollars, see Figures 6 and 7. The data for the years 1999 to 2004 falls on

or close to this line which starts in the positive territory. The exact chronology is

ignored and the data points for these years go up and down along this line. The

slope h and intercept c were fixed from the (x, y) pairs for 2000 and 2003. The

slope h = 2.527 > 1.

It is called an Inverse Type I since the receipts (akin to revenues of a company)

are decreasing (see direction of arrow) and therefore the surplus is also

decreasing (which is mathematically the same as an increase in the deficits).

This is the exact opposite of the behavior in the Clinton era, when both receipts

and surplus were increasing (or deficits were decreasing). While “normal” Type I

behavior means profits increasing with increasing revenues, or surplus increasing

with increasing receipts (both ∆x and ∆y are positive and slope h is also positive),

-2.000

-1.500

-1.000

-0.500

0.000

0.500

1.000

1.500

2.000

0.000 0.500 1.000 1.500 2.000 2.500 3.000 3.500

Receipts, x [$, trillions]

Su

rplu

s,

y [

$,

tril

lio

ns

]

A

B

C

D

Erratic performance like the old

Newcomen engine

Page 18 of 40

the INVERSE Type I behavior means profits are decreasing with decreasing

revenues ((both ∆x and ∆y are negative maintaining a positive slope h). The

steepness of the slope h > 1 is a cause for concern since it means that deficit is

increasing (or the surplus is decreasing) much more than the decrease in the

receipts. Imagine a company with a reduced $10 billion but with reduced profits of

$25.27 billion. This is what the steep slope = 2.527 means in the deficits problem.

Figure 7: US Budget 2000-2007. The data can be described by the two straight

lines B and C, as indicated here.

2004-2007: Normal Type I with a shallow slope h > 0, with c <0

The trend then reverses to a normal Type I following line C. The end points of this

line are 2004 and 2007 with the data for 2005 and 2006 falling in between on the

same line. The receipts are increasing (like the revenues of a company) but quite

slowly. The surplus is also increasing (since deficits are going down), which like

profits increasing or losses going down for a company. The small positive slope is

-0.50

-0.40

-0.30

-0.20

-0.10

0.00

0.10

0.20

0.30

0.40

0.50

0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50

Receipts, x [$, trillions]

Su

rplu

s,

y [

$,

tril

lio

ns

]

B

C

2000

2001

2002

2003

2004

2007

2006

2005

Page 19 of 40

maintained. This is how the economy, or a company, should be performing except

that all the data points should be in the positive territory.

2007-2011: Inverse Type I with ultra-steep slope h > 1, with c <0

This is illustrated by Line D with the equation y = 2.704x – 7.105, with x and y in

trillions of dollars. The data for 2007-2011 on or very close to this line. It has an

ultra-steep slope h = 2.704 > 1 and even greater than line B. It starts in the negative

territory and receipts go down with the surpluses going down much more

(equivalently deficits increasing). Again, the exact chronology is ignored and the

data points are moving back and forth along this line. The slope h and intercept c

were fixed from the (x, y) pairs for 2007 and 2009.

Figure 8: US Budget 2007-2011. The data can be described by the straight lines D

with a steep slope h > 1. The red arrows indicate the direction of movement.

This is also an Inverse Type I behavior. The steepness of the slope h > 1 is again a

cause for concern since deficits are increasing (more negative surpluses) at an

alarming rate with decreasing government receipts. Imagine again a company

-2.00

-1.50

-1.00

-0.50

0.00

0.50

0.00 0.50 1.00 1.50 2.00 2.50 3.00

Receipts, x [$, trillions]

Su

rplu

s,

y [

$,

tril

lio

ns

]

2007 2008

2009

2010

2011

Beginning of the era of

Trillion dollar deficits

D

Page 20 of 40

whose revenues reduced by $10 billion but the profits reduced by $27.04 billion,

even more than the $24.27 billion in the earlier period. Such a company cannot

continue its operations for too long.

Indeed, the old GM, before its bankruptcy filing in June 2009 revealed a similar

erratic behavior with profits going down increasing revenues and eventually with

losses increasing with increasing revenues. If the US government were a company

it would have declared bankruptcy by now, or be forced into merger with a willing

suitor (like the Air Tran – Southwest Airlines merger). Perhaps, merging with

Canada or Australia (lots of resources and lots of land for expansion) may not be

such a bad idea in the present economic conditions, especially with the personal

worth of a Canadian now being estimated to be higher than that of an American!

Ah, would we really want to do that?

This should also give us time to pause and think.

§ 7. Concluding Remarks

However much those of us who want the government to function efficiently like to

think of it as a business, ultimately, we must recognize that the government is NOT

a business. Not all businesses are paragons of efficiency, as we see from hundreds

and thousands of companies that are struggling, even those in the prestigious lists

such as the Fortune 500 and Forbes 500. Hence, the “model” of government being

a business might not always be a perfect one, even from a resource allocation or

financial efficiency standpoint, unless we first understand how to turn a business

into a perfect PROFITS ENGINE, like a few companies seemed to have managed

to do (Microsoft, Google, Apple, to mention a few). This is also what we learn

from James Watt. He took the old Newcomen engine, studied it, and made it work

consistently and dramatically improved its thermal efficiency, see Ref.[6-10].

If the US government, or any of the other struggling European governments, were

indeed a business, they would have been forced a) to declare bankruptcy, or b) to

enter into negotiations, with willing countries, into talks akin to a corporate

merger. That would be taking the idea of a government being a business to its

logical limit.

Page 21 of 40

Obviously, at least today, no one has seriously considered this corporate equivalent

of a merger to get our way out of the fiscal mess that we are in today. (Air Tran

found Southwest Airlines to get out of its mess. The future course of this merger,

concluded in 2011, remains to be seen.)

Figure 9: Historical receipts data (1976-2011) obtained the Fiscal year 2013

Budget of the US Government.

Of some concern, based on the analysis presented thus far, is the decreasing

receipts observed in recent years, see Figures 7 and 8, beginning circa 2000, at the

end of the Clinton presidency, coupled with increasing deficits (or decreasing

surpluses). Receipts decreased between 2000 and 2003 and even more between

2007 and 2009. The cuts in the top tax rates do not seem to have made much of an

impact on the receipts, from the trends in Figure 9. The government’s receipts were

going up even before the Reagan tax cuts, they also went up after the Reagan tax

cuts and the more recent Bush tax cuts, and also went up during the Clinton

presidency (when the top tax rates were increased).

0

500

1000

1500

2000

2500

3000

1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012 2016

Time t, [in Calendar years]

Receip

ts, x [

$, b

illio

ns

]

Page 22 of 40

Figure 10: Historical trends in the government receipts-surplus data, going back

to 1901, obtained from Table 1.1, accompanying the Budget of the US Government

for Fiscal year 2013.

The government’s receipts have been increasing, see also Figure 10, not entirely

because of the political tinkering with the top tax rates but because of the

natural increase in the population, which increases the labor force and therefore the

number of employed who pay taxes. The drop in the receipts (2000 to 2003, and

more so between 2007 and 2009) seems to be mainly due to the shrinking of the

tax base due to recessions that we have experienced. A review of all of the

historical data (the historical tables provided with the Budget of the US

Government for Fiscal year 2013), going back to 1901 shows that this trend of

decreasing receipts began after the peaking of the surplus during the Clinton

second term, in FY2000.

The government’s receipts were growing at a remarkably constant rate, during the

Clinton years, as shown already, Figure 1. As we see from Figure 10, the receipts

have been increasing since 1901 accompanied by a general decrease in the surplus

-1,600

-1,400

-1,200

-1,000

-800

-600

-400

-200

0

200

400

600

0 500 1000 1500 2000 2500 3000

Receipts, x [$, billions]

Su

rplu

s,

y [

$,

bil

lio

ns

]

1992

2000

y = 0.5845x – 945.043 r2 = 0.998

Page 23 of 40

(i.e., with increasing deficits). The trend reversed starting with FY1992 and

FY1993 when we see a rapid and unprecedented linear growth in the receipts-

surplus (or reducing deficit). Even the period 1920-1930, when the US enjoyed

interrupted surpluses, does not reveal this PERFECTLY linear trend. The receipts

dropped between FY2000 and FY2003, with a brief increase between 2004 and

2007, before the more dramatic decline since then. The raw data has been complied

in Table 5.

Table 5: Budget Receipts and Surpluses (Deficits) 2000-2011

Fiscal year Receipts, x

$, billions

Surpluses

(Deficits)

$, billions

Comments

1999 1827.452 125.610

2000 2025.191 236.241 Peak in receipts

2001 1991.082 128.236

2002 1853.136 -157.758

2003 1782.314 -377.585

2004 1880.114 -412.727

2005 2153.611 -318.346

2006 2406.869 -248.181

2007 2567.985 -160.701 Second peak in receipts

2008 2523.991 -458.863 Drop in receipts due to

high unemployment,

Deficits > $1T, slight

increase in FY2011.

2009 2104.989 -1412.688

2010 2162.724 -1293.489

2011 2303.466 -1299.595

It is of interest to note that the government’s receipts exceeded $100 billion for

the first time in 1963 whereas just 36 years in later, 1999, during the Clinton

second term, the budget surplus was in excess of $125 billion. And now the

receipts in excess of $2100 billion ($2.1T), deficits are increase of $1.4T.

Given this record of unprecedented growth in the government’s receipts, if the

government were really a business, would we allow its revenues (receipts) to go

down? The problems that Facebook has encountered after its IPO are largely due to

the fact that investors do not see how Facebook can increase its revenues.

Facebook stock has lost nearly 50% of its value because of this lack of confidence

Page 24 of 40

in the ability of Facebook to increase its revenues in the near future. The same

applies for many new companies (Groupon, Zynga, Annie’s) after their IPOs.

Microsoft reported its first ever quarterly loss in July 2012 and investors are now

looking carefully at its future revenues potential.

Yet, even as many advocate running the government like a business (with the debt

growing alarmingly and the deficits now exceeding trillion dollar levels since

2009), the unprecedented drop in the government’s revenues (or receipts) does

NOT seem have caught anyone’s attention. This too has gone down in recent years.

Ultimately, it is We The People who hold the national debt, even if

“investors”, including “foreign investors”, are supposed to be holding the debt. It is

really up to We The People to ensure that the government outlays, especially if

the outlays reflect spending of money raised via deficits, are spent wisely and

invested to create the three “R”s that embody the steps taken under President

Franklin D Roosevelt to get us out of the Great Depression and the ensuing

national calamity. The three “R”s were:

Relief, Recovery and Reform.

Some Relief came in 2008 and again in 2009. But, the political leadership

(beginning with the President down to each Senator and each member of Congress)

failed to ensure the other two “R”s took root. The slippery slope that led to the

financial meltdown of 2008 extends back to several decades.

I sincerely hope readers (of this article and the others dealing with national debt

and unemployment problems) will reflect on the finding here and also bring them

to the attention of other concerned citizens. It is quite simple really, once one gets

the hang of the graphs and the Type I, Type II, and Type III classifications.

GOD BLESS AMERICA.

Page 25 of 40

Figure 11: President Wilson was able to convince the Republicans to agree to an

unprecedented increase in income taxes. The top tax rate went up from 7% in 1915

to 15% in 1916 to 67% in 1917 to 77% in 1918. to 77% in 1918, as the US entered

World War I. The budget deficits increased dramatically. The US also recorded the

first $1 billion in receipts in 1917. The receipts went up to $3.645 billion in 1918

and to $5.571 billion in 1919. This can also only be attributed to steep increase in

the income taxes especially the tax rate on the richest Americans. Surpluses

returned promptly in 1920 and continued through 1930.

Year Receipts x,

$ billions

Surplus (Deficit), y

$, billions

Comment

1915 0.683 -0.063

1916 0.761 0.048

1917 1.101 -0.853 $1B mark

1918 3.645 -9.032

1919 5.130 -13.363

-20.00

-15.00

-10.00

-5.00

0.00

5.00

0.00 1.00 2.00 3.00 4.00 5.00 6.00 7.00 8.00

Receipts, x [$, billions]

Su

rplu

s,

y [

$,

bil

lio

ns

]

y = -3.1024x + 2.091 Joins 1912 and 1919

data points

Page 26 of 40

The Wilson presidency (1913-1921), which marked the US entry into World

War I (WWI) witnessed a virtual explosion in both the receipts and the

deficits; receipts going up due to the increase in the top tax rate from 7% in

1915 to 15% in 1916 to 67% in 1917 to 77% in 1918. Wilson, a Democrat,

convinced Republicans of the day to agree to the tax increases to cover the

costs of entering to the war; see Figure 11 for effect on receipts and surpluses.

Receipts decreased when the top tax rates were promptly cut once again,

between 1922 to 1931, under Presidents Harding (1921-1923) and Coolidge

(1924-1929), after the war ended. This encompasses the 11-year period of

sustained budget surpluses, from 1920 to 1930.

Alas, the stock market crashed in 1929 and the Great Depression followed!

We have to draw the right lessons from this tinkering of the top tax rates in

the early part of the 20th

century, starting with the Wilson tax increases. We

will revisit this in a separate article analyzing the ALL of the available budget

data to deduce the receipts-surplus relation.

Page 27 of 40

§ 8. Appendix I

The marginal tax rate and the tax equation

The US tax code is based on the principle of progressive taxation, i.e., the higher

the taxable income, the higher the taxes that must be paid.

The tax code is actually a series of straight lines, with a fixed slope, applicable

between predetermined income levels. As income level increases, the slope h is

increased (principle of progressive taxation) and correspondingly the intercept c

becomes more and more negative. This can be appreciated by considering the case

of a single taxpayer. The following tax rate schedule is obtained from the Internal

Revenue Service (IRS) website, http://www.irs.gov/pub/irs-pdf/i1040.pdf This is

the instructions to form 1040. The tax rate schedule is found on page 98.

Table A1: 2011 US tax rate schedule for a single taxpayer

If your

income

is over

But not

over

The tax is Of the

amount

over

Tax equation

y = hx + c

Slope

h

Intercept

c

$0 $8500 10% $0 y = 0.10x 0.1 0

8500 34,500 $850 + 15% 8500 y = 0.15x - 425 0.15 -425

34,500 83,600 4750+25% 34,500 y = 0.25x - 3875 0.25 -3875

83,600 174,400 17,025+28% 83,600 y = 0.28x -6383 0.28 -6383

174,400 379,150 42,449+33% 174,400 y = 0.33x -15,103 0.33 -15,103

379,150 34,500 110.106.50+35% 379,150 y = 0.35x -22,686 0.35 -22,686

The tax equation given in the fifth column can be deduced as follows. The first

equation, for incomes up to $8500 needs no explanation. The maximum tax owed

in this income bracket is 0.10 × $8500 = $850.

Now, consider the second equation, for incomes between $8500 and $34,500. If x

is the (taxable) income, the tax y = 850 + 0.15(x – 8500) = 0.15x + 850 – 1275 =

0.15x – 425 = hx + c. Thus, the slope h = 0.15 and intercept c = -425. Also, the

maximum tax owed in this income bracket is $4750 = 850 + 0.15 (34,500 – 8,500).

Page 28 of 40

= 850 + 3900. This explains the fixed amount in the third column for the next

income level. Thus, the tax equation can be determined for each income bracket.

Instead of providing the tax equation, the IRS provides tables (which are based on

these equations) for incomes up to $100,000. Beyond that income level, one must

use the equations given above. In the tax computation worksheet (page 86 of the

above document, immediately after the tables), to be used for the higher income

levels, we find what is known as the multiplication amount (column labeled b),

which is the slope h and the subtraction amount (column labeled d), which is

the intercept c. The numerical values of the slopes h and c given here in this

Appendix can be seen to agree with the amounts given by the IRS.

Thus, contrary to popular beliefs, the rich, because of the way the tax code is

designed, always pay more in taxes. The rich, however, have very different sources

of income which are taxed more favorably (not subject to above equations which

apply primarily to income earned as wages, or operating a small business) and also

have options, not available to others, to reduce their tax burden, within the

structure of the current tax code.

Page 29 of 40

§ 9. Appendix II: List of References

1. Yes, Virginia, A $2.98 Hammer REALLY Costs Our Government $100,

www.scragged.com, Will Offensicht, January 15, 2010. <

http://www.scragged.com/articles/yes-virginia-a-298-hammer-really-costs-

our-government-100 >

2. Does Government Pay more than the Private Sector? March 5, 2010,

Stephanie Condon, cbsnew.com, http://www.cbsnews.com/8301-

503544_162-6270781-503544.html

3. America’ Highest Paid Chief Executives, Scott Decarlo, April 4, 2012,

http://www.forbes.com/lists/2012/12/ceo-compensation-12_land.html

4. On a Heuristic Point of View about the Creation and Conversion of

Light, by A. Einstein, esfm2005.ipn.mx

http://www.esfm2005.ipn.mx/ESFM_Images/paper1.pdf . See also,

hermes.ffn.ub.es

http://hermes.ffn.ub.es/luisnavarro/nuevo_maletin/Einstein_1905_heuristic.pdf

5. Einstein’s Quanta, Entropy, and Photoelectric Effect, sigmapisigma.com,

by Dwight E. Neuenschwander, Fall 2004,

http://www.sigmapisigma.org/radiations/2004/elegant_connections_f04.pdf

6. The History of Steam Engines, inventors.about.com

http://inventors.about.com/library/inventors/blsteamengine.htm

7. Watts Steam Engine, Wikipedia.org,

http://en.wikipedia.org/wiki/Watt_steam_engine

8. Brief History of the Steam Engine, Carl Lira, egr.msu.edu

http://www.egr.msu.edu/~lira/supp/steam/

9. James Watt: History, bbc.co.uk,

http://www.bbc.co.uk/history/historic_figures/watt_james.shtml

10. James Watt: Inventor of Modern Steam Engine, about.com,

http://inventors.about.com/od/wstartinventors/a/james_watt.htm

11. Fiscal Year 2013, Historical Tables, The Budget of the US Government,

Office of Management and Budget, see Table 1.1 on pages 21 and 22,

http://www.whitehouse.gov/sites/default/files/omb/budget/fy2013/assets/hist.pdf

12. Google: A Lovable One-trick Pony, Another Single Product Company

Analyzed Using the New Methodology, July 1, 2012, www.scribd.com <

Page 30 of 40

http://www.scribd.com/doc/98825141/Google-A-Lovable-One-Trick-Pony-

Another-Single-Product-Company-Analyzed-Using-the-New-Methodology

13. Southwest Airlines turned the corner in 1973, Annual Report for 1973 and

all other years http://southwest.investorroom.com/company-reports

14. The Future of Southwest Airlines, Completed June 14, 2012 (to be

published). http://www.scribd.com/doc/102835946/The-Future-for-

Southwest-Airlines-The-Unknown-Story-of-Rising-Costs-and-the-

Maximum-Point-on-Profits-Revenues-Curve Published August 14, 2012.

15. The Air Tran Story: An Important Link to the Future of Southwest

Airlines, Completed June 27, 2012 (to be published).

http://www.scribd.com/doc/102832984/The-Air-Tran-Story-The-Merger-

and-Maximum-Point-on-Profits-Revenues-Graph Published August 14,

2012.

16. Why Can’t General Motors be more like Microsoft?, Aug 22, 2012.

www.scribd.com < http://www.scribd.com/doc/103607023/Why-Can-t-

General-Motors-be-more-like-Microsoft-The-new-GM-may-just-be >

17. The new GM: A Brief Analysis of the Profits-Revenues data through

1Q2011, Aug 22, 2012, www.scrib.com <

http://www.scribd.com/doc/103600274/The-New-GM-A-Brief-Analysis-of-

the-Profits-Revenues-Data-through-1Q2011 >

18. GM Before the Bankruptcy: Maximum point on the Profits-Revenue

Graph, Aug 25, 2012, www.scribd.com <

http://www.scribd.com/doc/103938349/GM-Before-the-Bankruptcy-

Maximum-Point-on-Profits-Revenue-Graph>

19. The US Teenage Pregnancy Rates-1, August 2, 2012, scribd.com,

http://www.scribd.com/doc/101828233/The-US-Teenage-Pregnancy-Rates-1

20. A Little known mathematical Property of a Straight Line: Strange, but true,

there is One, August 4, 2012, scribd.com

http://www.scribd.com/doc/102000311/A-Little-Known-Mathematical-

Property-of-a-Straight-Line-Strange-but-true-there-is-one

Page 31 of 40

Recent articles on the US National Debt

21. From Debt-free to $16T: Lessons to be learned, Sep 11, 2012, scribd.com,

http://www.scribd.com/doc/105651734/From-Debt-Free-to-16T-Lessons-to-

be-learned

22. The US National Debt Growth Rate: The Clinton-Bush-Obama

Transitions, Sep 6, 2012. www.scribd.com <

http://www.scribd.com/doc/105058946/The-US-National-Debt-Growth-

Rate-The-Clinton-Bush-Obama-Transition >

23. The Rate of Growth of the National Debt: The Obama versus Bush

years, Sep 4, 2012. www.scribd.com <

http://www.scribd.com/doc/104803209/The-Rate-of-Growth-of-the-

National-Debt-The-Obama-versus-the-Bush-years >

24. Is Taxing the Rich an Option for Budget Deficit Reduction?, Sep 2,

2012. www.scribd.com < http://www.scribd.com/doc/104661297/Is-Taxing-

the-Rich-an-Option-for-Budget-Deficit-Reduction >

Analysis of Financial Data of Companies

25. A Second Look at Microsoft after the Quarterly Loss, July 30, 2012,

www.scribd.com < http://www.scribd.com/doc/101518117/A-Second-Look-

at-Microsoft-After-the-Historic-Quarterly-Loss >

26. The Perfect Apple – II, July 30, 2012, www.scribd.com <

http://www.scribd.com/doc/101503988/The-Perfect-Apple-II >

27. Kia: A Disappearing Brand, July 6, 2012, www.scribd.com

http://www.scribd.com/doc/99333764/Kia-Motor-Company-A-Disppearing-

Brand, Published July 6, 2012.

Budgets, Taxes, and Deficits

28. Fiscal Year 2012, Historical Tables, The Budget of the US Government,

http://www.whitehouse.gov/sites/default/files/omb/budget/fy2012/assets/hist.pdf

29. Woodrow Wilson, topic.nytimes.com John Milton Cooper, Oct 1, 2010,

http://topics.nytimes.com/top/reference/timestopics/people/w/woodrow_wils

on/index.html

Page 32 of 40

30. Woodrow Wilson, Congress and the Income Tax, March 16, 2004,

wilsoncenter.org http://www.wilsoncenter.org/sites/default/files/ACF18.pdf

31. The Income tax arrives, Tax History Museums (1901-1932) taxhistory.org,

http://www.taxhistory.org/www/website.nsf/Web/THM1901?OpenDocument

32. Progressive Tax Reform Principles, Richard C. Leone, May 15, 2012,

tcf.org http://tcf.org/blogs/botc/2012/05/progressive-tax-reform-principles-

part-2-of-2

33. The Wilson Presidency: Woodrow Wilson’s World, by Byron King, April 7,

2005, whiskeyandpoweder.com http://whiskeyandgunpowder.com/the-

wilson-presidency-woodrow-wilsons-world/

34. Republicans must fight the lies about tax cuts, Thomas Del Beccaro, Oct 31,

2011, breitbart.com http://www.breitbart.com/Big-

Government/2011/10/31/Republicans-Must-Fight-the-Lies-About-Tax-Rate-

Cuts

35. Honoring Karl Marx, Is that what we really do? By Dr. Alan Snyder,

April 17, 2012, ponderingprinciples.com

http://ponderingprinciples.com/tag/income-tax/

36. Obama should look to history for how to get out of a recession, Henry

List, Sep 20, 2011, examiner.com, http://www.examiner.com/article/obama-

should-look-to-history-for-how-to-get-out-of-a-recession

37. The Benefits of Tax Cuts, by John R. Hendrickson, published Oct 2006,

insideronline.org, http://www.insideronline.org/archives/2007/winter/chap7.pdf

Page 33 of 40

§ 10. Appendix III

Bibliography of Related Articles

Posted at this website Since Facebook IPO on May 18, 2012

The first article listed below discusses a little known mathematical property of a

straight line. Figures 1 to 3 in this article provide the philosophical basis for

considering the significance of a nonzero intercept c as it applies to many problems

in the real world. We make observations (x and y values of interest to us) to deduce

y/x, usually called “rates”, “ratios”, or percentages.

1. http://www.scribd.com/doc/102000311/A-Little-Known-Mathematical-

Property-of-a-Straight-Line-Strange-but-true-there-is-one Published August 4,

2012.

Financial data (Profits-Revenues) analysis and Generalization of Planck’s law

beyond physics.

2. http://www.scribd.com/doc/95906902/Simple-Mathematical-Laws-Govern-

Corporate-Financial-Behavior-A-Brief-Compilation-of-Profits-Revenues-

Data Current article with all others above cited for completeness, Published

June 4, 2012 with several revisions incorporating more examples.

3. http://www.scribd.com/doc/94647467/Three-Types-of-Companies-From-

Quantum-Physics-to-Economics Basic discussion of three types of

companies, Published May 24, 2012. Examples of Google, Facebook,

ExxonMobil, Best Buy, Ford, Universal Insurance Holdings

4. http://www.scribd.com/doc/96228131/The-Perfect-Apple-How-it-can-be-

destroyed Detailed discussion of Apple Inc. data. Published June 7, 2012.

5. http://www.scribd.com/doc/95140101/Ford-Motor-Company-Data-Reveals-

Mount-Profit Ford Motor Company graph illustrating pronounced maximum

point, Published May 29, 2012.

Page 34 of 40

6. http://www.scribd.com/doc/95329905/Planck-s-Blackbody-Radiation-Law-

Rederived-for-more-General-Case Generalization of Planck’s law,

Published May 30, 2012.

7. http://www.scribd.com/doc/94325593/The-Future-of-Facebook-I Facebook

and Google data are compared here. Published May 21, 2012.

8. http://www.scribd.com/doc/94103265/The-FaceBook-Future Published May

19, 2012 (the day after IPO launch on Friday May 18, 2012).

9. http://www.scribd.com/doc/95728457/What-is-Entropy Discussion of the

meaning of entropy (using example given by Boltzmann in 1877, later also

used by Planck to develop quantum physics in 1900). The example here shows

the concepts of entropy S and energy U (and the derivative T = dU/dS) can be

extended beyond physics with energy = money, or any property of interest.

Published June 3, 2012.

10. The Future of Southwest Airlines, Completed June 14, 2012 (to be

published). http://www.scribd.com/doc/102835946/The-Future-for-Southwest-

Airlines-The-Unknown-Story-of-Rising-Costs-and-the-Maximum-Point-on-

Profits-Revenues-Curve Published August 14, 2012.

11. The Air Tran Story: An Important Link to the Future of Southwest Airlines,

Completed June 27, 2012 (to be published).

http://www.scribd.com/doc/102832984/The-Air-Tran-Story-The-Merger-and-

Maximum-Point-on-Profits-Revenues-Graph Published August 14, 2012.

12. Annie’s Inc. A Single-Product Company Analyzed using a New

Methodology, http://www.scribd.com/doc/98652561/Annie-s-Inc-A-Single-

Product-Company-Analyzed-Using-a-New-Methodology Published June 29,

2012

13. Google Inc. A Lovable One-Trick Pony Another Single-product Company

Analyzed using the New Methodology.

http://www.scribd.com/doc/98825141/Google-A-Lovable-One-Trick-Pony-

Another-Single-Product-Company-Analyzed-Using-the-New-Methodology,

Published July 1, 2012.

14. GT Advanced Technologies, Inc. Analysis of Recent Financial Data,

Completed on July 4, 2012. (To be published).

Page 35 of 40

15. Disappearing Brands: Research in Motion Limited. An Interesting type of

Maximum Point on the Profits-Revenues Graph

http://www.scribd.com/doc/99181402/Research-in-Motion-RIM-Limited-Will-

Disappear-in-2013 Published July 5, 2012.

16. Kia Motor Company: A Disappearing Brand

http://www.scribd.com/doc/99333764/Kia-Motor-Company-A-Disppearing-

Brand, Published July 6, 2012.

17. The Perfect Apple-II: Taking A Second Bite: A Simple Methodology for

Revenues Predictions (Completed July 8, 2012, To be Published)

http://www.scribd.com/doc/101503988/The-Perfect-Apple-II, Published

July 30, 2012.

18. http://www.scribd.com/doc/101062823/A-Fresh-Look-at-Microsoft-After-its-

Historic-Quarterly-Loss Microsoft after the quarterly loss, Published July 25,

2012.

19. http://www.scribd.com/doc/101518117/A-Second-Look-at-Microsoft-After-the-

Historic-Quarterly-Loss , Published July 30, 2012.

20. http://www.scribd.com/doc/103265909/A-Brief-Analysis-of-Groupon-s-Profits-

Revenues-Data Published August 19, 2012.

21. http://www.scribd.com/doc/103027366/Groupon-Analysis-of-Profits-

Revenues-Data-and-its-Business-Model Published August 16, 2012. More

detailed analysis including discussion of the idea of a work function.

22. http://www.scribd.com/doc/103369016/Analysis-of-Zynga-s-Profits-Revenues-

Data-Maximum-point-on-the-profits-revenues-curve Published August 20,

2012.

General Motors Financial Data

23. http://www.scribd.com/doc/103600274/The-New-GM-A-Brief-Analysis-of-the-

Profits-Revenues-Data-through-1Q2011, Published May 9, 2011 and again on

August 22, 2012, Discussion of the new GM data from 1Q2010 to 1Q2011.

24. http://www.scribd.com/doc/103607023/Why-Can-t-General-Motors-be-more-

like-Microsoft-The-new-GM-may-just-be Published August 22, 2012.

25. http://www.scribd.com/doc/103938349/GM-Before-the-Bankruptcy-Maximum-

Point-on-Profits-Revenue-Graph GM Before the Bankruptcy: Maximum

point on the profits-revenues graph, Published August 25, 2012.

Page 36 of 40

******************************************************************

The Unemployment Problem: Evidence for a Universal value of h in the

unemployment law.

26. http://www.scribd.com/doc/100984613/Further-Empirical-Evidence-for-the-

Universal-Constant-h-and-the-Economic-Work-Function-Analysis-of-

Historical-Unemployment-data-for-Japan-1953-2011 Single universal value of

h for US, Canada and Japan in the unemployment law y = hx + c, Published

July 24, 2012.

27. http://www.scribd.com/doc/100939758/An-Economy-Under-Stress-

Preliminary-Analysis-of-Historical-Unemployment-Data-for-Japan, Published

July 24, 2012.

28. http://www.scribd.com/doc/100910302/Further-Evidence-for-a-Universal-

Constant-h-and-the-Economic-Work-Function-Analysis-of-US-1941-2011-and-

Canadian-1976-2011-Unemployment-Data Published July 24, 2012.

29. http://www.scribd.com/doc/100720086/A-Second-Look-at-Australian-2012-

Unemployment-Data, Published July 22, 2012.

30. http://www.scribd.com/doc/100500017/A-First-Look-at-Australian-

Unemployment-Statistics-A-New-Methodology-for-Analyzing-Unemployment-

Data , Published July 19, 2012.

31. http://www.scribd.com/doc/99857981/The-Highest-US-Unemployment-Rates-

Obama-years-compared-with-historic-highs-in-Unemployment-levels ,

Published July 12, 2012.

32. http://www.scribd.com/doc/99647215/The-US-Unemployment-Rate-What-

happened-in-the-Obama-years , Published July 10, 2012.

****************************************************************

Traffic-fatality and Teen pregnancy problem

33. http://www.scribd.com/doc/101982715/Does-Speed-Kill-Forgotten-US-

Highway-Deaths-in-1950s-and-1960s Published August 4, 2012.

34. http://www.scribd.com/doc/101983375/Effect-of-Speed-Limits-on-Fatalities-

Texas-Proofing-of-Vehciles Published August 4, 2012.

35. http://www.scribd.com/doc/101828233/The-US-Teenage-Pregnancy-Rates-1

Published August 2, 2012.

Page 37 of 40

36. http://www.scribd.com/doc/102384514/A-Second-Look-at-the-US-Teenage-

Pregnancy-Rates-Evidence-for-a-Predominant-Natural-Law Published August

8, 2012.

Government and National Debt

37. http://www.scribd.com/doc/104663110/The-United-States-Postal-Service-A-

Test-Case-to-Understand-the-US-Government-Inefficiencies-and-Budget-Cuts-

Ahead United States Postal Service: A Test case for government inefficiencies,

Published Sep 2, 2012.

38. http://www.scribd.com/doc/104833993/Are-You-Better-Off-Than-You-Were-

Four-Years-Ago Published Sep 4, 2012. Briefly highlights the slowing down

the debt growth rate as we cross the $16 T mark. The national debt could have

been as high as $19.5T on August 30, 2012 if the high rate at the end of the

Bush presidency had continued.

39. http://www.scribd.com/doc/104803209/The-Rate-of-Growth-of-the-National-

Debt-The-Obama-versus-the-Bush-years Published Sep 3, 2012. The

importance of the debt growth rate h = dD/dt, as opposed to the debt level D, is

emphasized. The significance of the debt growth rate does not seem to have

been recognized, at least in the popular discussion.

40. http://www.scribd.com/doc/104677653/The-US-National-Debt-Brief-History-

Good-News-The-Rate-of-Growth-of-the-Debt-is-Slowing-Down , Published

Sep 1, 2012. Brief summary of the historical debt data starting with President

George Washington with attention being drawn to the recent slowing down of

the debt growth rate. The importance of the debt growth rate, as opposed to debt

levels, does not seem to have been recognized, at least in the popular

discussion.

41. http://www.scribd.com/doc/104659108/The-US-National-Debt-and-the-Long-

Term, first published on June 17, 2011, and republished Sep 1, 2012.

42. http://www.scribd.com/doc/104659448/The-US-National-Debt-Retirement-

Program, first published on June 23, 2011, before the debt default crisis which

led to lowering of the US rating, republished Sep 1, 2012.

43. http://www.scribd.com/doc/104662291/A-Radical-Proposal-to-Permanently-

Reduce-the-Unemployment-Rate, first published on October 13, 2011,

republished Sep 1, 2012.

Page 38 of 40

44. http://www.scribd.com/doc/104661297/Is-Taxing-the-Rich-an-Option-for-

Budget-Deficit-Reduction, first published on July 3, 2011, republished Sep 1,

2012.

Page 39 of 40

About the author

V. Laxmanan, Sc. D.

Email: vlaxmanan@hotmail.com

The author obtained his Bachelor’s degree (B. E.) in Mechanical Engineering from

the University of Poona and his Master’s degree (M. E.), also in Mechanical

Engineering, from the Indian Institute of Science, Bangalore, followed by a

Master’s (S. M.) and Doctoral (Sc. D.) degrees in Materials Engineering from the

Massachusetts Institute of Technology, Cambridge, MA, USA. He then spent his

entire professional career at leading US research institutions (MIT, Allied

Chemical Corporate R & D, now part of Honeywell, NASA, Case Western Reserve

University (CWRU), and General Motors Research and Development Center in

Warren, MI). He holds four patents in materials processing, has co-authored two

books and published several scientific papers in leading peer-reviewed

international journals. His expertise includes developing simple mathematical

models to explain the behavior of complex systems.

While at NASA and CWRU, he was responsible for developing material processing

experiments to be performed aboard the space shuttle and developed a simple

mathematical model to explain the growth Christmas-tree, or snowflake, like

structures (called dendrites) widely observed in many types of liquid-to-solid phase

transformations (e.g., freezing of all commercial metals and alloys, freezing of

water, and, yes, production of snowflakes!). This led to a simple model to explain

the growth of dendritic structures in both the ground-based experiments and in the

space shuttle experiments.

More recently, he has been interested in the analysis of the large volumes of data

from financial and economic systems and has developed what may be called the

Quantum Business Model (QBM). This extends (to financial and economic

systems) the mathematical arguments used by Max Planck to develop quantum

physics using the analogy Energy = Money, i.e., energy in physics is like money in

economics. Einstein applied Planck’s ideas to describe the photoelectric effect (by

treating light as being composed of particles called photons, each with the fixed

quantum of energy conceived by Planck). The mathematical law deduced by

Page 40 of 40

Planck, referred to here as the generalized power-exponential law, might actually

have many applications far beyond blackbody radiation studies where it was first

conceived.

Einstein’s photoelectric law is a simple linear law, as we see here, and was

deduced from Planck’s non-linear law for describing blackbody radiation. It

appears that financial and economic systems can be modeled using a similar

approach. Finance, business, economics and management sciences now essentially

seem to operate like astronomy and physics before the advent of Kepler and

Newton.

Cover page of AirTran 2000 Annual