A Brief Review of the Historical US Government Receipts-Surplus (Deficit) Relation

1. Summary
The financial performance of the government is described by the basic equation Surplus = Receipts Outlays. This is similar to the fundamental equation Profits = Revenues Costs that describes the financial performance of all companies. Both these equations are also exactly analogous to the equation Work = Heat in Heat out used by scientists and engineers to evaluate the performance of a Heat Engine. Empirical studies (Watt, Joule) coupled with theoretical speculations (Carnot, Clausius, Lord Kelvin) on the behavior Heat Engines, using this basic equation, led to the formulation of the law of conservation of energy and the far-reaching laws known as the laws of thermodynamics, in the 18th and 19th centuries. The ready availability of the Surplus, Receipts, and Outlays (S, R, O) data for the US, going back to 1901, provides a unique opportunity to analyze these empirical observations on the financial operations of the US government and develop a fundamental understanding that could enable us to design budgets and produce a surplus year after year, like modern heat engines that produce useful work W, and deliver any rated horsepower every time they are turned on. The analysis of the fiscal data for 24 years, i.e., more than 20% of the available (S, R, O) data, shows that a simple linear law relates the surplus S and receipts R Furthermore, this law, deduced from an analysis of the data for 1901-1916 and 1994-2001, is independent of even the very sources of government receipts, which were primarily based on consumption taxes in the early years (1901-1913) before taxation of income become the primary source of government receipts.

Page 1 of 19

Table of Contents
No.
1. 2. 3. 4. 5.

Topic
Summary Introduction The Surplus-Receipts Diagram List of References Appendix I: Bibliography of related articles

Page No.
1 3 5 10 12

Page 2 of 19

 2. Introduction
The fundamental law governing the financial performance of a company can be expressed in words, or by using descriptive mathematical symbols, as follows. Profits = Revenues Costs Or, P=RC (1)

More generally, we can use the symbols x and y where x denotes revenues, which is the independent variable and y the profits, which is the dependent variable. As revenues increase we expect profits to increase. The profit margin, the ratio y/x = m = P/R = Profits/Revenues, is widely used as a measure of the efficiency with which the company is able to convert its revenues into profits. Only a fraction of the revenues appears as profits. The remainder must be given up, in the form of costs of operation. Equation 1 is also exactly analogous to the basic equation used by scientists and engineers to assess the performance of a heat engine, such as the modern automobile, aircraft, locomotive, or rocket engines. Work = Heat in Heat out Or, W = Q1 Q2 (2)

The ratio = W/Q1 is taken as the measure of the thermal efficiency of the engine, i.e., how well it converts energy received in the form of heat Q1 into useful mechanical work W. The first practical application of a heat engine (such as the steam engine, perfected by James Watt) was to lift water out of coal mines that would frequently get flooded. The profit margin P/R is exactly analogous to W/Q1. Notice that not all of the heat Q1 can be converted into useful work W. Some of it must be given up and appears as the heat out, or Q2. This is the heat that is dissipated to the surroundings, often just the whole wide atmosphere that surrounds us. Likewise, not all of the revenues of a company appear as profits. Some of the revenues must be given up. This is what we mean by costs. This cost is really money flowing out of the company to its suppliers and vendors, with whom the company does business, whereas the revenues is money flowing in from its
Page 3 of 19

customers. Just like the symbols Q1 and Q2 we could use the symbols M1 and M2, instead of R and C to denote the revenues and costs, respectively. Thus, Profits = Money in Money out, or P = M1 M2 (3)

Q1
Heat Source

Q2
Heat Sink Money Source

M1

M2
Money Sink

W
Diagram of Heat Engine

P
Diagram of Profits Engine

The above is a schematic diagram of a Profits Engine, modeled after the idea of a Heat Engine from science and engineering. The heat source and heat sink are replaced by a money source (for the inflow of revenues) and money sink (for the outflow of costs). Thus, energy in physics seems to behave exactly like money in economics, finance, or business. Further ramifications of this idea have been discussed in several articles by the present author, see bibliography list, analyzing the financial data of various companies. Ideally, a company must function as a Profits Engine. Some successful companies seem to have mastered this art, a few examples being Microsoft (it reported its first ever quarterly loss in July 2012, after 26 years of operation, but was still reported a profit on an annual basis), Southwest Airlines (it has reported a profit continuously since it turned the corner in 1973), Google (profits each year since 2000, founded in 1998), Apple, to mention a few. The same considerations also apply when we analyze the financial performance of the government. This has been discussed in two recent articles discussing the budgetary surpluses observed during the Clinton years (click here and here); the links are given below.

Page 4 of 19

1. http://www.scribd.com/doc/105821230/The-Amazing-US-GovernmentReceipts-Surplus-Relation-during-the-Clinton-Presidency 2. http://www.scribd.com/doc/105819500/The-Clinton-Budget-SurplusesTreating-Government-like-a-Business The following equation, which is exactly analogous to equations 1 to 3 above governs the budgetary finances of the government. Surplus = Receipts Outlays, Or, S=RO (4)

The receipts of the government (primarily taxes of various kinds) are just like the revenues of a company and represent money in. The outlays, as the name implies, represent money out, distributed via various departments of the government back into society. Ideally, as receipts increase, the governments ability to spend also increases. A positive surplus will result if the receipts exceed the outlays and a negative surplus (deficits) will result if the outlays exceed the receipts. Since tables of the historical US budget (S, R, O) data are available, going all the way back to 1901, this provides us with a unique opportunity (not available even with the data for heat engines, which are well studied, or the profits engine data, since costs of a company remain a mystery) to study them to find if there is a unique relationship between these three fundamental fiscal variables.

3. The Surplus-Receipts Diagram

As discussed in Ref. [1] above, an amazing linear relation is observed between the receipts R and the surplus S, for the two Clinton terms. The receipts increased year after year, see Figure 1. As the receipts increased the deficits decreased and eventually turned into surpluses (for four consecutive years) following the simple linear law y = hx + c = h(x x0), where x is the receipts and y the surplus (or deficit). The constants h and c in this equation are, respectively, the slope of the line and the intercept made by the line on the y-axis (i.e., the nonzero value of y when x = 0). The values of h and c can be determined using the well-known linear regression analysis. Thus, we find
Page 5 of 19

y = 0.5845x 945.04

with r2 = 0.998

(5)

The linear regression coefficient r2 is a measure of the strength of the correlation. For a PERFECT positive correlation, r2 = + 1.000. Thus, we can use this relation with some confidence to estimate the breakeven point at which deficits turn into surpluses. This is deduced by setting y = 0 in the above equation. This gives the intercept made with the x-axis (as opposed y-axis), which yields the minimum, or the cut-off, receipts x = x0 = - c/h = 945.04/0.5845 = $1616.93 billion. When the government receipts exceed this minimum value a surplus will be reported.
400 300 200 100 0

Surplus, y [$, billions]

Clinton years y = hx + c = h(x x0) = 0.5845x 945.04 = 0.5845 (x 1616.93) r2 = 0.998

2000 2001

x0
-100

1994
-200 -300

500

1000

1500

2000

2500

Receipts, x [$, billions]

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. Deficits disappeared when receipts exceeded the cut-off level x0 = - c/h = $1616.93 billion. Also, as shown in Ref. [1], this cut-off receipt x0 is exactly analogous to the fixed costs of a company. Consider the simple case of a company making and selling N
Page 6 of 19

units of some product. The total costs C associated with the operation is given by C = a + bN where a is the fixed costs and b the unit variable cost. The total revenues generated from selling the N units is given by R = pN where p is the unit price. It follows that profits P = R C = (p b)N a. Or, since N = R/p, the profits P = [(p b)/p]R a. This can be written as y = hx +c = h(x x0), where x is revenues and y is profits. with h = (p b)/p and c = -a. Thus, the breakeven analysis implies that the P-R relation is a straight line with a slope h = 1 (b/p), which depends on the unit variable cost b and the unit price p. The intercept c equals a, the negative of the fixed cost. The breakeven revenue x0 = -c/h = ap/(b p) reflects the complex interaction of the three constants (a, b, p) that appear in the breakeven model for profitability. Thus, Slope h = 1 (b/p) Intercept c = - a Depends on unit variable cost and unit price ........(5) Depends on the fixed cost, a ..(6) ..(7)

Breakeven revenue x0 = - c/h = ap/(p b) All three constants

Although we have considered a really simple case of a company with a single product, various studies show that this linear law can be extended to real world companies, such as Microsoft, Google, Southwest Airlines, Apple, the new General Motors to name just a few. When the Profits Engine is working efficiently, as with successful companies, a nice linear relation between profits and revenues is observed. When a company is struggling, or operating erratically, it begins to deviate from the linear law revealed (positive slope h and negative intercept c). The reader is referred to the references and the bibliography list for more details. Exactly similar considerations apply with the government receipts-surplus or receipts-deficit behavior. The Clinton years seem to reveal an exceptionally perfect linear relation that has NOT been observed during any other era, based on the study of all of the historical data, going back to 1901. The data can be found readily in the Historical Tables, Fiscal Year 2013, Budget of the US Government (click here, then Section 1, Overview to go directly to Table 1.1).

Page 7 of 19

For example, on a similar Surplus-Receipts diagram for 1901-1916, see Figure 2, we find that most of the data for this period falls along the two straight lines labeled A and B. Line A, with the equation y = 0.873x 0.495 = 0.873 (x 0.566) joins the 1906 and 1907 data points. The data for 1904 and 1905 fall on or close to this line. As the receipts increased the deficits changed into surplus, exactly as in the Clinton years. The cut-off receipts x0 = -c/h = $0.582 billion, the point where the line crosses the x-axis to move into the positive territory.
0.20
0.15

A
B
1916

Surplus, y [$, billions]

0.10

0.05
0.00 -0.05 -0.10 1908 -0.15 -0.20 0.00

1911

0.20

0.40

0.60

0.80

1.00

Receipts, x [$, billions]

Figure 2: The Surplus-Receipts graph for the years 1901-1916 without regard to the chronological ordering of the data. The data falls on the three straight lines labeled A, B, and C. Although chronological order is ignored, in general, receipts usually increase as a function of time as we move up each line, i.e., the lower receipts are usually associated with earlier years. Also, Lines B and C are essentially parallel with slopes of h = 0.68 and h = 0.69, determined using actual (x, y) pairs on this graph. However, when the receipts increased further between 1907 and 1911, the data instead of following the extension of line A fall on a second straight line B, with the equation y = 0.68x 0.466 = 0.68 (x 0.686), which joins the (x, y) pairs for
Page 8 of 19

1908 and 1911. The slope h is smaller and correspondingly the cut-off receipt x0 = $0.686 billion is higher. It is also of interest to note that the data for 1901 and 1903 fall on the dashed line labeled C which is essentially parallel to the line B. The equation for line C is y = 0.69x 0.344 = 0.69(x 0.497) and this means a cut-off receipt of $0.497 billion. In other words, the fixed costs associated with the operation of the government went up, with the passage of time, and this accounts for the differences in the surplus and/or the deficits. This brief review considers 24 fiscal years and includes more than 20% of the available (S, R, O) data, covering the periods 1901-1916 (from McKinley to Wilsons first term) and 1994-2001 (two Clinton terms). It is also of interest to note that in these early years the government receipts depended entirely on consumption taxes such as tariffs levied on imported goods and excise taxes on luxury items. There was no income tax before 1913. It was only during the Wilson presidency that income as a source of taxation became firmly established as a means for government receipts. Wilson, the only President to date with a Ph. D. (he had studied government spending as a part of doctoral dissertation and was also President of the Ivy League school, Princeton University, before becoming President of the United States), supported the elimination of tariffs during his first term since he believed that was the best way to break up monopolies and increase competition. (And he was a Democrat!) The main point of introducing is bit of tax history at this stage is to call attention to the fact that the remarkably simple linear relation, y = hx + c = h(x x0) that we observe here, relating the Surplus (or Deficit) and Receipts, is indeed a universal law which is also independent of even the very source of government receipts. It is also remarkable that we observe a movement of the S-R data along essentially parallel lines. The intercept made by the straight line on the receipts (revenues) axis is also clearly associated with some kind of fixed costs of operation of the government. Budget surpluses (like the profits of a company) are observed only when this minimum receipt, to cover the fixed cost, is exceeded. In the next (the third) article this series, we will consider all the (S, R, O) data from 1901-2011. The aim is to provide a scientific analysis without political posturing
Page 9 of 19

although some discussion of the effect of changes in the top tax rate (ah, that tax on the rich!) during the different eras is unavoidable. Indeed, as we will see, the effect of the top tax rate on the government receipts can be analyzed using simple mathematical models to test the highly divisive opinions held on this topic. Hopefully, such an analysis will provide a solid foundation for the compromises that must be made by both Democrats and Republicans, and URGENTLY so, in the year ahead as we inaugurate the next President of the United States.

List of References
1. The Amazing US Government Receipts-Surplus relation during the Clinton Presidency, scribd.com, Sep 13, 2012, http://www.scribd.com/doc/105821230/The-Amazing-US-GovernmentReceipts-Surplus-Relation-during-the-Clinton-Presidency 2. The Clinton Budget Surpluses: Treating Government like a Business, scribd.com, Sep 13, 2012, http://www.scribd.com/doc/105819500/The-ClintonBudget-Surpluses-Treating-Government-like-a-Business 3. Fiscal Year 2013, Historical Tables, Budget of the US Government, The White House,
http://www.whitehouse.gov/sites/default/files/omb/budget/fy2013/assets/hist.pdf

4. The Benefits of Tax Cuts, by John R. Hendrickson, insideronline.org, Oct 2006, http://www.insideronline.org/archives/2007/winter/chap7.pdf 5. Tax Facts, taxpolicycenter.org, http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=213 6. 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-belearned 7. 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-RateThe-Clinton-Bush-Obama-Transition >

Page 10 of 19

8. 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/TheRate-of-Growth-of-the-National-Debt-The-Obama-versus-the-Bush-years > 9. 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-Richan-Option-for-Budget-Deficit-Reduction > 10. Woodrow Wilson, Congress and the Income Tax, March 16, 2004, wilsoncenter.org http://www.wilsoncenter.org/sites/default/files/ACF18.pdf 11.Two of the All-Time Greatest Successes in Cutting Taxes and Spending, by Jim Powell, forbes.com, August 10, 2011 http://www.forbes.com/sites/realspin/2011/08/10/two-of-the-all-time-greatestsuccesses-in-cutting-taxes-and-spending/ 12.Econ 101: How do Tax Cuts Work? By Gary Wolfram, Nov 11, 2006, mrc.org, http://www.mrc.org/node/29589 13.Success of Tax Cuts, By John R. Hendrickson, Oct 2006, insideronline.org, http://www.insideronline.org/archives/2007/winter/chap7.pdf

Page 11 of 19

Appendix I 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-MathematicalProperty-of-a-Straight-Line-Strange-but-true-there-is-one Published August 4, 2012. Financial data (Profits-Revenues) analysis and Generalization of Plancks law beyond physics. 2. http://www.scribd.com/doc/95906902/Simple-Mathematical-Laws-GovernCorporate-Financial-Behavior-A-Brief-Compilation-of-Profits-RevenuesData 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-FromQuantum-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-bedestroyed Detailed discussion of Apple Inc. data. Published June 7, 2012. 5. http://www.scribd.com/doc/95140101/Ford-Motor-Company-Data-RevealsMount-Profit Ford Motor Company graph illustrating pronounced maximum point, Published May 29, 2012.

Page 12 of 19

6. http://www.scribd.com/doc/95329905/Planck-s-Blackbody-Radiation-LawRederived-for-more-General-Case Generalization of Plancks 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-SouthwestAirlines-The-Unknown-Story-of-Rising-Costs-and-the-Maximum-Point-onProfits-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-andMaximum-Point-on-Profits-Revenues-Graph Published August 14, 2012. 12.Annies Inc. A Single-Product Company Analyzed using a New Methodology, http://www.scribd.com/doc/98652561/Annie-s-Inc-A-SingleProduct-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-PonyAnother-Single-Product-Company-Analyzed-Using-the-New-Methodology, Published July 1, 2012.
Page 13 of 19

14.GT Advanced Technologies, Inc. Analysis of Recent Financial Data, Completed on July 4, 2012. (To be published). 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-WillDisappear-in-2013 Published July 5, 2012. 16.Kia Motor Company: A Disappearing Brand http://www.scribd.com/doc/99333764/Kia-Motor-Company-A-DisppearingBrand, 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-itsHistoric-Quarterly-Loss Microsoft after the quarterly loss, Published July 25, 2012. 19.http://www.scribd.com/doc/101518117/A-Second-Look-at-Microsoft-After-theHistoric-Quarterly-Loss , Published July 30, 2012. 20.http://www.scribd.com/doc/103265909/A-Brief-Analysis-of-Groupon-s-ProfitsRevenues-Data Published August 19, 2012. 21.http://www.scribd.com/doc/103027366/Groupon-Analysis-of-ProfitsRevenues-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-RevenuesData-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-theProfits-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-morelike-Microsoft-The-new-GM-may-just-be Published August 22, 2012.
Page 14 of 19

25.http://www.scribd.com/doc/103938349/GM-Before-the-Bankruptcy-MaximumPoint-on-Profits-Revenue-Graph GM Before the Bankruptcy: Maximum point on the profits-revenues graph, Published August 25, 2012. ****************************************************************** 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-theUniversal-Constant-h-and-the-Economic-Work-Function-Analysis-ofHistorical-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-StressPreliminary-Analysis-of-Historical-Unemployment-Data-for-Japan, Published July 24, 2012. 28.http://www.scribd.com/doc/100910302/Further-Evidence-for-a-UniversalConstant-h-and-the-Economic-Work-Function-Analysis-of-US-1941-2011-andCanadian-1976-2011-Unemployment-Data Published July 24, 2012. 29.http://www.scribd.com/doc/100720086/A-Second-Look-at-Australian-2012Unemployment-Data, Published July 22, 2012. 30.http://www.scribd.com/doc/100500017/A-First-Look-at-AustralianUnemployment-Statistics-A-New-Methodology-for-Analyzing-UnemploymentData , Published July 19, 2012. 31.http://www.scribd.com/doc/99857981/The-Highest-US-Unemployment-RatesObama-years-compared-with-historic-highs-in-Unemployment-levels , Published July 12, 2012. 32.http://www.scribd.com/doc/99647215/The-US-Unemployment-Rate-Whathappened-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-USHighway-Deaths-in-1950s-and-1960s Published August 4, 2012. 34.http://www.scribd.com/doc/101983375/Effect-of-Speed-Limits-on-FatalitiesTexas-Proofing-of-Vehciles Published August 4, 2012.
Page 15 of 19

35.http://www.scribd.com/doc/101828233/The-US-Teenage-Pregnancy-Rates-1 Published August 2, 2012. 36.http://www.scribd.com/doc/102384514/A-Second-Look-at-the-US-TeenagePregnancy-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-ATest-Case-to-Understand-the-US-Government-Inefficiencies-and-Budget-CutsAhead 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-WereFour-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-NationalDebt-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-HistoryGood-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-LongTerm, first published on June 17, 2011, and republished Sep 1, 2012. 42.http://www.scribd.com/doc/104659448/The-US-National-Debt-RetirementProgram, first published on June 23, 2011, before the debt default crisis which led to lowering of the US rating, republished Sep 1, 2012.

Page 16 of 19

43.http://www.scribd.com/doc/104662291/A-Radical-Proposal-to-PermanentlyReduce-the-Unemployment-Rate, first published on October 13, 2011, republished Sep 1, 2012. 44.http://www.scribd.com/doc/104661297/Is-Taxing-the-Rich-an-Option-forBudget-Deficit-Reduction, first published on July 3, 2011, republished Sep 1, 2012.

Page 17 of 19

About the author V. Laxmanan, Sc. D.

Email: vlaxmanan@hotmail.com The author obtained his Bachelors degree (B. E.) in Mechanical Engineering from the University of Poona and his Masters degree (M. E.), also in Mechanical Engineering, from the Indian Institute of Science, Bangalore, followed by a Masters (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 Plancks 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 18 of 19

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. Einsteins photoelectric law is a simple linear law, as we see here, and was deduced from Plancks 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

Page 19 of 19