"Don't Come In Here!"

truly malicious, ignorant misinterpretation...deserves only contempt

2011-10-11T10:35:00.000-07:00

This is a series of AJC blog postings in which I was accused of the above (subject line). The main character here (MarkV) was engaged with someone else arguing about Marxism, and MarkV was trying to deny his position equated to Marx’s. This is where I chimed in.

MarkV

“To each according to his needs” = Funding social programs and entitlements.

This part of the motto refers to a utopian stage of the society, in which technology is so developed that everybody can get what he/she needs. Again, it is a laughable nonsense to compare it with a safety net in a capitalist society. How many people get “what they need” from the social programs and entitlements? Would you like to have all you needs satisfied by what the people below the poverty line get from those programs?

MPercy

I suspect part of the disconnect will lie in the definition of “what they need”. Humans all around the world demonstrate how little is truly required to survive. This might be one definition of “what they need”, but is probably not close to what progressive liberals mean when they say the words “what they need”, which apparently has come to mean “providing means for everyone to live a U.S. standard lower middle class lifestyle without any further requirements or responsibility on the recipients’ part”, i.e., an air-conditioned home or apartment with an assortment of electronic gadgets, cable TV, broadband internet, free cell phone, free food, reduced electric bill, reduced gas bill, a car and oh yeah, toss in some walking-around money.

MarkV

What you have written is a truly malicious, ignorant misinterpretation of “what progressive liberals mean when they say the words “what they need.” It deserves only contempt.

Tiberius - Your lightning rod of hate!

“It deserves only contempt.”

No, it deserves being backed up with a bit more facts than hyperbole, but there is no denying that the “poor” in America have a better standard of living than the vast majority of “poor” in every other country on Earth.

MPercy

Why? It appears accurate to me. Allow me to explain, with references.

A Department of Energy Survey [www.eia.gov/consumption/residential/data/2009/#undefined], includes a part of which breaks down appliance use in US homes by household Income.

For example it states that 16.9M households are below the poverty line, and of those 15.6M have microwaves, 8.6M have coffee makers, 10.6M have top-door (top freezer) refrigerators, 1.8M have a 2nd refrigerator, 3,9M have a separate freezer, 4.8M have a dishwasher, 10.9M have a clothes washer in their home.

For TVs, of the 16.9M households below the poverty line, only 0.3M had no TV, while 4.8M had one TV, 5.9M had two TVs, 3.5M had three TVs, 1.6M had four TVs, and 0.7M had five or more TVs. Some 8.9M had TVs between 21 and 36 inches in screen size, and 4.4M had “big screen TVs” of 37 inches or more, with 5.7M being LCD or plasma TVs. Some 6.1M had cable TV boxes connected to their primary TV, and 3.9M had a video game console, and 7.1M had a DVD player.

In addition 5.8M of the 16.9M households below the poverty line had computers, while 1.8M more had two computers (and nearly1M had three or more). Some 7.2M had internet access, of those 2.7M had cable broadband, 3.1 had DSL or fiber. And 5.2M had at least one printer.

8.0M (of 16.9M poverty-level) households have cordless phones, 5.2M have answering machines, 0.8M have fax machines, and 0.8M have photocopiers. 5.8M have stereo equipment.

“The Federal Communications Commission’s National Broadband Plan, scheduled to be publically presented to Congress next week, may have something for everyone, but a new intriguing bauble is the suggestion by the FCC that Congress will be asked to “consider use of spectrum for a free or very low cost wireless broadband service.” [www.informationweek.com/news/government/enterprise-architecture/223500023]

Free cells phones are being provided, too. “The latest expansion of an already bloated federal government is a program aimed at putting free cell phones into the hands of low-income Americans.” [www.ibtimes.com/articles/198119/20110816/verizon-cell-phones-tax.htm]

There are certainly programs for reduced utilities, federal programs such as Low Income Home Energy Assistance Program (LIHEAP), plus a bevy of state programs.

Foodstamps provide at least some free food, even fast food. “Food stamps – known more formally as the USDA’s Supplemental Nutrition Assistance Program – have been in use for grocery staples, such as bread and milk, since 1934, but now, for the first time, they can be used for fast food in four states across the country.” [abcnews.go.com/blogs/business/2011/09/fast-food-chains-getting-into-the-food-stamp-act/]

“Just last month the National Economic Development and Law Center (NEDLC) issued the findings of what must be the most comprehensive survey to date of low income car ownership (LICO) programs. The study gathered information from 110 different LICO programs across the country working to “improve access to cars for low-wage workers and their families.” [workforcedev.typepad.com/workforcedev/car_programs/]

I’ll call UI benefits, SSD, etc. “some walking-around money.”

Given the above, what is there about my characterization that is inaccurate?

MarkV

I guess you never heard about hunger in this country. How poor would you like the people in one of the richest countries to be to satisfy you?

You presented a lot of numbers. Have you given any thought to those numbers? For one thing, they do not tell you anything about the age and condition of the items. But even without that, let’s have a look at their meaning. Out of 16.9 million households under poverty line, 4.8 M have a dishwasher. That means that there are 12.1 million households without a dishwasher. How many of your friends have no dishwasher? 10.6M have a refrigerator- meaning that over 6 million households are without a refrigerator. Can you imagine your life without a refrigerator? Almost 9 million do not have a cordless phone. How many of you relatives or friends do not have a cordless phone? 13 million do not have a computer. You dare to cite a statistic of that as evidence that these people have no needs?

Given the above, what about your characterization is accurate?

MPercy

I’ve given a lot of though to those numbers. In my mind the notion that I am being forced to pay welfare benefits to even on household that chooses to squander their real income on Playstations and big screen TVs is too many. If they can afford to buy a TV, they can afford to buy their own food. If they’ve got a big TV from before they were poor (they lost a job perhaps), then sell the TV first to buy food, then when you’ve truly got nothing left, we can talk about your “needs”.

First of all, there is an extremely high correlation between poverty and obesity in this country, so it seems that most people are getting more food than they need.

So we should be paying benefits so that more people can have a dishwasher, cordless phone, and computer? As I said, it seems that you’re supporting the notion that everyone should be able to live a lower middle-class lifestyle, one that includes all those things, and that our welfare state should provide it without question of other lifestyle choices that may have been made, without requiring work on their part. Your language such as “How many of your friends have no dishwasher?” and “Can you imagine your life without a refrigerator?” implies that everyone is entitled to my lifestyle, which does currently include a refrigerator and dishwasher. You do realize that 75 years ago, even the very richest didn’t have any of the above and people got along fine?

No one needs a dishwasher. It is a luxury, work-saving device. No one needs a TV. It is an entertainment device. No one needs a Playstation, it is a game. No one needs a tattoo. It is a personal choice. No one needs Big Macs, Coke, beer, booze, or cigarettes. If you can afford to buy those, you can afford to meet your basic needs, but are choosing not to and expecting others to subsidize your decisions.

My definition of “need” comes in much lower than yours, and includes minimal support–I don’t want anyone to starve in this country, and want to provide a helping hand. But if you want more than the most basic subsistence level of support, get it yourself. Of course, though, people who simply lack the basic mental or physical ability to support themselves cannot be excluded from a reasonable level of support.

How rich do you want the poor people in this country to be? The onus should be on you,since you want to forcibly take money from me and other to redistribute it to those you feel do not have enough. You have not defined “enough” but your level of expectation on the word “need” seems much higher than mine.

MarkV

Perhaps nothing can illustrate better your blindness than the following:” First of all, there is an extremely high correlation between poverty and obesity in this country, so it seems that most people are getting more food than they need.”

Had you done the slightest amount of research, you would now that the obesity of poor people is not due to more food than they need,” but because of the high cost of healthier foods, severe limitation of food sources poor neighborhoods, less time to cook meals, less money to join sports clubs, less opportunity to exercise outdoors, etc.

We do live like 75 years ago. Most people are not below poverty line because they do not want to work or to work hard. That is a conservative fantasy. They are poor because their jobs they do not pay enough, while incomes of people in upper brackets are often obscene and soaring.

MPercy

Obesity is caused by consuming more calories than you expend. It’s a simple equation. All of the things you mention are irrelevant to the fact that they are consuming more calories than are necessary. You are simply trying to excuse the decision-making process. Rice & beans are cheap, an excellent source of nutrition and are sold in bodegas–and doesn’t the bus line in most urban areas reach a grocery store that lies outside the food desert? Cooking rice & beans is a no-brainer and doesn’t take any more time that going over to the junk food place for a burrito or cheeseburger. Most people eat for other reasons than being hungry; but if what you have is beans and rice that is less likely to happen–when I was a kind and whined that I was hungry, my mother would say, “There’s a can of corn in the kitchen, want me to warm that up for you?”. She had a point, I never did eat that can of corn.

Then there is your implication that we need to have a gym membership to be healthy? Shall we subsidize aerobics classes? And needing to go outside? You can exercise quite nicely in a very small area without any equipment–pushups, situps, for example.

While it is certainly easier for all the reason you list to be obese than to be healthy, barring some actual endocrine system failure, obesity is primarily lifestyle choice. And one that we enable in the poor by allowing foodstamps (EBT, SNAP, whatever they call it this week) to be used at convenience markets and fast food restaurants is simply enabling that lifestyle choice.

While we’re on rice&beans…”The Obama administration’s focus on what Americans eat includes Agriculture Secretary Tom Vilsack, who said on Monday that Americans will “adjust” their tastes to the food the government says is best for people to eat.”

MarkV

All I can say is that you are painfully ignorant of the issues involved in the obesity of the poor people. It is the same attitude of superiority that you are displaying in all your writing. Poor people kids having a play station – what a travesty. People who get some help from the society – and they want to have a TV? How dare they?

I do not like my taxes to be used to support people who do not want to work hard either. But if I should make a list of things I do not like to be supported by my taxes, it would be a long one. I do not want my taxes to be used to build unneeded fighter planes. I do not want them used to pay contractors in Iraq and Afghanistan who cheat the government of billions of dollars. And so on. The money wasted because some of the poor people getting government support do not deserve it is way down on my list. What I found unacceptable in your writing is the broad brush with which you have painted those receiving support.

I should also add that the way you started this discussion about the “need” was a misdirection from what the original issue, which was that Tiberius claimed that those who want to fund our social programs (“99% of the elected Democrat representatives, you, and virtually every other liberal poster on this blog”) were advocating the philosophy of Marx and communism, the motto of which is “From each according to his ability, to each according to his need.” That was the kind of scurrilous attack and labeling people like him make all the time, which shows either ignorance or deliberate misinformation. In fact, Marx specifically denounced the use of a social safety net in capitalist countries.

MPercy

I”m sorry you think I’m painfully ignorant, but you have not provided any counterpoint other than your emotional personal attacks on me whereas I have at least provided some independent background supporting my thesis, which is that progressive liberals seem to believe that everyone is entitled to at least a lower-middle class lifestyle, through government redistribution programs and no effort of their own. This is in contrast to the dire “people will starve to death in the streets” hyperbole. You honestly done nothing to dissuade me from my thesis, and in fact have consistently furthered it.

Re: poverty vs obesity, how about this NIH conclusion? “The association between poverty and obesity may be mediated, in part, by the low cost of energy-dense foods and may be reinforced by the high palatability of sugar and fat. This economic framework provides an explanation for the observed links between socioeconomic variables and obesity when taste, dietary energy density, and diet costs are used as intervening variables. More and more Americans are becoming overweight and obese while consuming more added sugars and fats and spending a lower percentage of their disposable income on food.”

How else can I read that but to think that people are simply choosing to eat low-cost food that are high in fat and sugar (energy-dense) because they like it and it’s cheap? And that given people in poverty a “chose any food you want” card is a bad idea? People in poverty are not starving, they are eating too much of the wrong food, by choice. Or maybe they just don’t know any better, I have to admit that, but really how stupid must you be to not know that Big Macs make you fat?

You seem to think that I am incapable of distinguishing between someone who is milking the system (please do not claim there are none) and those who simply could not survive without it (and I never claimed there are none). I am not painting with a broad brush either. I believe I was quite clear in distinguishing between the truly needy and those who use the programs but do not truly need them, where my distinction involves their ability to choose to spend their money on luxury items or “wants” (and yes, big-screen TV and Playstation are some examples) rather than food, rent, or bills or “needs”.

It was not my intent to misdirect anything. A the time you two were arguing about Marx, I was merely predicting that the root of the point you raised about getting what you need from government services would hinge on what you were using as the definition of “need”. I explained that my definition of need (vs want) would certainly differ from yours and provided my estimation of what I believe the progressive liberal definition of “need” seems to be. Subsequently, I backed up my thesis with external sources.

At no point have you said anything that indicates you disagree with my thesis, and everything you’ve said (well, at least everything that is not some emotional personal attack) seems to solidify the notion that you (as a progressive liberal) believe that everyone is entitled to at least a lower middle-class lifestyle and that the government is right to pursue redistributive programs to that effect, and specifically to provide things like free cells phones, free broadband, free Big Macs, free rent so that the little real income *some* people living in poverty have can be used for big screen TVs and playstations.

Is that or is that not your position?

MarkV

I am not going to discuss such a complex issue as poverty/obesity in these posts. I do not believe you are competent to do that, and neither am I. I have no quarrel with the NIH conclusions you have cited. It is enough to quote your one sentence: How else can I read that but to think that people are simply choosing to eat low-cost food that are high in fat and sugar (energy-dense) because they like it and it’s CHEAP?” (My emphasis) Would you expect them to eat food that is expensive? I could go on and on, picking up your arguments: For instance: “…but really how stupid must you be to not know that Big Macs make you fat?” You really expect the usually less educated poor people to be less “stupid” than those in upper classes who get fat by eating Big Macks?

I think I have expressed clearly enough that there are people milking the system, and that I have no sympathy with that. What you failed to explain is what you want to do about it? Deny the help to all because of some are milking the system? Double the size of the government to watch every one who receives support whether he/she buys a big screen TV or a Playstation?

And yes, you have painted with a broad brush, which was the reason for my original response. Just read your post at 4:37 pm yesterday.

MarkV

MPercy: “…everything you’ve said (well, at least everything that is not some emotional personal attack) seems to solidify the notion that you (as a progressive liberal) believe that everyone is entitled to at least a lower middle-class lifestyle and that the government is right to pursue redistributive programs to that effect, and specifically to provide things like free cells phones, free broadband, free Big Macs, free rent so that the little real income *some* people living in poverty have can be used for big screen TVs and playstations.”

Why don’t you show me exactly where I expressed such a notion. It is not and never was my position.

MPercy

You’re right, I did use a broad brush…to paint progressive liberals. You seem to think I’m attacking people in poverty. I’m not. I’m attacking progressive liberals who do not clearly distinguish between wants and needs. There could possibly be progressive liberals who will use the words “want” vs “need” in a forthright and honest fashion, and my broad brush did not allow for that prospect. Apologies.

I tried to support that statement using evidence from a number of sources. In essence, I was arguing that progressive liberals regularly and with malice aforethought attempt to portray poverty in the most negative possible way, when in reality the standard of living among the poor in the United States has steadily increased to the point where a US person living in poverty has a standard of living similar to middle-class Europeans, and would be the envy of much of the world’s truly poor.

These folks did a nice job capturing this idea…

[Understanding Poverty in the United States: Surprising Facts About America's Poor]

“For most Americans, the word “poverty” suggests near destitution: an inability to provide nutritious food, clothing, and reasonable shelter for one’s family. However, only a small number of the 46 million persons classified as “poor” by the Census Bureau fit that description. While real material hardship certainly does occur, it is limited in scope and severity.

“Although the mainstream media broadcast alarming stories about widespread and severe hunger in the nation, in reality, most of the poor do not experience hunger or food shortages. The U.S. Department of Agriculture collects data on these topics in its household food security survey. For 2009, the survey showed:

* 96 percent of poor parents stated that their children were never hungry at any time during the year because they could not afford food.
* 83 percent of poor families reported having enough food to eat.
* 82 percent of poor adults reported never being hungry at any time in the prior year due to lack of money for food.

“Other government surveys show that the average consumption of protein, vitamins, and minerals is virtually the same for poor and middle-class children and is well above recommended norms in most cases.

“Television newscasts about poverty in America generally portray the poor as homeless people or as a destitute family living in an overcrowded, dilapidated trailer. In fact, however:

* Over the course of a year, 4 percent of poor persons become temporarily homeless.
* Only 9.5 percent of the poor live in mobile homes or trailers, 49.5 percent live in separate single-family houses or townhouses, and 40 percent live in apartments.
* 42 percent of poor households actually own their own homes.
* Only 6 percent of poor households are overcrowded. More than two-thirds have more than two rooms per person.
* The average poor American has more living space than the typical non-poor person in Sweden, France, or the United Kingdom.
* The vast majority of the homes or apartments of the poor are in good repair.

“By their own reports, the average poor person had sufficient funds to meet all essential needs and to obtain medical care for family members throughout the year whenever needed.

“Of course, poor Americans do not live in the lap of luxury. The poor clearly struggle to make ends meet, but they are generally struggling to pay for cable TV, air conditioning, and a car, as well as for food on the table. The average poor person is far from affluent, but his lifestyle is far from the images of stark deprivation purveyed equally by advocacy groups and the media.

“The fact that the average poor household has many modern conveniences and experiences no substantial hardships does not mean that no families face hardships. As noted, the overwhelming majority of the poor are well housed and not overcrowded, but one in 25 will become temporarily homeless during the year. While most of the poor have a sufficient and fairly steady supply of food, one in five poor adults will experience temporary food shortages and hunger at some point in a year.

“The poor man who has lost his home or suffers intermittent hunger will find no consolation in the fact that his condition occurs infrequently in American society. His hardships are real and must be an important concern for policymakers. Nonetheless, anti-poverty policy needs to be based on accurate information. Gross exaggeration of the extent and severity of hardships in America will not benefit society, the taxpayers, or the poor.

“Finally, welfare policy needs to address the causes of poverty, not merely the symptoms. Among families with children, the collapse of marriage and erosion of the work ethic are the principal long-term causes of poverty. When the recession ends, welfare policy must require able-bodied recipients to work or prepare for work as a condition of receiving aid. It should also strengthen marriage in low-income communities rather than ignore and penalize it.

The rest of the essay cites provides plenty of government surveys, studies, etc.

[http://www.heritage.org/research/reports/2011/09/understanding-poverty-in-the-united-states-surprising-facts-about-americas-poor]

MPercy

“Why don’t you show me exactly where I expressed such a notion. It is not and never was my position.”

I never said you said it, I said that you seem to believe, appear to support, I have a notion that you believe, etc. Your words implied this notion, and I inferred it from your words. You say this is not your position, but the things you’ve said are not consistent with that statement.

For example, you said “You dare to cite a statistic of that as evidence that these people have no needs?” This was preceded by several items such as dishwashers, cordless phones, and computers that it seems reasonable to infer, based to their position leading up to this question, that you included those items in your list of “needs”. The inference is mine, but should I not have made it given what you wrote?

Subsequently, you called me ignorant and blind. These emotional personal attacks do nothing to help your argument.

MarkV

“Subsequently, you called me ignorant and blind. These emotional personal attacks do nothing to help your argument.”

I do not make personal attacks of the kind I see and get from some people here. But I am also straightforward in expressing my opinion, and it is never an emotional attack. I did not call you “ignorant” and “blind” in the sense of calling you an ignorant person. I called you “painfully ignorant of the issues involved in the obesity of the poor people.” I am sorry if you do not understand the difference. I have not change my opinion. While I do not want, as I have written, discuss those issues here because of their complexity, I have read enough about it to have an opinion that your view is painfully one-sided, and that you lack sufficient sympathy for people, many of whom try hard to make ends meet and give their families some measure of happy life. Yes, even buying their kids Playstations and good TV. It may be a difficult concept for you to understand – it is not for me. Buy the mothers, who come home after a day of heavy work, a dishwasher to allow her a little more rest. You may call it luxury – I do not.

The rich are "job creators"

2011-09-14T17:03:00.001-07:00

Think the rich don’t provide jobs? Or that they only provide a few jobs through their investment activities? People with a lot of money spend a lot of money on stuff and services that the many of the rest of us provide!

One example...

Once upon a time we had a thriving yacht-building business in the US. Congress decided that a luxury tax on yachts sounded like a great idea! Tax the rich fat cats splurging millions on yachts, what’s a few hundred thou in extra taxes?! 10% extra tax on boats costing $100K or more (this was in 1990 or so).

The end result was devastating. Thousands in the boating industry lost their jobs (as did thousands in other industries penalized with similar luxury taxes). The rich? They just bought their yachts overseas and avoided the taxes. There is virtually no yacht building or sales left in the US as a result of this tax, even after it was repealed–those jobs were killed but good!

[Walter Williams]

“Within eight months after the change in the law took effect, Viking Yachts, the largest U.S. yacht manufacturer, laid off 1,140 of its 1,400 employees and closed one of its two manufacturing plants. Before it was all over, Viking Yachts was down to 68 employees. In the first year, one-third of U.S. yacht-building companies stopped production, and according to a report by the congressional Joint Economic Committee, the industry lost 7,600 jobs. When it was over, 25,000 workers had lost their jobs building yachts, and 75,000 more jobs were lost in companies that supplied yacht parts and material. Ocean Yachts trimmed its workforce from 350 to 50. Egg Harbor Yachts went from 200 employees to five and later filed for bankruptcy. The U.S., which had been a net exporter of yachts, became a net importer as U.S. companies closed. Jobs shifted to companies in Europe and the Bahamas. The U.S. Treasury collected zero revenue from the sales driven overseas.

Back then, Congress told us that the luxury tax on boats, aircraft and jewelry would raise $31 million in revenue a year. Instead, the tax destroyed 330 jobs in jewelry manufacturing and 1,470 in the aircraft industry, in addition to the thousands destroyed in the yacht industry. Those job losses cost the government a total of $24.2 million in unemployment benefits and lost income tax revenues. The net effect of the luxury tax was a loss of $7.6 million in fiscal 1991, which means Congress’ projection was off by $38.6 million. The Joint Economic Committee concluded that the value of jobs lost in just the first six months of the luxury tax was $159.6 million.”

Keep this in mind when you realize that Pres. Obama has called for a luxury tax on corporate jets, and remember that a goodly number of corporate jets are built in the United States (Gulfstream, Cessna). How many people will lose their jobs as a result? How much revenue will be generated? We've seen this movie before...the remake won't end differently.

Real Stimulus: Eliminate corporate income taxes

2011-09-08T10:49:00.000-07:00

There is a common meme that corporations pay income taxes. This is simply false. First of all, some 2/3s of US corporations don't owe any taxes in any given year, since they aren't profitable enough to have positive tax rate. But more importantly, when a corporation does pay taxes, those taxes are simply a cost of doing business that is passed to consumers, workers, and shareholders.

Even the federal government agrees with this concept. The Congressional Budget Office produced a report "THE INCIDENCE OF THE CORPORATE INCOME TAX" in which it states

A corporation may write its check to the Internal Revenue Service for payment of the corporate income tax, but that money must come from somewhere: from reduced returns to investors in the company, lower wages to its workers, or higher prices that consumers pay for the products the company produces.

That report goes on to say:

Although economists are far from a consensus about exactly who bears how much of the burden of the corporate income tax, the existing studies highlight the significant types of economic mechanisms as well as the empirical estimates necessary for further quantifying the burdens. CBO's review of the studies yields the following conclusions:
The short-term burden of the corporate tax probably falls on stockholders or investors in general, but may fall on some more than on others, because not all investments are taxed at the same rate.
The long-term burden of corporate or dividend taxation is unlikely to rest fully on corporate equity, because it will remain there only if marginal investment is not affected by those taxes. Most economists believe that the corporate tax system has some effect on investment decisions.
Most evidence from closed-economy, general-equilibrium models suggests that given reasonable parameters, the long-term incidence of the corporate tax falls on capital in general.
In the context of international capital mobility, the burden of the corporate tax may be shifted onto immobile factors (such as labor or land), but only to the degree that the capital and outputs of different countries can be substituted.
In the very long term, the burden is likely to be shifted in part to labor, if the corporate tax dampens capital accumulation.
Most attempts to distribute the burden of corporate taxation have neglected the possible importance of effects on the relative prices of products.

Corporate income taxes account for about $250-$300B in annual revenue for the federal government. Compliance costs for business to determine how much tax they owe is also estimated at about $200-$300B annually. In other words, it costs corporations almost as much slightly more to determine how much they owe as they actually owe. Then there is the inordinate amount of effort that goes into determining how to run the business when various tax considerations come into play instead of simply doing what's best for the business for business reasons rather than tax reasons. For example, should we buy a new truck this year, or build new factory, or hire a 50th employee. Each action can have tax implications that may have a greater influence on decisions made than does the business implications. And virtually all of these taxes and compliance costs get passed on directly to consumers/labor/shareholders.

The federal corporate statutory tax rate is 35%, one of the highest in the world, and the United States is the only country that seeks to double-tax income of multinationals. The rate and the related policies are often cited by businesses when they defend their decisions to off-shore production and jobs or structure their business to legally avoid US taxes (including keeping some $1T overseas rather than face the US taxes if they repatriated the income).

Almost every bit of "corporate welfare" comes in the form of special tax breaks which allow favored industries or even favored companies to avoid some part of the corporate tax code. Also note that a large portion of the potentially corruptive influence on Congress comes in the form of corporate lobbyists trying to "rent-seek" by getting tax provisions passed which benefit their clients.

Given the above, my position involves completely eliminating the federal corporate income tax.

This accomplishes a number of things in one fell swoop. It ends the vast majority of corporate welfare (which usually takes the form of preferential tax treatment). It unburdens the economy of the US relative to the rest of the world, since 0% is a lot less than 10, 20 or 30, or 35%--certainly some multinationals will rush to move their HQs to the USA? It frees up some $300B/yr (more or less) in compliance costs that US companies spend each year just to figure out how to minimize their taxes. Removing the tax burden and compliance costs would make it more feasible for some, but not all, activities (and the jobs) that had been previously offshored to return here, i.e., those jobs which were *almost* but not quite worth keeping here.

The "cost" for this move would have an initial price tag of $250B/yr (more or less). This is the amount that the IRS collects from corporate taxes each year. However, since a large share of the $250B in corporate taxes not being paid and the $300B (more or less) not being spent in compliance costs will be returned to shareholders, they will pay income taxes on those dividends, and workers who might be given raises will pay taxes on those raises. In other words, recognizing that corporations pass on the cost of taxes, eliminating the corporate tax would largely just move the corporate profits into individuals pockets, where it would be taxed under the income tax code. Then there's the positive economic impact of corporations moving their HQs and some production back to this country, those relocated and rehired workers would be paying income taxes, too.

To further offset the "cost", we can eliminate the IRS workers (*), programs, etc. charged with collecting the corporate taxes in the in first place, but a better use would probably be to refocus them on collecting the nearly $300B/yr estimated to exist in the "tax gap" between personal income taxes owed and those actually paid. In other words, if we could simply collect the full amount of personal income taxes owed, it would completely offset the baseline of missing corporate income taxes (not including the offsetting elements I mentioned above).

(*) We'd have to include the cost of the UI we'd have to pay to the fired IRS workers, corporate tax accountants, etc. But I'm sure at least some of them could get jobs with the multinationals to help them figure out their foreign taxes?

Lather, rinse, repeat

2011-08-22T17:33:00.000-07:00

I found this in my Drafts folder. I'm not sure if I copied from somewhere or wrote it myself...

The pattern is

Government policy and poor regulation cause (or invents) a crisis.
The government publicly and violently searches for culprits, aided by the MSM, and names the wrong parties--usually in the private sector.
The government then rolls out a massive new law and its regulatory children to "fix" the problem as they defined it.
The new law doesn't solve the real problem, costs a lot, and has massive unintended (but fully predicted) consequences, including setting the stage for the next crisis, which will be bigger and more damaging.
Memory of the past crisis fades and everybody reluctantly adjusts to the massive new regulatory overhead.
A new crisis occurs. The government publicly and violently searches for the culprits, aided by the MSM--looking exclusively in the business community...

and so it goes.

Would you believe? 70% vs 35% tax rate...

2011-08-22T17:30:00.001-07:00

For fun, let’s compare the effective rates and a few other values under Carter (1979) and G.W. Bush (2006). Recall that under Carter (1979) the marginal rate went all the way up to 70% paid on income over $215,400 (married filing jointly); under Bush (2006), the highest marginal rate was *only* 35% paid on income over $336,550 (married filing jointly). The CBO puts out a nice paper every year. It starts with data from 1979 and runs up to 2006 (the last year for which I have data, 2005 for the top 0.01%), making this comparison easy.

Would you believe that in 1979, when the highest marginal tax rate was 70%, the effective income tax rate paid by the top 1% was just 21.8% (compare to the marginal rate of 70%). In 2006, after massive tax rate cuts that were accompanied by elimination of a host of deductions, the effective income tax rate for the top 1% had dropped only a few points down to 19% (compared to marginal rate of 35%).

Would you believe that in 1979, when the highest marginal tax rate was 70%, the top 1% paid 15.4% of all federal taxes collected but that in 2006, when the highest marginal rate was a mere 35%, the top 1% paid 27.6% of all federal taxes collected?

Would you believe that the bottom 80% are *all* (statistically, not necessarily as individuals!) paying a smaller share of the both the total federal tax burden and income tax burden in 2006 than they were in 1979? Only the top 20% are paying more?

Would you believe that the bottom 40% went from paying about 4% of income taxes collected in 1979 to paying -3.6% in 2006 (negative share of taxes due to excess refundable tax credits, primarily EITC and child-related credits)?

Believe it!

Share of Total Federal Tax Liabilities
* the lowest quintile (20%) paid 2.1% of all taxes collected in 1979 and 0.8% in 2006
* the second quintile paid 7.2% of all taxes collected in 1979 and 4.1% in 2006
* the middle quintile paid 13.2% of all taxes collected in 1979 and 9.1% in 2006
* the fourth quintile paid 21.0% of all taxes collected in 1979 and 16.5% in 2006
* the highest quintile paid 56.4% of all taxes collected in 1979 and 69.3% in 2006
* top 1 percent paid 15.4% of all taxes collected in 1979 and 27.6% in 2006
* top 0.01% percentile paid 2.7% of all taxes collected in 1979 and 6.5% in 2005

Share of Federal Income Tax Liabilities
* the lowest quintile paid 0.0% of income taxes collected in 1979 and -2.8% in 2006
* the second quintile paid 4.1% of income taxes collected in 1979 and -0.8% in 2006
* the middle quintile paid 10.7% of income taxes collected in 1979 and 4.4% in 2006
* the fourth quintile paid 20.2% of income taxes collected in 1979 and 12.9% in 2006
* the highest quintile paid 64.9% of income taxes collected in 1979 and 86.3% in 2006
* top 1 percent paid 18.3% of income taxes collected in 1979 and 39.1% in 2006
* top 0.01% percentile paid 2.6% of income taxes collected in 1979 and 8.0% in 2005

Share of Pre-Tax Income
* the lowest quintile earned 5.8% in 1979 and 3.9% in 2006
* the second quintile earned 11.1% in 1979 and 8.4% in 2006
* the middle quintile earned 15.8% in 1979 and 13.2% in 2006
* the fourth quintile earned 22.0% in 1979 and 19.5% in 2006
* the highest quintile earned 45.5% in 1979 and 55.7% in 2006
* top 1 percentile earned 9.3% in 1979 and 18.8% in 2006
* top 0.01 percentile earned 1.4% in 1979 and 4.2% in 2005

Total Effective Federal Tax Rate (income+payroll+excise+corporate)
* the lowest quintile rate was 8.0% in 1979 and 4.3% in 2006
* the second quintile rate was 14.3% in 1979 and 10.2% in 2006
* the middle quintile rate was 18.6% in 1979 and 14.2% in 2006
* the fourth quintile rate was 21.2% in 1979 and 17.6% in 2006
* the highest quintile rate was 27.5% in 1979 and 25.8% in 2006
* top 1% percentile rate was 37.0% in 1979 and 31.2% in 2006
* top 0.01% percentile rate was 42.9% in 1979 and 31.5% in 2005

Effective Income Tax Rate
* the lowest quintile rate was 0.0% in 1979 and -6.6% (negative 6.6 percent) in 2006
* the second quintile rate was 4.1% in 1979 and -1.0% (negative 1.0 percent) in 2006
* the middle quintile rate was 7.5% in 1979 and 3.0% in 2006
* the fourth quintile rate was 10.1% in 1979 and 6.0% in 2006
* the highest quintile rate was 15.7% in 1979 and 14.1% in 2006
* top 1% rate was 21.8% in 1979 and 19.0% in 2006
* top 0.01% percentile rate was 21.0% in 1979 and 17.0% in 2005

Futility of "Taxing the rich" as the solution to the problems

2011-07-20T16:02:00.001-07:00

In the last year for which data is available, 2008, the highest marginal tax rate was 35%. This rate is paid on AGI above $357,700. Certainly someone with AGI over that value is in the well-to-do category, but may not be “millionaires and billionaires” (but this is immaterial to my point). According to the IRS, the number of returns that were in this highest marginal rate was 971,510. So there’s nearly a million households in this country that are, at least by the IRS bracket definition, “rich”. Not too shabby, it seems the USA is indeed the land of opportunity.

According to the IRS, the cumulative amount of AGI subjected to this highest rate was $622,765,389,000, so let’s round up to $622.8B. The taxes generate on this money is therefore $218B (the IRS reported $217,967,886,000). The overall effective rate for these returns (taxes paid / income) was 28.9%.

Let’s assume for a moment (no matter how unrealistic the assumption is) that no one affected would change a lick of their income-generating behavior as a result if we raised the top marginal rate to 100%. How much revenue would that generate? Why, all of $622.8B, if no one modified their behavior in any way that affected their income and tax impact. That is, it would generate an additional $404.8B in revenue relative to the current 35% bracket.

If you added that $404B to the revenue pot, our deficit this year would still be over $1T…

Global Warming? Part II

2010-08-26T18:26:00.000-07:00

I have some exposure to some of the models used by climate researchers at NOAA. I can tell you, the models are frequently ad hoc and contain numerous fudge factors and corrections to massage the data, throw out outliers, adjust that term during this time period, this term during that time period, etc. Further, many temperature measurements are based on proxies--e.g. assuming tree rings are wider during higher temperatures, but there's simply no way to determine how much wider per degree C.

I'm not saying that their models are wrong, just that, having implemented models like these before, I understand enough of the math to know that a minor mistake in a fudge factor meant to allow dissimilar measurements to be used as if they were from the same dataset can make a huge difference in the validity of the model. Not to mention simple errors in implementation that can have the results "look right" but still be completely wrong.

For example consider the story told by the data that turned out to be wrong.

In this case, the scientists found out that their ERSST model was producing warmer results, by about 0.2C, than other instruments. It turned out that in 2001, the satellite providing the data was boosted to a different orbit, and the model failed to take that into account. It took 10 years before anyone thought that there might be a problem! Up until then, everyone apparently assumed the earth had warmed by 0.2C suddenly in 2001. Worse, they assumed that the data for 1971-2000 was wrong and massaged it to fit the 2001+ data. "In early 2001, CPC was requested to implement the 1971–2000 normal for operational forecasts. So, we constructed a new SST normal for the 1971–2000 base period and implemented it operationally at CPC in August of 2001" (Journal of Climate).

Just the abstract to that particular paper reveals how fragile the models are, being based on assumptions piled on top of assumptions, and unveiling a tendency to massage data.

"SST predictions are usually issued in terms of anomalies and standardized anomalies relative to a 30-yr normal: climatological mean (CM) and standard deviation (SD). The World Meteorological Organization (WMO) suggests updating the 30-yr normal every 10 yr."

How can a normal be updated--the data is the data, and its normal is its normal? This sentence implies that the data is somehow massaged every ten years or so. There may be legitimate reasons to do so, but anytime you massage data, there have to be questions as to the legitmacy of the alteration.

"Using the extended reconstructed sea surface temperature (ERSST) on a 28 grid for 1854–2000 and the Hadley Centre Sea Ice and SST dataset (HadISST) on a 18 grid for 1870–1999, eleven 30-yr normals are calculated, and the interdecadal changes of seasonal CM, seasonal SD, and seasonal persistence (P) are discussed."

This says that data is being assembled from widely disparate data sources, with different measurement techniques, and that some of the data was made with instrumentation that simply cannot be validated (data from 1854?).

"Both PDO and NAO show a multidecadal oscillation that is consistent between ERSST and HadISST except that HadISST is biased toward warm in summer and cold in winter relative to ERSST."

Now we see that different data sets, ostensibly of the same population, disagree. And the fact that one data set exhibits bias to the extreme (too warm in summer and too cold in winter) raises questions about the proper use of this data. One scientist may be able to make a valid claim that the more stable data is in error and "correct" it to be more in line with the more volatile data; another scientist may do the opposite. And their personal bias will play a role as to which way they go.

Global Warming?

2010-08-26T18:17:00.000-07:00

I for one don't deny that the globe may be warming (or at least that the climate may be changing), nor even that man may have exacerbated this trend. And I am willing to do my part to help minimize my impact: I telecommute when I can, I minimize my driving (e.g. walk to lunch when I'm at the office), we have a garden, we compost, I drive a car with decent gas mileage (albeit 11 years old--trading the footprint to produce a new car vs the slightly better mileage I could get with my next car, which will be a Jetta TDI), and we're planning for our retirement house to be as off-grid capable a possible.

On the other hand, the earth has gone through severe climate shifts even within the last few thousand years--none of which were precipitated by man-made pollutants. 11,500 years ago, much of the Northern Hemisphere was covered with mile-thick ice sheets. Yet that ice all melted. Why? Was the ice an aberration (no) or was the warming an aberration (no)? What is the earth's "correct" temperature? If the earth was cooling and glaciers were expanding and the seas retreating (as ice build-up captured more and more water) would these same scientists and politicians be recommending that we burn more stuff to put more CO2 into the atmosphere? Why is water vapor--the #1 grenhouse gas by a 7-1 margin--never mentioned? What caused the medieval warm period when olives last grew in England and Vikings last lived on the shores of Greenland and silver mines in Sweden were not covered by glaciers? What caused the subsequent Little Ice Age that saw the Thames freezing solid every winter for 200 years, and farms and villiages in northern latitudes were destroyed by expanding glaciers?

At Copenhagen, the AGW crowd lamented sea-level rise: "Just two years ago, the UN Intergovernmental Panel on Climate Change predicted a worst-case scenario rise of 59 centimetres. But the accelerated melting of ice sheets in Antarctica and Greenland caused by faster warming means the worst case is now put at 1.2 metres. " When? By 2200... Current satellite data going back to 1993 has sea-levels rising about 3mm per year. The average, based on a set of tidal measurements over the last 220 years is 2mm/yr.

Fifty-nine centimeters in 190 years is just 3.1mm per year; a rise of 2 feet over 200 years seems like something we could plan for and adjust to and not at all like a geologically recent event. About 8500 years ago the largest lake in the world, Lake Agassiz, which once covered almost half-a-million square kilometers (about 180,000 square miles) of central Canada simply drained, virtually overnight in the geologic timescale, into the Arctic ocean. "The last major shift in drainage occurred about 8,400 calendar years before present (about 7,700 14C years before present). The melting of remaining Hudson Bay ice caused lake Agassiz to drain nearly completely. This final drainage of Lake Agassiz contributed an estimated 1 to 3 meters to total post-glacial global sea level rise. Much of the final drainage may have occurred in a very short time, in two or one events, perhaps taking as short as a year. [emphasis mine]"

In India, we find that "Useful data on sea level fluctuations have been collected during the present expedition. Three wavecut benches were encountered at depths of 11.22 metres, 4.6 metres and 1.34 metres. The proto-historic city was built on the lowest bench, the early historic and the medieval townships on the higher benches. The island of Bet Dwarka, 30 km north of Dwarka, which is also famous as the pleasure resort of Sri Krishna, was connected with the mainland between Otha and Aramda. The reclamation referred to in ancient texts was made in this zone when the sea level was lower 3,500 years ago." The sea has risen 120 meters over the last 20,000 years, albeit with virtually all of that rise taking before about 5000 years ago. All without the help of man.

I'm not against "doing something" and certainly agree that pollution is bad. I'm just not willing to agree that the proposed so-called cap-and-trade legislation is going to do anything about pollution, and if it does have a minor impact on pollution and/or warming (by the bill's supporter's own admission), will it do so without crippling our alreadywounded economy.

And further, I think that the cap-and-trade bill expects some magic technology to spring into being simply because the bill mandates it--how else to get 65% reduction in emissions from coal-fired plants (except to shut them down). Why not mandate 500MPG cars (and $1M/year unemployement benefits to stimulate the economy)? So while I'm willing to "do something", I'm not willing to put my faith in a demonstrably ineffective Government, nor am I willing to live in a cave, naked and eating dirt (but my carbon footprint would be pretty low if I did), nor am I willing to cripple our economy.

Crazy Eddie

2010-08-26T10:34:00.000-07:00

"The pattern was always the same. First they wished for the impossible. Then they worked toward it, still knowing it to be impossible. Finally, they acted as if the impossible could be achieved and let that unreality influence every act."

"The Mote in God's Eye"--Larry Niven and Jerry Pournell

This sounds like some liberal politicians to me...

45000 without insurance die?

2010-02-25T17:02:00.000-08:00

I often see the proclamation that 45 thousand people die every year because they don’t have health insurance. This number comes from a Harvard study, so it is pronounced with great reverence and seldom questioned or considered. The study is widely available on the internet, and I suggest you read it. While reading it consider the point-of-view of one of the authors: according to the NIH website "Dr. Stephanie Woolhandler helped found Physicians for a National Health Program, a not-for-profit organization for physicians, medical students, and other health care professionals who advocate a national health insurance program."

Of course, the number quoted is the highest number in the study, and comes about only when using criteria suggested by the Urban Institute. The lower end of the estimated range is 27424, or a just about 50% less, albeit this covers only ages 25-64. Ignoring the Urban Institutes guidelines, the number provided is 35327 deaths annually for the non-elderly (ages 18-64), compared to the larger number 44789.

But the study also had several severe limitations.

First, the study relied on self-reported insurance status (unverified data). Further, the study only included insurance status at a single point in time, without determining whether the participants were actually insured at the time of their death. If a person had not been insured at the time of the initial interview, but got insurance later in the 6-year study period and may have actually had insurance at the time of death, they were counted as if a lack of insurance had contributed to their death. The authors have no information as to the duration of insurance coverage or lack thereof--only that the person was uninsured during the initial interview. To be fair, it may also be true that some people who reported having private insurance later dropped or lost their insurance, but the study does not consider either case.

Next, the study made no effort to determine that the cause of death was related to health insurance status. Deaths due to auto accidents, homicides, etc. were counted the same as deaths due to untreated diabetes. This is made more problematic because the study oversampled blacks and blacks are six times more likely to be victims of homicide than whites.

The study also excluded people on Medicare, which is reasonable as the study focused on the non-elderly. However, the study also excluded "nonelderly Medicare recipients and persons covered by Medicaid and the Department of Veterans Affairs/Civilian Health and Medical Program of the Uniformed Services military insurance, as a substantial proportion of those individuals had poor health status as a prerequisite for coverage." These people were excluded because they were probably already sick and the fact that they had health care coverage, albeit government supplied, would likely have skewed the results. If they had died during the study, the hypothesis that lack of coverage is associated with increased likelihood of death may have been less strongly supported; also, it may well have indicated that having government-provided coverage is even more strongly associated with increased likelihood of death.

Although the study seemed to indicate that “uninsurance is associated with mortality,” it also points out that “uninsurance was associated with younger age, minority race/ethnicity, unemployment, smoking, exercise, self-rated health, and lower levels of education and income. Regular alcohol use and physician-rated health were also associated with higher rates of uninsurance.” Or, as the authors put it “unmeasured characteristics (i.e., that individuals who place less value on health eschew both health insurance and healthy behaviors) might offer an alternative explanation for our findings.”

Finally, it is worth noting that of all those who were included in the study, a total of 3.1% died. Of those who died, 83.8% had private insurance (but still died). The overall rate of death was 3.0% for the privately insured, and 3.3% for the uninsured. So, 97% of the privately insured were still alive after the study period ended, and so were 96.7% of uninsured.

In other words, there may be a 0.3% increased chance of death associated with instances of unverified periods of uninsurance (of unknown duration) and where cause of death may or may not be related to health-care related factors.

By way of comparison, in 2008 there were 43,313 deaths in auto accidents in the U.S. That number is typical for the annual loss of life on our roads. Each of those deaths was 100% preventable by simply banning automobiles. We could save many of them by simply lowering the speed limit to 25MPH on all roads. Are we willing to spend $1T to save those people over the next 10 years?

For further comparison, the CDC says that approximately 90,000 people die each year as a result of acquiring an infection while in a hospital. Almost all of those deaths could be avoided if doctors, nurses, and other hospital staff would simply wash their hands and use hand sanitizers regularly and properly.

P.S. According to the numbers in the Harvard report, being male had almost the exact same “risk” as being uninsured.

"8 years of Republican control"

2010-01-24T14:47:00.000-08:00

On blog after blog, I read about “8 years of Bush” or “8 years of Republican control”. As if Pres. Bush and the Republican party in Congress had total control over the country. These statements often reflect either ignorance or complete denial of the facts.

First, we know that Pres. Bush did not have Congressional support in the final two years of his 2nd term, as the 110th Congress was controlled by Democrats (233-202 in the House, and 49-49-2 in the Senate with Leiberman and Sanders as “independents” who mostly joined Democrats when they voted). Any bill which passed the 110th Congress had to have Democratic support, and especially had to have the support of Speaker Nancy Pelosi. Indeed, they passed two bills that Pres. Bush vetoed and who’s vetoes were subsequently overridden. (Water Resources Development Act of 2007 and Food and Energy Security Act of 2007 (the 2007 Farm Bill)).

But even when Republicans held majorities in Congress under Bush, as they did in the 107th-109th Congresses, the majorities were slim, and especially slim in the Senate (often an even split). Thus whenever a bill was approved in the Senate, it had to be done with support of something close to 20% of the Democrats in the Senate (assuming 100% Republican support, which was not at all guaranteed). In light of this, anything that passed the Congress did so with something of a bipartisan effort, since Democrats could block the Senate on any issue simply by withholding cloture votes as a bloc (or something remotely like a bloc). Instead we saw one of the most “Bushy” bills, the PATRIOT Act, passed 99-1 in the Senate and 357-66 in the House. On the other hand, another big Bush bill, the Medicare Modernization Act, passed 220-215 with 16 Democrats voting Yea in the House (and 25 Republicans voting Nay) and 54-44 in the Senate, with 11 Democrats supporting it and 9 Republicans opposed (i.e., nearly ¼ of the Democrats in the Senate voted for the bill). In perhaps the most telling vote, the Iraq war was started with strong Democratic support, according to Wikipedia: “Introduced in Congress on October 2, 2002 in conjunction with the Administration's proposals, H.J.Res. 114 passed the House of Representatives on Thursday afternoon at 3:05 p.m. EDT on October 10, 2002 by a vote of 296-133, and passed the Senate after midnight early Friday morning at 12:50 a.m. EDT on October 11, 2002 by a vote of 77-23. It was signed into law as Pub.L. 107-243 by President Bush on October 16, 2002.” Eighty-two Democrats (40%) supported the action in the House and 29 Democrats (50%) in the Senate also supported the action. In fact, the Democrats+Jeffords(I-VT) as a bloc had a 51-49 majority in the Senate, yet they still passed the bill. Even the Bush tax cuts of 2003 could have been held up, but 2 Yeas from Democrats in the Senate counterbalanced 3 Nays by Republicans, leaving the final vote in Dick Cheney’s hands breaking the 50-50 tie.

It has been widely reported than Democrats in Congress (esp. Barney Frank) blocked attempts by the Bush administration to reform and regulate the mortgage industry in the part of Fannie Mae and Freddie Mac. Even though in the minority party, they could block items in committees and by withholding cloture, because the Senate was so evenly split.

In the end, nearly everything in the Bush years, other than executive orders and other policy matters (e.g. rules set by Cabinet Secs.) was done with some measure of Democratic support. In particular, since only Congress controls the purse strings, all the money spent under Bush was spent with Democratic votes in support. Had Democrats held their party line, the “Bush years” would have come out differently.

"Tea Partiers don't get it"

2010-01-17T10:45:00.000-08:00

ajc blogger: "Tea baggers are a small group of 6th grade educated morons. Anyone above a 6th grade education would know better."

First, you use offensive language, then you insult a lot of peoples' education.

I attended the April Tea Party at the Capitol with several members of my family (some of whom also attended the Tea Party in D.C. later in the year) and between the 5 adults we held a PhD, several master's degrees (plus a not-quite finished MBA), five bachelor's degrees in various disciplines. And yet, there we were speaking out.

It is oversimplifying the issue to say we are against taxes and government. When I say "we" here I cannot speak for all Tea Party attendees, but only those I know and spoke with.

The case is more that we are opposed to increased Federalism, especially so much of the federal government's actions that appear to be outside the limited powers provided for in the Constitution. And at the time, we were specifically opposed to and quite upset about TARP and the unread, pork-laden stimulus bill that many of us felt was simply not going to work. We didn't want the federal government to bail out the GM or AIG, let alone Fannie and Freddie. We believed that it was madness to socialize risk and privatize profit (which is what the bailouts did and will do next time). We believed that the housing meltdown was exacerbated if not precipitated largely by the federal government's policies and the fact that the federal government held more than $5T in mortgage loans through the auspices of Fannie and Freddie (even though there's was never a promise that the government would backstop Fannie and Freddie--nudge-nudge wink-wink, right?) We believed that all of these problems were not only foreseeable, but had been clearly foreseen and corrective actions actively fought by elements in Congress on both sides of the aisle.

We understand that government is necessary, and it has to be funded. But we also believe that, especially at the federal level, the Constitution provides a very specific set of powers and responsibilities. We are seeking a return to that limited government--we believe that the federal government ought not be everyone's mommy. We believe that the current situation (huge deficit spending) is unsustainable and it is better to deal with the problem now rather than face total economic collapse. We see a future when the Treasury will be forced to print money, when devaluing the dollar will be the only way to pay our debts. That will not be pretty. One way to stave that off is to start cutting the expenditures of the federal government. As it is much of the federal government actions are simply unfunded mandates to the States. We believe that these actions should be made at the State level anyway, and taking the federal government out of the loop is a good thing.

Ironically, in light of this article, we believe that transportation is at least partly within the enumerated domain of the federal government, I have no problem with Interstate highways as "post roads"; more so that I am familiar with the military aspects of the system as constructed. The notion that these post/military highways serve civilian needs (also known as "dual use") is just a bonus. And the gasoline tax is perhaps the single fairest and least complicated way to offset the maintenance requirements caused by civilian use of the system: the more you drive, the more you pay (and heavier and less efficient vehicles pay more).

On the other hand, the income tax system has been used as a mechanism for social engineering and class warfare. We have a system in which more than 40% (and every year we get closer to the 50% tipping point) not only pay no income taxes, but where a growing number have negative tax liability (aka tax welfare). When 141 thousand people pay more than 20% of all federal income taxes, when the top 5% pay more than 71% and then the bottom 75% pay barely more than 13% of collected income taxes, this system cannot be considered fair. Indeed the imbalance means that every day more and more voters will be freeloaders, paying nothing into the system yet sucking more and more out and voting themselves more and more largess. How quickly would the system fail if the top 5% simply stopped doing what they're doing?

So, we believe that government is a necessary evil, but that it must be limited to what is prudent, necessary, and affordable. We know that government must be funded to do those things and that taxes, equitably assessed, are necessary. What we disagree on is simply what we believe is the line for prudent, necessary, and affordable.

The Northeast and west coast are subsidizing the south and heartland

2010-01-16T13:19:00.000-08:00

On ajc blog:

Re: Not Going To Use My Usual Name
"The Southern states take WAY MORE than they pay as a percentage of federal taxes. The Northeast and west coast are subsidizing the south and heartland"

Well, that's true and false, meaning you've made a generalization that has some truth in it, but is not the whole story.

It is also true that Alabama ($1.66), Mississippi ($2.02), Louisiana ($1.78), and Arkansas ($1.41) receive more than they pay (at least in 2005). But Georgia ($1.01) basically breaks even, North Carolina ($1.08) is a little on the plus side, and Texas ($0.94) pays in more than it takes out. On the other hand, we can look at New Mexico ($2.08), North and South Dakota ($1.68, $1.53 respectively) being big consumers of tax dollars, while Vermont ($1.08) shows that not all Northeastern states are paying in.

Some of the biggest dollars go to Maryland ($1.30) and Virginia ($1.51), proving that the government likes to spend money on itself. And the king of all the tax dollar money pits is D.C. ($5.55).

California ($0.78) and New York ($0.79) do payout much more than they receive, on the other hand they have by far more millionaires residing there than anywhere else (excepting Florida ($(0.97) and Texas ($0.94)) so maybe there's something to the whole "tax the rich" scheme----if all the evil millionaires live in California and New York, and you want to tax the rich, then it follows that those states (and their evil population) will be net payers to fund the desires of the government.

Which is what I thought Democrats want. So stop complaining about it.

Tyranny of Harry Reid and Nancy Pelosi

2010-01-15T07:30:00.000-08:00

[My wife sent me a chain-email (see below) with a question: "So much of this internet email stuff is total crap - do you know anything about this?? D". This is my response...]

Go to this CNN link to download the document (http://i.cdn.turner.com/cnn/2009/images/11/18/hcbill.pdf) which shows up in an CNN article http://www.cnn.com/2009/POLITICS/11/18/health.care/index.html. Once you have the PDF go to page 1020 in the PDF, starting on Line 7 that text indeed appears. This is the House bill that passed (HR3590). The Senate bill was essentially the same bill with 350+ pages of amendments (link to download http://democrats.senate.gov/reform/managers-amendment.pdf). It's somewhat harder figure out what the final bill looks like until you piece together the various snippets, but I see no amendments to Section 3403 that change this language. However, as I read it starting on page 184 in the amendment PDF file on line 20, the subsection (d) of Section 3403 has only minor tweaks that do not affect the language in question. Therefore, I am forced to conclude that this is indeed language in the bill.

I've copied the text in question and the amendments to it

HR3590 Section 1304 subsection (d)

‘‘(d) CONGRESSIONAL CONSIDERATION.—
‘‘(1) INTRODUCTION.—
‘‘(A) IN GENERAL.—On the day on which
a proposal is submitted by the President to the
...[snip 3 pages of text]...
‘‘(B) LIMITATION ON CHANGES TO THE
BOARD RECOMMENDATIONS IN OTHER LEGISLA
TION.—It shall not be in order in the Senate or
the House of Representatives to consider any
bill, resolution, amendment, or conference re
port (other than pursuant to this section) that
would repeal or otherwise change the rec
ommendations of the Board if that change
would fail to satisfy the requirements of sub
paragraphs (A)(i) and (C) of subsection (c)(2).
‘‘(C) LIMITATION ON CHANGES TO THIS
SUBSECTION.—It shall not be in order in the
Senate or the House of Representatives to con
sider any bill, resolution, amendment, or con
ference report that would repeal or otherwise
change this subsection.

(Senate) Amendments to Section 1304 subsection (d)

(2) in subsection (d)—
(A) in paragraph (1)(A)—
(i) by inserting ‘‘the Board or’’ after
‘‘a proposal is submitted by’’; and
(ii) by inserting ‘‘subsection
(c)(3)(A)(i) or’’ after ‘‘the Senate under’’;
and
(B) in paragraph (2)(A), by inserting ‘‘the
Board or’’ after ‘‘a proposal is submitted by’’;

"Be excellent to each other."
The most non-heinous of all golden rules.

From:
To:
Sent: Fri, January 15, 2010 7:56:10 AM
Subject: Fw: tyranny of Sen. Harry Reid - This scares me

So much of this internet email stuff is total crap - do you know anything about this??

----- Forwarded Message ----
From:
To:
Sent: Thu, January 14, 2010 8:59:50 PM
Subject: FW: tyranny of Sen. Harry Reid - This scares me

From:
Sent: Thursday, January 14, 2010 1:53 PM
To: Uncle Myral
Subject: tyranny of Sen. Harry Reid - This scares me

All -

Read this, then contact your federal representative (thanks, Pablo). What they are doing is unconstitutional. where the hell is the Supreme Court now?

Dan T.

SAN FRANCISCO Examiner Editorial: The impudent tyranny of Sen. Harry Reid

Senate Majority Leader Harry Reid of Nevada is proving once again the maxim that darkness hates the light. Buried in his massive amendment to the Senate version of Obamacare is Reid’s anti-democratic poison pill designed to prevent any future Congress from repealing the central feature of this monstrous legislation.

Beginning on page 1,000 of the measure, Section 3403 reads in part: “… it shall not be in order in the Senate or the House of Representatives to consider any bill, resolution, amendment or conference report that would repeal or otherwise change this subsection.” In other words, if President Barack Obama signs this measure into law, no future Senate or House will be able to change a single word of Section 3403, regardless whether future Americans or their representatives in Congress wish otherwise.

Note that the subsection at issue here concerns the regulatory power of the Independent Medicare Advisory Board (IMAB) to “reduce the per capita rate of growth in Medicare spending.” That is precisely the kind of open-ended grant of regulatory power that effectively establishes the IMAB as the ultimate arbiter of the cost, quality and quantity of health care to be made available to the American people. And Reid wants the decisions of this group of unelected federal bureaucrats to be untouchable for all time.

No wonder the majority leader tossed aside assurances that senators and the public would have at least 72 hours to study the text of the final Senate version of Obamacare before the critical vote on cloture. And no wonder Reid was so desperate to rush his amendment through the Senate, even scheduling the key tally on it at 1 a.m., while America slept. True to form, Reid wanted to keep his Section 3403 poison pill secret for as long as possible, just as he negotiated his bribes for the votes of Senators Mary Landrieu of Louisiana, Ben Nelson of Nebraska and Bernie Sanders of Vermont behind closed doors.

The final Orwellian touch in this subversion of democratic procedure is found in the ruling of the Reid-controlled Senate Parliamentarian that the anti-repeal provision is not a change in Senate rules, but rather of Senate “procedures.” Why is that significant? Because for 200 years, changes in the Senate’s standing rules have required approval by two-thirds of those voting, or 67 votes rather than the 60 Reid’s amendment received. Reid has flouted two centuries of standing Senate rules to pass a measure in the dead of night that no senator has read, and part of which can never be changed. If this is not tyranny, then what is?

More impudent thoughts on health care

2009-08-27T17:42:00.000-07:00

Pres. Obama is claiming to anyone who'll listen that the Democrat's health plan will squeeze hundreds of millions of dollars of waste and inefficiency out of the Medicare & Medicaid systems ("I've also proposed saving another $313 billion in Medicare and Medicaid spending in several other ways."). How about you start with that. Make those changes and only those changes. Once you've saved $300B (materially, not just as an accounting trick) maybe we can talk. Don't promise me you'll save that money *after* you spend it on something else -- that's just a great way for you to screw me twice.
I need to do some research and some math, but everyone on the other side loves tossing numbers around that are refutable. Like 50M uninsured, and U.K has better health care because they have longer life expectancies. 20M of the 50M are illegal immigrants, let's start with that. Life expectencies are very close, about 1 year difference. Are homicides and car accidents health care failures? In the USA, we drive much farther on average than they do in the UK, you can get statistics on vehicle deaths per 1000 miles driven, and you can work out how many additional deaths per year are due simply to more fatal car accidents per capita due to more miles per capita. Similar math for homicides.

Impudent thoughts on health care

2009-08-18T18:47:00.000-07:00

Why not simply expand Medicaid to cover more of these "poor" people who can't afford health insurance?

Why not build some hospitals, hire some doctors & nurses, then open the doors to anyone who wants "free" health care?
Why are so many of the same people who are crying about our carbon footprints and how humans are killing the earth also trying to get health care for everyone? Wouldn't it be better if fewer people survived to continue to rape the planet?
If health care is a basic human right, where was my right to an MRI fifty years ago?
There's a name for forcing other people to provide for your wants and (so-called) needs...starts with an 's'...
Why is there a plan to tax soda and other junk food, ostensibly to fight obesity and reduce health care costs when it's made with corn syrup, which we subsidize farmers to grow?
Health care as we know it is a recent invention (see MRI above) and heavily dependent on technology. If a "fundamental human right" can attach to something that was invented last decade that we've decided is simply too important to live without, what's next? Public option iPhone?
If it is a "fundamental human right" don't we have a duty, responsibility, obligation to render this to all humans? There's more than 6B people outside the US that we owe this to, too?
If I can force others to provide me with health care, as is my "right", can I force others to pay for my arms--as in right to keep and bear? Please deliver my taxpayer funded M-16 and supply of ammunition.
Everyone dies. It's folly to expend resources in a sky's-the-limit attempt to get each and every person a few more minutes, hours, days, months or even years.
Presumably, a "fundamental human right" comes without limits, so my "free" health care will be all-I-can-eat. So maybe I'll be able to eat all-I-can-eat and smoke and drink all I can too, after all, the financial consequences of doing so will not be mine to bear. Once you admit to some limits, we're just arguing over degrees*.
If technology someday soon provides a pill that will provide 100% cure for and prevatative against contracting cancer, HIV, hep, and a slew of other diseases but costs $500,000 each dose (say it's made from comet dust, just that it costs that much even with the manufacturer making zero profit), will it be covered? For everyone? What if the pill is only good for one year, and you need a booster every year at another $500k per?
The phrase is "life, liberty, and the pursuit of happiness"...
If a) Congress's new plan will not force me to buy insurance and b) will forbid any insurance company from denying me coverage for a preexisting condition, why shouldn't I wait until I got sick or hurt before signing up and paying premiums?

* There's an old joke:
He: "Would have sex with me for $1 million?"
She: "Yes."
He: "Would have sex with me for $10?"
She: "No way! What do you think I am?"
He: "Oh, we've already established what you are, now we're just haggling over the price."

Democrat predictions were correct!

2009-07-21T04:27:00.000-07:00

A post I am copying from a WSJ blog, with the original "author unknown" attribution:

(posted to an SKF board, author unknown)

Much as it pains me to say this, I have to admit it - my Democrat friends were right.

They told me if I voted for McCain, the nation's hope would deteriorate, and sure enough there has been a 20 point drop in the Consumer Confidence Index since the election, reaching a lower point than any time during the Bush administration.

They told me if I voted for McCain, the US would become more deeply embroiled in the Middle East, and now, tens of thousands of additional troops are scheduled to be deployed into Afghanistan .

My Democrat Party friends told me if I voted for McCain, that the economy would get worse and sure enough unemployment is approaching double digits and the new stimulus packages implemented recently have sent the stock market lower than at any time since the Islamic Terrorists attacks of 9-11.

They told me if I voted for McCain, we would see more "crooks" in high ranking positions in Federal government and sure enough, several recent cabinet nominees and Senate appointments revealed resumes of scandal, bribery and tax fraud.

They told me if I voted for McCain, we would see more "Pork at the trough" in Federal government and sure enough, 17,500 "Pork Bills" showed up in Congress since January 2009...

I was also told by my Democrat friends that if I voted for McCain, we would see more deficit spending in Washington D.C. , and sure enough, Obama has spent more in just 30 days than all other Presidents together - in the entire history of the good ole USA ...

Well I voted for McCain in November and my Democrat friends were right... all of their predictions have come true!

Government health care, public housing?

2009-07-17T19:44:00.000-07:00

If you ask someone if they want "free health care", they're likely to say yes.

Just like if you ask someone if they want a free home, they'll say yes. But not many people want to live in public housing.

Taxes:politicians as ?:?

2009-06-27T05:57:00.000-07:00

Taxes are to politicians what crack is to an addict; they never can stop and too much is just right.

Joe Boccuzzi

link

Social Security vs 401k

2009-05-18T19:05:00.000-07:00

This article is rife with questionable assumptions. The basic premise is that "Hah! Aren't you glad we didn't let Bush privatize your Social Security?" True, people heavily invested in securities had seen their investments decrease by one-third to 40%. But unless you were retiring in the next year or so, then you are still likely to be ahead of the game in your 401k vs. Social Sceurity.

First, the money in your 401k is yours. Unlike SS, which is nothing short of a Ponzi scheme, a 401k or IRA is always your own money (barring some sort of malfeasance on the part of your administrator). You have control over it, and you have resposibility to manage it. Social Security pays out by taking monies from current workers. The SS "trust fund" doesn't exist--rather, it is a pile of IOUs that the Government wrote to itself.

Second, under the Bush plan, only a very small part of your SS "contributions" would have been eligible for self-management. And one of the options for that sliver of money would have been US Treasuries, the only investment that SSA can "invest" their IOUs in--so you could have had the same return as SS, but would have owned the money rather than have it go to pay benifits to current SSA recipients.

Third, and finally, when SSA starts having to pay out more than they take in, they can simply invoke the power of the US Government to extract additional "returns" from taxpayers. So the so-called fragility of the market returns relative to SSA returns are apples and oranges, or rather honest men vs con artists. The 30 year ROI in the market is more than 11%. SSA's rate-of-return is a mere 1.23% by some measures, for the lowest income contributions. Higher-income contributors are less favored, since they pay in much higher contributions relative to what they can legally received. And minorty contributors are pretty much screwed with negative ROI, since they have life expectency that means their SS payout is far less than they were forced to pay into the system.

Socialism for class grades

2009-05-11T12:22:00.000-07:00

Snopes.com says that the attributions in some versions of this viral email are wrong and there is no legitimate recorded instance of this actually happening. Nevertheless, this tale seems apropos:

An economics professor at a university said he had never failed a single student, but had once failed an entire class.

The students insisted that socialism worked since no one would be poor and no one would be rich, a great equalizer. The professor then said, "OK, we will have an experiment in this class on socialism."

"All grades will be averaged and everyone will receive the same grade so no one will fail and no one will receive an A."

After the first test the grades were averaged and everyone got a B. The students who had studied hard were upset while the students who had studied very little were happy.

But, as the second test rolled around, the students who had studied little studied even less and the ones who had studied hard decided that since they couldn't make an A, they also studied less. The second Test average was a D.

No one was happy. When the 3rd test rolled around the average grade was an F.

The scores never increased as bickering, blame, name calling, all resulted in hard feelings and no one would study for anyone else.

To their great surprise all failed. The professor told them that socialism would ultimately fail because the harder people try to succeed the greater their reward (capitalism) but when a government takes all the reward away (socialism) no one will try or succeed.

You probably missed this in Saturday's paper

2009-04-26T13:14:00.000-07:00

Even if you noticed the headline, what the article is *actually* about is nothing short of a reason to go to DC and hunt down Pelosi and Reid. I certainly have not seen or heard anything on CNN, NBC, etc.

http://www.ajc.com/metro/content/printedition/2009/04/25/budget0425.html

Headline:

Democrats close in on budget pact

Subhead is much more accurate:

Agreement would move Obama plan to overhaul health care system forward without threat of Republican filibuster

What Dems are doing here is using a procedural rule that allows budget bill to not face filibuster. Since Obama's health-care bill would *never* pass on it's own merit at this point Reid & Pelosi are tacking the health-care bill onto a budget bill.

So...something as important and that will change the countries economy (esp. taxation and governance) will be subject to a maximum of 20 hours of debate and will require only a simple majority in the Senate:

Under typical Senate rules, 60 votes are needed to advance a bill, but passage of the budget plan would allow for a so-called reconciliation bill that can pass with just a simple majority and only 20 hours of debate.

And this statement is laughable:

Democrats, including Obama, say they genuinely want a bipartisan health care bill and that the filibuster-proof process would be used only if the GOP obstructs.

So, if you disagree with us, we'll do a procedural end-run because then you're simply be "obstructionist".

Combine the above with what follows. Under government health-care, the state, not your doctor determines how you will be treated. And rationing of health-care is predicted as an inevitability. I hate to say "I told you so" but...

http://www.ajc.com/printedition/content/printedition/2009/04/25/medicaid0425.html

A federal appeals court in Atlanta says Medicaid providers and state health officials should have a say along with physicians in determining how to treat patients.

Florida, Georgia and Alabama argued that their Medicaid officials should make the final decision in treating Anna Moore, a 14-year-old Georgia girl who suffers from almost daily seizures. The state is trying to reduce the number of hours she is treated by a home nurse, despite the recommendations of her doctor.

And for comic relief, we have Homeland Security Secretary Napolitano sticking both feet full into her mouth recently. First, she releases a report that lumps veterans, pro-life advocates, anti-illegal immigration groups, and tea-partiers in with skinhead and neo-Nazis as "right-wing extremists" who might be using the economic downturn to recruit for home-grown terror cells.

http://www.thelibertypapers.org/2009/04/12/homeland-security-document-targets-most-conservatives-and-libertarians-in-the-country/

Rightwing extremism in the United States can be broadly divided into those groups, movements, and adherents that are primarily hate-oriented (based on hatred of particular religious, racial or ethnic groups), and those that are mainly antigovernment, rejecting federal authority in favor of state or local authority, or rejecting government authority entirely. It may include groups and individuals that are dedicated to a single issue, such as opposition to abortion or immigration.

Then this week she goes on to say that entering the country illegally is not even a crime..."Crossing the border is not a crime per se. It is civil.”

So the Secretary for Homeland Security thinks veterans are likely to become terrorists (after all Tim McVeigh...) and doesn't even know the law regarding simple border security. She needs to read the US Code, Title 8 Section 1325...if the penalty includes imprisonment, it's criminal not civil...

§ 1325. Improper entry by alien

(a) Improper time or place; avoidance of examination or inspection; misrepresentation and concealment of facts
Any alien who
(1) enters or attempts to enter the United States at any time or place other than as designated by immigration officers, or
(2) eludes examination or inspection by immigration officers, or
(3) attempts to enter or obtains entry to the United States by a willfully false or misleading representation or the willful concealment of a material fact, shall, for the first commission of any such offense, be fined under title 18 or imprisoned not more than 6 months, or both, and, for a subsequent commission of any such offense, be fined under title 18, or imprisoned not more than 2 years, or both.

On the former screwup, she threw her office under the bus...

Napolitano blamed one of her agency’s analysts for prematurely sending out the intelligence assessment to law enforcement...

And on the latter:

Napolitano spokesman Sean Smith said: “Americans can rest assured that she understands what the law is along the border,” he said.

I don't think she does.

Joining Ms. Napolitano in the political doublespeak category, although perhaps saying what he really feels, is AG Holder regarding gun control (specifically, having the US bend to Mexico's demands):

"I don't think our Second Amendment will stand in the way of efforts we have begun and will expand upon."

So now the Constitution is just something that might "stand in the way" of the Administration's desire to control yet another aspect of our lives.

Interesting Tax Figures

2009-04-24T16:40:00.001-07:00

For what they're worth (all numbers are for federal income taxes only).

The data below comes from tables at this link, which also has some reminders (emphasis mine):

Some important facts to keep in mind about the information provided on this page.
(1) All tax returns that have a positive AGI are included, even those that do not have a positive income tax liability.

(2) Income tax after credits (the tax measure above) does not account for the refundable portion of EITC. If it were included (as is often the case with other organizations), the tax share of the top income groups would be higher. The refundable portion is legally classified as a spending program by the Office of Management and Budget and therefore is not included by the IRS in these figures.

In 1980:

the top 1% consisted of 932 thousand taxpayers who had AGI greater than $80,580
they had a total of $138B in AGI, which comprised 8.4% of overall AGI
they paid a total of $47B in taxes, which comprised 19.05% of the overall taxes
their average effective tax rate was 34.47%
per taxpayer, average revenue was $50,429

In 2006:

the top 1% consisted of 1,357,192 taxpayers who had AGI greater than $388,806
they had a total of $1,792B in AGI, which comprised 22.06% of overall AGI
they paid a total of $408B in taxes, which comprised 39.89% of overall taxes
their average effective tax rate was 22.79%
per taxpayer, average revenue was $300,663

Even though the effective rate went down markedly, the amount of tax collected per taxpayer went up even more markedly, rising by a factor nearly six. And the share of taxes collected from this group more than doubled, although their share of income also went up 2.5x.

In 1980:

the bottom 50% consisted of 46,619 thousand taxpayers who had positive AGI less than $12,936
they had a total of $288B in AGI, which comprised 17.68% of overall AGI
they paid a total of $18B in taxes, which comprised 7.05% of the overall taxes
their average effective tax rate was 6.10%
per taxpayer, average revenue was $386

In 2006:

the bottom 50% consisted of 67,859,580 taxpayers who had postive AGI less than $31,987
they had a total of $1,016B in AGI, which comprised 12.51% of overall AGI
they paid a total of $31B in taxes, which comprised 2.99% of overall taxes
their average effective tax rate was 3.01%
per taxpayer, average revenue was $456

So their effective tax rate was cut in half, while their income went up 2.4x. Even though the effective rate went down markedly, the amount of tax collected per taxpayer not surprisingly did go up a bit (1.2x). However, the share of taxes collected from this group dropped quite a bit.

It is worth noting that the income figure for the lower 50% is the upper limit, while the figure for the top 1% is a lower limit. So comparisons of those numbers should keep that in mind. However, this fact must also be balanced with the recognition that a very large number of the bottom 50% actually had zero or even negative tax liability.

Following this link, we can see that in 2004, there were a total of 131,113,969 tax returns filed. Of those, 42,545,501 (32.4%) had $0 tax liability, or even had negative tax liability and actually received money from the IRS. An estimated 15 million more people earned some income but did not file a return. When these non-filers are added to the non-payers, they add up to 57.5 million income-earning people who will be paying no income taxes. Even 57.5 million is not the actual number of people because one tax return often represents several people. When all of the dependents of these income-producing people are counted, roughly 120 million Americans – 40 percent of the U.S. population – are outside of the federal income tax system.

We can also learn from that same link that

Despite the charges of critics that the tax cuts enacted in 2001, 2003 and 2004 favored the “rich,” these cuts actually reduced the tax burden of low- and middle-income taxpayers and shifted the tax burden onto wealthier taxpayers.

Tea Party

2009-04-16T07:33:00.001-07:00

My extended family here in ATL went to the "Tea Party" last night. Accounts vary, but I would certainly believe 15,000 people were there.

Of course, the media mostly got it wrong. We weren't there protesting taxes or even Obama, per se, but run-away government as a whole. CNN reporters I saw on TV later tried to portray protesters as stupid "Don't you realize Pres. Obama has cut taxes for 95% of Americans and that you might be eligible for a $400 credit?". CNN's website to day barely mentions the event, but does have an iReport from someone who claims that he and his wife are both unemployed, but are happy to be paying their taxes and what are these people crying about.

Given how Obama carried something like 95% of black voters, admittedly, I had expected the crowd to be mostly angry white men like myself and also mostly Republicans. I was a bit surprised on the way dowtown on MARTA to be standing next to an older black gentleman who was asking me directions to get to the rally and we chatted a bit about how many people were goign to be there, that sort of thing. As we approached our stop, he said "Let's hope this is enough to get someting really started". Arriving on the scene, I was further surprised by the mixture of people there--especially the number of 20-somethings and the number of black and Hispanic folks. And there were plenty of signs along the lines of "I'm a Democrat and I didn't vote for this!"

Perhaps the most interesting twist was the number of people who left shortly after 9:00, which is when Sean Hannity came on stage. We did. Getting back on MARTA we were commenting on it, wondering if it was mostly people with kids (it was a schoolnight), and a 20-something turned around and said "It's the Hannity factor." Yep, I can agree with that.

The AJC had this to say:

The Atlanta rally was one of 20 around the state and more than 300 across the country. Billed as grassroots protests, the gatherings were attacked by critics as frauds created by Republican advocacy groups with the backing of deep-pocketed lobbyists and Fox News Channel, which reported prominently on the movement.

To which I can only respond with a statement and a question. My family are not Republicans, were not paid to be there, and rarely watch Fox News (esp. Hannity, O'Reilly, or that godawful morning show--I do like that Megan Kelly though!). For the question: when Obama campaign rallies around the country were funded by Mr. Soros and the DNC, and the supporters were flogged into a frenzy by the DailyKos and MoveOn.org, those were proclaimed to be grassroots events representing an uprising force for "change"? Oh, one more thing too, for the record, every speaker I heard was quick to criticize spending by both parties, and usually pointed out that this is nothing new but is something that has reached a limit with the "stimulus" bill and the pork-laden budget with $1T+ deficit passed are just the back-breaking straws for us camels.

President's virtual Town Hall meeting: sham

2009-03-30T07:07:00.001-07:00

The virtual town hall meeting was on TV the other night. Here's a summary of it.

The phrase use in this article

"In a first for the White House, the president braved a public grilling from a pool of around 100,000 people who had submitted questions via the internet."

is, quite simply, false. The questions were not an ad hoc "grilling" but a carefully culled selection of questions, pre-prepared answers to which the President was able to read from his teleprompter.

I, in fact, submitted a question that I knew stood little chance of getting answered:

Would you eliminate corporate income taxes? This would provide more than $500B of stimulus and make the US the most favorable nation for doing business. You could offset $370B lost
revenue by collecting $300B in annual unpaid personal income taxes.

[Questions were limited to 250 characters. Otherwise my question would have been more detailed, along the lines of my previous blog entry.

Not only were the questions not only carefully selected to enable maximal proselytizing by Mr. Obama, even the people asking the "live" questions were actually all former Obama staffers.

BTW, the #1 submitted question, which they figured they *had* to address even if it was off-topic simply because it was by far the most asked question, was a variation on a theme: "Will you legalize marijuana?"

The answer to that was a simple no, then they moved on the the real show.

Vent and an answer

2009-03-25T10:37:00.000-07:00

From today's AJC Vent column:

The U.S. Postal Service has to cut services and jobs because it is losing money, but can you tell me a single U.S. agency that makes money?

How about the U.S. Mint?

Recession hitting latinos, blacks harder

2009-03-24T16:34:00.000-07:00

There's this article that says so.

But I'd like to mention the racism exhibited by one of the people interviewed in the article:

Salter's mother worked as a housekeeper, and his father was a custodian. Before his divorce, Salter's stepdaughter and her four children lived with him for many years. Professional blacks "don't usually start out with an inheritance," he said. "On top of that, quite often things happen in our families to cause us stress. An unexpected child or grandchild, drug problems. When you try to set aside money to put your kids through college, all of a sudden you have to say, 'I can't let this family member fall and become homeless.'

"I would say eight out of 10 people I know have a similar situation."

The main implication I get from that is that white people usually start out with an inheritance, and it's that reason why they succeed where so many black people may fail.

For the record, when my father died, he left each of my two brothers $10,000. He left me nothing, except the non-binding suggestion to his wife (my stepmother) that she sell me his share of the family place on Lake Ontario for the price of $1. On which I immediately began paying taxes. I was 31, hardly "starting out with an inheritance." It's unlikely we would have gotten anything had he lived beyond the age of 55.

Having said that, inheritance is hardly a fact of life for anyone. According to a study conducted by Jagadeesh Gokhale and Laurence Kotlikoff for the Federal Reserve Board, 92% of Americans will receive inheritances of $0, while slightly more than 4% will receive a modest sum (less than $25k).

Nearly 92 percent of the population will receive nothing at all, the study concluded.

Of the 8 percent who stand to inherit something, half will inherit less than $25,000, while just 1.7 percent of the population can expect to inherit more than $50,000.

The study was initially published in 2000, but the authors say if anything, the picture has worsened.

That means that for most Americans, any inheritance will not be a “life-changing event.”

Clearly it is the case that the very rich will accumulate wealth that is passed down. And further I will submit that the top 1% are very probably white. But it is disingenuous, if not outright racially offensive, to portray that tiny slice of the uber-rich as being representative of the experience of all white people.

For those who do inherit, the primary source of that inheritance is value of the parent's home, and we know where that all just went.

Certainly there is less inherited wealth among blacks because of previous institutional racism. Segregation prevented eariler generations from accumulating wealth. And the numbers now continue to paint a bleak picture, but again, it is not fair to point at white people and say they succeed because they inherited wealth--because it just doesn't happen in any substantial way for 95% of people of any race. Further, this book, says that only 10-20% of the black-white difference in wealth is attributable to inheritance.

According to this book, there's some not-so-shocking nor racist tidbits:

62% of households headed by single parents have no savings or other financial assets
40% of households with only high-school educations have no nest egg
nearly 1/3 of all households are without financial resources

The same book goes on to demonstrate that when occupation, education, and income are factored out (i.e., given similar levels of each) black households still end up with $25k less in savings than their white counterparts. Middle-class blacks earn 70-cents for every dollar their white counterparts make, but only accumulate 15 cents of wealth for every dollar of wealth accumulated by their white counterparts.

Racism may be a factor, but it ain't the only factor. I think most people would agree that institutional racism has decreased steadily since the '60s. Yet the disparity in wealth between whites and blacks and hispanics has hardly changed at all in the last 20 years. One reason explored in this paper is that blacks may have lower risk-tolerance than whites, and therefore when they do have similar income, education, etc. they simply choose less-risky--and therefore often less lucrative-- investments. On the other hand, stock ownership rates among blacks "grew much more rapidly" than whites between 1996 and 2001, but then the trend reversed between 2001 and 2004.

Based on a logistic regression model, Black households had the same predicted stock ownership rates in 1998 and 2001 as White households that were otherwise similar in terms of income, net worth, risk tolerance, and other characteristics, but in 2004 Black households had significantly lower predicted stock ownership rates than White households.

All researchers have found that Black and Hispanic households are less likely than White households to own risky assets than White households. Previous research has also found that Black and Hispanic respondents are less willing to take investment risk than White respondents. The level of investment risk a household is willing to take has implications for the household’s financial behavior and future well being. Owning high return investments is necessary for households to be able to reach long term goals such as having a comfortable retirement.

While doing some reading on this topic, I found some gems:

"Wealth has never been democratically distributed in U.S. society."
While the stated intention of most asset building policies is to benefit working and poor families, a deeper look shows that they have failed to benefit low-income families; in large part owing to the predominance of asset building policies that operate through the tax code. Currently, almost $300 billion per year in federal tax expenditures goes to support asset building among individuals in the form of tax credits, deferments, or exemptions for investments, homeownership, and retirement accounts. These policies are of little benefit to many low-income individuals who do not have tax liabilities.
"Lack of wealth is both a cause and an effect of low income and poverty, and the two are highly correlated."

AIG bonuses returned--tax implications?

2009-03-24T06:36:00.000-07:00

Just a quick thought, since I am again too busy to really put in the effort here today.

As I understand it, you owe taxes on money you have been paid. In particular, you are responsible for taxes in the year in which you take constructive receipt. So those AIG folks who were paid bonuses took constructive receipt of that money. At that moment, it became income which they must report and pay taxes on. What they do with it after that is up to them.

Now, many of them have returned the money. They have given AIG a gift. They did not return money paid to them by mistake, as if their paycheck accidentally got an extra zero. They did not refuse to money when it was offered (an act which would negate constructive receipt). They just dipped into their cash-on-hand and wrote a check to AIG. Anytime you render a gift to anyone other than an IRS recognized charity in excess of $13,000 ($26,000 per couple) you will be required to pay a gift tax.

On top of all that, Congress is moving to tax the money at 90%. I don't expect Congress to so carefully craft such a law so as to exempt from normal income or gift taxes money that gets returned. They might not even think to exempt returned money from the 90% threat!

So the people who have returned their bonuses face normal income taxes, plus gift taxes, on money they have returned! And they may owe 90% taxes on top of that!

So a guy who was given a bonus of $1M in January, returns the money in February. He took constructive receipt. He owes 35% income tax on the $1M, ignoring deductions etc. That's $350k. He "returned" his $1M bonus, by giving AIG a gift. He's now out the $1M, but still owes $350k in income tax (maybe $900k!!). Adding insult to the injury, he may face up to 45% gift taxes. So returning his $1M bonus has may now cost him $1.7M.

"Shoot it, whitey!"

2009-03-13T07:09:00.000-07:00

I was at the Georgia Dome yesterday for the ACC Basketball tournament, disappointed at watching my Clemson Tigers lose their opening game.

A game during which, a loud fan yelled the above. See, Clemson has a wing player (shooting guard) who happens to be a white kid. He normally is a very effective 3-point shooter but was off his game yesterday, so I can only imagine that this fan (who happened to be black and who happened to be wearing the other team's colors) wanted to see him to continue to miss.

But I was left thinking about what would have happened had the racial situation and epithets been reversed?

Supreme blunder?

2009-03-06T06:06:00.000-08:00

[Update: The WSJ has an opinion piece on this topic]

http://blogs.usatoday.com/oped/2009/03/opposing-view-t.html#more

An unfortunate error cost a woman her arm. She had been given a drug, administered in a manner that was strongly warned against in the drug's documentation, that caused gangrene. But now the Supreme Court has ruled that warning labels are simply not enough, even though the FDA strictly advises on how labels are written and what they must contain.

This drug has been approved and used since 1955 with very few unfavorable results "It had been used beneficially and with very rare incidents more than 200 million times since 1955 under FDA-approved labeling." One botched injection in violation of the warning on the label and poof, expect this mfr to lose lots of money. And the inevitable negative impact is that drug prices will increase to cover potential losses across the board--I mean even more so than already.

Of course USA Today's editorial board feels differently. And the initial jury found Wyeth liable for $7.4M.

USA Today and the Surpreme Court seem to think that a warning label written for medical professionals under federal guidelines is not enough. "The drug label's warnings had been approved by the U.S. Food and Drug Administration, but a Vermont jury found that Wyeth could have — and should have — made those warnings stronger." And according to one article I read "Wyeth has never been remiss in reporting incidents of gangrene from Phenergan via IV push, this is not the kind of Merck/Vioxx-type case in which a drug company deliberately withheld risks from the FDA."

I can tell you one way that Wyeth could have avoided "acting negligently". They could have decided that this exceedingly small risk (by my short googling research, about 50 incidents...math follows: 50 / 200e6 = 0.000025%) meant that they ought not to sell this drug.

Thirty seconds of googling show many journal articles discussion the danger, although they certainly can be related to this case. I'd love to cut&paste the actual warning as printed, but the PDF document does not allow text extraction. So follow this link and read along. On page 2, it says "Under no circumstances should PHENERGAN Injection be given by intra-arterial injection due to the likelihood of severe arteriospasm and the possibility of resultant gangrene (see WARNINGS-Injection Site Reactions)." [bold face and capitalization as in the document]. Now scroll down to middle of page 4 "Injection Site Reactions" and the two paragraphs describing the results of Inadvertent Intra-Arterial Injection. Gangrene and amputation are listed at least twice!

Does this look like a "mild warning" per this article?

The FDA has ostensibly known about the drug’s gangrene risks for many years, and despite the over 50 amputations that have resulted from the IV push method of administration, has continued to approve the drug for IV push use, including only a mild warning on the label to advise doctors of the risk.

I just can't see how anyone could rightly think Wyeth is at fault here.

Who owns banks now?

2009-02-24T06:46:00.000-08:00

On CNN this morning, some asshat was talking about how it will be good to partially nationalize banks by forcing them to sell preferred convertible shares to the Government to the tune of about 40% in the big banks. He goes on say something like "by investing in these bank and making taxpayers their owners..."

At that point I lost conscious thought about what he had to say after that due to the rage implosion going on in my brain.

Who does this clown think owns the banks right now? Shareholders. Even though a huge number of Americans have zero or negative tax liability, I would guess that by and large that owners of bank shares are among the 50% American that actually pay taxes.

Read the stimulus bill

2009-02-17T06:24:00.001-08:00

Our good friend sent us this link (Read the Stimulus).

At least two promises are being broken. Congress passed a resolution last week that they would not vote on the bill until the full final text had been available for 48 hours--they voted less than 24 hours after the bill cleared committee. Coming up one vote short in the Senate, President Obama sent a plane to retrieve an Ohio senator who had rushed home because his mother died. If they had waited the 48 hours they set for themselves, this would not have been necessary (and how much did that cost?).

Also being broken (again): BO promised that he would not sign any legislation without providing it on the White House web site for 5 days. He already broke that promise with the Ledbetter Fair Pay Act, signing it hours after it passed Congress. He will be signing the stimulus bill only 3.5 days after it squeeked through Congress late Friday night.

What really pisses me off, though, on top of everything, is that every single MOC who voted for this bill has not read it. They could not possibly have read the final bill before they voted on it. It should be a basic responsibility of every MOC to at least read a bill before they vote on it.

Declining home prices not the end of the world

2009-02-13T10:19:00.000-08:00

The AJC had an AP article headlined with

Foreclosures sank home prices in most cities

Home prices fell in nearly nine out of every 10 U.S. cities in the fourth quarter of last year as low-cost foreclosures flooded the market and the housing market’s decline spread nationwide.

But is this necessarily a bad thing? Sure, it hurts when you have to sell you house in such a market--your gains on the house now are not what they could have been 2 years ago, or you might even be loosing money. And it hurts if you cannot make your ARM payment and cannot refinance because you're underwater.

Home prices in Ft. Meyers Florida are down 50%. Down 12% nationally. But lower house prices are *good* for lots of people--people who are trying to buy homes! Many people in the worst hit areas can now afford housing that they were priced out of a short time ago because of artificially inflated prices (housing bubble).

The states in which sales rose —- Nevada, California, Arizona, Florida, Minnesota and Virginia —- are places where buyers have been able to snap up foreclosed homes at a bargain. Sales more than doubled in Nevada, rose 85 percent in California, and nearly 43 percent in Arizona.

“We see a pattern of strong sales gains, particularly in lower-price homes, in areas with price declines resulting from foreclosures,” Lawrence Yun, the trade group’s chief economist, said in a prepared statement.

In California and Florida, sales of distressed properties accounted for about two-thirds of all sales, compared with about 45 percent nationally.

Gregg is out

2009-02-12T16:33:00.001-08:00

According to the WSJ today Sen. Gregg withdrew his name from consideration. He stated that his views on the stimulus package and the Census were irreconcilable with the President's. I guess that at least keeps a Republican in the Senate.

Racial profiling

2009-02-12T13:37:00.000-08:00

I'm late to this story, but I found it very interesting. I had to piece together quotes from other sources, because the original article has been moved into the paper's pay-per-view archive. Here's the original lead though "Some in Danville cry foul over high school basketball cuts" and the teaser "Some black community members have accused the Danville High School boys basketball head coach of racial profiling for cutting at least eight black players from [the] team. Now they're planning to organize a protest in an attempt to get Coach Gary Tidwell, who is white, removed."

Here's some other quotes:

"We have racial profiling going on," said Frank McCullough, pastor of Mount Olive Christian Church, adding that's the only explanation in his mind. "He took a look at the way the young men wore their hair, and made comments about that and whether he thought they should be hanging out with certain people."

Senior Omar Kelly said he felt coach Gary Tidwell discriminated against him and senior Ayron Worthington because they wore braids.
Debra Gouard, a local minister and Bryant's mother, was incensed when Tidwell told her and other mothers that he chose the best players for the team, but that he didn't have his selection criteria in writing. She said the mothers are starting a petition to get the students reinstated and Tidwell removed.

Here's the kickers though:

All the remaining players are also black. The original sentence above ended "cutting at least eight black players from an all-black team." Also "The entire team is African-American."
Two of the remaining players have the same hairstyle as the whiners: "But he acknowledged that two other players who were not cut also wear them."
What mommy dearest (Gouard) was so mad about was that she was basically told that her son was not one of the 8 best players to base his team on based on his criteria: Tidwell "said there were five factors he looked at – whether they were coachable, academics, commitment level, behavior and athletic skill"
At least the principle is standing behind him: "The coach chose the student athletes that he thought were the very best players and would help the team be successful this year," Principal Mark Neil said. "That was the basis of the choice.

This sounds to me much like one of a brouhaha over nothing more than a coach making normal coaching decisions. It also seems to me that when you are hypersensitive to the point that you are imagining racial slights, then perhaps it it you who is the racist.

Oh, I found a full link.

Math problems in Congress?

2009-02-12T08:06:00.000-08:00

Boortz says this about an amendment in the Recovery and Reinvestment Act (argh, so-called stimulus bill) [may or may not be present in final bill]:

The amendment included in the bill would penalize companies that paid bonuses of more than $100,000 to executives after the company received bailout funds last year. The companies would be required to repay any portion of that bonus over $100,000 within four months or be hit with an excise tax of 35% on the portion above $100,000.

Now, if I was running a company that was in this situation, do I just wonder who these idiots are in Congress that can't do math? Say my company gave a guy $500k bonus. That's $400k over the limit. This amendment says "pay back the $400k or pay 35% tax penalty on the $400k". Guess what I'm gonna do? Pay back $400k or pay a "fine" of $140k? Seems simple enough to me.

Working families

2009-02-10T07:09:00.000-08:00

"Working" is not a synonym for "low-income". This terminology is repeated and repeated, seemingly in a conspiratorial effort to make it seem that anyone who is not low-income doesn't work. I earn a good salary, but I certainly am working for it!

Tragedy?

2009-02-06T10:05:00.000-08:00

A 93-year-old WWi veteran was found frozen to death in his Michigan home in January. His electricity had been reduced, and then shut off by a device called a limiter, because he owed more than $1000 on his electric bill.

A neighbor who lives down the street called Schur's death "unforgivable."

"This can't be allowed to happen in this country," said Jerome Anderson.

Walworth said he believes his uncle's death was "preventable."

Certainly we all would have sympathy for a poor old man who was preyed upon by the evil electric company. But lost in the outrage would be questions:

Why, when the power went out, did he not bother to call the electric company? The limiter device can be reset by the occupant in the event a shut-off is triggered.
Why didn't he call 911 or anyone else, for that matter, once he started to get cold?
Why was this 93-year-old man living alone? Where was the nephew and neighbors? If he couldn't figure out to call the power company or 911, then he should never have been left alone by his family, friends, and neighbors. Shame should fall on those people, too.

and most importantly

Why didn't he just pay his power bill? After all, he apparently had $600,000 in savings--money that was left to a local hospital.

Seen in this light, the situation changes somewhat. It's still sad that he died, but it was indeed entirely preventable. By him.

In a similar vein, we have the case of a Georgia woman whose house burned down. As was covered by the national press and, she claimed it was racially motivated and was specifically because she was an Obama supporter--her house was targeted because she had an Obama sign in her yeard and a sticker on her car. Her case became cause celebre in the Democrat digital realm.

A single Mother of three, who supported Obama's election bid and had traveled to Washington for the inaugeration, returned home to Georgia to find her home burned to the ground and graffiti indicating a threat to the President left behind.

Turns out now that the arson investigators have done their job, that she herself is the primary suspect, and is hardly a portrait of virtue, currently in jail on unrelated drug charges.

A Forsyth County woman who claimed her house was burned down because she supported President Barack Obama is now suspected of setting the fire herself, authorities said Wednesday.

The homeowner, Pamela Graf, 47, had not been charged late Wednesday in connection with the fire, which occurred the weekend before the presidential inauguration.

But she was in jail on unrelated drug charges, said Capt. Jason Shivers, spokesman for the Forsyth County Fire Department.

Shivers confirmed Wednesday that Graf and her boyfriend, Steve Strobel, 46, of Winder are “both officially labeled as a suspect” in the Jan. 18 fire at Graf’s five-bedroom, 2,900-square-foot house north of Cumming.

Fire officials said Graf told them she was in Washington to attend the inaugural when the fire broke out, but rushed home when she heard what happened.

Racially charged graffiti was spray-painted on a fence near the property, and investigators said Graf told them she had received a threatening note after she put an Obama campaign sign in her yard.

Graf and Strobel were arrested late Tuesday night when Forsyth County fire investigators executed search warrants at a motel in Cumming where Graf has been staying and at a place in Barrow County where Strobel has been residing, Shivers said.

“We were in search of fruits of the crime of arson,” said Steve Anderson, the Fire Department’s chief of investigations.

Graf was charged with three felonies and one misdemeanor for possession of cocaine and marijuana, Shivers said. Strobel was charged with obstruction of justice and with making false statements to investigators about the fire, the spokesman said.

Shivers and Anderson said investigators are continuing to run down leads in the case and could be filing additional charges in the next few days.

Now, she must still be presumed innocent of these charges, but again, the picture presented by the press changes once additional facts become known.

The emperor's missing clothes?

2009-02-06T08:31:00.000-08:00

Charles Krauthammer says Obama's honeymoon is over already--he blew it.

“A failure to act, and act now, will turn crisis into a catastrophe.”

—- President Obama, Feb. 4

Washington —- Catastrophe, mind you. So much for the president who in his inaugural address two weeks earlier declared “we have chosen hope over fear.” Until, that is, you need fear to pass a bill.

JK Harris and tax cheats for Cobinet positions

2009-02-06T07:27:00.000-08:00

Every time I see those ads on TV for JK Harris, where they promise to help you get out of trouble with the IRS, I cringe. Certainly our tax code is complicated enough that an honest person trying to do the right thing can make a mistake, but it seems to me that if the IRS is after you the way they depict in the ads, then you've probably done more than made a simple mistake. Math errors, number transpositions, and the like are usually handled by a notice from the IRS and a Form 9465 (Installment Agreement Request). Also, according to the IRS "If you are experiencing a financial hardship and are unable to pay anything, we may temporarily suspend collection action."

All of which leads me to think that the many people seeking JK Harris's services are nothing more than tax cheats or people who didn't even bother to file & pay their taxes (lesser evil than actively cheating, it feels like to me). So I have little sympathy.

On the other hand, it seems that JK Harris itself is a shady operation (google "jk harris scam").

Meanwhile, tax cheats continue to pile up in the Obama administration. Along with Geithner (confirmed) and Daschle (withdrawn), and chief performance officer nominee Nancy Killefer (withdrawn), we now have USA Today saying "The confirmation of another Cabinet member stalled Thursday because of unpaid taxes after USA TODAY disclosed that the husband of Labor secretary nominee Hilda Solis paid about $6,400 this week to settle numerous tax liens against his business dating to 1993."

"Stimulus" package by analogy

2009-02-05T11:07:00.001-08:00

Heard several analogies, but this one may be the best: "It's like taking buckets of water from the deep end of the pool and pouring them into the shallow end and hoping to make the pool bigger."

Tax relief?

2009-02-04T12:41:00.000-08:00

Since those charged with creating the mess that is our tax code should be expected to abide by it (ahem, Mssrs. Geithner & Daschle), here's some ideas on ideas for fixing the tax code. Not, mind you, really fixing it a la FairTax, but just to get it cleaned up a little.

For all members of Congress and the White House (cabinet members and President) and including high-level congressional staffers (chiefs-of-staff, deputies, etc.) who regularly rub elbows with lobbyists.

Require all of the above to do their own taxes. I could be cruel and say "by hand" but I'll allow TurboTax or other software, but I will require an affidavit (threat of perjury!) swearing the return was self-prepared.
Require an annual IRS audit for all of the above.

With all due respect

2009-02-04T09:17:00.000-08:00

Just passing along this word:

http://www.cato.org/special/stimulus09/

McD's figures it out

2009-02-02T06:04:00.000-08:00

For some time now, McD's had a dollar menu, which for breakfast included an egg-and-cheese biscuit and a sausage biscuit. Since I occasionally do manage to go to work early enough to think breakfast is necessary, I had been getting one of each. Having spent my $2, I would remove the sausage patty into to egg&cheese biscuit, produce a sausage&egg&cheese biscuit, plus a plain biscuit (albeit with a little sausage flavoring) that I could slop some strawberry jelly on. See, the normal price of a sausage&egg&cheese was $2.69, so I was coming out ahead.

This morning, I stopped in for the first time in several weeks, and only after my order was rung up did I notice that the egg&cheese biscuit was not on the $1 menu anymore. Actually, I couldn't see since the menu board at McD's is generally the most stupid layout and hadn't been changed for breakfast yet. Anyway my order was now $2.69. Dammit.

This is the 2nd time this has happened. Double-cheesburgers used to be on the $1 menu, but got dropped. Expecting a $2+tax and getting $5 bill was a shock. McD's had enticed me into their store with $1 menu and by being the only thing open on my way home at 10PM. Wendy's 99-cent menu is stripped bare, and Taco Bell's is similarly down-graded.

Maybe I'll just go home and make myself a chicken-salad sandwich.

[Edit: McDouble has replaced double-cheeseburger. Same sandwich but with 1 slice of cheese instead of two. Apparently dairy (cheese) costs are skyrocketing. Hmm, maybe egg-biscuit is still $1? And Taco Bell's new double-cheesy beef burrito for 89-cents is a great deal as far as I'm concerned.]

Forgive my cynicism

2009-02-01T14:33:00.000-08:00

I heartily doubt that President Obama's purported nominee for Commerce, Senator Judd Gregg (Republican of New Hampshire) is being named out of respect for his abilities. I suspect that he is being listed as a cover, since New Hampshire has a Democrat governor. If Gregg is named and accepts (and is confirmed), then the Democrats will likely have a filibuster-proof Senate, since a Democrat will be named to replace the Senator as he vacates his office.

[Edit: Sen. Gregg has stated that he would not consider the nomination if it might tip the balance of power in the Senate.]

More "do as I say, not as I do" from the Dems

2009-02-01T14:26:00.001-08:00

With the anticipated tax increases just around the corner now that Democrats control Congress and the White House, it should baffle me that two Cabinet-nominee Democrats have not bothered to pay nearly $150k in taxes between them. And Caroline Kennedy, Hillary's one-time replacement in the Senate, had to withdraw her name, reportedly due to tax issues. I *should* be baffled, but I'm not. The rules don't apply to the Democratic privileged class in a classic double-standard. Can you imagine the outrage if W. had nominated a Republican who owed $100k in back taxes because he didn't claim the lobbyist-provided limo and driver on his taxes?

More irony

2009-02-01T14:21:00.001-08:00

The pundits on the Hill and at 1600 Pennsylvania Avenue would not be able to cry foul over the bonuses of Wall Street executives had their companies been allowed to fail. Instead, they were propped up with taxpayer's money, against the express desires of many citizens. Propping up a failed business, then expecting different behavior? I've heard a similar definition for insanity.

There were alternatives, but in the rush to *do something* billions and billions of dollars have gone into this black hole, with no accountability, and certianly no idea as to whether the expenditure has provided *any* positive results.

They fail to see the irony

2009-01-21T07:17:00.001-08:00

In the AJC today there's an article about car dealerships "left out of Detroit bailouts".

Here's an excerpt:

Executives with the nation’s Big Three automakers say they love you. They sympathize with you. But they think there are too many of you out there, and they’re not about to come to your rescue if you’re hanging on by a thread.

When pressed about the plight of dealerships during media sessions before the show opened to the public, executives from the Big Three were resolute about what they saw as the need to reduce the number of dealerships as the recession grinds on.

The restructuring plans of all three companies include reducing the number of dealers in communities across the country. But rather than forcing the reduction through corporate strong-arming, which could lead to costly lawsuits or buyouts, executives this week suggested it would be achieved through natural selection: The weakest would go; the strongest would survive.

“When you take a third of the market out, a third of the dealers don’t really have a business to go forward with,” Jim Press, vice chairman and president of Chrysler LLC, said Jan. 11, referring to how the Big Three have lost sales to foreign competition.

How bitter is the irony? Here I was thinking that if you take away a third of the market, then it seems reasonable that one of the Big 3 is likely to go out of business. Instead, they show up in front of Congress with their hands out, ready to suck off the taxpayer tit. But their dealers, of let's let some of them fail, it's only natural.

In this case, my thoughts are that what's good for the goose (dealers) ought to be good for the gander (Big 3).

Geithner had to know

2009-01-17T10:34:00.000-08:00

It seems to me that if he was audited for '03 and '04 and had to pay back taxes, interest, and penalties that he should have been smart enough to realize that he had done exactly the same things in '01 and '02. At that point, he could have done the right thing and paid those off too. Instead it seems he decided to keep his mouth shut so as to "get away with it"

If this guy is the best we can do for Treasury, then we've got big problems. He might be the smartest, most qualified re education and experience, but if he's dishonest enough to knowingly cheat on his taxes to the tune of tens of thousands of dollars then he should be dismissed from consideration.

After all, Michael Vick was a great quarterback, but his cruelty and dishonesty off the field means he will probably never play football again. Even after he gets out of prison.

Geithner again: now I'm pissed

2009-01-16T06:32:00.000-08:00

In fairness, I must note that the man was once-upon-a-time a Republican, who re-registered as an independent some time ago; he later served in varying roles in Treasury in the Clinton administration. So my "Dems:..." post below, while still "truish", might not be factual--I have no idea whether he now considers himself a Democrat.

More information keeps coming out. Again, not a national tragedy, but it does fall under the "do as I say not as I do" flag and presents a conflict of interest question if nothing else. I've got a few postings below that explain some of the problem (that Obama's appointment for Treasury--who would be in charge of the IRS--didn't pay some of his taxes in 2001,02,03,and 04).

Documents released by the Senate Finance Committee strongly suggest that Geithner knew, or should have known, what he was doing when he did not pay self-employment taxes in 2001, 2002, 2003, and 2004. After his failure to pay was discovered, first by the IRS and later during the vetting process, Geithner paid the federal government a total of $42,702 in taxes and interest.

The IMF did not withhold state and federal income taxes or self-employment taxes — Social Security and Medicare — from its employees’ paychecks. But the IMF took great care to explain to those employees, in detail and frequently, what their tax responsibilities were. First, each employee was given the IMF Employee Tax Manual. Then, employees were given quarterly wage statements for the specific purpose of calculating taxes. Then, they were given year-end wage statements. And then, each IMF employee was required to file what was known as an Annual Tax Allowance Request. Geithner received all those documents.

The tax allowance has turned out to be a key part of the Geithner situation. This is how it worked. IMF employees were expected to pay their taxes out of their own money. But the IMF then gave them an extra allowance, known as a “gross-up,” to cover those tax payments. This was done in the Annual Tax Allowance Request, in which the employee filled out some basic information — marital status, dependent children, etc. — and the IMF then estimated the amount of taxes the employee would owe and gave the employee a corresponding allowance.

At the end of the tax allowance form were the words, “I hereby certify that all the information contained herein is true to the best of my knowledge and belief and that I will pay the taxes for which I have received tax allowance payments from the Fund.” Geithner signed the form. He accepted the allowance payment. He didn’t pay the tax. For several years in a row.

So now it seems that he was meaningfully informed by his employer about his tax responsibilities, quarterly even! And yet this "mistake" continued for four years. Combined with some of the other ways he cheated on his taxes, I'm not sure he's someone who should be running the IRS.

On the other hand, what did I expect from a politician?

Perhaps I was too easy on Geithner

2009-01-14T19:38:00.000-08:00

According to the WSJ, President-elect Obama's Treasury nominee Timothy Geithner made "mistakes" on his taxes for several years. I had initially read that he simply didn't pay his FICA taxes, because his employment with the IMF was as a 1099 employee. Ok.

I said it was stupid, especially since it went on for several years. I expected TurboTax, etc. or his accountant to do a better job than that and to have caught the error in the first year.

Now it seems that this was not his only "mistake". The WSJ says

Other tax issues also surfaced during the vetting, including the fact Mr. Geithner used his child's time at overnight camps in 2001, 2004 and 2005 to calculate dependent-care tax deductions. Sleepaway camps don't qualify.

Amended tax returns that Mr. Geithner filed recently include $4,334 in additional taxes, and $1,232 in interest for infractions, such as an early-withdrawal penalty from a retirement plan, an improper small-business deduction, a charitable-contribution deduction for ineligible items, and the expensing of utility costs that went for personal use.

I love the WSJ's remarks: "We're tempted to say America needs a Treasury secretary who is smart enough to figure out his own taxes. But such a cheap shot would be beneath us. Instead, we are going to make a serious point: America needs a tax code simple enough for the Treasury secretary to figure out." Pretty much what I said yesterday.

Dems: Do as I say not as I do?

2009-01-14T07:04:00.000-08:00

http://www.ajc.com/metro/content/printedition/2009/01/14/geithner.html

Timothy Geithner, the man tapped to lead the nation out of the greatest economic crisis in decades —- and who would oversee the Internal Revenue Service —- trekked to Capitol Hill on Tuesday to explain to senators how he made $42,702 worth of mistakes on his own tax returns.

As treasury secretary, Geithner’s job would be directing a mammoth rescue of the nation’s economy. President-elect Barack Obama selected him for the post late last year, citing his “unparalleled understanding of our current economic crisis, in all of its depth, complexity and urgency.”

Now, to be fair, it does seem to have been a minor snafu and not some sort of intentional tax evasion. He thought his employer was withholding FICA. But they were not, because they (the IMF) hires so many foreigners they do not automatically do that and require employees who must pay those taxes to manage their own affairs. He has apparently already paid the back taxes, penalties and interest.

On the other hand, if he plugs the numbers into TaxCut or TurboTax he'd find that they didn't come out right and should have known right away (i.e. in the first year) and should not have gone on for more than 3 years. If he had tax accountant, that's even worse.

What it does highlight is the absurd complexity of our tax code.

Why am I not surprised?

2009-01-13T10:57:00.001-08:00

Multiple sources, but this one is pretty concise.

It turns out that the best time to make money on Wall Street is when Congress is out of session. In fact, according to Wall Street analyst Eric Singer, stocks do ten times better when Congress leaves town. (Good news! The House has gone on recess, and the Senate set to leave any day, and they won't be back until September!)

Whether you're a Republican or Democrat, this is a real eye-opener. We all hate to see our hard-earned taxpayer money wasted, or our business over-regulated. Now the evidence is in: Politicians are bad for Wall Street, and your pocketbook!
Singer revealed his shocking study at this year's FreedomFest in Las Vegas (www.freedomfestcom). He went back to 1963, "When we went off the silver standard" (as he puts it). He found that the S&P 500 Index has gone up only 1.6% a year during the time when Congress is in session... and a whopping 17.6% annually when Congress is in recess.

Economists Michael Ferguson, of the University of Cincinnati, and Hugh Douglas Witte, of the University of Missouri at Columbia, confirmed Singer's proposition.

They found that since 1897, 90% of the gains in the Dow Jones Industrial Average came on days when Congress was out of session. A dollar invested in 1897 with the strategy of going back to cash every time Congress met was worth $216 by 2000.

But an 1897-dollar invested on the reverse strategy was worth only $2. The correlation got worse after World War I, when Washington started playing a more activist role in taxing, regulating and inflating.

Another look at the same topic (and same research) comes from the woman who wrote "The Forgotten Man" (see my blog entry on same).

How to profit from the effect? To ensure your money is in stocks during all Congressional holidays and all in cash when Congress is in Washington, you'd have to go in or out of the market 15 or 20 times each year. Singer doesn't say how he's addressing such challenges, or share his results.

Still, the facts are there: If you applied his thesis from the end of 2000 through 2005, and stayed out of the S&P 500 while Congress was working, you earned close to 7 percent a year. If you stayed in the S&P 500 the whole time, the annual total return (including dividends) was less than 1 percent. There may be money in ideology, after all.

This satisfies my notion that the best federal Government is one where Congress and the President are from different parties and are largely antagonistic. This leads to "gridlock" in Government, which as far as I can tell is a good thing.

Obama the "Ice Cream Man"

2009-01-12T07:02:00.000-08:00

This is a comment on the Town Hall article by Neal Boortz:

I have copied the entry here because it is too classic to be left alone.

Posted by Dave:

Obama the "Ice Cream Man"
CIVICS 101 3rd GRADE
From a teacher in the Nashville area

We are worried about "the cow" when it is all about the "Ice Cream"

The most eye-opening civics lesson I ever had was while teaching third grade this year. The presidential election was heating up and some of the children showed an interest. I decided we would have an election for a class president.

We would choose our nominees. They would make a campaign speech and the class would vote.

To simplify the process, candidates were nominated by other class members. We discussed what kinds of characteristics these students should have. We got many nominations and from those, Jamie and Olivia were picked to run for the top spot.

The class had done a great job in their selections. Both candidates were good kids. I thought Jamie might have an advantage because he got lots of parental support. I had never seen Olivia's mother.

The day arrived when they were to make their speeches Jamie went first. He had specific ideas about how to make our class a better place. He ended by promising to do his very best. Every one applauded. He sat down and Olivia came to the podium.

Her speech was concise. She said, "If you will vote for me, I will give you ice cream." She sat down. The class went wild. "Yes! Yes! We want ice cream."

She surely would say more. She did not have to. A discussion followed. How did she plan to pay for the ice cream? She wasn't sure. Would her parents buy it or would the class pay for it. She didn't know. The class really didn't care. All they were thinking about was ice cream.

Jamie was forgotten. Olivia won by a land slide.

Every time Barack Obama opens his mouth he offers ice cream, fifty percent of the people react like nine year olds. They want ice cream. The other fifty percent know they're going to have to feed the cow and clean up the mess.

My stimulus plan

2009-01-12T06:21:00.001-08:00

Instead of printing up $1T or thereabouts and letting Government bureaucrats decide which companies live or die, I propose the following.

First item: Let's acknowledge that corporate taxes are a fraud. Corporations do not pay taxes. Rather, they remit so-called taxes that have been passed on, ultimately to consumers. Any tax the Government may levy on corporations will almost always be passed along to the consumer in one way or another. The corporation may simply directly pass along the cost by increasing prices and assuming taxes similarly affect all their competitors then this will be the easiest to accomplish. They may cut back on workers wages and benefits to offset the taxes. They may cut or eliminate dividends to shareholders. Most likely some combination of the three. And they may even pretend to eat some of the tax by paying for it by reducing profits (but I contend this is equivalent to cutting dividends).

Second item: business regularly seek to manipulate their operations to minimize taxes. They hire tax accountants and make business decisions based not on the soundness of the decision vis-a-vis how it benefits the business but on how the tax bottom line is impacted. On top of the actual corporate taxes paid, which were about $370B in 2007, corporations spend an additional $200B or more simply to comply with the tax code.

Third item: businesses regularly lobby for special exemptions and loopholes in the tax code. This leads to an overly complex tax code (and increased compliance costs) as well as the potential (and actuality!) for corruption in Government.

Fourth item: our federal corporate tax rate is one of the highest and most punative in the world, and is cited as a major reason for our multi-national corporations to move their headquarters overseas.

By now, my proposal should be obvious: eliminate corporate taxes.

The compliance costs go away...$200B+ freed up for more productive things.
$350B (+$200B compliance costs) or so goes right to the bottom line, which will lead to cheaper goods for consumers and/or higher wages or dividends to employees and shareholders--what'll that do for the economy?
Business decisions now will be based on sound busniess principles instead of tax impact.
Loopholes, etc. go away...all businesses now on level playing field.
"Corporate welfare", which almost always takes the form of tax credits, goes away.

But best of all, consumers will make the decisions, not bureaucrats.

Addendum: current estimates of uncollected taxes are estimated at $250B to $300B each year. So put the IRS people who would have been overseeing corporate tax collections to work recovering these revenues and the corporate taxes not collected are basically offset!

What Roland Burris should have said

2009-01-08T03:50:00.000-08:00

Once Governor-under-indictment Rod Blagojevich appointed him, Roland Burris has greedily lapped up the spotlight and proclaimed himself to anyone with a microphone to be "the junior Senator from Illinois". His words and actions, not to mention his appointment by Blogojevich, makes me wonder whether he doth protest too much. That is to say, I'll always wonder whether he (Burris) did have some hand in the pay-for-play appointment to get the title he seems so desperately to want.

He could have really taken the high road with something like this:

Ladies & gentlemen,

I am honored by the consideration our Governor has bestowed upon me when he named me as his choice to fill President-elect Barak Obama's former Senate seat. However, given the current scandal surrounding the Governor and this same Senate seat, I must respectfully decline the appointment.

I further implore my fellow citizens, especially those who have served and are currently serving the people of the State of Illinois, to likewise refuse any appointment that might be made by Governor Blogojevich. Leaving the Senate seat unfilled for a short period of time is better for Illinois than carrying a cloud of suspicion to Washington, D.C.

I would be proud to serve the state of Illinois in the US Senate in the future, should the situation be resolved and the appointment was offered again under better circumstances.

AJC swipes at Bush again

2009-01-07T06:10:00.000-08:00

They just keep beating this lame duck.

Bush’s tax cuts helped eliminate the surpluses of the Clinton years and drive the annual budget deficit to a record $413 billion in 2004. The deficit later plummeted to $162 billion in 2007 but soared to $455 billion in the fiscal year that ended in September.

It wasn't Bush tax cuts that did this. While tax revenues did dip in 2002 and 2003, due to the recession at that time, they quickly rebounded and are at an all-time high by 2007. Here's personal income taxes and total tax revenue (all sources, in millions of dollars) for a few years:

1995 590,244 1,351,932
1996 656,417 1,453,177
1997 737,466 1,579,423
1998 828,586 1,721,955
1999 879,480 1,827,645
2000 1,004,462 2,025,457
2001 994,339 1,991,426
2002 858,345 1,853,395
2003 793,699 1,782,532
2004 808,959 1,880,279
2005 977,222 2,153,859
2006 1,043,908 2,407,254
2007 1,163,472 2,568,239
2008* 1,219,661 2,521,175 (*estimated, source tax policy center)

The problem was not the Government's income, but rather its outlay:

FY 2000 1,813,718
FY 2001 2,026,886
FY 2002 2,280,841
FY 2003 2,518,447
FY 2004 2,518,626
FY 2005 2,604,577
FY 2006 2,873,261

Note: numbers may not be in same adjusted dollars, I could not find that notation in either source used.
Note: not sure if first set of numbers is FY or calendar.

Spending increased about 30% in the administration, which is the real problem, which annual government spending per household rising to $23,494 in 2007 (up from $20,451 in 2000), up 14.8% over the period.

Let's face it, the Government has run a deficit almost every year since 1965. The one noticeable (very noticeable) change comes under Clinton, but not until Newt's Congress takes over.

Reading "The Forgotten Man"

2009-01-05T06:08:00.000-08:00

This book is about the Great Depression, in particular how Government actions actually prolonged the Depression. Ironically, a good friend is reading the same book (not too strange, since we were both given the book for Christmas by the same person) and, based on a brief discussion, I think he thinks the book is actually about how the New Deal was a great thing. But here's some notes from the inside flaps:

The author also traces the mounting agony of the New Dealers themselves as they discovered their errors. She shows how both Presidents Hoover and Roosevelt failed to understand the prosperity of the 1920s and heaped massive burdens on the country that more than offset the benefit of New Deal programs. She argues that the real question about the Depression is not whether Roosevelt ended it with World War II, but why the Depression lasted so long. From 1929 to 1940, from Hoover to Roosevelt, government intervention helped to make the Depression Great.

The title comes from an essay by Yale professor William Graham Sumner, which I found a copy of here.

The type and formula of most schemes of philanthropy or humanitarianism is this: A and B put their heads together to decide what C shall be made to do for D. The radical vice of all these schemes, from a sociological point of view, is that C is not allowed a voice in the matter, and his position, character, and interests, as well as the ultimate effects on society through C's interests, are entirely overlooked. I call C the Forgotten Man.

The fallacy of all prohibitory, sumptuary, and moral legislation is the same. A and B determine to be teetotalers, which is often a wise determination, and sometimes a necessary one. If A and B are moved by considerations which seem to them good, that is enough. But A and B put their heads together to get a law passed which shall force C to be a teetotaler for the sake of D, who is in danger of drinking too much. There is no pressure on A and B. They are having their own way, and they like it. There is rarely any pressure on D. He does not like it, and evades it. The pressure all comes on C.

The question then arises, Who is C? He is the man who wants alcoholic liquors for any honest purpose whatsoever, who would use his liberty without abusing it, who would occasion no public question, and trouble nobody at all. He is the Forgotten Man again.

This essay is chock full of great tidbits:

Now, we never can annihilate a penalty. We can only divert it from the head of the man who has incurred it to the heads of others who have not incurred it. A vast amount of "social reform" consists in just this operation. The consequence is that those who have gone astray, being relieved from Nature's fierce discipline, go on to worse, and that there is a constantly heavier burden for the others to bear.

And:

They are always under the dominion of the superstition of government, and, forgetting that a government produces nothing at all, they leave out of sight the first fact to be remembered in all social discussion - that the State cannot get a cent for any man without taking it from some other man, and this latter must be a man who has produced and saved it.

Bailout pork

2008-12-30T09:50:00.000-08:00

USA Today article:

The relationship of catfish to economic stimulus might not instantly be obvious, but to the Catfish Farmers of America, it's perfectly plain that $50 million in government assistance would help avert a collapse of catfish farms that would spread further economic pain in already depressed Southern states.

The American Library Association says $100 million for libraries would help people get back to work, and the American Association of Port Authorities wants $6.8 billion for harbor maintenance as part of an economic plan. The National Retail Federation wants a series of tax-exempt shopping days. The Air Transport Association has a $4 billion wish list for runway construction and new avionics, and the National Automobile Dealers Association wants a "cash for clunkers" program that would help people trade in old, inefficient cars for new ones.

What's much less clear is how to spend all that money in ways that will actually help the economy, rather than fund nice but non-essential projects, or utterly wasteful ones that reward campaign contributors or help a powerful member of Congress build a bridge to nowhere. In ordinary times, the idea of bailing out the catfish industry would be laughable, and perhaps it still is, but if that's your livelihood, or the biggest employer in your town, suddenly it's not so funny. The problem is, just about every industry and special interest could make the same pitch.

And that, folks, is the fundamental problem with government choosing who lives and who dies.

Maybe there are simply too many catfish farmers producing more supply than the market demands, driving down prices across the board. Rather than propping up the whole industry with subsidies and bailouts, we need to let a few go out of business. This will reduce supply and cause the price to rise naturally until the remaining efficient producers are profitable.

The same can be said for all industries (and farmers).

It will certainly be painful for those impacted, but better for the nation as a whole.

Wow, just wow

2008-12-29T07:50:00.000-08:00

WSJ article:

President-elect Obama has pledged a $1 trillion stimulus package. To put it in perspective, that sum would exceed, in inflation-adjusted dollars, government spending on the New Deal, the
savings-and-loan crisis and the Marshall Plan combined, according to Bianco Research.

USA Today article

This [stimulus package] is expected to carry a price tag of as much as $850 billion over two years. How much is that? Think of it this way: It's twice the $425 billion (adjusted for inflation) it took to build the 42,700-mile interstate highway system started in the 1950s, and more than the entire cost of the Vietnam War ($698 billion). It's huge.

So-called income inequality

2008-12-29T07:14:00.001-08:00

This weekend I read an article in the AJC about so-called income inequality.

It had the typical AJC slant. For example:

Is the middle class no longer being left behind?
In Georgia, the answer to those questions up to now has been no, according to data released earlier this year by the U.S. census.

While the typical Georgia family’s income hasn’t grown so far this decade, after accounting for inflation, the well-off got better-off.

The number of Georgia households making more than $200,000 a year jumped more than 70 percent between 2000 and 2007, while the number of households making less than $75,000 stayed relatively stagnant. Some of that trend was the result of wage inflation, since the income brackets were not adjusted for inflation since 2000.

That sure looks to me like like something got better! More and more Georgian households are earning more than $200k. Isn't that upward mobility? It doesn't say that those earning more than $200k made even more and everyone else lost. It says *more* are getting richer, and those who aren't getting richer are about the same.

It goes on in much the same vein for awhile, then reaches what the author presents almost as a snide toss-off comment:

Experts cite differing reasons for the growing gap, partly depending on where they fit on the political spectrum.

Republicans tend to call it a natural consequence of free markets and innovation, such as advances in technology, which drives up the incomes of some but also displaces other industries and workers.

This make sense to me, but I guess I'm on that end of the political spectrum the author is discounting. It is certainly a truism that, except for professional athletes and supermodels, those who make their living with their brains will earn more than those who make their living with their bodies. Remember, farriers and buggy-whip makers were in displaced industries.

I remember fairly recently a plant in metro-ATL was closed and some 300-400 workers lost their jobs. There was a sob story in the paper that highlighted the 27-year worker who cried "I don't know what I'm going to do now. This is all I know." (Something like that). This plant made cassette tapes. I wondered strongly at the time how many of those people honestly expected that the demand for cassette tapes would remain high enough to keep them employed? I wondered how many of them had CDs and digital answering machines? CDs were introduced in the 80's so they had something close to 20 years to contemplate the potential for cassette tapes to loose their luster, just like they surpssaed their vinyl bretheren (who surely faced similar problems). In fact, cassette tapes sales surpassed vinyl LP sales in 1982, and CD sales surpassed vinyl LP sales in 1988, and CDs surpassed cassettes in 1992.

Back to the article, and this is the most telling paragraph, the toss-off:

Others argue that the gap has been growing because the affluent have benefited from Bush administration tax breaks. Meanwhile, middle-class and poor Americans have seen their incomes fall behind the wealthy as employers cut health and pension benefits, and the government trims spending on education, health care and child care.

Reading this another way: "When the government allowed some people to keep more of what they earned, they got richer. Those who depend on the government got poorer when the government cut back." Typical.

Tragedy of American Compassion

2008-12-29T06:47:00.000-08:00

This is a book I've been reading on and off (more like thumbing through and reading chunks, it's a bit of an academic slog). This quote has fascinated me:

Lyndon Johnson's economic advisors warned in 1964 that the poverty rate, in the absence of federal action, could be as high as 13 percent by 1980. After sixteen years of multi-billion dollar programs, the poverty rate at the end of that year was--13 percent.

It goes on to say:

Lack of mobility was not caused by lack of opportunity--the dramatic successes of immigrants from Asia and Cuba during [the time period] shows that. Those who adopted the traditional work-hard-and-rise pattern by staying out of the welfare system usually succeeded in rising--but native-born Americans who took advantage of the proffered liberality stayed put. Some welfare recipients even gave up jobs and educational opportunities in order to remain in the poor but secure spot that welfare payments afforded them.

My next car will not be a Chrysler/Dodge (or GM)

2008-12-19T06:40:00.000-08:00

Since my college "beater" (mazda 323), all our cars have been Chrysler or Dodge. Over the years, we've had a Sebring, 2 Dodge Durangos and a Chrysler 300M parked in our garage. There was a Saturn in there somewhere, too. My parents drove Chrysler's for many years, and even my mother-in-law has also had two Durango's after she replaced her Chrysler Concorde.

This moring when I was driving to work (in my 300M) I heard Pres. Bush's presser where he gave the auto makers (Chrysler, GM) $13.4B in loans, basiclly requiring them to promise to try to do better. There's $4B more in the wings in case they need it too. There's a scary threat of calling the loan if they haven't made progress on their promises by 31 Mar 09. Does anyone think that's going to happen under an Obama/Pelosi/Reid troika?

I called Mrs. Percy to tell her what I just heard on the radio. We both said, talking over each other at the same time, "I guess we've bought our last Chrysler product, GM too for that matter."

Comparing GM against Toyota

2008-12-17T11:53:00.000-08:00

Bailing out the Big 3 is a bad idea all around (as was the financial industry bailout--two wrongs will not make a right here). Here's a perfect example of why (from WSJ article):

But the $15 billion auto rescue plan failed in the Senate last week. As Minority Leader Mitch McConnell said, the American taxpayer should not be asked "to subsidize failure." The failure can be seen in the comparative financial data: both Toyota and GM, for example, made about 9.4 million vehicles last year. But as Investors Business Daily notes, Toyota made a profit of $1,874 per car, while GM lost $4,055 per car, or $38.7 billion, and almost all of those loses were due to its U.S. operations.

Consider also that GM lost billions in a failed partnership with Fiat, and ultimately paid Fiat $2B just to get out of the deal. GM also posted total net loss of $1.419B in 2004 and $2.697B in 2005, years in which the economy was not collapsing! According the the GM's annual report "The 2005 total net loss is primarily due to the impact of Delphi benefit guarantee charges offset by favorable income tax items." In other words, they lost billions of dollars on their Delphi parts manufacturing subsidiary as they had to rework the UAW's benefits package. Oh, and that seems related to the fact that Delphi was in Chapter 11 bankruptcy!

Yes, I've been too busy to update

2008-12-12T10:30:00.000-08:00

I was sick for awhile and then had to catch up back at work.

Here's just a tidbit for the moment. Something about the Big 3 bailout failure last night:

The group came close to agreement, but it stalled over the UAW’s refusal to agree to wage cuts before their current contract expires in 2011. Republicans, in turn, balked at giving the automakers federal aid.

Reid called the bill’s collapse “a loss for the country,” adding: “I dread looking at Wall Street tomorrow. It’s not going to be a pleasant sight.”

It's now 1:35, and although the market was down earlier, it stands at DOW +12...oops, now back to DOW -9. If that's what Harry Reid "dreads" he's got a weak constitution. Maybe later in the day it gets scary?

Social Security privatization

2008-11-25T12:12:00.000-08:00

In the AJC Vent today:

The only thing that could have made Bush more unpopular than he is now is if he’d prevailed in investing Social Security funds in the stock market.

This and comments like it have been common lately, and always they miss the point. They seem to assume that all Social Security money would have been in the stock market and all would be lost now.

This is of course wrong. The Bush plan called for a transition to a combination of a government-funded program and personal accounts through partial privatization of the system. A portion (about 1/4) of the mandated "contribution" or "premium" would have gone not into the Government's big pot-o-money with a promise that you'll get something back (probably, maybe if you're lucky) but rather into an account in your name. You'd have gotten a modicum of control over that money, as that portion could have been invested in various managed investment funds similar to the government employees' retirement plan in which the investor can choose between Treasury bills, public and private (corporate) bonds, and stock market funds. The rest of the normal SS taxes would continue to go into Government hands as normal.

The risk-averse could have simply had the money go into T-Bills and been just as "safe" as if there were no accounts. Younger, more savvy, and less risk-averse could place their monies in the stock market, just like anyone can when they fund an IRA or a 401(k). Yes, they could lose money; and yes, they could retire during a downturn where their account might be worth less that it had previously. These are risks that each indivual should be able to chose for themselves.

Wikipedia link says that the Heritage Foundation calculates that a 40-year-old male with an income just under $60,000, will contribute $284,360 in payroll taxes to the Social Security trust fund over his working life, and can expect to receive $2,208 per month in return under the current program and claims that the same 40-year-old male, investing the same $284,360 equally weighted into treasuries and high-grade corporate bonds over his working life, would own a PRA at retirement worth $904,982 which would pay an annuity of up to $7,372 per month (stocks could produce even larger returns, but with commensurate risks).

Aside from the high likelihood of increased rate of return, one big difference would be that the account is your money, not some IOUs the government's file cabinets. If you die, you could leave that money to your heirs. This could have a marked impact in the black community, since currently Social Security essentially transfers money from working black men and women (who die earlier) to older white women who live the longest.

Finally, consider this link explaining how three counties in Texas that provide private Social Security to its employees. USAToday also weighs in on this.

Of course, the SSA has a different view, one that stretches hard to discredit the Galveston plan, especially since they seem to base many of the negatives on what might happen in 2045 and what happens after you've been drawing on your retirement for more than 20 years (in earlier years benefits are higher, often much higher than SSA).

Perhaps most damning "[The Galveston plan does not] provide any redistribution from higher earners to lower earners."

Obama's Language

2008-11-24T18:22:00.000-08:00

The left, as exemplified by Obama's own website use words to mean things very different from what I think they mean. Here's a quote:

Obama will ask the wealthiest 2% of families to give back a portion of the tax cuts they have received over the past eight years to ensure we are restoring fairness and returning to fiscal responsibility.

Let's consider that this single sentence uses at least three words differently from what I think they mean.

Let's first consider the phrase "Obama will ask..." This is odd in two different ways. First, assuming this sentence implies a change in the tax code, no one will be asked to do anything. They will comply or face fines and/or imprisonment. Second, if there is to be a change in the tax code, President Obama will not be rendering the bill--his role in legislation of this nature is to sign or veto bills (understanding of course that Harry Reid and Nancy Pelosi will be Obama's puppets in Congress, and that Obama's staff may very well draft the bill; the incestuous nature of executive and legislative branches being controlled by the same party is exposed here as evil, whether it be Democrats or Republicans in charge).

Next, the phrase "give back". This is a favorite phrase among the so-called progressives. When I donate to charity, I am giving. I am not giving back. Giving back implies that I was previously given the thing in question. A fiance' may give back an engagement ring, but my income was earned through hours of hard work and so having a portion of my income forcibly taken from me is definitely not the same as giving something back. Now, I'm not trying to discount someone who feels that they have truly received something, say from their community, and feel that giving something to that community for them represents "giving back". Indeed, I feel that my donations to Clemson University are in a way "giving back", since I attended Clemson on a full scholarship (Alumni Frank J. Jervey Scholarship). But paying taxes is in no way giving back, unless you believe that the government gave me my income in the first place [* more on that later].

Finally, we are told that raising taxes will "restore fairness". All I can say is that I have commented before on the very twisted meaning of the word fair that liberals seem to have when it comes to paying taxes. See Because they can afford it parts I and II. The top 1% pays 39.89% of income taxes collected and 41% of the US population will be outside the federal income tax system, essentially free-loading on on other half becuase they have zero or negative tax liability or do not even file a return.

* Federal budget law defines "tax expenditures" as "revenue losses attributable to provisions of the Federal tax laws which allow a special exclusion, exemption, or deduction from gross income or which provide a special credit, a preferential rate of tax, or a deferral of tax liability." Thus it seems that any income that the government lets you keep, the government considers to be a tax expenditure--they start with assuming they have 100% of your income, then count what they let you keep as something they "spent" (gave to you!).

Fast-food ad ban called for

2008-11-23T10:01:00.000-08:00

An article in the AJC this week prompted me to write a letter to the editor. Here's the gist of the article:

A little less “I’m Lovin’ It” could put a significant dent in the problem of childhood obesity, suggests a new study that attempts to measure the effect of TV fast-food ads. A ban on such ads would reduce the number of obese young children by 18 percent and obese older kids by 14 percent, researchers found.

My response was:

Kids are not obese because of fast-food ads. There are zero calories in a TV or radio ad, and unless you eat the paper it's printed on, there are no calories in a newspaper or magazine ad. The calories come from actually eating fast food, and we all understand that young children (who have no money or transportation) are being fed fast food by their parents. The fault, therefore lies entirely on the parents who choose to feed their kids obesity-inducing amounts of fast food and chips, cookies, and unhealthy food at home.

Update: got a call today from AJC verifying permission to run my letter. Looks like I'm published again!

And the pigs come back to the trough, again

2008-11-07T08:05:00.000-08:00

House Speaker Nancy Pelosi was meeting with the chief executives of Detroit’s automakers to hear their expected plea for an additional $25 billion in federal loans for future health care payments for retirees.

Those who forget history...doomed

2008-11-04T06:01:00.000-08:00

In light of all the largesse being doled out to financial and automotive industries--the bailouts--here's an oldie for you.

Remember the bailout of Chrysler and how that worked out for us? Read this paper. Brief summary:

Chrysler used the federal government to go bankrupt without actually declaring bankruptcy. They reorganized debt, wrote off debt at 30 cents on the dollar because the Act forced their creditors to do so.
The bailout simply allowed Chrysler to continue bad management practices. To a degree, the rest of Detroit also continued down the same path thinking that they could get a bailout too if it came to it. If Chrysler had failed, maybe Ford & GM would have realized they had a stinking mess on their hands.
Chrysler repeated tried to renege on their obligations. When the warrants they issued actually became quite valuable, they protested that paying off the warrants amounted to usury. The asked the government to reduce their interest rate from 1% to 0.5%.
Salaries for top management were adjusted downward as a part of the deal. But as soon as the 2 year term was over, top executives got retroactive raises, despite the $0.5B loss that year.
Losses accrued during the Act's period were carried forward, meaning Chrysler's tax bill was basically zero for several more years (during which they had record profits).
Union's forced concessions were nearly totally restored by 1982.

The Conclusions section speaks for itself:

When the loan guarantee program was being considered by Congress, Chrysler's unions and top management constituted the "visible" constituency, pleading its case in Washington and begging to be pulled back from the jaws of bankruptcy. Unrepresented and unheard was a huge "invisible" constituency. They included:

Current and future laid-off Ford and General Motors workers, who never understood that their tax dollars were being used to destroy their own jobs in order to save jobs at Chrysler

Small businessmen and private individuals, who never understood that the Chrysler bail-out would squeeze $1.2 billion out of the credit market, making it difficult and more costly for them to raise business capital or finance a mortgage on a new house, all of which would have created new jobs

Over 60,000 now laid-off Chrysler workers, who expected the bailout to save their jobs

American car buyers, who never understood that Ford and General Motors would have taken over much of a bankrupt Chrysler's market and produced cars more efficiently, reducing the cost of domestic automobiles.

The problem with the Chrysler bail-out—in fact, the problem with all "industrial policy"—is that it is necessarily political in nature; the loudest interest groups get the greatest reward, while the scattered and fragmented "invisible constituency" is largely ignored. But a free market is a tangled web of infinite and subtle interaction, in which the full impact of intervention is not always recognized until too late. In the case of the Chrysler bail-out, a big chunk of taxpayer money was committed to a shaky and inappropriate venture. Every American became an involuntary and uncompensated partner in a company whose future is still in doubt. The precedent established is extremely dangerous. On top of this, the bail-out even failed in its purpose.

Police not interested in drunk driver

2008-11-01T17:23:00.000-07:00

A personal experience Halloween night.

At about 3AM, we were awakened by some loud noise outside our house. As I wandered around the house to see if there was a break-in attempt or something, I heard a very loud grinding sound in the street. Worried that the noise we heard had been someone trying to steal our utility trailer I ran out the front door and around the side of the house where the trailer was parked. It was still there but I could hear the grinding noise headed up the street. I quickly checked some other things like the gas grill on the back deck, etc. All still present, and I could still hear the noise so I went out to the street.

I could see grooves in the road at the entrance to our neighborhood, where clearly a car dragging something heavy had turned around. I realized that there had to have been some sort of accident and that they had driven away. I figured drunk driver, and was worried as to whether there may be anyone hurt. So I got some pants on and got in my car and drove up the road. I never saw any other evidence, just the grooves in the road. So I decided to follow them in case this idiot did some more stupid things.

The grooves weaved all over the road, in a very circuitous route through neighborhoods and even out onto Roswell Rd (120) for a short stint. Eventually I tracked the grooves all the way to Bonnie Glenn apartments on Power's Ferry Rd where I found a dark 4-door Honda on two tires--the passenger side tires were gone and the rims where ground down to the axle. I took down the license plate number and came home, not wanting to get in any sort of confrontation.

Mrs. Percy dialed the non-emergency number for the police and we described what we had seen, heard and discovered. The police operator repeatedly said that there's nothing to be done since there was no damage to our property (or any property that I had seen) and the car was now parked. I at least made sure to give them the license number and location in case this car might have been involved in a hit-and-run before they drove up in our our neighborhood.

After golf Saturday morning (played horribly again), I decided to go back up the road to see if I could find out how all this started. I walked about 3/4 mile up Old Canton following the grooves backwards hoping to find the origin. What I discovered was that the car had apparently been going north on Old Canton, had tried to turn left into a neighborhood about 100 yds north of Robinson, missed the turn, drove up onto the sidewalk, took out a bush and probably hit a phone pole but not hard enough to do any significant front-end damage.

They backed out of that mess, got back on Old Canton southbound, and quickly managed to run up onto the sidewalk again. The twin rubber stripes on the curb indicated to me that this was where they lost their tires. Now up on the sidewalk, they stay up there for a bit, narrowly avoid a mailbox, then swerved back onto Old Canton Rd using a driveway as a launching point. About 100 more yds south on Old Canton, their tires must have gone down entirely because there's some indicatation that they pulled off the road again. It looks like that's where they got out to check the damage. They had to back-and-forth to get out of the grass and back on the road. Shortly thereafter they tried to do a U-turn using the extra width our neighbohood entrance provided. Of course, they missed, tore up the curb and did more damage to their front rim and narrowly missed hitting a sign pole.

They back off the curb, completed their U-turn and drove off north again, where I tracked them as I described above.

I was glad to find that no other vehicles, people, or even animals seemed to have been involved. But I was disappointed that the police were not more interested, but I guess that there's no way to prove who was actually driving the car and unless there had been someone else involved then there's nothing much to be done. And the idiot has done about $1000 damage to his car and I doubt the insurance company will be paying anything.

Other bailouts continue

2008-11-01T13:59:00.000-07:00

Non-banks like GMAC are trying to requalify their organization as a true bank so that they can get in line for the "free money".

Also a plan for credit-card companies to get taxpayer money to cover credit card balances of people in default.

Automakers want their $25B handout to be sweetened by having taxpayers cover bad car loans.

Student loans had already been targeted for bailout. But that got expanded.

Next up on bailout, subsidies list

2008-10-28T13:53:00.000-07:00

Apparently lobstering is not a good business to be in right now. Don't be surprised if we find an earmark coming up soon to qualify lobster fishermen as farmers so they can get those subsidies and welfare payments. Of course, the real problem is that there's too many lobstermen (or farmers) producing more product that the market will buy even at steeply discounted prices.

Tipping point

2008-10-26T14:14:00.000-07:00

Usually I find him to be a right-wing blowhard, and often when I do agree with his position I find his logic supporting that position to be questionable. But today Jim Wooten's column had an interesting slant on the tipping point represented by this election.

Consider
"A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that a democracy always collapses over loose fiscal policy..." Attributed to various people.
While the source of the quote is questionable, there it is nonetheless.

That tipping point: 220 million eligible voters. 89 million pay no income taxes, and another 65 million pay only 3% of income taxes collected. Obama wants to add millions more to the no-taxes column. More than half of the voters are not paying into the pot of money from which they will control the outflow.

More from that article:

Bob Irvin of Atlanta, a management consultant and former Republican minority leader of the Georgia House, observes that Obama “is trying to convince voters that his new taxes will only hit” those at the top.

“But do the rough math for yourself,” he continues. “Suppose he took a hundred million dollars a year from every Fortune 500 CEO. That’s $50 billion. If you add $100,000 from each of the top 1 percent, that’s 3 million people times $100,000 and that totals $300 billion.”

Continues Irvin: “You’re still less than halfway to the annual amount he proposes to increase spending, which is $800 billion a year. To get there, he’ll have to raise taxes on everybody else an average of $1,500 a year,” including illegal immigrants and those who pay no taxes now.

Note that that $1500 is from every man, woman, and child. And the math here is correct, the $800B figure is commonly quoted for Obama's plans and ($800B - 500 * $100M - $100K * 3,000,000) = $450B. And if the population is 300 million people, $450B / 3ooM = $1500.

Another take on that is this. The expected tax increase for the top 0.1% (income more than $2.87M) under Obama's plan is $701,885, and the expected tax increase on next 1% (income between $603,403 and $2.87M) is $115,974. Now, it seems to me that if I had that kind of income, I could afford to pay accountants and layers to help me structure my finances to minimize my tax load. It certainly seems like a decent trade for me to pay $500k to avoid having to pay an additional $700k in taxes. Or maybe I could spend $100k to reduce my tax load by $500k or for the next group, it seems that if I can spend $50k to avoid paying %100k in additional taxes, then I'd probably do it.

So I have to wonder what Obama is going to do when all those people decide to *not* pay those taxes. Or what the charities these people have been contributing to find themselves short hundreds of thousands of dollars in contributions?

Health care is not a right

2008-10-26T12:04:00.000-07:00

Nor is housing, food, or any number of other things socialist nanny/welfare states try to say are fundamental human rights.

To me, it is a self-evident truth that your rights do not trump mine. If the only way you can afford food, shelter, clothing or health care is to force your fellow citizens to pay for them, then you have essentially decided that it is worth enslaving others to meet your needs.

Here's how we can see that health-care is not a right. Imagine that tomorrow every doctor, nurse, P.A., EMT, etc.--every health-care provider--decided to quit their jobs and refused to practice medicine. How then will you exercise your health-care "rights"? Many people will say that doctors will have to be forced to provide care. And those people have just espoused a form of slavery--forced labor is a form of slavery.

Forcing others to pay for your health-care is only somewhat removed from that far-fetched scenario. Each dollar removed from someone to pay for your health care is a dollar they worked to earn. A portion of their alloted time on this Earth was confiscated from them for your benefit.

While I'm on health-care here's some things to consider:

About 10% of all health-care spending in the USA is obesity-related.
Between 10 and 15% of all health-care spending in the USA is smoking-related.
Health-care costs in the USA averaged $6,280 per person in 2004.
Half of the population spends little or nothing on health care, while 5 percent of the population spends almost half of the total amount. Among this group, annual medical expenses (exclusive of health insurance premiums) equaled or exceeded $11,487 per person.
In contrast, the 50 percent of the population with the lowest expenses accounted for only 3 percent of overall U.S. medical spending, with annual medical spending below $664 per person. Thus, those in the top 5 percent spent, on average, more than 17 times as much per person as those in the bottom 50 percent of spenders.
The elderly (age 65 and over) made up around 13 percent of the U.S. population in 2002, but they consumed 36 percent of total U.S. personal health care expenses.
A new study from the Mayo Clinic reports that intensive care accounts for 30 to 40 percent of hospital spending, with the majority of care given to elderly patients with chronic conditions.

Even if you think health-care should be provided by the government, do you think every person in the US (notice I didn't say citizen) should have unlimited benefits? Consider this article:

Ana Puente was an infant with a liver disorder when her aunt brought her illegally to the U.S. to seek medical care. She underwent two liver transplants at UCLA Medical Center as a child in 1989 and a third in 1998, each paid for by the state.

But when Puente turned 21 last June, she aged out of her state-funded health insurance and was unable to continue treatment at UCLA.

This year, her liver began failing again and she was hospitalized at County-USC Medical Center. In her Medi-Cal application, a USC doctor wrote, "Her current clinical course is irreversible, progressive and will lead to death without another liver transplant." The application was denied.

The county gave her medication but does not have the resources to perform transplants.

Late last month Puente learned of another, little-known option for patients with certain healthcare needs. If she notified U.S. Citizenship and Immigration Services that she was in the country illegally, state health officials might grant her full Medi-Cal coverage. Puente did so, her benefits were restored and she is now awaiting a fourth transplant at UCLA.

The average cost of a liver transplant and first-year follow-up is nearly $490,000, and anti-rejection medications can run more than $30,000 annually, according to the United Network for Organ Sharing, which oversees transplantation nationwide.

What does Ana say about her situation?

"It doesn't matter if I'm undocumented," she said. "They should take care of me at UCLA for the rest of my life because I've been there since I was a baby."

Stupid vent in AJC today

2008-10-23T18:41:00.000-07:00

"McCain is a maverick? Oh, come on. All he does is push tax cuts, tax cuts and more tax cuts. That is the same old tired idea the Republicans have flogged for years, and what did it get us? Gigantic budget deficit, crumbling infrastructure and a deep recession."

Please. The reason we have a huge deficit is spending. Prior to the recent downturn, tax revenues were at an all-time high in real dollars, and tax revenue increases rose sharply after the Bush tax cuts. Especially helpful were capital gains cuts and corporate tax rate cuts.

And we're *still* not in a recession, despite what people think. The economy grew in the first two quarters, and may have shrunk ever-so-slightly in the 3rd quarter. A recession is 2 consecutive quarters of negative growth. The recession of the early 80s saw 13.5% inflation and 10.8% unemployment. Right now we have 5-point-something for unemployment and inflation. Anyone who says we are in a "deep recession" is just plain wrong. We could certainly be headed for one, and next year we might find out that we were indeed in a recession (once 4th quarter numbers are out).

Great Vent in the AJC today

2008-10-23T18:40:00.000-07:00

"My mid-40s son and his wife read no newspapers, no magazines; don’t watch or listen to any news (except “The Daily Show” and “SNL”); have two kids, a large adjustable-rate mortgage, credit card debt and zero savings. Needless to say, they’re just wild about Obama."

"Because they can afford it" part 2

2008-10-17T15:37:00.000-07:00

This quote from the Tax Foundation was mentioned in the previous posting:

The top-earning 25 percent of taxpayers (AGI over $64,702) earned 68.2 percent of the nation's income, but they paid more than four out of every five dollars collected by the federal income tax (86.3 percent).

Another way of looking at that: Four guys go out for dinner, one guy is forced to pay for everyone's meal, while the other three agree to pay the tip. But they complain about it and would really prefer it next time if the first guy pay for most--if not all--of the tip next time, too.

They think it'd be fair, too, since he makes ten times what any one of them makes. And besides, his steak was better than theirs (probably because he stole the best steak from them while they were taking a smoke break).

"Because they can afford it"

2008-10-17T11:06:00.000-07:00

Was discussing some of the tax plans being put forward by the candidates at lunch the other day, and one of the guys agreed with the notion that it was OK to demand more taxes on the rich "because they can afford it". Even after discussing the disparities in the current tax domain (2006 numbers from here and here) he still thought it was a good idea.

lower 50% pays 2.99 % of income taxes collected
top 1% pays 39.89% of income taxes collected (AGI > $388.806)
top 10% pays 70.79% of income taxes collected (AGI > $108,904)
lower 50% pays average tax rate of 3%
top 1% pays average tax rate of 22.79%
top 10% pays average tax rate of 18.86%
top 1% earned 22.06% of cumulative AGI (but paid 39.89% of income taxes)
top 10% earned 47.32% of cumulative AGI (but paid 70.79% of income taxes)
41% of the US population will be outside the federal income tax system, essentially free-loading on on other half

43.4 million tax returns, representing 91 million individuals will have zero or negative tax liability (out of 136 million tax returns)

15 million more households file no tax returns at all

this is by far the highest these numbers have ever been, as a percentage, going back to 1950 (when it was 28%)

the "Bush tax cuts" caused this number to jump form 26% to 32% to 41%

The top-earning 25 percent of taxpayers (AGI over $64,702) earned 68.2 percent of the nation's income, but they paid more than four out of every five dollars collected by the federal income tax (86.3 percent).
The top 1 percent of taxpayers (AGI over $388,806) earned approximately 22.1 percent of the nation's income (as defined by AGI), yet paid 39.9 percent of all federal income taxes. That means the top 1 percent of tax returns paid about the same amount of federal individual income taxes as the bottom 95 percent of tax returns.

In the face of these numbers, I find it hard to believe that anyone thinks somehow the rich are not paying their "fair share". And to think that anyone would support taking still more from the very people who provide jobs and capital makes even less sense to me.

The notion of "spreading the wealth" is one Marx would be pleased to hear about. It was Marx, after all, who popularized the notion of "From each according to his ability, to each according to his needs." Combined with "because they can afford it" and a skewed notion of "fair share" leads to a bad place.

The ultimate conclusion of this logic is a society where everyone "earns" the same amount of money no matter what their job is or even whether they work or not. Anyone who earns more than the equality line would be taxed for 100% of their income above the equality line. Anyone who earns less will be "given" money from the government to bring them up to equality line, even if their starting point is zero. Now, everyone has exactly their "fair share" of the national product, and the wealth was spread evenly. And those whose "earned" paid into the system more "because they could afford it".

We can see clearly what would happen in such a society. Those with abilities would quickly decide that their efforts are not worth anything more than anyone else's effort and they would abdicate. Soon, they will be forced to labor "for the collective good of society".

Ayn Rand's "Atlas Shrugged" explored this very topic. In that society, well, here's what Wikipedia says:

Looters and moochers

Rand's heroes must continually fight against the "Parasites", "looters", and "moochers" of the society surrounding them.

The looters are those who confiscate others' earnings "at the point of a gun" (figuratively speaking) —often because they are government officials, and thus their demands are backed by the threat of force. Some looters are following the policies of the government, such as the officials who confiscate one state's seed grain to feed the starving citizens of another state; others are exploiting those policies, such as the railroad regulator who illegally sells the railroad's supplies on the side. The common factor is that both use force to take property from the people who produced or earned it, and both are ultimately destructive.

The moochers are those who demand others' earnings because they claim to be needy and unable to earn themselves. Even as they beg for their help, however, they curse the people who make that help possible, because they hate the talented for having the talent they don't possess. Although the moochers seem benign at first glance, they are portrayed as more destructive than the looters—they destroy the productive through guilt and often motivate the "lawful" looting performed by governments.

Looting and mooching are seen at all levels of the world Atlas Shrugged portrays, from the looting officials Dagny Taggart must work around and the mooching brother Hank Rearden struggles with, to the looting of whole industries by companies like Associated Steel and the mooching demands for foreign aid by the starving countries of Europe.

Sanction of the victim

The Sanction of the victim is defined as "the willingness of the good to suffer at the hands of the evil, to accept the role of sacrificial victim for the 'sin' of creating values."

The entire story of Atlas Shrugged can be seen as an answer to the question, what would happen if this sanction were revoked? When Atlas shrugs, relieving himself of the burden of carrying the world, he is revoking his sanction.

The concept may be original in the thinking of Ayn Rand and is foundational to her moral theory. She holds that evil is a parasite on the good and can only exist if the good tolerates it. To quote from Galt's Speech, as presented in the novel: "Evil is impotent and has no power but that which we let it extort from us," and, "I saw that evil was impotent...and the only weapon of its triumph was the willingness of the good to serve it." Morality requires that we do not sanction our own victimhood, Rand claims. In adhering to this concept, Rand assigns virtue to the trait of rational self-interest. However, Rand contends that moral selfishness does not mean a license to do whatever one pleases, guided by whims. It means the exacting discipline of defining and pursuing one's rational self-interest. A code of rational self-interest rejects every form of human sacrifice, whether of oneself to others or of others to oneself.

Throughout Atlas Shrugged, numerous characters admit that there is something wrong with the world but they cannot put their finger on what it is. The concept they cannot grasp is the sanction of the victim. The first person to grasp the concept is John Galt, who vows to stop the motor of the world by getting the creators of the world to withhold their sanction.

The question "Who is John Galt?" is also answered towards the closing of the novel — John Galt is a man disgusted that non-productive members of society use laws and guilt to leech from the value created by productive members of society, and furthermore even exalt the qualities of the leeches over the workers and inventors. He made a pledge that he would never live his life for the sake of another man, nor ask another man to live for him, and founded an enclave, separate from the rest of the country, where he and other productive members of society have fled.

Here's a thought exercise. Everyone has someone they know who earns less than they do. Some friend who is always unemployed or underemployed and never has any money. You know that it's because they've made bad choices in their life. Now, what do you think if I told you it wasn't fair that you have more, and I'm going to take half of your income and hand it to that guy. If you think that's unfair, welcome to my point of view. If you think that's fair and think it's a good idea, why haven't you handed him your money voluntarily yet?

USA Today's pretty fair analysis of bailout causes

2008-10-13T16:17:00.000-07:00

I hope this was a front-page article (hard to tell in on-line version) and every reader of that paper studied the article carefully. It rightfully points at two big problems, recognizes both parties role, but rightfully attributes "government" as the primary cause, although it does seem to focus more on the role of Gramm's hedge-fund amendment compared and blame Democrats for fighting Bush's and then McCain's attempts to reign in Fannie and Freddy. When mentioned as a cause, the CRA is dismissed. So maybe not so fair and balanced.

No single government decision sparked the crisis, but collectively the candidates had a point: Both parties in Congress played important roles in setting the stage for the ongoing financial meltdown.
...
"The crisis was caused by government," Gramm says. He cites the Community Reinvestment Act, which he says "forced banks to make subprime (mortgage) loans" to people who couldn't afford them.
Democrats, including Harkin, and many economic analysts dispute that. As for what he learned, Harkin says, "Don't pay attention to Wall Street when it comes to issues like this."

Bailout train wreck

2008-10-12T17:35:00.000-07:00

Once again our good friend Bill has produced a must-read link. I have neighbor who stopped to chat while I was doing yard work and we got to talking about the bailout. He predictably ended up with some sort of "I blame Bush for this mess" comment. I stopped and explained to him about CRA, Fannie & Freddie, how Bush administration had tried to do *something* back in '03, and how as stupid a Bush might have been, at least this one thing you can't pin on him or his administration--the bailout program itself, sure, but not the mess the bailout is purported to clean up. At the end of the conversation, I told him to hang on a second, I have something for you to read -- I had printed this article out for myself since it was too long to read comfortably online, so I gave him my copy.

You might keep a copy on hand for just such an emergency.

It's a long journal article. Here's the official executive summary (emphasis mine):

Why did the mortgage market melt down so badly?
Why were there so many defaults when the econ-
omy was not particularly weak? Why were the se-
curities based upon these mortgages not considered
anywhere as risky as they actually turned out to be?
This report concludes that, in an attempt to in-
crease home ownership, particularly by minorities
and the less affluent, virtually every branch of the
government undertook an attack on underwriting
standards starting in the early 1990s. Regulators,
academic specialists, GSEs, and housing activists
universally praised the decline in mortgage-under-
writing standards as an “innovation” in mortgage
lending. This weakening of underwriting standards
succeeded in increasing home ownership and also
the price of housing, helping to lead to a housing
price bubble. The price bubble, along with relaxed
lending standards, allowed speculators to purchase
homes without putting their own money at risk.
The recent rise in foreclosures is not related em-
pirically to the distinction between subprime and
prime loans since both sustained the same percent-
age increase of foreclosures and at the same time.
Nor is it consistent with the “nasty subprime lend-
er” hypothesis currently considered to be the cause
of the mortgage meltdown. Instead, the important
factor is the distinction between adjustable-rate and
fixed-rate mortgages. This evidence is consistent
with speculators turning and running when hous-
ing prices stopped rising.

There are some more choice bits in there too, this is from the conclusions section:

The question that is being asked is the correct
question: how did it come about that our financial
system allowed such loans to be made, condoned
such loans, and even celebrated such loans? The
answers that are being given are not yet the correct
ones, however. The main answer that is being given,
that unscrupulous lenders were taking advantage of
poorly informed borrowers, does not fit the evidence
nor does it dig deep enough.
The “mortgage innovations” that are largely the
federal government’s responsibility are almost com-
pletely ignored. These “innovations,” heralded as
such by regulators, politicians, GSEs, and academ-
ics, are the true culprits responsible for the mortgage
meltdown. Without these innovations we would not
have seen prime mortgages made with zero down
payments, which is what happens when individuals
use a second mortgage to cover the down payment
of their first. Nor would we have seen “liar loans”
where the applicant was allowed to make up an in-
come number, unless the applicant was putting up
an enormous down payment, which was the perfect-
ly reasonable historical usage of no-doc loans (which
require minimal financial documentation).
The political housing establishment, by which I
mean the federal government and all the agencies
involved with regulating housing and mortgages,
is proud of its mortgage innovations because they
increased home ownership. The housing establish-
ment refuses, however, to take the blame for the flip
side of its focus on increasing home ownership—
first, the bubble in home prices caused by lowering
underwriting standards and then the bursting of the
bubble with the almost catastrophic consequences
to the economy as a whole and the financial diffi-
culties being faced by some of the very homeown-
ers the housing establishment claims to be trying to
benefit.

This Vent says it all

2008-10-07T08:04:00.000-07:00

In the AJC Vent column (random one-liner musing from anonymous readers):

I am afraid that McCain won’t deliver on his election promises, but I’m more afraid that Obama will deliver on his.

I think this sums up my opinion too.

AJC's Jay Bookman Opined on Obama's Tax Plan

2008-10-06T16:06:00.000-07:00

According to the headline: "McCain plan skewed toward affluent; Obama approach more balanced."

After launching the column by highlight McCain's flip-flop, Mr. Bookman proceeds to use analysis provided by the "nonpartisan Tax Policy Center" to repeat their conclusion that “Sen. McCain’s tax cuts would primarily benefit those with very high incomes. … Many fewer households at the bottom of the income distribution would get tax cuts.”

First of all, the Tax Policy Center is decidedly not non-partisan. It is a joint outcropping of the left-of-center Brookings Institution and the Urban Institute. The Brookings Institution's web site proclaims in progressive rhetoric that among their primary goals are to "foster the economic and social welfare, security and opportunity of all Americans" and to "secure a more open, safe, prosperous and cooperative international system". The Urban Institute was created by hthe Johnson administration to study the nation’s urban problems and evaluate the welfare state as embodied in more than 400 laws passed as part of the Great Society initiative and is still funded primarily by federal government contracts. I can hardly see either of these bodies as a bastion of impartiality.

To the rest of the comments, I say "Duh!" When you cut taxes, those benefiting the most, in absolute dollars, will be those who pay taxes. In an analysis of the 2006 IRS data, economists at the Tax Foundation determined that of the 136 million federal tax returns filed, roughly 43.4 million tax returns, representing 91 million individuals, will face a zero or negative tax liability.

A negative tax liability means that these people will not only be paying zero dollars in taxes, they will be receiving a bonus payment from the pockets of real taxpayers. Normally, this is through the Earn Income Tax Credit, which is an anti-poverty program that transfers between $2800 and $4800 from taxpayers to the working poor, provided they have children. However, nearly one-third of the more than $30B expended by this program is going to people who don't qualify (and many who have committed outright tax fraud by claiming it).

On top of that 43.4M filings, another 15 million households will not file a tax return. So roughly 121 million Americans—or 41 percent of the U.S. population—were completely outside the federal income tax system in 2006. And Mr. Obama wants to relieve millions more of their responsibility as citizens to help pay for the upkeep of the country, even in the smallest way. In fact, he wants to just give $1000 qualified families (many of which will now have negative tax liabilities). This is just wealth redistribution, and Karl Marx would be proud.

The Tax Foundation also pored over IRS data to discover that the lower half of tax filers (remember, this does not include the 15M who did not even bother to file) pay, collectively less than 3% of all collected income taxes. The evil, filthy rich, the top 1%? They paid over 40% of all collected income taxes, despite earning only 22% of the the income versus . That means that 1.35M filers paid more than 10 times the collective taxes collected from the 67.85M filers in the bottom 50%. The top 10% paid more than 47% of the total. What, exactly, then is their "fair share"?

Obama's plan will take an extra $788,959 per taxpayer in the top 0.1% (income over $2.8M). Two questions: what is that rich person not going to spending that money on, and do you really think that money will trickle down to the "working class" from the government that confiscates it?

We have a system of government and taxation wherein half the participants are, for want of a better term, free-loading on the system. The old saying is that "A government robbing Peter to pay Paul can count on the support of Paul."

Subprime videos on youtube

2008-10-02T17:40:00.001-07:00

Our good friend Bill has pointed these out to me. Worth watching.

This first one is bunch of clips from CSPAN covering a 2004 hearing on Fannie & Freddie.

This one is actually a slideshow (with some bad language).

Ups and Downs

2008-10-02T09:34:00.001-07:00

The news publication timeline being what it is, there ware a lot of letters-to-the-editors of the newspapers I read that cried about the 777 point market drop Monday. "Can't you people see we *need* this for working-class folks like me, I was really hurt by the market drop."

I light of Tuesday 500 point recovery, I wonder how many of them will be writing back to say "never mind"?

I also noticed this pattern this week:

Monday, passage of the bailout bill appears imminent--market tanks by 777 points (largest single-day loss).
Tuesday, the bill has been rejected by the House--market up over 500 points (3rd largest single-day gain).
Wednesday, slow news day--market stable, down 19 points.
Thursday, Senate passed a revised bill chock full of goodies on top of the $700B (and plenty of earmarks in in "must-pass" bill), currently down 250 points.

It looks to me like passage of the bill hurts the market more than non-passage. This bailout bill will further devalue to dollar, set a horrible precedent (like that hasn't happened already), and the earmarks will come to light far too late.

In 2 or 3 years, will taxpayers still be paying for this bailout and be expected to bail out the next big losers (maybe the auto industry will come back for more than the $25B already slipped to them this week while everyone was looking the other way).

Bailout blame: The Government

2008-10-01T11:50:00.001-07:00

I still find myself too swamped to make my own comments. But I thought I'd point out this article by an Harvard economist who argues from the same position I laid out earlier.

The current mess would never have occurred in the absence of ill-conceived federal policies.

So what should the government do? Eliminate those policies that generated the current mess. This means, at a general level, abandoning the goal of home ownership independent of ability to pay. This means, in particular, getting rid of Fannie Mae and Freddie Mac, along with policies like the Community Reinvestment Act that pressure banks into subprime lending.

The right view of the financial mess is that an enormous fraction of subprime lending should never have occurred in the first place. Someone has to pay for that. That someone should not be, and does not need to be, the U.S. taxpayer.

Let's toss in a column by the ever-erudite Thomas Sowell, who also calls out Barney Frank and points out that the Bush administration tried, unsuccessfully, to reign in Fannie and Freddie.

If Fannie Mae and Freddie Mac were free market institutions they could not have gotten away with their risky financial practices because no one would have bought their securities without the implicit assumption that the politicians would bail them out.

It would be better if no such government-supported enterprises had been created in the first place and mortgages were in fact left to the free market. This bailout creates the expectation of future bailouts.

Phasing out Fannie Mae and Freddie Mac would make much more sense than letting politicians play politics with them again, with the risk and expense being again loaded onto the taxpayers.

Something my mother sent me (funny)

2008-09-26T10:35:00.001-07:00

I'm sure this is making the email rounds and I cannot attribute the original author.

Subject: A Little Irish Humor
Date: Wed, 24 Sep 2008 00:28:58 +0000
An e-mail from Ireland

An email from Ireland to all of their brethren in the States...a point to ponder despite your political affiliation:

'We, in Ireland, can't figure out why you people are even bothering to hold an election in the United States.

'On one side, you had a pants wearing female lawyer, married to another lawyer who can't seem to keep his pants on, who just lost a long and heated primary against a lawyer, who goes to the wrong church, who is married to yet another lawyer, who doesn't even like the country her husband wants to run!

Now...On the other side, you have a nice old war hero whose name starts with the appropriate 'Mc' terminology, married to a good looking younger woman who owns a beer distributorship!!

What on earth are ya lads thinkin over in the colonies!

Bailout blame?

2008-09-21T19:29:00.000-07:00

You may have seen that Bob Barr has filed a lawsuit in Texas to keep Obama and McCain off the ballot there, since (he claims) they failed to follow Texas election law.

A blogger commenting on a article snidely remarked “With their [Libertarians] penchant for deregulation, I wonder how the markets would have reacted if they had been in charge for the last 8 years?”

I tried to overlook the partisan sneer on the Bush administration, but couldn't (even though it's not my Party). I point out that Democrats have been in charge of Congress for nearly two years and have done absolutely nothing that they could have done to rectify any problems they may have been concerned about. Similarly, President Clinton was supported by a Democrat-led Congress for six years of his term and did nothing. In fact, the current Administration tried to overhaul Fannie and Freddie in 2003 but was snubbed by powerful Democrats in Congress.

The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.

Under the plan, disclosed at a Congressional hearing today, a new agency would be created within the Treasury Department to assume supervision of Fannie Mae and Freddie Mac, the government-sponsored companies that are the two largest players in the mortgage lending industry.

The new agency would have the authority, which now rests with Congress, to set one of the two capital-reserve requirements for the companies. It would exercise authority over any new lines of business. And it would determine whether the two are adequately managing the risks of their ballooning portfolios.

The plan is an acknowledgment by the administration that oversight of Fannie Mae and Freddie Mac -- which together have issued more than $1.5 trillion in outstanding debt -- is broken. A report by outside investigators in July concluded that Freddie Mac manipulated its accounting to mislead investors, and critics have said Fannie Mae does not adequately hedge against rising interest rates.
''There is a general recognition that the supervisory system for housing-related government-sponsored enterprises neither has the tools, nor the stature, to deal effectively with the current size, complexity and importance of these enterprises,'' Treasury Secretary John W. Snow told the House Financial Services Committee in an appearance with Housing Secretary Mel Martinez, who also backed the plan.

It's very interesting now to notice who immediately opposed the idea and especially to read the comments of Barney Frank against this oversight (emphasis mine):

Significant details must still be worked out before Congress can approve a bill. Among the groups denouncing the proposal today were the National Association of Home Builders and Congressional Democrats who fear that tighter regulation of the companies could sharply reduce their commitment to financing low-income and affordable housing.
''These two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis,'' said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ''The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.''
Representative Melvin L. Watt, Democrat of North Carolina, agreed.
''I don't see much other than a shell game going on here, moving something from one agency to another and in the process weakening the bargaining power of poorer families and their ability to get affordable housing,'' Mr. Watt said.

I have said in an earlier posting that there is plenty of blame to go around., and I'm not trying to excuse any Republican involvement, I just can't stand it when someone knee-jerks a partisan comment.

This crisis was a long time brewing, but it was foreseen by many people, including Alan Greenspan and other Fed leaders, long ago. Congress knew about the problem and did nothing, mostly because Democrats fought regulation of Fannie & Freddie tooth and nail. I found a link to a Wall Street Journal chronology where the WSJ has focused on problems with Fannie Mae for a long time. Several of these articles name Mr. Frank as a ring-leader for changes that more than likely exacerbated the current crisis.

So determined are Barney Frank and Chuck Schumer to "do something" about subprime mortgages that they have come up with a proposal that is unnecessary, will do little to help distressed borrowers, and would increase the risk to taxpayers from Fannie Mae and Freddie Mac. Other than that, it's a fabulous idea.

One more note, in 1995 the Clinton Administration revamped the Community Redevelopment Act. Here's Wikipedia's entry on the law. It is interesting to note the name of the first company to take advantage of the changes the law wrought. It is also interesting to note that the Bush administration, as mentioned above, tried to insert some checks-and-balances into the system but Barney Frank and Democrats kept it from passing Congress.

In 1995, as a result of interest from President Bill Clinton's administration, the implementing regulations for the CRA were strengthened by focusing the financial regulators' attention on institutions' performance in helping to meet community credit needs. These revisions^[1] with an effective starting date of January 31, 1995 were credited with substantially increasing the number and aggregate amount of loans to small businesses and to low- and moderate-income borrowers for home loans. These changes were very controversial and as a result, the regulators agreed to revisit the rule after it had been fully implemented for seven years. Thus in 2002, the regulators opened up the regulation for review and potential revision.^{[citation needed]}

Part of the increase in home loans was due to increased efficiency and the genesis of lenders, like Countrywide, that do not mitigate loan risk with savings deposits as do traditional banks using the new subprime authorization. This is known as the secondary market for mortgage loans. The revisions allowed the securitization of CRA loans containing subprime mortgages. The first public securitization of CRA loans started in 1997 by Bear Stearns. ^[2] The number of CRA mortgage loans increased by 39 percent between 1993 and 1998, while other loans increased by only 17 percent. ^[3] ^[4]

An article in Forbes puts it succinctly: The Government Did It.

The government has promoted bad loans not just through the stick of the CRA but through the carrot of Fannie Mae and Freddie Mac, which purchase, securitize and guarantee loans made by lenders and whose debt is itself implicitly guaranteed by the federal government. This setup created an easy, artificial profit opportunity for lenders to wrap up bundles of subprime loans and sell them to a government-backed buyer whose primary mandate was to "promote homeownership," not to apply sound lending standards.

I never got around to answer the basic question, I got so sidetracked in pointing out the root of the problem can hardly be laid in the category of "failed Bush economic policies."

Some topical links

2008-09-18T10:30:00.001-07:00

I don't want to miss the chance to at least get these out even if I can't take time right now for commenting on them:

"Obamanomics"

WSJ on high tax rates vs economic prosperity

Democrats doling out "free gas"

And $50B more "free money" from Dems:

More mortgage fraud arrests (again *against* not by the mortgage companies)

AJC series on bailouts 1 2 3

Bail out for automakers coming? USA today (For, against)

Chuck Norris,the Fair Tax, and the pursuit of good government

ADD kids can't drive, Mommy's whining about kid losing license

More bailouts: $55B here, $85B there...

2008-09-18T07:32:00.000-07:00

and pretty soon you're spending more nationalizing companies than you are pursuing the war. according to USA Today, this year the federal government has provided $900B in "rescues and special loans".

This figure discounts the fact that now the US taxpayers are on the hook for about $4.5 trillion dollars after the government took over the liabilities of Freddie Mac and Fannie Mae. It only includes the expected expenditures to cover this years losses.

That includes the $30B we're on tap for in the bailout of Bear Stearns, where the government has loaned $30B to JP Morgan so they could buy out BS. The terms of the loan are way better than anything they could get anywhere except from the taxpayers.

The government skipped a chance to bail out Lehman brothers. Whew. But then 3 days later they basically nationalize a large insurance company buy "buying" 80% of the company for $85B dollars. In reality, what the government did was open a line of credit of $85B to the company, with 80% of the company as collateral. Of course, if the company continues downhill, the "loan" will not be paid back and the taxpayers are left owning 80% of a worthless company.

What caused this "sub-prime meltdown," which is claimed to be the root of all this market turmoil. Basically, mortgages were made to people who had no business borrowing that kind of money. The real question is why these loans were made in the first place?

It boils down to, I think, that it's easy to spend someone else's money. Banks were uneasy with easy credit and often turned down "subprime" borrowers. These are people who have a combination of factors like poor credit history, questionable income or job history, criminal records, or are borrowing more than they can comfortably repay. A subprime loan is more likely to be defaulted on by the borrower, and so carries higher interest rates.

It turns out that minorities are disproportionately represented in the subprime category. So the government, in 1988 ammended the Fair Housing Act to make it easier to claim discrimination. Since this opens banks up to what would usually be unfounded lawsuits just becuase they turned someone down for a loan (with good cause), the government at the same time offered to back these subprime loans. In other words, the goverment basically told banks "You have to give these loans out, pretty much to anyone who asks for one (especially if they're a protected minority). But don't worry, we'll buy those loans (through Freddie, Ginnie, Frannie), bundle them in lots and resell them. Of course, no one will really want to buy them since so many will default, so we'll sweeten the deal to the buyers by promising that taxpayers will make good on any losses." So the banks did what they needed to do, made the loans, and sold the paper to Fannie and friends.

And then...the banks turned around and bought the bundles right back from Fannie and friends! They weren't worthless, risky loans anymore, but had been converted into what amounted to Treasury Bonds.

But even Fannie and friends have some minimum standards, so not all these loans are in their hands. While all this was going on the Federal Reserve Bank had cut interest rates to the bone to stimulate the economy, while housing values were rapidly increasing. This allowed banks to justify making riskier loans by selling adjustable rate mortgages, 100% or even %110 financing, interest-only loans, etc. While these loans sometime make sense, they were also sometimes marketed to people as a way for them to get into a house when nothing else worked. That is, here's a loan that requires little or no down payment, minimum payments (at least in the short term), and if 3 or 5 years down the road you can't make payments (like the 3 or 5 year balloon payment, or if rates adjust upward sharply), the worst that is likely to happen is that you have to sell the house, pay back the loan, and pocket your profit -- the house will have appreciated by a lot in the meantime.

This had all the makings of a bubble waiting to burst. And it did. With inflation now becoming a problem, the Fed started to raise rates, which triggered ARMs to adjust rates upwards. With higher cost of borrowing, fewer people could get mortgages (and those high-risk loans dried up, since they didn't make much sens anymore). Fewer buyers means a downturn in housing values. Some people couldn't pay, and when they found out that their house was worth less than what they owed, badness ensued.

Now taxpayers are having to pick up the pieces of a problem that was, in large part, a direct result of the government interfering in the mortgage marketplace. Mortgages are essentially a commodity. The mortgage market simply needed regulation for real nondiscriminatory lending practices: banks must be able to demonstrate a risk-assessment based strictly on objective measures to justify a decision to grant or reject a loan or setting interest rates (as a commodity, there's not really much need to make subjective decisions) . They could require truthfulness and transparency, by regulating disclosure requirements (standard forms with standard content). Instead the government effectively became the nation's mortgage company.

It's not surprising that we're where we are.

Libertarian VP choice?

2008-09-15T06:13:00.001-07:00

Mrs. Percy has suggested that Verne Troyer run with Bob Barr on the Libertarian ticket.

The posters could read "Barr and Mini-Barr".

Teacher shortage

2008-09-15T05:46:00.000-07:00

On Sunday, the AJC ran a series of columns on a supposed "teacher shortage". I have not had a chance to read them all yet, but the first one I read was written by Jim Hubbard, who is the president of the Georgia Association of Educators.

The topic here is second-career teachers. These are people who have left a career to take up teaching. The basic tenor of the column was that 2nd career teachers may have experience doing something else, but they will not be able to be teachers unless they are re-educated themselves, as he puts it "these new teachers must be grounded in the preparation for the reality of our classrooms." This is necessary "no matter how well-versed they are in their real-life subject matter."

And I'm not sure what he means by these teachers will need to "slant pedagogy for more diverse learners." But if I had to guess I'd say he means don't actually expect anyone to learn from you, and certainly don't do anything so rash as to fail someone.

Of course, he also wants these new teachers to join the union.

Oh, and one last thing: "While we will never be in favor of any compensation package based solely on performance, we are very much open to the discussion and study of compensation models where performance could be a part of an overall package of educator pay."

A second column discusses a proposed pay change, where low-supply high-demand teachers like physics and calculus teachers would get paid more. Here's a few telling quotes:

“All teachers are special,” said Kelly Henson, executive secretary for the Georgia Professional Standards Commission, which presented the study to legislators. “We are not suggesting that differentiated pay only be extended to math and science teachers, but that is the right place to start.”
“You are slapping the other teachers in the face by saying you are not worth as much as science and math teachers,” said Barbara Wilson, co-president of the Gwinnett Association of Educators, who has a doctorate in language arts.

Once again, someone fails to understand that supply-and-demand applies to labor, and compounds the error by equating wages with value as a human-being.

Virtually any literate adult can teach a child how to read, to understand the parts of speech, and how to communicate. This is clearly evidenced by the number of children who learned to speak and read before they enter school. Far fewer people understand calculus or physics or chemistry well enough to effectively teach it to someone else. It should be plain then that the pool of "qualified" 3rd grade language arts teachers is much larger than the pool of qualified biology teachers. In fact, I would suspect that any math or science teacher at Ms. Wilson's school could effectively teach her class, while I was suspect that the opposite is not the case.

Small things I'd change if I was king

2008-09-10T08:30:00.001-07:00

These are the small things, not grand policy ideas or anything.

My first things are consumer-oriented:

No car commercial can feature "Professional drivers on closed course." I want a car that requires neither.
Gasoline cannot be sold for per-gallon costs that include that stupid 9/10ths of a cent. $3.219 is not something you can make change for if I buy exactly one gallon of gas. Just sell it for $3.22 and be done with this ugly charade.
Rebates are evil, but if as a producer you think you must use rebates there's some new rules. First, you may not advertise the after-rebate price. That TV is not $200 (after $100 rebate). It's $300 and a $100 rebate may apply. Second, the rebate redemption process must be sane: a form that human beings can fill out my name and address (not some 1" square I have to cut out from the box and microprint my life story onto), receipt, UPC. That's it. Then 4-6 weeks later you send a check. No tricks or gimmicks that allow you to disqualify 99.999% of all submissions.
If your ISP or cell phone provider advertises "Unlimited" use, then they're not allowed to disconnect you for "excessive use".

Unionizing Illegals

2008-09-10T08:03:00.000-07:00

I saw a few minutes of a movie called "Bread and Roses" on the IFC this morning while I was getting ready for work. Yes, I watch IFC. This movie, based on a true story, was about a guy trying to unionize illegal immigrants working as cleaning staff in L.A.

Indeed, I found an article about the main guy:

By 1995, Justice for Janitors, part of a nationwide effort led by the Service Employees International Union, had lifted wages for 7,000 L.A. County cleaners, many of them illegal immigrants, and won them paid vacation time and family health insurance. The janitors’ three-week strike in 2000 – the year the movie came out – pushed hourly pay to about $12 in downtown L.A.

Somehow it doesn't seem right that that illegal immigrants--people who have no right to work in this country and who are technically (administratively, at very least) criminals, many whom have committed multiple federal felonies just by being here--can turn around and use the laws of this country to agitate to improve the working conditions for jobs at which they should not even be working.

And they even went on strike. Did you know that in some cases striking workers are entitled to unemployment benefits after two weeks of strike time?

Next bailout?

2008-09-09T12:57:00.001-07:00

USA Today reported today that "Unemployment trust funds are running low in many states, making a federal bailout likely to keep the funds solvent."

No big surprise, bailout of Freddie and Fannie

2008-09-09T12:06:00.000-07:00

Congress and the Administration have teamed up to cover the losses of these mortgage behemoths. They essentially took them over as government operations, kinda like Hugo Chavez did for many industries in Venezuela.

Now, between the three of them (Fannie, Freddie, Ginnie), US taxpayers are on the hook for about half of the existing $12T in mortgage debt.

Oh, and by forcing the bail-out, the Government has driven the stock share prices of Fannie Mae down from $7 to about $1, Freddie Mac from about $5 to about $1. Given the market capitalization of these entities, this resulted in a net loss to the market of about $10.33B in one day. Of course, last October Fannie was trading at nearly $70 and Freddie was at about $65, so the majority of the meltdown was over (already lost $120B since last October).

What next?

We are also looking at bail-out for the auto industry ("too important to let fail").

The student loan industry is a mirror image of the mortgage industry and is likely to face a similar explosion. Government creates a perverse incentive (usually in the name of diversity) to loan money to people who cannot pay it back. As a government supported program, private lenders are willing to take more and more risk, pocketing the profits and turning to the Government to cover to losses.

9/11 gifts to victims families, Katrina support for 3+ years and still some have not bother to find a job or a place to live, unemployment benefits extended and re-extended (why bother to get a minimum wage job when you can collect 39 weeks of unemployment (soon to be extended another 13 weeks, so one year of unemployment payments). This list can go on and on.

Our Government is a classic enabler and we are all codependent. An enabler is a person who by their actions make it easier for an addict to continue their self-destructive behavior by rescuing the addict. The codependent party exhibits behavior that controls, makes excuses for, pities, and takes other actions to perpetuate the obviously needy party's condition, because of their desire to be needed and fear of doing anything that would change the relationship.

I forgot about Ginnie Mae

2008-09-09T12:02:00.000-07:00

Not only is the federal government in the mortgage business with Fannie Mae and Freddie Mac, they have a sister, Ginnie May. All three "companies" do essentially the same thing: buy mortgages from banks (i.e., supply banks with money) and bundle the mortgages up into a security instrument that is then resold to investors. Their "value-add" is the backing, real or implied, of the US Government--read taxpayers--so that if the mortgages are not repaid, then the Government will cover the losses.

Since I cannot explain a good reason why the Government is in the mortgage business, I surely cannot explain why they created not one but three distinct entities with about 95% overlapping missions.

Ginnie Mae was split off of Fannie Mae when Fannie Mae was recharted in 1968.

Fannie & Freddie

2008-09-01T21:38:00.000-07:00

The AJC (Atlanta Journal-Constitution) ran a series of columns & articles on Fannie Mae and Freddie Mac, but first, some questions:

Why is the federal government of the USA in the mortgage business? Some might argue that there is an inherent advantage in encouraging home-ownership. And that perhaps there might be a few people who need just a little help getting started, people for whom private mortgages appear to be unavailable. Even if you accept that, let's consider why they cannot get a private mortgage: bad credit, not enough income, criminal records all make it hard to get someone to lend you tens or hundreds of thousands of dollars. Why then should taxpayers be expected to lend these people money, and then politicians act shocked when they don't pay it back? You could argue about potential discrimination when other factors like the aforementioned are not relevant, but it seems to me that vigorous anti-discrimination regulation and enforcement of same would be a better role for government than setting up a public-cum-private bank like Fannie Mae.

And even if so far you still think Fannie may is a good idea, would you be as surprised as I was to find out that Fannie and Freddie, i.e. taxpayers, are holding the paper for 42% of mortgages in this country? Exposure measured in trillions of dollars, all set at the foot of taxpayers.

http://www.ajc.com/opinion/content/printedition/2008/08/31/fanfred.html

Fannie Mae and Freddie Mac, known as government-sponsored enterprises, have for decades played an important role in markets that bankroll American housing.

Fannie and Freddie, created to boost homeownership, own or guarantee at least 42 percent of the $12 trillion in U.S. residential-mortgage debt outstanding. They make money by buying home loans and mortgage securities, profiting on the difference between their borrowing cost and the yield on the debt.

They also guarantee and package loans as securities, charging a fee.

Fannie and Freddie have reported $14.9 billion in net losses for the past four quarters as loan delinquencies rose.

Fannie Mae Chief Executive Daniel Mudd announced a top management shake-up last week in a move to restore investor confidence.

Many investors and policy-makers are concerned that the companies do not have enough capital to withstand rising losses from homeowner defaults.

Last month, Congress authorized the Treasury Department to pump billions of dollars into the companies, if needed.

During the current housing crisis, Freddie and Fannie have been criticized for rewarding shareholders using private profits while relying on taxpayers to absorb losses.

Fannie Mae

In 1938, Fannie Mae was created during the presidency of Franklin D. Roosevelt. An inconsistent supply of mortgage financing at that time meant that millions of families could not buy homes, or were at risk of losing properties.

Congress “rechartered” Fannie in 1968 as a shareholder-owned company that funded its operations using private money from investors around the globe.

Freddie Mac

Chartered in 1970, Freddie Mac plays a similar role to Fannie Mae, undergirding what’s called the secondary mortgage market.

http://www.ajc.com/opinion/content/printedition/2008/08/31/housinged.html

Back in 2005, when the troubles of Fannie Mae and Freddie Mac weren’t yet commanding the front page so regularly, the government was already spending about $41 billion to subsidize housing directly.

More than triple that amount, or $147 billion, was foregone on indirect tax subsidies to homeowners. That chunk of change might have been used for any number of government projects: pounding percentages into fifth-graders’ heads, lowering the capital gains tax, declaring summer gas holidays. Phelps’ anti-house argument calls to mind the analysis of one of his Columbia colleagues, Michael Heller. Heller’s new book, “The Gridlock Economy,” posits that “too much ownership wrecks” the economy.

http://www.ajc.com/opinion/content/printedition/2008/08/31/fanned.html

As government-sponsored enterprises, Fannie and Freddie have long had one foot in the free market and the other firmly planted on Capitol Hill. To get their way through the years, both agencies have spent millions of dollars on campaign contributions, lobbyist fees and foundation grants unavailable to true government agencies. At the same time, the pair has been exempt from local and state taxes, giving them a financial advantage over truly private competitors. They also paid lower rates than their private competitors because investors assumed taxpayers would ultimately make good on their obligations, come what might.

In return, of course, Fannie and Freddie have played a valuable role in mortgage markets, buying home loans, repackaging them and selling the end products to investors. Millions of Americans likely would not own their homes today without assistance from those two agencies.

Even so, government should ask if there’s a better, more efficient way to undergird the market and deliver the same impact. Most likely, there is.

In analyzing the matter, Congress should start with the belief that the time may have come, as the Cato Institute urges, to start dismantling Fannie and Freddie as we have come to know them. That step would allow the private sector to gradually assume their role of risk-taking in the marketplace. At the very least, numbers need to be crunched and a spirited public debate should begin over the spreadsheet results and what they portend for Fannie and Freddie’s future.

Among the advocates for phasing out Fan and Fred is William Poole, a Cato Fellow and, until earlier this year, president of the Federal Reserve Bank of St. Louis. In a New York Times op-ed piece recently, Poole argued that “Fannie Mae and Freddie Mac are not essential to the mortgage market; if they were put out of business in an orderly fashion over five to 10 years, the market would pick up the business they abandon.”

http://www.ajc.com/opinion/content/printedition/2008/08/31/fannbox.html

The Housing and Economic Recovery Act of 2008 will provide crucial support for the housing market and … also establishes a series of landmark reforms that will put U.S. housing and mortgage finance on solid footing for the long term. Chief among these is the establishment of a new regulatory framework for the federally chartered housing enterprises that are at the center of the mortgage market: Fannie Mae, Freddie Mac and the Federal Home Loan Banks.”

—- Daniel H. Mudd, president and chief executive officer, Fannie Mae

“Fannie and Freddie’s continued activity is central to the speed with which we emerge from this housing correction and remove the underlying financial-market and financial-institution uncertainty. The temporary liquidity and capital backstops included in this new [housing recovery] law are aimed at supporting the short- and longer-term stability of financial markets, not just these two enterprises.”

—- Treasury Secretary Henry Paulson, in a July 31 speech

“Congress and the president are congratulating themselves for bailing out Fannie and Freddie and imposing more regulatory control, with the excuse that they pose a threat to financial market stability. A better solution, however, is to make these and other government-sponsored enterprises play by the same rules as other businesses, and to end the distortions caused by federal subsidies.”

—- Daniel J. Mitchell, Senior Fellow, Cato Institute

"Don't come in here!"

2008-09-01T21:20:00.000-07:00

My nephew was about 5 or 6 and was visiting our house. During dinner he proclaimed he had to use the bathroom, so off he went. After about ten minutes or so, he hadn't come out. I had finished eating so I knocked on the door to remind him his food was getting cold and asked if he was coming out soon.

"Don't come in here!" he stridently proclaimed. Since I could hear noises that did not sound like he was just sitting there waiting for things to happen, I knocked again and asked him if everything was O.K.

"Don't come in here!" again. More sounds.

I went in. He started screaming "Don't come in here! Don't come in here!" as soon as he heard the doorknob turning.

Scene: pants around his ankles, a plunger fixed in his little hands, the sink was running full blast, the toilet was edging toward overflowing the rim with what appeared to be about 8000 sheets of toilet paper roiling around.

Ever since in my family "Don't come in here!" is invoked, usually in falsetto, whenever you've screwed up big-time and are about to be busted. Somehow it seemed like an apropos title for my various rants.

"Don't Come In Here!"

truly malicious, ignorant misinterpretation...deserves only contempt

The rich *are* "job creators"

Real Stimulus: Eliminate corporate income taxes

Lather, rinse, repeat

Would you believe? 70% vs 35% tax rate...

Futility of "Taxing the rich" as the solution to the problems

Global Warming? Part II

Global Warming?

Crazy Eddie

45000 without insurance die?

"8 years of Republican control"

"Tea Partiers don't get it"

The Northeast and west coast are subsidizing the south and heartland

Tyranny of Harry Reid and Nancy Pelosi

More impudent thoughts on health care

Impudent thoughts on health care

Democrat predictions were correct!

Government health care, public housing?

Taxes:politicians as ?:?

Social Security vs 401k

Socialism for class grades

You probably missed this in Saturday's paper

Interesting Tax Figures

Tea Party

President's virtual Town Hall meeting: sham

Vent and an answer

Recession hitting latinos, blacks harder

AIG bonuses returned--tax implications?

"Shoot it, whitey!"

Supreme blunder?

Who owns banks now?

Read the stimulus bill

Declining home prices not the end of the world

Gregg is out

Racial profiling

Math problems in Congress?

Working families

Tragedy?

The emperor's missing clothes?

JK Harris and tax cheats for Cobinet positions

"Stimulus" package by analogy

Tax relief?

With all due respect

McD's figures it out

Forgive my cynicism

More "do as I say, not as I do" from the Dems

More irony

They fail to see the irony

Geithner had to know

Geithner again: now I'm pissed

Perhaps I was too easy on Geithner

Dems: Do as I say not as I do?

Why am I not surprised?

Obama the "Ice Cream Man"

My stimulus plan

What Roland Burris should have said

AJC swipes at Bush again

Reading "The Forgotten Man"

Bailout pork

Wow, just wow

So-called income inequality

Tragedy of American Compassion

My next car will *not* be a Chrysler/Dodge (or GM)

Comparing GM against Toyota

Yes, I've been too busy to update

Social Security privatization

Obama's Language

Fast-food ad ban called for

And the pigs come back to the trough, again

Those who forget history...doomed

Police not interested in drunk driver

Other bailouts continue

Next up on bailout, subsidies list

Tipping point

Health care is not a right

Stupid vent in AJC today

Great Vent in the AJC today

"Because they can afford it" part 2

"Because they can afford it"

The rich are "job creators"

My next car will not be a Chrysler/Dodge (or GM)