Some people do have more to give – problem is they don’t have enough
With the White House and Republicans on another collision course over the federal budget—this time due to the looming expiration of the country’s authorization to borrow—there is renewed attention on taxing the rich to solve our fiscal dilemma. President Obama, in his April 13 speech outlining his plan to reduce the deficit, urged eliminating the Bush tax cuts for people making more than $200,000. Democrats are quick to point out that federal taxes in 2011 will be 14.4 percent of the gross domestic product—the lowest since 1950. http://bit.ly/gbVTg6 Many on the left are looking forward to the expiration of the Bush tax cuts at the end of 2012 as an opportunity to get a “fairer” amount of taxes the rich and help lower the deficit at the same time.
Cutting Defense Spending Growth Does Not Necessarily Mean Cutting Defense
Here’s a bit of supposedly irrelevant information that provides an insight into spending at the Pentagon. Did you know the Defense Department spent $100 millionon unused flight tickets and never bothered to collect refunds—even though the tickets were entirely refundable? http://bit.ly/aE37KH
This cavalier attitude toward wasteful spending is of course rife throughout Washington. But this piece of trivia helps explains why the Pentagon cannot be exempt when budget planners look for ways to cut the federal budget. The Congressional Budget Office has even come up with some reasonable ideas to hold down defense spending, from freezing future growth to caps on raises to limiting military health care. http://bit.ly/jtRAWg
Only an Irrational Company Would Put Itself at a 13% Disadvantage to Choose to Add Jobs in America
Look at the graph below and it is easy to see what is wrong with that picture.
Combined Corporate Tax Rate
The US government is signaling to business that if they have a choice there are better places than the U.S. to invest new jobs and grow. Any first year financial analyst would recognize that the return on investment needed to invest in America must be at least 13% better than other OECD (Organization of Economic Co-Operation and Development made up of countries with established, emerging, and developed economies committed to global development) countries in order to make sense.
The U.S. Loses When States Wage Battle Against Each Other to Bring in Business
In times of trouble, Americans should work together to solve our problems; fighting amongst each other just creates more troubles. While the U.S. has been brought to its knees by the worst economic period since the Great Depression, states continue to fight with each other to attract businesses. Their weapon of choice, the state-level corporate income tax rate.
Perception vs. Reality of Corporate Taxes, Why is There a Difference?
Debt, Deficit, Taxes are the talk of the town right now. Whether government spending and taxes are too high or too low is a confounding issue. Right now there is a consensus that the current corporate tax rates scare away foreign business and push U.S. companies into investing abroad. Neither of these actions helps the U.S. get out from under its mound of debt. In all of the confusion, there is a solution that helps both businesses and the U.S.
The Debt Ceiling & the Missed Opportunity in Social Media
Like many Americans I have become fed up with the debt ceiling debate. How many more articles do we need to read about potential solutions that go nowherein the contentious nature of today’s Washington? The situation got so out of hand that President Obama and House Speaker Boehner spoke directly to the American people to drive support for their plans. The President specifically said “I’m asking you all to make your voice heard. If you want a balanced approach to reducing the deficit, let your member of Congress know.” Calls and emails to the White House and Congress surged, but it seemingly has had little impact, if any at all.
Deficient Deficit Reductions
The recently passed debt ceiling deal, the Budget Control Act of 2011, is already being attacked for its deficiencies. The bill was a necessary short-term fix for raising the debt ceiling to prevent a governmental default. However, it does not adequately address long-term fiscal problems. Reflecting the deal’s inadequate fiscal reduction plan to stabilize the government's debt, Standard & Poors downgraded the US credit rating from AAA to AA+.
USPS Unions Solution Fails to Deliver
The United States Postal Service is in trouble.
Since the early 70’s the USPS has funded by the sales of stamps and shipping charges, and as a result has been able remain self-sufficient without the aid of taxpayer money. However, as is the case with many government-run operations, regulations and tough times are coming together to send it to the precipice of default. If the USPS cannot make a $5.5 billion payment to fund future retirees’ health benefits by September 30th, trouble looms.
While its competition in the shipping industry, Federal Express and the United Parcel Service, have seen profits and income rise over the years, the USPS is experiencing drops in volume and income, and has nearly doubled its debt over the past two years.
Job Creation? With The American Jobs Act, It’s Still A Game Of Chance.
In early September, President Obama asked Congress to pass the American Jobs Act, a bill that would call for $447 billion to create jobs. Immediately Republicans were opposed to the idea as the proposal itself asks for higher taxes on the top earners in the US who are responsible for creating jobs as well. If that’s not enough, Starbucks has teamed with the Opportunity Finance Network for the “Create Jobs for USA” initiative, which designed to help small business to create jobs and stimulate the economy.
Job Creation? With The American Jobs Act, It’s Still A Game Of Chance.
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In early September, President Obama asked Congress to pass the American Jobs Act, a bill that would call for $447 billion to create jobs. Immediately Republicans were opposed to the idea as the proposal itself asks for higher taxes on the top earners in the US who are responsible for creating jobs as well. If that’s not enough, Starbucks has teamed with the Opportunity Finance Network for the “Create Jobs for USA” initiative, which designed to help small business to create jobs and stimulate the economy.
Cutting Through the Spin: What Obama’s Budget Reveals
By Charles Kadlec
This blogpost originally appeared on Forbes.com, February 20, 2012.
The federal budget is a dense document totaling hundreds of pages of numbers. Yet, for all of the digital precision, the use of various “base line” budgets, numbers that span 11-year time frames and other arcana known only to Washington insiders and budget mavens obscure more than they reveal about what the federal government is up to.
To cut through the haze and spin, I chose to focus on President Obama’s “Proposed Budget”, and to compare all projections with actual 2011 levels. I came away with four observations:
Tim Geithner Covers for Corruption On Pennsylvania Avenue
By Charles Kadlec
This blogpost originally appeared on Forbes.com, March 5, 2012.
Last Friday, Treasury Secretary Timothy Geithner charged in a Wall Street Journal op-ed that those who oppose the Obama Administration’s regulatory regime for the financial services industry “seem to be suffering from amnesia about how close America came to complete financial collapse under the outdated regulatory system we had before Wall Street reform.” Au contraire, Secretary Geithner, it is you who choose to ignore and misrepresent the lessons of the financial crisis by perpetuating the myth that the source of the crisis was a lack of regulation.
No such thing as a temporary tax break
Oh, temporary tax breaks, music to the ears of their beneficiaries and the bane of CBO Director Douglas Elmendorf who must make budget projections accounting for them.
If it weren’t for the recent explosion in the number of tax breaks, they wouldn’t be such pesky pieces of economic policy. In 1998, there were only nine temporary tax breaks. By 2009, there were 73; meaning that in more than 10 years the number of temporary tax breaks built into the tax code has increased by 711%.
The Rising Price Of the Falling Dollar
By Charles Kadlec
This blogpost originally appeared on Forbes.com, March 19, 2012.
Do you know why oil and prices are moving sharply higher? Some blame the oil companies, charging they are manipulating prices. Others cite U.S. sanctions on Iran and the threat of a military encounter that would disrupt the flow of oil from the Middle East.
Speculators, too are blamed for ostensibly bidding up the price of oil. In the political arena, President Obama is taking credit for increased domestic oil production even as his critics point out the slow pace of drilling permits issued by his Administration soon will hamper additional increases in the U.S. oil production.
Yet, the basic reason for higher energy prices is being overlooked, even though it is right before our eyes: Oil prices are up because the value of the dollar is down. Our common sense hides this source of higher prices because we view the dollar as fixed, and prices as moving. News reports explain the sharp rise in consumer prices in February were caused by higher energy and food prices, implying that higher prices cause inflation. Of course, higher prices do not cause inflation. Higher prices are inflation.
Our Debt, Not Our Children's
By Deroy Murdock
This article originally appeared in National Online Review March 2, 2012.
When explaining the dangers of America’s ballooning national debt, fiscal conservatives unwittingly sabotage their cause by invoking “the children.” They should spend lots more time discussing how federal red ink harms adults today.
Tying debt reduction to future generations causes two problems:
First, if America’s children will pay off the national debt, why sweat it now? Washington’s spendaholics will clutch at any available excuse to keep federal spending grinding forward. If the debt only will vex America’s kids, it clearly needs no attention for another decade, maybe two. So, until then, PARTY!
The Picture Worth A Trillion Dollars: Inside the New Debtor’s Prison—and the Key Out
By Charles C. Johnson
“Boys and girls go to college to get more knowledge,” goes the old rhyme, but can they afford it? In our “knowledge-based” economy, it’s getting harder and harder to get knowledgeable, as higher education is priced higher and higher.
California and Washington Are Fond of Fixing Their Spending Problems by Taxing the Rich
As the entire country (except for that area known as Washington, D.C.) works to get out of this financial rut, we are starting to see the same economic problems on the local level as we have seen on the national level.
Last week California Gov. Jerry Brown announced that the Golden State has a projected deficit of $15.7 billion. At least it wasn’t the same as our national deficit of $1.3 trillion.
Left to our own devices - why the Medical Device Tax is a bad idea
By Charles C. Johnson
“An unlimited power to tax involves, necessarily, a power to destroy,” Daniel Webster argued in McCullough v. Maryland (1819).
Obamacare, with its unlimited power to regulate health care, might just wind up destroying the medical devices market with its 2.3% tax.
The so-called “device tax” is expected to raise $28.5 billion from 2013 to 2022. It applies most deleteriously to gross sales, not to profits, affecting the startups and mid-sized companies most likely to advance well-being. The tax applies to everything from cardiac defibrillators to artificial joints to MRI scanners, affecting millions of Americans. To understand how harmful the tax is, consider a hypothetical company with a $1 million in sales with only $100,000 in profits. Thanks to the tax, nearly 25% of your profits would be taken. Given the long lag time idea to market, medical device companies often take a long time before they turn a profit, but under Obamacare, they would still need to pay profits on those sales. Indeed the $20 billion is nearly double the annual amount the medical devices company spends on research and development.
Obama – A Failed Experiment
By Richard Callahan
Job creation almost nil, unemployment increasing, the left is angry, the right is up in arms and the center is grumbling. What is wrong with this great experiment that promised so much?
Almost 4 years ago an eloquent, energetic, charismatic political outsider, Barack Hussein Obama, burst upon the scene. He arrived at a time of great economic turmoil and dissatisfaction with the regime in power and promised sweeping change. He promised change from an economic downturn gripping the country. He promised new, forceful leadership in which all citizens of the country would be united as one and prosperity and economic vibrancy would once again be restored. He promised American international leadership and the restoration of the American dream. Sadly, his promises have proven to be empty rhetoric and his policies have wreaked destruction on the unity of America, it's economy and the hope of so many Americans who believed his false prophecy.
Data Matters: The 1986 Tax Reforms
By Tammy Frisby
This blogpost originally appeared on Advancing a Free Society, on June 12, 2012.
This week’s installment of Data Matters features data presented by Tammy Frisby, a research fellow at the Hoover Institution who also teaches in the political science department and public policy program at Stanford.
This week on Capitol Hill, there was renewed attention to the looming Taxmaggedon (or Taxmageddon; take your pick), which involves, among other pending tax code changes, the scheduled expiration of lower tax rates on income, dividends, and capital gains, and the end of the extended payroll tax holiday. There is now more public talk from senators and members of Congress about using the threat of Taxmaggedon in January 2013 to build a legislative coalition for a sweeping tax overhaul that would preempt the economic and political damage that Taxmaggedon would wreak.
Can we prevent a debt-driven economic collapse without reforming entitlements?
By James D. Agresti and Dustin Siggins
If the U.S. government continues with its current tax and spending policies, children born this year will be saddled with a crippling publicly held debt that is more than twice the size of Japan's by the time they turn 30 years old. This grim picture, projected by the Congressional Budget Office (CBO) in its newly published annual long-term budget outlook, expects U.S. publicly held debt to grow from 73% of GDP by the end of 2012 to 247% of GDP by 2042.
Worse still, the CBO projects that current policies will continue to drive the U.S. deeper into debt, and by the time today's newborns reach 38 years of age in 2050, the major federal healthcare programs and Social Security will consume all federal revenues, leaving nothing for any other function of federal government or even interest payments on the national debt.
Disability Ranks Outpace New Jobs In Obama Recovery
By John Merlin
This piece originally appeared in Investors Business Daily on July 6th 2012
More workers joined the federal government's disability program in June than got new jobs, according to two new government reports, a clear indicator of how bleak the nation's jobs picture is after three full years of economic recovery.
The economy created just 80,000 jobs in June, the Bureau of Labor Statistics reported Friday. But that same month, 85,000 workers left the workforce entirely to enroll in the Social Security Disability Insurance program, according to the Social Security Administration.
The disability ranks have outpaced job growth throughout President Obama's recovery. While the economy has created 2.6 million jobs since June 2009, fully 3.1 million workers signed up for disability benefits.
The Governing Elite Are The Greatest Threat To America's Middle Class
By Charles Kadlec
This article orginally appeared in Forbes on July 24th, 2012
The crisis of the governing class is intensifying. Last week:
• The 100 billion euro bailout of Spanish banks and massive tax increases to narrow the government’s budget deficit are followed by a rise in interest rates on Spanish government bonds to a euro-record high.
• San Bernardino became the third California city in the past month to file for bankruptcy.
• Faced with a budget crisis that threatens to eliminate thousands of teachers, California’s government voted to spend more than $3 billion on a high-speed train to nowhere.
• New research showed strong evidence that increased government spending reduces economic growth.
Their effort to refashion society by redistributing income and regulating markets is now hitting the reality of insufficient cash flow. Even worse, the governing elite’s self-love, sense of noble entitlement and arrogant belief that their good intentions trump bad results have led to a series of policy blunders that have destroyed jobs and businesses in the productive private sector, intensifying the government debt crises here and abroad.
Fourth California Bankruptcy Comes Knocking
By Michael Lombardi
This article orginally appeared in Profit Confidential on July 23rd, 2012
Just outside Los Angeles is the City of Compton, home to 93,000 people…a city running out of money. As the city treasurer eloquently put it, he has $3.0 million in cash and $5.0 million in bills due in the next month. (Source: Reuters, July 18, 2012.)
If debt restructuring decisions are not made soon, the City of Compton could file for bankruptcy as early as September.
Due to the fact that Compton has a $43.0-million budget deficit hole, it has been unable to secure a line of credit to get it through a difficult period. The reason why it can’t secure a line of credit is that the budget for 2012 is forecasting a further budget deficit of $9.0 million!
Blink! U.S. Debt Just Grew by $11 Trillion
By Laurence Kotlikoff and Scott Burns
"Republicans and Democrats spent last summer battling how best to save $2.1 trillion over the next decade. They are spending this summer battling how best to not save $2.1 trillion over the next decade.
In the course of that year, the U.S. government’s fiscal gap -- the true measure of the nation’s indebtedness -- rose by $11 trillion.
The fiscal gap is the present value difference between projected future spending and revenue. It captures all government liabilities, whether they are official obligations to service Treasury bonds or unofficial commitments, such as paying for food stamps or buying drones.
Some question whether “official” and “unofficial” spending commitments can be added together. But calling particular obligations “official” doesn’t make them economically more important. Indeed, the government would sooner renege on Chinese holding U.S. Treasuries than on Americans collecting Social Security, especially because the U.S. can print money and service its bonds with watered-down dollars.
For its part, economic theory sees through labels and views a country’s official debt for what it is -- a linguistic construct devoid of real economic content. In contrast, the fiscal gap is theoretically well-defined and invariant to the choice of labels. Each labeling choice changes the mix of obligations between official and unofficial, but leaves the total unchanged."
Click here to read the entire article
President of the United States of Decline
This article originally appeared on The National Review Online on October 5, 2012
Slip slidin’ away . . .
Why does America seem to be slouching? Multiple measures have found this country going down, down, down since President Obama’s inauguration.
Obama Drowns in Red Ink
This article originally appeared on the National Review Online on October 19, 2012
"Today I am pledging to cut the deficit in half by the end of my first term in office,” President Obama boldly declared on February 23, 2009. He added that this “means taking responsibility right now, this administration, for getting our spending under control.”
Among Obama’s parade of disappointments, this vehicle may be the most dangerous.
With the Vast Deficit, Where is Our Economy Headed?
The federal deficit, currently $1.1 trillion, is now about 7 percent of our economy or gross domestic product (GDP). Although the deficit was even higher by this standard in 2009, at 10.1 percent of GDP, both figures are historically high numbers in the post-World War II era, according to the Congressional Budget Office’s most recent Monthly Budget Review.
When the government borrows on the scale that Washington has been doing over the past decade, it reduces the funds available for private lending and therefore the investment activities that fuel the economy. Concerned observers have raised the possibility, unless substantial deficit reduction occurs, of a long-term trend of higher interest rates and slow growth.
