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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.
U.S. economic growth is staggering toward a second recession because of unsound political ideas and shortsighted implementation of ideological policies. While there are those that insist that our economic problems stem from rising taxes, ever-growing regulations, and mounting uncertainty, the real fundamental problem is lack of demand.
It’s not a tax issue. While the top marginal income tax rate was lower between 1988 and 1992 than it is today, since 1950 top tax rates have been lower less than 10% of the time. And, since 1960, the effective tax rate for highest income earners is either the lowest, or very close to the lowest, due to the capital gains tax rate and other deductions.
More concerning is that the tax cuts for the wealthy and corporations, which Bush enacted and Obama continued, have shown no positive effect. In fact, the Congressional Research Service found that by "almost any economic indicator, the economy performed better in the period before the tax cuts than after the tax cuts were enacted.
It’s not a regulation issue. According to the Bureau of Labor Statistics’ Mass Layoff Statistics, a program that collects reports on mass layoff actions, layoffs caused by regulation has been insignificant and has actually been lessening under the Obama administration.
By Charles Kadlec
This blopost originally appeared on Forbes.com, February 6, 2012
The Federal Reserve Open Market Committee (FOMC) has made it official: After its latest two day meeting, it announced its goal to devalue the dollar by 33% over the next 20 years. The debauch of the dollar will be even greater if the Fed exceeds its goal of a 2 percent per year increase in the price level.
An increase in the price level of 2% in any one year is barely noticeable. Under a gold standard, such an increase was uncommon, but not unknown. The difference is that when the dollar was as good as gold, the years of modest inflation would be followed, in time, by declining prices. As a consequence, over longer periods of time, the price level was unchanged. A dollar 20 years hence was still worth a dollar.
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:
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.
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.
Speaker of the House John Boehner, House Majority Leader Eric Cantor and their fellow House Republicans should claim credit for this jobs recovery. It never would have happened had they not stopped the counter-productive fiscal policies of the Obama Administration — starting with blocking the job killing increase in personal income tax rates that otherwise would have taken place on January 1, 2011, and then last fall refusing to vote for yet another round of wasteful “stimulus” spending and money losing investments in “green jobs."
By Michelle Minton
This blogpost first appeared on Open Market, May 24, 2012.
Today, the Senate will vote to reauthorize and modify the Food and Drug Administration’s (FDA) prescription drug and medical device user-fee program (S. 3187). During debate on the measure, Senator Dick Durbin (D-Ill.) announced plans to introduce an amendment to give the FDA more power over supplements such as vitamins and energy drinks. While Sen. Durbin is selling the amendment as moderate, commonsense legislation, its passage would significantly increase the financial and regulatory burden on supplement companies — especially small ones. Worst of all, it would do nothing to increase consumer safety.
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.
The campaign rhetoric about government as our guardian against abuse by big business distracts us from its burdens upon small business. And those should concern us more—partly because government is a monopoly and therefore inescapable. In addition, the big guys in the marketplace can usually live with more regulation and higher taxes. The little guys can’t.
President Obama’s “you didn’t build it” remark, blurted out in a pro-government riff at a recent campaign stop, was a defiant response to small-business owners’ natural tendency to claim moral stature based on their hard work
Why does America’s economy feel like an SUV that is running on fumes? The Obama administration’s laughably rigid enforcement of a Baby Bush–era ethanol mandate typifies today’s regulatory climate. When Uncle Sam governs with a tire iron in his hand, U.S. companies wisely pull off the road and pray for new management.
The Environmental Protection Agency has slapped a $6.8 million penalty on oil refiners for not blending cellulosic ethanol into gasoline, jet fuel, and other products. These dastardly petroleum-mongers are being so intransigent because cellulosic ethanol does not exist. It remains a fantasy fuel. EPA might as well mandate that Exxon hire leprechauns.
Why is America’s economy hogtied? For one answer, consider the excellent chart released Tuesday by the Republican staff of the Congressional Joint Economic Committee (JEC). With devastating clarity, it illustrates the miles and miles of red tape that bind the hands of entrepreneurs and CEOs like those of hijacked jet passengers. Regulation is a major and mounting cost that consumes scare resources — namely growth capital, management time, and basic patience.
The U.S. economy remains in the grip of a growth recession, and there is no relief in sight. Slow growth means continued high unemployment as workers bear the brunt of the burden of President Obama’s failed economic policies. Continued slow growth also means trillions of dollars will be added to projected deficits and more contentious battles over spending and taxes. But, corporations appear to have adjusted to a plodding economy by cutting costs enough to be on their way to reporting record profits, driving stock prices to within reach of their highs hit before the Great Recession.
Economic activity in the fourth quarter was flat, as overall GDP contracted at a teeny tiny 0.1% annual rate. Two one-time events – a 22% annual rate of decline in defense spending and a reduction in inventories subtracted about 2.5 percentage points from the growth rate. But, these were offset by the recovery in residential investment and consumer spending on durable goods which was boosted in part by an aging auto fleet feeding new car sales. Accelerated bonus payments of $45 billion (at annual rates) and dividend payouts of – get this — $317 billion artificially inflated personal income and the savings rate during the quarter as individuals scramble to protect as much income as possible from the Obama tax increase.