by | BLOG, COVID, ECONOMY, FREEDOM, GOVERNMENT, NEW YORK, POLITICS
As a lifelong New Yorker and fan of Jerry Seinfeld, I really wanted to like CNN’s article,“Jerry Seinfeld is right about New York’s future.” The more I read it however, the more delusional it became until it was outright laughable. The author, Jeffery Sachs, attempts to explain why New York will not fail and he’s right that the city has had tough times before. He’s correct that there will be a day of reckoning. But he is utterly incorrect that this reckoning is “between the superrich and the rest.”
Sachs has decided to lay the blame of the current state of New York City on the feet of the highest income earners, outright suggesting that the rich have gotten richer on the backs of those experiencing financial desperation and hunger due to the pandemic. It’s not the elected officials. It’s not the rioters. It’s not the bungled COVID-19 responses. It’s the billionaires. You can’t make this up:
“NYC has more billionaires than any other city in the world — 111 in 2019. They like NYC, like the rest of us. They depend on NYC for their vast fortunes. And many have enjoyed astounding windfalls of wealth this year as frontline workers around them have died or faced eviction. The true challenge for New York City is not technology or even the pandemic. It is basic decency. A city survives and thrives as a living breathing social organism, one that acts together for the common good. The billionaires must be the ones paying higher taxes to keep the City’s schools, hospitals, public transport and social services running as NYC picks itself up from the crisis.”
What Jeffery Sach either fails to realize or purposefully omits is that the billionaires are already paying far in excess of any rational share of taxes to keep the City’s schools, hospitals, public transport and social services running as NYC picks itself up from the crisis. Highest income earners pay the top rates, including 8.82% in state income taxes along with an extra 3.876% in NYC income taxes. Add to that the 40.8% marginal federal income tax rate — and billionaires pay an income tax rate of over 53%! That’s 119 people paying 53% of their taxes for $8.5 million people and justice warriors want them to pay more? It’s not like these billionaires are using more services.
What’s really going on is that Jeffery Sachs is helping to shape the narrative that billionaires need to pay (more of) their fair share. Is it any coincidence that a new “Make Billionaires Pay” campaign by progressive lawmakers and activists is being debated right now in New York as some sort of a budget justice initiative? They want to add a new form of capital gains tax on those exceeding $1 billion in assets.
A fundamental principle of our American heritage and history says that you don’t take something from somebody just because they have it. That is the approach of a crook. When Willie Sutton was asked why he robbed banks, he famously replied, “because that’s where the money is.” Of course it’s a joke, but it seems like de Blasio didn’t get the joke. Crooks do that, not civil society. As Walter Williams said, “If one person has a right to something he did not earn, it means that another person does not have a right to something he did earn.”
Rather than cutting spending and government services, these fiscally ignorant crusaders take the easy way out and blame the very people who provide the vast majority of the income NYC receives–and then subsequently squanders through bad policy and abysmal leadership. But they aren’t satisfied. They want more. And unlike Jerry Seinfeld, that’s just not funny.
by | BLOG, COVID, ECONOMY, EDUCATION, FREEDOM, GOVERNMENT, NEW YORK, POLITICS
The NYC public schools are now supposed to begin opening on September 29, but unions continue to be apprehensive about in-person instruction. De Blasio already delayed school opening twice this year after ongoing threats of a teacher strike, citing “concerns raised by our labor partners.” On the other hand NYC charter and private schools have a variety of re-opening options other than virtual: from fully in-person to hybrid to outdoor classrooms. The contrast in competency is astounding.
The schools have been fully closed for six months because of COVID, and it’s not like educators didn’t know that their singular task of providing education to children would resume in the fall. Nor are NYC public schools the only education system to face COVID. Virtually the entire country has had to come up with plans to safely re-open schools, and yet NYC public schools continue to be unprepared and incompetent.
De Blasio has proven incapable of negotiating with the unions, and in doing so, he has let down students and parents. This inability to effectively execute a plan to help students learn is perhaps the strongest argument to date as to why charter and private schools should really be the models we move towards in order to provide quality 21st century learning to our children.
by | BLOG, COVID, ECONOMY, POLITICS
I was annoyed to read an article as ridiculous as Alan Blinder’s “Will Congress Ever Break the Covid Relief Standoff?” in which Blinder puts the blame on Senate Republicans. In fact, the entire premise of the article is that “Senate Republicans resist passing a new bill, even though it’s needed and politically expedient.” But this is simply untrue, and shows the great lengths to which Blinder omits key facts in order to advance the narrative that the Republicans are at fault.
A few days ago, Senate Democrats declined to consider a $500 billion COVID package put forth by Senate Republicans. 52 Republicans (all except Rand Paul) voted to advance the bill, but without one single Democrat vote, the measure died. According to the rules of the Senate, having a majority that included nearly 100% of the Republicans isn’t enough to pass the bill; by invoking cloture (requiring 50 votes to override) they prevented the bill from even being debated. But did Blinder mention this at all in his article? Absolutely not. Instead, he describes how the Senate Republicans “resisted” passing a new bill, because not caving to the $3 trillion relief package offered by the Democrats is somehow an act of resistence.
Blinder continues this ridiculous idea, saying “progress has been blocked” by McConnell. How? The Democrat $3 trillion relief package version (the Heroes Act) contained “items that Republican abhor,” and this somehow makes it the Republican’s fault? And yet, in the very same paragraph, Blinder describes how the Heroes Act itself “was just an opening bid, which House Democrats never expected Senate Republicans to embrace.” This brings to mind two questions: 1) why are the Democrats crafting a bill that they willfully acknowledge they didn’t expect to pass; and 2) why are the Democrats given a free pass to craft a bill (they don’t expect to pass) at the high end of the spending spectrum, but when the Republicans craft a bill at the low end of the spending spectrum, it’s considered a “political stunt.”
Blaming Republicans for causing problems (resisting) because their bill, which the Democrats described as “emaciated,” did not have the right kind of Democrat spending, is outrageous. Such nonsensical hypocrisy and patent lies should not be tolerated.
by | ARTICLES, BLOG, ECONOMY, ELECTIONS, POLITICS
I was shocked to read “Get Ready for the Biden Stock Boom” in the pages of the Wall Street Journal, written by a former editor of Barron’s, no less. Ed Finn really, really wants you to support Joe Biden and his article is full of so much wishful thinking that it reads like a Disney Fairy Tale — except in reality, there will be no happy ending.
To be fair, Ed Finn does acknowledge that the stock market will certainly experience some turbulence if Joe Biden is elected — but that’s because smart investors know that socialist policies are coming in the form of higher taxes, strangling regulation, and ridiculous legislation such as the “Green New Deal.” You think Obama was bad for the economy? Wait until Biden gets in there.
Yet after laying out the coming economic reality, Ed Finn still wants you to believe in Joe Biden, and the rest of his analysis is basically dependent on the word IF. You can’t make this up:
“IF a President Biden can control the federal budget deficit, IF he can forge better relationships with America’s trading partners, IF he can reverse some of President Trump’s anti-immigration policies, IF he can bring a less combative atmosphere to Washington and the nation, there is no reason to think that during his term average annual stock returns, including dividends, can’t be in the 10% range, as they have for the past 95 years.”
It should be noted that even with all the “if’s” coming true, they have no positive economic consequence. They would be nice, but not economically powerful.
How does he spell out how Joe Biden’s going to improve the economy: “Given Mr. Biden’s ambitious plans to use increased tax revenue to fund more spending on green energy, health care and infrastructure, it’s conceivable he could spur the U.S. economy enough to push annual stock returns to 15%.” Ed Finn must think that the readers of the Wall Street Journal are stupid. To think that anything relating to “green energy” isn’t detrimental to the economy is economically illiterate. We already have efficient fossil fuels, but the Democrats would happily pay three times as much for less energy to be environmentally woke — and that’s supposed to improve the economy? That’s either ignorant or socialist or both. And see how Finn continues to use wishful language: “it’s conceivable he could spur the U.S. economy enough to push annual stock returns to 15%.” That’s because neither Finn’s analysis nor Biden’s policies are actually grounded in any sort of economic reality, only fantasy.
On the other hand, what we do know is that there are multiple policy proposals that WILL have negative economic consequences, none of which will come close to offsetting any of the rosy positives that Finn is pinning his hopes on. The main threats Biden poses to the stock market are increased regulation and higher taxes. Increased regulation will inevitably result in slowed economic growth, and with that decreased profits and a less robust stock market. But that’s not even the worst of it. Two specific initiatives will affect the stock market both in the short- and long-term: 1) Raising taxes on corporate profits from 21% 28% and 2) Nearly doubling the capital-gains tax from 20% to 39.6% on income over $1 million/year — and don’t forget the investment-tax surcharge of 3.8%! Of course, Biden plans to raise taxes on nearly every taxpayer regardless.
Ed Finn ought to be ashamed for penning such an unrealistic economic outlook with Joe Biden at the helm. Increased taxation, crushing regulation, and impudent legislation never improves the economy or the lives of the American people.
by | ARTICLES, BLOG, BUSINESS, ECONOMY
I was disappointed to read “How the Bidens Dodged the Payroll Tax” last week in the WSJ, not because Biden is a good guy, but because the author of the screed, Chris Jacobs, gets it all wrong. Those of you who read my columns regularly know that I’m no fan of Biden, but in this case, Biden is in the right. There is nothing legally wrong with how he structured and paid his taxes – to the contrary, it elucidates an ongoing tax inequity that was completely missed in the article.
In order to understand what Biden did and didn’t do, you need to understand a little bit about s-Corps, LLCs, partnerships, and Social Security taxes. Foremost is that Social Security taxes are imposed on individuals’ earned income – salaries for employees and earned business income for independent earners. It is a tax on earned income — and only earned income. It’s money contributed from your work that goes into your retirement social security pension, not your business profits, interest and dividends income, capital gains or anything else. Social security is calculated from your working history, because you are taxed only on your earned income. That’s why it’s dubbed the payroll tax.
So now let’s look at some different scenarios. Say you work for a business operated as a C corp or S corp, and you also are a stockholder in that business. The money you get as a stockholder — such as dividends–is not working income so you do not pay the Social Security tax. But the money you earn on your labor for your work in this company – salary – up to $137,700 (for 2020)- is subject to the social security tax.( Amounts earned over the $137,700 is still subject to the much smaller Medicare Tax).
But it gets more complicated when you consider partnerships (or LLC’s which are taxed as partnerships). If you work for and are also an owner of a partnership, your share of the partnership income – both for your labor and share of profits are included in one number reported to you on a K-1 form. And the full amount is subjected to the social security tax. For instance, say you are a 50% owner of an architecture partnership and the firm makes $2 million, you would get a K-1 form showing $1 million. Though that would be for both labor and profit, you would have to pay Social Security tax on the full amount.
But if you are structured as an s-Corp, you pay yourself a salary. If the architecture firm were an s-Corp and it earned $2 million and each shareholder received a $400K salary and netted $600K in profit, they only pay the Social Security tax on the earned income, the $400K. And this is exactly what Biden did. He paid tax on his earned income.
So with an S-corp, you have cleared defined salary and (hopefully) profits. It is conceivable that, in Biden’s case, his salary was too low. That is a bit unclear. But what is absolutely clear is that the business is not all labor and therefore he should not be paying Social Security on the full amount. The problem, therefore, isn’t that Biden did something wrong or that he used an S-Corp “loophole” to “get away with” only paying tax on some portion of the business. The problem is that just because someone is a business owner should not mean that he has to pay social security tax on his business profits. Remember Social Security is a tax only on earned income and thus Biden rightly paid the Social Security tax only on his salary. The real problem is that partnerships, unlike their C-corp and S-corp counterparts, have to unjustly pay the full Social Security tax on both their labor and profits. This is the real problem with the tax code that has needed reform for many years. Biden and Trump would do well to address this inequality in the future.
by | ARTICLES, BUSINESS, ECONOMY, FREEDOM, POTUS, TRUMP
When I read commentary by people associated with the Club for Growth — known for promoting the rule of law, low taxes, small government, low tariffs, economic growth, etc. — I expect to find analysis consistent with their principles. Therefore, the recent CNS News article on 8/10, “American Manufacturers Come Back, Thanks to Trump,” took me completely by surprise because it was essentially the rantings of someone who is economically ignorant. Ken Blackwell, former elected official in Ohio and current member of the Board of Directors for the Club for Growth advocates for protectionism, pure and simple.
Blackwell praises how Trump instituted “strategic counter-tariffs on bad actors such as China to combat the effects of illegal and abusive trade practices that previously put companies like Whirlpool at an unfair disadvantage.” But this pro-tariff position runs counter to any competent economic analysis. Tariffs clearly and consistently hurt the consumer and taxpayer by driving costs up to everybody in amounts far in excess than any benefits given to those crony beneficiary companies. To call a tariff a “pro-growth economic policy” as Blackwell does is utterly ridiculous, and his entire article reads like a cheap campaign ad.
Tariffs don’t “strengthen” American manufacturers as Blackwell believes; it is cronyism of the highest order. How the Club For Growth — as well as the National Taxpayers Union — can have someone on the board with views that are economically ignorant and destructive to our economy is beyond comprehension.
by | ARTICLES, BLOG, ECONOMY, EDUCATION, HYPOCRISY, NEW YORK
I was disgusted to read Jamie Dimon’s new initiative, the “New York Jobs CEO Council,” not because I oppose gainful employment for New Yorkers, but because Dimon completely gives a free pass to the New York education system with this program. He misses an opportunity – and ignores his responsibility – to help improve a clearly broken system.
Dimon spends most of his op-ed talking about “skills-based hiring and matching,” but completely ignores the elephant in the room: New York’s education system is failing our kids. He describes how, “The council will create sustained pathways for opportunities in the city, better aligning educational programs with skills that employers need as the demands of the labor market rapidly evolve. This will alleviate unemployment—filling currently open jobs through skills training and empowering communities for the jobs of the future.” Quite frankly, this is PR-speak nonsense. New Yorkers are bereft of a decent education system, which is strangled by public school unions, and exacerbated by the fact that Mayor de Blasio is abusively hostile to charter and religious schools, even though those schools consistently outperform public schools — especially among black and Hispanic students.
If Dimon really wanted to make a difference, he would blast de Blasio on the sub-standard New York education system, but instead, he’s joining forces with him. This is an embarrassment, a detriment of rank-and-file New Yorkers. You would think Dimon would be smart enough to know that he’s in bed with New York politicians and playing politics with regular New Yorkers, but perhaps he thinks he can get away with being so political just because he’s the CEO and chairman of JPMorgan Chase.
by | ARTICLES, BLOG, ECONOMY, MEDIA
The Wall Street Journal has a feature called “Notes on the News” which is supposed to “walk you through the biggest news stories of the week.” Unfortunately, their writer, Tyler Blint-Welsh is so inept and full of bias that he misses key points in his summaries to the detriment of WSJ readers.
For instance, on July 26, while writing about federal agents being sent to US cities, he describes how federal officers have been patrolling Portland, Oregon since July 2, but utterly leaves out the fact that violence in Portland has been going on for much longer; many people and property have been injured, yet he ignores that fact in order to focus on the presence of federal authorities. He further mishandles the scenario by describing the use of force on protesters as “apparently without provocation.” However, anyone watching the videos of the circumstances can’t possibly make the assumption of apparent provocation; doing so is utterly inappropriate and dishonest. The protesters were trying to set the courthouse on fire with people in it, but he completely omits that from his analysis. He also chooses not to include the fact that the federal agents were there to protect the federal buildings that the mayor refused to protect but managed to mention that the mayor was tear-gassed by federal agents. The lopsided point-of-view is ridiculous.
Unfortunately, it doesn’t end there. Blint-Welsh also analyzes the situation with unemployment benefits which face an expiration at the end of the month, saying “that lack of progress could jeopardize the $600 weekly unemployment supplement that millions of Americans have been relying on since the pandemic triggered record numbers of jobless claims.” He further describes how the Democrats want to extend the $600 until January 2021 while noting that the Republicans want to reduce the benefit amount. However, he conveniently leaves out the fact that the reason the Republicans want to cut back payments is because a large number of recipients are paying more to stay home than if they went to work — which is hampering economic recovery. Forget about the fact that it shouldn’t be so readily available to collect because jobs are available. The extension that the Democrats want is unconscionable but he’s making it seem like the Democrat position is reasonable and that the Republicans are selfish and cold-hearted.
It’s hard to imagine that Blint-Welsh is so uninformed as to not know what’s actually going on, so the only conclusion is that he is intentionally distorting these situations. That is egregious for both the integrity of the Wall Street Journal and those who have to read his diatribes.
by | ARTICLES, BLOG, ECONOMY, GOVERNMENT, NEW YORK, POLITICS
New York Governor Cuomo continues his crusade for a state bailout by claiming that New York is a “donor state” and therefore entitled to more federal funds. By this, he means that New York gives more in tax revenue to Washington than it gets back. However, the “donor state” mantra and his calculations making that claim are incorrect.
A recent article in the Wall Street Journal, “New York is No ‘Donor’ State,” did a thorough breakdown on how to calculate and account for federal funds in order to better understand the ebb and flow of dollars in and out of states. In this, it showed that New York really isn’t a donor state at all. It seems that various “donor state” claims tend to cling to a Rockefeller Institute report published in 2017 that erroneously calculated what states receive. For instance, it counted both food stamps and servicemen’s paychecks as federal subsidies when that’s clearly not the case. Likewise, it omitted the federal subsidization of municipal debt issuance and also didn’t account for the implicit socialization of their unfunded pensions and postemployment benefits. Thus, in reality, New York is one of several high-tax blue states that “are net ‘receivers’ of federal funds.” The aforementioned article is a definitely worthwhile read.
But even if the donor state claim were true to some degree, it’s still a weak argument for a bailout. Any notable imbalances occur for several reasons that Cuomo refuses to even consider. For instance, the federal tax code is very progressive and New Yorkers have high incomes. Likewise, New York receives relatively less money in the form of federal contracts and federal employee wages. This is logically caused by the fact that New York has made itself such a terrible place to do business (including sky-high costs and ridiculously burdensome regulation and taxes) that it can’t compete for these projects. Furthermore, the flow of New York taxpayer money to Washington and back has virtually nothing to do with why the New York government can’t balance its budget due to overspending. The government is not the taxpayer. The states send no money to Washington – their earners do.
In other words, it’s not that the government is being shortchanged. The state government isn’t hurt by this at all. The taxpayers of New York are the ones hurt by perennial fiscal mismanagement and it is a sham to request a bailout under the guise of being a donor state.
by | ARTICLES, ECONOMY, ELECTIONS, FED, GOVERNMENT, OBAMA, POLITICS, POTUS, SOCIAL SECURITY, TAXES, TRUMP
Are we past the tipping point for economic reform? I would argue that Obama’s budgets and spending accelerated the deficits beyond repair. Some people will go back to Reagan and say that the deficit and the debt ballooned during the Reagan Administration and they will blame it on his tax cuts. But what is actually true is that the tax cuts generated a large increase in revenue, and the only reason why he had deficits was that the Democrat-led Congress increased spending even over the increased revenue. The same thing happened with the Bush tax cuts which were very pro-growth; the revenue went up sharply, but spending went up even faster. But at this point the debt was still manageable.
Then you come to Obama. At the beginning of his administration, we had the deep recession -which arguably could have benefited by one year of stimulus. The concept of a stimulus is supposed to be a one-off event. In other words, you engage in big one-time expenditures to get the economy on track and then spending goes back to previous levels as the recovery occurs. The problem is that Obama didn’t put things in for just one year. He did long term things, like food stamps, teacher’s compensation, etc., knowing full well that once put into effect they could not easily be withdrawn. And it was pretty clearly his intent all along, for political reasons, to bake them into the budget. So now when we started to have a recovery, you had ballooning deficits — even with a growing economy. Then by the time Trump was elected, the locked-in recurring spending with its locked-in annual increases made the deficit – and the debt – almost impossible to rein in.
Now we have the pandemic and we have no place to go. There’s no surplus to go to the deficit. Millions of Americans are unexpectedly unemployed, which means they’re not paying into Social Security. At the same time, we see older workers who have lost their jobs choose to draw their benefits as soon as they become eligible. This will speed up the insolvency train. But then Trump did something that was very stupid (though his political motivation is clear). He said that entitlements are off the table. If entitlement reform is off the table at this point, we’re headed to bankruptcy.
We’ve been talking about the coming insolvency of the Social Security and Medicare programs for many, many years now and Congress has done nothing to stave off the inevitable. Couple that with Obama budgets, Trump’s lack of action, and the pandemic, and the deficits are even larger now. Anyone seriously looking at the situation knows that absent a major change to entitlements, the mandated annual increases, both because of cost of living adjustments and demographics, will bankrupt both programs in the next ten to fifteen years. It’s very safe to say that absent major entitlement reform, we’re basically past the tipping point.
