by | ARTICLES, ECONOMY, OBAMA, TAXES
Obama’s $3.6 trillion budget proposal was defeated Wednesday night in the House of Representatives by a vote of 414-0. Not a single Democrat supported it. This vote was reminiscent of the defeat of Obama’s budget last year in the Senate, by a vote of 97-0. No Democrats would put their name to that budget, either.
Clearly, considering that we are now 1065 days without a budget is result of the lack of any substantive and serious thought coming from the White House. Two years, two unanimous defeats in two different parts of Congress can only lead to one conclusion: Barack Obama’s economic ideas on taxes and deficit reduction are so vastly out of touch with both Republicans and Democrats that no one is willing to back them.
by | ARTICLES, ECONOMY, HYPOCRISY, POLITICS, TAXES
What is so special about April 29, 2009?
It’s the last time Congress passed a budget. 1000 days later, we are operating without any plan. Oh, the delicious irony that it is today… I can’t wait to hear about it during the State of the Union tonight, right? Just like last year’s State of the Union; the budget Obama tried to pass shortly thereafter, modeled on the ideas espoused during his speech, failed 97-0. It was so outrageous, not one Senator of either party would put his name to it.
I’ve read some recent articles about the last 1000 days. Human Events had some worthwhile observations:
Senate Majority Leader Harry Reid (D-NV) said it would be “foolish” to have a budget.
“There’s no need to have a Democratic budget in my opinion,” Reid said in a May interview with the Los Angeles Times. “It would be foolish for us to do a budget at this stage.”
The breakdown in the Senate came after Sen. Kent Conrad (D-ND), chairman of the Budget Committee, failed to get a consensus among panel Democrats last year on any plan that was proposed to the caucus.
Meanwhile, U.S. Rep Sandy Adams penned a short piece about Congressional budget activity, (or lack thereof)
The previous Democrat-led Congress had ample time to do so. With President Obama in theWhite House, Senate Majority Leader Harry Reid and former Speaker Nancy Pelosi had the power to implement any budget they chose. Unfortunately, they punted on their responsibilities, choosing to pass legislation creating a national energy tax and an unpopular health-care law instead.
And finally, the Heritage Foundation put forth their list of facts about our nation’s budget and America’s money:
- The last time the Senate passed a budget was on April 29, 2009.
- Since that date, the federal government has spent $9.4 trillion, adding $4.1 trillion in debt.
- As of January 20, the outstanding public debt stands at $15,240,174,635,409.
- Interest payments on the debt are now more than $200 billion per year.
- President Obama proposed a FY2012 budget last year, and the Senate voted it down 97–0. (And that budget was no prize—according to the Congressional Budget Office, that proposal never had an annual deficit of less than $748 billion, would double the national debt in 10 years and would see annual interest payments approach $1 trillion per year.)
- The Senate rejected House Budget Committee Chairman Paul Ryan’s (R–WI) budget by 57–40 in May 2011, with no Democrats voting for it.
- In FY2011, Washington spent $3.6 trillion. Compare that to the last time the budget was balanced in 2001, when Washington spent $1.8 trillion ($2.1 trillion when you adjust for inflation).
- Entitlement spending will more than double by 2050. That includes spending on Medicare, Medicaid and the Obamacare subsidy program, and Social Security. Total spending on federal health care programs will triple.
- By 2050, the national debt is set to hit 344 percent of Gross Domestic Product.
- Taxes paid per household have risen dramatically, hitting $18,400 in 2010 (compared with $11,295 in 1965). If the 2001 and 2003 tax cuts expire and more middle-class Americans are required to pay the alternative minimum tax (AMT), taxes will reach unprecedented levels.
- Federal spending per household is skyrocketing. Since 1965, spending per household has grown by nearly 162 percent, from $11,431 in 1965 to $29,401 in 2010. From 2010 to 2021, it is projected to rise to $35,773, a 22 percent increase.
So there you have it. We stopped having a budget with a Democrat in the White House, a Democrat-controlled Senate, and with a Democrat-controlled House of Representatives. 1000 days ago. So how come they aren’t talking about it?
Update: The Hill is reporting that some Republicans will be sporting “1000 days” buttons to mark the 1000 days of ineptitude
by | HYPOCRISY, SOCIAL SECURITY, TAXES
One of the most common means by which politicians deceive their constitutents is by referring to Social Security as a either a tax or as a retirement system — but usually only as the politics or issues of the day suit them.
We have politicians who stand strongly behind the concept that Social Security must be maintained because it’s a retirement system that people pay for. I certainly believe, as FDR did when he started Social Security, that this is a forced retirement system. As such, it is critical that the entity managing it (the federal government) include Social Security’s actuarially calculated expenses in the current year. By not doing that with their accounting, they are able to simultaneously mischaracterize Social Security as a tax.
If Social Security is truly a retirement and disability plan, it is patently unfair to also consider Social Security collections as a tax that is paid. This is hypocrisy to the citizens contributing toward their retirement. Therefore, when you hear a politician calling Social Security a tax, understand that such a description qualifies it as an entitlement supported the general revenue fund. It can’t be both. The true Social Security Fund, as it is currently being collected and paid out, has been stolen from the taxpayers.
Social Security as a retirement plan has lost its meaning along the way. Yes, benefits promised to recipients have been much more than the amounts taken from pay. For that reason, and for the way by which Social Security is accounted by the government, the system is broken. Nevertheless, we must fundamentally maintain the view that Social Security is the way by which people pay for their own retirement — if we are to fix the imbalances.
The way to lead Social Security back to health is to convince people that the amounts taken from their pay is protected and truly going to their retirement by reclaiming the Social Security Fund so it reflects that reality. Often when it’s realized how little income tax many people pay, the focus typically goes on to how much people do pay toward Social Security. This is not altogether a bad thing. With citizens trying to retire at the age of 65 but often having life expectancies until 90, people need to contribute more money to their retirement.
We need to restore Social Security to a level of sustainability by moving it back to being a path to retirement, view it as a forced retirement system, and hold it accountable in that regard. By modifying the system to be more like present-day 401ks, people can better realize the amount that they are actually putting in. In doing that, more people will ultimately be happy with their Social Security accounts and will also make a mockery of such recent legislation as the payroll tax holiday.
If though, the powers that be continue to insist Social Security is a tax, then the fact becomes that people are really not paying for their own retirement. Therefore beneficiaries are not entitled to anything other that what Congress on a whim decides, because it is subject to the general revenue fund via tax revenue. This would be an outrageous outcome. It turns Social Security into a means by which the people are dependent on government to provide a modest stipend by extracting money from us.
by | POLITICS, TAXES
While Congress debated the merits of the two-month extension of the payroll tax holiday, no one mentioned the devasting economic impact this legislation will have on our small and large businesses, nor the tens of millions of dollars wasted by the Senate to come up with this hiccup.
Our Senate did a disengenous job at compromise merely to enable them to go home on vacation. There is absolutely no consideration of the havoc being wreaked on our economy and our businesses due to the instability that comes with not knowing what the tax rate will be in the long run. A one year extension is bad enough – does anyone seriously think that businesses will hire or that individuals will spend just because of another even a one year 2% reduction? But extending for only two months is far worse.
Even now, these companies with payroll will have to make changes and adjustments. They have been waiting with uncertainty as to how to proceed in the coming year – and we are mere days away from 2012. Forms cannot be printed, and when they are printed, around-the-clock overtime will result. The same is true with respect to accounting software. And how can a business institute any new changes to the tax schedule in a proper and timely matter? It’s ludicrous, not only regarding the nightmare of compliance and calculation, but also the inefficiency from all the extra man hours spent.
As a lifelong CPA, I can assure you that such a short-lived extension in the middle of tax season creates the absolute certainty that mistakes will be made– lots of them. Mistakes mean IRS penalties. The financial and wasted cost from our government sending out notices, following up, making corrections, and dealing with taxpayers fighting the penalties is a gross misuse of time and resources, all because Congress is incompetent and short-sighted. And then Congress and the IRS will spend more time writing regulations explaining the extent to which these penalties are to be abated.
More money will be spent than saved, with higher costs endured by our businesses; this extension is a sham.
by | BUSINESS, ECONOMY, TAXES
There are rumors circulating around the country that the Congressional Super Committee may take action that would immediately repeal the $5 million gift tax exemption by Thanksgiving. This is sending countless tax lawyers and accountants scurrying to complete gift planning that the law tells them they have until December 31, 2012 to complete. The lifetime gift level tax exemption was temporarily increased to $5 million under the 2010 Tax Relief Act for 2011 and 2012. Neither the Obama administration nor Congress have commented on these rumors, causing great concern and uncertainty. An about-face reversal with little notice would be extremely disruptive, unfair, and inequitable.
Regardless of how many or few people this change would affect, the fact that this Congressional committee would have the ability to alter the law midstream on the taxpayers who have been working on their long-term plans is outrageous. Any taxpayer – wealthy or not – should be entitled to be able to rely on their current tax law when making tax decisions, and, if a law might be modified, have ample time to implement necessary changes. The real possibility that the aforementioned law might be changed as of the super committee deadline is unconscionable.
This disruption, just by the speculation that is not being refuted or confirmed, is causing great stress. Most of the taxpayers to be impacted by such a change are the very people who create the jobs in this country. With business people dropping everything to deal with these rumors which could have major effects on their business transition plans, it could also impede job growth.
If there were to be such action taken by the Super Committee, it is likely to do serious harm to the United States economy. But more importantly, it reveals the shallowness of any real commitment to tax equity and transparency. The country seems to be rallying around the concepts contained within the Simpson-Bowles and the Rivlin-Domenici reports, both pushing for greater transparency and comprehensive and reliable tax reform. It would be abhorrent if this ‘new direction’ had, as its first implementation, a huge gotcha moment.
