by | ARTICLES, ECONOMY, OBAMA, POLITICS
Four years without a budget — it’s delicious!
April 29, 2013 marks four years without a true operating budget for our country. 1461 days and running. In the realm of budget history, April 29 is an historic day.
First, an interesting juxtaposition exists between April 29, 1909 and April 29, 2009. On April 29, 1909, the world’s biggest Superpower — Great Britain — introduced the “People’s Budget”, which is famously noted for being the first budget in the history of Britain with the “expressed intent of redistributing wealth” among the British people. A century later, on April 29, 2009, the world’s biggest Superpower — the United States — passed its last operating budget, the first budget in the history of the United States with the expressed intent to run a trillion dollar deficit.
Back in Great Britain, it took both a full year and the threat of adding additional Liberal “peers” (seats) in Parliament by the British King to garner enough votes in Britain to actually pass the “People’s Budget”. This ultimately succeeded exactly a year later on April 29, 2010. Winston Churchill’s biographer observed that this budget, which Churchill supported, was a “revolutionary concept”.
Here in the United States, it has taken Congress a full four years of continuing resolutions, Supercommittees, Fiscal Cliffs, Sequestrations and trillion dollar deficit spending, and still we have failed to pass a new budget for the people of the United States.
Of course, there have been budget attempts. President Obama, for his part, submitted a budget late to Congress every year except for 2010. His last two budgets prior to this year’s submission, however, were so outrageous that not even one Democrat from his own Party either year would sponsor or vote for his budget proposals.
In 2010, the Democrat-led Senate chose not to offer their budget plan on the Senate floor. The GOP-led House of Republicans passed a budget for $1.2 trillion.
In 2011, the GOP-lead House passed a budget for FY2012, cutting $6 trillion in comparison to Obama’s budget, which failed 0-97 in the Senate. The Senate did not offer their own budget that year. Senate Majority Leader Harry Reid said that would be “foolish”, while Senator Schumer remarked ““To put other budgets out there is not the point.”
In 2012, the GOP-lead House passed a budget for FY2013, while Senate Majority Leader Harry Reid announced in February that the Senate would not consider a budget yet again. The House this time voted on President Obama’s $3.2 trillion budget, which failed 0-414.
Now in 2013, both the GOP-lead House and the Democrat- led Senate passed their own budgets for FY2014 (the first for the Democrats in four years) President Obama presented his budget 2 months late on April 10, totaling $46.5 trillion over the next 10 years without ever balancing. It is also noted for even more taxes on the wealthy to pay for more social programs, a generous helping of wealth redistribution. But nothing has been agreed upon by Congress.
This past Saturday, President Obama described the “pain” of the current operating scenario from sequestration, and further urged,
“There is only one way to truly fix the sequester: by replacing it before it causes further damage…A couple weeks ago, I put forward a budget that replaces the next several years of these dumb cuts with smarter cuts; reforms our tax code to close wasteful special interest loopholes; and invests in things like education, research, and manufacturing that will create new jobs right now.”
Sounds similar to the threats of the British King used to pass the “People’s Budget”.
So here we are, 4 years without an operating budget for our nation. We also now consistently have yearly, trillion dollar deficits on top of the additional, higher taxes. Many will likely observe that — to borrow from their UK counterparts a century ago — this budget status, this new modus operandi for the United States is also a “revolutionary concept” for the land of the free and the home of the brave.
by | ARTICLES, ECONOMY, OBAMA
John Steele Gordon’s recent Op-Ed in the WSJ opened with following observation: “The question of how to fairly and equitably tax capital gains has been a political problem since the modern personal-income tax was adopted in 1913”. Being a business/financial historian, he gives an adequate overview of the history of capital gains and how it has reached its present state. But because he is not an economist or CPA, he disingenously presents a one-sided treatment of the issue of capital gains and “carried interest” without actually exploring the merits of the tax. The result is that Gordon sounds like sour grapes on the wealthy and ultimately, he is wholly unable to answer his own question.
Gordon puts forth the notion that “carried interest” is a “cause of much recent controversy”. This much is true, in that the recently defeated Baucus/Grassley bill was attempting to “fix” carried interest because of a seemingly unfair low-tax capital gains income rate.
This is true. But so what? It’s not as though the income isn’t from capital gains. If the law was changed so that the operators were taxed at ordinary income only, it wouldn’t get rid of those gains — it would simply mean that the investors get the benefit of the capital gains lost by the operators. This fixes nothing.
Ultimately such a change, which is again being explored in Obama’s proposed budget, will merely shift the tax benefit from the operators to the investors. This takes a tax break away from people who are working for a living and gives it to millionaires who are just investing – pure hypocrisy from liberals who wish to inflict additional taxes on the wealthy at every step. It make compensation deals for hedge fund operators a bit more complicated (i.e. requiring more assistance from accountants), but the amount of compensation stays revenue neutral.
Therefore, it takes a whopping dose of either incompetence or disingenuousness from Gordon and other carried interest critics to look at the hedge fund industry and proclaim that the hedge fund operator “carried interest” is the problem that needs to be addressed.
by | ARTICLES, ECONOMY, OBAMA
Peter Ferrara pens a fantastic Op-Ed in Forbes this morning. He documents the myriad inaccuracies claimed by the Obama Administration regarding his new budget, the staggering amount of spending contained therein, and the additional taxes to be levied. He also does some cost comparison to Ryan’s budget and dispels the myth of the tax cut vs tax credit, (a point I have made many, many times as a CPA), and discusses the problems with Obama’s treatment of entitlement reform.
Some of the highlights include:
- No reduction in spending, even net reduction from expected increase in spending.
- Cancels sequestration
- “Obama’s budget proposes to spend $46.5 trillion overall over the next 10 years, even more than the Senate Democrat budget, the highest government spending in world history
- “Obama’s budget also proposes $1.1 trillion in additional tax increases, on top of the $1 trillion in tax increases already going into effect this year under Obamacare, and the $600 billion in tax increases from the expiration of the Bush tax cuts for them in January”
- Raises taxes on the middle class
- The “Buffett Rule” doubles the top capital gains tax rate from when Obama entered office — making it the 4th highest rate on the globe
- Explains the difference between tax credits and tax cuts — and how most of Obama’s so-called “cuts” are credits, which is government spending run through the tax code.
- “His own budget admits that after 10 years, the deficit would still be $439 billion, still about the highest in history before President Obama. Congressman Paul Ryan’s House Republican budget, in sharp contrast, would balance the federal budget within 10 years, with no tax increases, as scored by CBO”.
- “President Obama’s budget claims to reduce federal deficits by $1.8 trillion over the next 10 years. But that only results from calculating the effect on deficits from an “adjusted baseline” used by the Obama budget, and not the CBO baseline”.
- “Obama’s budget assumes a suddenly booming economy to result from these policies, with real GDP growth in 2016, the end of his second term, at 3.6%, more than four times the average of his first term”
- He assumes that there will not be another recession within the next 10 years
- Obama budget will “only reduce Social Security spending increases by one-fourth of one percent. Even with Obama’s “reform,” his own budget projects Social Security spending to soar over the next decade by 85%, from $768 billion last year to $1.427 trillion in 2023.
So what is the point of the President issuing a budget proposal now?
The point is to simply posture for all those low information, Twitter voters in the 2014 elections, who will hear only from all the Democrat Party propagandists at the New York Times, the Washington Post, and MSNBC and brethren. They will hear only about President Obama’s “spending cuts,” his grand, compromising, entitlement reforms, and how he is fighting for the middle class, with declining median incomes throughout his Administration, for the poor, with record, soaring poverty, and for “equality,” even as inequality has actually risen throughout his Administration. Is this generation of Americans in the process of proving America’s more than 200 year experiment with democracy a failure”
Ferrara analysis is spot on. I urge you to read the piece in its entirety.
by | BLOG
Paul Revere’s Ride
Henry Wadsworth Longfellow
Listen my children and you shall hear
Of the midnight ride of Paul Revere,
On the eighteenth of April, in Seventy-five;
Hardly a man is now alive
Who remembers that famous day and year.
He said to his friend, “If the British march
By land or sea from the town to-night,
Hang a lantern aloft in the belfry arch
Of the North Church tower as a signal light,–
One if by land, and two if by sea;
And I on the opposite shore will be,
Ready to ride and spread the alarm
Through every Middlesex village and farm,
For the country folk to be up and to arm.”
Then he said “Good-night!” and with muffled oar
Silently rowed to the Charlestown shore,
Just as the moon rose over the bay,
Where swinging wide at her moorings lay
The Somerset, British man-of-war;
A phantom ship, with each mast and spar
Across the moon like a prison bar,
And a huge black hulk, that was magnified
By its own reflection in the tide.
Meanwhile, his friend through alley and street
Wanders and watches, with eager ears,
Till in the silence around him he hears
The muster of men at the barrack door,
The sound of arms, and the tramp of feet,
And the measured tread of the grenadiers,
Marching down to their boats on the shore.
Then he climbed the tower of the Old North Church,
By the wooden stairs, with stealthy tread,
To the belfry chamber overhead,
And startled the pigeons from their perch
On the sombre rafters, that round him made
Masses and moving shapes of shade,–
By the trembling ladder, steep and tall,
To the highest window in the wall,
Where he paused to listen and look down
A moment on the roofs of the town
And the moonlight flowing over all.
Beneath, in the churchyard, lay the dead,
In their night encampment on the hill,
Wrapped in silence so deep and still
That he could hear, like a sentinel’s tread,
The watchful night-wind, as it went
Creeping along from tent to tent,
And seeming to whisper, “All is well!”
A moment only he feels the spell
Of the place and the hour, and the secret dread
Of the lonely belfry and the dead;
For suddenly all his thoughts are bent
On a shadowy something far away,
Where the river widens to meet the bay,–
A line of black that bends and floats
On the rising tide like a bridge of boats.
Meanwhile, impatient to mount and ride,
Booted and spurred, with a heavy stride
On the opposite shore walked Paul Revere.
Now he patted his horse’s side,
Now he gazed at the landscape far and near,
Then, impetuous, stamped the earth,
And turned and tightened his saddle girth;
But mostly he watched with eager search
The belfry tower of the Old North Church,
As it rose above the graves on the hill,
Lonely and spectral and sombre and still.
And lo! as he looks, on the belfry’s height
A glimmer, and then a gleam of light!
He springs to the saddle, the bridle he turns,
But lingers and gazes, till full on his sight
A second lamp in the belfry burns.
A hurry of hoofs in a village street,
A shape in the moonlight, a bulk in the dark,
And beneath, from the pebbles, in passing, a spark
Struck out by a steed flying fearless and fleet;
That was all! And yet, through the gloom and the light,
The fate of a nation was riding that night;
And the spark struck out by that steed, in his flight,
Kindled the land into flame with its heat.
He has left the village and mounted the steep,
And beneath him, tranquil and broad and deep,
Is the Mystic, meeting the ocean tides;
And under the alders that skirt its edge,
Now soft on the sand, now loud on the ledge,
Is heard the tramp of his steed as he rides.
It was twelve by the village clock
When he crossed the bridge into Medford town.
He heard the crowing of the cock,
And the barking of the farmer’s dog,
And felt the damp of the river fog,
That rises after the sun goes down.
It was one by the village clock,
When he galloped into Lexington.
He saw the gilded weathercock
Swim in the moonlight as he passed,
And the meeting-house windows, black and bare,
Gaze at him with a spectral glare,
As if they already stood aghast
At the bloody work they would look upon.
It was two by the village clock,
When he came to the bridge in Concord town.
He heard the bleating of the flock,
And the twitter of birds among the trees,
And felt the breath of the morning breeze
Blowing over the meadow brown.
And one was safe and asleep in his bed
Who at the bridge would be first to fall,
Who that day would be lying dead,
Pierced by a British musket ball.
You know the rest. In the books you have read
How the British Regulars fired and fled,—
How the farmers gave them ball for ball,
From behind each fence and farmyard wall,
Chasing the redcoats down the lane,
Then crossing the fields to emerge again
Under the trees at the turn of the road,
And only pausing to fire and load.
So through the night rode Paul Revere;
And so through the night went his cry of alarm
To every Middlesex village and farm,—
A cry of defiance, and not of fear,
A voice in the darkness, a knock at the door,
And a word that shall echo for evermore!
For, borne on the night-wind of the Past,
Through all our history, to the last,
In the hour of darkness and peril and need,
The people will waken and listen to hear
The hurrying hoof-beats of that steed,
And the midnight message of Paul Revere.
by | BLOG, OBAMA, POLITICS
Obama asked for a gun vote during his State of the Union Address. He got it.
Not much more to say about that.
The “Manchin-Toomey” amendment failed in the Senate today on a 54-46 vote. It aimed expand background checks gun shows and to Internet sales.
Republicans who voted “yes” (alphabetically):
Maine Sen. Susan Collins
Illinois Sen. Mark Kirk
Arizona Sen. John McCain
Pennsylvania Sen. Pat Toomey
Democrats who voted “no” (alphabetically):
Montana Sen. Max Baucus
Alaska Sen. Mark Begich
North Dakota Sen. Heidi Heitkamp
Arkansas Sen. Mark Pryor
Nevada Sen. Harry Reid (It is surmised that Reid voted no for procedural reasons in order for Democrats to bring up the provision at a later date)
Update: Obama is blathering on now like a petulant child who lost.
by | BLOG, ECONOMY, OBAMA
In preparation for a talk to a group of financial people, I had to put together some numbers regarding President Obama’s “little bit more” that he has asked “the wealthiest among us” to pay. So I calculated the additional federal income taxes a high earner will pay in 2013 vs what one would have paid on the same income for 2012,
The increases are caused by 1) the increase in rates from the expiration of Bush era tax rates, and 2) the new 3.8% Obamacare tax on investment income of high income earners.
For someone making $1million, federal taxes go up by $55,700
For someone making $5million, federal taxes go up by $405,900
For someone making $10 million, federal taxes go up by $834,800
These numbers assume that the income is substantially all qualified dividends and long-term capital gains. But the increases are still approximately 90% of these amounts above if half of the income is earned income.
What’s worthwhile to note is that those numbers do not include anything from Obama’s budget proposal released last week. That proposal includes more hits to the wealthy, such as:
— implementing the “Buffett Rule” (which is no more than code for elimination of the special rate for qualified dividends and long-term capital gains)
— adding a 28% cap on tax deductions and other write-offs,
— adding a cap of $3 million on IRA and other tax-deferred retirement savings, and
— eliminating carried interest treatment for private equity, venture capital and other financial managers
Now, the president and his ardent supporters, such as Warren Buffet, Gene Sperling, Paul Krugman and other pseudo-economists, have repeatedly pushed forth the notion that the people who make America move financially — the investment bankers and equity partners — are all okay with having their taxes raised. And they further state that these substantial tax increases will not impact the amount that these individuals will invest.
Quite the contrary! I can tell you that with respect to my clients, there is a direct relationship between the amount of money they pay in taxes and the amount of money they invest.
My clients tend to invest the money left over after they have paid their (substantial) living costs and taxes. If taxes go up, the amount left to invest goes down.
There are those who will argue that “I don’t have $10 million or $5 million or even $1 million. Why should I care?” And “They have lots of money anyway — what’s the big deal?”
I submit to you that in making a decision as to whether to invest in a high risk start-up, whether as an individual or as a private equity decision-maker, the anticipated after-tax return is key. Higher tax rates therefore reduce the number of start-ups and other investments that get funded. The key to a healthy economy is investment, not consumptive spending. That is Economics IA. Hurt the investors, those with capital, and everyone is hurt.
One final thing to remember is the Obamacare effect. Remember, we were promised that Obamacare would not add one dollar to the deficit. Implicit in that was a multitude of new taxes such as the medical device tax of 2.3%.
The latest revised numbers from the CBO peg the costs of Obamacare to be $1.85 trillion through 2023. At the same time, the Heritage Foundation calculated that the 18 new taxes created for Obamacare would only raise $836 billion through that same period. Clearly, Obamacare is in a financial death spiral.
In sum, continuing to bleed the wealthy a “little bit more” (for Obamacare or other government spending) is only going to continue to hurt our economy. The problem with socialism is that we eventually run out of other people’s money.
by | ARTICLES, BLOG, ECONOMY, OBAMA, POLITICS
There was a lot of discussion this past weekend on the Sunday talk show circuit regarding the March Jobs Report released last Friday. Only 88,000 jobs were added in March. Compared to February, which added 268,000 jobs, this is a 180,000 drop. Actually, more like a plummet: economists had figured more than twice that number would be added. However, this number was the lowest jobs addition since in nine months (June 2012).
Why was this one so terrible? The pundit debate this weekend was puzzled and trying to discern the cause — Was it sequestration? The 2% payroll tax? The weather? Other? Why this anomaly when prior reports of the last few months were good. (Translation: how do we spin this atrocity?)
Here’s the truth. We haven’t had a good jobs report in nearly 5 years.
Yes, we are adding jobs, but they are not enough. We are barely adding enough jobs to cover the natural population growth. That is currently calculated (for this month) to be roughly 106,000 jobs in order to keep pace with population. In fact, this most recent report didn’t even cover that.
Yes, we are going down in unemployment (from 7.7% – 7.6%)– but not because we are adding jobs. It’s because less people are actively looking for a job. The Labor Department noted that 496,000 Americans stopped working or looking for work. That’s nearly half-a-million in one month.
This jobs report just compounds nearly 5 years of Obama’s policies. From Obamacare burdens, to increased regulation, to higher taxes, we are no where near a recovery, and really haven’t been.
If you are interested in a decent jobs calculator, the Atlanta Fed has a neat little one set up that gives you all kinds of data, percentages, etc in a multitude of categories. You can click here to play with it.
For instance, if you wanted to get the unemployment rate down to 6% over the next 12 months (a year to achieve this rate), the average monthly change in payroll employment needed to achieve the target unemployment rate would be … 303,141 jobs a month. When was the last time those numbers were consistently that high? Years…
As you can see, We haven’t been there with job creation in a long time. With Obama’s policies continuing to undermine our country and small businesses, the recovery will be continue to be excruciatingly slow and disappointing.
Crossposted at alanjoelny.com
by | ARTICLES, BLOG, FREEDOM, OBAMA, TAXES
In another class-warfare move, The Hill reports on the latest Obama gimmick: Obama’s budget includes a cap on IRAs and other retirement accounts.
The White House apparently has a problem with how much money might be in your retirement account(s).
The senior administration official said that wealthy taxpayers can currently “accumulate many millions of dollars in these accounts, substantially more than is needed to fund reasonable levels of retirement saving.”
The administration official then proceeds to define their level of reasonable retirement: $205,000/year, or around $3 million. Tax-deferred retirement accounts — like IRAs — will be prohibited from containing more than that.
The government is just salivating over the thought of tax-deferred money just sitting around. By capping the amount allowed in such an account, it keeps money from being deferred (hint: taxed now) so it can go directly in the government coffers. “The proposal would save around $9 billion over a decade, a senior administration official said, while also bringing more fairness to the tax code”.
So, what’s really going on?
$9 billion over a decade. That’s $900 million in revenue a year for 10 years. When that amount is checked against the more than $1 trillion in deficit per year the last several years, the suggestion that capping retirement accounts is part of a grand plan to reduce the deficit is insulting.
It’s not about deficit reduction. It’s about class warfare and need. The White House cites this measure as a way to bring more “fairness” in the tax code. Fairness? Restricting any American taxpayer how much money they can save for retirement is not fair. Pre-determining for any American taxpayer what is “needed to fund reasonable levels of retirement saving” is not fair.
They use the word need to get what they want. William Pitt the Younger sagely put it, “Necessity is the plea for every infringement of human freedom. It is the argument of tyrants; it is the creed of slaves.”
So it’s not about deficit reduction and it’s not about any real fairness either. It is about a body politic with a rapacious appetite. First it determines your needs, and then goes after the wealthy because the wealthy have what it needs (money for more spending).
As I have written before, the question of additional taxes on the wealthy is really a liberty and equity issue, impinging on the very entrepreneurial environment that made our country great. At the heart of any monetary decisions should be free will, not free money (for the government).
In a free country such as ours, it is entirely my judgment as to whether or not I want to work hard and try to earn a lot of money (or not), and/or save my money (or not). It is unequivocally immoral that our government – or any government – should feel it has the place and authority to come along after I earned my success and basically declare that because I have done well for myself, I should have to now pay more to that government. This is legal plunder.
Why should I, who have proven myself to be successful (according to the government) have to give my success over to people who have proven to grossly mismanage our country’s finances?
This is a true and concerted effort to keep the wealthy less wealthy. It a disincentive against saving and a punishment for success. Why bother to work hard, to be self-sufficient, if the government can potentially decide, willy-nilly, that it needs more money than you?
