by | BLOG, BUSINESS, ECONOMY, ELECTIONS, FREEDOM, GOVERNMENT, OBAMA, POLITICS
Friday before Election Day, the Obama Administration via the Department of Education released a “gainful employment” rule applicable to higher education, which singles out a particular type of learning institution: the for-profit school. The new regulation will prohibit students from being able to receive federal student aid “unless the program can show that their graduates’ annual loan payments do not exceed 20% of discretionary income, or 8% of total earnings.” The Department of Education essentially surmises that for-profit schools do not produce quality programs.
Basically this new rule will throw many for-profit colleges out of business. It’s not the first time a regulation of this kind has been issued, either. A federal court struck down the first attempt put forth by the Administration back in 2012. And yet, this newer version is more stringent — with 7 times as many programs likely to not pass standards/criteria for “gainful employment” now. The estimate is that around 1,400 programs educating 840,000 persons will fail the new magical threshold.
The Administration has stated that the goal of the new rule is to “protect students”, and that the rule is necessary “to ensure that colleges accepting federal funds protect students, cut costs and improve outcomes.” However, the rule is not applicable to public and nonprofit institutions. When pressed for the double standard during a congressional hearing on the topic last spring, Education Secretary Arne Dune said that “development of the college rating systems would address the rest of higher education”. That is a cop-out.
So here we have an Administration interfering with the ability of adults to pursue the educational path that best fits their needs by limiting their choices through the deliberate withholding of financial aid assistance from certain schools or programs that the government deems unfit. The government has chosen to redefine the term “gainful employment” in such a way that many career pathways will now be closed at a myriad of institutions that have previously educated many — especially a large number of poor and/or minority persons. These students quite often lack parental financial assistance anyway, and now removing the option for financial aid adds another barrier to upward mobility.
This ridiculous regulation was opposed in a signed letter by 18 members each of both the Republican and Democrat parties last spring, many of whom are minorities, citing their concerns for its adverse affect on low income students and those from non traditional backgrounds. However, their non-partisan approach fell on deaf ears.
Our country has many options for education — some students thrive a four year public institution; others, a community college or small private school and still others, a for-profit institution. Though Obama has consistently championed college education, this rules changes will make it harder, not easier, for a segment of the population to become a college graduate.
Another troubling aspect is how the rule measures debt. The WSJ points out that, “if the department were merely trying to protect students, then Mr. Obama’s “Pay As You Earn” plan that caps loan payments at 10% of discretionary income would make the rule moot. This is why the rule doesn’t measure graduates’ actual loan payments, but rather the median amount of debt they incur amortized over 15 years for bachelor’s degrees. Many students take up to 25 years to repay their loans.”
And more: “This economic reality is why the Administration is steering students toward loan forgiveness plans like Pay As You Earn. Grads who find non-gainful employment in government or at a nonprofit can get their loans forgiven after 10 years of modest payments. So the White House is encouraging graduates to pursue low-paying jobs in “public service” even as it punishes for-profit colleges whose graduates do precisely that.”
The Administration is once again picking winners and losers, this time in the realm of education. The new rule essentially encourages students to pursue their education — but only at places whose programs and operations are subsidized by taxpayer dollars.
by | BUSINESS, ECONOMY, FREEDOM, GOVERNMENT, OBAMA, POLITICS, TAXES
Well, now we know something that has been long suspected for the past four years: the IRS and the White House are sharing taxpayer information.
That has certainly been the suspicion since at least 2010, when a senior White House official, Austan Goolsbee, made a comment about the Koch Brother’s business practices in August 2010. The Weekly Standard was one of the first to cover this indiscretion as part of an article about the growing practice of attacking the Koch Brothers by liberals. From TWS back then:
“While the attention is unwanted for the Kochs, if somewhat expected, a lawyer for Koch Industries now tells THE WEEKLY STANDARD that the administration may have crossed a line by revealing tax information about Koch Industries. According to Mark Holden, senior vice president and general counsel of Koch Industries, a senior Obama administration official told reporters at an August 27 on-the-record background briefing on corporate taxes:
“So in this country we have partnerships, we have S corps, we have LLCs, we have a series of entities that do not pay corporate income tax. Some of which are really giant firms, you know Koch Industries is a multibillion dollar businesses. So that creates a narrower base because we’ve literally got something like 50 percent of the business income in the U.S. is going to businesses that don’t pay any corporate income tax. They point out [in the report] you could review the boundary between corporate and non-corporate taxation as a way to broaden the base.”
Holden tells THE WEEKLY STANDARD that this quotation from a senior administration official “came to our attention from different avenues. We are very concerned about why this would be said about us, particularly in this setting. We are concerned where this information would have been obtained from. We also are concerned in light of recent events that we have been singled out by the government and others as a campaign against us because of our political views.“
Additionally, Austan Goolsbee further this very line of thought on an interview shortly thereafter on September 12, 2010 with Chris Wallace.
During that fall of 2010 right before midterms, the Obama Administration started targeting small businesses and the way they pay taxes, as part a push for higher individual rate margins/repeal of the Bush Tax Cuts. The Administration began specifically trying to discredit Koch Industries and a plethora of small businesses by implying that not paying corporate taxes is somehow wrong or underhanded — while omitting that fact many businesses structure themselves as non-corporate entities to avoid the scourge known as double taxation. The White House used the Koch Brothers’ tax structure in an attacking anecdote, and openly discussed tax information that was not publicly available, in order to bolster their own talking points.
This has come back to light now four years later. Last week, TIGTA acknowledged the existence of about 2500 documents that fit the FOIA request, from a group called “Cause of Action”, asking for communication between the IRS and the White House.
Then on Tuesday, TIGTA retreated from its openness by withholding the bulk of the documents. A letter from TIGTA counsel to the group suing for the information, noted that there were 2,509 pages of documents “potentially responsive to your request”, and of those, 2,043 were in fact responsive. However, TIGTA cited tax code and privacy as the reason not to disclose those documents, saying “All of the 2,043 pages of documents we have determined to be responsive were collected by the Secretary of the Treasury with respect to the determination of possible liability under Title 26 of the United States Code. These pages consist of return information protected by 26 U.S.C. § 6103 and may not be disclosed absent an express statutory exception.”
Clearly, even without knowing the substance of the information, we do now know that the IRS and White House have shared some taxpayer information (roughly 2500 documents worth), which is a stunning breach of impropriety. The Koch Brothers were definitely in the crossfire back in 2010, and have been a concerted target of liberals ever since. Everyone questioned how the White House could know about their confidential taxpayer information. Now we know how. We just don’t know how deeply. Or who else.
The act of the IRS sharing the information is in itself a violation of federal law 26 U.S.C. § 6103, which is the very same law they are using to shield themselves from releasing the information now, citing “privacy”. The fact that the IRS and White House teamed up to share taxpayer information, and in at least one instance, used it to target American business owners while pushing their own economic agenda is thoroughly atrocious.
Update: Washington Free Beacon corroborates the Austan Goolsbee link, as the original FOIA request from “Change of Action” was specifically related to how the White House appeared to possess private taxpayer information of the Koch Brothers.
by | ARTICLES, BLOG, BUSINESS, CONSTITUTION, ECONOMY, GOVERNMENT, POLITICS, RETIREMENT, TAXES
Many states continue to bamboozle their citizens by obfuscating the true depth of their debt that is occurring in the form of unfunded liabilities. Those liabilities are mainly state public pension plans, and they continue to routinely promise pie-in-the-sky returns, even after years of bleak economic growth and investment.
A group called State Budget Solutions analyzes the problem of underfunding each year. Its annual report “reveals that state public pension plans are underfunded by $4.7 trillion, up from $4.1 trillion in 2013. Overall, the combined plans’ funded status has dipped three percentage points to 36%. Split among all Americans, the unfunded liability is over $15,000 per person.”
Many people might think, “I don’t work for my state government, so it doesn’t affect me”. It most certainly does. We are facing a generation of Baby Boomers who are getting ready to retire, and expect to have the pension that has been promised to them. Those promises are the unfunded liabilities which must be paid out. Pension costs come from state budgets — you and me — and in order to cover the costs, adjustments must be made. Expect tax increases and/or reduced government services in the coming years because a greater portion of the state budget will need to be dedicated to meeting these obligations.
How did we get here? The most damning factor is that of generous promises.
Ultimately, negotiators — be it union heads, lawmakers, or other bureaucrats — have had a fiduciary responsibility not to pay more than fair compensation, thereby restricting compensation and benefits to amounts no greater than what those skills would command in the private sector. Unfortunately, there are really no such competitive inhibitions in the public sector and therefore the negotiation routine lacks the incentive for restraint. In most cases, the self-interest of the public sector negotiator is more directly aligned with the leader that can get him elected rather than the taxpayer whom he is representing.
Lofty and mythical promises have been made for years now without a care about how it will be paid for — because the negotiator will likely be long gone when obligations come due. This is a true case of the fox in charge of the hen house. Thus runaway financial promises have deeply accumulated in state governments for which it cannot properly budget, while binding future governments not yet in office.
The Great Recession has made the problem more acute in recent years. “As the economy struggles to get back on track, states’ fiscal health also suffers, making it more difficult for state officials to make up for the shortfalls with greater contributions. As bond yields have suffered due to interest rates being held at historic lows, the fair market valuation of public pension liabilities also took a hit.”
Furthermore, most, if not all states, have hidden the vast problem by using accounting tricks — probably hoping the economy or investment will bounce back, or else just passing the buck year after year so it becomes someone else’s problem.
For instance, “state pension funds use a high discount rate. Discounting liabilities is a necessary part of fund management. Fund managers must assume that the current assets will be worth more in the future due to a number of factors, notably the return on investing those current assets. The problem arises because the discount rate is not based on the nature of the assets held by the pension plan, but is rather based on the assumed rate of return.”
The assumed rate of return — herein lies the problem. By continuing to perpetuate and promise rates of return of 5-8% for pensions, state governments show on paper that their liabilities are much smaller than they are. However, for years now, returns have been much closer to 2-3%. Yet state governments fail to make those realistic adjustments because it sounds neither glamorous nor generous to the employee.
What’s more, some states are facing such enormous financial pressures and shortfalls in all sectors of the state budget that they have reduced or skipped the yearly contribution to the pension funds altogether — thereby making the gulf that much wider. New Jersey balanced its budget (again) this year by reducing (again) the payment by $2.4 billion; Virginia skipped its payment back altogether in 2010 — although it did implement a repayment plan over subsequent 5 years to make up for that choice.
In fact, a cursory glance back at these practices reveal that the games have been ongoing for several years now. A Wall Street Journal article on this subject from Spring of 2010 — nearly 5 years ago — discusses how states were reducing and skipping payments and delaying the “day of reckoning”. New Jersey, California, and Illinois were some of the worse offenders then.
Is it any wonder that these three states are in the top ten for the amount of unfunded liabilities? California has the worst, $754 billion. In terms of funding ratios, Illinois leads the list with only 22% of its obligations funded. You can look at the full and various lists here.
The crisis will only continue to worsen unless changes are made. The outlook is gloomy for state governments and, based on past performance, is not likely to get better anytime soon. For most states, the “kick the can” approach allows them to coast while the liabilities fester, letting it become the problem of other future governments at some undefined point in the future. That is reprehensible.
by | ARTICLES, BLOG, BUSINESS, ECONOMY, GOVERNMENT, POLITICS, TAXES
The Legatum Institute’s 2014 Prosperity Index scored Norway as the most prosperous country in the world, with the United States ranked as the 10th. 142 countries that are ranked in the Index. Central Africa Republic is the least prosperous
There are eight factors that go into the ranking. They are:
Economy
Entrepreneurship
Governance
Education
Personal freedom
Health
Security
Social capital
The Legatum Institute has released the Prosperity Index for seven years. The top ten this year are:
1 Norway
2 Switzerland
3 New Zealand
4 Denmark
5 Canada
6 Sweden
7 Australia
8 Finland
9 Netherlands
10 United States
In 2008, the first year of the Index, the United States ranked 6th place. 2009 it was 9th place, 2010 and 2011 it was 10th place, 2012 it was 12th place, 2013 it was 11th place, and now in 2014 it’s back to 10th place.
Legatum is a private, United Arab Emirates-based, investment organisation and thinktank. It’s headquarters are in Dubai International Financial Centre. It is interesting to see such a scoring from a perspective on the other side of the world.
by | ARTICLES, BUSINESS, ECONOMY, POLITICS, TAXES
The Tax Foundation released its yearly State Business Tax Climate Index. This index measures the impact of taxes on business activities by looking at how much the citizen is taxed and also the amount of compliance. Five taxes are considered: 1) individual; 2) corporate; 3) sales; 4) property; 5) unemployment insurance.
Wyoming lead the states in growth, with a GDP gain of 7.6%. At the bottom, predictably, are New York (49th) and New Jersey (50th). New Jersey saw GDP growth of only 1.1% last year, while New York’s was only 0.7%. According to the report, New Jersey secured last place because “suffers from some of the highest property tax burdens in the country, is one of just two states to levy both an inheritance and an estate tax, and maintains some of the worst structured individual income taxes in the country.” Contrast that with Wyoming, which has no corporate or individual income tax.
The most surprising finding from the report was that North Carolina, which previously ranked 44th, was now ranked 16th. According to the Tax Foundation, “North Carolina’s largest improvement was in the individual income tax component section, where legislation restructured the previously multi-bracketed system” with a top rate of 7.75% to a single-bracket system with a rate of 5.8% “and a generous standard deduction of $7,500.”
The WSJ also noted that, “North Carolina is also reducing its corporate income tax rate—to 6% this year from 6.9% last year. The rate could drop as low as 3% by 2017 if the state achieves certain revenue targets for its general fund. North Carolina also received credit in this year’s ranking for a simplified sales tax system.”
The ten best states this year are:
1. Wyoming
2. South Dakota
3. Nevada
4. Alaska
5. Florida
6. Montana
7. New Hampshire
8. Indiana
9. Utah
10. Texas
8 of these top ten do not have of the five major taxes noted above. Indiana and Utah do have five, “but levy them with low rates on broad bases.”
The ten worst states are:
41. Iowa
42. Connecticut
43. Wisconsin
44. Ohio
45. Rhode Island
46. Vermont
47. Minnesota
48. California
49. New York
50. New Jersey
They earned this spot because all of the states “suffer from the same afflictions: complex, non-neutral taxes with comparatively high rates.”
In sum, “Taxes matter to business. Business taxes affect business decisions, job creation and retention, plant location, competitiveness, the transparency of the tax system, and the long-term health of a state’s economy. Most importantly, taxes diminish profits. If taxes take a larger portion of profits, that cost is passed along to either consumers (through higher prices), employees (through lower wages or fewer jobs), or shareholders (through lower dividends or share value). Thus, a state with lower tax costs will be more attractive to business investment and more likely to experience economic growth.”
by | ARTICLES, BUSINESS, ECONOMY, OBAMA, POLITICS, TAXES
Businesses are constantly make decisions about where its people need to be do their jobs. They follow the incentives to be the best company, to manufacture their product in the strongest and least intrusive way. Oftentimes that means, at some point, part of their operation moves abroad.
Opening up new foreign markets doesn’t lose jobs. Relocating work overseas typically is a reaction to proximity to supply chains, developing interests in new consumer markets, and keeping costs low for customers here — much more than the mantra that “shipping jobs overseas” is about labor costs and profitability for the business owner.
A business owner has to do what is best for his company. His competitor is doing the same thing — what he needs to do to survive. If the business policies in the United States are making it difficult to succeed and compete, that’s not the fault of the business owner. Those who wish to level this attack at business owners would do well to first take a critical eye to the policies that affect businesses here.
Businesses “ship jobs overseas” only if it needs to be done. Rarely does it have to do with the fact that labor is cheaper abroad. Blame can be placed squarely in the government imposed obligations and regulations and the pervasive anti-business climate. Businesses do not go into business to comply with government dictates — but to make things, provide a product, a service. If some of the processes to stay in business are found better abroad, the owner will follow suit in order to survive and thrive.
by | ARTICLES, BLOG, BUSINESS, ECONOMY, HYPOCRISY, OBAMA, POLITICS, TAXES
Michelle Nunn has been getting a lot of traction on the “shipping jobs overseas” rhetoric in an effort to paint her opponent, David Purdue, as unsympathetic to American workers. It’s a tactic toward anyone who is in business to demagogue them for shipping jobs overseas, just like they did to Romney in 2012.
Michelle’s cheap shots have lead her to create an ad campaign specifically focused on this narrative. Hours of countless searching has turned up a deposition from 2005, during which David Perdue “answered a question about his ‘experience’ with outsourcing by saying: ‘Yeah, I spent most of my career doing that.’”
Unfortunately, she made a bad decision about whom she chose to highlight — it turns out the ad features a businessman, Roy Richards Jr, whose company has also outsourced jobs. Perhaps she should have done her homework on him instead.
Politifact of Georgia couldn’t even make the stretch that Purdue’s career outsourcing meant that he “was proud to have sent jobs overseas”. Politifact noted, “it is accurate to claim Perdue’s sworn statement is that he spent most of his business career outsourcing. But that doesn’t translate into callous indifference to American workers – or even a tenure that did nothing more than ship jobs abroad. We continue to rate the claim Half True.”
The Washington Examiner goes more in-depth to the nature of his business dealings:
“Perdue was not referring to outsourcing as most understand it – that is, the process of firing American workers in favor of cheap labor overseas — but rather a business plan for his former company, Pillowtex, to save some American jobs, as Politifact noted.
“There is nothing to suggest he was narrowly moving jobs overseas just to increase profits or give himself a bonus,” said Rob Bliss, a finance professor at Wake Forest University in an interview with Politifact. “Moving jobs overseas would have been an effort to make the company more competitive. It’s a perfectly legitimate thing to do.”
Politifact also noted other companies where Perdue worked that did outsource jobs, but said those companies were “in industries where jobs were being lost to both cheaper foreign production — outsourcing — and also to technology and global business trends far outside his scope of control.”
As for the attack ad trying to substantiate that Perdue despises American workers, National Review Online called it “seriously hypocritical” since the featured businessman apparently also engaged in outsourcing at his own company. The Atlantic Journal-Constitution gives a rundown here. And NRO noted that “Cato’s Dan Ikenson has explained in Forbes, relocating jobs overseas can have as much to do with costs for customers, proximity to supply chains, or interest in new consumer markets as it does with labor costs and profitability.” Simply put, it’s a stretch to boil down “outsourcing” as simply disdain for the American worker for the sake of profit. But that is what Michelle Nunn wants you to believe.
Businesses continuously make decisions about where to get jobs and how to keep a company afloat. If the policies here in the United States are making it difficult to succeed and compete, or the market and demand has changed, that’s not the fault of the business owner. They must be willing to adapt or risk going out of business. Someone as ignorant as Michelle Nunn about basic economics should not be elected to Senate.
by | BUSINESS, ECONOMY, FREEDOM, GOVERNMENT, HYPOCRISY, TAXES
Last week, I wrote about the population shift from the northeastern states to other parts of the country due to the high taxation. It seems that the Yankees aren’t the only ones concerned enough with crushing taxes that they are willing to relocated — the French are too.
From the Independent:
“France’s unemployment rate is hovering around 10 per cent. As for high-earners, almost 600 people subject to a wealth tax on assets of more than €800,000 (£630,000) left France in 2012, 20 per cent more than the previous year. Manuel Valls, the Prime Minister, announced in London this week that the top income tax rate of 75 per cent would be abolished next January after a number of business tycoons and celebrities moved out.”
Hélène Charveriat, the delegate-general of the Union of French Citizens Abroad, concurs. Charvariat noted that the “young people feel stuck, and they want interesting jobs. Businessmen say the labour code is complex and they’re taxed even before they start working. Pensioners can also pay less tax abroad.”
Though the repeal of the 75% is a start, the loss of French citizens to other parts of the world is going to hamper economic recovery in France. I wrote about this probability in 2012 when Hollande first proposed his “rich tax” scheme. The Laffer Curve effect has been proven here in France as it did in England last year: namely, that increasing tax rates beyond a certain point will be counterproductive for raising further tax revenue.
As we can see, high taxes drives away citizens who wish not to hand over to the government the money they have saved and earned — just to see it misspent and frittered away.
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While stumping for Democrat candidates in Oregon, the Vice President shared his thoughts on the current economy with voters. And he got it very wrong.
“Economic growth has replaced the income that was lost during the recession, but the gains went primarily to taxpayers on the top. I think we should make them start to pay their fair share. Take the burden off the middle class”
Economic growth has not happened. Since Obama began his presidency:
The national debt has skyrocketed from $10.6 trillion to $17.8 trillion
Homeownership has decreased from 67.5% to less than 65%
Labor participation has fallen from about 66% to 63%.
Food stamp use has increased from 32 million to 46 million participants
Lost income has not been replaced: Since Obama began his presidency:
Median incomes have decreased from about $54,000 to $51,500.
The number of Americans who consider themselves middle class has dropped nearly 20%
Gains did not primarily go to taxpayers on top:
“The top 20 percent of earners accounted for 51 percent of all income in 2013, unchanged from 2012 and up slightly from 49.4 percent in 1999″.
Of course, Biden used his (wrong) economic talking points to pull out the old class-warfare playbook and insist that the rich “pay their fair share”.
Finally, if Biden is concerned about taking the burden off the middle class, he needs to start with the government. As I said earlier this week, the middle class has been the most devastated by Obama’s policies. Job growth and small business sustainability have been decimated by government regulation, taxation, fines, and lawsuits meddling in normal business practices. The middle class can’t get good jobs anymore, businesses have failed, growth is tepid, and everyday Americans are rightfully discouraged.
by | ARTICLES, BUSINESS, ECONOMY, GOVERNMENT, OBAMA, POLITICS, TAXES
Suddenly, Obama is everywhere talking about economic policies again. He is the mastermind behind the growth in corporate profits. He is the reason for the current stock market highs. He has single-handedly reduced unemployment to its lowest rate since 2008. He is Obama!
And yet, the middle class is repeatedly telling Obama that they feel left behind.
Why such disparity? The Administration can try to attribute these recent “successes” to Obama, but it only shows that they have a laughable cluelessness about what is really happening as a result of his economic policies.
Major corporations are doing well because they have enough size and stability to weather the storm created by Obama’s terrible business policies. This has included minimizing employment and trying to be as lean and efficient as possible. Mom-and-pops, on the other hand, have not the luxury to be as resilient.
The stock market is high only because major corporations have continued to persevere by changing the way they do business. Because of the government policies — including over-regulation and excessive taxation — companies have been forced to operate on the skinny just to survive. By doing so, profits are able to be maintained and the stock market reactive to that.
As a result of efficiency, therefore, unemployment is at its lowest percentage because there are no jobs to be attained anymore and people are just simply leaving the workforce altogether. Obama refuses to acknowledge the fact that labor participation is at its lowest rate since 1962. That is the major contributing factor to his “low” unemployment number — not because of job creation as he claims. Americans have stopped looking for work.
Thus, the middle class has the correct assessment because they have been the most devastated by Obama’s policies. Job growth and small business sustainability have been decimated by government regulation, taxation, fines, and lawsuits meddling in normal business practices. The middle class can’t get good jobs anymore, businesses have failed, growth is tepid, and everyday Americans are rightfully discouraged.
Related: “AP’s ‘Fact Check’ of Obama’s ‘Stronger Economy’ Claims Limited to ‘A Few’ Items: Two”
Lou Dobbs Refutes Obama’s Claim that the Economy Has Improved by Every Economic Measure
Are You Better Off Today? Here are the True Facts & Figures From the Obama Economy
