Fiscal Cliff – The Soap Opera Continues

McConnell, Reid point to fiscal stalemate

Tune in to the political programs on television and radio and all you hear is talk about the Fiscal Cliff. It’s been a continuing story where missing one or two episodes really means nothing.

My question is what fiscal cliff?

The U.S. government spent $3.563 Trillion in 2012. The total revenue was $2.435 Trillion. It does not take a mathematical genius to understand that the revenues will have to increase and the spending will have to decrease. Brooking Institute figures are similar to those provided by the Heritage Foundation.

The automatic spending cuts amount to $1.2 Billion in one year. That leaves spending at $3.443 Trillion assuming the budget does not increase one cent in 2013. Why the whining? That is hardly a cut.

From The Center for Public Integrity

http://www.publicintegrity.org/2012/12/05/11891/fact-check-facing-facts-fiscal-cliff

Some facts to consider:

The scheduled tax increases, if allowed to take effect, would net an additional $536 billion in fiscal year 2013, according to the nonpartisan Tax Policy Center, raising more than $5 trillion in 10 years. Nearly 90 percent of Americans would pay more in taxes, TPC says, with the average increase being nearly $3,500.
The automatic spending cuts scheduled to take effect would cut $1.2 Trillion over 10 years, split roughly in half between domestic and military spending. That works out to $1.2 Billion a year.
A temporary payroll tax cut enacted for 2011 was extended through 2012, but is now set to expire at the end of this year.
Tax increases contained in the Affordable Care Act on upper-income taxpayers will go into effect: a 3.8 percent tax on unearned income, 0.9 percent increase in Medicare payroll taxes and a higher income threshold for deducting medical expenses.
The Alternative Minimum Tax, which was designed to make sure wealthy Americans pay a minimum tax, was never indexed to inflation on a permanent basis.

If all that happened, taxes would increase an average of $3,466 per household, according to the TPC. Middle-income households — those earning nearly $40,000 to about $64,500 a year — would see an average increase of $1,984. Is this going to stop all spending? NO!

Once again it’s the whining. It is the result of this thinking. You can cut anywhere you want just don’t impact me.

Consider these four likely impacts listed by The Week magazine.

– Higher cost of lattes because a dairy subsidy will lapse. It appears we have had a dairy subsidy for about 30 years. Starbuck’s will suffer (maybe). Who knew?

– The Transportation Security Administration (TSA) will be laying off thousands of screeners at the airports. That will result in less screening. It is a wasteful program that has never caught a single terrorist.

– If a deal isn’t reached, and the economy creeps back toward recession, demand for fuel will fall (because presumably, Americans won’t have money to go anywhere), slashing gas prices. That is a good thing!

– According to Money Morning, during the debt-ceiling crisis last year, there was a 30 percent increase in the price of gold — a cost-climb we are likely to see again should the latest negotiations fail. Another good thing for all of us that bought gold!

Tough choices are part of life.

35 Days to Fiscal Cliff Hell

Some of this posting is based upon an article titled, “Fiscal Cliff Could Cost America 277K Jobs in January” posted on this website.

While addressing the House Financial Services Committee in February of this year, Federal Reserve Chairman Ben Bernanke coined the term “fiscal cliff,” describing, “a massive fiscal cliff of large spending cuts and tax increases” scheduled to occur on January 1, 2013.

Just a few days ago President Barack Obama, House Speaker John Boehner, and Senate Majority Leader Harry Reid and minority leaders were all talking as if an agreement to avoid the fiscal cliff was a realistic possibility.

Today’s news reports are that little progress has been made.

Should Congress fail to act, allowing the tax cuts to expire and budget cuts to take effect, the results could be drastic, increasing the annual federal tax burden on the average family of four by about $2,200, according to the Congressional Budget Office.

The major components of the fiscal cliff are the expiration of the Bush Tax Cuts, federal unemployment benefits, and social security payroll tax cuts, on top of automatically triggered spending cuts associated with the Budget Control Act of 2011.

Cuts associated with the Budget Control Act could result in the loss of 277,000 federal jobs, according to a report from the George Mason University Center for Regional Analysis. The report assesses the impact the Budget Control Act would have on all agencies subject to cutbacks including Agriculture, Commerce, Education, EPA, Energy, Health and Human Services, Homeland Security, Housing and Urban Development, State, NASA, Transportation and Interior. While the cuts would only reduce federal spending from 22.9% of GDP to 22.4% of GDP, according to the CBO, they would cause significant job losses for federal health inspectors, Federal Aviation Administration workers, and FBI agents.

The president does not appear to be willing to write a piece of proposed legislation to avert going over the fiscal cliff. This was my complaint about his management style throughout his first term. It was no Barack Obama who wrote the Affordable Care Act. It was members of the Democratic Party leadership in the houses of Congress.

If the sequestration occurs both political parties deserve blame. The president should not be campaigning as he did during much of his first term. He should be negotiating with congress. His failure to bring this self inflicted event to a satisfactory conclusion will dog his next four year term.

No Real change in the Unemployment Rate

Try Crunching these numbers!

President Obama received some good news last night. The unemployment rate has dropped to 7.8%. As Chris Mathews and others have said repeatedly, no president has been re-elected when the rate was over 8% since FDR. Market Watch has questioned whether the books have been cooked. I prefer to believe the data is accurate. After all, the government could have provided false data over the past year and apparently did not. How could the unemployment rate decline? More people stopped looking for jobs than those obtaining new jobs.

The problem is the focus of the data. The BLS trumpets the unemployment rate rather than the number of unemployed. It’s only after extensive reading did I learn about another piece of data that tells the real story. Table A-15 (Alternative measures of labor underutilization) of the BLS monthly report on Line U-6 provides a more accurate reflection of the true unemployment situation. That line provides “Total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force.”

That number is 14.7% for this past month. At its peak in December 2010 the percentage had reached 16.6%.

The president is silent on his plans and Mitt Romney has said he will create 12 million jobs in four years. There are no details on the plans. No wonder! No one employs more help without demand. Lower taxes are wonderful for the pocket book but will that make a difference in hiring?

I don’t think so!

Vote Yes on California Proposition 30

Californians are spoiled and selfish. They cry about their high taxes without considering the consequences. Two significant results of the no additional taxes is the condition of our schools and highways. California is rated 47^th in the country in quality of schools and highways are mediocre at best. Consider the general property tax rate in New Jersey. Their rate is .03758 according to that state’s web site. The result is that taxes on a home with an assessed value of $150,000 are $5,637. There is no Proposition 13 control on increasing the appraised value. Thus my home has an increased value of just over 50% in the past 33 years. The actual market value of the home increased by 6 times before the 2008 crash.

You might argue that we have higher sales tax rates but here are the rates in various major cities throughout the country

Birmingham, AL 10.0%

Chicago, IL 9.75%

Seattle, WA 9.5%

Los Angeles 8.75%

San Francisco 8.5%

NYC 8.5%

Las Vegas, NV 8.1%

Philadelphia 8.0%

San Diego 7.75%

Boston 6.25%

A loaf of Bread cost 9 cents in 1938. My parents bought their first home in 1949 for $12,500. Today Zillow values the house at about $375,000. We simply can’t get our heads wrapped around the fact that everything costs more today. That includes the cost of government.

You are the 47 Percent

By Joel Mathis in the Los Angeles Daily News, September 23, 2012

Are you married? Have a job? How about a kid or two? Did you get a tax refund last year because your status as a working parent made you eligible for an Earned Income Tax Credit?

Congratulations: Mitt Romney thinks you’re a welfare-addicted bum.

See, when Romney talks about that 47 percent of Americans who don’t pay income taxes, he’s talking about you.

You may not think that’s true, because of course you pay plenty of taxes – there’s the payroll tax that comes out of your check every week, the fee that goes to pay for Social Security. And of course, the world is a maze of taxes for you: Every time you fill up the gas tank or buy a birthday gift for the kid, the price is a little higher because of the extra few cents that goes to the state or local governments.

Surely Romney’s talking about somebody else?

Somebody who sits at home and waits for a government check they didn’t earn?

Nope. He’s talking about you.

See, to get to that 47 percent number, Romney has to include folks who actually work but didn’t officially pay income taxes because they didn’t earn enough, or because they qualified for the Earned Income Tax Credit.

Nearly two-thirds of Romney’s laggardly 47 percent paid payroll taxes.

And to state the obvious: You generally have to be on a payroll to pay the payroll taxes. You have to have a job.

Now: Romney obviously wasn’t taking you into account when he said that 47 percent is “dependent on government” and “entitled to health care, to food, to housing, to you-name-it.”

Which is the problem: Romney wasn’t taking you into account. He and the rest of the Republican Party have been so solicitous of so-called ‘job creators” that they’ve treated job doers rather shabbily. It’s something to think about when you vote in November.

The Real Mitt Romney

Wow!

Mother Jones magazine obtained this video clip. It tells what Mitt Romney thinks about 47% of us.

Responding to a question from a donor about how he could triumph in November, Romney replied:

There are 47 percent of the people who will vote for the president no matter what. All right, there are 47 percent who are with him, who are dependent upon government, who believe that they are victims, who believe the government has a responsibility to care for them, who believe that they are entitled to health care, to food, to housing, to you-name-it. That that’s an entitlement. And the government should give it to them. And they will vote for this president no matter what…These are people who pay no income tax.

Romney went on: “[M]y job is is not to worry about those people. I’ll never convince them they should take personal responsibility and care for their lives.”

How stupid can this man be?

As reported by the Associated Press;

According to the TaxPolicyCenter study, 38 million — half of those who owe no federal income taxes — escape owing money to the IRS because their income is too low. For them, merely using the standard deduction, personal exemptions and other basic parts of the tax code allow them to avoid income taxes.

Overall, 93 percent of those who owe no federal income taxes earn $50,000 annually or less. But 5 percent of them earn $50,000 to $100,000 and the rest — around 430,000 nonpayers — earn more than $100,000 annually. That includes 4,000 households earning more than $1 million a year, thanks largely to tax exempt interest, reduced rates on capital gains and dividends and other deductions.

This entire event is not going to derail the Romney campaign. Obama made his remarks about some people clinging to their guns in 2008 and it made little impact on his win – but we all know what he really believes and that comment will have an impact on this election.

The question is: what does Romney stand for and what would he do as president? Unless he can provide convincing answers his chances to win the election are considerably diminished.

Special Income Tax Rates for the Very Wealthy

Everyone should be taxed at the same rate. There should be no deductions or allowances for any thing!

Steve Rattner, President Barack Obama’s former car czar, appeared on Fareed Zakaria’s GPS a few week ago. (Steven Rattner is Chairman of Willett Advisors LLC, the investment arm for New York Mayor Michael R. Bloomberg’s personal and philanthropic assets.) Mr. Rattner said that one of the reasons Mitt Romney won’t release his income tax returns is his legal but highly unusual asset protection.

Romney has a $100 million IRA and off shore accounts that avoid US income tax. Rattner pointed out that many rich people pay income tax at the 35% rate while there is a group that pay at the much lower rates. Rattner said he didn’t think the American people would be too happy with this situation. I certainly am not happy!

There is always going to be a very rich part of this society. I don’t know the reason but it was confirmed by Vilfredo Pareto (15 July 1848 – 19 August 1923). He made several important contributions to economics, particularly in the study of income distribution and in the analysis of individuals’ choices. The Pareto principle was named after him and built on observations of his such as that 80% of the land in Italy was owned by 20% of the population. Today in the USA 85% of America’s wealth is owned by 20% of the population (quite close to Pareto’s 80-20 theory).

What I do not accept is the idea that the wealthiest among us pay 15% in income taxes.

This is nothing about Jealously. This is about fairness.

There is no question that rich people spend more money on stuff. The question is: Should rich people whose earnings are the result of investments be taxed on their income at 15% (or less if Paul Ryan has his way) than people whose earnings are based upon a salary?

Personally I believe everyone should pay income taxes at the same graduated rate no matter what the source of the income. No one should be given any allowances or deductions for ANYTHING. You want a wife, more kids – go for it – just don’t expect any help from the government.

Bill Kristol, Fox News Pundit, Questions Tax Cut for the Wealthy

Back in 2001 and 2003 President George W. Bush pushed his income tax reduction laws through Congress. The theory behind those tax reductions was the government was running a surplus and the economy needed a boost. What was the result? Higher net income for business and the loss of American jobs to China, India, and other nations. The result is that business leaders tell the American people we are no longer a manufacturing society, we are now a service society. Those services translate to lower paying jobs for the middle class. What middle class? Those jobs are the jobs of the poor!

Even Bill Kristol is now questioning the idea of even lower taxes for business.

By Igor Volsky of Think Progress on Aug 11, 2012 at 3:42 pm

Bill Kristol, who had predicted that Mitt Romney would name Paul Ryan as his vice presidential running-mate, expressed some concern Saturday morning that Republicans may have a hard time defending the GOP budget, which disproportionately cuts taxes for the rich.

“It’s the tax cuts for the wealthy, where Republicans have not done a particularly good job of defending it and I think you’ll see Democratic attacks focus on that side of the equation,” he said. The Wall Street Journal’s Stephen Moore agreed, but noted, “who’s better to defend those policies that Paul is, I mean he knows this stuff better than anyone.”

Paul Ryan’s infamous budget — which Romney embraced — replaces “the current tax structure with two brackets — 25 percent and 10 percent — and cut the top rate from 35 percent.” Federal tax collections would fall “by about $4.5 trillion over the next decade” as a result. To avoid increasing the national debt, the budget proposes massive cuts in social programs and “special-interest loopholes and tax shelters that litter the code.”

But 62 percent of the savings would come from programs that benefit the lower- and middle-classes, who would also experience a tax increase. That’s because while Ryan “would extend the Bush tax cuts, which are due to expire at the end of this year, he would not extend President Obama’s tax cuts for those with the lowest incomes, which will expire at the same time.” Households “earning more than $1 million a year, meanwhile, could see a net tax cut of about $300,000 annually.”

Investment Scandal is Standard Operating Procedure

You Can’t Trust Banks or Brokers

The Madoff scandal seems like many years ago but it was December 2008. Then there was the Allen Stanford February 2009 scandal that the SEC called a “massive ongoing fraud” involving $7 billion. We had to wait to December 2011 for the MF Global bankruptcy. Jamie Dimon of JP Morgan Chase announced in May of this year that the bank lost $2 Billion but as things turned out the amount may be closer to $7.5 Billion. A mere $15 Million is missing in the accounts of an Iowa futures brokerage named Peregrine – the 64 year old founder is suspected of falsifying customer accounts for at least two years (sounds like the Madoff affair). He tried to commit suicide – we should have let him – It would have saved the government the cost of his imprisonment.

Not to be outdone, the banks that set the Libor (London Interbank Offered Rate) has been rigging the rates and Barclays has been fined $450 Million. Some American banks may be involved. Many American consumer and home mortgage loans are based upon this rate.

Mere mortals, such as myself, are at the mercy of the wheeler dealers.

If there was another failure of any of our large banks the United States would come to their rescue even though politicians say they won’t. Why? Because just four of the conglomerates have assets totaling 51% of our annual national economy.

The list:

Bank of America
JP Morgan Chase
Citi Group
Wells Fargo

Their assets total $7.7 Trillion. The national GDP $15.1 Trillion.

Can Anyone Fix This Economy?

Read Mitt’s plan then read Barack’s plan. If it’s “the economy stupid” then where is the plan to set the nation on a course to recovery?

The number of new employees added to the job payrolls has been less than breathtaking. With 5 million long term unemployed is anything other than low pay service sector jobs going to be created in the coming years? The number of new June jobs is 80,000. The unemployment rate remains at 8.2% for a second straight month. That is less than the number required to keep pace with our growing population according to most economists. Perhaps the better question to ask is what are the plans of the two candidates for president?

From Mitt Romney’s campaign web site.

Mitt’s Plan

Mitt Romney sees two important objectives that America can pursue immediately to build on the extraordinary traditional strengths of its workforce. The first is to retrain American workers to ensure that they have the education and skills to match the jobs of today’s economy. The second is to attract the best and the brightest from around the world.

Retraining Workers

Mitt Romney will approach retraining policy with a conservative mindset that recognizes it as an area where the federal government is particularly ill-equipped to succeed. Retraining efforts must be founded upon a partnership that brings together the states and the private sector. The sprawling federal network of redundant bureaucracies should be dismantled and the funds used for better purposes. One particularly promising approach that Romney supports and believes states should be encouraged to pursue is a system of Personal Reemployment Accounts for unemployed individuals. These accounts would facilitate programs that place individuals directly into companies that provide on-the-job training—as governor of Massachusetts, Romney helped create just such a program.

Eliminate redundancy in federal retraining programs by consolidating programs and funding streams, centering as much activity as possible in a single agency
Give states authority to manage retraining programs by block granting federal funds
Facilitate the creation of Personal Reemployment Accounts
Encourage greater private sector involvement in retraining programs

Attracting the Best and the Brightest

To ensure that America continues to lead the world in innovation and economic dynamism, a Romney administration would press for an immigration policy designed to maximize America’s economic potential. The United States needs to attract and retain job creators from wherever they come. Foreign-born residents with advanced degrees start companies, create jobs, and drive innovation at an especially high rate. While lawful immigrants comprise about 8 percent of the population, immigrants start 16 percent of our top-performing, high-technology companies, hold the position of CEO or lead engineer in 25 percent of high-tech firms, and produce over 25 percent of all patent applications filed from the United States.

Raise visa caps for highly skilled workers
Grant permanent residency to eligible graduates with advanced degrees in math, science, and engineering

Barack Obama jobs plan is not posted on his campaign web site. Instead his site points to the growth of jobs and offers these successes and plans.

Barack’s Plan

 489,000: Jobs added in the manufacturing sector since January 2010

 233,000: Jobs added in the auto industry since June 2009—the most growth in a decade

 100%: The percent of investment in plants and equipment that businesses could expense under a tax cut extension President Obama proposed, which would spur investment in the United States

 18%: Tax deduction President Obama has proposed for domestic advanced manufacturing technologies—which would double the current 9 percent deduction

 20%: Income tax credit the President has proposed providing to companies on expenses related to moving operations back to the United States

Neither candidate offers any idea to re-employ those middle class wage earners that have faced a devastatingly long unemployment period. As matter of fact no one has offered one sensible plan. If Mitt Romney believes that the independent voters will elect him to office by just saying Obama has failed to re-invigorate the economy he is not likely to gain my support. He should not gain your support either. Vague references to re-training programs when the there are no growing industries are not enough.

If my choice is between just another face and no plan then I will vote for Obama. At least he has the experience that no other job in the world can provide. Then again why should I vote for a leader who has not been able to change our course?