Tidbits
Quotations
To Accompany the February 14, 2012 edition of Tidbits
http://www.trinity.edu/rjensen/tidbits/2012/tidbits021412.htm
Bob Jensen
at
Trinity University
To laugh often and much; to win the respect of
intelligent people and the affection of children; to earn the appreciation of
honest critics and endure the betrayal of false friends; to appreciate beauty,
to find the best in others; to leave the world a little better; whether by a
healthy child, a garden patch or a redeemed social condition; to know even one
life has breathed easier because you have lived. This is the meaning of success.
Ralph Waldo Emerson
Thank you Maureen for the heads up.
Any time you have an opportunity to make a
difference in this world and you don't, then you are wasting your time on Earth.
Roberto Clemente, 1972)
Thank you Dennis Bline for the heads up.
Canada's Economic Action Plan ---
http://www.actionplan.gc.ca
Visualizing Economics
Comparing Income, Corporate, Capital Gains Tax Rates: 1916-2011 and Other
Graphics ---
Click Here
http://visualizingeconomics.com/2012/01/24/comparing-tax-rates/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+VisualizingEconomics+%28Visualizing+Economics%29&utm_content=Google+Reader
"U.S. Taxes Really Are Unusually Progressive," by Clive Crook, The
Atlantic, February 10, 2012 ---
http://www.theatlantic.com/business/archive/2012/02/us-taxes-really-are-unusually-progressive/252917/
If you ask me, Jonathan Chait, a writer I respect,
has made an ass of himself in a fight he picked with Veronique de Rugy over
taxes and progressivity. She offended him by saying that
America's income taxes are more progressive than
those of other rich countries. Chait assailed her "completely idiotic"
reasoning, called her an "inequality
denier", "a ubiquitous right-wing misinformation
recirculator" and
asked if it was really any wonder he cast insults
now and then at such "lesser lights of the intellectual world". (Paul
Krugman said he sympathises. With Chait, obviously. The only danger here is
in being too forgiving,
Krugman advises. Chait may think the de Rugys of
this world are only lazy and incompetent, but we know them to be liars as
well.)
Just one problem. On the topic in question, De Rugy
is right and Chait is wrong.
Income taxes in America are more
progressive than in other rich countries--according to an authoritiative
official study which, to my knowledge, has not been contradicted. The OECD's
report "Growing
Unequal", on poverty and inequality in industrial
countries, includes a table that provides two measures of income tax
progressivity in 2005. This is evidently the source of de Rugy's numbers.
Here they are in an
excel file. According to one measure, America's
income taxes were the most progressive of the 24 countries in the sample,
except for Ireland. According to the other, they were the most progressive
full stop. (A more recent OECD report, "Divided
We Stand", uses different data, a smaller sample
of countries and a different measure of progressivity: the results are
similar.)
Before you ask, this ranking takes account of
employee-side payroll tax as well as the federal income tax.
Chait first objected to de Rugy's claim about
progressivity because he thought she was inferring it from the fact that the
US collects the biggest share of income taxes--45 percent of the total, col
B1 in the table--from the top income decile. That would be a false
inference, as Chait says, because it could be true of a country with a very
unequal income distribution even if its taxes were not especially
progressive. But look at the table. There was no need for de Rugy to draw
any such inference, let alone try to mislead readers. All she needed to
do--and all, I'm sure, she did--was glance over to the last column, which
actually gives the measure of progressivity, showing the US to have the
highest score.
The measure of progressivity is hard to explain, so
I can see why de Rugy quoted the tax share instead. But she could have
chosen a much more dramatic number if she was seeking merely to bamboozle
her readers. Exclude payroll tax, and the top 1 percent of taxpayers, not
the top 10 percent, have lately accounted for nearly 40 percent of income
tax receipts, the top 5 percent for nearly 60 percent, and the top decile
for roughly 70 percent. (Here are the IRS data,
excel file.)
For the reason I just gave, this does not prove
that the US tax system is more progressive than anybody else's--but it
surely has some relevance to the question, "Are the rich paying their fair
share of income tax?" If this isn't fair, what would be?
When Chait, with all the authority of a leading
light of the intellectual world, says "Rich Americans pay a bigger share of
the tax burden because they earn a bigger share of the income, not because
the U.S. tax code is more progressive," he is making the same kind of sloppy
bias-driven error he falsely accuses de Rugy of making. (I'll refrain from
wondering whether he made the mistake deliberately.) According to the OECD,
rich Americans bear a bigger share of the tax burden because they earn a
bigger share of the income and because the US income tax
system is more progressive.
There's a lot more to say on this subject.
Is measuring progressivity straightforward? No.
It's difficult, because the underlying data are very complicated and hard to
compare across countries. Another problem: expressing progressivity across
the whole income range as a single number, so that one can say A is more or
less progressive than B, can be misleading. Unfortunately, we all want to be
able to say, A is more or less progressive than B.
Why, according to the OECD, is the US system so
progressive? Not because the rich face unusually high average tax rates, but
because middle-income US households face unusually low tax rates--an
important point which de Rugy mentions and Chait ignores.
How does the picture change if you take indirect
taxation into account? That would make the US system look even more
progressive, because the US doesn't rely on a flat consumption tax like most
other governments.
Continued in article
Most developed nations, other than the U.S., provide relief on double
taxation
"Corporate Dividend and Capital Gains Taxation: A Comparison of the United
States to Other Developed Nations," by Ernst & Young (Drs. Robert Carroll
and Gerald Prante), February 2012 ---
http://images.politico.com/global/2012/02/120208_asidividend.html
Graphic: How Much People Pay for Health Care Around the World ---
http://visual.ly/how-much-people-pay-health-care-around-world
Fairy Tale of the Month
Employees of Notre Dame will never have to fund the "free" contraception
"compromise" of the Obama administration. The cost of $600 per year for each
worker on birth control in the United States will all be taken out of insurance
company profits. Notre Dame's employees will never have to pay whether or not
they are on the pill.
"Immaculate Contraception: An 'accommodation' that makes the
birth-control mandate worse," The Wall Street Journal, February 11,
2012 ---
http://online.wsj.com/article/SB10001424052970203646004577215150068215494.html?mod=djemEditorialPage_t
Here's a conundrum: The White House wants to impose
its birth-control ideology on all Americans, including those for whom
sponsoring or subsidizing such services violates their moral conscience. The
White House also wants to avoid a political backlash from this blow to
religious freedom. These goals are irreconcilable.
So you almost have to admire the absurdity of the
new plan President Obama floated yesterday: The government will now write a
rule that says the best things in life are "free," including contraception.
Thus a political mandate will be compounded by an uneconomic one—in other
words, behold the soul of ObamaCare.
Under the original Health and Human Services
regulation, all religious institutions except for houses of worship would be
required to cover birth control, including hospitals, schools and charities.
Under the new rule, which the White House stresses is "an accommodation" and
not a compromise, nonprofit religious organizations won't have to directly
cover birth control and can opt out. But the insurers they hire to cover
their employees can't opt out. If that sounds like a distinction without a
difference, odds are you're a rational person.
Say Notre Dame decides that its health plan won't
cover birth control on moral grounds. A faculty member wants such coverage,
so Notre Dame's insurer will then be required to offer the benefit as an
add-on rider anyway, at no out-of-pocket cost to her, or to any other worker
or in higher premiums for the larger group.
But wait. Supposedly the original rule was
necessary to ensure "access" to contraceptives, which can cost up to $600 a
year as Democratic Senators Jeanne Shaheen, Barbara Boxer and Patty Murray
wrote in these pages this week. The true number is far less, but where does
that $600 or whatever come from, if not from Notre Dame and not the
professor?
Insurance companies won't be making donations. Drug
makers will still charge for the pill. Doctors will still bill for
reproductive treatment. The reality, as with all mandated benefits, is that
these costs will be borne eventually via higher premiums. The balloon may be
squeezed differently over time, and insurers may amortize the cost
differently over time, but eventually prices will find an equilibrium. Notre
Dame will still pay for birth control, even if it is nominally carried by a
third-party corporation.
This cut-out may appease a few of the
Administration's critics, especially on the Catholic left—but only if they
want to be deceived again, having lobbied for the Affordable Care Act that
created the problem in the first place. The faithful for whom birth control
is a matter of religious conviction haven't been accommodated at all.
They'll merely have to keep two sets of accounting books.
The real audience for this non-compromise are the
many voters shaken that the White House would so willfully erode the
American traditions of religious liberty and pluralism, most of whom don't
adhere to anti-contraceptive teachings. On a conference call with reporters
yesterday, a senior Administration official not known for his policy chops
claimed that the new plan was "our intention all along" and that the furor
is nothing more than partisan opportunism. Hmmm.
We couldn't recall any spirit of conciliation when
the birth-control mandate was finalized in January, so we went back and
checked the transcript of that call with senior Administration officials.
Sure enough, back then they said that the rule "reflects careful
consideration of the rights of religious organizations" and that a one-year
grace period "really just gives those organizations some additional time to
sort out how they will be adjusting their plans."
A journalist asked, "Just to be clear, so it's
giving them a year to comply rather than giving them a year to in any way
change how they feel or the Administration to change how it feels." Another
senior official: "That is correct. It gives them a year to comply."
Yesterday's new adventure in damage control and
bureaucratic improvisation makes the compliance problem much worse. There is
simply no precedent for the government ordering private companies to offer a
product for free, even if they recoup the costs indirectly. Why not do that
with all health benefits and "bend the cost curve" to zero? The shape of the
final rule when the details land in the Federal Register is anyone's guess,
including the HHS gnomes who are throwing it together on the fly to meet a
political deadline.
One major problem will be how the rule applies to
large organizations that self-insure. Arrangements in which an employer pays
for care directly and uses insurers to manage benefits and process claims
(not to take on insurance risk) account for the majority of the private
market. In these cases there isn't even a free lunch to pretend exists.
As reporting by Bloomberg and ABC this week has
made clear, the contraception mandate was fiercely opposed within the
Administration, including by Vice President Joe Biden. The larger tragedy is
that none of them objected to government health care, which will always take
choices away from individuals and arrogate them to an infallible higher
power in Washington. Who was it again who claimed that if you like your
health plan, you can keep your health plan?
Newsweek Magazine is a relative liberal, anti-conservative news
magazine. Since Tina Brown became editor the magazine is no less liberal, but it
is a much thinner magazine now with mostly shallow articles that rarely excite
me at all. However, the January 30, 2012 edition is an exception that appeals to
my academic nature. Academics generally like to read about opposing sides of
most any issue, especially a political issue. The article below attacks back at
a previous edition's cover story where Andrew Sullivan's praises of President
Obama's performance to date.
Thank you Tina for being willing to show both sides of this debate.
"David Frum Strikes Back at Andrew Sullivan on Barack Obama," by David
Frum, Newsweek Magazine, January 23, 2012 ---
http://www.thedailybeast.com/newsweek/2012/01/22/david-frum-strikes-back-at-andrew-sullivan-on-barack-obama.html
Now let’s move to the real debate. You don’t have
to succumb to ideological fever or paranoid fantasy to see that the
Obama administration is dragging America to the
wrong future: a future of higher taxes and reduced freedom, a future in
which entrepreneurs will innovate less and lobbyists will influence more, a
future in which individuals and communities will make fewer choices for
themselves and remote bureaucracies will dictate more answers to us all.
The intentions are not malign. But it’s not
intentions that matter—it’s results.
You begin to see those results in the small hearing
rooms in which Social Security disability cases are decided. In the months
since the financial crisis, the Social Security Administration has been
awarding more and more disability pensions: almost 100,000 in the last month
of 2011, 50 percent more than before the financial crisis.
Not much surprise there. Applications for
disability have jumped even more steeply. It’s not very likely that
Americans are suddenly suffering a lot more accidents than they used to
suffer, back when many more of them were working. More likely: with
unemployment higher, more people are seeking help—and with jobs scarce, more
judges are saying yes.
It’s easy to sympathize with the thinking of the
individual Social Security judges. Here’s a worker who has lost her job as a
forklift operator. Five years ago, a judge might have told her: forget the
pension, Walmart is hiring. But now Walmart isn’t hiring—or anyway, not
hiring enough. So the judge relents. Why not give the applicant just a
little something? An extra $12,000 a year (the size of the average award)
won’t break the federal budget. The country can figure out later how to pay
for it. Which is how it happened that we’re on the verge of enrolling the 9
millionth American on disability—almost double the number of the late 1990s.
Of course, as the federal government manages more
and more disability pensions, it must hire more judges and administrators to
hear and process those requests. Employment at the Social Security
Administration is up by more than 6,000 since 2007, or 10 percent. In fact,
hiring is up across the federal government, by 15 percent since 2007.
Federal hiring has been more than offset by layoffs at the state and local
level. But when the economy recovers, as it will, the states and localities
will hire again—and at the rate we’re going, an upswing in state and local
hiring won’t be balanced by commensurate reductions in federal staffing.
You don’t have to vilify President Obama as a
Kenyan socialist to recognize that his policies are reorienting the country
toward more dependence on the federal government. Through most of the past
half century, the federal government has spent about one dollar in five of
national income. Right now, it’s spending about one in four. If Barack Obama
is reelected and his policies are continued, that one-dollar-in-four ratio
will harden into permanent reality, on the way to one dollar in three, with
state and local spending on top of that.
Every president since the late 1970s has struggled
to contain the growth of government, Democrats as well as Republicans. Jimmy
Carter battled Democrats in Congress to stop wasteful construction projects.
He signed the deregulation of airlines, trucking, and rail. Bill Clinton
announced that “the age of big government is over,” signed welfare reform,
and accepted budgets that reduced government spending as a share of national
income.
Barack Obama is the first president since Lyndon
Johnson to push aggressively for bigger and more interventionist
government—and not merely as an emergency measure against the recession.
Look at the president’s energy policy, for example.
We need to reduce our use of oil; every president since Richard Nixon has
agreed to that. We know how to do it, too: raise the price. When oil prices
jumped in the late 1970s, American oil use tumbled. As late as 1995,
Americans were using less oil than in 1978. Not less per person. Less oil,
period.
When oil prices jumped in the 2000s, Americans
again changed their behavior. For the first time in a century, they drove
fewer miles, year over year.
Want to reduce oil use even more? Tax it, and then
let Americans decide for themselves how to conserve: whether to move closer
to work, invest in a hybrid car, or buy fewer consumer products shipped from
half the world away.
Instead, Obama has resorted to direct intervention
in the energy marketplace. Solyndra, the failed solar-energy company that
got $500 million–plus in direct government aid, is one example. Maybe a more
important one is the Keystone pipeline from Canada, canceled to conciliate
the president’s environmental backers. Those backers apparently prefer to
change consumption habits by brute force rather than through the mechanisms
of the market, as we can see from their thus-far-successful efforts to
scuttle oil projects one by one—drilling in Alaska, drilling in the Gulf of
Mexico, Keystone.
You see the same reliance on brute force, not
market force, in health care. I am one of the few Republicans who will still
defend the Heritage Foundation’s idea of regulated insurance exchanges in
which customers are mandated to buy pri-vate insurance, with subsidies for
those who need subsidies: Romneycare, in a word. Leaving tens of millions of
Americans uninsured is both inhumane and inefficient.
But it is striking that the main engine of coverage
expansion under the president’s health-care reform is actually not the
mandate you hear so much about. The Congressional Budget Office projects
that half of all the net gain in insurance coverage under the president’s
health-care proposal will be due to higher enrollment in government
programs: Medicaid and the CHIP program for poor children.
Even before Obama took office, half of all the
health-care dollars spent in the U.S. were spent by government in one way or
another. We’re on our way to government spending much more. And that means
that health-care cost control—also urgently needed—will not come via market
competition. It will come by direct government order.
Why does the president so favor the expansion of
government? There’s no need to resort to paranoid theories. In his
characteristically lucid way, he has already told us.
In December, Obama traveled to the Kansas town of
Osawatomie to deliver one of the most important speeches of his presidency
to date. There he poignantly described the dimming prospects of the American
middle class—and then offered the following policy response: “The over 1
million construction workers who lost their jobs when the housing market
collapsed, they shouldn’t be sitting at home with nothing to do. They should
be rebuilding our roads and our bridges, laying down faster railroads and
broadband, modernizing our schools—all the things other countries are
already doing to attract good jobs and businesses to their shores ... Of
course, those productive investments cost money. They’re not free. And so
we’ve also paid for these investments by asking everybody to do their fair
share.”
In other words, the president is championing a more
active government, not as a way to meet social needs but as a permanent and
growing source of middle-class employment. Some of us will work directly for
the public sector. Others will be contractors. Either way, many more of us
will be working in jobs from which it will be difficult to fire us—and where
the government sets more of the terms of employment.
Something like this approach was tried in Britain
under the Labour governments of Tony Blair and Gordon Brown. Between 1997
and 2008, Blair and his successor Brown used rapidly rising government
revenues to finance new public-sector jobs in depressed old industrial
areas. Over the decade, the public sector provided more than half of all the
net new jobs in three of the four main economic regions of England—and 80
percent of the net new jobs for women.
They piled more and more taxes on a smaller and
smaller slice of the economy. Meanwhile, the expanded public sector did not
spark the benefits it was supposed to. The depressed areas remained
depressed. The gap between rich and poor grew instead of shrinking.
Obama becomes impatient when his policies are
compared to Blair’s or Brown’s. But it’s hard to see the basis for that
reaction. A reelected President Obama would want to see the Bush tax rates
lapse, federal revenues rise, and the proceeds used to fund a permanently
higher level of federal spending and government employment.
. . .
Yes, much of the criticism of the Obama
administration has been hysterical and deluded. Yes, many of the attacks on
the president and his family have been ugly and hateful. But in rejecting
the extremism of some critics, we shouldn’t race to the opposite and equally
invalid extreme of denying all criticism.
There is much to admire in Barack Obama the man.
But his presidency, especially on the domestic front, has been a bitter
disappointment to almost everybody—perhaps above all to those who most
desperately needed help from the government he led. It’s time for a new way
forward.
Jensen Comment
Social Security was intended originally to be an actuarially sound pension
system for retired workers where benefits varied depending upon when a person
commenced to draw on the trust funds after becoming 62 years of age or older..
Over the years it became damaged when Congress commenced to fund social benefits
from Social Security rather fund those benefits from general revenues on a
pay-as-you-go plan to set up separate trust funds for those social benefits. By
far the biggest disaster was adding monthly payments for disabled persons at any
age they are declared disabled. For example, my wife commenced to collect Social
Security Disability Payments at age 53 or thereabouts after she had several
unsuccessful spine surgeries.
In this great land there should be benefits for disabled persons. But the
decision by President Johnson and his Congress at the time to tack disability
onto the Social Security system, because the SS system was never actuarially
funded for disability. Sure enough over the years the Social Security trust
funds are now depleted and Congress adding to trillion dollar deficits to fund
both SS retirement entitlements and disability retirement benefits.
But the story gets worse. At Age 65 or older, persons who have paid into the
Medicare system while they were working are eligible for Medicare health
benefits that are really quite generous compared to many private medical
insurance plans. But unlike retired workers, disabled persons do not have to
wait until age 65 to begin collecting Medicare benefits. My wife, for example,
became eligible for Medicare the instant she was declared disabled and became
eligible for social security disability benefits.
And the story gets even worse as alluded to in the article above. Being
fraudulently declared disabled and becoming eligible for disability payments and
Medicare has been spreading across the United States like wildfire. Doctors and
lawyers everywhere are cooperating in frauds to declare perfectly healthy people
disabled.
Of course we could have disability fraud if disability was funded in ways
other than Social Security and Medicare systems. But other alternatives might be
less overwhelmed with fraud. For example, if the disability was funded by state
governments or even the private sector perhaps more local level internal
controls would be more effective than the total ineffective controls in place at
this point in time. Fraud in the system did not begin with President Obama. But
delays in economic recovery and reduced unemployment have fanned the fires of
disability fraud.
What happens when we have more "disabled persons" on the dole for the rest of
their lives than persons admittedly are able to work?
Audit Failure: The GAO Reported No Problems Amidst All This Massive Fraud|
Note that most of these particular workers retire long before age 65 and are
fraudulently collecting full Social Security and Medicare benefits intended for
truly disabled persons
"The Public-Union Albatross What it means when 90% of an agency's workers
(fraudulently) retire with disability benefits (before age 65)," by Philip
K. Howard, The Wall Street Journal, November 9, 2011 ---
http://online.wsj.com/article/SB10001424052970204190704577024321510926692.html?mod=djemEditorialPage_t
The indictment of seven Long Island Rail Road
workers for disability fraud last week cast a spotlight on a troubled
government agency. Until recently, over 90% of LIRR workers retired with a
disability—even those who worked desk jobs—adding about $36,000 to their
annual pensions. The cost to New York taxpayers over the past decade was
$300 million.
As one investigator put it, fraud of this kind
"became a culture of sorts among the LIRR workers, who took to gathering in
doctor's waiting rooms bragging to each [other] about their disabilities
while simultaneously talking about their golf game." How could almost every
employee think fraud was the right thing to do?
The LIRR disability epidemic is hardly unique—82%
of senior California state troopers are "disabled" in their last year before
retirement. Pension abuses are so common—for example, "spiking" pensions
with excess overtime in the last year of employment—that they're taken for
granted.
Governors in Wisconsin and Ohio this year have led
well-publicized showdowns with public unions. Union leaders argue they are "decimat[ing]
the collective bargaining rights of public employees." What are these
so-called "rights"? The dispute has focused on rich benefit packages that
are drowning public budgets. Far more important is the lack of productivity.
"I've never seen anyone terminated for
incompetence," observed a long-time human relations official in New York
City. In Cincinnati, police personnel records must be expunged every few
years—making periodic misconduct essentially unaccountable. Over the past
decade, Los Angeles succeeded in firing five teachers (out of 33,000), at a
cost of $3.5 million.
Collective-bargaining rights have made government
virtually unmanageable. Promotions, reassignments and layoffs are dictated
by rigid rules, without any opportunity for managerial judgment. In 2010,
shortly after receiving an award as best first-year teacher in Wisconsin,
Megan Sampson had to be let go under "last in, first out" provisions of the
union contract.
Even what task someone should do on a given day is
subject to detailed rules. Last year, when a virus disabled two computers in
a shared federal office in Washington, D.C., the IT technician fixed one but
said he was unable to fix the other because it wasn't listed on his form.
Making things work better is an affront to union
prerogatives. The refuse-collection union in Toledo sued when the city
proposed consolidating garbage collection with the surrounding county.
(Toledo ended up making a cash settlement.) In Wisconsin, when budget cuts
eliminated funding to mow the grass along the roads, the union sued to stop
the county executive from giving the job to inmates.
No decision is too small for union micromanagement.
Under the New York City union contract, when new equipment is installed the
city must reopen collective bargaining "for the sole purpose of negotiating
with the union on the practical impact, if any, such equipment has on the
affected employees." Trying to get ideas from public employees can be
illegal. A deputy mayor of New York City was "warned not to talk with
employees in order to get suggestions" because it might violate the "direct
dealing law."
How inefficient is this system? Ten percent? Thirty
percent? Pause on the math here. Over 20 million people work for federal,
state and local government, or one in seven workers in America. Their
salaries and benefits total roughly $1.5 trillion of taxpayer funds each
year (about 10% of GDP). They spend another $2 trillion. If government could
be run more efficiently by 30%, that would result in annual savings worth $1
trillion.
What's amazing is that anything gets done in
government. This is a tribute to countless public employees who render
public service, against all odds, by their personal pride and willpower,
despite having to wrestle daily choices through a slimy bureaucracy.
One huge hurdle stands in the way of making
government manageable: public unions. The
head of the American Federation of State, County and Municipal Employees
recently bragged that the union had contributed $90 million in the 2010
off-year election alone. Where did the
unions get all that money? The power is imbedded in an artificial legal
construct—a "collective-bargaining right" that deducts union dues from all
public employees, whether or not they want to belong to the union.
Some states, such as Indiana, have succeeded in
eliminating this requirement. I would go further: America should ban
political contributions by public unions, by constitutional amendment if
necessary. Government is supposed to serve the public, not public employees.
America must bulldoze the current system and start
over. Only then can we balance budgets and restore competence, dignity and
purpose to public service.
Bob Jensen's threads on the entitlements disaster are at
http://www.trinity.edu/rjensen/Entitlements.htm
Question
Can you lower income taxes for people who don't pay any income taxes?
Note that about half the taxpayers in the United States do not pay any income
taxes.
Answer
Of course. You can increase their refunds that their already receiving before
you "lower" their taxes.
"Can you cut taxes for people who don't pay taxes?" Des Moines
Register, February 07, 2012 ---
http://www.rothcpa.com/archives/007655.php
Jensen Comment
It was conservative economist and Nobel Prize winner Milton Friedman who
advocated simplifying the welfare system by introducing a negative income tax.
We seem to have a negative income tax in place without giving Professor Friedman
enough credit .
To help explain what is really going on here I wrote a teaching case:
A Teaching Case: Professor Tall vs. Professor Short vs. Freddie Mac
http://www.trinity.edu/rjensen/TallVerusShort.htm
Question
Why won't Freddie Mac provide more relief to homeowners having mortgages that
are under water --- meaning the prepayment balance due is more than 80% of the
current value of the property?
"Freddie Mac’s big bet against homeowners," by Suzy Khimm, The
Washington Post, January 31, 2012 ---
http://www.washingtonpost.com/blogs/ezra-klein/post/freddie-macs-big-bet-against-homeowners/2012/01/30/gIQAQ8tYcQ_blog.html
ProPublica’s Jesse Eisinger and NPR’s Chris Arnold
have discovered that Freddie Mac has used a complex derivative transaction
to place large bets that rely on millions of American homeowners remaining
in overpriced mortgages to pay off. The bets in Freddie’s investment
portfolio — which totaled $3.4 billion in 2010 and 2011 — directly
contradict the housing giant’s stated mission to provide affordable
mortgages to Americans.
Freddie’s bet against refinancing — known as an
“inverse floater,” which depends on mortgages interest payments —
underscores a central tension between the White House and the Federal
Housing Finance Agency, which gained conservatorship of Fannie and Freddie
after the crisis. When Freddie and Fannie’s huge investment portfolios
profit, it helps reduce the potential burden on taxpayers. That’s been a
priority for FHFA under Edward DeMarco’s leadership. At the same time,
Fannie and Freddie could, by easing the way for homeowners to lower their
payments, help heal the housing market. That’s the priority for the White
House. As such, Freddie Mae made “a direct bet against the administration’s
public policy effort,” Christopher Mayer, professor of housing finance at
Columbia University, tells me.
When it comes to refinancing, “there’s always been
this lingering question — why aren’t the GSEs doing more? Everyone says it’s
because of their portfolio, ” said Mayer, who’s been a proponent of mass
refinancing through Fannie and Freddie. He points out that Freddie, in
recent months, had tighter rules for refinancing than its counterpart
Freddie. “Now we know why,” Mayer says.
Continued in article
Jensen Comment
To help explain what is really going on here I wrote a teaching case:
A Teaching Case: Professor Tall vs. Professor Short vs. Freddie Mac
http://www.trinity.edu/rjensen/TallVerusShort.htm
"Once a Castle, Home is Now a Debtors' Prison," Nicolas P. Retsinas,
Harvard Business School, February 2, 2012 ---
http://hbswk.hbs.edu/item/6791.html
We have created a housing hybrid in America,
refashioning the single-family home into a mini debtors' prison. Almost 11
million dot the landscape. In Las Vegas and Phoenix, over 50 percent of
homeowners live in one.
Forget the notion of the home as "castle,"
protecting the owner from greedy landlords. Forget too the expectation that
a physical nest will morph into a nest egg. For 22 percent of people who
hold mortgages, those notions are anachronistic—relics of a long-ago era
before unemployment soared, the Dow plummeted, and credit default swaps
surfaced. In today's jargon, these owners are underwater—they owe more than
the value of their homes.
But underwater is a misnomer. People underwater
either swim or drown.
These underwater owners linger, trapped in their
very own debtors' prisons. Their task is Sisyphean: they work, pay the
monthly debt to the lender, yet see a perpetual gap between payments and
value. The payments can seem like an extortion episode from The Sopranos.
Exit strategies are few. If an owner sells the
house for less than the mortgage, the owner must pay the lender the
difference. Owners will still need to find someplace else to live.
An owner can walk away from the loan and join the
"strategic defaulters," who defaulted not because they could not pay but
because they did not want to. Their house was a bad investment. The
advantage of this maneuver is real: strategic defaulters save money.
Sometimes they can rent a comparable home. But they risk a lower credit
rating, which could bar them from buying another home for up to seven years.
Understandably, most owners do not grab either of
these solutions; instead, they live shackled in what the Chinese call
fang nu—slaves to their house.
One owner's misery is personal; when over a fifth
of mortgage-holders are shackled, the personal misery becomes national. For
the country, these homes are an economic shackle, hobbling the housing
market. They also distort the labor market: people offered jobs far afield
stay put, reluctant (and unable) to leave their underwater homes. Since the
recovery of the housing market will undergird any broader recovery, we must
address these debtors' prisons.
Novel solutions
The solutions will force lenders to throw out their
textbooks.
First, lenders can recognize the wisdom of short
sales, accepting less than the face value of the mortgage. Currently banks
do accept short sales but only after protracted negotiations. One advice
columnist recently advised sellers eager to unload an underwater house to
keep trying—on the third try, a bank might relent. A short sale will put the
house on the market, opening it to another buyer, letting the seller move.
Lenders could proactively set prices for short sales.
Continued in article
To help explain what is really going on here I wrote a teaching case:
A Teaching Case: Professor Tall vs. Professor Short vs. Freddie Mac
http://www.trinity.edu/rjensen/TallVerusShort.htm
How to Mislead With Statistics: Unemployment Statistics Exclude
Worker Wannabes Who Just Gave Up Looking (living on welfare?)
"Unemployment drop still leaves low skill workers behind," by Michael
A. Fletcher, The Washington Post, February 6, 2012 ---
Click Here
http://www.washingtonpost.com/business/economy/unemployment-drop-still-leaves-low-skill-workers-behind/2012/02/05/gIQA5RSFvQ_story.html?hpid=z6
The nation’s jobless rate has declined to its
lowest level in three years, a fact that has left Jamie Bean, an unemployed
air-conditioner repairman, feeling more left out than ever.
Bean, 36, lost his job in December. Now he is
scrambling to keep up with child-support payments to his wife, who is also
unemployed. “As it stands now, I can’t afford to get divorced,” he said,
managing a wry smile.
Bean’s
predicament is not unlike that of many people who have a high school
education or less. Not only were they hit especially hard by the
recession but they have continued losing ground in the recovery that has
followed.By
disproportionate numbers, these Americans have given up looking for
work, making the nation’s recovery appear better than it is. If the
unemployment rate counted the 2.8 million people who want jobs but have
stopped looking, it would sit at 9.9 percent rather than its current
8.3 percent.
These would-be workers
are falling behind as other people are gaining momentum, economists say.
Employment prospects are modestly improving for college graduates, for
instance, but dimming for those who have a high school diploma or less.
The number of
Americans facing this predicament isn’t small. Nearly a third of the
nation’s labor market has only a high school diploma. And more than one
in 10 of these workers lost their jobs between late 2007 and early 2011,
according to the
Urban Institute, a nonpartisan think tank.
About a third of those job losses occurred since the recovery began in
mid-2009.
The news is worse for
high school dropouts. One in five of them have lost their jobs since
2007, with about half of those losses occurring after the recession
ended, the Urban Institute said. Overall, the unemployment rate for high
school dropouts was 13.1 percent last month.
The recovery, economists
say, has highlighted the consequences of not earning a college degree.
“There has been a
considerable difference in who is getting those jobs,” said Pamela J.
Loprest, director of the Urban Institute’s Income and Benefits Policy
Center. She added that recent improvements in the jobless rate have not
significantly lifted the burden on less-educated workers.
“Lower-educated workers got hit harder. And the recovery has been uneven
in that it has most benefited those with more skills.”
President Obama hailed
the Labor Department’s most recent report that the nation’s unemployment
rate had ticked down for the fifth consecutive month as evidence of an
accelerating recovery.
Although the latest jobs
report showed broad-based gains, the nation has a long way to go to make
up for the positions lost during the recession — especially in some
traditionally blue-collar occupations that were decimated by the
recession.
Manufacturers, led
by the auto industry, created 50,000 jobs in January and have added more
than 300,000 positions in the past two years. But those gains pale in
comparison with the
2 million manufacturing jobs that were lost
during the recession. Similarly, construction jobs have grown in recent
months, but not nearly enough to offset the
1.5 million that were lost
in the recession.
More on how to mislead with statistics
It brings to mind the joke about Bill Gates walking
into a bar and suddenly everyone in the room becomes a millionaire.
Statistically, by averaging the incomes in the room, the statement is true.
Zachary Karabell (see below)
"There Is No 'The Economy'," by Zachary Karabell, The Wall Street Journal,
June 30, 2008; Page A13 ---
http://online.wsj.com/article/SB121478256977914431.html?mod=djemEditorialPage
Once upon a time, and for most of the 20th century,
there was. The data that we use today is a product of the nation-state, and
was created in order to give government the tools to gauge the health of the
nation. The Bureau of Labor Statistics, which measures the unemployment rate
and inflation, was created around the turn of the 20th century, and for much
of that century the U.S. was a cohesive unit. It was its own most important
market, its own source of consumption, and its own source of credit.
Big-picture statistics form the basis of almost
every discussion about "the economy." But these statistics are averages
reporting one blended number that is treated as if it applies to all 300
million Americans. It brings to mind the joke about Bill Gates walking into
a bar and suddenly everyone in the room becomes a millionaire.
Statistically, by averaging the incomes in the room, the statement is true.
Macro data and big-picture statistics like GDP
growth, the unemployment rate and consumer spending are all large averages.
The fact that the economy is growing or contracting by 1% or 2% is taken as
a proxy not just for the economic health of the nation, but for the economic
health of the bulk of its citizens. The same goes for consumer spending. If
it goes up or down 2%, that is taken as representative not just of the
statistical fiction called "the American consumer" but as indicative of the
behavior and attitudes of U.S. consumers writ large.
To begin with, someone in the upper-income brackets
is living a different life than those in the lower-income brackets. The top
20% of income earners spend more than the lower 60% combined. The wealthiest
400 people have more than $1 trillion in net worth, which exceeds the
discretionary spending of the entire federal government. These groups are
all American, yet it would be stretching the facts to the breaking point to
assert that they share an economic reality. On the upper end, the soaring
price of food and fuel hardly matter; on the other end, they matter above
all else. The upper end does matter quantitatively, but the group of people
on the lower end is vastly larger and therefore has more resonance in our
public and electoral debate.
Look at housing, widely regarded as a national
calamity. The regional variations depict something different. In Stockton,
Calif., one in 75 households are in foreclosure; in Nebraska, the figure is
one in every 1,459; and the greater Omaha area is thriving. Similar
contrasts could be made between Houston and Tampa, or between Las Vegas and
Manhattan. Home prices have plunged in certain regions such as Miami-Dade,
and stayed stable in others such as San Francisco and Silicon Valley.
Houston, bolstered by soaring oil prices, has a 3.9% unemployment rate; the
rate in Detroit, depressed by a collapsing U.S. auto industry, is 6.9%. The
notion that these disparate areas share a common housing malaise or similar
employment challenges is a fiction.
We hear continual stories of the subprime economy
and its fallout on Main Street and Wall Street. All true. Yet there is also
an iPhone economy and a Blackberry economy. Ten million iPhones were sold
last year at up to $499 a pop, and estimates are for 20 million iPhones sold
this year, many at $199 each. That's billions of dollars worth of iPhones.
Add in the sales of millions of Blackberrys, GPS devices, game consoles and
so on, and you get tens of billions more.
The economy that supports the purchases of these
electronic devices is by and large not the same economy that is seeing
rampant foreclosures. The economy of the central valley of California is not
the same economy of Silicon Valley, any more than the economy of Buffalo is
the same as the economy of greater New York City. Yet in our national
discussion, it is as if those utterly crucial distinctions simply don't
exist. Corn-producing states are doing just fine; car-producing states
aren't.
The notion that the U.S. can be viewed as one
national economy makes increasingly less sense. More than half the profits
of the S&P 500 companies last year came from outside the country, yet in
indirect ways those profits did add to the economic growth in the U.S. None
of that was captured in our economic statistics, because the way we collect
data – sophisticated as it is – has not caught up to the complicated web of
capital flows and reimportation of goods by U.S.-listed entities for sale
here.
These issues are not confined to the U.S. Every
country is responsible for its own national data, and every country is
falling victim to a similar fallacy that its national data represent
something meaningful called "the economy."
In truth, what used to be "the economy" is just one
part of a global chess board, and the data we have is incomplete,
misleading, and simultaneously right and wrong. It is right given what it
measures, and wrong given what most people conclude on the basis of it.
The world is composed of hundreds of economies that
interact with one another in unpredictable and unexpected ways. We cling to
the notion of one economy because it creates an illusion of shared
experiences. As comforting as that illusion is, it will not restore a
simplicity that no longer exists, and clinging to it will not lead to viable
solutions for pressing problems.
So let's welcome this new world and discard
familiar guideposts, inadequate data and outmoded frameworks. That may be
unsettling, but it is a better foundation for wise analysis and sound
solutions than clinging to a myth.
Our goal is for our economy to look more like Texas,
and a lot less like California.
Sam. Brownback, 2012 Governor
of Kansas ---
http://en.wikipedia.org/wiki/Sam_Brownback
"The Heartland Tax Rebellion: More states want to repeal their
income taxes," The Wall Street Journal, February 7, 2012 ---
http://online.wsj.com/article/SB10001424052970203889904577200872159113492.html#mod=djemEditorialPage_t
Oklahoma Governor Mary Fallin is starting to feel
surrounded. On her state's southern border, Texas has no income tax. Now two
of its other neighbors, Missouri and Kansas, are considering plans to cut
and eventually abolish their income taxes. "Oklahoma doesn't want to end up
an income-tax sandwich," she quips.
On Monday she announced her new tax plan, which
calls for lowering the state income-tax rate to 3.5% next year from 5.25%,
and an ambition to phase out the income tax over 10 years. "We're going to
have the most pro-growth tax system in the region," she says.
She's going to have competition. In Kansas,
Republican Governor Sam Brownback is also proposing to cut income taxes this
year to 4.9% from 6.45%, offset by a slight increase in the sales tax rate
and a broadening of the tax base. He also wants a 10-year phase out. In
Missouri, a voter initiative that is expected to qualify for the November
ballot would abolish the income tax and shift toward greater reliance on
sales taxes.
South Carolina Governor Nikki Haley wants to
abolish her state's corporate income tax. And in the Midwest, Congressman
Mike Pence, who is the front-runner to be the next Republican nominee for
Governor, is exploring a plan to reform Indiana's income tax with much lower
rates. That policy coupled with the passage last week of a right-to-work law
would help Indiana attract more jobs and investment.
That's not all: Idaho, Maine, Nebraska, New Jersey
and Ohio are debating income-tax cuts this year.
But it is Oklahoma that may have the best chance in
the near term at income-tax abolition. The energy state is rich with oil and
gas revenues that have produced a budget surplus and one of the lowest
unemployment rates, at 6.1%. Alaska was the last state to abolish its income
tax, in 1980, and it used energy production levies to replace the revenue.
Ms. Fallin trimmed Oklahoma's income-tax rate last year to 5.25% from 5.5%.
The other state overflowing with new oil and gas
revenues is North Dakota thanks to the vast Bakken Shale. But its
politicians want to abolish property taxes rather than the income tax.
They might want to reconsider if their goal is
long-term growth rather than short-term politics. The American Legislative
Exchange Council tracks growth in the economy and employment of states and
finds that those without an income tax do better on average than do high-tax
states. The nearby table compares the data for the nine states with no
personal income tax with that of the nine states with the highest personal
income-tax rates. It's not a close contest.
Skeptics point to the recent economic problems of
Florida and Nevada as evidence that taxes are irrelevant to growth. But
those states were the epicenter of the housing bust, thanks to overbuilding,
and for 20 years before the bust they had experienced a rush of new
investment and population growth. They'd be worse off now with high
income-tax regimes.
The experience of states like Florida, New
Hampshire, Tennessee and Texas also refutes the dire forecasts that
eliminating income taxes will cause savage cuts in schools, public safety
and programs for the poor. These states still fund more than adequate public
services and their schools are generally no worse than in high-income tax
states like California, New Jersey and New York.
They have also recorded faster revenue growth to
pay for government services over the past two decades than states with
income taxes. That's because growth in the economy from attracting jobs and
capital has meant greater tax collections.
The tax burden isn't the only factor that
determines investment flows and growth. But it is a major signal about how a
state treats business, investment and risk-taking. States like New York,
California, Illinois and Maryland that have high and rising tax rates also
tend to be those that have growing welfare states, heavy regulation,
dominant public unions, and budgets that are subject to boom and bust
because they rely so heavily on a relatively few rich taxpayers.
The tax competition in America's heartland is an
encouraging sign that at least some U.S. politicians understand that they
can't take prosperity for granted. It must be nurtured with good policy, as
they compete for jobs and investment with other states and the rest of the
world.
"Our goal is for our economy to look more like
Texas, and a lot less like California," says Mr. Brownback, the Kansas
Governor. It's the right goal.
Continued in article
State Individual Income Tax Rates in the 50 States, 2000-2011 ---
http://www.taxfoundation.org/taxdata/show/228.html
On a per capita basis ---
50-State Table of State and Local Individual Income Tax Collections Per
Capita
Comparison of Corporate Income Tax Rates in the 50 States ---
http://www.taxfoundation.org/taxdata/show/230.html
On a per capita basis ---
http://www.taxfoundation.org/taxdata/show/281.html
This is a little misleading since many states like Illinois give their
largest corporate employers "Get Out of Tax Free" cards (or offsetting
subsidies)
State Sales, Gasoline, Cigarette, and Alcohol Tax Rates by State,
2000-2010 ---
http://www.taxfoundation.org/publications/show/245.html
PBS Video: What Do Tax Rates' Ups and Downs Mean for
Economic Growth?
http://video.pbs.org/video/2176062522
Thank you Paul Caron for the heads up.
Marginal Tax Rates Around the World ---
http://www.econlib.org/library/Enc/MarginalTaxRates.html
Tax Foundation ---
http://en.wikipedia.org/wiki/Tax_Foundation
Video from the Tax Foundation --- How Much Do U.S. Corporations Really Pay
in Taxes? New Video Documents High Effective Rates
http://taxfoundation.org/news/show/27953.html
Thank you Paul Caron for the heads up at the Tax Prof blog
U.S. companies pay among the highest corporate tax
rates in the world, even after accounting for all deductions and loopholes,
according to a new video produced by the Tax Foundation. This explanation of
“effective” tax rates for corporations, based on recent academic studies of
tax systems around the globe, is the third in a 5-part series on corporate
taxes. “The impression that a large number of U.S. companies are using
loopholes and creative accounting to get out of paying taxes could not be
more wrong,” said Tax Foundation president Scott Hodge. “American
corporations are consistently paying at the highest levels in the world, and
that burden impacts their ability to compete both at home and abroad.”
Jensen Comment
The Tax Foundation has been around since 1937, but it has been recently heavily
criticized by liberals like Paul Krugman for misleading research.
Note that just because a corporation elects to not transmit profits earned
abroad back to the United States, thereby deferring U.S. corporate taxes, does
not mean it is not paying taxes on these profits that are often subject to
foreign corporate taxes that are usually lower than U.S. corporate taxes on
those profits.
Bob Jensen's threads on taxation ---
http://www.trinity.edu/rjensen/Bookbob1.htm#Taxation
"The Fed Votes No Confidence The prolonged—'emergency'—near-zero interest
rate policy is harming the economy," by Charles Schwab, The Wall Street
Journal, February 6, 2012 ---
http://online.wsj.com/article/SB10001424052970204740904577197374292182402.html?mod=djemEditorialPage_t
We're now in the 37th month of central government
manipulation of the free-market system through the Federal Reserve's
near-zero interest rate policy. Is it working?
Business and consumer loan demand remains modest in
part because there's no hurry to borrow at today's super-low rates when the
Fed says rates will stay low for years to come. Why take the risk of
borrowing today when low-cost money will be there tomorrow?
Federal Reserve Chairman Ben Bernanke told
lawmakers last week that fiscal policy should first "do no harm." The same
can be said of monetary policy. The Fed's prolonged, "emergency" near-zero
interest rate policy is now harming our economy.
The Fed policy has resulted in a huge infusion of
capital into the system, creating a massive rise in liquidity but negligible
movement of that money. It is sitting there, in banks all across America,
unused. The multiplier effect that normally comes with a boost in liquidity
remains at rock bottom. Sufficient capital is in the system to spur
growth—it simply isn't being put to work fast enough.
Average American savers and investors in or near
retirement are being forced by the Fed's zero-rate policy to take greater
investment risks. To get even modest interest or earnings on their savings,
they move out of safer assets such as money markets, short-term bonds or CDs
and into riskier assets such as stocks. Either that or they tie up their
assets in longer-term bonds that will backfire on them if inflation returns.
They're also dramatically scaling back their consumer spending and living
more modestly, thus taking money out of the economy that would otherwise
support growth.
We've also seen a destructive run of capital out of
Europe and into safe U.S. assets such as Treasury bonds, reflecting a
world-wide aversion to risk. New business formation is at record lows,
according to Census Bureau data. There is still insufficient confidence
among business people and consumers to spark an investment and growth boom.
We're now in the 37th month of central government
manipulation of the free-market system through the Federal Reserve's
near-zero interest rate policy. Is it working?
Business and consumer loan demand remains modest in
part because there's no hurry to borrow at today's super-low rates when the
Fed says rates will stay low for years to come. Why take the risk of
borrowing today when low-cost money will be there tomorrow?
Federal Reserve Chairman Ben Bernanke told
lawmakers last week that fiscal policy should first "do no harm." The same
can be said of monetary policy. The Fed's prolonged, "emergency" near-zero
interest rate policy is now harming our economy.
The Fed policy has resulted in a huge infusion of
capital into the system, creating a massive rise in liquidity but negligible
movement of that money. It is sitting there, in banks all across America,
unused. The multiplier effect that normally comes with a boost in liquidity
remains at rock bottom. Sufficient capital is in the system to spur
growth—it simply isn't being put to work fast enough.
Average American savers and investors in or near
retirement are being forced by the Fed's zero-rate policy to take greater
investment risks. To get even modest interest or earnings on their savings,
they move out of safer assets such as money markets, short-term bonds or CDs
and into riskier assets such as stocks. Either that or they tie up their
assets in longer-term bonds that will backfire on them if inflation returns.
They're also dramatically scaling back their consumer spending and living
more modestly, thus taking money out of the economy that would otherwise
support growth.
We've also seen a destructive run of capital out of
Europe and into safe U.S. assets such as Treasury bonds, reflecting a
world-wide aversion to risk. New business formation is at record lows,
according to Census Bureau data. There is still insufficient confidence
among business people and consumers to spark an investment and growth boom.
Jensen Comment
Bob Jensen's threads on the bailout mess are at
http://www.trinity.edu/rjensen/2008Bailout.htm
Bob Jensen's threads on The Greatest Swindle in the History of the World
---
http://www.trinity.edu/rjensen/2008Bailout.htm#Bailout
"Health Reform Built to Fail How Medicare rigs competitive bidding and
hurts patients," The Wall Street Journal, February 6, 2012 ---
http://online.wsj.com/article/SB10001424052970204740904577193224024421442.html#mod=djemEditorialPage_t
Americans may not be familiar with the medical
innovation called negative pressure wound therapy, though it has helped
hundreds of thousands of patients with complex or chronic injuries like
burns or diabetic ulcer complications that could never heal on their own.
Now President Obama's Medicare team is about to severely damage this field,
and many others too—all in the name of reforming how the entitlement pays
for care.
Last week a Medicare competitive-bidding program
went live in 91 metro regions—nearly all the U.S. population—for what's
known as durable medical equipment. That bureaucratic jargon covers advanced
devices like wound therapy, respiratory assist equipment for people who
can't breathe, and feeding tube systems for people who can't eat. It also
lumps in things like walkers, scooters and "support surfaces." Those would
be beds.
The good intentions of this saga date to 2003, when
Congress in a fit of sanity ended Medicare's price controls in favor of
auctions. Both political parties soon rebelled when oxygen tank suppliers,
scooter stores and such in their home districts started whining about being
asked to compete on market prices, rather than plod along with the
guaranteed revenue of the fee schedule. But the much deeper problem is that
Medicare cooked up an auction process that defies all economic sense.
Normally when the government wants to buy
something, it asks companies how much they can provide and to name their
price. Winners are selected from the lowest bid up until the government has
what it needs at the lowest possible cost, and thereby finds competitive
equilibrium prices.
Under Medicare's highly unusual version of
competitive bidding, it will pay the winners the median price of all the
winning bids, rather than using the clearing price. Bids are also for some
reason nonbinding.
This matters because it creates incentives for
unscrupulous third-party companies to make low-ball "suicide bids." If the
median price shakes out high enough, they automatically win the contract,
buy the medical products from manufacturers and turn a profit. If it isn't,
they can dump the contract since bidding involves no commitment.
Medicare will then offer the contract at the median
price to the honest companies that have made bids aligned with their true
costs, and they can take it or leave it. Medicare benefits because the
median prices will be biased below the clearing price—in other words, the
"auction" is merely another way of generating arbitrary below-cost price
controls.
The Bush Administration road-tested this scheme in
2008 with pilot projects in nine cities. For illustration let's return to
negative pressure wound therapy, a technique that involves a sealed dressing
attached to a vacuum pump to prevent infection and improve recovery.
Patients can recuperate at home but require 24/7 clinical and safety
support, typically provided by the device's maker. Advanced wound treatment
is far more complex than, say, a cane.
In 2008, only 17 of the 88 winning bidders bothered
to supply wound therapy devices. Only 10 of them had any actual expertise in
how the technology is used or in patient support. The supply crisis was so
deep that for several weeks no Medicare patients in two of the cities could
receive this treatment at home, and the government threw out the entire
program and said it would retool competitive bidding.
Yet by one estimate, a 2011 reprise had roughly
one-fifth of the bids going to companies that were on credit hold with
device manufacturers—i.e., they couldn't buy if they wanted to. Medicare,
meanwhile, boasts that it will reduce prices for durable medical equipment
by 35% and "save" taxpayers $28 billion. All it is really doing is rewarding
the fly-by-night operators while harming innovative companies and ultimately
patients.
The current nationwide rollout has no substantive
revisions from the failed pilots, despite the objections of 244 economists
and auction scientists led by the University of Maryland's Peter Cramton.
The consensus of basically everyone who knows anything about auctions is
that the no-risk bids and median pricing are idiotic and designed for
failure.
At a December meeting, a coalition of device makers
and professional clinical groups even accepted these flaws but begged
Medicare deputy administrator Jonathan Blum merely to accredit wound therapy
bidders. He refused to apply any such basic quality control standards. The
Administration does not care.
The larger tragedy is that market methods like
auctions are the only way to rationalize the entitlement state. They're at
the core of the reform ambitions of Paul Ryan and Ron Wyden—and they're
already tough enough to achieve given the resistance of the providers that
want more of Medicare's money. This fiasco turns on 1.4% of Medicare's
annual spending, yet it risks discrediting competitive bidding for good.
Bob Jensen's threads on the health care mess ---
http://www.trinity.edu/rjensen/Health.htm
From Paul Caron's TaxProf Blog on January 26, 2012 ---
http://taxprof.typepad.com/
The
Tax Foundation
yesterday
released the
2012 State Business Tax Climate Index (9th ed.)
which ranks the fifty states according to five indices: corporate tax,
individual income tax, sales tax, unemployment insurance tax, and property
tax. Here are the ten states with the best and worst business tax climates:
1 |
Wyoming
|
41 |
Iowa |
2 |
South Dakota |
42 |
Maryland |
3 |
Nevada |
43 |
Wisconsin |
4 |
Alaska |
44 |
North Carolina
|
5 |
Florida |
45 |
Minnesota |
6 |
New Hampshire |
46 |
Rhode Island |
7 |
Washington |
47 |
Vermont |
8 |
Montana |
48 |
California |
9 |
Texas |
49 |
New York |
10 |
Utah |
50 |
New Jersey |
Interestingly, all ten of the states with the worst
business tax climates voted for Barack Obama in the 2008 presidential
election, and five of the ten states with the best business tax climates
voted for John McCain (and eight of the ten voted for George Bush in 2004).
"States Where People Pay the Most (and Least) in Taxes," by Charles B.
Stockdale, Michael B. Sauter, Douglas A. McIntyre, Yahoo Finance, July
21, 2011 ---
http://finance.yahoo.com/taxes/article/113173/states-pay-most-least-taxes-247wallst
Jensen Comment
But we're only operating in the narrow range of 6.3% (Alaska) to 12.2% (New
Jersey) for state and local taxes, including property taxes. One would hope
that, by adding to a state's tax burden, the quality of education would be the
result of higher taxes. This, however, is not the case for most states. For
example, South Dakota comes in at Rank 3 with a very low 7.6% tax burden and
manages to have one of the very best K-12 rural and urban education systems
among the 50 states. Unfortunately, this does not extend to higher education in
South Dakota. New Jersey has the highest taxation rate of 12.2% but does not get
a whole lot of K-12 bang for the buck in terms of education compared with the
low taxation states of South Dakota, New Hampshire, and Tennessee.
The largest cities in the U.S. face the most daunting problems in K-12
education. Problems with rural versus urban may be greater than problems with
high state taxation versus low state taxation. For example, rural New York has
some very nice rural K-12 schools that exist apart from troubled NYC schools. On
the other hand, rural Texas has some of the worst rural K-12 schools in the
nation. Mississippi has some of the worst urban and rural schools in the nation,
but Mississippi is neither a high nor a low taxation state total state and local
taxation rankings. However, in terms of local property taxation, Mississippi has
low property tax burdens. Quality of schools in rural communities correlates
highly and negatively with degree of poverty in those communities. Quality of
urban schools is more complicated. New York City and Chicago are quite wealthy
and prosperous in ways that do not translate in to quality of K-12 inner city
public schools. Minneapolis is less prosperous and wealthy but probably has
somewhat better public schools. although in every large U.S. city the inner city
schools are lower in quality than schools in their suburbs.
Bob Jensen's threads on taxation are at
http://www.trinity.edu/rjensen/BookBob1.htm#010304Taxation
PBS Video: What Do Tax Rates' Ups and Downs Mean for Economic
Growth?
http://video.pbs.org/video/2176062522
Thank you Paul Caron for the heads up.
Marginal Tax Rates Around the World ---
http://www.econlib.org/library/Enc/MarginalTaxRates.html
Although I favor raising taxes at all income levels
with much higher marginal rates for the wealthy, keep in mind that there are
limits. A close friend in Sweden argued that at one point for certain wealthy
Swedes like him the marginal tax rate exceeded 100% ---
which has to really discourage both working and investing risk capital.
In the 1970s and 1980s economic growth in Sweden was very low compared to other
Western European nations, and much of this is attributed to high marginal
tax rates (80+%) on workers in general and even higher
for wealthy Swedes, many of whom shifted their wealth and even themselves out of
Sweden ---
http://en.wikipedia.org/wiki/Sweden
A bursting
real estate bubble caused by
inadequate controls on lending combined with an
international recession and a policy
switch from anti-unemployment policies to anti-inflationary policies
resulted in a fiscal crisis in the early 1990s.]
Sweden's GDP declined by around 5%. In 1992, there was a run on the
currency, with the central bank briefly jacking up interest to 500%.
The response of the government was to cut spending and institute a multitude
of reforms to improve Sweden's competitiveness, among them reducing the
welfare state and
privatising public services and
goods. Much of the political establishment promoted EU membership, and the
Swedish referendum passed with 52% in favour of joining the EU on 13
November 1994. Sweden joined the
European Union on 1 January 1995.
Marginal Tax Rates by Country ---
http://www.nationmaster.com/graph/tax_hig_mar_tax_rat_ind_rat-highest-marginal-tax-rate-individual
By 2009, Sweden had dropped its marginal tax rate of
well over 80% to 57%. This still leaves Sweden with the third-highest
marginal tax rate. At a marginal
tax rate of 35%, the United States is tied with many nations at Rank 37.
The reason almost half of U.S. taxpayers, many of whom are well above the
poverty level, pay zero or very low income tax is that
there are so many ways to avoid or defer income taxes, especially with all the
newer types of credits available in the revised U.S. Tax
Code.
Sometimes what appears to be a raising of income taxes is merely a shifting of
taxes such as when huge and painful increases on a state's cost of capital are
passed to its more regressive sales and property taxes and apartment rentals. It
will be very tough if school districts, towns, cities, counties, and states must
compete head-to-head in bond markets with corporations.
The problem with tax exempt bonds is that there are
gazillions of dollars invested in these bonds such that even small increases in
tax-exempt cost of capital can clobber citizens in need
of schools, road repairs, welfare, etc.
Rates Versus Enforcement
Marginal Tax Rates by Country ---
http://www.nationmaster.com/graph/tax_hig_mar_tax_rat_ind_rat-highest-marginal-tax-rate-individual
One of the problems in comparing marginal tax
rates and economic growth by country is the enormous problem of variations in
tax enforcement between nations. Countries (read that Greece and Italy) may have
relatively high marginal tax rates where enforcement is a sham. Illinois just
imposed one of the largest tax rate increases among all 50 states in the United
States. But Illinois is handing out "Get Out of Tax Free" cards right and left
for large corporations that threaten to pull up stakes in Illinois and move on
to states that have lower tax rates.
Benefits Covered in Tax Payments
Marginal Tax Rates by Country ---
http://www.nationmaster.com/graph/tax_hig_mar_tax_rat_ind_rat-highest-marginal-tax-rate-individual
Another problem in comparing marginal tax rates
and economic growth by country is that countries vary in terms of what taxpayers
receive in return. Many nations provide health care benefits for all citizens in
revenues collected from taxes. Others provide less health services from
taxation. Some nations can keep taxes lower because they are protected by the
military might of neighbors. Canada, for example, has never had to invest
heavily in its military because it lives under the powerful military umbrella of
the United States. Israel is a high taxation state, but taxes would soar through
the roof if the United States did not heavily subsidize military protection of
Israel.
Harvard alums say tax code, politics drive U.S. decline
"Business execs blame political system for US decline," by Erik
Wasson, The Hill, January 18, 2012 ---
http://thehill.com/blogs/on-the-money/801-economy/204901-business-execs-blame-political-system-for-us-decline-
Sometimes random walks are more pleasing than those chosen by your tour
guide.
It's well documented that many (most?) of the time a randomly chosen
investment portfolio will perform better (by whatever criterion) than the
portfolio your so-called professional investor chooses for you.
"On the relationship between partition and random testing," IEE
Xplore, December 1994 ---
http://ieeexplore.ieee.org/xpl/freeabs_all.jsp?arnumber=368132
Weyuker and Jeng have argued without proof that the
worst case of partition testing will, in most cases, be worse than random
testing, based on the following intuition that "in the random testing case,
the tester gets n attempts at finding a bug, with each try having a
likelihood of ...
Continued in article
"Judging the Quality of Gene Expression-Based Clustering Methods Using
Gene Annotation," by Francis D. Gibbons and Frederick P. Roth, Genome
Research, July 30, 2002 ---
http://genome.cshlp.org/content/12/10/1574.short
... Clusters of genes derived from single- and
average-linkage hierarchical clustering tend to produce worse-than-random
results. ... In the Cho data set (Fig. 2a), the performance of
single-linkage hierarchical clustering is worse than random, and average
linkage fares little better. ...
Continued in article
"On the relationship between partition and random testing," IEE
Xplore, December 1994 ---
http://ieeexplore.ieee.org/xpl/freeabs_all.jsp?arnumber=368132
Weyuker and Jeng have argued without proof that the
worst case of partition testing will, in most cases, be worse than random
testing, based on the following intuition that "in the random testing case,
the tester gets n attempts at finding a bug, with each try having a
likelihood of ...
Continued in article
"Judging the Quality of Gene Expression-Based Clustering Methods Using
Gene Annotation," by Francis D. Gibbons and Frederick P. Roth, Genome
Research, July 30, 2002 ---
http://genome.cshlp.org/content/12/10/1574.short
... Clusters of genes derived from single- and
average-linkage hierarchical clustering tend to produce worse-than-random
results. ... In the Cho data set (Fig. 2a), the performance of
single-linkage hierarchical clustering is worse than random, and average
linkage fares little better. ...
Continued in article
Polls show that a generic (randomly chosen) GOP candidate has a good chance
of beating President Obama in 2012. However, neither of the two leading
candidates has a ghost of a chance, which goes to show that electoral selection
can be worse than random selection. Of course we've known this for years,
especially for candidates in the House and Senate.
"The GOP Deserves to Lose That's what happens when you run with losers,"
by Bret Stephens, The Wall Street Journal, January 24, 2012 ---
http://online.wsj.com/article/SB10001424052970203806504577178594236642420.html?mod=djemEditorialPage_t
Let's just say right now what voters will be saying
in November, once Barack Obama has been re-elected: Republicans deserve to
lose.
It doesn't matter that Mr. Obama can't get the
economy out of second gear. It doesn't matter that he cynically betrayed his
core promise as a candidate to be a unifying president. It doesn't matter
that he keeps blaming Bush. It doesn't matter that he thinks ATMs are
weapons of employment destruction. It doesn't matter that Tim Geithner
remains secretary of Treasury. It doesn't matter that the result of his
"reset" with Russia is Moscow selling fighter jets to Damascus. It doesn't
matter that the Obama name is synonymous with the most unpopular law in
memory. It doesn't matter that his wife thinks America doesn't deserve him.
It doesn't matter that the Evel Knievel theory of fiscal stimulus isn't
going to make it over the Snake River Canyon of debt.
Above all, it doesn't matter that Americans are
generally eager to send Mr. Obama packing. All they need is to be reasonably
sure that the alternative won't be another fiasco. But they can't be
reasonably sure, so it's going to be four more years of the disappointment
you already know.
Continued in article
"The GOP Goes MAD: The candidates go thermonuclear, but the party
itself may get hit," by Daniel Henninger, The Wall Street Journal,
January 25, 2012 ---
http://online.wsj.com/article/SB10001424052970203718504577183092873042610.html?mod=djemEditorialPage_t
Whose idea was it to get in the way of the
Republican Party's presidential smackdown with a State of the Union speech?
Bring back the Grand Old Party Brawlers. Newt Gingrich and Mitt Romney are
locked in a death struggle. They'll survive, but will their party?
For nearly three decades, the American and Soviet
nuclear arsenals cohabitated uneasily inside a policy of Mutual Assured
Destruction without blowing each other up. MAD was insane, but the players
were not. Campaigning politicians operate under no such rational constraint.
We are hours away from the second Florida primary debate in which Newt
Gingrich will give Mitt Romney a lesson in massive retaliation for the
governor's Gatling-gun attack on the speaker last Monday night.
Traditionalists will dismiss the idea that the GOP
is in the process of blowing itself up. Campaign politics has always been
about the rough and tumble, old boy. It was ever thus.
Thus is over. With every turn of the election
cycle, it seems the new, ever-expanding universe of modern media takes
politics into unchartered hyperspace.
In 2008, it was Barack Obama's discovery that small
Internet contributions could grow into a mighty war chest. In 2010,
conventional wisdom laughed off the tea party movement until its members,
pumped up by social media, powered Republicans at all levels of government
to a deep, historic victory.
This year it's the debates. The early "debates"
were a clown-car stunt, with pressure to add more clowns. The formats
restricted the candidates to 30- or 60-second soundbites. Other than "oops,"
we learned next to nothing. But the debates drew viewers for the same, weird
reasons people feel compelled to watch Tom DeLay on "Dancing With the
Stars." But when the field trimmed to four candidates, with more time to
talk, the televised debates became the central arena in which campaigns
would rise and fall—and rise.
From Jan. 14 to Jan. 18, Mitt Romney's poll numbers
rose in South Carolina, reaching an eight-point lead over Mr. Gingrich by
the 18th. On Jan. 19, the candidates debated in Charleston. The Romney lead
evaporated overnight. He lost the primary two days later by 12 points. A
20-point swing in three days.
Continued in article
Jensen Comment
Life is so strange and unpredictable. Newt Gingrich would be going nowhere
without the funding a billionaire Jewish couple (Sheldon
and Miriam Adelson) who hint in Newt's ear that they want the U.S. Embassy
in Israel moved from Tel Aviv to Jerusalem ---
http://www.vosizneias.com/99463/2012/01/23/new-york-ap-jewish-billionarie-gives-another-5m-to-pro-gingrich-pac
Newt promises that within one hour of being sworn in as President of the United
States an order will go out to move the U.S. Embassy to Jerusalem. Michelle
Bachman promised the same thing, but she did not have the Adelsons throwing tens
of millions of campaign funds her way ---
http://www.jstandard.com/content/item/21493
I don't understand why Newt gets all this support when Jews traditionally
make all their political donations to the Democratic Party.
Is the massive Jewish funding of Gingrich a devious plot to nominate a GOP
candidate that has no chance against any candidate of the Democratic Party?
"The Myth of Starving Americans: According to the Census Bureau, 96%
of parents classified as poor said their children were never hungry," by
Warren Kozak, The Wall Street Journal, January 30, 2012 ---
http://online.wsj.com/article/SB10001424052970204573704577185553258224344.html?mod=djemEditorialPage_t
We take it as a given that hunger stalks America.
We hear it in the news, we see a myriad of government and private
organizations set up to feed the hungry. And we are often reminded of the
greatest of all ironies—in the richest nation on earth, there are still
those without enough to eat. But are these media portrayals of hunger in
America accurate?
A hungry child is the ultimate third rail in the
entitlement debate. Few candidates—Democrat, Republican or independent—would
even question conventional wisdom on this particular issue because that
would make them look indifferent to hungry children and that, of course, is
political death.
The U.S. government spends close to $1 trillion a
year providing cash, food, housing, medical care and services to poor and
near-poor people. Of that figure, about $111 billion is spent on food in
federal and state programs. Yet despite this spending, stories of rampant
hunger persist. With all that money going out, how is that possible?
In a report published last September by the
Heritage Foundation, researchers Robert Rector and Rachel Sheffield asked
that very question. They found that, according to Census Bureau data for
2009 (the most recent year statistics are available), of the almost 50
million Americans classified as poor, 96% of the parents said their children
were never hungry. Eighty-three percent of poor families reported having
enough food to eat, and 82% of poor adults said they were never hungry at
any time in 2009 due to a lack of food or money.
One could deduce that the reason the vast
percentage of America's poor say they are never hungry is precisely because
of federal and state assistance, but the government offers no way of testing
whether this is true or false.
Continued in article
"OECD Targets Tax Relief on Mortgages," The Wall Street Journal,
January 23, 2012 ---
http://online.wsj.com/article/SB10001424052970203806504577179223659194122.html?mod=googlenews_wsj&mg=reno-wsj
Governments should eliminate tax relief on mortgage
interest payments and pension contributions, and tax capital gains from the
sale of residential property in order to boost growth and reduce inequality,
the Organization for Economic Cooperation and Development said Monday.
In a chapter from its annual "Going for Growth"
report, the OECD said that while economists don't agree on the link between
inequality and growth, there are some policies that are clearly "win-win"
options, which both boost growth and reduce income inequality.
"Income inequality has drifted up, and at the same
time the recovery is very patchy and the outlook uncertain," said Peter
Hoeller, head of the public economics division at the OECD. "But we can find
policies that are good for inequality and raise growth."
The Paris-based think tank said a broad range of
measures that it described as "tax expenditure," and are more popularly
known as "tax breaks," were obvious candidates.
They include tax relief on interest paid on
mortgage loans, relief on contributions to private pension funds, and
exemptions from capital gains tax on the sale of primary or secondary
residences.
The OECD argued that while reducing the gap between
rich and poor, the money saved by eliminating breaks that largely benefit
the wealthy could be used to cut income tax rates and thereby boost growth.
"Cutting back tax expenditures, which mainly
benefit high-income groups, is likely to be beneficial both for long-term
GDP per capita, allowing a reduction in marginal tax rates, and for a more
equitable distribution of income," the OECD said.
The OECD also questioned the use of some tax relief
measures that are justified as encouraging entrepreneurial activity, but
show little sign of doing so.
"In particular, there is little justification for
tax breaks for stock options and carried interest," it said. "Raising such
taxes would increase equity and allow a growth-enhancing cut in marginal
labor income tax rates."
The OECD's proposals come at a time of renewed
focus on the perceived fairness of developed economies following the
financial crisis and more than a decade-and-a-half of rising income
inequality.
In the U.K., the junior partner in the government
coalition campaigned on a promise to make the tax system fairer in the May
2010 election, and still hopes to introduce a so-called "Mansion Tax" on
residential properties with a value of £2 million or more.
Jensen Comment
Economic success stories aren't based on rising tax
rates. China's certainly wasn't.
Nial Feguson, Harvard University as quoted in "The Inequality Dodge," Newsweek
Magazine, February 6, 2012, Page 258
President Obama's drive to increase tax rates for the wealthy is based more
on a political ploy to win another term as President than it is to stimulate
jobs and the economy. There are really three issues that should not be bundled into one. Firstly
there is the issue of principal residence versus vacation homes. Secondly, there
is the issue of whether or not to cap the interest rate deduction. Thirdly,
there's the issue of minimum thresholds for deductions from adjusted gross
income as is currently built into the U.S. tax rules and is probably hurting
lower income tax payers more than its hurting higher income taxpayers when the
minimum threshold cannot be reached by lower income taxpayers.
There's also an issue of abruptly hammering down on a real estate market that
is already under water. The mortgage interest deduction most certainly impacts
demand for and prices paid for real estate. In my opinion the deductibility of
home mortgage interest and property taxes has greatly increased both the amount
of housing built in the United States and the quality/maintenance of such
housing.
There are externalities to consider. Home owners take more pride in
maintaining and adding to homes that they own. If there are fewer tax breaks of
home ownership more and more potential owners will instead opt for rentals. When
Erika and I visit Germany we're amazed by the proportion of the population that
appears to us to live in rental housing (although I've not researched this
question). It also seems that those big apartment houses are run down relatively
to what they would become as condos.
"5% of patients account for half of health care spending," by Kelly
Kennedy, USA Today, January 20, 2012 ---
http://www.usatoday.com/news/washington/story/2012-01-11/health-care-costs-11/52505562/1
"Will Employers Undermine Health Care Reform by Dumping Sick Employees?"
by Amy Monahan and Daniel Schwarcz, Virginia Law Review 125 (2011) ---
http://www.virginialawreview.org/articles.php?article=321
Thank you Paul Caron for the heads up.
This Article argues that federal health care reform
may induce employers to redesign their health plans to encourage high-risk
employees to opt out of employer-provided coverage and instead acquire
coverage on the individual market. It shows that such a strategy can reduce
employer health care expenditures without substantially harming either
high-risk or low-risk employees. Although largely overlooked in public
policy debates, employer dumping of high-risk employees may threaten the
sustainability of health care reform. In particular, it potentially exposes
individual insurance markets and insurance exchanges to adverse selection
caused by the entrance of a disproportionately high-risk segment of the
population. This risk, in turn, threatens to indirectly increase the cost to
the federal government of subsidizing coverage for qualified individuals and
to exempt more individuals from complying with the so-called individual
mandate. The Article concludes by offering several potential solutions to
the threat of employer dumping of high-risk employees.
Jensen Comment
Since it's illegal to dump sick employees without justifiable reasons, the
impact of Health Care Reform may be to both increase the number of law suits and
increase the number of hurdles that employees must surmount to obtain and keep
jobs. For example, factory employees and store clerks must be able to stand
without a break for x minutes, diabetic and epileptic bus and taxi drivers may
be dropped at the first episode of unconsciousness, drug testing may become more
common, Mental health patients may be particularly vulnerable to dismissal.
Then there is an even bigger risk that employers will drop health coverage of
all employees
"No, You Can't Keep Your Health Insurance: A new study by McKinsey
suggests that as many as 78 million Americans could lose employer health
coverage," by Grace-Marie Turner, The Wall Street Journal, June 7,
2011 ---
http://online.wsj.com/article/SB10001424052702304432304576371252181401600.html?mod=djemEditorialPage_
"'The Flight to the Exchanges': The Wall Street Journal
writes that ObamaCare may cause small businesses to drop insurance coverage,"
The Wall Street Journal, July 25, 2011 ---
http://online.wsj.com/article/SB10001424053111903554904576462010405702984.html#mod=djemEditorialPage_t
McKinsey & Co. made itself the White House's public
enemy number—well, we've lost count—after releasing a survey last month
showing that nearly one in three businesses may drop insurance coverage as a
result of the new health-care law. The real offense of the management
consultants seems to be accurately portraying reality.
Consider a suggestive new survey to be released
today by the National Federation of Independent Business, the trade group
for small businesses. William Dennis, a senior research fellow who has
conducted the study for 35 years, reports that 57% of a cross-section of
companies that employ 50 or fewer workers and offer coverage may stop doing
so. Look out below.
About two of five small companies sponsor
insurance—a share that, according to NFIB, has on net held mostly stable or
declined very slightly since the passage of the Affordable Care Act. Yet 12%
of these companies—one of eight—have either had their plans cancelled or
have been told that they will be in the future. This churn in the private
small-group market is a direct result of ObamaCare's new rules and
mandates—but a far larger destabilization could be in the offing, what Mr.
Dennis calls "the flight to the exchanges."
Those would be the dispensaries of heavily
subsidized insurance, and the NFIB finds that 26% of small businesses today
sponsoring insurance are "very likely" to drop it should their employees
start to flood government coverage. Another 31% of the 750 firms surveyed
report they are "somewhat likely."
Small-business workers are eligible for exchange
subsidies even if they can get job-based coverage. The incentive is for them
to take it—given that the new government payments will be so generous,
small-group coverage is generally costly and the insurance tax break for
employers usually doesn't go very far when the employer is small.
If enough workers split, in other words, private
coverage will soon erode and cease to exist as an option. Meanwhile,
start-ups are constantly entering and exiting the market, and the ones with
fewer benefits and liabilities will gain a competitive advantage. Businesses
with fewer than 50 employees also aren't subject to any "play or pay"
penalties. As Mr. Dennis put it in an interview, "Once you pull the string,
everything may unravel."
ObamaCare's partisans claim none of this will
happen because of the social norm theories of behavioral economics.
Businesses offer insurance to attract workers, the thinking goes, and it's
the right thing to do. But that assumes utter irrationality—that workers
won't take a cheaper deal when they see it and businesses won't try to
compete against their rivals.
Continued in article
Bob Jensen's threads on health care are at
http://www.trinity.edu/rjensen/Health.htm
"No Need to Panic About Global Warming: There's no compelling
scientific argument for drastic action to 'decarbonize' the world's economy,"
The Wall Street Journal 27, 2012 ---
http://online.wsj.com/article/SB10001424052970204301404577171531838421366.html?mod=djemEditorialPage_t
Jensen Comment
There are many other compelling reasons to keep moving ahead as fast as possible
to develop alternative forms of energy that are cleaner burning and less carbon
based. At the same time we should not destroy the environment for the sake of
alternate forms of energy --- down with wind power.
From ACLU Week in Review on January 27. 2012 ---
http://www.aclu.org/blog/organization-news-and-highlights/week-civil-liberties-1272012
ACLU Lens: Google's New Privacy Policy
This week,
Google announced a new privacy policy effective March 1.
The new policy is consistent across the vast majority
of Google products, and it’s in English; you don’t have to speak legalese to
understand it. But, the new privacy policy makes clear that Google will, for
the first time, combine the personal data you share with any one of its
products or sites across almost all of its products and sites (everything
but Google Chrome, Google Books, and Google Wallet) in order to obtain a
more comprehensive picture of you. And there’s no opting out.
Jensen Question
Is this doing "no evil?"
"'Lawfare' Loses Big The ACLU loses its nasty suit against former defense
officials," The Wall Street Journal, January 28, 2012 ---
http://online.wsj.com/article/SB10001424052970203718504577181191271527180.html#mod=djemEditorialPage_t
. . .
In Lebron v. Rumsfeld et al., the ACLU
sued under the Supreme Court's 1971 Bivens decision, which has been
interpreted as creating a right of action against the federal government.
Their targets included a retinue of Pentagon officials, starting with former
Secretary of Defense Donald Rumsfeld and going down to the Navy brig
commander where Padilla was held. Mr. Rumsfeld doesn't have to worry about
getting another job, but the ACLU wants to make lower-level officials
politically radioactive so they have a difficult time getting promoted or
working in any influential position.
The good news is that the Fourth Circuit's
three-judge panel saw this for what it was and unanimously rejected the
claims. In his 39-page opinion, the influential Judge Harvey Wilkinson wrote
that the Constitution gives authority over military affairs to Congress and
to the President as Commander in Chief, but it never created a similar role
for the courts.
"It takes little enough imagination," Judge
Wilkinson wrote, "to understand that a judicially devised damages action
would expose past executive deliberations . . . [and] would affect future
discussions as well, shadowed as they might be by the thought that those
involved would face prolonged civil litigation and potential personal
liability."
The decision is especially notable because one of
the three judges is Clinton appointee Diana Motz, who has been a skeptic of
the Bush Administration's detainee policies and has dissented from her
colleagues in cases like 2003's Hamdi v. Rumsfeld.
The ACLU may appeal to all of the Fourth Circuit
judges, but Judge Wilkinson's ruling is comprehensive enough that an appeal
is unlikely to prevail. The judges deserve credit for understanding that the
Constitution gave war powers to the political branches, not to courts. The
country will be safer for it.
"What You Can Learn From Mitt Romney's (203 page) Tax Return,"
WSJ via Paul Caron's Tax Prof Blog, January 29, 2011 ---
http://taxprof.typepad.com/
Wall Street Journal,
What You Can Learn From Mitt's Tax Return, by Laura Saunders:
Watch the Video ---
Click Here
http://online.wsj.com/video/heres-what-we-learned-from-romneys-taxes/C6F7C4F0-0431-4D69-90DB-7A6F3472EDCE.html?KEYWORDS=What+You+Can+Learn+From+Mitt+Romney%27s+Tax+Return
[Mitt
Romney's tax returns] lift the veil on how the wealthy can use the
tax code to their advantage. Here are some lessons the experts have
gleaned:
- Avoid salary, wages and tips to the extent possible
- Muni-bond interest isn't the be-all and
end-all
- Strive for "qualified" dividends
- If you have a "Schedule C" business, think twice before claiming a
home-office deduction
- Generate income from long-term capital gains
- Know the score on itemized deductions
- Capital gains and dividends can help trigger the AMT
- Beware of small benefits requiring large tax-prep efforts
- Offshore investments can save onshore taxes
Capital Gains Tax History and Debates ---
http://en.wikipedia.org/wiki/Capital_gains_tax_in_the_United_States
Jensen Comment
I think the rich should be taxed at possibly higher rates through a tougher
alternative minimum tax rather than increases in the capital gains tax. The AMT
has a less direct impact on starving the nation's risk and venture capital relative to
increases in the capital gains tax. Increases in the capital gains tax simply
make it less profitable to risk savings for investments in new startup
businesses and expansion of small businesses as well as buying into risky IPOs.
Low capital gains taxes give some relief to investors for holding on to
long-term investments over decades of inflation such as selling farm land that
has been owned for 50 years. If capital gains rates are
increased they should be offset with inflation index adjustments much like we
see in certain types of investments like U.S. Treasury Inflation Protected
Securities (TIPS) investments ---
http://www.investopedia.com/terms/t/tips.asp
Also see inflation index bond ---
http://en.wikipedia.org/wiki/Inflation-indexed_bond
Current (low?) capital gains tax rates provide some inflation relief but in
many instances they are not sufficient to offset declines in the purchasing
power of the dollar between when an investment is purchased and when it is sold
decades later. There are some inflation protections (exclusions) for primary
residence homes but not for most other types of long-term holdings.
The problem is that there are so many loopholes in the U.S. Tax Code that
wealthy people will find other avenues to avoid or defer taxes other than
investing their capital in risky ventures and long-term ties ups of their
capital. Purportedly Warren Buffet has positioned himself so he will not have to
pay the Buffet Tax he proposes for other wealthy people. Wealthy people may have
many alternatives for shifting funds into better tax deals such as special
provisions for urban development and other sweet deals built in to current tax
rules.
Taxes need to be reformed, although I do not think the flat tax is the best
way to go about tax reform. There are too many externalities to be considered
before changing economic behavior in this nation so drastically in one swoop.
Bob Jensen's helpers for taxpayers are at
http://www.trinity.edu/rjensen/Bookbob1.htm#010304Taxation
Big Brother's Hawaiian
Natives wanting privacy might return to coconut wireless systems
"Hawaii may keep track of all Web sites visited Declan McCullagh," by
Declan McCullagh, C|net, January 26, 2012 ---
http://news.cnet.com/8301-31921_3-57366443-281/hawaii-may-keep-track-of-all-web-sites-visited/
Hawaii's legislature is weighing an unprecedented
proposal to curb the privacy of Aloha State residents: requiring Internet
providers to keep track of every Web site their customers visit.
Its House of Representatives has scheduled a
hearing this morning on a new bill (PDF) requiring the creation of virtual
dossiers on state residents. The measure, H.B. 2288, says "Internet
destination history information" and "subscriber's information" such as name
and address must be saved for two years.
H.B. 2288, which was introduced Friday, says the
dossiers must include a list of Internet Protocol addresses and domain names
visited. Democratic Rep. John Mizuno of Oahu is the lead sponsor; Mizuno
also introduced H.B. 2287, a computer crime bill, at the same time last
week.
Last summer, U.S. Rep. Lamar Smith (R-Texas)
managed to persuade a divided committee in the U.S. House of Representatives
to approve his data retention proposal, which doesn't go nearly as far as
Hawaii's. (Smith, currently Hollywood's favorite Republican, has become
better known as the author of the controversial Stop Online Piracy Act, or
SOPA.)
Democrat Jill Tokuda, the Hawaii Senate's majority
whip, who introduced a companion bill, S.B. 2530, in the Senate, told CNET
that her legislation was intended to address concerns raised by Rep.
Kymberly Pine, the first Republican elected to her Oahu district since
statehood and the House minority floor leader.
Continued in article
"Hawaiian politician backs away from Web dossier law," by Declan
McCullagh, C|net, January 26, 2012 ---
http://news.cnet.com/8301-31921_3-57367226-281/hawaiian-politician-backs-away-from-web-dossier-law/?tag=mncol;txt
A Hawaii politician who proposed requiring Internet
providers to record every Web site their customers visit is now backing away
from the controversial legislation.
Rep. Kymberly Pine, an Oahu Republican and the
House minority floor leader, told CNET this evening that her intention was
to protect "victims of crime," not compile virtual dossiers on every
resident of--or visitor to--the Aloha State who uses the Internet.
"We do not want to know where everyone goes on the
Internet," Pine said. "That's not our interest. We just want the ability for
law enforcement to be able to capture the activities of crime."
Pine acknowledged that civil libertarians and
industry representatives have leveled severe criticism of the unprecedented
legislation, which even the U.S. Justice Department did not propose when
calling for new data retention laws last year. A Hawaii House of
Representatives committee met this morning to consider the bill (PDF), which
was tabled.
The bill, H.B. 2288, will likely now be revised,
Pine said. The idea of compiling dossiers "was a little broad," said Pine,
who became interested in the topic after becoming the subject of a political
attack Web site last year. "And we deserved what we heard at the committee
hearing."
What the House Committee on Economic Revitalization
and Business heard from opponents today was that the bill was anti-business
and fraught with civil rights issues.
Laurie Temple, a staff attorney at the American
Civil Liberties Union of Hawaii, wrote a letter (PDF) calling H.B. 2288 a
"direct assault on bedrock privacy principles." Instead of keeping more and
more records about users, good privacy practices require deleting data
that's no longer needed, the ACLU said.
NetChoice, a trade association in Washington, D.C.,
that counts eBay, Facebook, and Yahoo as members, sent a letter (PDF)
warning that H.B. 2288's data collection requirements "could
be misused in lawsuits." And the U.S. Internet
Service Provider Association warned in its own letter (PDF) that H.B. 2288
would be incredibly expensive to comply with. "Narrower" national
requirements would cost much more than $500 million in just short-term
compliance costs, the letter said, and Hawaii's legislation is broader.
Continued in article
Bob
Jensen's universal health care messaging ---
http://www.trinity.edu/rjensen/Health.htm
Bob Jensen's
Tidbits Archives ---
http://www.trinity.edu/rjensen/tidbitsdirectory.htm
Bob
Jensen's Pictures and Stories
http://www.trinity.edu/rjensen/Pictures.htm
Shielding
Against Validity Challenges in Plato's Cave ---
http://www.trinity.edu/rjensen/TheoryTAR.htm
·
With a Rejoinder from the 2010 Senior Editor of The Accounting Review
(TAR), Steven J. Kachelmeier
·
With Replies in Appendix 4 to Professor Kachemeier by Professors Jagdish
Gangolly and Paul Williams
·
With Added Conjectures in Appendix 1 as to Why the Profession of Accountancy
Ignores TAR
·
With Suggestions in Appendix 2 for Incorporating Accounting Research into
Undergraduate Accounting Courses
Shielding
Against Validity Challenges in Plato's Cave ---
http://www.trinity.edu/rjensen/TheoryTAR.htm
By Bob Jensen
What went
wrong in accounting/accountics research? ---
http://www.trinity.edu/rjensen/theory01.htm#WhatWentWrong
The Sad State of Accountancy Doctoral Programs That Do Not Appeal to Most
Accountants ---
http://www.trinity.edu/rjensen/theory01.htm#DoctoralPrograms
AN ANALYSIS OF THE EVOLUTION OF RESEARCH CONTRIBUTIONS BY THE ACCOUNTING REVIEW:
1926-2005 ---
http://www.trinity.edu/rjensen/395wpTAR/Web/TAR395wp.htm#_msocom_1
Bob Jensen's threads on accounting theory
---
http://www.trinity.edu/rjensen/theory01.htm
Tom Lehrer on Mathematical Models and Statistics
---
http://www.youtube.com/watch?v=gfZWyUXn3So
Systemic problems of accountancy (especially the vegetable nutrition paradox)
that probably will never be solved
---
http://www.trinity.edu/rjensen/FraudConclusion.htm#BadNews
Bob
Jensen's economic crisis messaging
http://www.trinity.edu/rjensen/2008Bailout.htm
Bob
Jensen's threads ---
http://www.trinity.edu/rjensen/threads.htm
Bob
Jensen's Home Page ---
http://www.trinity.edu/rjensen/