Tidbits Quotations
To Accompany June 30, 2014 edition of Tidbits
Bob Jensen at Trinity University

My Free Speech Political Quotations and Commentaries Directory and Log ---

We have enough lawyers, although it’s a fine profession,” he told the crowd. “I can say that because I’m a lawyer.
Barack Obama, President of the United States
Warning:  This is one of those quotations that is easily taken out of context (USA law schools are certainly hoping this is the case)

We must be willing to get rid of the life we've planned, so as to have the life that is waiting for us.
Joseph Campbell

If everyone is thinking alike, then somebody isn't thinking.
George S. Patton

It's better to walk alone than in a crowd going in the wrong direction.
Diane Grant

Taliban Cuts off Fingers of Those Who Voted in Afghan Elections ---

I bet Ed Snowden could find the lost Lerner e-mails! ---

Democracy is Wrong for the World and Belgium is a Test Case ---

My comment below is inspired by the primary voting outcome in Mississippi, although in general I'm opposed to the disruptive Tea Party.


The voting outcome in Mississippi is not a first.
There are many earlier  instances of party crossovers in the past where activists in one party (usually the Democratic Party) have crossed over in primary elections to vote for the worst possible candidates that cannot possibly win in the general November elections.
If this strategy catches on it the future it could be a disaster for democracy in the USA. Imagine hoards of voters on both parties crossing over in the primary elections just to elect the worst possible candidates so that better candidates will not be on the November general election ballot.

It his becoming a democracy where the best strategy in a primary election is to do a cross-over vote for the candidate you hate the worst?
Under this strategy only the worst possible candidates would be facing one another in the general November elections. Imagine having a worse government than we have today. I think it is almost certain to happen if this party crossover strategy catches on in the primary elections.
It's hard enough getting competent citizens to run for elective state and national offices these days. The party crossover strategy, if it catches on big time, will further guarantee that no competent citizen will be elected to state and national offices.
I'm glad I'm not young anymore!

Bob Jensen

Here's a crib note sheet for your next economics examination ---

"Student Leaders Ask Hillary To Return 'Outrageous' $225,000 School Speaking Fee," by Colin Campbell, Business Insider, June 27, 2014 ---

Two top student government leaders at the University of Las Vegas are requesting Hillary Clinton return the "outrageous" $225,000 speaking fee she reportedly will receive for an upcoming speech at the school in October.

In a video circulated by the national Republican Party Friday, Elias Benjelloun, the UNLV student body president, and Daniel Waqar, the student government's public relations director, slammed the university's foundation for paying Clinton so much for the event.

"We really appreciate anybody who would come to raise money for the university. But anybody who's being paid $225,000 to come speak, we think that's a little bit outrageous. And we'd like Secretary Clinton — respectfully — to gracefully return the money to the university or the foundation," Waqar said on the Nevada political program "Ralston Reports."

Benjelloun echoed Waqar's remarks.

"When we heard $225,000, we weren't so thrilled," he said. "We would hope that Hillary Clinton commits to higher education ... and returns part or whole of the amount she receives for speaking."

Clinton, an expected front-runner in the 2016 Democratic presidential contest, has had her wealth come under increasing scrutiny in recent weeks. Despite being a reported multimillionaire, Clinton has stumbled through several gaffes, including an interview where she insisted she was not "truly well off."

Clinton and the UNLV did not immediately return requests for comment. The money is reportedly going to Clinton's foundation rather than directly to her.

Read more:


Let's Call it the 186 Club of the One Percent Tax Avoiders
A new law allows Americans to pay minimal or no taxes if they live on the island for at least 183 days a year, and unlike with a move to Singapore or Bermuda, Americans don't have to turn in their passports.---

IRS ADMITS LEAKING CONFIDENTIAL INFORMATION Used Against Mitt Romney in 2012 Elections ---

The IRS admitted this week to leaking the National Organization for Marriage‘s confidential information to far left groups. The IRS will pay the National Organization for Marriage $50,000.

The conservative group National Organization of Marriage accused the IRS of leaking documents to the Obama Campaign in 2012. A top Obama campaign official Joe Solomese used the information to attack Mitt Romney during the 2012 election. The Huffington Post used the leaked documents in a story questioning former Massachusetts Governor Mitt Romney’s support for traditional marriage. The document showed Romney donated $10,000 to NOM.

Continued in article

History Lesson on Professionalism:  Back When the IRS Agreed to Testify Under Oath About Political Hit Lists

"Johnnie Walters, RIP," by James Taranto, The Wall Street Journal, June 27, 2014 ---

In the scandal involving the Internal Revenue Service, the IRS commissioner refused to play along with a corrupt administration, the New York Times reports. A White House aide handed him a list of 200 political "enemies" the president wanted investigated. In response, the aide asked: "Do you realize what you're doing?" Then, he answered his own rhetorical question: "If I did what you asked, it'd make Watergate look like a Sunday school picnic."

The White House aide's reply was "emphatic," according to the Times: ""The man I work for doesn't like somebody to say 'no.' "

The commissioner went to his boss, the Treasury secretary, "showed him the list and recommended that the I.R.S. do nothing." The secretary "told him to lock the list in his safe." Later, he retrieved the list and turned it over to congressional investigators.

It's enough to restore your trust in the government--except that it happened more than 40 years ago. The corrupt order was delivered by John Dean in September 1972. The commissioner, Johnnie Walters, eventually "testified to various committees investigating alleged Nixon misdeeds," the Times reports. "He left office in April 1973." He died Tuesday; the Times article we've been quoting is his obituary.

Walters wasn't the first IRS commissioner to resist President Nixon's political pressure. His predecessor, Randolph Thrower, was fired "for resisting White House pressure to punish political opponents," as the Times notes. Thrower died this March at 100. When Walters took office in 1971, "his stated goals were simplifying the tax process and catching tax cheats," but his job "had grown more complex" when Nixon imposed wage-and-price controls in an economically ignorant effort to curb inflation.

Continued in article

History Lesson in Non-Professionalism:  When an IRS Executive (Lois Lerner) Refuses to Testify About Political Hit Lists

"Lois Lerner of IRS sought audit of Grassley," The Des Moines Register, June 26, 2014 ---

Congressional investigators say they uncovered emails Wednesday showing that a former Internal Revenue Service official sought an audit involving U.S. Sen. Chuck Grassley of Iowa in 2012.

Republicans quickly viewed former IRS official Lois Lerner's actions as an attempt to initiate a baseless IRS examination against a sitting Republican senator. Grassley called the situation "very troubling" and said it's the kind of thing that fuels deep concerns about political targeting by the IRS.

The emails show Lerner mistakenly received an invitation to an event that was meant to go to Grassley, a Republican.

The event organizer apparently offered to pay for Grassley's wife to attend the event.

Instead of forwarding the invitation to Grassley's office, Lerner emailed another IRS official to suggest referring the matter for an audit, saying it might be inappropriate for the group to pay for his wife.

"Perhaps we should refer to exam?" Lerner wrote.

It was unclear from the emails whether Lerner was suggesting that Grassley or the group be audited — or both.

The other IRS official, Matthew Giuliano, waived her off, saying an audit would be premature because Grassley hadn't even accepted the invitation. "It would be Grassley who would need to report the income," Giuliano said in one of the emails.

The name of the event organizer was blacked out on copies of the emails released by the U.S. House Ways and Means Committee because they were considered confidential taxpayer information. Grassley and his wife signed waivers allowing their names to be released.

Lerner headed the IRS division that processes applications for tax-exempt status. The IRS has acknowledged that agents improperly scrutinized applications by tea party and other conservative groups before the 2010 and 2012 elections. Documents show that some liberal groups were singled out, too.

In a written statement about today's disclosure, Grassley said: "This kind of thing fuels the deep concerns many people have about political targeting by the IRS and by officials at the highest levels. It's very troubling that a simple clerical mix-up could get a taxpayer immediately referred for an IRS exam without any due diligence from agency officials."

Grassley learned of the emails from the Ways and Means Committee, aides said. He didn't accept the invitation referred to in the emails, and he didn't receive Lerner's invitation, they said.

The IRS said in a statement that it could not comment on the specifics of the case "due to taxpayer confidentiality provisions."

"As a general matter, the IRS has checks and balances in place to ensure the fairness and integrity of the audit process," the IRS statement said. "Audits cannot be initiated solely by personal requests or suggestions by any one individual inside the IRS."

The IRS says it has lost an untold numbers of Lerner's emails because her computer crashed in 2011, sparking outrage among Republican lawmakers who have accused the tax agency of a cover-up. The emails released Wednesday were among the thousands that have been turned over to congressional investigators.

"We have seen a lot of unbelievable things in this investigation, but the fact that Lois Lerner attempted to initiate an apparently baseless IRS examination against a sitting Republican United States senator is shocking," Rep. Dave Camp, R-Mich., chairman of the Ways and Means Committee, said. "At every turn, Lerner was using the IRS as a tool for political purposes in defiance of taxpayer rights."

Iowa Republican Joni Ernst sought to use the news to focus blame on her Democratic opponent in the U.S. Senate race, U.S. Rep. Bruce Braley. Ernst noted that Braley was one of the members of Congress who wrote a letter in 2012 to encourage the IRS to investigate whether any social welfare organizations were improperly engaged in political campaign activity.

Continued in article

Jensen Comment
Since Lois Lerner still refuses to testify under oath about political hit lists we may never know if there were other hit lists and who ordered her to do the hits.

From the U.S. House of Representatives Committee on Oversight and Government Reform
Darrell Issa (CA - 49), Chairman

Staff Report 113th Congress
How Politics Led the IRS to Target Conservative Tax - Exempt Applicants for their Political Beliefs

June 16, 2014

Jensen Comment
This saga is probably not over and probably will not be over until (if) Lois Lerner testifies under oath and/or more smoking guns are found in the recovery of email messages "lost" by the IRS. Purportedly the NSA has back up copies of these email messages but it is not yet clear whether Congressional investigators will gain access to the "lost" email messages --- particularly those of Lois Lerner.

From TaxProf Blog on June 17, 2014|
The IRS Scandal, Day 404

Continue reading


FATCA --- http://en.wikipedia.org/wiki/FATCA

"Dropping the bomb America’s fierce campaign against tax cheats is doing more harm than good," The Economist, June 28, 2014 ---

At a recent conference for offshore wealth managers in Geneva, Basil Zirinis of Sullivan & Cromwell, a law firm, began his presentation with a discussion of events in Iraq, where Islamist fighters were advancing on Baghdad. Barack Obama, he claimed, was drawing a red line around the city and, if necessary, would “drop FATCA on them”. Worse, they would get no deadline extension. The nuclear option, he added, was to treat them as if they were Swiss.

The analogy was tasteless, but also telling. FATCA stands for Foreign Account Tax Compliance Act, an American law passed in 2010 to crack down on the use of offshore banks, particularly in Zurich and Geneva, to hide taxable assets. The law, part of which takes effect on July 1st, is the most important and controversial development in decades in the international fight against tax evasion. It is feared and loathed by moneymen because of its complexity, its global reach and the high cost of compliance. One senior banker denounces it as “breathtakingly extraterritorial”. In this section

. . .

Transparency campaigners love it because it threatens to blow apart the old way of exchanging tax information between countries “on request”, which they view as unwieldy and soft on cheats. FATCA, they hope, will usher in “automatic” exchange of data, leaving the tax-shy with nowhere to hide.

In essence, FATCA turns foreign banks and other financial institutions into enforcement arms of America’s Internal Revenue Service (IRS). They must choose between turning over information on clients who are “US persons” or handing 30% of all payments they receive from America to Uncle Sam. The threat appears to be working. More than 77,000 financial firms have signed up. About 80 countries have struck agreements with America to allow their banks to hand over data.

The financial industry is struggling to work out which funds, trusts and other non-bank entities count as “financial institutions” under the law. There is also confusion over who is a “US person”. The definition is broad and includes not only citizens but current and former green-card holders and non-Americans with various personal and economic ties to the United States. Some Canadian “snowbirds” who travel to America for part of each year could be caught in the net, says Allison Christians, a tax professor at McGill University. As the complexities of implementation have grown apparent, the American authorities have had to extend several deadlines. Banks, for instance, will get a two-year moratorium on enforcement as long as they are striving to comply.

FATCA has already sent a chill through the 7m Americans who live abroad. Thousands have been told by their local banks and investment advisers that they no longer want their custom because it is too much hassle. Many others will now have to spend thousands of dollars to straighten out their paperwork with the IRS, even if they owe no tax (and most do not, since they will have paid a greater amount abroad, which counts as a credit against tax owed in America).

A record 2,999 of these exasperated expats renounced their citizenship or green cards in 2013. More than 1,000 did so in the first quarter of 2014. (Before FATCA the number was a few hundred a year.) Others have remained American and fought back against unfriendly banks. Using anti-discrimination laws, a Dutch-American sued a Dutch lender that had pre-emptively shut his account and 149 others; he won the case in April. To its credit, the IRS acknowledges the problem and is trying to soften the blow. It recently introduced a streamlined compliance programme for expats who inadvertently failed to fill out the right forms, for example—although this still requires refiling three years of returns.

FATCA also places a burden on the IRS, by generating an unwieldy amount of information. The agency is being given far more to do with far fewer people (thanks to budget cuts), leaving it “on the verge of collapse”, according to a former senior official.

It is not clear that the law will ensnare its quarry. Seasoned tax dodgers are not so naive as to hold money in their own names. FATCA will penetrate some of the shell companies and other structures they hide behind, but Senate investigators and other experts say loopholes remain.

Related to that is the question of whether FATCA will pay for itself. Counting only the expense for American financial firms, the answer is maybe, if it brings in at least the $800m a year estimated by Congress. (The law was passed without any formal cost-benefit analysis.) However, the overall costs of complying, borne mostly by non-American banks, are likely to far exceed the extra tax receipts.

FATCA is about “putting private-sector assets on a bonfire so that government can collect the ashes,” complains Richard Hay of Stikeman Elliot, a law firm. Mark Matthews, a former deputy commissioner of the IRS now with Caplin & Drysdale, another law firm, argues that the effort put into hunting offshore tax evaders is disproportionate: the sums they rob from the public purse “look like a pinprick” compared with other types of tax dodging, such as the under-declaration of income by small businesses.

Another question is whether FATCA might be subsumed into a scheme being promoted by the OECD, a club of mostly rich countries, whereby signatories would share data on financial accounts annually. It has won backing from around 50 countries, including big European nations, India, China and Brazil (and from big banks, which assume compliance costs will be lower under a single global standard). It differs from FATCA in an important respect: information-sharing will be based on residence, not citizenship.

Let's Call it the 186 Club of the One Percent Tax Avoiders
A new law allows Americans to pay minimal or no taxes if they live on the island for at least 183 days a year, and unlike with a move to Singapore or Bermuda, Americans don't have to turn in their passports.---

"Walgreens' Planned Move From Illinois to Switzerland Would Save $4 Billion in Taxes," by Paul Caron, TaxProf Blog, June 15, 2014 ---

Walgreens could cost taxpayers $4 billion in lost revenue over five years should the company decide to renounce its American corporate legal status and move its official address to Switzerland, a tax haven. The company is widely reported to be considering this move and says it will announce its intentions as soon as this summer. Walgreens is the nation’s largest pharmacy retailer with 8,200 stores and locations in all 50 states.

Jensen Comment
Moving most anywhere in the USA from Illinois would save a bundle, although probably not over $1 billion per year.

"Trial Lawyers Party at the Supreme Court:  Chief Justice Roberts misses a chance to fix a class-action mistake," The Wall Street Journal, June 24, 2014 ---

t was a champagne day for trial lawyers at the Supreme Court Monday as the Justices voted to maintain the status quo on securities class-action lawsuits that provide a windfall to plaintiffs attorneys. In a 9-0 decision, the Court opted not to revisit the case that created the legal theory for securities class certification and launched the securities lawsuit industry as we know it.

The High Court's original sin in 1988's Basic v. Levinson was to enshrine the legal theory of "fraud on the market," whereby markets are assumed to include all publicly available information, and investors' decisions are seen as a monolith. Under this theory, if a company makes a material misstatement, investors are presumed to have relied on it and to have thus been defrauded if they establish the other aspects of the claim.

In Halliburton HAL +0.19% v. Erica P. John Fund, Chief Justice John Roberts writes in his controlling opinion that Halliburton "urges us" to "require every securities fraud plaintiff to prove that he actually relied on the defendant's misrepresentation in deciding to buy or sell a company's stock. Before overturning a long-settled precedent, however, we require 'special justification,' not just an argument that the precedent was wrongly decided."

We'd say one justification is that the Court's current legal framework has created no end of mischief by the plaintiffs lawyers who know that if they can get a class certified, the sheer scale of the litigation costs and damages can force companies to settle. Since 1996 more than 4,000 class actions have been filed and only 20 ever went to trial.

The Court did give a narrow technical victory to Halliburton by overturning the Fifth Circuit Court of Appeal's ruling that the company could not include at the class certification stage evidence that a misstatement did not affect its stock price. That shifts the line of scrimmage a few inches, but it still leaves the burden on the defendant to rebut the presumption created by the fraud-on-the-market theory.

In the real world, plaintiffs and defendants will both come to court armed with "experts" to testify, and few class certifications will be denied. In a concurring opinion joined by Justices Antonin Scalia and Samuel Alito, Justice Clarence Thomas writes that Basic had created an "unrecognizably broad cause of action ready made for class certification" and should have been overturned.

The judicial giveaway to the impact of the case is Justice Ruth Bader Ginsburg's concurrence. In her one paragraph opinion joined by Justices Stephen Breyer and Sonia Sotomayor, Justice Ginsburg writes that the Court's decision "recognizes that it is incumbent upon the defendant to show the absence of price impact." The court's judgment, therefore, "should impose no heavy toll on securities-fraud plaintiffs with tenable claims."

In other words, more paydays for the tort bar, so she's happy with the Chief's opinion. Cohen, Milstein, Sellers & Toll partner Daniel Sommers released a statement saying that the ruling assured the "continued vitality of Basic" and that the "conduct of securities class actions should not substantially change in the wake of this decision." Which means it is one more missed opportunity for the Roberts Court.

The French Economy Goes From Bad to Worse Under High Taxation
"It's Bad In France," by Joe Weisenthal, Business Insider, June 25, 2014 ---
Note the tables and charts

Meanwhile Spain Lowers Taxes on Individuals and Business Firms

What happened to the Keynesians in Spain?

They're probably not Laffering ---

"Spain Unveils Sweeping Cuts on Income, Corporate Taxes Budget Minister Says Cuts Will Stimulate Investment, Jobs and Competitiveness," by David Roma, The Wall Street Journal, June 20, 2014 ---

MADRID—Spanish leaders who broke their no-new-taxes pledge after taking office 2½ years ago announced sweeping tax cuts on Friday, saying it was time to compensate a recession-battered populace for its sacrifices and boost a nascent recovery.

Budget Minister Cristóbal Montoro, announcing the government's main economic initiative of the year, said the planned reductions of income and corporate taxes will stimulate investment, creating jobs and making Spanish companies more competitive abroad.

They will also put more money in the pockets of consumers as the ruling, conservative Popular Party moves toward elections, which are expected as early as the end of next year.

Spain's corporate tax rate would drop from 30% to 25% by 2016. People earning more than €300,000 ($408,000) a year would see their personal income-tax rate fall from 52%, one of the highest in Europe, to 45% in 2016.

Those earning less than €12,450 a year would pay 19% in 2016, compared with 24.75% now.

Some individuals in the middle—those earning between €100,000 and €150,000 a year—would see their tax bills go up, Mr. Montoro said, because the number of tax brackets is being reduced. But overall, he said, income-tax rates will drop by 12.5% over the next two years.

Officials say the economy is growing fast enough that tax revenue will continue to rise even as tax rates fall. The International Monetary Fund said last month that Spain's economy, which emerged from recession last summer and is forecast to grow 1.2% this year, had "turned the corner" and has room to cut corporate taxes.

Some independent economists questioned that assumption. They said the government had failed for years to meet its annual revenue projections and now risks a decline in tax revenue and a reversal of three years of advances in trimming the budget deficit.

"It's not clear to me why they hiked taxes soon after taking office, if their argument is now that the way to increase revenue is tax cuts," said José Carlos Díez, a Madrid-based economist.

Prime Minister Mariano Rajoy inherited a severe economic crisis when he assumed office in December 2011. Within months, he raised income and sales taxes, saying they were needed to narrow the budget deficit.

He apologized for breaking a campaign pledge and said some of the tax increases were temporary.

Mr. Montoro said it was now possible to reverse course because Spain's modest growth is increasing tax revenue. He said tax receipts in the first five months of the year were 5% higher than the same period of 2013. He said Spain's tax revenue is about 38% of gross domestic product, one of the lowest in the euro zone, but growing.

The cuts announced Friday would by 2016 bring income-tax rates back to their pre-2012 levels for high-income earners and lower them slightly for low-income earners. Sales taxes wouldn't come down. The plan is subject to modification but is assured of passage because Mr. Rajoy's party controls parliament.

The New GASB Standard Will Bring Light to the Dark Corners of Underfunded Government Pension Funds

Accounting Change Will Expose ...


By Michael Hicks, includes “This week marked the full implementation of two new Government Accounting Standards Board rules affecting the reporting of pension liabilities. These rules -- known in the bland vernacular of accountancy as Statements 67 and 68 -- require state and municipal governments to report their pensions in ways more like that of private-sector pensions. … One result of this is that governments with very high levels of unfunded liabilities will see their bond ratings drop to levels that will make borrowing impossible. In some places, like Indianapolis or Columbus, Ohio, may have to increase their pension contributions and perhaps make modest changes to retirement plans, such as adding a year or two of work for younger workers. Places like Chicago or Charleston, West Virginia, will be effectively unable to borrow in traditional bond markets.  Pension funds in Chicago alone are underfunded by almost $15 billion. Under the new GASB rules Chicago's liability could swell to almost $60 billion or roughly $21,750 per resident. Retiree health care liabilities add another $3.6 billion or $1,324 per resident, so that each Chicago household will need to cough up $61,000 to fully fund their promises to city employees. The promise will be broken. …

Bob Jensen's threads on pension liabilities and post-employment benefits ---

Bob Jensen's threads on the sad state of governmental accounting ---

"More Millennial Mothers Are Single Than Married," by Belinda Luscombe, Time Magazine, June 17, 2014 ---

Despite the anxiety society still feels about single mothers, most American women aged 26 to 31 who have children are not married. And the number of these millennial single mothers is increasing. In fact, in a study just released by researchers at Johns Hopkins University, only about a third of all mothers in their late twenties were married.

The less education the young women have the higher the probability that they became a mom before they got married. Conversely, the married moms of that generation probably have a college degree. “It is now unusual for non-college graduates who have children in their teens and 20s to have all of them within marriage,” says Andrew Cherlin, one of the authors of the studyChanging Fertility Regimes and the Transition to Adulthood: Evidence from a Recent Cohort.”

Sociologists such as Cherlin have been tracking the decline of marriage as one of the milestones or goals of an individual’s life—the whole “first comes love, the comes marriage, then comes the baby with the baby carriage” paradigm. And it’s clear that an increasing number of young people are just not putting a ring on it. “The lofty place that marriage once held among the markers of adulthood is in serious question,” says Cherlin.

Motherhood is beginning to show the fissures along income and education lines that have already appeared in other aspects of U.S. society, with a small cluster of wealthy well educated people at one end (married with kids), a large cluster of struggling people at the other (kids, not married) and a thinning middle. While many children raised by single parents are fine, the advantages of a two parent family have been quite exhaustively documented. Some of these advantages can be tied to financial resources, but not all.

Among people with kids between the ages of 26 to 31 who didn’t graduate from college, 74% of the mothers and 70% of the fathers had at least one child outside of marriage, Cherlin found. And, 81% of births reported by women and 87 % of births reported by men had occurred to non-college graduates.

The chart below, using data from the National Longitude Study of people born in 1997, shows all the births reported by women who didn’t get through high school, how old they were when their kids were born and whether they were married. Only a quarter of these young moms were married, slightly more than a third were living with someone, not necessarily the child’s father, and almost 40% had no partner at all.

Continued in article

Bob Jensen's threads on the history of women in the professions, including the CPA profession, are at

Jensen Comment
Studies also show that USA women are delaying having their first child much longer than their own mothers and grandmothers and great grandmothers.

Teen pregnancies are at their lowest rates in years.

Unaccompanied children are pouring into the USA at unprecedented levels --- over 400 per day, although this number will probably decline if more and more of these children are returned to their parents in Latin America. President Obama assigned the task of stemming the tide to his Vice President Joe Biden. The tide will probably increase if more and more of these inflowing children are aided in seeking the American Dream.

"News Flash: Haiti Is on the Upswing The country has made tremendous progress, but needs more support to defeat cholera and homelessness," by Sean Penn, The Wall Street Journal, June 17, 2014 ---

The rains have come to the Caribbean and hurricane season is upon us. But for the first time in four years, the nearly 60,000 people who sought refuge on the Petionville Club golf course after the earthquake are now under solid roofs in safer homes.

Our team at J/P Haitian Relief Organization continues to support these families as they rebuild resilient, sustainable and self-sufficient communities. Elsewhere in Haiti, Doctors Without Borders has brought health care to the most remote areas of the country, and the Haitian government has developed new building codes as part of a national housing policy.

Port-au-Prince, the capital city, has made remarkable progress. Nearly all of the 10 million cubic meters of rubble that buried the city have been cleared from the streets. More than 90% of the almost two million people left homeless have moved from tent camps to more permanent housing.

Haiti's economy is among the fastest-growing in the Caribbean, as the government continues to make economic development a priority. Hundreds of kilometers of roads are now paved, thousands of homes built and tens of thousands of damaged homes repaired or retrofitted. Crime rates have dropped, and in May 2011, one political party transferred power to another peacefully after an election for the first time in modern history.

The people of Haiti have come a long way, which may shock those who watch the news. Headlines continue to spin Haiti as a dark, poverty-entrenched no-man's-land. Even on the left, efforts at economic development have been portrayed as colonization by corporations or occupation by a foreign force.

Such cynicism sells papers and entices people to click, but at the cost of Haitian lives. This coverage scares away would-be investors, hindering economic development and reinforcing prejudices that Haiti is beyond help. And those who work every day to overcome the country's challenges become gun-shy about discussing the real challenges, fearing that they will perpetuate the negative stereotypes and invite even more criticism.

This is tragic, because there are two urgent problems that need to be addressed: postearthquake homelessness and cholera.

Less than 10% of those initially displaced remain in camps, but that's still almost 140,000 people—a big number that when taken out of context makes Haiti's recovery so easy to criticize. Rather than cynicism and apathy, these families need help to leave the camps, find safe homes and return to a normal life.

At J/P HRO, we intend to ensure that each of these families makes it home. In partnership with the Haitian government and other organizations such as the International Organization of Migration and the Red Cross, we have helped develop a successful conditional cash transfer program. It gives displaced families the money they need to move out of the camps, while also injecting much-needed capital into the local economy. We've come so far, but flagging financial support is preventing the remaining families from returning home. They should not have to endure the deluge of another hurricane season homeless.

Haiti also is suffering the largest cholera epidemic in the world. Death from this bacterial infection is preventable, and with soap and safe water, infection is avoidable. Nevertheless, many in Haiti play down cholera for fear of scaring away tourists and deterring economic investment. Yet Kenya, India, Thailand and China also are fighting cholera. None of these countries is forced to bear the stigma Haiti endures.

To eradicate this disease, Haiti needs international support. We support a two-pronged approach, which Haiti's government has already begun implementing. In the short-term, health education, vaccinations and treatment supplies can prevent further deaths. In the long-term, the country needs assistance to strengthen its health-care system and build better sanitation infrastructure. All organizations on the ground will have to coordinate their efforts with the government and international institutions. None of us can do it alone.

Cholera has already spread to the Dominican Republic and Cuba. If the epidemic is not stopped it will spread to the rest of the Caribbean, Mexico, Central America and beyond. The only thing we have to fear from cholera in Haiti is the tragic consequences of our own inaction.

Haiti has made tremendous progress after one of the greatest natural disasters in history, but there's still a long road ahead. In collaboration with local and national government leaders, other international NGOs, U.N. agencies, donors and the community members themselves, the team at J/P HRO will continue to fulfill our mission of "saving lives and building sustainable programs with the Haitian people quickly and effectively."

Continued in article

What USA state has the worst job market?

It's not California, Illinois, or Vermont, all of which are trying to tax away economic growth.

"Rhode Island Has the Country’s Worst Job Market," by Ben Casselman, Nate Silver's 5:38,"  June 23, 2014 ---

Jensen Comment
But that does not make Rhode Island the worst (or best) state to become unemployed. These are the best and the worst states if you are choosing where to become temporarily unemployed ---

If you're seeking permanent unemployment on welfare you should pack your HDTV television sets into a U-Haul and move to Vermont. Maine is not a bad second choice, but don't get lost in New Hampshire along the way. In Maine or Vermont look for an old mill town where many of the houses are still vacant and rent is really, really cheap. A lot of Somali immigrants chose the old Lewiston, Maine mill town. Given Maine's recent efforts to cut their welfare, they may have been smarter to have picked Vermont.

It can be costly to heat in northern New England, but it's pretty easy to steal firewood from the big timber companies if you cut and haul your own.

Graphic from the New York Times via Barry Ritholtz:  Change in private manufacturing jobs, by county in the USA
This graphic shows why there is such a lousy future in manufacturing jobs. There are many causes, especially the slow economic recovery and reduced government spending for such  things as military equipment, but the increasing displacements are causes by robotics and automation that increasingly replace manufacturing workers in ways that were not imagined 20 ago. Will the last person leaving an automated factory turn out the lithts ---


Teaching Case
From The Wall Street Journal Weekly Accounting Review on June 6, 2014

VA Audit Finds Delays in Care Widespread
by: Ben Kesling
Jun 10, 2014
Click here to view the full article on WSJ.com

TOPICS: Auditing, Internal Auditing

SUMMARY: "During a nearly monthlong audit of 731 VA facilities and nearly 4,000 employees, the VA found widespread problems with appointment scheduling." The related video also begins with a statement about the internal audit. Regarding the performance metrics that are the focus of the related article, "starting in 2011, when the VA instituted a new system to track performance standards, five VA hospitals notched consistently poor scores on a range of critical-care outcomes, including mortality and infection rates."

CLASSROOM APPLICATION: The article may be used to discuss different types of audits; their importance for verifying measures, in this case, of health outcomes rather than financial outcomes; and internal auditing versus external auditing,

1. (Introductory) What issues have led to the resignation of Veterans Affairs Secretary Eric Shinseki?

2. (Introductory) Review the graphic in the related article entitled "Weak Links." Summarize the points being made with the three metrics about death rates.

3. (Advanced) How has a Veterans Affairs audit identified information related to these issues? Who conducted the audit? What type of audit was conducted?

4. (Advanced) According to the article, what additional audit will now be undertaken? What type of audit do you think it will be? Who do you think will conduct the audit?

Reviewed By: Judy Beckman, University of Rhode Island

VA Halted Turnaround Visits to Troubled Hospitals
by Thomas M. Burton
Jun 10, 2014
Page: A1

"VA Audit Finds Delays in Care Widespread," by Ben Kesling, The Wall Street Journal, June 10, 2014 ---

Nearly 60,000 veterans are waiting to get appointments at the Department of Veterans Affairs and 70% of facilities have used an alternative to official appointment schedules to make wait times appear shorter, according to an internal VA audit released Monday.

During a nearly monthlong audit of 731 VA facilities and nearly 4,000 employees, the VA found widespread problems with appointment scheduling and pressure on employees to change data. More than 10% of scheduling staff were given instruction on how to alter patient appointment scheduling, according to the audit.

"Today, we're providing the details to offer transparency into the scale of our challenges, and of our system itself," said Sloan Gibson, acting VA secretary, in a release. "I'll repeat—this data shows the extent of the systemic problems we face, problems that demand immediate actions."

Monday's report is the culmination of an extensive audit ordered by Eric Shinseki, the former VA secretary, in the wake of widespread reports of the use of unauthorized patient wait lists throughout the VA system that made official wait times appear to be much shorter than the actual wait times faced by veterans.

As of May 15, roughly 57,436 veterans were waiting to be scheduled for care and another 63,869 had enrolled in the VA health-care system over the past decade yet have never been seen for an appointment.

Mr. Shinseki presented President Barack Obama with preliminary findings then resigned his position on May 30.

The VA's independent inspector general has also released an interim report on its review, which has found systemic problems with appointment-scheduling procedures at the VA. The full report from the independent IG is expected to be released in August, according to an IG spokeswoman.

At a House Committee on Veterans' Affairs hearing Monday evening, Richard Griffin, the VA's acting inspector general, said his office is reviewing 69 VA medical facilities and is coordinating with the Justice Department when inspectors identify potential criminal violations.

At his last appearance before a congressional hearing in mid-May, Mr. Griffin said the IG was reviewing 42 facilities. The IG issued an interim report soon after those hearings.

"The issue of manipulation of wait lists is not new to VA," said Mr. Griffin. "And since 2005 the [inspector general] has issued 18 reports that identified at both the national and local level deficiencies in scheduling, resulting in lengthy wait times and in negative impact on patient care."

Mr. Griffin also said his office has found no evidence of willful destruction of evidence at any of the locations they have reviewed during unannounced visits.

Accompanying the release of the VA's review data Monday morning, Mr. Gibson announced a hiring freeze among senior positions at the VA, and has said the VA will "trigger administrative procedures" against senior leaders in charge of problem facilities.

Mr. Gibson also said the VA will be creating an independent, external audit of scheduling practices. The Government Accountability Office has routinely said in reports and testimony from GAO officials that the VA lacks third-party validation of scheduling reform.

The VA-wide audit was ordered by Mr. Shinseki and took place over three weeks beginning on May 12.

In a conference call with reporters, a senior VA official noted that schedulers have to contend with a software system first launched in 1985 and which hasn't had a total overhaul since then. "The current scheduling practice predates the Internet," the official said, adding that designing scheduling policy is complicated because officials have to contend with this difficult-to-use software

Last week, Mr. Gibson made his first public appearances as acting VA secretary, traveling to Phoenix and San Antonio to address ongoing issues concerning patient scheduling procedures and wait times for appointments.

"We now know there is a leadership and integrity problem among some of the leaders of our health care facilities, which can and must be fixed," Mr. Gibson said in Phoenix Thursday. "That breach of integrity is indefensible."

From the CPA Newsletter on June 16, 2014

Senators ask Pentagon to stop using "plugs" to balance books
A bipartisan group of senators, which includes Sens. Charles Grassley, R-Iowa; Tom Coburn, R-Okla.; Thomas Carper, D-Del.; and Ron Johnson, R-Wis., have sent a letter to Defense Department Comptroller Robert Hale asking the Pentagon to cease using "plugging" accounting practice, referring to the use of false numbers in the Pentagon's accounting ledgers and financial reports to make the books balance. Use of these plugs or "reconciling amounts" totaled $9.6 billion last year, an 80% increase since 2008, the senators said. Reuters (6/13)

Is it impossible to audit, as the GAO used to insist, the fraud-infested finances of the Pentagon?

"Pentagon Backtracks on Goals for First Audit, GAO Says,"  by Tony Capaccio, Bloomberg, May 13, 2014 ---

The Pentagon has backtracked from a pledge to have all budgetary accounts ready by Sept. 30 for the initial step toward its first-ever full financial audit.

Then-Defense Secretary Leon Panetta pledged an “all-hands effort” in 2011 to prepare for evaluation a “Statement of Budgetary Resources” -- covering funds received, unspent, obligated or put under contract over several years -- by the end of this fiscal year so that an audit could begin in 2015.

Instead the Defense Department has decided to “narrow the scope” of the initial budgetary data to a one-year snapshot of spending and accounts covering about 77 percent of those funds, according to a report by the U.S. Government Accountability Office scheduled for release today.

The delay may further undercut public confidence in the department’s ability to manage billions of dollars effectively even as the military seeks permanent relief from the automatic budget cuts known as sequestration. The current efforts are focused on having the initial set of budget books ready to start an audit in fiscal 2015 and the rest by 2017.

“The Pentagon’s accounting system is a broken mess,” a new advocacy group, Audit The Pentagon, said in a posting on Facebook. “The Defense Department is the only major federal agency that cannot pass an audit -- and DoD has no serious target date to do so.”

The GAO, the watchdog agency for Congress, has criticized the department for its inability to properly account for an inventory that makes up 33 percent of the federal government and includes $1.3 trillion in property, plants and equipment. The Pentagon’s budget accounts for almost half of the discretionary spending that Congress approves annually. Hagel’s Pledge

The new GAO report praised the Pentagon for committing “significant resources to improving funds controls for achieving sound financial management operations and audit readiness” and increasing the training of its workforce. Defense Secretary Chuck Hagel said on assuming office in 2013 that he was committed to Panetta’s initiative.

The narrowed scope of the initial data excludes all unspent funds previously appropriated by Congress “as well as information on the status and use of such funding in subsequent years,” the GAO said in its report for Senator Tom Carper, a Delaware Democrat who’s chairman of the Senate Homeland Security and Governmental Affairs committee. Carper’s Criticism

“Federal agencies have been required to produce auditable financial statements since the mid-1990s,” Carper said in an opening statement prepared for a committee hearing today. “Unfortunately, nearly two decades later, the Department of Defense -- which spends more than $2 billion every day -- has yet to meet this obligation. In fact, its books are so bad that auditors cannot even attempt to perform a complete audit.”

Navy Commander William Urban, a spokesman for the Defense Department comptroller, said in an e-mail that the Pentagon “is not backing off the goal for a full audit of the Statement of Budgetary Resources.”

“About a year ago, we did modify our audit plan in order to pursue a cost-effective strategy as required by law,” Urban said. “Congress was informed of the change shortly after it was put in place.”

Jensen Comment
The GAO also claimed that it would be impossible to audit the IRS. I don't think there's anybody to date that argues that it's possible to audit the IRS.

The Sad State of Governmental Accounting and Accountability ---







Huge Medicaid Fraud:  The Biggest Drain on State Budgets in Medicaid
The Biggest Drain in the Federal Budget is Medicaid, Medicare, and Social Security
"The Medicaid Black Hole That Costs Taxpayers Billions," by John Tozzi, Bloomberg Businessweek, June 23, 2014 ---

Here’s some cheerful news: States and the federal government are doing little to stop a costly form of Medicaid fraud, according to a government report released last week.

Medicaid, the federal-state health insurance program for poor Americans, now covers more than half its members through what’s known as Medicaid managed care. States pay private companies a fixed rate to insure Medicaid patients. It has become more popular in recent years than the traditional “fee for service” arrangement, in which Medicaid programs reimburse doctors and hospitals directly for each service they provide.

Despite the growth of managed care in recent decades, officials responsible for policing Medicaid “did not closely examine Medicaid managed-care payments, but instead primarily focused their program integrity efforts on [fee-for-service] claims,” according to the Government Accountability Office, the investigative arm of Congress. The managed-care programs made up about 27 percent of federal spending on Medicaid, according to the GAO. The nonpartisan investigators interviewed authorities in California, Florida, Maryland, New Jersey, New York, Ohio, and Texas over the past 12 months.

Funded jointly by the federal government and the states, Medicaid provided health insurance to about 72 million low-income Americans at a cost of $431 billion last year, according to the report. By the Medicaid agency’s own reckoning, $14.4 billion of federal spending on Medicaid constituted “improper payments,” which include both overpayments and underpayments. That’s 5.8 percent of what the federal government spends on the program. The $14 billion figure doesn’t tally what states lose to bad payments.

The fraud risk for managed care is twofold. Doctors or other health-care providers could be bilking the managed-care companies, which pass on those fraudulent costs to the government. Or the managed-care companies themselves could be perpetrating schemes that cost taxpayers money and harm patients.

What does this look like in practice? New York Times reporter Nina Bernstein wrote a Dickensian report last month detailing the competition among managed-care companies in New York to find the most profitable Medicaid clients:

“Many frail people with greater needs were dropped, and providers jockeying for business bought, sold or steered cases according to the new system’s calculus: the more enrollees, and the less spent on services, the more money the companies can keep.

“Adult home residents, like those caught in the hotel, had long been victimized under the old fee-for-service Medicaid system, in which providers were paid for services rendered. Now, under managed care, they find themselves prey to new versions of old tactics, including intimidation to accept services they do not need.

“’They came like vultures—”Sign here, sign here!”—with their doughnuts and cookies,” recalled Robert Rosenberg, 61, who has a spinal disorder and Crohn’s disease, and, at 4 feet 4 inches tall, had waded through hip-high water to escape the flood at Belle Harbor Manor in Queens. ‘They coerced people. They told residents they would lose their Medicaid if they didn’t sign.’”

Even well-meaning managed-care companies may not have an incentive to stop fraud by medical providers, the GAO says. “If [managed-care organizations] are making payments that are too high, or have some waste, fraud, and abuse, sometimes those payments then get put into the calculation for next year’s rates,” says Carolyn Yocom, director of health care at the GAO and author of the report.

The Department of Health and Human Services, in a five-page written response to the GAO included with the report, says the agency periodically assesses states’ managed-care programs, promotes best practices, and offers training for state leaders. The agency’s “comprehensive reviews have identified findings and vulnerabilities related to managed care program integrity,” according to the response. The agency also noted that managed-care audits can be more complex than policing traditional Medicaid payments, so “states can benefit from more direct support.” A spokeswoman for the department declined provide additional comment.

Part of the problem is that Medicaid in general “has not traditionally been very transparent, nor has it been very easy to see where the money goes,” the GAO’s Yocom says. Managed-care arrangements are even more difficult to monitor. “The visibility of what happens is once-removed, because of the managed-care entity itself.”

Craziest of all, states aren’t required to audit the payments they make to managed-care companies, or the payments those companies make to medical providers. The GAO, in its drily ascerbic way, recommends they start.

Continued in article

Jensen Comment
An even bigger fraud arises when Medicaid coverage granted to people who are really not eligible for Medicaid.

"Audit reveals half of people enrolled in Illinois Medicaid program not eligible," by Craig Cheatham, KMOV Television, November 4, 2013 ---

The early findings of an ongoing review of the Illinois Medicaid program revealed that half the people enrolled weren’t even eligible.

The state insisted it’s not that bad but Medicaid is on the federal government’s own list of programs at high risk of waste and abuse.

Now, a review of the Illinois Medicaid program confirms massive waste and fraud.

A review was ordered more than a year ago-- because of concerns about waste and abuse. So far, the state says reviewers have examined roughly 712-thousand people enrolled in Medicaid, and found that 357-thousand, or about half of them shouldn't have received benefits. After further review, the state decided that the percentage of people who didn't qualify was actually about one out of four.

"It says that we've had a system that is dysfunctional. Once people got on the rolls, there wasn't the will or the means to get them off,” said Senator Bill Haines of Alton.

A state spokesman insists that the percentage of unqualified recipients will continue to drop dramatically as the review continues because the beginning of the process focused on the people that were most likely to be unqualified for those benefits. But regardless of how it ends, critics say it's proof that Illinois has done a poor job of protecting tax payers money.

“Illinois one of the most miss-managed states in country-- lists of reasons-- findings shouldn't surprise anyone,” said Ted Dabrowski.

Dabrowski, a Vice-President of The Illinois Policy Institute think tank, spoke with News 4 via SKYPE. He said the Medicaid review found two out of three people recipients either got the wrong benefits, or didn't deserve any at all.

We added so many people to medicaid rolls so quickly, we've lost control of who belongs there,” said Dabrowski.

Continued in article

Bob Jensen's universal health care messaging --- http://www.trinity.edu/rjensen/Health.htm

From the CPA Letter Today on June 27, 2014

The self-charged interest rules and the 3.8% net investment income tax  (for Medicare)
The final regulations governing the 3.8% net investment income tax include an exclusion for self-charged interest income, but, unfortunately, the regulations do not cover all the scenarios in which a taxpayer may have the economic equivalent of self-charged interest. This article explores the outcome in certain situations in which a passthrough entity's owner has a borrowing or lending transaction with the entity. Corporate Taxation Insider (6/26)


Jensen Comment

Interest income from municipal bonds is exempt from the 3.8% surtax as well as distributions from retirement accounts like IRAs and 401(k)s. However, income from retirement distributions may cause a taxpayer to exceed the income threshold and expose other invest - ment income to the surta

Bob Jensen's universal health care messaging --- http://www.trinity.edu/rjensen/Health.htm

Bob Jensen's Tidbits Archives ---

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Summary of Major Accounting Scandals --- http://en.wikipedia.org/wiki/Accounting_scandals

Bob Jensen's threads on such scandals:

Bob Jensen's threads on audit firm litigation and negligence ---

Current and past editions of my newsletter called Fraud Updates ---

Enron --- http://www.trinity.edu/rjensen/FraudEnron.htm

Rotten to the Core --- http://www.trinity.edu/rjensen/FraudRotten.htm

American History of Fraud --- http://www.trinity.edu/rjensen/FraudAmericanHistory.htm

Bob Jensen's fraud conclusions ---

Bob Jensen's threads on auditor professionalism and independence are at

Bob Jensen's threads on corporate governance are at


Shielding Against Validity Challenges in Plato's Cave ---

·     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?  ---

The Sad State of Accountancy Doctoral Programs That Do Not Appeal to Most Accountants ---


Bob Jensen's threads on accounting theory ---

Tom Lehrer on Mathematical Models and Statistics ---

Systemic problems of accountancy (especially the vegetable nutrition paradox) that probably will never be solved ---

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/