Wednesday, July 30, 2014

A Taxing Experience

In the most recent Weekly Address from the White House, President Obama addressed the issue of corporate tax loopholes.

Obama opens his address by noting the extent of his economic recovery:

"Hi, everybody. Our businesses have now added nearly 10 million new jobs over the past 52 months. The unemployment rate is at its lowest point since September 2008 – the fastest one-year drop in nearly 30 years. 401(k)s are growing, fewer homes are underwater, and for the first time in more than a decade, business leaders around the world have declared that the world’s number one place to invest isn’t China; it’s the United States of America – and our lead is growing."

He notes a problem:

"But there’s another trend that threatens to undermine the progress you’ve helped make. Even as corporate profits are as high as ever, a small but growing group of big corporations are fleeing the country to get out of paying taxes. They’re keeping most of their business inside the United States, but they’re basically renouncing their citizenship and declaring that they’re based somewhere else, just to avoid paying their fair share."

And he is right. Chiefly through a practice called inversion, many large companies move overseas to a more hospitable environment in respect to taxes. And he is right to compare this practice to renouncing citizenship. The directors of many large corporations appear more beholden to their company and its stockholders than to their own country. We have witnessed this already in the flight of companies to China in order to utilize a more docile and less demanding work force. The leader in this trend has been Walmart, which severs business transactions with American electronics and textile firms that pay more than $10 per hour in favor of Chinese based suppliers who pay their labor about $1.75 per hour. (I am still waiting for a congressman with the right amount of snark to give a tongue-in-cheek speech lamenting that American companies can no longer exploit their workers and so have to forced to move the communist workers' paradise of China in order to realized all the surplus value profit off the labor of the working class.)

As usual, however, the President stumbles over himself. 

After demanding that these American companies pay "their fair share," he notes the unfairness of American tax law. 

The best way to level the playing field is through tax reform that lowers the corporate tax rate, closes wasteful loopholes, and simplifies the tax code for everybody. But stopping companies from renouncing their citizenship just to get out of paying their fair share of taxes is something that cannot wait. That’s why, in my budget earlier this year, I proposed closing this unpatriotic tax loophole for good. Democrats in Congress have advanced proposals that would do the same thing. A couple Republicans have indicated they want to address this too, and I hope more join us.

The President claims that such reforms cannot wait. Then why has he waited for six years?

Yes, you saw it coming. Its Taxman . . .

Monday, July 28, 2014

Buyer's Remorse

CNN reports the Americans are experiencing "buyers remorse" over the decision to reelect President Barack Obama over challenger Mitt Romney.

In a CNN/ORC International poll conducted between July 18-20,2014, those surveyed favored Romney over Obama by nine percentage points--53-44. This results revealed an increase in the preference from similar polls conducted earlier.

It seems the more voters see of the Obama administration, the less they like it. And now they wish the election turned the other way.

A far more interesting case of "buyer's remorse" below. Remember this woman, a "poster child" among conservatives for "everything that is wrong in America?"

Sunday, July 27, 2014

Cue the Music for Another Supreme Court Shuffle

Who can forget Justice John Roberts performing the "Supreme Court Shuffle" when, in a last minute change of heart, ruled that the PPACA "fine" was really a "tax" and thereby passed constitutional muster.

Now the stage is set for another dance.

Last week the United States Court of Appeals for the District of Columbia ruled against the government in its application of tax subsidies for insurance purchased in federal exchanges. The PPACA in Section 36B authorizes the IRS to provide tax credits to those who purchase insurance in the state insurance exchanges. The problem is that many states refused to set up exchanges. Consequently, the federal government set up its own exchanges in those states. The legal question at hand concerned whether the IRS could provide tax credits to purchases of insurance in those federal exchanges.

The Court of Appeals in a 2-1 ruled that the plain language of the PPACA permits tax credits ONLY for insurance purchased in state exchanges. That rulings effectively eliminates tax credits in the 36 states where the federal government set up its own exchanges.

A very brief summary can be read here. The entire ruling is uploaded here.

Reading  the entire PPACA or even a summarizing it will, of course, make your head explode.

The supporters of the PPACA already putting together the dance cards for another "Supreme Court Shuffle."

Recently one of the chief developers of the PPACA, Joanthan Gruber,  claimed that a "typo" accounts for alleged misreading by the Court of Appeals. That is a strange enough claim in itself; lawyers more than anyone else know the significance of every word, letter, and punctuation mark.  More interesting, though, is what he claimed several months ago. The juxtaposition of the "then" and "now" below:

Will John Roberts accept his invitation to dance?

Wednesday, July 23, 2014

Training Day

In last weekend's Weekly Address, President Obama continues pushing different aspects of what he calls his "Opportunity Agenda." This week's opportunity is training workers.

The President opens by noting that businesses have created 10 million jobs since the economic crisis of 2008 and that the United States have recovered more swiftly than any other nation.

With his recovery in full swing,  he suggests that "Now we have the opportunity to ensure that this growth is broadly shared."

This assertion follows that claim made in his address the previous week that most of the benefits of the recovery have accrued at the top. It true, this is a damning admission coming from an administration dedicated to "fairness."

He adds:

"Our economy grows best not from the top-down, but from the middle-out. We do better when the middle class does better. So we have to make sure that we’re not just creating more jobs, but raising middle-class wages and incomes. We have to make sure our economy works for every working American."

Does this even mean anything?

Increasing middle-class wages and incomes, desirable as that may be for everyone in the middle-class,  is not growing the economy. The basics of an economy are the production, distribution, and consumption of goods and services. Growing an economy requires businesses creating more jobs devoted to  production of goods or performance of a service. Shifting a companies expenditures from r and d, capital investment or marketing to increasing wages and benefits does not grow the economy.

As if he paid no attention to what he just said, the President asserts that among other things, that his "Opportunity Agenda" actually does include creating more jobs:

"My opportunity agenda does that. It’s built on creating more jobs, training more workers, educating all our kids, and making sure your hard work pays off with higher wages and better benefits."

Despite our recovery from the 2008 financial crisis, at least in the stock market and financial sectors, the Obama administration  has failed to deliver when it comes to jobs. Unemployment remains high and many Americans have dropped out of the workforce. That does provide the administration with the "opportunity agenda" of retraining all those unemployed Americans.

This week, Vice President Biden will release a report he’s been working on to reform our job training system into a job-driven training system. And I’ll visit a community college in L.A. that’s retraining workers for careers in the fast-growing health care sector. Because every worker deserves to know that if you lose your job, your country will help you train for an even better one.

Hopefully, this community college retrains workers as part of a state funded programs. Federally funded programs do not seem to work so well. And probably the best training consists of that given by an individual's new employer.

(Interesting, a new terminology has come about in these job training programs to describe people in need of training. Workers laid off from plant closings are now "displaced workers." Recently divorced women who worked exclusively in the home during their marriages are known as "displaced homemakers." Too bad in 2112 we failed to create a "displaced President.")

Ultimately--and predictably--the President returns to progressive economic regulations with unintended consequences that will wipe out any gains:

"In recent days, both parties in Congress have taken some good steps in these areas. But we can do so much more for the middle class, and for folks working to join the middle class. We should raise the minimum wage so that no one who works full-time has to live in poverty. We should fight for fair pay and paid family leave. We should pass commonsense immigration reform that strengthens our borders and our businesses, and includes a chance for long-time residents to earn their citizenship."

The last thing we need is more immigration. This only adds to the pool of unemployed persons looking for work and collecting benefits. And we do not need "immigration reform" to secure the border.

You have everything you need Mr. President--your pen and your phone.

Monday, July 14, 2014

The President Discovers Opportunity

In the President's Weekly Address, he discovers the need to create opportunity.

As is his custom in his weekly addresses, President Barack Obama opened with a human interest story.

This time it concerned Elizabeth Cooper, a college sophomore concerned about the cost of college and how difficult it is for middle class families to afford it.

On the one hand, once a woman gives birth, the parents have nearly twenty years to save for college. If one starts twenty years before the first tuition and books bill arrives, it is no so bad. If one waits until high school graduation day, it is definitely a challenge.

On the other hand, college is more expensive. When I attended the University of Texas way back in the late 1970s, the University charged $15  a semester hour. That translates into  about $45 a course or $225 a semester for a full load of five courses. Of course, the University hit me (or, more specifically, my parents) with all kinds of fees. Housing proved the biggest expense. Today, tuition at the University of Texas approaches $10,000 a year. I have since relocated to Atlanta, Georgia. Tuition at our flagship state university over in Athens is over $10,000.

Of course, what no one will hear from President Obama is red hot rhetoric about "greedy" administrators or professors. Thy constitute a small but important voting block.

Frankly, they are not responsible for the rising costs of college. Part of it results from rising demand. Because everyone knows the lifelong impact to one's financial well-being that a college degree will bring,  everyone  feels compelled to attend college. Many politicians at both the state and local level attempt to enact policies to allow more people to attend college. This increased demand drives up the cost.

It also means fewer subsidies to go around for each student. States have subsidized the costs in public universities for decades. With more students attending college and fewer tax dollars available to fund higher education, students find themselves paying a greater percentage of the actual costs.

Here in Georgia the legislature created a state lottery to fund the Hope Scholarship Program. This accounts for the fact that in while in Texas just over 50% if students receive some kind of aid, here in Georgia, over 90% of students receive aid. One side effect of the program is--you guessed it--increased enrollment in Georgia colleges. Some of this results from grade inflation. Although SAT scores remain stable, students "earning" the kind of grades that qualify them for the Hope Scholarship have increased. Teachers appear to be inflating grades to permit more students to attend college. This, of course, drives up costs.

Back to Barack and Elizabeth:

"And she shared something I know many of you feel when you wonder what’s going on in Washington. She said she feels 'not significant enough to be addressed, not poor enough for people to worry [about], and not rich enough to be cared about.' ”

Yes, this is one might feel when the one middle class government benefit dries up. The government appears increasingly devoted to the well-being of the rich and the poor--not the middle class.

The President acknowledges the plight of the middle class in the next passage:

"And after the worst economic crisis in generations, our businesses have now created nearly 10 million new jobs over the past 52 months. The unemployment rate has fallen to its lowest point since 2008. By almost every measure, our economy is better off than it was five years ago.

But while we’ve created more jobs at this point of the year than any year since 1999, too many families barely earn what they did in 1999. It’s harder to pay for college, save, or retire, because people’s wages and incomes have not gone up. Nearly all the gains of the recovery are going to the very top – and aren’t making a difference in your lives.

And I believe America does better when the middle class does better. And I’ve laid out an opportunity agenda to create jobs, train workers, educate our kids, and make sure hard work actually pays off."

This is a sad, but revealing indictment of his own administration--that "nearly all the gains of the recovery are going to the very top." 

If this is true and he finds it objectionable, he only has himself to blame.  Although he faults Republicans for obstructing his economic legislation, Obama enjoyed a Democratic majority in Congress for his first two years in office.

Granted, he inherited both the economic crisis and a policy of bailing out wealthy financial institutions. So what did he accomplish? He continued with bailout of financial institutions, especially those two notorious GSEs--Fanny Mae and Freddie Mac. And he secured passage of the PPACA--a plan that already moved businesses to reduce working hours for their employees and  will need incredible amounts of taxed derived subsidies to keep it on life support--taxes invested in the real economy.

How's that for helping the middle class.

Friday, July 4, 2014

The Declaration of Independence and Our National Identity

While the Continental Congress approved a resolution declaring independence from Britain on 2 July 1776, it  approved Thomas Jefferson's document explaining the reasons that compelled Americans to declare their independence on 4 July 1776.

This is the reason we celebrate Independence Day on the fourth of July rather than on the second.

Jefferson's Declaration began as simply a political document announcing the separation from Britain and the birth of a new independent nation. It has become much more than that. It is now an American creed, assuming an almost religious significance about what we believe as Americans: liberty, equality, and republican government. And in the absence of traditional components of nationality, those ideas in the Declaration of Independence have become a substitute for those components. It is the ideas of the Declaration of Independence that to a large extent constitute our national identity.

Traditionally, any people's national identity rests upon geography, language, ethnicity, and religion. People groups generally identify with some geographic location where they have lived. Regardless of how well their land has provided material needs, they romanticize it as their homeland. They lay some claim to it based upon historical or mythological narratives about how they settled there. They are unified by a common language. Speakers of other languages are often seen as less civilized. Perhaps the linguistic group share some physical characteristics that encourage the development of some degree of ethnic consciousness. Finally, a shared religious tradition adds to their social cohesion and provides myths about origins and destiny Often their government provides legal and financial support to their historic faith.

These traditional elements of national identity only had shallow roots in the New World. Over the two centuries of our history as an independent nation, there roots have withered. First, America’s sense of place is not as deep rooted as that in other nations. Many of the first settlers, especially the wealthier leadership behind the colonization efforts never intended to make North America their permanent home. They hoped to strike it rich like Spanish conquistadors and return home to Britain to assume the life of country gentlemen. The few that achieved this goat were largely the sugar planters in the islands of the West Indies. Most of those who come, however, never became prosperous enough to make it back home to Britain. For others, the North American wilderness offered opportunities for the future, not a basis for a historic homeland rooted in the past.

Second, Americans do not have their own language. We speak a foreign language: English. Even the regions accents of American speakers of English derive from the different regions of England from which they originated.

Third, Americans does have a distinctive ethnicity identity, especially when considered from the perspective the physical appearance. Europeans, Africans, and Asians all differ in degrees regarding aspects of physical characteristics. And the people of many  nation-states to some extent exhibit the physical characteristics of the dominant ethnic background. We all have some general expectations of how persons form China, Nigeria, or Italy appear to us. Not so much with Americans. No one recently has expressed surprise upon meeting someone by saying  "Funny, you don't look American.".

America to a higher degree than most other nations is known for its ethnic diversity. Out diversity is hardly a recent development. Britain’s colonies from the beginning possessed a diverse population. Europeans from Britain, Sweden, Holland, Germany, and France established enclaves of settlement. Africans from that continent’s West Coast lived throughout the colonies, though chiefly in the Southern region. A general sense of Northern European identity that Americans shared gradually disappeared with the later arrival of Eastern and Southern Europeans, Asians, and in more recent times, Hispanics. Because of this immigration and ethnic diversity, Americans possess no distinct physical characteristics of an ethnic group.

Finally, America has no national, government supported religion. This circumstance, too, results from our long standing diversity. Anglicans, Congregationalists, Presbyterians, Quakers, Dutch Reformed, Baptists, Lutherans, Unitarians, and Deists populated the early colonies. Some colonies established a particular denomination as the government sanctioned faith. This resulted in some persecution of Quakers by Congregationalists in Massachusetts, and of Baptists in Virginia by Anglicans. Partly because of this religious diversity, the Constitutional Convention created no nationally established religious denomination. The Constitution of 1787 left the legal status of religion to the states. Gradually, however, even the state establishments disappeared. Americans shared a general sense of Protestantism (that accompanied their self-conception as ethnic Northern Europeans) for many decades. The immigration that brought new ethnic groups also brought new religious faiths. Adherents to Catholicism now outnumber any Protestant denomination and a wide range of non-western religious faith now dot the cultural landscape.

So what holds such diverse elements together? The ideas contained in the Declaration of Independence. The devotion to the ideas of liberty, equality, and republican government provides the cohesion that in many other diverse countries can only be achieved through authoritarian governments.

As historian Richard Hofstadter put it, "It has been our fate as a nation not to have ideologies, but to be one."

In other words, we are not Americans because of who we are geographically, linguistically, ethnically, or religiously. We are Americans because of what we believe.

Thomas Jefferson

Wednesday, July 2, 2014

Happy Independence Day!

On this date two hundred thirty eight years ago thirteen of Great Britain's twenty seven North American colonies declared independence.

The Second Continental Congress convened on 10 May 1776 to assess the progress made since its sessions the previous summer in maintaining their rights against the British Parliament while at the same time preserving their union with Britain. The situation had worsened.

The previous October King George III charged in a speech before Parliament that opposition in the colonies was “carried on for the purpose of establishing an independent Empire.” The colonists, he continued, make “vague expression of attachments to the parent state, and the strongest protestations of loyalty to me, whilst they were preparing for a general revolt.” It was time, he concluded, “ to put a speedy and to these disorders by the most decisive exertions.” In response to the King's charges, Parliament passed the Prohibitory Act. This act declared the colonies outside the protection of the empire, prohibited all commerce with the colonies,  initiated a naval blockade, and announced that all colonial ships and cargo forfeit to the Crown as enemy vessels. Moreover, the month before the convening of the Congress, fighting erupted between British regulars and Massachusetts militiamen at Lexington and Concord.

During the month of May, Congress assumed the role of an unofficial provisional government, trying to coordinate the colonies and assume military control over the thousands of militiamen gathering in the Boston area.

Then on 7 June 1776, representative Richard Henry Lee of Virginia introduced the following resolution:

“That these United Colonies are, and of right ought to be, free and independent States, that they are absolved from all allegiance to the British Crown, and that all political connection between them and the State of Great Britain is, and ought to be, totally dissolved. That it is expedient forthwith to take the most effectual measures for forming foreign Alliances. That a plan of confederation be prepared and transmitted tot he respective Colonies for their consideration and approbation.”

After a couple of days debate, the Congress postponed additional discussion until July. At the time, only slightly more than half the colonies supported independence. A consensus had to be formed. Meanwhile, the Congress appointed a committee of five to draft a formal declaration of independence for adoption if the colonies reached a consensus. The committee delegated one of its members, Thomas Jefferson, to write the draft.

Finally, on 1 July, the Congress resumed debate on Lee's original resolution. Although no new points emerged, a virtual consensus had been reached. Only the delegates from the state of New York had failed to receive any instructions to support the resolution. So on 2 July 1776, the Continental Congress voted to pass the Lee resolution declaring independence. The United Colonies became the United States.

Two days later, on 4 July, 1776, the Congress voted to approve the Declaration of Independence as a formal statement of their decision.

Richard Henry Lee

Tuesday, July 1, 2014

The Hobby of Regulation

The Supreme Court issued their ruling  in the case of Burwell vs.Hobby Lobby. The Court ruled in favor of Hobby Lobby, effectively excluding it from some of the contraception mandates contained in the PPACA.
The Court split 5-4 along political lines. For those with the patience, you can download and read the Court's decision here. Your can read the translation from legalese into standard English and analysis in several links here.

Outside of the legal world, pundits of every political persuasion have analyzed the case and the ruling from every conceivable angle:

*Religion of corporate directors vs. religion of employees

*Corporate rights vs. women's rights

* Birth control vs. abortifacients

*Rights of non-profits vs. rights of for profit corporations

*Government regulation vs. religious liberty

The court case, of course, centered on that last issue. It involved not only the first amendment constitutional protection of religion, but also the Religious Freedom Restoration Act of 1993. (To the dismay of Progressive opponents of Hobby Lobby, that law passed unanimously in the House of Representatives with only  three dissenting votes in the Senate (among the Jesse Helms), was introduced in the Senate by Charles Shumer, and enjoyed the support of such liberal "luminaries" as Kennedy and Kerry, Feinstein and Boxer, Metzenbaum, Biden, and Shumer, and was signed into law by President Clinton. The court ruled that PPACA imposed as substantial burden on the religious freedom of Hobby Lobby, in violation of the RFRA.

A memo to Progressives: if this case infuriates you, stop passing regulations that eventually end up at the Supreme Court anyway.

Conservatives should celebrate the victory by Hobby Lobby. The decision at least erects a small barrier to the ever expanding government intrusion and regulation generated by PPACA. (Indeed, regulation seems to be a hobby of sorts for the federal government these days--done as much for fun and fulfillment as for executive branch responsibility.)

It is also a reminder how broad the way remains for government regulation, especially through the PPACA. In Burwell vs Hobby Lobby, the Court sanctioned a narrow realm of liberty for those who profess belief in an abstract theoretical construct they call God. Meanwhile, those who oppose PPACA on the more substantive grounds of property rights and the rights of contract remain subject to its mandates.

In addition, the religious claims of Hobby Lobby involve other complexities outside the question of law. The Green family who owns Hobby Lobby no doubt are devout Christians. And one can argue for the morality of the marketplace--where humans both cooperate and compete in the exchange of goods, services, and idea for their betterment. But the market can have negative outcomes, even for Christians like the Greens. Hobby Lobby now has over 500 stores with  thousands of employees. It is one of the smaller "big box" retailers that have become so prevalent. Like the others, however, it must go to China for suppliers to remain competitive.  According to the United States Department of Labor, the average Chinese hourly wage in manufacturing is $1.74. And Chinese workers, of course, are not American workers.