Archive for the ‘Taxes’ Category

The Man Who Made His Accountant Cry

Saturday, March 29th, 2008

Larry Ellison Loves Himself

What has 23 acres, an 8000 sq. ft. house with two wings, a guest home, three cottages, a gym, a 5-acre lake, two waterfalls, two bridges, and hundreds of mature cherry and maple trees planted among 1000 redwoods pines and oaks?

The $200 million estate of Larry Ellison, the $25 billion, 12th-ranking member on the Fortune 500 list of world’s richest asswipes. The one that had his aptly-named Octopus Holding company buy it from him in 1995 for a deflated $12 million. The one that just “earned” him a $3 million property tax cut based on a professed 60% decline in the home’s value vs. the 6.3% for an average home. An average home - the ones not being foreclosed on anyway - that is being over-assessed because the neighbors can’t pay their mortgages down at Loan Shark Larry’s Savings and Loan.

And the rationale for the cut? It’s even richer than Larry (and apparently God) himself.

According to his tax appeal, the behemoth bungalow in his private redwood grove suffers from “significant functional obsolescence” because there apparently isn’t much of a market for $200 million pimp cribs. He also says the 16th century Japanese architecture, “over improvements”, and “excessive landscaping” are too costly for mere millionaire to maintains, so gee he’d appreciate it if just give him a break willya?

The Woodside White Elephant
In other words, Larry builds a Japanese-bred white elephant that no one can afford to buy, maintain, or want to live in so the taxpayers now owe him $3 million for his foresight in building such an opulent slum. Or as a consumer watchdog group puts into perspective, “Three million dollars to Larry Ellison is the equivalent of $300 to the average home owner.” Oh, and just so you know we aren’t picking on poor beleaguered Larry, Bill Gates did the same thing several years ago with his Redmond, WA-based monument to ostentation, avarice, and greed.

It makes you really admire modest billionaires like Warren Buffett, who actually pay taxes.

But Woodside, CA town manager Susan George says the deal is on the up and up. “It shouldn’t make any difference how much money he has if the process is fair. We’ll miss the money. We always have good things to do with it.”

True enough, but that’s relatively easy for George to say. Cash-flush Woodside is usually the top or near-top median income ZIP code in the country. The rest of relatively affluent - but still within human understandingly affluent - San Mateo County isn’t so lucky. They have people who can’t afford to claim their E. Palo Alto, cockroach-infested apartment is worthless because it’s “significantly functionally obsolete” with a leaking roof and broken plumbing. BTW, East Palo Alto is the other Palo Alto, the one that’s not home to multiple multi-millionaires and Stanford University. The folks in E. Palo Alto suffer from a crippling crime rate and crumbling housing over there on the wrong side of the freeway - the side that isn’t protected by sound fencing like the gracious folks across the road.

Rich Shouldn’t Matter
In principle I agree with the town manager. It shouldn’t matter how much money you have. So I suppose Larry wouldn’t mind if his revaluation was the going 6.3% - just to be fair and all. I’m sure he won’t mind, because he could just recoup the money by delaying the painting of his yacht, the world’s largest. Or perhaps he could stop routinely violating nighttime noise restrictions at San Jose International for landing after hours in his private Gulfstream jet. He was exempted from the noise restrictions too.

Larry is well-known as the infant-terrible of Silicon Valley. He runs his company Oracle based on the principles of Sun Tzu’s The Art of War.

He regularly buys out any competitors, frequently in hostile takeovers - and grinds their successful products under his heel in order to buy new sails for his America’s Cup yacht or gas for his aerobatic team. At each hostile takeover, employees lose jobs to feed Larry’s Giant Maw of GreedTM. And it’s a hungry maw indeed. So hungry, that Larry’s accountants warned him several years ago to cut his fantastic spending lest he bankrupt himself.

It’s Tough Out There for a Billionaire Pimp
I guess $12 billion doesn’t go as far as it used to.

I’m a firm believer in capitalism, although I recognize its limitations if left totally unrestricted. I have nothing against people earning money. In fact, I don’t care if a person makes billions - more power to them. But if you make billions you also inherit some responsibilities.

One of those responsibilities is paying your taxes like any other good citizen of modest means without a buttload of full-time shysters to find boondoggle tax breaks. It also comes with a moral responsibility to not deprive others to feed your own hubris and greed. Don’t take money away from schools and hospitals simply because you can. It’s not a frickin’ game to see who dies with the most toys. Don’t lay off employees to get that quarterly bonus that’s just about equal to the money you “saved” by laying them off. I don’t require you to find the light and abandon your Marley-like stinginess like Bill Gates turned away from his once well-known anti-philanthropic ways. Hell, you can even illegally fly your jet late at night provided you pay buy soundproofing for the more modest home owners who will go to work exhausted tomorrow from a lost night of sleep courtesy of your (literally) money-burning flying hard on. In short, all I ask you to do is act like a normal human being instead of a shit stain in the crotch of humanity’s Jockey shorts.

In short Larry, stop being such an asshole.

Cross posted at The Omnipotent Poobah Speaks!

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GWB: The Cash In The Cradle & The Silver Spoon - I’m Gonna Be Like Him

Friday, March 14th, 2008

I try to avoid making unequivocal assertions…but if my instincts are correct, I’m not taking much of a risk in predicting that the calamity that will define this Bush presidency will not be the Iraq war. As with his father’s presidency, it will be the economy. Yes, the Iraq war will be factored into the equation that facilitated one of the worst recessions in modern times, but numerous other missteps will receive far more attention.

With the Savings and Loan scandal of the late 80’s as my point of comparison, I expect the magnitude of this recession to be much deeper and far more complex. Frankly, the fact that we survived events like the S & L scandal and the tech bubble have only contributed to the lackadaisical policies that have fostered an air of invincibility. This false confidence has resulted in a deadly conflation of economic poisons that will place a strain on our financial fortitude that hasn’t been witnessed since the Great Depression.

For months, the Bush administration has sought to convince the American public that the economy is sound. Unfortunately, the hollowness of those assurances expands exponentially with each new report. Today’s news is awash with further warnings of economic uncertainty. The President’s remarks, in response to the growing storm clouds, simply highlight the mindset that has typified his inclination to ignore information that doesn’t comport with his rose colored rhetoric.

Unfortunately, I fear this president suffers the misconception that he can tackle this systemic economic malaise in the same manner he addressed the many miscalculations that have plagued the prosecution of the Iraq war. Sadly, brute force has little relevance when it comes to the economy. As with the troop surge, the attempts by the Federal Reserve to pump more money into the economy in order to prop up flailing financial institutions fails to address the dire dynamics that underly the debacle.

Let’s pause to review the observations of others.

From The Wall Street Journal:

It is a very logical progression. Peloton, Carlyle, Focus — hedge funds and other non-deposit-taking financial institutions (NDFIs) are now being hit by the credit crunch, which had so far been mainly confined to mortgage lenders and the banks.

The Federal Reserve has reacted. Its Term Securities Lending Facility aims to encourage investment banks and prime brokers to lend to NDFIs and so relieve those parts of the credit market it cannot reach with its rate cuts and loans to banks.

So far its liquidity injections have got no further than the banks. Now it hopes to reach higher. Unfortunately, it won’t work.

The Fed is like King Canute with a difference — it is trying to halt an ebbing tide rather than a rising one. Its liquidity injection seems huge at $200 billion (with perhaps more to follow), but it is still only equivalent to one-third of the expected losses in the NDFI sector.

Moreover, the Fed’s readiness to accept almost any asset at just below face value as collateral will prevent price discovery. That means the U.S. financial system will remain burdened with uncleansed balance sheets that penalize future lending and economic growth.

Creating a lot of liquidity does not resolve an issue of solvency, which is now the driver of credit contraction. All the Fed will achieve is a dollar that will be further debased and inflation that will be higher. It cannot stop the process of deleveraging and asset price decline.

The credit crisis is unfolding as we expected, but more slowly than anticipated, because of the actions taken by central banks (mainly the Fed) and the U.S. government to allay its effects. The wholesale socialization of credit has meant that government and central bank measures account for 70% of new credit since last summer.

But these policy measures will not prevent asset-price deflation or credit contraction, which are functions of risk appetite and general readiness to maintain current levels of gearing throughout the economy. The non-bank sector has the potential to inflict more damage on the system than banks, because it has a much smaller capital cushion for a much more volatile and risky balance sheet.

Credit contraction translates through the financial system into a reduction in available credit for the non-financial corporate sector, and thus into reduced investment and growth in the real economy. The size of that contraction can be estimated from the leverage ratios of the financial sector and their impact on real GDP growth.

We estimate that nonfinancial corporate debt ultimately will have to shrink by 11%-12%. This will generate a decline of five percentage points of real U.S. GDP growth and push the U.S. into recession. Europe’s real GDP growth will contract by two percentage points.

Essentially, the point being made by the author is that the Federal Reserve’s efforts to lower interest rates is inadequate to address the fundamental problem - the value of the assets that underly much of the existing debt is in a period of contraction…largely as a result of the collapsing housing industry.

As such, the ability of lenders to lend is limited. They lack the capital needed to make loans; let alone the capital required to support declining equity positions and the increasing default risks that are associated with these loans. Hence, the Fed’s efforts to infuse the economy with the capital needed to spur growth isn’t going to be sufficient. Even worse, should this contraction lead to lender insolvency, the likelihood of the need for a huge government bail out advances. If this happens, I believe it will be far larger than the one witnessed during the S & L scandal.

From The New York Times:

The Fed’s economic power rests on the fact that it’s the only institution with the right to add to the “monetary base”: pieces of green paper bearing portraits of dead presidents, plus deposits that private banks hold at the Fed and can convert into green paper at will.

When the Fed is worried about the state of the economy, it basically responds by printing more of that green paper, and using it to buy bonds from banks. The banks then use the green paper to make more loans, which causes businesses and households to spend more, and the economy expands.

This process can be almost magical in its effects: a committee in Washington gives some technical instructions to a trading desk in New York, and just like that, the economy creates millions of jobs.

But sometimes the magic doesn’t work. And this is one of those times.

Instead of following its usual practice of buying only safe U.S. government debt, the Fed announced this week that it would put $400 billion — almost half its available funds — into other stuff, including bonds backed by, yes, home mortgages. The hope is that this will stabilize markets and end the panic.

Officially, the Fed won’t be buying mortgage-backed securities outright: it’s only accepting them as collateral in return for loans. But it’s definitely taking on some mortgage risk. Is this, to some extent, a bailout for banks? Yes.

Still, that’s not what has me worried. I’m more concerned that despite the extraordinary scale of Mr. Bernanke’s action — to my knowledge, no advanced-country’s central bank has ever exposed itself to this much market risk — the Fed still won’t manage to get a grip on the economy. You see, $400 billion sounds like a lot, but it’s still small compared with the problem.

Krugman offers a look into the risks being taken by the Federal Reserve to avert the looming collapse of financial institutions. The fact that the government is taking unprecedented risk signals the seriousness of the situation. The fact that the government has committed half of its available funds to this risk intensive effort suggests that the ultimate solution will require the government to appropriate additional funds…hence the bailout begins. The price tag of the S & L scandal would likely pale in comparison.

The impact to the overall economy could be mind-boggling since it would be apt to affect consumer spending. Falling home values would strip millions of Americans of the bulk of their accumulated wealth which would no doubt restrict their ability and willingness to spend money. The direct correlation of this intertwined cause and effect spiral could have disastrous consequences.

We haven’t even factored in the disproportionate numbers of baby boomers moving towards retirement. A worst case scenario could place the financial stability of many of these individuals in jeopardy at a time when the safety net of Social Security is also approaching insolvency.

From CNBC:

The United States has entered a recession that could be “substantially more severe” than recent ones, former National Bureau of Economic Research President Martin Feldstein said Friday.

“The situation is very bad, the situation is getting worse, and the risks are that it could get very bad,” Feldstein said in a speech at the Futures Industry Association meeting in Boca Raton, Florida.

“There isn’t much traction in monetary policy these days, I’m afraid, because of a lack of liquidity in the credit markets,” he said.

The Fed’s new credit facility, announced on Tuesday, “can help in a rather small way … but the underlying risks will remain with the institutions that borrow from the Fed, and this does nothing to change their capital,” Feldstein noted.

I simply don’t see the mechanism by which this strained liquidity can be alleviated in the near term. Pumping more cash into the system could have short term benefits but the risk to the already tenuous value of the dollar would likely outweigh them. Relying upon the standard bearers…the consumer…to spend us out of this mess seems unlikely. Rarely have prior recessionary periods been accompanied by such significant declines in home values.

Were we to see the emergence of sustained inflation, the picture becomes even more disconcerting. Many of the measures designed to address the liquidity crunch have the potential to do just that. Toss in our trade imbalance, the amount of debt held by the Chinese, and an international shift away from the dollar as the preferred reserve currency and one begins to see the growing alignment of negatives.

The fact that the American image has been tarnished during the current administration makes it difficult to imagine the kind of international cooperation we might have otherwise received during such a slowdown. In fact, don’t be surprised if a number of nations stand idly by as the perceived bully endures its comeuppance.

Returning to the Bush legacy, I recall the deteriorating situation faced by his father prior to the 1992 election. When the senior Bush expressed his amazement with the scanning technology found in grocery stores, his appeal and his connection to the average American is thought to have suffered. When the Clinton campaign added, “It’s the economy, stupid”, the stain became permanent.

The fact that the current president expressed surprise when a member of the press mentioned the prospects of $4.00 per gallon gas seems eerily similar to the last days of his father’s presidency…and it may also assist in cementing the economy as his legacy’s leading albatross.

George W. Bush’s seeming shortage of empathy for the plight of the average American shone through in his mishandling of Katrina, his passage of tax cuts for the wealthiest, his inept energy policy, and his willingness to sink trillions of dollars into the execution of a virtual vendetta in Iraq. These events will forever be tethered to his tenure and his successors are apt to spend years trying to repair the damage done.

They say the writing of one’s legacy is rarely finished since the past undoubtedly shapes the future. In the case of George Bush, I suspect he’d be best to hope that his influence on the future be less indelible than his unabashed attempts to color the present.

Gertrude Stein stated that a “rose is a rose is a rose”. Ernest Hemmingway responded with “a rose is a rose is an onion”. In thinking of the Bush legacy, I’m inclined to argue that a silver spoon may beget rose colored rhetoric…but a silver spoon full of rose petals rarely helps us swallow the thorns. When the bow breaks, the Bush legacy will fall.

Cross-posted at Thought Theater

The House That Wouldn’t Bend Over

Friday, March 14th, 2008

You Go Democrats! For the next two weeks at least, America’s telecom executives will be just as accountable to the law as the other 300 million of us. What a concept! Why should a few VIPs have a law that specifically prevents them from ever being sued? I don’t know anybody who has that kind of permanent protective cocoon wrapped around them. Do you? We’re a nation of laws; well, for two more weeks anyway.

It didn’t exactly take an act of blind courage for Congress to stand up to a cerebrally-challenged alcoholic president with single-digit approval ratings. But still, with all the bending and gyrating this Congress has been doing, it’s a huge relief that, for one fleeting moment, they actually stood up and said “No!”

Savor the moment. There’s no doubt, our petulant child king will be bringing this subject back for another vote, and another vote, again and again and again until he gets his way. You can’t say “No” to a scion of the Bush Crime Family. It’s just not done.

I forget where I read this, but somebody was making an excellent point: there’s something huge going on behind the scenes that’s making these Conservatards keep pushing and pushing and pushing and grandstanding and pleading and shouting for retroactive telecom immunity. Our bribery system doesn’t usually work like this. Generally, a congressperson gets a bribe from a certain industry, and he/she is instructed to vote accordingly. And that’s all.

Getting bribed isn’t supposed to require months and months of pleading and threatening and foaming at the mouth every time a TV camera appears. WTF is going on here? Probably a lot more than we’ll ever know.

This other story is sort of along those same lines — government secrecy, things we’re not supposed to know, etc. The Pentagon has completed a study which shows there was no connection whatsoever between Saddam Hussein and al Qaeda. Uh, that was one of our main reasons for invading Iraq five years ago (along with those non-existent Weapons of Mass Destruction). For a full year before the invasion we heard nothing but “Saddam al Qaeda Hussein bin Laden 9/11 Iraq Saddam bin Laden Iraq al Qaeda…”

And now that there’s a Pentagon report showing that there was no connection between Saddam Hussein and the Reichstag Fire September 11th attacks, we the lowly peons — whose tax dollars paid for this invasion — are not entitled to know about it. The Pentagon has been instructed not to release this report, and the report is not available online.

Move along. Nothing to see here.

Stimulus Checks: Building A Bridge To Nowhere?

Monday, March 3rd, 2008

If you want to understand the degree to which politicians make shortsighted decisions intended to win favor with the voters at home, look no further than the passage of the $168 billion dollar economic stimulus package.

If you want to see how ill-advised such decisions may be, take a moment to look at a new report by Pew Research. The report grades each of the states on the management and maintenance of their infrastructure…and the results aren’t encouraging.

WASHINGTON (Reuters) - Almost half of the states in the United States are falling behind in their infrastructure maintenance and fiscal systems, according to a report released Monday by the Pew Center on the States and Governing Magazine.

The groups gave 23 states grades for infrastructure that were below the national average in their study called “Grading the States.” Using a scale similar to those found in U.S. schools, where an A is excellent and an F failure, they decided 23 states had grades below C+.

In the money category, which encompassed budget balancing, contracting, and other fiscal categories, 20 states received C+ and below, while 19 states garnered grades of B and above. The average among 50 states was B-.

It’s clear that our infrastructure has been in need of a capital infusion for a number of years. It’s also clear that our economy has been kept afloat by a housing bubble driven by artificially low interest rates rather than by sustainable economic growth that creates a stable increase in jobs and the kind of expansion that is cumulative in nature.

Politicians and voters have become accustomed to stop gap measures designed to dispel consumer doubt and forestall recessionary pressures. Unfortunately, while such measures may provide a temporary economic boost, they also promote a boom and bust mindset and the hills and valleys that accompany it.

In truth, it’s a form of bait and switch. Politicians choose to offer voters a few hundred dollars, and thus the ability to buy a new television set, rather than making the difficult decisions to enact measures that would provide long term stability. In our consumption is king construct, we’ve adopted the pathology that comes with the need for instant gratification.

The political calculations that flow from our short election cycles simply promote more of the same. We’re not only raiding the cookie jar; our elected officials are handing out cookies without considering the need to manage and maintain the bakery.

Prior to the millennium, numerous politicians mouthed the metaphor of building a bridge to the 21st century. As it turns out, we not only refuse to fund the bridges needed to take us there, we’ve taken a shine to building bridges to nowhere.

I struggle to find the silver lining in rolling out billions of dollars in refund checks while the wheels are falling off the wagon. Then again, perhaps our politicians want to be sure we can watch the news coverage of the next bridge collapse…on our shiny new high definition televisions.

Cross-posted at Thought Theater

Attending a Wingtard Convention: Inside the Belly of the Beast

Monday, March 3rd, 2008

You’ve gotta check out this article. It’s long, but it’s an excellent read: appalling, hilarious, infuriating, absurd…

The author, Leonard Pierce, infiltrated the annual meeting of the Conservative Political Action Committee (CPAC). He got in by posing as a lobbyist for the American Milk Solids Council. We know that two percent of America has gotten rich beyond belief in the past 7 years, and that 19% still think George W. Bush is doing a heckuva job.

Knowing those statistics is one thing, but just imagine being surrounded by thousands of these people. As Pierce describes it, “Here’s a description of Hell: a huge room full of all the people you hate most, and they’re all having a wonderful time.”

There’s a speech by Dick Cheney (of course). During his speech, the crowd starts cheering and yelling “Four More Years!” Cheney gives the usual soundbites about 9/11, telecom immunity and the wonders of torture. But the most telling thing about Cheney’s speech was the observation that: “His defense of torture gets a standing ovation, but his praising of our fighting men in uniform does not. It takes a man to fight, but it takes a train to waterboard.”

Next comes Mitt Romney’s famous speech where he says he entered the race because he loves his country and now he’s leaving (the race, not the country) for the same reason.

And there has to be a speech by Dumbya. Before Boozo the Clown even begins his speech, the crowd starts chanting “Four More Years!”

Bush’s speech itself had the predictable Bushisms: “Dick Cheney is the greatest vice president in the history of the United States.” The Bush Administration “didn’t seek the approval of editorialists…and we darned sure didn’t seek permission from groups like Code Pink and MoveOn before taking action.”

But check out Pierce’s description of Bush:

“In person, he looks a little haggard and tired: no legacy to speak of, no friends overseas (whither Pooty-Poot? a nation turns its starving eyes to you), and another boatload of corpses to go and frown at later today. He won’t last as long as his old man once he’s out of office: With no one to stand in the way of, with no one to infuriate, with no press hanging over his shoulder for him to mutter ‘fuck off’ at, he’ll wither away and disappear, just another burnout boomer with prostate cancer and no hobbies.”

The Price Of Economic Inequality?

Thursday, February 28th, 2008

A report on the rising number of incarcerated Americans provides a disturbing look at the unspoken impact of economic inequality and the high cost we pay for perpetuating it. At the same time, during each election cycle, politicians from both parties accuse each other of practicing suspect fiscal discipline.

For this discussion, I want to look at the costs of incarceration in relation to providing universal health care as well as the Bush tax cuts. Time and again, the GOP points out the exorbitant costs that might be associated with providing universal health care. From what I’ve read, the plans being pushed by Senators Clinton and Obama are reported to cost 10 to 15 billion dollars annually. That’s a big expense…but before one concludes we can’t afford it, one must consider the burgeoning costs of incarceration and the distribution and impact of the Bush tax cuts.

From The Seattle Post-Intelligencer:

NEW YORK — For the first time in U.S. history, more than one of every 100 adults is in jail or prison, according to a new report documenting America’s rank as the world’s No. 1 incarcerator. It urges states to curtail corrections spending by placing fewer low-risk offenders behind bars.

Using state-by-state data, the report says 2,319,258 Americans were in jail or prison at the start of 2008 - one out of every 99.1 adults. Whether per capita or in raw numbers, it’s more than any other nation.

The report, released Thursday by the Pew Center on the States, said the 50 states spent more than $49 billion on corrections last year, up from less than $11 billion 20 years earlier. The rate of increase for prison costs was six times greater than for higher education spending, the report said.

So in the course of 20 years, we have increased our annual corrections spending by a whopping $38 billion dollars. That is roughly three times the projected annual cost to provide universal health care…health care that would help elevate the very people who are disproportionately represented in the prison population. Factor in the following data on the Bush tax cuts and one will begin to see the larger picture.

From MSNBC.com:

WASHINGTON - Since 2001, President Bush’s tax cuts have shifted federal tax payments from the richest Americans to a wide swath of middle-class families, the Congressional Budget Office has found, a conclusion likely to roil the presidential election campaign.

The conclusions are stark. The effective federal tax rate of the top 1 percent of taxpayers has fallen from 33.4 percent to 26.7 percent, a 20 percent drop. In contrast, the middle 20 percent of taxpayers — whose incomes averaged $51,500 in 2001 — saw their tax rates drop 9.3 percent. The poorest taxpayers saw their taxes fall 16 percent.

Unfortunately, these percentages are deceptive. Let’s look at a practical explanation of what these tax cuts meant to the working poor.

From BusinessWeek.com:

Imagine you are a waitress, married, with two children and a family income of $26,000 per year. Should you be enthusiastic about the tax cuts proposed by President Bush? He certainly wants you to think so. He uses an example of a family like yours to illustrate the benefits of his plan for working Americans. He boasts that struggling low-income families will enjoy the largest percentage reduction in their taxes. The income taxes paid by a family like yours will fall by 100% or more in some cases. This is true–but highly misleading.

President Bush fails to mention that your family pays only about $20 a year in income taxes, so even a 100% reduction does not amount to much. Like three-quarters of working Americans, you pay much more in payroll taxes–about $3,000 a year–than in income taxes. Yet not a penny of the $1.6 trillion package of Bush tax cuts (in reality, closer to $2 trillion over 10 years) is used to reduce payroll taxes. Moreover, should your income from waitressing fall below $26,000 as the economy slows, your family could be among the 75% of families in the lowest 20% of the income distribution that stand to get absolutely zero from the Bush plan.

The President claims that the “typical American family of four” will be able to keep $1,600 more of their money each year under his plan. Since you won’t be getting anything like that, you might be tempted to conclude that your family must be an exception. Not really. The reality is that the President’s claim is disingenuous. Eighty-nine percent of all tax filers, including 95% of those in the bottom 80% of the income distribution, will receive far less than $1,600.

In other words, when a 100% tax cut is the equivalent of $20.00, a family of four might be able to translate that twenty dollars into a meal at McDonalds…one time in 365 days. On the other hand, if one is lucky enough to be in the top one percent (those with $915,000 in pretax income…and first class health care) of earners and receive a 20% tax reduction, I suspect the savings would buy more than one fast food dinner over the course of a year. The skewed advantages…and disadvantages…suddenly become obvious.

If that isn’t bad enough, let’s return to the costs of incarceration and look at future cost projections.

From The New York Times:

By 2011, the report said, states are on track to spend an additional $25 billion.

The cost of medical care is growing by 10 percent annually, the report said, and will accelerate as the prison population ages.

In less than four years, we will spend another $25 billion annually (more than enough to pay for universal health care) to incarcerate more and more Americans…the bulk of which come from the economically underprivileged.

More From The New York Times:

Incarceration rates are even higher for some groups. One in 36 Hispanic adults is behind bars, based on Justice Department figures for 2006. One in 15 black adults is, too, as is one in nine black men between the ages of 20 and 34.

The report, from the Pew Center on the States, also found that only one in 355 white women between the ages of 35 and 39 are behind bars but that one in 100 black women are.

Let me be clear…crime is wrong…and it should be punished. However, we cannot ignore the factors that facilitate crime. Failing to provide opportunities to those most lacking in resources is also wrong…and it often leads to a lack of education and therefore a susceptibility to participating in crimes that are driven by poverty.

We have likely exceeded the point at which it will cost us more to punish and incarcerate those who commit these crimes of poverty than it would have cost us to insure their education, to raise the minimum wage above the poverty level, and to grant them the dignity and peace of mind that comes with knowing one’s family members can receive health care when it is warranted; not just when it is necessary to prevent death.

Instead, under the guidance of the GOP, we have elected to ignore the fact that 47 million Americans lack health care and to focus upon further enriching the wealthiest…all the while being forced to endure asinine arguments that doing so will create jobs and thus facilitate a rising tide to float the boats of all Americans. It simply isn’t true.

At a savings of $20 a year, millions of Americans can’t even buy a seat in the boat…let alone stay afloat by treading water in the midst of the steady deluge of ever more ominous waves. If the number and availability of life preservers continues to dwindle, we are fast approaching the point at which our society will collapse under the weight of the inequity we chose to ignore.

If that happens, it will be as my grandfather argued many years ago, “They can eat you, but they can’t shit you”. The cannibalism has begun. What follows will not be pleasant.

Cross-posted at Thought Theater

When Sleazy Companies Shortchange Their Workers, It Can Get Expen$ive

Thursday, February 21st, 2008

Three cheers for the IRS! As hated as they are, sometimes they end up doing the jobs of our government “regulators,” using the term loosely.

The IRS has ruled that FedEx is no longer entitled to receive hundreds of millions of dollars worth of welfare payments. These handouts were being given by FedEx workers to their bosses.

Here’s how the scam worked: 13,000 FedEx employees were reclassified as “independent contractors.” The IRS ruled that this classification was incorrect, and that FedEx illegally “saved” $319 million in taxes in 2002. The IRS is still auditing FedEx for 2004 through 2006.

The Teamsters Union — who’s been pushing this case — thinks FedEx could ultimately owe the IRS a billion dollars.

Companies save a fortune when they redefine their employees as “independent contractors.” A company doesn’t have to pay workers’ compensation, unemployment or disability taxes, Social Security or Medicare taxes to an independent contractor. Independent contractors also aren’t subject to minimum wage laws and they have no government guarantee of a safe work environment.

It must have seemed like the best of both worlds for FedEx bosses: they could keep their workers straitjacketed with a million company regulations, and then wiggle out of paying their fair share of taxes by calling them “independent contractors.” Fun’s over, Assholes.

If you want to decide whether these FedEx workers are employees or independent contractors, take the “DUUHH” test: they use FedEx equipment, they wear FedEx uniforms and they work under strict FedEx rules. Independent contractors???

How Many Revised Economic Forecasts Before The Fed Says The “R” Word?

Wednesday, February 20th, 2008

stimuluspackage.jpg

Just how many revised economic forecasts does it take to finally conclude that the U.S. is in a recession? Former Fed Chairman Alan Greenspan likes to up his odds we’re heading into a recession by approximately 20 percentage points every quarter. Current Fed Chairman Ben Bernanke seems to prefer a different approach. His modus operandi is to lower GDP a few tenths of a percent with each revised outlook.

As an outside observer, this measured slide towards using the “R” word feels like being in my car at a red stoplight with my favorite backseat driver seated beside me. As we wait for the lights to change (because we know they will), my trusted traffic manager sits there predicting the seconds until the opposing green light will turn yellow…never getting it quite right…but jubilant each time he announces…after the fact…that “The light just turned yellow”. This process continues until our red light turns green and we can proceed to the next intersection…to start all over again.

While I realize my analogy isn’t an actual equivalent, the frustrations are much the same. Yes, predicting the twists and turns of the economy isn’t an exact science…but I do find our willingness to grant these prognosticators a free pass each time they err to be a rather absurd practice. The fact that the nation holds its breath each time a new report is scheduled for release merely supports my contention.

WASHINGTON (AP) — The Federal Reserve on Wednesday lowered its projection for economic growth this year, citing damage from the double blows of a housing slump and credit crunch. It said it also expects higher unemployment and inflation.

Under its new economic forecast, the Fed said that it now believes the gross domestic product will grow between 1.3 percent and 2 percent this year. That’s lower than a previous Fed forecast for growth, which at that time was estimated to be between 1.8 percent and 2.5 percent.

With economic growth slowing, the Fed projected that the national jobless rate will rise to between 5.2 percent to 5.3 percent this year. That is higher than the central bank’s old forecast for the rate to climb to as high as 4.9 percent. Last year, the unemployment rate averaged 4.6 percent.

And, with energy prices marching upward, the Fed also raised its projection for inflation. The Fed now expects inflation to be between 2.1 percent and 2.4 percent this year. That’s higher than its old forecast for inflation, which was estimated to come in at around 1.8 percent to 2.1 percent.

The Fed said its revised forecasts reflected a number of factors including “a further intensification of the housing market correction, tighter credit conditions …. ongoing turmoil in financial markets and higher oil prices.”

In truth, I suspect that the average American has just as good a sense of where the economy is headed as those who get paid to inform us. If the last number in our checkbook is negative, we conclude we have a problem. Why wouldn’t the same math hold true for our national economy?

No, we allow our political leaders to sell us on the notion that a tax rebate of $300.00 to $1,200.00 is all that matters and all that is needed to jump start the economy…even as they continue to predict further economic contraction. Excuse me, but isn’t that on par with each of us taking a cash advance on an already debt heavy credit card and thinking we’re suddenly in the black?

Look, I understand the notion of spending an economy out of a downturn. However, the rest of that equation posits that the increased spending will result in new jobs, greater investment and productivity, and increasing revenues for the individual, the corporation, and the government.

Unfortunately, this equation may no longer be valid…especially since the jobs are often created in other nations, the investments are frequently targeted for countries with cheap labor such that productivity is less relevant, and the only increased revenues find their way into the pockets of formerly impoverished third world individuals and the corporations and their CEO’s that benefit from the enhanced bottom line that ensues.

So what does the average American get? A stimulus package that provides a single check that won’t overcome the unfavorable wage-inflation ratios, the higher costs of fuel, the expanding credit card debt, the skyrocketing health care costs, and the ever shrinking job opportunities.

At the same time, some of our political leaders clamor for making the tax cuts for the wealthiest Americans permanent and lowering the corporate tax rate from 35 to 25 percent. I don’t know about anyone else, but these refund checks remind me of the dynamics underlying “the world’s oldest profession”…the one where one party gets poked for a few bucks by the fat cat who realizes that money can buy him anything he wants.

In the end, getting the powers that be to speak the “R” word is an exercise in relabeling. After all, once the deed has been done and the hush money has been paid, does it really matter what we call an old fashioned screwing? I think not.

Cross-posted at Thought Theater

Hey GOPers- If A Democrat President Raises Your Taxes, You Only Have Bush To Blame

Thursday, January 31st, 2008

If I have to listen to another Republican complain about how a new Democratic president is just going to raise their taxes and increase the size of government I might just put my foot right up their ass. After all, it’s precisely because of the Republican party, the Republican Congress, and an asshat of a Republican president that our next national leader may indeed have to raise taxes. Somebody has to clean up the country after it’s been crapped on for 8 years.

Consider that when Bush took office the federal government had a budget surplus, and despite way too many pork barrel projects, earmarks were much lower than they are now. But then came a series of tax cuts, an increase in federally mandated spending programs, an unnecessary war, a couple of tax rebate give-aways, and unprecedented borrowing to finance the largest expansion in the federal government in over 50 years. The surplus disappeared. The spending didn’t.

Republicans like to pretend that the only thing Democrats care about is “Big Brother” government. Hah! Bush has presided over the biggest “Big Brother” expansion ever. Republicans think that only Democrats expand the size of government. Hah! Bush has added more government jobs to the federal payroll than probably any other president since FDR. Republicans like to pretend the Democrats will take all your tax dollars and waste them on untested and ineffective social programs that ultimately hurt people more than they help them. Can anyone say No Child Left Behind???

The fact is that Republicans aren’t alone in disliking taxes. Democrats don’t much like them either. But where Democrats can accept the fact that it takes taxes to run government, Republicans only seem to think that taxes are evil.

Here it is kids…no matter who takes over as next president, we are going to have to see a serious reversal in domestic funding policy. That likely means higher taxes and lower spending. Hopefully the next president will get us out of Iraq which would save a serious amount of change. but it won’t be enough, especially in the short term. Especially when our government (both Dems & Reps) think it is wiser to borrow another $150 billion they don’t have to hand out to citizens so they will rush out and spend it. This is an economic stimulus plan? For what? A month? Gee Mr. President (and all the rest of you in Congress), what kind of stimulus plan will we get when that $600 bucks is all gone? Do they really think that peopl e are going to have extra money all the time now that the government sent them a check for a few hundred bucks? The only thing this plan stimulates is the Chinese manufacturing industry and the banks- for about a month.

Of course, in our brave new world, most people don’t give two seconds thought to government finances, just so long as their special interests are being funded.

Fiscal prudence means that not everyone gets everything all of the time. Fiscal malfeasance means that some people get everything they want, most get a bone thrown to them, and behind the scenes the red tape is stacked higher than the Sears Tower.

Well boys and girls, federal spending affects us all, and when you turn over the federal purse to a bunch of failed businessmen and drunken sailors, somebody eventually has to pay. That somebody will be all of us when the next administration gets to town.

So for all of you whining GOPers who are so upset that a Democrat in the White House will raise your taxes, shut up already. YOUR guy put us all in this situation to begin with. Just because he’ll be out of office when the bills come due doesn’t make it any less his fault. If you want to complain, send a letter to Bush. But quit whining to me about it.

(cross psoted at Common Sense)

When Greed Isn’t Good

Sunday, January 27th, 2008

I’m not sure whether to be worried or not, but I found myself agreeing with Mike Huckabee this week. For a man who thinks the planet was created last week, he’s remarkably astute about the stimulus package both parties are currently flogging.

The Huckster hit the nail on the head when he said that we’ll go hat-in-hand to China and borrow the money to fund the tax rebates. The folks who qualify for the rebates will then spend it on something frivolous, like food or clothing. They’ll run down to the local Walmart and buy Chinese-made underwear or toxin-laced tomatoes.

Simply Stimulating
The plan has other “stimulating” facets too. While the bipartisan boneheads are throwing a sop to the lower income segment, they’re also making sure corporations get a big chunk of the pie. These would be the same corporations that loaned money to people using oxygen for collateral, or that have moved all their production to China, or both.

The mortgage meltdown was obvious to anyone who ever balanced a checkbook long before the astronomically paid investment bankers and their equally greased clientele woke up to it. Somehow they missed the Economics 101 lecture about the inadvisability of loaning money to people who can’t pay it back. And while the saga unfolded, the C-student from Yale stood by not only insisting that things were just fine, but refusing to regulate a market completely unwilling to regulate itself. At least Alan Greenspan, had the good manners to call the equally unregulated Clinton markets “irrationally exuberant”.

(more…)


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