Archive for category Stimulus

Look in the Mirror

Pork

This column will be published on the eve of the annual Update Banquet, a weekend of education and camaraderie.  A chance to reconnect with old and new friends and to discuss the issues that are near and dear to our hearts.  Once again family obligations keep me from coming to my second favorite city to join in the festivities.  But that doesn’t mean I can’t join in the conversation.

As many of you gather to discuss the big issues there is an ongoing debate within the Republican Party as to whether it is the party of business or the party of free enterprise.  To a Democrat they are the same thing.  To those who think at all about the issues they are very different. 

The debate today centers around the reauthorization of the Export Import Bank.  It has become a litmus test of whether you are for or against crony capitalism and now many members of congress (even some Democrats) are wrapping themselves in that vote to show how pure they are.  How they are for the little guy.  Well unless you work for Boeing it’s not that difficult to be against the Ex Im Bank.

But after taking that easy position the hard questions start.  It’s important to look in the mirror and ask if we really are the party of free enterprise or the party of big business.  It’s easy to be against the things that don’t effect you, but where do you stand when you or someone close to you gets a direct or indirect benefit from a government program.  And let’s be honest, with a government that spends and regulates as much as ours does we are all touched by it one way or another.  So are you willing to gore your own ox?  This is a list that I crafted in a few short minutes but with a little effort I could go much broader and deeper.  I will only comment on a few of the items.  We each need to be asking ourselves, what are we willing to give up?

Direct Spending

Education Funding – 12 % of all direct education spending is funneled through the Department of Education.  They don’t create the wealth, they just take if from us, take a cut and send it back and yet we feel good about this.

Farm Bill – The farm bill is $956 Billion over 10 years.   $756 Billion goes to food stamps, $90 Billion to Crop Insurance, $56 Billion to Conservation, $44 Billion to Commodity Programs (price supports) and $8 Billion to everything else.

College Aid and Loans

Green Energy Investments

Transportation Bill – It’s not that I am opposed to roads but does the money need to flow through Washington and back to the states.  Should someone in Arizona really have helped pay for the “Big Dig” here in Boston?

BRAND USA – $100 mm annual direct spending to support tourism in the United States.

Tax Deductions

Home Mortgage Interest – One of the most controversial items on this list.  We have all been brought up that owning a house is important to society and that home interest should be deductible.  How much of the real estate crash was because of this mindset.  Canada has an equal percentage of home ownership without the subsidy.

Charitable Contributions

Tax Free Muni Bonds

Special treatment of Carried Interest – When an investment firm (PE or Hedge typically) receives a payment of carried interest it is taxed at the lower capital gains rate.  This isn’t typical capital gains because there is no money at risk.  It is more of a bonus payment based on performance.

Special Treatment of Oil and Gas Depletion Allowance – Oil and Gas companies get to take a depletion allowance (think depreciation) based on how much oil or gas they initially believe is in the well.   Then can then continue to take this allowance well past 100% as more oil or gas is discovered in the well.

Regulations or Administrative Actions

Anti Online Casinos Legislation – Shelly Adelson, a big donor to Republican candidates and causes is also the biggest proponent of keeping online gambling illegal.  Not because he is against gambling but he doesn’t want competition for all of his casinos.

Ethanol Blending requirements

Zero Interest Rates from the Fed – The fed allowing banks and other financial services firms to borrow at close to zero interest rates is essentially providing a subsidy to them while discouraging saving in society.

Insurance Mandates – Insurance mandates provide demand for things like contraception, chiropractic and other services because someone else is paying for them.  If you lobby enough you can get on the list.

ObamaCare

Licensing Requirements – Licensing for hair stylists and taxi cabs and nail salons only limits competition and benefits the owners of the businesses.

USDA and FDA Regulations –

So have I pissed everyone at the banquet off a little or am I being burned in effigy?  If so, I have done my job. 

Many of these we could all agree on, but can we all agree that a simpler tax and regulatory environment is better for the country even if it means that our personal ox is gored?  What are you willing to give up?

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Farm Bill

http://www.washingtonpost.com/blogs/wonkblog/wp/2014/01/28/the-950-billion-farm-bill-in-one-chart/

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Obama’s Jobs Program

I keep thinking about Obama’s latest jobs program and it really makes me wonder if anyone in the White House knows anything about economics or creating jobs.

First a Recap of Obama’s Plan

Payroll Tax Cut – both the share paid for by the employee and the share paid for by the employer ($240 billion) – This is the biggest element but it is only temporary. So while it gets an additional $12.50 in someone’s paycheck it doesn’t have the desired effect (remember Bush’s $300 checks – people paid off bills). Milton Friedman proved that people make decisions based on permanent incentives not temporary ones. No one is going to hire people based on a small reduction in payroll taxes, it will just add to corporate profits and make the left go crazy.

Extension of Unemployment Benefits ($49 billion) – Although this smacks of compassion, it is exactly the opposite. In general the intensity of someones job search increases when unemployment benefits are about to run out. I actually had lunch with someone this week and that was what they were doing. Benefits were going to run out in December so they were in no hurry. So people purposely stay unemployed longer and the longer they are unemployed the less employable they become. Compassion indeed.
Subsidies for Construction and related projects (highways, airports, school renovation -infrastructure bank) ($90 billion) – didn’t our president say “There is no such thing as shovel ready”. These projects are guaranteed to be tied up in red tape so the spending will happen sometime in the future. There are also buy American provisions and other rules that can add up to 20% of the cost of a project so we won’t get as many of these “essential” projects done.
Aid to State and Local Governments ($35 billion) – we tried this with the last stimulus. It just pushed out the pain and keeps government spending on an unsustainable path. It does nothing to help the private sector which has to support the state and local governments.
Financial Assistance to Homeowners to Refinance their Mortgages ($15 billion) – This is a loser from the get go. Once again trying to bail out people who have made bad choices. Previous efforts have found that they default again within 6 months and in many cases there are legal restrictions on refinancing because they have bad credit.
Tax Credits for Employers who hire persons who have been unemployed for at least six months ($8 billion) – It’s obvious that no one in the White House has ever hired anyone in the private sector. If I have a job opening I interview candidates, find the best person and hire them. If it turns out that they are eligible for a tax credit great – free money – but that is not why I hired them.

The aim would be to spend most of the $450 billion between now and the end of 2012. The cost would be recouped by a combination of unspecified spending cuts and unspecified tax increases for upper-income taxpayers—but not immediately The Wimpy plan – “I’ll gladly pay you Tuesday for a Stimulus today”.

“OK Dave, it’s easy to trash someone’s plan but do you have anything better.”

The Blakelock Job’s Plan – Also known as get the hell out of the way.

Most of these can be done immediately with no cost and very little legislation. Which is why Barak would never do it.

Trade Bills – Immediately pass the three trade bills (Panama, Columbia and South Korea) that Obama has been holding on his desk. The International Trade Commission has estimated that these bills would create 250,000 jobs.

Keystone XL – Have the State Department approve Keystone XL – It has been estimated that this would create 118,000 jobs.

Energy Exploration – Immediately stop opposing Fracking, drilling off the east coast and in the gulf and exploration in Alaska. Not only would this have the benefit of creating jobs but it would also reduce the dollars that we would be sending oversees.

Bush Tax Cuts – Businesses are just waiting for the other shoe to drop. Very few are expanding because all they see on the horizon is bad news. Increased taxes that only appear to be going even higher. Make the Bush tax cuts permanent and that uncertainty will be eliminated. At the same time begin a process for redoing the tax code to make it simpler with lower overall rates.

Obama Care – Immediately repeal Obamacare and replace it with common sense reforms like medical malpractice reform, cross state line purchasing, no tax preference for premiums, reduction in mandates to allow for low cost catastrophic plans. This will remove another big unknown that is hanging over businesses head.

This is my start, it could all be done by November 1. After that I would move onto Sarbanes Oxley, Dodd-Frank and Entitlement Reform. The first 3 Obama could do right now. The other two he could do but would never do in a million years. If you want jobs it really isn’t that hard. The problem comes when the jobs take a back seat to your basic dogma that carbon based fuels and rich people are bad and need to be eliminated at every turn.

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