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September 30, 2008

Bailout Roundup III

A week ago on September 22, we started blogging about the current financial crisis involving Fannie Mae and Freddie Mac facing the country, and expected to be able to merely add additional links to references about another aspect of the crisis. However, there were just too many news articles. Then on September 25, we linked to two GAO reports that recommended streamlining oversight. Hopefully, a “round-up” approach will improve the tracking of the many items available to understand the causes and solutions for the crisis. Future posts in this series will use Roman numerals. (All dates are 2008 unless noted.)

  • Wall Street Journal, September 9, writes: “Taxpayers are now on the hook for as much as $200 billion to rescue Fannie Mae and Freddie Mac, and if you want to know why, look no further than the rapid response to this bailout from House baron (Rep.) Barney Frank (D-MA).”
  • Wall Street Journal, September 25. Contributor Andy Kessler, a former hedge fund manager, argues the “Paulson Plan” might “pull off the mother of all trades, which could net a trillion dollars . . . for the United States Treasury.”
  • Wall Street Journal, September 26. Arthur Levitt, former SEC chairman, writes “The only way we can bring sanity back to the credit and stock markets is by restoring public trust. And to do that, we must improve the quality, accuracy, and relevance of our financial reporting. This means resisting any calls to repeal the current mark-to-market standards.”
  • Forbes Magazine, July 28. Steve Forbes writes that the “rescue of Fannie Mae and Freddie Mac is only a stopgap. Unless fundamentally restructured, these two debt-bloated giants will sooner or later blow up.”
  • Thinking on the Margin, September 24. Summary of a letter “(a) group of prominent economists sent . . . to Congress expressing deep concern about Paulson's plan to deal with the financial crisis:”
We hope ACTA members find this new approach more useful.

September 29, 2008

One Thing To Consider When Voting

Just this past Friday, we growled that Arlington County ranked #33 out of 3,077 American counties “according to the median property taxes paid on homes.” Today, the Tax Prof, Paul L. Caron, associate dean of faculty and law professor at the University of Cincinnati, adds another level of information to the Tax Foundation’s analysis. Caron writes:

“Note that 26 of the 30 highest-tax states in the three categories are Blue States that voted for John Kerry in 2004, and that 24 of the 30 lowest-tax states in the three categories are Red States that voted for George Bush in 2004:”

Here’s the chart referenced in Caron’s blog:

Something to consider when voting on November 4 and in the future? 

September 28, 2008

Famous Last Words

Thanks to the Tax Foundation for linking to a C-SPAN video of a September 10, 2003 hearing of the U.S. House of Representatives' Committee on Financial Services “on an administration proposal to alter the regulation of (government-sponsored enterprises) like Fannie Mae and Freddie Mac.” In view of the current financial crisis, which may involve as much as a $700 billion bailout by American taxpayers, it’s especially interesting to listen to the opening remarks at the hearing of Rep. Barney Frank (D-Massachusetts). Below are the first three paragraphs from Rep. Frank’s remarks (emphases added):

“I want to begin by saying that I am glad to consider the legislation, but I do not think we are facing any kind of a crisis. That is, in my view, the two government sponsored enterprises we are talking about here, Fannie Mae and Freddie Mac, are not in a crisis. We have recently had an accounting problem with Freddie Mac that has led to people being dismissed, as appears to be appropriate. I do not think at this point there is a problem with a threat to the Treasury.

“I must say we have an interesting example of self-fulfilling prophecy. Some of the critics of Fannie Mae and Freddie Mac say that the problem is that the Federal Government is obligated to bail out people who might lose money in connection with them. I do not believe that we have any such obligation. And as I said, it is a self-fulfilling prophecy by some people.

“So let me make it clear, I am a strong supporter of the role that Fannie Mae and Freddie Mac play in housing, but nobody who invests in them should come looking to me for a nickel--nor anybody else in the Federal Government. And if investors take some comfort and want to lend them a little money and less interest rates, because they like this set of affiliations, good, because housing will benefit. But there is no guarantee, there is no explicit guarantee, there is no implicit guarantee, there is no wink-and-nod guarantee. Invest, and you are on your own.”

Famous last words. indeed! The cost of those words? Perhaps as much as $1 trillion.

Note: here is the link to the transcript of the hearing before the House of Representatives’ committee on financial services.

September 27, 2008

Government Grows and Grows and . . .

With the President and Congress "near" on a taxpayers bailout of "the $700 billion Wall Streat rescue plan," according to today's Washington Times, it's worth contemplating past episodes of increases in the size of Leviathan. The following two paragraph are taken from the Independent Institute's OnPower.org project:

"Government has continually grown in size and scope during this past century, but how and why has it done so? Is such growth inherent in the nature of government, because of some greater societal need, or are there other causes?

"In his book, Crisis and Leviathan: Critical Episodes in the Growth of American Government, Independent Institute Senior Fellow Robert Higgs shows that the main reason for such growth lies in government’s responses to national “crises” (real or imagined), including economic upheavals (e.g., the Great Depression) and especially wars (e.g., Civil War, Spanish-American War, World Wars I and II, Cold War, etc.). The result is ever increasing state power, which endures long after each crisis has passed--fostering extensive corporate welfare and pork, raising taxes, and undermining civil and economic liberties and economic growth. Moreover, crises are usually the creation of earlier government interventions and the flouting of constitutional law. Thus, government action begets further government action in an endless 'death spiral.'"

September 26, 2008

Hey Taxpayers, Arlington County Is #33

According to Wikipedia, “The word county is used in 48 of the 50 states, while Louisiana uses the term parish and Alaska uses borough, Including those, there are 3,077 counties in the US.” The Wikipedia entry goes on, “The U.S. Census Bureau lists 3,141 counties or county-equivalent administrative units total.”

The Tax Foundation has just released their Fiscal Fact No. 147 (tax data here), which provides “new census data on property taxes on homeowners.” They write:

“The Census Bureau has released new housing numbers courtesy of the 2007 American Community Survey (ACS), which includes real estate taxes paid on owner-occupied housing units . . . (but) (w)hen people want to know where property taxes are the highest, though, they typically wonder about property taxes levied specifically on homeowners. This is where the ACS data is useful.”

In their conclusion, the Tax Foundation writes:

“The Northeast, mainly New Jersey and New York, remains the area with the highest property taxes on homeowners. These states also have high per capita income, and the highest property tax bills, in terms of dollar amounts, are usually found in the areas with the highest incomes. As for the percentage-of-home-value measure, counties in New Jersey and New York still dominate as they tend to impose the highest property tax rates on homeowners as well.”

Unfortunately, Northern Virginia has three of the top 34 counties in the entire country when ranked according to the median property taxes paid on homes -- Loudoun (#30), Arlington (#33), and Fairfax (#34). (emphasis added)

The Grand Poohbahs at the Courthouse would have to agree, however, but they would argue that two other measures are more representative -- either taxes as a percentage of median home value or taxes as a percentage of income. According to these two measures, Arlington is either #475 (0.8%) when ranked according to taxes as a percentage of median home value or #203 (3.6%) according to taxes as a percentage of median income for homeowners. By comparison, Loudoun County ranks #404 and #146  and Fairfax #441 and #178 on those measures.

At a median property taxes paid on homes of $4,636, Arlington is is in some pretty exotic company. Never the less, residents of New York and New Jersey -- where residents of  the top 13 counties pay median property taxes between $8.422 and $6,494 -- moving to Northern Virginia must think they’ve entered nirvana.

September 25, 2008

Just Who Does Congress Listen To?

A search of the U.S. General Accountability Office’s ‘reports and testimonies’ database for “Fannie Mae” found 36 publications. The two most recent ones dealing with Fannie Mae were:

  • Housing Government-Sponsored Enterprises: A Single Regulator Will Better Ensure Safety and Soundness and Mission Achievement (GAO-08-563T, March 6, 2008)
  • Housing Government-Sponsored Enterprises: A New Oversight Structure Is Needed (GAO-05-576T, April 21, 2005)

GAO, the so-called auditing arm of the U.S. Congress, performed the 2008 study because “concerns exist that the fragmented oversight structure for the (government-sponsored enterprises) is not well-positioned to help ensure that they operate in a safe and sound manner and fulfill their housing missions.”

GAO testified to the U.S. Senate’s Committee on Banking, Housing and Urban Affairs in 2008 that “housing GSE activities involve significant risks,” saying specifically:

“While the housing GSEs have generated public benefits, their large size and activities pose potentially significant risks to taxpayers. As a result of their activities, the GSEs’ outstanding debt and off-balance sheet financial obligations total more than $6 trillion. The GSEs face the risk of losses primarily from credit risk, interest rate risk, and operational risks. Although the federal government explicitly does not guarantee the obligations of GSEs, it is generally assumed on Wall Street that assistance would be provided in a financial emergency. In fact, during the 1980s, the federal government provided financial assistance to both Fannie Mae and the Farm Credit System (another GSE) when they experienced difficulties due to sharply rising interest rates and declining agricultural land values, respectively.”

GAO also testified that recently “the housing GSEs have experienced a variety of operational and financial challenges, including:

“Starting in 2003, first Freddie Mac and then Fannie Mae were found to have engaged in misapplication of relevant accounting standards and earnings manipulation. The GSEs also misstated their incomes by billions of dollars. Consequently, OFHEO required Fannie Mae and Freddie Mac to develop capital restoration plans and both GSEs are still operating under regulatory agreements, which require improvements in their operations.

“Fannie Mae reported that rising mortgage defaults and falling home prices contributed to a $3.6 billion loss for the company in the last quarter of 2007. The GSE predicted that housing prices will continue to fall and that its financial performance will deteriorate further. Similarly, Freddie Mac reported a loss of about $2.5 billion for the same period, of which approximately $2.3 billion is attributed to losses on derivative trades.”

Unfortunately, there is no evidence that either report was acted upon. Taxpayers may want to read both of the above reports before calling their Congressional representatives. By the way, the chairman of the U.S. Senate’s Committee on Banking, Housing and Urban Affairs is Christopher Dodd (D-CT) and the senior Republican is Richard Shelby (AL). The committee’s webpage contains such useful information as statements on various legislation.

September 24, 2008

When Bad News Can Be Good News

Today’s Richmond Times-Dispatch reports on a “confidential 64-page” report to Virginia Gov. Kaine (D) from his “economic advisers” who “counsel him on revenue trends.” The newspaper writes:

“The declining economy could force additional Virginia spending cuts of nearly $3 billion, raising the specter of deeper reductions in public services and broader layoffs.”

“The worst-case scenario . . . made public yesterday afternoon, would come atop $2 billion in reductions already enacted by Kaine and legislators.”

Norm Leahy, blogging at Tertium Quids, sees some good in the bad budget news, noties:

“One genuine positive from all this? It makes the money-saving option of school choice even more attractive. Adam Schaeffer discussed that option with me yesterday on TQ radio “

Take a few minutes to listen, and then listen to Norm's other interviews. 

September 23, 2008

Audit Finds “Few Results”

Yesterday’s Washington Post featured a story talking about the agency failings at Metro that were found by an audit by Metro’s inspector general. The newspaper reported:

“Metro is overhauling the office in charge of the popular SmarTrip electronic fare cards after internal audits found that failures by the main contractor and agency managers have added at least $2 million in costs and three years in delays for long-awaited, customer-friendly features.”

“Continuing software issues and the office shakeup have slowed the project even more. As a result, features to make the plastic card more convenient and versatile, which were supposed to be ready next month, will not be working until 2010, officials said.”

The newspaper goes on to write:

“Riders have been repeatedly promised these features by officials from Metro and Cubic Transportations Systems, which has been paid almost $15 million to upgrade SmarTrip hardware and software and fare collection equipment, with few results.”

Especially troubling, however, was this response by Arlington County Board member Chris Zimmerman, who currently serves as chairman of the Metro board. According to the Washington Post:

“Metro Board Chairman Chris Zimmerman acknowledged that delays have resulted in frustrations "in getting the improvement that everyone wants." At the same time, he said, Metro has been at a disadvantage in dealing with Cubic because of its dominance in the market.

"They are a difficult party to deal with, and we don't have much leverage," Zimmerman said. "We're at the mercy of folks whose business it is to get money out of government."

That’s an amazing statement for someone whose job is to get money out of taxpayers. While that may be cynical, if the contracting staff of a government agency is competent, they should never be at a disadvantage to a business they’ve contracted with. Isn’t that why written contracts have built-in safeguards?

September 22, 2008

Fannie, Freddie, And Their Enablers

Where do you begin to grasp the enormity of the financial turmoil that is threatening to submerge not only Wall Street, but Main Street as well? For the next week or so, I will use this post to log links to various sources taxpayers can use to begin to better understand the mess we’re in. Entries will be much, much briefer than most of my posts -- essentially the source and not more than two or three explanatory sentences.

  • Cafe Hayek -- George Mason University economics professor Russ Roberts set-up the category “government intervention in housing.” to log his posts. Very good background information.
  • Village Voice -- says “(t)here are as many starting points for the mortgage meltdown as there are fears about how far it has yet to go . . . .” Explains “(h)ow the youngest Housing and Urban Development secretary in history gave birth to the mortgage crisis.”
  • Rush Limbaugh Show -- several useful background pieces in addition to Mr. Snerdley’s great question, "After listening to your brilliant explanation of this in the first hour, why should I even bother paying off my mortgage?  I mean, I could just not pay it, I go into default and the government's going to let me keep the house.”
  • Investor’s Business Daily Editorials -- this editorial asks, “Can Congress just walk away from a problem it helped create?” IBD has published a number of editorials dealing with various aspects of the financial fiasco. Use their “Past 90 Days” feature or search their archives.
  • Bloomberg News -- Kevin Hassett writes, “. . . the story is now clear. The economic history books will describe this episode in simple and understandable terms: Fannie Mae and Freddie Mac exploded, and many bystanders were injured, some fatally.”
  • Heritage Foundation -- several posts on one of the blogs, The Foundry, providing additional perspective and resources (here, here, and here).

UPDATE (9/24/08) 

Wall Street Journal (opinion/editorial pages, which are free)

Those are just the more significant pieces. Searching for "Fannie Mae" at the Wall Street Journal's opinion pages had 1,000 'hits.'

Check back for updates with additional, useful resources.

September 21, 2008

Another Month, Another ‘Porker of the Month

According to Citizens Against Government Waste (CAGW), the “Porker of the Month is a dubious honor given to lawmakers, government officials, and political candidates who have shown a blatant disregard for the interests of taxpayers.”

And now they’ve named Senator Carl Levin (D-Michigan) as the September 2008 Porker of the Month (here, but here for the entire Hall of Shame):

“for attempting to give earmarks contained in committee reports the force of law.  The provision is included in S. 3001, the National Defense Authorization Act for Fiscal Year 2009.”

CAGW explains:

“Currently, earmarks listed in committee reports do not have the force of law; only those included in the statutory language have that status.  Traditionally, members of Congress have included earmarks in committee reports knowing they are not the law, but have expected federal agencies to treat those spending items as if they had the force of law.  President Bush issued an Executive Order on January 29, 2008 instructing government agencies not to fund any earmarks contained in report language, or based on any non-statutory source, such as phone calls from members of Congress.

“This means that beginning with this fiscal year’s authorization and appropriation bills, agencies would be under no obligation to fund earmarks contained in committee or conference reports.  In a brazen attempt to gut the executive order, Sen. Levin inserted a provision (Section 1002) into the defense reauthorization bill that would incorporate the earmarks listed in the committee report into the statute itself, making the earmarks “a requirement in law.”  The earmarks would be “binding on agency heads in the same manner and to the same extent” as if they were written into the bill.

“This provision continues a practice of using committee reports to hide earmarks and make them difficult to eliminate by offering amendments to authorization and appropriations bills.  It certainly does not qualify as “reform” of the earmarking process.  It would prevent open debate and votes on earmarks and reduce transparency and accountability.  The “incorporation” language sets a precedent for other fiscal year 2009 legislation.  If it is not removed from the bill, it would demonstrate that the Democratic leadership of Congress has no intent of ever getting earmarks under control.”

Sen. Carl Levin -- just another irresponsible Congressional Porker! As CAGW concludes:

“For attempting to circumvent the January 29 Executive Order and make it easier to earmark the taxpayers' money, CAGW names Senator Carl Levin (D-Mich.) its September 2008 Porker of the Month.”

September 20, 2008

Taxpayers and Taxtakers

That’s certainly one way of looking at the competing tax plans of the two major-party candidates, Senator John McCain (R) and Senator Barack Obama (D). In fact, a new analysis from the Tax Foundation, released on Friday, reports that “both candidates tax plans will reduce millions of taxpayers’ liability to zero (or less).” Specifically, the Tax Foundations writes:

“According to the most recent IRS statistics for 2006, some 45.6 million tax filers—one-third of all filers—have no tax liability after taking their credits and deductions. For good or ill, this is a dramatic 57 percent increase since 2000 in the number of Americans who pay no personal income taxes.

“Tax Foundation estimates show that if all of the Obama tax provisions were enacted in 2009, the number of these "nonpayers" would rise by about 16 million, to 63 million overall. If all of the McCain tax proposals were enacted in 2009, the number of nonpayers would rise by about 15 million, to a total of 62 million overall.”

The Tax Foundation points out that “major structural tax changes enacted during the 1980s contributed greatly to the doubling of nonpayers. Perhaps the most significant was indexing the tax brackets in 1985 to prevent inflation from pushing people into higher tax brackets. Also, the Tax Reform Act of 1986 nearly doubled the personal exemption and replaced the zero-bracket with the basic standard deduction for nonitemizers.” To see just how many tax filers now owe zero income tax, consider the following chart from the study:


The Tax Foundation concludes their analysis with some very thought-provoking comments: 

“Over the past two decades, lawmakers have increasingly turned to the tax system rather than direct spending programs to funnel money to targeted groups of Americans, furthering some social or political goal. As a result, millions of Americans have been effectively removed from the income tax payment system while the tax code has been made more complicated to comply with and more difficult to administer. The tax plans of both the presidential candidates would exacerbate this situation greatly.

“It is time for a serious public discussion of whether it is desirable to have so many Americans disconnected from the cost of government and what the consequences are of using the tax system as a vehicle for social policy.” (emphasis added)

The entire analysis is worth reading because it deals with issues other than "zero liability" tax filers, e.g., the undersireable effects of the credits Congress increasingly uses :instead of government spending programs to funnel money to groups of people them want to reward."

Oh, one more thing. About that "dramatic 57 percent increase since 2000 in the number of Americans who pay no personal income taxes." Can some liberal or progressive explain why President Bush isn't given far more credit for helping the poor? Compare, for example, that 57% change versus the change from 1992 to 2000.

September 19, 2008

Paying Taxes And Patriotism

And one may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one’s taxes. (emphasis added)

    -- Learned Hand

Over and over again courts have said that there is nothing sinister in so arranging one’s affairs as to keep taxes as low as possible. Everybody does so, rich or poor; and all do right, for nobody owes any public duty to pay more than the law demands; taxes are enforced extractions, not voluntary contributions. To demand more in  the name of morals is mere cant. (emhasis added)

    -- Learned Hand

Who is Learned Hand? Here is the first paragraph from his Wikipedia entry:

“Billings Learned Hand (January 27, 1872 – August 18, 1961) was an influential United States judge and judicial philosopher. He served on the Southern District Court of New York and the United States Court of Appeals for the Second Circuit. Hand has reportedly been quoted more often than any other lower-court judge by legal scholars and by the Supreme Court of the United States.”

Fast forward to September 19, 2008. CNSNews.com reported (or Yahoo/AP or Free-Market News Network): “Wealthy people who will pay higher income taxes under an Obama-Biden administration should consider it their patriotic duty, Sen. Joe Biden (D-DE) said on Thursday.” The online news organization goes on to quote the Democratic Vice-Presidential candidate telling ABC’s “Good Morning America” he and his Presidential running mate, Sen. Barack Obama, want to:

“take money and put it back in the pocket of middle-class people . . .  It’s time to be patriotic . . . Time to jump in, time to be part of the deal, time to help get America out of the rut. And the way to do that is -- they’re still going to pay less taxes than they paid under Reagan.”

Consider also the opinion of Kristina Rasmussen of the National Taxpayers Union who writes at Government Bytes:

“If your patriotism is measured by how much you pay, I would argue that the wealthy are pretty gosh darn patriotic."

If you don’t believe that, take a look at the chart Ms. Rasmussen points readers to. It’s rather difficult to believe that Sen. Biden is an attorney and adjunct professor who teaches a constitutional law seminar. The senator might want to read some tax law.

September 18, 2008

“Ignorant, Stupid, or Deceptive”

In his Townhall.com column this week, George Mason University economics professor Walter Williams asks:

“are politicians, pundits and media people -- who persist in talking about a president cutting or raising taxes, or creating a budget deficit -- ignorant, stupid or deceptive?”

The question is well-worth pondering because, as Dr. Williams begins his essay:

“Here's what the U.S. Constitution says: "All bills for raising Revenue shall originate in the House of Representatives; but the Senate may propose or concur with Amendments as on other Bills." How many times have we heard politicians, pundits and guardians of our news media say that President Bush cut taxes, or Obama is going to raise taxes? The fact of the matter is that presidents have no power to raise or lower taxes. They can propose tax measures or veto them but it is Congress that has the ultimate power to raise or lower taxes since they can, with a two-thirds vote, override a presidential veto. The same principle applies to spending. Presidents cannot be held responsible for budget deficits or surpluses. A president cannot spend a dime that Congress does not first appropriate.”

And what about the credit crunch and high mortgage foreclosure rate? Dr. Williams concludes the essay by writing:

“The credit crunch and foreclosure problems are failures of government policy. In fact, what we see now is a market correction to foolhardy government policy. Congress' move to bailout lenders and borrowers who made poor decisions will simply create incentives for people to make unwise decisions in the future. English philosopher Herbert Spencer said, "The ultimate result of shielding men from the effects of folly is to fill the world with fools."”

Another of Dr. Williams’ column that is well-worth reading in its entirety. And, it should be required reading by every politician, pundit and media person.

September 17, 2008

Thanks Bob

Item 35 on the Arlington County Board’s so-called “consent agenda” for the September 13 + 16, 2008 meeting involved the Manager’s recommendation to the Board to reduce appropriations in the FY 2009 county budget by just over $1.2 million because of reductions in state funding.

According to the Manager’s report, “Arlington had two options for dealing with these reductions – cutting expenditures, or increasing another revenue source, such as real estate taxes.  A reduction in departmental expenditures is recommended.” One department slated for cuts was the Electoral Board where the Manager recommended cutting $4,530, and provided the following description:

“Cut supplies, and equipment used for temporary staff hired leading up to the November election.  If sufficient savings cannot be achieved through these means, may need to reduce number of Election Officials in the precincts on election day.”

But isn’t everyone predicting extremely large voter turnouts for the November 4, 2008 elections? Well, yes. In fact, according to this story posted at the online Arlington Sun-Gazette, “officials predicting a record turnout of more than 115,000 voters - up more than 20 percent from the last presidential election . . . .”

In steps Bob Atkins. He testified on item 35 at the Board’s September 16 recessed meeting. The Sun-Gazette reported:

“Give them back the money - don't ruin the election . . . ,” Atkins told board members.

“If such a cut had been proposed anywhere else in Virginia, “the Democratic Party would be in court, seeking an injunction [and claiming] vote suppression,” said Atkins, a Republican activist.”

Not to worry, though. The Sun-Gazette reports that County Manager Ron “Carlee said that the Electoral Board cuts, which total about $4,300, would be offset by the support provided by other county departments on Election Day. “All of the resources of the county are available to the registrar,” the county manager said. “We will make any adjustments we need.””

So there you are! The Electoral Board’s budget is cut from $921,863 to $917,33, or just over 0.49%, but it is being asked to do perhaps 20% more work. Now if only we can just get the rest of the county and the schools to do the same. Without Bob Atkins’s testimony yesterday, it’s likely the Board would have approved item 35 with the other “consent items” without the clarification and promise from the Manager."

September 16, 2008

Speaker's Comprehensive Energy Flim Flam

On August 1, 2008, we growled about the revolt on Capitol Hill by Republicans in the House of Representatives after the Speaker of the House Nancy Pelosi (D-Calif) “adjourned the House, turned off the lights and killed the microphones, but Republicans . . . still on the floor talking about gas prices.” Then on August 5, we growled again, citing a column by Larry Kudlow in which he noted, “There is a voter revolt going on, and it reminds me of the anti-tax rebellion that lifted Ronald Reagan into office twenty-eight years ago.”

House Speaker Pelosi held a press conference this afternoon, and according to the press release, said in part:

“We’re here today to talk about the good news that will happen on the floor later today. We will be passing a comprehensive energy bill that will honor our responsibility to make America energy independent . . . The choice on the floor today is the status quo, which is preferred by Big Oil, the Big Oil status quo, or the change for the future to take our country in a New Direction . . .“Republicans must set aside their drill-only mentality and embrace the provisions of this legislation, which is balanced, which is comprehensive, which respects the needs of the consumer. It is imperative that we are energy independent, so we can enhance the prospect for a great future of renewables and creating good paying jobs.

In a press release last week, the National Taxpayers Union (NTU) complemented the Democratic Leadership in the House, saying they “should be praised for paying heed to the basic position held by a substantial majority of Americans: that we should unlock our offshore areas to responsible development to help alleviate high prices over time,” but then goes on to point out:

“Preliminary details suggest that the House Democrats' proposal opens up all coastal states to drilling, but only beyond a restrictive 50-mile offshore buffer that would keep upwards of 90 percent of recoverable resources off-limits in some areas.

“Perhaps most important for exploration purposes, the proposal does not include any revenue sharing for states that choose to allow offshore development, Moylan noted. This would provide no major "opt-in" incentive for states, which are accustomed to onshore drilling and extraction agreements where revenue is split 50/50 with the federal government.”

An analysis by the Institute for Energy Research (HT to Mark Levin) notes, “To the casual observer, this certainly seems like a reasonable compromise.  Unfortunately, it’s not.  It’s a bait and switch.” (emphasis in the original) The ‘bottom line’ for the IER, however, is:

“It appears as though the new plan would take the America from banning access to 85 percent of the OCS acreage surrounding the lower 48 states to banning access to roughly 90 percent of its most-promising and easy-to-produce offshore energy reserves.  By opening only the farthest reaches of the OCS where no infrastructure exists, denying the states a share in the revenues, and locking up the reserves that are closest (and largest), this proposal ensures that (1) new production would be sparse, at best, and (2) new supplies would not come online for a long, long time.  Combine these facts with the plan’s new taxes and government handouts, and the American consumer gets little more than an expensive energy bridge to nowhere.” (Ehphasis in the original)

The legislation in question, HR 6899, passed the House of Representatives this evening. There were two votes (598 to recommit and 599 on passage). The vote to recommit failed with 191 ‘ayes’ (13 Democratic and 178 Republican) and 226 ‘noes’ (216 Democratic and 10 Republican) with 17 members not voting. The vote results for passage of the bill was essentially the opposite. There were 236 votes for passage (221 Democratic and 15 Republican), 189 votes against (13 Democratic and 176 Republican), and nine members not voting.

September 14, 2008

About the Growth of Government

Taxpayers on either side of the political aisle should be concerned about the growth of government since the size of government directly relates to the amount of taxes they pay. Few people are more qualified to write about the growth of government than Robert Higgs, author of Crisis and Leviathan: Critical Episodes in the Growth of American Government. He introduces this essay for the August 1990 issue of The Freeman by writing:

“Our nation was founded by men who believed in limited government, especially limited central government. They were not anarchists; nor did they espouse laissez faire. But they did believe that rulers ought to be restrained and accountable to the people they govern. If the founders could see what has happened to the relation between the citizens and the government in the United States during the past two centuries, they would be appalled.

“The size and scope of government are important for many reasons. By virtue of their taxing, spending, and regulating, governments affect the allocation of economic resources, the distribution of wealth, and the rate of economic growth. Governments determine the very nature of our political economy, the character of the social organization within which we may lawfully conduct our affairs and pursue our goals. The size and scope of government determine—they are, so to speak, the opposite side of—our freedoms.

“All but the few anarchists among us recognize that effective liberty requires some government, if only to define and protect rights to life and property. Beyond a point, however, bigger government begins to cut into our liberties; then the growth of government becomes synonymous with the sacrifice of liberty. In the United States, we entered this stage a long time ago.”

Higgs then writes about the several ways of measuring the growth of government as well as the result of increased regulation. He then notes that from the 1840’s to the 1890’s, “the United States approximated perhaps as closely as any large society ever did a condition we might call the minimal state.”  However, there has been a “revolution in ideology,” according to Higgs, who explains:

“somewhere along the line, the dominant ideology of the United States has undergone a complete revolution . . . How did so many activities once viewed as “not the proper business of government” come to be undertaken by governments and accepted as legitimate?

"I have no short, definitive answer. The process by which the dominant ideology of the American people changed over the past century is surely complex, and no one understands it fully. It is possible, however, to identify certain critical aspects of the process.”

The entire essay is well worth reading in order to understand why government has become leviathan. Without that understanding, achieving a significant reduction in our tax burden, not to mention a more limited government, will be possible.

September 13, 2008

Bearing The Burden of Corporate Taxes

According to this press release, dated August 26, 2008, from the Tax Foundation, there’s a growing consensus saying that “corporate taxes are most in need of reform. Specifically, they “released a revised summary showing that the US federal corporate income tax quietly taps family pocketbooks for nearly $370 billion per year in the form of higher prices, lower wages and poorer return on investment.” Scott Hodge, the Tax Foundation president said:

"Most people think corporate income taxes are paid by wealthy, anonymous companies . . . But as economists have been teaching for years, ultimately people bear the burden of corporate taxes, not companies. And in 2006 that burden averaged $3,190 per household. That's more than the average household spends on restaurant food, gasoline or home electricity in a year."

The previous week, “the Tax Foundation launched their CompeteUSA campaign with the goal to raise the public's awareness of the burden America's business taxes may place on workers through lower real wages and living standards than would have occurred otherwise.” The CompeteUSA page contains several helpful resources.

The Tax Foundation cites new research from the Congressional Budget Office, which shows that:

“in a global economy where capital is highly mobile but workers can’t easily move abroad -- a good description of today’s economy -- workers end up bearing the brunt of corporate taxes.”

For more on what corporate income taxes cost American families, read this edition of Tax Watch (requires Adobe). And here is a Tax Foundation chart that compares European and American tax rates.


Finally, how do the two major party presidential candidates economic tax policies compare? The only discussion of corporate taxes I could find at Senator Obama’s website is “a windfall profits tax on excessive oil company profits to give American families an immediate $1,000 emergency energy rebate to help families pay rising bills.” On the other hand, Senator McCain’s website says he would “cut the corporate tax rate from 35 to 25 percent” because “(a) lower corporate tax rate is essential to keeping good jobs in the United States.“

September 12, 2008

Hey Congress, Say No To “Stimulus 2”

On Tuesday, the National Taxpayers Union was one of more than 40 groups that warned Congress against a so-called “Stimulus 2” in this press release:

“As Congress scrambles to complete work on a number of issues during the final three weeks of the current session, an open letter from more than 40 citizen groups urged lawmakers "to reject a massive increase in government spending disingenuously disguised with a 'Stimulus 2' moniker." The joint statement was organized by the 362,000-member National Taxpayers Union (NTU).

"Congress should cut taxes and cut spending instead if it wants to stimulate the economy," the signatories noted. "Government doesn't create wealth; it either redistributes it or destroys it. Our members understand that shifting money from individuals to government programs (many with questionable performance records) will not 'stimulate' sustainable economic growth."

In their letter to members of Congress, the coalition, which includes ACTA, pointed out:

Government doesn't create wealth; it either redistributes it or destroys it. Our members understand that shifting money from individuals to government programs (many with questionable performance records) will not "stimulate" sustainable economic growth. (emphasis added)

“In early 2008, many of our organizations pointed out in an open letter that if "Congress seeks true stimulus that is economically sound, it ought to reduce tax rates ... ." That suggestion remains as true today as it did earlier this year. Low tax rates on hard work and investment will do much more over the short and long term to expand prosperity in America. Reject calls for higher federal spending.” (emphasis in the original)

For background information, see:

  • The Hill newspaper reports “Democrats intend to move a second stimulus package costing at least $50 billion this month and make its passage a priority, Rep. Rahm Emanuel (D-Ill.) said.“
  • Wall Street Journal’s economic blog writes: “ Former U.S. Treasury Secretary Lawrence Summers Tuesday said a second fiscal stimulus program is “the right response” to the current turmoil facing the U.S. economy but the plan shouldn’t raise projected deficits beyond a year or two.”
  • Forbes magazine reports: “Senate Appropriations Committee Chairman Robert Byrd is peddling a $24.1 billion stimulus bill that includes $10 billion for infrastructure and energy investments, like $100 million for Amtrak and $52 million in additional funding for the Federal Housing Administration. Democratic presidential nominee Barack Obama is pitching a $50 billion stimulus plan.”
  • Additional reporting in the Wall Street Journal, U.S. News & World Report, and Detroit Free Press.

Finally, have you signed up to receive your “I don’t vote for Tax Hikers” bumper sticker?

 

September 11, 2008

Never Forget September 11

Unfortunately, the memory of what happened on the morning of September 11, 2001 is seemingly fading for too many. The links below include a reminder that “the evil that men do lives after them;” Alan Jackson’s song asking us where were we on the morning of September 11, 2001; a set of Flickr photos of the attack on America; and a video memorial of September 11 “through fire and ambulance calls, the 911 calls of a trapped World Trade Center worker, and the lens of a local resident who saw an explosion while walking to work.”

Victor Camras reminds us at the Counterterrorism Blog that the evil men do endures:

“It has become customary for commentators on terrorism to mark the anniversary of Al Qaeda’s 9/11 attack against the United States as an occasion to review and assess the progress we have made in combating terrorism. Our government and other governments around the world have expended enormous efforts to isolate Al Qaeda’s senior leaders, reduce their appeal, and to better secure our safety. Much of our confidence has been restored as we go about our normal daily business; although we have had to acclimate ourselves to new restrictions, airport inspections, a diminution of our civil liberties, and a massive invasion of our privacy. But, the fact is that terrorism has not abated. And while Al Qaeda may well be on the run, terrorism has morphed from being an “Al Qaeda thing,” into a tactic of choice for a growing number of disaffected groups and insurgency movements around the world. Funding for terrorism, and the number of those recruited to carry out suicide bombings and other terrorist attacks, has increased.”

Alan Jackson asks us through song to remember where we were on the morning of September 11,2001 in this You Tube video. And Darryl Worley asking if we have forgotten September 11 in this You Tube video.

And a photo set at Flirkr taken by a photographer who saw the the jet slam into the South Tower of the World Trade Center.

Then, this 2006 video memorial by Evan Coyne Maloney from the lens of another New Yorker who was an eyewitness to what transpired on that fateful morning. (HT to Kathryn Jean Lopez at National Review Online’s ‘The Corner’ for the pointer to this video memorial)

Finally, Channel 9 live footage, posted at You Tube, of Pentagon eyewitnesses only minutes after flight 77 slammed into the Pentagon.

UPDATE (9/11/08): Today's Washington Post has a special project on the Pentagon Memorial. Michelle Malkin has a special feature in horor of the crew and passengers of United Airlines Flight 93, which crashed in Shanksville, Pennsylvania, and this video of the collapse of the World Trade Center's North Tower. Finally,  Arlington County's Central Library has this resource page on September 11, including links to a special collection of the Library of Congress and the Arlington County Fire Department Historical Society.

September 10, 2008

Some Context On The Federal Budget Deficit

Arlington County taxpayers repeatedly hear the County Board tell us how happy we should be because "Arlington County has the lowest property tax rates in the region.” But those ‘tax rates’ are just half of the equation. Since Arlington’s assessments are among the highest in the region, the result is that Arlington’s real estate property taxes are equally among the highest.

The reality that most economic news often has at least two sides was brought home when seeing the reporting on the release of Congressional Budget Office’s latest budget and economic outlook. The Washington Post chose to focus on the increase in the deficit, reporting:

“This year's deficit will be more than double last year's $161 billion, and it will rise from 1.2 percent of the gross domestic product to nearly 3 percent. If the next president extends some or all of President Bush’s signature tax cuts, as both candidates have promised, annual deficits could balloon to as much as 5 percent of the economy . . . .”

On the other hand, the Wall Street Journal’s editorial page reports:

“Here's a prediction: The media will report today that the federal budget deficit is big and getting bigger. What most of them won't report, alas, is that the cause of these deficits is an explosion in federal spending. The era of big government is back, bigger than ever. (emphasis added)

The real news in yesterday's Congressional Budget Office semiannual report is that federal expenditures on everything from roads to homeland security to health care will on present trends reach 21.5% of GDP next year. That's a larger share of national output than at anytime since 1992. If the cost of the federal takeover of Fannie Mae and Freddie Mac prove to be large and are taken into account, next year federal outlays could be higher as a share of the economy than at anytime since World War II. In this decade alone, federal spending has increased by almost $1.2 trillion, or 57%.” (emphasis added)

“. . . We hope Congress and the Presidential candidates don't obsess over the deficit per se, because the real fiscal drag from government comes from how much it spends, not how much it borrows.”

In conclusion, the Journal editorial says:

“The point to keep in mind is that this big spending blitz is coming even before a new President and Congress arrive next year with far more spending promises in tow. As they contemplate their choice for President, voters might want to consider which of the candidates is likely to be a check on Congressional appetites, rather than a facilitator.” (emphasis added)

The following Journal chart shows just how much federal spending has increased:

 

September 09, 2008

Thomas Sowell To The Left: “Grow Up”

Most everything Thomas Sowell writes is well-worth reading, and this essay posted today at National Review Online is no exception. He begins by writing:

“Conservatives, as well as liberals, would undoubtedly be happier living in the kind of world envisioned by the Left.

“Very few people have either a vested interest or an ideological preference for a world in which there are many inequalities.

“Even fewer would prefer a world in which vast sums of money have to be devoted to military defense, when so much benefit could be produced if those resources were directed into medical research instead.

“It is hardly surprising that young people prefer the political Left. The only reason for rejecting the Left’s vision is that the real world in which we live is very different from the world that the Left perceives today or envisions for tomorrow.

“Most of us learn that from experience — but experience is precisely what the young are lacking.”

Later, Sowell writes:

“The agenda of the Left is fine for the world that they envision as existing today and the world they want to create tomorrow.

That is a world not hemmed in on all sides by inherent constraints and the painful trade-offs that these constraints imply. Theirs is a world where there are attractive, win-win “solutions” in place of those ugly trade-offs in the world that the rest of us live in.”

Read the entire essay. Most taxpayers will find it to their liking. If you like it, you’ll like his book, “The Vision of the Anointed,” even better.

September 08, 2008

Can American Welfare Cost $1 Trillion A Year?

Last month, we growled about the cost of the left’s compassion, and cited a column by Dr. Walter E. Williams, professor of economics at George Mason University, which featured a new book by Edgar K. Browning. Now comes Browning himself to raise a number of questions that “paint a bleak picture of the accomplishments of the American welfare state,” according to this column posted at the Independent Institute. Browning writes:

“Incredible as it may seem, Americans transfer more than a trillion dollars each year to low-income families through a bewildering variety of programs, all in the name of fighting poverty and inequality.  That’s about seven times the cost of the Iraq war.”

Browning reminds us, "When Lyndon Johnson inaugurated the War on Poverty in 1964, he assured the public that “. . . this investment [of tax dollars] will return its cost many fold to our entire economy.” Browning then identifies several questions that taxpayers, as well as policy makers, should be asking about the cost of the so-called war on poverty. For example:

  • “Is the low-income population more independent and self-supporting than before the War on Poverty?”
  • “Has the trillion-dollar expenditure eliminated poverty in America?  Reduced it dramatically?
  • “Has the trillion-dollar expenditure reduced inequality?  Are the egalitarians grateful to the American people for their sacrifices in this area, or are they continually carping about increasing inequality?”
  • “Are more disadvantaged children being raised in stable two-parent families today than before the War on Poverty?”

Browning concludes by saying:

“While a nuanced interpretation of the evidence may identify a few positive returns on our “investment,” we have a right to expect a lot more for a trillion dollars a year.  Perhaps it is time to stop worrying about an exit strategy for the War in Iraq and formulate one for the War on Poverty.”

September 07, 2008

Spending on So-Called Affordable Housing

If Arlington County taxpaywers want to see where some of your local tax dollars are going, turn to page 35 of the County’s Fiscal Year 2008 Adopted Budget. Thanks to direction from the County Board several years ago, the Manager and his Department of Management & Finance staff now consolidate expenditures and revenues for three “multi-departmental programs  -- housing, senior adults and youth -- on a single page.

For the moment, let’s focus just on the 21 housing programs, which span four separate departments. One way of looking at the housing programs is according to the department that administers the program:

  1. Department of Community Planning, Housing and Development (CPHD). Programs include homeownership services, housing services, neighborhood strategy areas, code enforcement, housing planning, housing division, housing development (AHC, etc.), and AHC rehabilitation program.
  2. County Manager’s Office. Fair housing program.
  3. Department of Human Services (DHS). Section 8 housing, housing grants, supportive housing,  transitional housing grants, assisted living residence, homeless shelter, mental health residential services, and intellectual and developmental disability residential services.
  4. Non-Departmental. Homeowner grants (administered by DHS) and the so-called affordable housing investment fund.
Most of the housing programs require something called “net tax support” (NTS) although it should properly be called “net local taxpayer support” since many of the programs get revenues, primarily from the federal or state government. Let’s take a look at several of the larger programs:
  • Section 8 housing. This federal housing program is budgeted to cost $16.0 million, but no NTS.
  • Housing Services. Staffs the housing information center, handles tenant-landlord relations, and tenant relocations with expenditures budgeted at $487,000, revenues of $38,000, and requires NTS of $449,000.
  • Housing Grants. These provide housing subsidies for the needy, and budgeted with $4.3 million of NTS.
  • Real Estate Tax Relief. Provides an exemption or partial exemption of real estate taxes for homeowners age 65 and older or certain disabled persons. Expected budgeted expenditures, all NLT, are $4.5 million.
  • Homeless shelter program. Expenditures $2.5 million, expected revenues $89,000, and NTS of $2.4 million.

Overall, the 21 programs cost taxpayers $40.8 million, expect to receive $16.0 million in revenues, mostly from federal taxpayers, and will cost Arlington taxpayers $$24.8 million in NTS. However, all of it is not used for affordable housing, strictly speaking. Take a few moments, and look at the adopted budget to see just how much all of the 21 programs are costing you.

September 06, 2008

Quote of the Day

"When the economy is strong, liberals want to grow government. When the economy is weak, liberals want to grow government. There is no business cycle in government, there is just growth."

    -- Rush Limbaugh, September 5, 2008

 

 

 

 

September 05, 2008

Taxpayers Need Protecting

We growled last week about an op-ed by Norm Leahy at Bacon’s Rebellion in which he argues for a tax expenditure law (TEL) in Virginia. Today, in New Hampshire’s Union Leader, the newspaper editorializes:

“We are told -- always by proponents of big government -- that government can restrain its own spending; all voters need to do is elect the right people.

“History shows otherwise.”

The paper argues that taxpayers need protection because “elections are not enough.” According to the editorial, Exhibit A is the Republican Revolution of 1994, followed by an  attempt to implement a TEL or Taxpayer Bill of Rights legislation in New Hampshire.

Now the city of Manchester is trying to do what several other New Hampshire cities have done, i.e., implement tax or spending caps. The Union Leader concludes the editorial saying:

“Government spending will never be controlled unless elected officials are forced by the people to control it. Elections are insufficient safeguards. Tax and spending caps have been shown to do the trick. Which is why the powers that be at city hall are fighting so vigorously to prevent the people of Manchester from implementing one.”

For more information, read “The Case for a Virginia Taxpayer’s Bill of Rights” by Stephen Slivinski and Michael New, which they wrote for the Virginia Institute for Public Policy.

September 04, 2008

News You Can Use

I’d guess that most blog readers have a fairly short list of sites to visit each and every day. If you have a list of blogs that you regularly read, you may want to consider adding Tertium Quids. There are a number of reasons for visiting TQ on a regular basis, including the following recent examples:

  • Blog Talk Radio where Norm Leahy conducts extended interviews each week with knowledgeable guests on topics that too often interest our wallets, e.g., fixing transportation, the economics of politics, and cleaning the budget stables. Use the icon in the right column of Tertium Quids to listen.
  • Choice, Education, and NCLB where Norm comments about, and links to, a debate between the education spokespeople of the McCain and Obama campaigns.
  • Smarter Budget Cutting where Norm points to South Carolina‘s Gov. Mark Sanford regarding sensible budget cutting.
  • Adding to Virginia’s Vocabulary in which Norm has fun with a couple of new words or phrases from Arlington County, i.e., ‘civic charisma’ and ‘Arlogance,’ Arlington’s brand of arrogance.

Take a look at the Tertium Quids blog where Norm Leahy is joined by other TQ leaders to provide viewpoints that taxpayers won’t find very often in the mainstream media.

September 03, 2008

Taxing Wealth and Income

Richard Rahn, a senior fellow at the Cato Insttute, writes, “Many politicians and media people confuse taxable income with disposable and in-kind income,” in a recent column (here at Cato and here at the Washington Times). After describing two illustrative families, one rich in income and one rich in wealth writes:

“many in the U.S. Congress, including Sen. Barack Obama, want to increase taxes on the first (and poorer) family and not on the wealthier family. They have mis-defined "rich" by confusing a flow (income) with a stock (real net assets), and thus come to the wrong conclusion. They want to tax those (who make more than $250,000 a year) who are trying to become rich, while preserving the status for those who already have wealth.”

He also writes about taxable income and so-called in-kind income:

“Many politicians and media people confuse taxable income with disposable and in-kind income. Because of the highly progressive income tax system, (97 percent of income taxes are paid by the top 50 percent of income earners and the top 1 percent pays 40 percent of the tax, despite having only 20 percent of the income), the difference in high-income and low-income families in after-tax income is far less than pre-tax income. In addition, there are many government welfare and subsidy programs for low-income people that are not included in many of the standard definitions of income.”

And explains thus:

“Those who want the "rich" to pay more or "give back" not only confuse income with wealth, but also fail to understand life cycle mobility, and the effects of taxation and income redistribution programs on "disposable income."

Rahn provides a useful tutorial explaining the differences between wealth and income, and summarizes thus:

“Those who confuse taxable income with wealth are guilty of both sloppy use of language and sloppy thinking. Is it prudent to trust the writing of the tax code to a group of sloppy thinkers?”

September 02, 2008

Don’t Vote for Tax Hikers!

Your humble scribe has never been one to adorn the bumpers of his gas-guzzling V-8 with bumper stickers. That will soon change after seeing the ones offered by the National Taxpayers Union. Kristina Rasmussen writes at NTU's blog, Government Bytes:

“On both the federal and state level, governments are now facing the unpleasant prospect of having to pay the piper for years of irresponsible and wasteful spending. So what's the answer? If you believe many of the lawmakers that got us into this mess, the "solution" is to boost your taxes even higher!”

“At NTU, we have a different answer: Don’t Vote for Tax Hikers! We’re launching a website called www.NoTaxHikers.org, where you can join your fellow citizens in pledging not to vote for politicians who seek to raise taxes.”

For signing up to receive their free taxpayer alerts, they’ll send you this bumper sticker.

 

September 01, 2008

Some Thoughts on Labor Day

After first noting that the first labor celebration occurred on September 5, 1882 in New York City and became a legal holiday when President Grover Cleveland signed legislation making the first Monday in September a federal holiday, according to the editorial in today’s Washington Times, the newspaper writes:

“On this Labor Day, we might gain much wisdom by comparing our daily lives to the lives of the 10,0000 workers who marched for their rights in the 19th century - and who established this day of festivity and recollection. How much have our lives improved since then? What new challenges have emerged?”

The editorial cites data from this August 2007 Heritage Foundation study showing:

“since the mid-1960's, the amount of time the typical American spends working fell by eight hours per week. And the time the average American spent on leisure activities rose by just under seven hours per week.”

The following chart from the Heritage study shows how personal consumption spending on recreation has increased just since 1965. Proof that American life is indeed better than ever?