Getting Credit

The federal government is in a no win situation when it comes to providing federal aid. If it chose to forego giving Texas money to assist with the fires, it would be blamed for not supporting the State - as it was when it failed to quickly respond to the disaster after Katrina. If it does give money, Texans will refuse to give it credit and continue to believe, falsely, that they are self sufficient and don't need federal assistance. What the federal government needs to do is get a better PR group on it's side, so it gets credit for the things it assists with and people can start appreciating what their tax dollars are spent on. This might get people to start voting based upon the reality of where their benefits are coming from opposed to the false belief that they get nothing from their federal taxes.

For instance after the stimulus bill was passed, the government put signs up on highways which were being built due to federal money financing it. This gave the government credit for it's spending on a local level. Similarly, it needs to find a way to reinforce with Texans that they are not going it alone; rather federal employees have been on the ground since March ready to assist with the fires and have worked along side state and local employees to quell the fires. Yet, the elected representatives from that state seek to kill all federal aid.

Maybe if the voters start to realize what they will be without if their elected representatives were to prevail in their endeavors to kill all federal aid, then people will stop voting for people that want to take away the benefits they get.

Government Intervention

It certainly seems mean spirited, as no one wishes harm on other citizens, but since the Texas leaders, including Governor Perry, claim that government has no business being involved in our lives, maybe the US Government should refuse to provide federal assistance to Texas for the current wildfires. If they want to go it alone, then let them do just that. FEMA should not be responding to tragedies in states where the people do not want them to be. Such federal assistance can be reserved for places such as NY and VT, states that have not rejected federal government involvement. This is a matter of States Rights - it is the right of the state to reject federal assistance and so long as the state leaders are going to criticize US Government involvement, then they should not receive any.

Open Letter To President Obama On Tax Burdens

As the congressional committee meets to determine how to decrease the national debt, the White House needs to make the moral argument on why taxes need to be increased, especially on big business, the rich and super-rich - it is their obligation to repay the money spent on them. The debt that is being decreased is for the expenses that the US has already spent. The items money has been spent on include two recent wars, highways, safe airways via financing the FAA, financial bailouts, and other federal government obligations. Those who have benefited the most from these expenses are the corporations, the rich and the super-rich, and now they need to pay back their fair share of the debt that has been accrued.

No one benefits more from good roads than do employers. Workers need to go to work, products need to be transported from place to place, shipping harbors need to be dredged and made safe for passage, the airways need to be organized and safe for cargo transport. All of these measures allow business to be conducted. If the federal government ceased spending money on these things, then businesses - large and small - would cease to operate efficiently. The federal government has allowed businesses to work efficiently for many years by spending large amounts on updating roads and bridges, on maintaining the safety of shipping harbors, and on managing the nations airways. Accordingly there is no reason that businesses, the rich and super-rich who have all benefited from these projects should not be "burdened" with paying for the past payments on these projects.

The wars in Iraq and Afghanistan will benefit corporations as well. Big oil companies are seeking to make profits from having access to the Iraqi oilfields, and now the Libyan oilfields. Exxon, the most profitable company in history, will surely benefit from the billions spent on the Iraq war. There is no reason that Exxon and it's shareholders should not, through increased taxes, help pay for the war. Further, as ships were attacked by Somali pirates, the companies shipping products through the straits looked to the US Navy to protect them - meanwhile many companies were avoiding taxes by flagging their ships in Liberia and Panama. The shipping companies should pay their share of the military protection they received - alternatively they could request naval protection from Liberia and Panama. The US military has been good for US business and those who have benefited the most from the military interventions should pay for theses expenses.

The benefits to big business as a result of the financial bailouts for the banks and automotive industry is well documented, and those who run these organizations should pay their share of taxes to offset the costs to the government.

Big Government benefits Big Business much more than people give it credit for, and it would behoove the White House to start making this argument in response to the GOP's false claims concerning taxes and business. Warren Buffet started the discussion in the recent New York Times Op-Ed piece. Now the White House needs to carry the conversation further to the obligation businesses, the rich and super-rich have to repay the government for the investment it has given to them over the past several decades, so they could do business, flourish and become the rich and super-rich.

Not a New Decade

In politics, sports and other arenas, people are talking about the past decade and trying to characterize it one way or another. The bad news for them is that the last decade is not over. Decades run from the years ending in 1 until and through the years ending in 0. In other words, the current decade started on January 1, 2001 and will end on December 31, 2010. January 1, 2011 starts the next decade, not January 1, 2010. This is apparent when one considers that we started counting years in year 1, not year 0; therefore, the first decade was from year 1 to year 10. The same continues to be true as we count above year 2000. While we may be in a hurry to end the past ten years with two recessions and other horrible events, unfortunately, we are stuck with it for another year no matter how much wishing or fuzzy math we want to apply to it.

Healthcare Insurance Debate

While we do not yet know what it is the Senate is going to propose concerning its Health Insurance Reform bill, there is some speculation that it will not include a public option. We anticipate that it will require that everyone have health insurance, that insurance companies can not refuse coverage for people with pre-existing conditions and possibly remove caps on annual and lifetime coverage amounts. However, if these items are included and there is no public option, then the US Congress will be giving the health insurance industry a license to steal.

If there is not going to be some control on what the cost for the coverages will be, the industry will say, "Having to cover everyone under these circumstances is expensive and the premiums will reflect the cost." They will say this whether it is true or not. Then our current 15 - 20% annual increases will seem small when they start ramping up the rates and blaming the legislation for it. The end result will be people will not be able to afford the coverage and will have to go uninsured. Small businesses will not be able to afford the premiums that will be charged and will have to drop coverage for their employees, who in turn will not be able to afford the individual coverage and will have to go uninsured. Without the public option, the problem of the uninsured is going to worsen, not be cured.

Peace Prize

Much ado has been made regarding President Obama getting the Noble Peace Prize. Many have said that he has not done anything to earn it, which may be true. However, some committee in Oslo obviously disagrees, and we are required to accept their determination regarding this.

What is not being discussed is that the award is likely much more of a rebuke of the GWB policies than an endorsement of President Obama's actions to date. Certainly, Europe was not a fan of our last President, and Obama is much more adored by our neighbors to the East. Nonetheless, it seems that the award to the newly elected President so quickly after taking office speaks more to what his predecessor blindly did regarding the wars than what Obama has done or will do regarding them. Just as importantly, Obama stated during the campaign and recently regarding the Afghanistan War that he is looking to reduce troop numbers and initiate a complete withdrawal as soon as possible, this had to make the Committee happy.

The award may also be a message to President Obama that there are high expectations for him regarding the two wars that he inherited.

No doubt after today that the world is watching.

Deficit Spending

There is a correlation between the tax rate and the revenue generated. If a tax rate is too high or too low, then the government does not maximize the tax revenue it could achieve. This theory is called the Laffer Curve, which has previously been discussed. The same kind of principal applies to the amount of tax received and the amount of spending in which the government engages.

If the government receives too little revenue, it spends more than it receives. If it receives too much money through tax revenue, then it spends too much. The end result in either case is deficit spending. There is, however, a solution. If the tax rate is too low, as it currently is, the tax rate needs to be increased to prevent overspending. If the tax rate is too high, the tax rate would need to be decreased to prevent overspending. Apparently, the ideal tax rate to prevent deficit spending is 19%.**

The rationale for the required tax rate is that Congress and the public need to feel the pinch of government. If the perceived cost of government is that it is cheap, then overspending results. In more micro terms, if a person has a high credit limit and low monthly payment, then it does not seem to cost a lot to spend a lot so debt is incurred. If the cost of high spending is perceived to be expensive (a higher monthly credit card payment), then it is less likely that a person or Congress will over spend. If the spending curve was graphically superimposed on the Laffer Curve, it would show an increase in spending by .15% for every 1% of tax rate reduction and a decrease in spending of .15% for every 1% of tax increase.

Many said that the balanced budgets during the Clinton Administration were a result of the GOP Congress being so disciplined. Considering the deficit spending that the GOP has engaged in while controlling the Congress and White House, this is obviously not the case. Rather, it was the tax increases that the first Bush and Clinton Administrations imposed that controlled spending. The reason for today's deficit spending is the ill conceived tax cuts that were given to the wealthy in 2001 and 2003 because now the cost of government seems low so it is easy for Congress to continue to spend too much money. Had these cuts not gone into place, the perceived cost of government would have remained high and the spending would have remained under control, and the debt imposed upon the future generations would not have been imposed.

To prevent future generations from being saddled with continued debt, this new Democratic Congress needs to raise taxes to maximize revenue and eliminate deficit spending. Taxes need to be raised and the debts which have accumulated over these past six years need to be paid immediately so that the American Public is not saddled with the significant debt and high tax rates that will be necessary in the future to correct the fiscal mismanagement done by the Bush Administration.

* The diagram is from Wikipedia
** More information on this can be obtained in the June 2006 Atlantic Monthly; however, a subscription to the website is required.

GW's Tax Increase

The deficit spending that the GOP has engaged in over the past six years has direct and immediate impacts on the American population. Everyone is talking about saddling future generations with taxes to pay the debt that has been incurred today, but Americans are having to pay the equivalent of higher taxes today to prevent themselves from being hit with even bigger taxes tomorrow to compensate for the deficit spending.

All financial advisors say that you need to start planning for your retirement as early as possible. The benefit of compound interest and maximizing your contributions to a 401(k) or IRA will assist in ensuring that you will be able to pay for your retirement when that day comes. If you do not start early, the compound interest will not have long enough to provide maximum benefits, and if you do not contribute enough money to the retirement plan, you will not get enough compounding to total the amount necessary for retirement. However, there is another element to this that is not being discussed: tomorrow's tax rate.

Today, you can put your money into a traditional 401(k) or IRA. Either allow you to deduct the contribution from your taxes. Thus, you get the benefit of saving pre-tax dollars and allowing the compounding effect to occur until you withdraw the money. When you withdraw the money after retirement, you will be required to pay tax on all the money withdrawn (contributions and earnings). The theory is that when you are working, you are going to be in a higher tax bracket than when you are retired and have no working income. This may not come true. Due to the deficit spending this administration has embarked on, when today's 30-somethings start retiring, Congress may need to significantly raise the tax rates to pay for the Social Security IOUs that have been accumulating since the Reagan Administration and crescendoing during this Administration as well as pay for all of the accumulated debt that has been incurred during the past six years. The end result is that today's tax benefit will become tomorrow's tax burden. Those who benefitted by deferring the tax consequences of the traditional 401(k) and IRA will get hit with a higher tax burden than if they had originally saved post-tax dollars.

Many retirement advisors are telling people to save money in a Roth IRA or the newly created Roth 401(k). These are post-tax dollars saved and when they are withdrawn no tax is paid. The net result is that people are having to pay more in taxes today, by not getting the tax deferred traditional retirement plans, so they can avoid having to pay the possible excruciatingly high tax that will be required tomorrow to pay for the fiscal mismanagement we are currently under.

No one explained to the tax payers that the tax cuts for the rich in 2001 and 2003 were going to immediately increase the tax burden of the middle class. This is the bait and switch in which the GOP consistently engages. Deceive the public into thinking that they will benefit by sending them a check for $300.00 and then increase their effective tax rate significantly, but don't tell them what you are doing until it is too late for them to stop you from giving significant benefits your rich country club buddies. Worse yet, most people do not have access to a Roth 401(k), so they cannot even protect themselves from getting hurt upon retirement. Shame on the Administration for continuing to undercut the middle class in this manner.