Nutter's Washington

Federal Tax Extenders: Let them Expire and Start Over

The U.S. Senate Finance Committee held a hearing today on the long-term fate and philosophy on expiring tax provisions. According to the Joint Committee of Taxation, there are 60 tax provisions that expired in December 31, 2011 and another 41 that will expire at the end of this year. The size and magnitude of these provisions range from several billons of dollars a year to those that for budgetary purposes get an asterisk.

I am not going to list the various provisions as I have done that before. Provisions were enacted for various reasons over the years, some because they can provide a temporary boost to a certain activity or provide some kind of targeted tax relief to this or that taxpayer or provided some political sop to a well-connected group. Mostly they are enacted on a “temporary basis” because they have a budgetary impact and making them permanent has significant impact on the budgetary process. 

State of the Union: Wasted Opportunity on Taxes

          The State of the Union address on Tuesday evening contained very few proposals by the President. As I wrote in my last piece, Mr. Obama has basically given up trying to lead or govern the country. He has become a shrill caretaker running for re-election. There are numerous reasons for this sad state of national affairs. Take your choice depending on your viewpoint.

 However, since I have spent my professional life involved in the vagaries of the Federal tax system-both from a technical, policy and political prospective- the few proposals he did make bear commenting. It should be noted the Federal Budget to be submitted sometimes in mid-February  (not to be passed or even considered by the Democrat-controlled U.S. Senate) will contain many more proposals on the revenue side, most of them submitted and rejected before by Congress.

State of the Union: Gone too Far, so Turn Back

"We've come too far to turn back now."

                     Barack Obama January 24, 2012

 

The President gave a “State of the Union” address to a Joint Session of Congress last night. I did not watch it, as I have not watched one for the past 25 years. I find them useless, overly pompous and a waste of time. I have, however, read the text of the speech and seen a few of the video clips. Mr. Obama did nothing to sway my opinion in favor of this event.

I will leave the substance of the speech to another time. It will not take much space to comment on the non-starter proposals. There are two interesting aspects that struck me about the speech. The first is Mr. Obama has completely given up on trying to lead and govern like a Chief Executive. He intends to ride out this year by campaigning, as I am “less bad” than those horrible Republicans. He further intends to govern by executive fiat, a recess appointment mentality and regulate economic activity in the government’s favor on whatever the Administration can get away with.

The second point in the speech-which his own advisors admit was a campaign kickoff-was the absence of crowing about achievement. He spoke about his vision of the future among other issues but it is instructive to look at the past. Most campaigns tout their record but I did not see some of these prominent items mentioned. To wit:

• Anemic economic recovery, the slowest recovery since the Great Depression.
• Passage of unpopular, ineffective, oppressive and government largess legislation, such as health care, bailouts, cash for caulkers and clunkers, educational funding takeover.
• Polarizing rhetoric and inability to bring various views and interests together.
• Back Seat, apologetic role and aimless drift for U.S. foreign policy, such as Syria, Iran, Egypt, Russia  (forgot a positive, we recognized Myanmar)
• Failed and wasted fiscal stimulus bill.
• Selective enforcement of federal laws sworn to uphold and attacks on those that do such enforcement such as the States of Arizona and Alabama.
• Crony favoritism and waste in pushing uneconomical alternative energy.
• Beyond soaring deficits, currently accumulating at $4 billion a day.
• Downgrading of Federal Debt.
• Shifting all accountability by blaming any and everything on predecessors.
• Failure to address structural economic problems.

 I am being deliberately harsh (but not unfair) as I sometimes think Mr. Obama recognizes the problem but just fails to find a real solution to solve  it, makes a decision that makes the problem worse or just does not have the strength to do the right thing or,at times, anything. 

 I can understand why he chose not to dwell on any of these failures. But, I am vexed over the quote. “We’ve come too far to turn back now.” Goodness, that sounds like it was written for one of those the “earth must be saved” disaster movies I watch on the SYFY Channel. My view is a bit different. If I know I am going to drive off the cliff, hit a dead end, lose all my money on some hair-brain venture, run over the extension cord with the lawn mower, I change direction. I do something else. If it is broken, then I fix it. I do not say, “well, the cliff is coming up, better speed up because I have driven this far”

 The quote begs the question as not only how far we have come but in what direction? Is the direction towards economic recovery, shoring up government finances, making the world safe?  If I am going the wrong way, then going too far just compounds the problem. Mr. Obama either does not see the cliff or believes the cliff will go away or just does not care.

I believe in the resilience of the American economy and our citizens. It will rebound. Jobs will be created. It will do so in spite of government, not because of it. I believe in most cases government action hinders not helps.  It will just take time and maybe new leadership.

President Obama is staking his re-election on the notion of fairness and equality. It is based on the premise that the individual is where he is in life due to some unfairness. Taxes are unfair, employment is unfair, and I am being held back due to my unfair 8^th grade education and no skills. Fairness is, of course, a subjective standard. Is it unfair to the 53 percent of us that pay income taxes that the 47 percent do not? Yes, I think. Is it unfair the so-called ultra-wealthy do not pay enough? Yes, I think. I also believe a lot of others things are unfair and I dare say they are not the same things Mr. Obama thinks is unfair.

Government should not always be the final arbitrator of fairness and often times its judgment is to bring this or that group or perceived unfairness down (as opposed to elevate) to the least common denominator—now that is the way to destroy the middle class.

I will not watch the SOTU next year either.

 

 

 

 

 

 

 

 

 

 

 

What is Ahead in Congress: Gridlock and Opportunity

The House of Representatives returned last week to begin the 2nd Session of Congress with the Senate returning this week. The President's next re-election campaign appearance, also known as the State of the Union address, will be tomorrow night. Now there is ninety minutes of wasted time a person will never recover if watched. But the important thing to note is that once delivered, the political season is in full swing.

South Carolina Primary: After the Debate

The Republican Presidential field is narrowing. Now there are four with the withdrawal of Rick Perry. I watched the South Carolina debate last night.  Good entertainment.

There is not much different is the views of most of the candidates. They eschew the standard more or less Republican mantra—low taxes, less government, freedom and liberty for all and anti-anything Obama. So, the voters will make their choices.

There are considerable dynamics in play here and it is not always pretty to watch. The talking heads are dissecting the performance of the participants and what it all means.  Here is how I saw it:

Don't Confuse the Wealth of Mitt Romney and Tax Policy

Mitt Romney is a wealthy man. He indicated yesterday that due to his large amount of investment income he probably has an effective tax rate of around fifteen percent. Not surprising as that is what the law allows for dividends and long term capital gains. However, somehow his wealth is generating controversy. Does his wealth mean he is not qualified to be President? Did he do something wrong?

Private Equity, Carried Interest and Mitt Romney

Featured on MarketWatch.com http://www.marketwatch.com/story/private-equity-carried-interest-and-mitt-romney-2012-01-18?dist=beforebell

The term “private equity” is being demonized in political circles these days. The White House and some Republicans have equated private equity with some sort of evil, a disease, and a sort of scourge. I want to believe these politicians do not really understand the concept and if they do, then I fear the country is in a whole lot more trouble than we think.

Private equity consists of investors and funds that provide private companies with direct investments or conduct buyouts of public companies resulting in a delisting from public markets. These investments can be used to fund new start up companies, expand working capital, make acquisitions, or improve a balance sheet. Private equity is one of the foundations of the capitalist system.

Grading after New Hampshire: Is it Primary Season About to be Over?

New Hampshire is over, on to South Carolina for the Republican Presidential nominee aspirants. The primaries have been predictable, typical, a bit nasty and somewhat surprising.  It is time to handicap and grade the field. 

Washington in the Doldrums: 5 Questions to Ponder

It is still January and still in the doldrums in Washington. Congress is not around, the President making it easier for illegal aliens to enter the country and appointing people to posts in direct contravention to the Constitution but really not much to get excited about but much to ponder.

Second Session of Congress: Dead on Arrival

The first session of the 112th Congress ended in a whimper. The employee payroll tax break was extended for a whole 60 days. Unemployment compensation and physician’s government health care payments similarly got a rollover.  Each side tried to play some sort of idiotic gamesmanship with each other, with both the Republicans and the Democrats looking quite foolish. The President was absent in all of this. Why lead when you can do nothing? These issues are not solved and will continue to be a hot potato for the next few months. The Federal deficit is still increasing at about $4 billion a day. Can you count to $16 trillion?

The election season is in full swing. The President is in total campaign mode, agitating Republicans in what I think is an unconstitutional move on recess appointments. It looks like he intends to base his re-election chances on the theory that he is “less worse” than the other guys, rather than on his accomplishments and leadership. I would not look for any initiatives of this Administration to go forward, other than the continued regulatory onslaught by such agencies as the EPA, Departments like Interior and intimidation by the Department of Justice that selectively decides which laws to enforce and against whom and which ones to ignore.