On taxing and spending

Here (from the Wall Street Journal) is what our federal government spending looks like, as proposed by the president in February (green line) and as modified by him last week (gray line), and as contrasted to the Republican budget proposed by Paul Ryan (orange line). Gross Domestic Product is the sum of all goods and services created by 300 million Americans. Historically, the federal government has spent one dollar out of five--20 percent of GDP. Last year we boosted that to 25 percent of GDP, a level not reached since the Second World War. Mr. Ryan would like to beat that down to the historical average, but the president will have none of it. He thinks it would be neat to spend somewhere between 22.5 and 24 percent of American wealth every year.

In return for this geyser of spending, what have we gained? The unemployment rate is higher now than when Mr. Obama took office. In terms of the Great Depression, we are now at 1935. If madcap spending didn't work for Franklin Roosevelt, it's highly unlikely to work for Barack Obama. Recall that the United States didn't get out of that tax-and-spend ditch until 1940--that is, 2014 in terms of the Great Recession. Blue skies! -- Dan Ford

Spending reductions in the tax code

I haven't listened to the president's speeches for the past couple of years, because they remind me of how stupid I was to have voted for him in the 2008 New Hampshire primary. Comedian Jon Stewart points out that I thereby missed a particularly fine piece of political sophistry, where Mr. Obama explained Wednesday evening that he was going to reduce the deficit through "spending reductions in the tax code." This is how Mr. Stewart riffed on that bit of bafflegab:

What? “Spending reductions in the tax code”? The tax code isn’t where we spend, it’s where we collect, and that…. ohhhhhhhhhhhhhhh. I guess what you said is tax “code”, code for raising taxes. You managed to talk about a tax hike as a spending reduction. Can we afford that and the royalty checks you’re going to have to send to George Orwell? That’s the weirdest way of… just say “tax hike”! That’s like saying, “I’m not going on a diet, I’m going to add calories to my excluded food intake!”

Blue skies! -- Dan Ford

On, Wisconsin!

Congratulations to Governor Scott Walker and the (rump) Wisconsin State Senate, who despite the mayhem have managed to pass a public-employee reform bill that returns some measure of power to the citizens who foot the bill for all that early retirement, comfortable pensions, and gold-plated health insurance. Blue skies! -- Dan Ford

If unemployment is getting worse, we should raise taxes, right?

Reports the Associated Press:

WASHINGTON – In a surprising setback, the nation's unemployment rate climbed to 9.8 percent in November, a seven-month high, as hiring slowed across the economy.

The report was a reminder that the economic recovery is proceeding more slowly and fitfully than many economists had expected. It is likely to push lawmakers before year's end to pass an extension of long-term unemployment benefits, which expired this week.

No mention of taxes! Apparently it escapes the wizards at the Associated Press that if you raise taxes on the hiring class, you'll get less hiring. (You'll also get less work, but that's a much more subtle result.) Could it be? -- could it possibly be? -- that hiring slowed precisely because small businessmen feared their taxes would go up on January 1?

Congress meanwhile thinks this is a great moment to raise taxes, at least on the more favored members of society, who are also the ones running the businesses that aren't hiring anybody this month, thanks all the same! Of course the vote is mostly a symbolic nod to the "progressive" left of the Democratic party, since such a bill has almost no hope of passage in the Senate. But it does show how desperately some people would like to reprise the 1930s, when the Roosevelt administration took a financial panic and turned it into an eight-year Depression. Blue skies! -- Dan Ford

On Grannie's feeding tube

During the debates on ObamaCare, there was much talk of the Death Panels that would decide whether decrepit oldsters would be allowed to live. It's time to spare a thought for the hundreds, probably thousands, of informal death panels in households around the country: let's suppose that Grannie dabbled in real estate and now owns half a dozen properties each worth $500,000. Her net worth therefore is $3 million and probably quite a bit more when her various checking accounts are factored in. Are the heirs doing the math? You bet they are!

If Grannie dies on or before December 31, the estate passes entire to her loving kin. If she hangs on past the New Year, however, and the U.S. Congress fails to act, they get a tax bill of well over a million dollars (55 percent of everything over $1 million)! How many heirs, do you think, are keeping one eye on Nancy Pelosi and the other eye on Grannie's feeding tube? Blue skies! -- Dan Ford

Can ye spare a Euro, mister?

 

The Irish government evidently capitulated to the European Community yesterday, agreeing to take the bailout that it has been resisting for a week. The price, as everyone knows, is that Ireland must raise its taxes to European Community levels, thus ending the run of the Celtic Tiger. What a pity. (The gent on the left is Ajai Chopra of the International Monetary Fund. Though ready to bail out the nation with other people's money, he doesn't seem to have dropped anything into the beggar's cup.) Blue skies! -- Dan Ford

We are all Greeks now!

Thirty-five arrests and fourteen injured, half of them police officers, when university students rioted in London the other day. The window belongs to the Conservative Party, which in the metaphor of President Obama is trying to get the British economic vehicle out of the ditch. In the US, according to our eloquent president, the naysayers stand around with their Slurpies and watch. Prime Minister Cameron must wish he could be so lucky. Blue skies! -- Dan Ford

Deadbeat bureaucrats

Something about this Washington Post story really tickled me--the circularity of people whose salaries are paid by the taxpayers, but who themselves don't bother to pay taxes! What could be neater than that?

• Federal employees nationwide owe $1 billion in unpaid taxes
• Senate and House employees alone owe $9.3 million (the WaPo doesn't say whether that includes any actual Congressmen, but I'll bet it does)
• While those working in the White House itself owe $831,000 

Alas, the WaPo story doesn't give a deadbeat figure by executive department, but one assumes that the Treasury under Timothy Geithner runs a cleaner ship than most. Blue skies! -- Dan Ford

Let's all be happy for the city manager

I earlier celebrated Hugo Tassone, the Yonkers policeman who retired at age 44 with a pension of $101,000, having never earned more than $74,000 a year. Now we can cast a prayerful glance toward Robert Rizzo, the city manager of Bell, California (pop. 40,000) who resigned recently when it came out that he was earning $800,000 a year, along with other benefits including 26 weeks (!) of vacation and sick time that brought his annual compensation to an estimated $1,500,000. Forced out or not, Mr. Rizzo stands to collect a pension of at least $600,000 a year.

Even so, his good fortune pales beside that of Bruce Malkenhorst, who is retired from his post as city manager of Vernon, California. His pension is a relatively slender $510,000 a year, but here's the thing: Vernon's population, as of the 2000 Census, was 91. Blue skies! -- Dan Ford

Europe catches on

Well, the Gray Lady seems to be inching toward the realization that there are limits to government largesse First came the story of Policeman Tassone, drawing a $101,000-a-year pension at the age of 47. Yesterday came a story about the unsustainable level of social welfare in Europe.

“Across Western Europe,” writes Steven Erlanger, “... the assumptions and gains of a lifetime are suddenly in doubt. The deficit crisis that threatens the euro has also undermined the sustainability of the European standard of social welfare, built by left-leaning governments since the end of World War II.....

“With low growth, low birthrates and longer life expectancies, Europe can no longer afford its comfortable lifestyle, at least not without a period of austerity and significant changes. The countries are trying to reassure investors by cutting salaries, raising legal retirement ages, increasing working hours and reducing health benefits and pensions.”

Even more astonishing, Mr. Erlanger credits part of that lifestyle to U.S. military might: “Europeans have benefited from low military spending, protected by NATO and the American nuclear umbrella.” (“Protected by NATO”—that’s rich! Who has provided NATO’s muscle all these years?)

“In Athens, Aris Iordanidis, 25, an economics graduate working in a bookstore, resents paying high taxes to finance Greece’s bloated state sector and its employees. ‘They sit there for years drinking coffee and chatting on the telephone and then retire at 50 with nice fat pensions,’ he said. ‘As for us, the way things are going we’ll have to work until we’re 70.’"

In the good old days, Mr. Iordanidis could have escaped his treadmill by emigrating to the United States. No longer: in New York, a policeman can retire at 44, and with a much fatter pension. Blue skies! – Dan Ford

On working for the government

Let us all be happy for Hugo Tassone, the Yonkers NY policeman who was earning $74,000 a year when he retired three years ago at the age of 44. His pension amounts to $101,333 a year. At 47, he stands to collect several lifetimes’ worth of his not-ungenerous salary in the golden years stretching ahead of him. But what can it be like to be a New York taxpayer, laboring to pay off that obligation, not only to Mr. Tassone, but also to his successor, who no doubt is even now planning for his own retirement? For every active-duty policeman and fireman, in this crazy universe, we bid fair to have two retirees earning half again as much. Piling insult upon injury, they pay no state or city income tax on their pensions.

The same New York Times story notes that at least 3,700 retirees in the state are pulling down pensions of $100,000 a year or more, with the golden palm going to a certain Edward Stolzenberg, who ran a hospital in Westchester County, and who collects $222,143 a year. (Oops! I see that the Gray Lady only credits Mr. Stolzenberg with being “one of the biggest New York State pensions.” There may be bigger ones?)

As it happens, the delightfully named Mortimer Zuckerman wrote an op-ed for the Wall Street Journal the other day, ominously titled “The Bankrupting of America.” Read it and wonder what hope you have for your own retirement. Blue skies! – Dan Ford

This is how the demos ends ...

Democracy began in Greece, and may well end there. This rather good video comes from AlJazeera, of all places in the world. It shows what happens when politicians buy votes by promising more than they can deliver: the voters burn the ... banks? (To be fair, they probably would have burned parliament if it had been easier to reach.)

Easy to feel superior to the Greeks, but aren't we doing the very same? Where Athens stands today, Sacramento could stand tomorrow, Albany the day after, and the District of Columbia the day after that. Blue skies! -- Dan Ford

And who will protect us from our protectors?

Charles Schumer is a United States Senator from New York. He announced on Sunday that he had "personally contacted officials at American Airlines, Delta Airlines, JetBlue, United Airlines and US Airways, and secured commitments from all five companies" that they wouldn't impose fees for carry-on luggage.  Imagine that! The courage! The senator was spurred into action by an off-brand outfit, Spirit airlines, which plans to charge $45 to use the overhead bins.

"In the last week we have gained tremendous momentum in our effort to keep carry-on bags free," said Schumer. "We have begun to put the brakes on runaway and out-of-control airline fees. I am pleased some of the major carriers have responded to our efforts and have agreed not to charge for something that has always been free."

Could anyone other than a Washington politician be so stupid--so disconnected from reality--as to believe that the overhead bins are free? Next thing you know, he'll try to send a suitcase home on a flight on which he holds no ticket. "Just put it in the overhead bin, son."

Listen, Mr. Schumer, it's this simple: you pay for the little extras when you buy your ticket. When the airline has to sell tickets so cheaply that it loses money as a regular thing, then it starts charging for the extras--like lunch and checked bags. Hey, Ryan Air has a surcharge if you pay with a credit card! This is called a business model.

The senator's mindset reminds me of the news story I read the other day, in which a community was in such bad shape that it had to cut back some "free" services, explaining that they were paid for by taxes for the most part, "though some of them are funded by government grants." We live in a world where town officials think that government money doesn't come from taxes, and where U.S. senators think they can tell airlines what they can do with their overhead bins. Blue skies! -- Dan Ford

Another multi-millionaire politician

Sarah Palin is working full time to pack in $12 million (see below). But Barack Obama, who has a day job paying $400,000 a year (plus an expenses of up to $169,000) just filed his Form 1040 showing $5.5 million in income for 2009. This does not include his million-dollar Nobel Peace Prize, which he donated to charity and did not report on his tax form. How does that work? He didn't claim it, but instead directed it to certain charities. Isn't that the same as claiming it?

To be sure, presidents have always received perks unavailable to the rest of us, and the Form 1040 is no exception. I recall when the IRS deemed Dwight Eisenhower's best-seller as income spread over several years because it was based on his WWII service. No other writer of the time was able to succeed in that argument. Blue skies! -- Dan Ford