November 14, 2005

“Normalcy” Returns in (and Spreads Through) Western Europe

Filed under: Economy,Immigration,Taxes & Government — Tom @ 7:15 pm

Brussels Louts Send Banlieue Blackmail to the Insane Government on the Seine

This is part of Western Europe’s “normalcy”–the payoff-for-bad-behavior aid begins to flow:

France’s worst rioting since the 1960s seems to be nearing an end, the national police chief said Sunday as fewer cars were torched nationwide and Paris remained calm despite Internet and cell phone messages urging violence in the streets of the capital.

European Commission President Jose Manuel Barroso proposed that the European Union give $58 million to France for helping riot-hit towns recover. He said the EU could make up to $1.2 billion available in longer-term support.

Some details of the banlieue blackmail (4th and 5th paragraphs):

The French government has already announced a package of social reforms designed to give career guidance and job placements to all the young unemployed below the age of 25 in the poorest suburbs. The government also plans tax breaks for companies who start branch offices or businesses in the poorest public housing districts where the bulk of two weeks of riots have taken place, with more than 8,000 vehicles torched and more than 3,000 arrests.

The government is also offering a $1,160 lump sum for jobless people who return to work, plus another $174 a month for a year. It has pledged to hire 5,000 extra teachers and teaching assistants and 10,000 scholarships to encourage those with high marks to stay in school, and will open 10 new boarding schools for those who want to leave their run-down housing estates to study.

I would think that it will take a bit more than a few tax breaks to convince companies to expand into locales where there can be no realistic expectation of personal safety.

Civil “Normalcy” Returns–And Spreads

Returning to “normalcy” in France apparently means this (5th and 6th paras; bold is mine):

Youths set fire to 374 parked vehicles before dawn Sunday, compared to 502 the previous night, police said. A week ago, 1,400 cars were incinerated in a single night.

If the downward trend continues, “things could return to normal very quickly,” National Police Chief Michel Gaudin said, noting that French youths burn about 100 cars on an average Saturday night.

Oh, and there are new nations (6th para) to add to the affected list (new ones are in bold):

With scattered incidents of rioting in Germany, Switzerland, Belgium and Holland, the EU is taking the view that the French riots, launched mainly by the teenage children of Arab and African immigrants is becoming a broader European problem. Brussels had its worst night over the weekend, with 42 vehicles torched.

Continuation of German Drift Appears a Foregone Conclusion

Filed under: Economy,Taxes & Government — Tom @ 4:34 pm

From The Wall Street Journal (link requires subscription):

Schroeder Wins…

Remember Gerhard Schröder’s strangely jubilant posturing after Germany’s Sept. 18 elections, claiming victory even though his Social Democrats came in second? Turns out, the departing Chancellor wasn’t suffering from temporal delusion after all — he did really win.

Mr. Schröder didn’t even need a recount or to stuff the ballots to make his claim come true. All he needed was a designated new Chancellor, the Christian Democrats’ Angela Merkel, who was ready to pay a heavy price to become his successor.

And so she did. Last Friday, the Christian and Social Democrats agreed to a coalition treaty — a detailed and binding wedding contract that will guide this government throughout its term in office. On economics, the treaty offers up a policy mix of Keynesian pump-priming, tax hikes, obsessive budget balancing and old-style state planning that is more “red,” in hue and substance, than even the previous red-green government.

Rather than just a coalition of the lowest common denominator, the next German government in fact looks destined to be even lower. It manages to combine the worst ideas from both parties.

….. If all parties approve the coalition treaty at conferences in the coming days, Ms. Merkel is destined to make history on Nov. 22 by becoming the country’s first female chancellor. If she doesn’t manage to inject more of her original free-market ideas into the coalition, that might be all she will be remembered for.

Read the rest and weep, if you subscribe. As has been stated many, many, many, many times, the Germans are in a very serious financial box and simply can’t afford to dither as they are.

Perhaps the Germans should convince retired Motorcycle Hall of Famer Fred Merkel to take a stab at running things.

Procrastinators (Including Yours Truly) Rejoice: IRS Automatic Extension Will Be for 6 Months

Filed under: Money Tip of the Day,Taxes & Government — Tom @ 1:35 pm

When someone extends their federal income tax return next year, it will typically be for six months:

WASHINGTON — Taxpayers will be able to request an automatic, six-month tax-filing extension for most common individual and business returns under regulations released today by the Treasury Department and the Internal Revenue Service.

The new regulations provide streamlined and simplified procedures that are expected to save taxpayers between $73 million and $94 million, annually, by eliminating or consolidating several existing IRS forms. As a result, Beginning Jan. 1, 2006, most individuals and businesses will be able to request a full six-month tax-filing extension, without a reason or even a signature.

The new procedures will replace the existing two-step process under which noncorporate taxpayers could only get a six-month extension by first obtaining an extension, usually automatic, for part of that period and then requesting a discretionary extension for the remainder. A tax-filing extension does not extend the tax-payment deadline.

“Some taxpayers need a full six months for extensions as the law provides. This change simplifies the process so they can make the request just once, not twice,” said IRS Commissioner Mark W. Everson.

Beginning with 2005 returns due in 2006, individuals will be able to use a single IRS form (Form 4868) to get an automatic six-month extension of time to file. This will replace the existing two-step process under which an automatic extension was only allowed for four months, generally until Aug. 15. If more time was needed, a taxpayer had to explain why, using a second extension request form (Form 2688). About 6% of individual taxpayers request the initial four-month extension, and about a third of those go on to request a second extension, usually for two months until October 15. Form 2688 will be eliminated.

Requesting an extension is an especially good idea if you want to make a retirement account contribution for the previous year but don’t have the full amount of the desired contribution on April 15–which is my typical reason for extending.

Robert Samuelson Redux on the Real Vs. Rhetorical Economy

Filed under: Economy,MSM Biz/Other Bias,Quotes, Etc. of the Day — Tom @ 10:45 am

For not being the Samuelson who is the economist (noted previously), this guy sure has some good economic insights (Wall Street Journal link requires subscription):

But until then, I have another theory to explain what’s been a persisting disconnect between the mood in the U.S. and the behavior: the hangover from the 1990s boom. Americans subconsciously compare everything now with what happened then; and the comparison favors the past and disparages the present. Almost nothing looks as good as it did then. America was marching toward a carefree future. The Internet was everything — and American companies dominated the Internet; the business cycle was dead or dying; interest rates and inflation were low; stock prices would rise forever; budget deficits were disappearing; unemployment was low. The powerful U.S. economy could subdue almost any threat (say, the 1997-98 Asian financial crisis).

Not coincidentally, the Michigan confidence numbers reached unprecedented levels in the late 1990s; the historic peak occurred in January 2000 at 112. It wasn’t simply that the economy did well. What was distinctive is that it did so well that it suggested Americans could take its future for granted. It was called the New Economy, which implied that the rules of the game had changed. There were explanations for all this bliss: new technologies; adoption of just-in-time inventory practices; the revival of entrepreneurship. These arguments were satisfying; they were also superficial. Alfred E. Neuman had become the chief economic guru: what, me worry?

The central fantasy was that we could dispense with uncertainty and anxiety. Now they’ve reasserted themselves with a vengeance. Americans fret about China, a housing “bubble” (remembering the stock and tech “bubbles”), huge trade and budget deficits, oil — as well as terrorism, Iraq and possible pandemics. The return of worry partly accounts for the weakness of consumer-sentiment polls. People are less confident about the future. But what then explains the strength of actual consumer spending? The answer is that Americans’ personal spending decisions depend less on their general view of the economy and more on their personal circumstances — and these haven’t shifted so dramatically.

The only things I would add relate to how business press reporting played into these feelings:

  • The business press in the mid- and late-1990s, with the gleeful assistance of the administration in power at the time, fed us the fantasies Samuelson referred to about the end of the business cycle, uncertainty, and anxiety (and yes, many of us who should have known better, myself EXcluded, bought it).
  • The business press has overreacted since the Internet bubble burst and the Bush Administration came into office, to the point where no economic news, no matter how good, is good enough, and not subject to all kinds of things that could go wrong down the road to bring things to a halt.
  • The business press, since it got co-opted by the rest of its liberal brethren during the 1980s, has never bought into the idea that reducing marginal tax rates can and will raise government receipts, even though it has happened no fewer than three times (Kennedy tax cuts of the mid-1960s, Reagan tax cuts of the early 1980s, Bush tax cuts of 2002-2003).

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UPDATE, Nov. 15: Make that four times: Willisms reminds us that the 1920s were The Roaring 20s because of tax cuts. Sorry, Will, I wasn’t around for that one. Is that a first-hand report you’re providing?

Bizzy’s AM Coffee Biz-Econ Links (111405)

Filed under: Bankruptcy & Reform,Business Moves,Economy — Tom @ 8:02 am

New York Times Reports Roughly 135,000 Paid Subscribers to TimesSelect

That’s in a little bit less than two months:

NEW YORK (AP) — The New York Times Co. said Wednesday it had signed up about 135,000 paying subscribers to its new online service that offers access to Op-Ed columns and other premium content.

The new service, TimesSelect, launched Sept. 19, and is free to home delivery subscribers. Non-subscribers can get access to the service for $49.95 a year or $7.95 every month.

The Times said it had signed up more than 270,000 subscribers to the service since it began, and that about half of them are online-only.

135,000 paid subscribers (half of 270,000) at about $45 per year (early-bird subscribers got in for $39.95) is about $6 million. Give them the benefit of a huge doubt and assume they can somehow double their TimesSelect subscribers with no more discounts and get another $7 million by the service’s one-year anniversary, giving them a total of $13 million for the first year. I know it beats nothing, and that The Times has many other media properties, but $13 million would be about 0.4% of last year’s total revenues of $3.3 billion.

This revenue stream, assuming it fully materializes, appears at best to be at the low end of the Times’ vaguely stated goal (7th and 8th paragraphs):

….. NYTimes.com has offered a number of piecemeal premium services in the past, but in aggregate they only brought in a couple million dollars a year. The ambition is to have a much larger revenue stream.

He’s looking for significant numbers. The goal won’t be met with TimesSelect subscription numbers in the tens of thousands, (NY Times Digital President) Nisenholtz says; it needs to be in the hundreds of thousands in the early years, and even more over the long term.

I don’t see TimesSelect getting past double the current paid level, even over the long haul, because I expect drop-offs to about equal add-ons after the first-year buildup.

The point: I don’t see how TimesSelect is going to be the company’s salvation.

GM Facing Bankruptcy, Says NY Bank

GM is of course denying it:

A leading United States banker says it’s inevitable General Motors will declare bankruptcy. But the company says it has no plans to do so.

General Motors is saying bankruptcy is not an option. But an analyst with Bank of America tells the “Detroit Free Press” it may have no other choice.

I don’t think a filing is imminent, but wouldn’t rule it out in the next 3-5 years.

Management Guru Peter Drucker Died Saturday

His value added to the world economy was and still is immeasurable. His influence continues to this day, and will be felt for many years to come:

Peter F. Drucker, revered as the father of modern management for his numerous books and articles stressing innovation, entrepreneurship and strategies for dealing with a changing world, died Friday. He was 95.

Drucker died of natural causes at his home in Claremont, east of Los Angeles, said Bryan Schneider, a spokesman for Claremont Graduate University, where Drucker taught.

“He is purely and simply the most important developer of effective management and of effective public policy in the 20th century,” former U.S. House Speaker Newt Gingrich said Friday. “In the more than 30 years that I’ve studied him, talked with him and learned from him, he has been invaluable and irreplaceable.”

Drucker was considered a management visionary for his recognition that dedicated employees are key to the success of any corporation, and that marketing and innovation should come before worries about finances.

His ability to explain his principles in plain language helped them resonate with ordinary managers, said former Intel Corp. Chairman Andy Grove.

“Consequently, simple statements from him have influenced untold numbers of daily actions. They did mine over decades,” Grove said.

Drucker championed concepts such as management by objective and decentralization, and his motivational techniques have been used by executives at some of the biggest companies in corporate America, including Intel and Sears, Roebuck & Co.

Business Week magazine hailed him as “the most enduring management thinker of our time,” and Forbes magazine featured him on a 1997 cover under the headline: “Still the Youngest Mind.” President Bush awarded him the Presidential Medal of Freedom in 2002.

I still have his book, simply called “Management,” from college, and remember it as one of the least painful and most informative reads in business school. It, and he, based on various interviews of him that I read through they years, had so much common sense that still remains elusive to many managers.

Here is a link to a 1993 Wired Magazine interview (HT BoingBoing-don’t ask).

Positivity: “Sound Of Music” Cast Reunites After 40 Years

Filed under: Positivity — Tom @ 6:12 am

The cast of perhaps the greatest musical of all time, and (on an inflation-adjusted bases) the third highest-grossing film ever, got together in New York last Thursday:

(more…)

This CAT Should Be Killed (Ohio Commercial Activities Tax)

Filed under: Economy,Taxes & Government — Tom @ 12:01 am

The State of Ohio enacted a Commerical Activities Tax (CAT) of 0.26% on gross annual revenues (NOT profits) above $150,000 that is set to take effect starting January 1 July 1, 2005. It is a brand-new category of tax in the state that is meant to make up for reductions in other business taxes.

The CAT’s bite is much more painful to businesses with high revenues and low profit margins, such as retailers (especially food chains) and distributors, than it is on high-margin and service businesses. As you might expect, the lobbying for exemptions has begun (link is from my Ohio Society of Certifited Co-Opted Public Accountants weekly e-mail):

Bill Would Exclude Food Sales From Commercial Activity Tax

A bipartisan bill with 49 co-sponsors is designed to exclude food sales from the commercial activity tax (CAT), and could threaten the viability of the low-rate, broad-based tax.

Rep. Michael Skindell, D-Lakewood, has introduced legislation (HB 399) that would exempt sales of take-out food, wholesale sales of food, items purchased by resellers of food for use in business or retail sales of packaging containing food from the CAT. Despite the breadth of support by House members, passage of the bill remains in question due to concerns by key House leaders.

Lawmakers have also tried to exempt all foreign-trade-zone activity from the CAT, which can maintain its low .26 percent rate only if the base remains very broad. The Ohio Society of CPAs supported the CAT with the caveat that credits and exemptions should be strictly limited.

The Ohio Society will continue to monitor the legislation and will fight to maintain the integrity of the CAT.

So The Ohio Society of Co-Opted Public Accountants’ concern is that the exemptions will gut the CAT (“integrity”?). I’ve got a better idea: Don’t just gut The CAT–Kill The CAT. Why? The state doesn’t need the money.

The lastest available report (Warning: PDF-go to near the bottom of Page 13) from the state’s Office of Budget and Management indicates that receipts are running $319 million, or 5.6%, ahead of last year, in just the first three months of the fiscal year. That projects to a nearly $1.3 billion increase over the entire year, and could likely be even more as Ohio’s economy, which has trailed the rest of the nation in the recovery process, continues to pick up belated steam.

That is enough money to justify killing The CAT, which as best I can tell may generate a bit more than $1 billion in its first year (the only info I could find was at this link, which states near the bottom of Page 2 that when “fully implemented,” The CAT will generate $1.61 billion in fiscal 2011). Not having The CAT hanging around will free businesses from an onerous tax and compliance burden, save the state all the auditors who would be needed to argue about whether sales took place inside or outside the state, keep consumer prices low, enable businesses to concentrate more on growing, and in the long run give members of The Ohio Society of Co-Opted CPAs more prosperous companies to work with.

This is a CAT killing even PETA won’t object to.
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UPDATE: I corrected the effective date in the first sentence above. Taxpayers had until today to register for the tax. The fact that it doesn’t kick in until July means that there is more time to attempt to kill it, and more time for the states surplus situation to become clearer, and more embarrassing. The only downside is that if CAT is killed, a lot of $15-$20 registration fees will have to be refunded. Too bad, so sad.