February 12, 2007

January’s Treasury Report: Supply-Side Econ Rocks On; Surplus in FY09 Appears to Be More Than Possible

Filed under: Business Moves,Economy,Taxes & Government — Tom @ 5:05 pm

Note: This post has been moved to the top for the rest of Monday.
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Here we go again — Another blockbuster month for tax collections, and another month of the deficit trending sharply downward:

TreasRecsOutlays0107

As noted at this post earlier today, the predictions were for a January surplus of $40 billion, and the $38 billion-plus result is pretty close to that. It would have been even better, but January 2007 spending was over 6% higher than January 2006. Even with spending control slipping a bit, the deficit is 57% lower through the first four months of FY07 than it was at the same time in FY06. Wow.

Both Brian Wesbury (whose predictions I mentioned this morning) and yours truly have to admit to being wrong so far this year on revenue growth. We both have been thinking (Wesbury here, BizzyBlog here) that it’s going to come in at 9%, but as you see, through four months it’s actually pushing 10%.

The revenue bonanza should not have been totally unexpected. There were a few clues that January tax receipts would be very strong:

  • The Google founders’ massive capital gains payments to the State of California, which probably required even bigger payments to Uncle Sam.
  • Other similar but smaller “high tech gold” from the likes of Oracle and Cisco mentioned in the same article as the Google windfall, which again would be expected to have a federal equivalent.
  • The secret settlement of a $200 million tax bill with the state of California (this was governor Arnold Schwarzenegger’s lucky month, wasn’t it?). This could also have reflected a settlement made at roughly the same time with the IRS.
  • In the bigger picture, a pretty good 2006 in the equity markets should have compelled many of those who sold at a profit during the year to ante up their payments by January 16 to avoid tax penalties and interest when they file their 2006 returns.

The belief that the federal budget will be in a surplus situation in the fiscal year when President Bush hands over the keys to the White House in January 2009 has a lot more credibility now than four months ago when I first suggested that it might very well happen.

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UPDATE: Now ask yourself — If Google’s founders, instead of paying about 25% tax on their capital gains (10% state and 15% federal) had faced combined federal/state capital gains taxes of about 30% (with federal increasing to the 20% level it was at before the Bush 2003 tax cuts), what are the chances they would have done something to minimize the tax impact? None? What if the rate were 45% (increasing the federal to the current 35% top ordinary-income rate)? It’s hard to believe that they wouldn’t have done something to avoid or somehow minimize the payments at that level of taxation.

But instead, they (and obviously so many others) have settled up with Uncle Sam and, if applicable, their state, and moved on. Now they and others are free to put their remaining capital to what they believe will be its highest use(s) — i.e., the one(s) with the best potential to yield the highest long-term returns. The better deployment of capital by smart people will most likely enable the economy to grow faster than it would have if the capital had remained locked in by high tax rates. What’s not to like about that?

UPDATE 2: Governor Schwarzenegger should be especially grateful that his state has a better real climate than Nevada, and that The Sagebrush State doesn’t have a business equivalent (in size and scope) of Silicon Valley. If Nevada ever achieves a high-tech critical mass, the Golden State may be in dire straits.

UPDATE 3: To give credit where truly due, Skeptical Optimist, who I hope has recovered well and fully from surgery, has been predicting that the budget would get to a breakeven situation by various times within fiscal year 2009 for some time now, with an outside chance that true surpluses might begin during the latter stages of the 2008 presidential campaign. (Update 3A, Feb. 13SkepOp’s latest post [Feb. 13; HT Ironman in a comment at another post] is projecting that the budget is on track for balance in June 2008.)

UPDATE 4, Feb. 13: What Happens If a Deficit Falls and Almost No One Reports It?

This Has All the Earmarks of a Massive Separation of Powers Violation

Filed under: MSM Biz/Other Bias,Taxes & Government — Tom @ 4:38 pm

The OpinionJournal.com’s Kimberly Strassel was on this last week (HT Porkopolis), but she didn’t catch the really big problem:

Welcome to Congress’s new and dirtier earmark game, in which the big spenders are setting all the rules. In front of the cameras, both parties claim to have found earmark religion, and are talking up a bill that would reform the way Congress asks for billions in goodies for lawmakers’ home districts. Behind the scenes, they’re working feverishly to keep the earmarks rolling, this time using a technique outside of the legislative process and hidden from public view…

…Congressional members, led by appropriators and an army of staff, have already figured out a new way to keep their favors in the money, and it might as well be called 1-800-EARMARKS (which unfortunately is already taken). All across Washington, members are at this moment phoning budget officers at federal agencies — Interior, Defense, HUD, you name it — privately demanding that earmarks in previous legislation be fully renewed again this year. There might not be a single official earmark in the 2007 spending bill, but thousands are in the works all the same.

And getting far less scrutiny than before — if that’s even possible. Under this new regime, members don’t even have to go to the trouble of slipping an earmark into a committee report, where it might later (once the voting is over) come in for criticism. All the profligates need now to keep the money flowing is a quiet office and a cellphone.

Despite a congressional desire to keep this quiet, the evidence of marathon dialing is mounting. Lobbyists, thrilled their clients are still getting earmark handouts, are now publicly crowing about this underground program.

Lobbyists, congresspersons, and senators can crow ’til the cows (or pigs) come home, but under our Constitution, the Executive Branch spends the money that the Legislative branch specifically permits it to spend. Contact between legislators and federal agencies for the express purpose of demanding that money be spent in a way that is NOT specifically identified in enacted legislation appears from here to be blatantly illegal and unconstitutional — and I daresay possibly prosecutable under laws that have surely been passed over the years to prevent legislative tampering with federal agency operations.

If this were a Republican-controlled Congress attempting an end run around a Democratic president, we’d never hear the end of it from the formerly Mainstream Media.

Brian Wesbury Channels BizzyBlog, and Then Some, in Predicting FY2009 Surplus

But I was four months earlier in “calling” it than Wesbury (who has previously been referenced at BizzyBlog posts here, here, and here). :–>

In my post of October 8, 2006 (“The Federal Budget Deficit: Bush Benchmark Achieved, Ignored”), I projected that (bold in original):

If federal tax receipts continue to increase at just 9% per year, which is only about 70% of the 13.1% average annual increase in the past two fiscal years, and if federal spending and the Social Security surpluses in future years turn out as the CBO (Congressional Budget Office) predicts ….. the last Bush budget in fiscal 2009 will show a reported surplus.

Now here’s Wesbury at ftportfolios.com (“No Need for Tax Hikes, Surplus on Tap for 2009″; HT Skeptical Optimist; bold is mine):

In fact, our models expect average tax revenue growth of 9% over the next three years and spending growth of between 4% and 5%. This will generate a well below consensus deficit in FY07 of just $115 billion. Next year in FY08, we forecast a deficit of only $35 billion. On a 12-month basis, we suspect that the budget will move into balance early in FY2009, well before the Office of Management and Budget or the Congressional Budget Office expect.

My FY 2007 and 2008 deficit predictions (okay, they were guesstimates, which should be OK, because Wesbury’s group only “suspects”) were $177 and $85 billion, respectively. Since Wesbury and I are on the same page on revenue growth, he is clearly a LOT more optimistic about spending control (after netting the Social Security surplus) than I and the CBO were. His optimism may be justified, especially in light of the fact that federal spending in the first quarter of fiscal 2007 was up less than 1% compared to the first three months of the previous fiscal year.

There is, however, one problem: By writing about it, there’s a danger the Washington pols might read what we’re saying, and decide that it’s important to do whatever they can to keep a surplus from happening.

So could you mellow out a little bit over there, Brian?

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UPDATE: If you go to that October BizzyBlog post, you’ll see that I’m not particularly impressed with the concept of a “surplus” as most define it, because the current large Social Security annual surpluses are needed (i.e., “raided”) to accomplish that. A true surplus that begins to actually leave the Social Security surplus where it belongs (i.e., the Social Security system) won’t, according to my projections, take place until FY 2012 — and that’s only if the Bush tax cuts of 2001 and 2003 are extended past their current expiration in 2010. If that doesn’t happen, forget about the idea of getting to a true surplus while leaving Social Security alone for quite a long time.

UPDATE 2: At the same ftportfolios.com link, Wesbury is predicting that January’s Monthly Treasury Report, due out sometime at 2:00 p.m. today, will show that Uncle Sam ran a $40 billion surplus in January (this article quotes another expert agreeing with that). I believe that the reported surplus will be even higher, for reasons that I’ll reveal if I’m right. :–>

UPDATE 3: Can’t let this go unnoticed (HT Club for Growth and Matt Naugle at Human Events’ The Right Angle [nice job on the name change, Matt; you're on your way to a branding empire :-->]) — Wesbury is apparently the brains behind The Economic Freedom Fund, which invests in a portfolio involving the top 20 countries in the Heritage Foundation’s Index of Economic Freedom. It’s not too much of a leap to believe that such a fund might outperform a typical international fund if the countries involved stay in the top tier of the economically free. Obviously, though, this is NOT-NOT-NOT a recommendation; you have to do all the necessary homework before you invest, and the decision to jump in or not is entirely yours.

From the ‘Get a Life’ Department (Literally)

Filed under: Business Moves — Tom @ 7:32 am

From AP via Fox News:

General Motors (GM) says it’ll edit a commercial about a sad robot jumping off a bridge because complaints were made to a suicide-prevention group.

The ad made its debut during the Super Bowl .

GM had initially said it would not change the spot, but the company changed its plans after a meeting this morning with the American Foundation for Suicide Prevention. The group says it started receiving complaints the day after the game.

The ad opens with the machine dropping a screw while working on a GM assembly line. It’s kicked out of the plant and finds work waving a “Condos for Sale” sign and holding up a speaker at a fast-food joint. It appears sad as it watches new GM vehicles drive by.

As the song “All By Myself” plays, the despondent robot leaps off a bridge into the water below. It then wakes up inside the factory. It was all a dream.

Having seen the commercial (fourth item in main video frame at the time of this writing) — Zheesh, that it’s a dream is the point, people. What about using a robot and “It was all a dream” don’t you understand?

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UPDATE: Debbie Schlussel didn’t like the ad, for an understandable reason. But she did NOT call for it to be pulled.

UPDATE 2, Feb. 16: The VW ad described at this article, on the other hand, probably deserved the quick hook it got, because it shows a HUMAN contemplating suicide.

Couldn’t Help But Notice (021207)

One of the quietest stories from the end of last week:

Consumer confidence climbed to a 2½-year high with people feeling even better about job prospects, the current economic climate and investment opportunities.

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Another similarly quiet story from last week: The productivity report for the fourth quarter from the Bureau of Labor Statistics that was (as these things have been for some time now) “stronger than expected” (though the performance for the entire year was less than stellar).
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Here I find out that the “Money Honey” supposedly has “credibility.” That’s funny, Sonny.

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A perspective on what “90% certainty” really means in science (bold is mine), in an article that is otherwise about “An experiment that hints we are wrong on climate change”:

When politicians and journalists declare that the science of global warming is settled, they show a regrettable ignorance about how science works. We were treated to another dose of it recently when the experts of the Intergovernmental Panel on Climate Change issued the Summary for Policymakers that puts the political spin on an unfinished scientific dossier on climate change due for publication in a few months’ time. They declared that most of the rise in temperatures since the mid-20th century is very likely due to man-made greenhouse gases.

The small print explains “very likely” as meaning that the experts who made the judgment felt 90% sure about it. Older readers may recall a press conference at Harwell in 1958 when Sir John Cockcroft, Britain’s top nuclear physicist, said he was 90% certain that his lads had achieved controlled nuclear fusion. It turned out that he was wrong. More positively, a 10% uncertainty in any theory is a wide open breach for any latterday Galileo or Einstein to storm through with a better idea. That is how science really works.

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Misplaced voter compassion hits homeat work (HT Drudge):

New wage boost puts squeeze on teenage workers across Arizona

Oh, for the days when Arizona’s high school students could roll pizza dough, sweep up sticky floors in theaters or scoop ice cream without worrying about ballot initiatives affecting their earning power.

That’s certainly not the case under the state’s new minimum-wage law that went into effect last month.

Some Valley employers, especially those in the food industry, say payroll budgets have risen so much that they’re cutting hours, instituting hiring freezes and laying off employees.

Those in Ohio, which also passed minimum-wage legislation in a ballot initiative last year, you may have noticed certain prices have increased at places relying on minimum or near-minimum wage employees.

Voters can’t repeal the economic law of supply and demand.

UPDATE, 4 PM: Bill Sloat at The Daily Bellwether notes the negative impact of the minimum-wage increase on student employment at Ohio colleges.

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Allah at Hot Air nails journalistic malpractice at the Associated Press (in revising a direct quote from a CAIR official after the fact by watering down its harshness). Ombudsman Bryan Calame at the New York Times (HT Allah at Hot Air) calmly but completely crucifies (probably requires registration) the paper’s laughably inaccurate “majority of women are unmarried” story from a couple of weeks ago.

There aren’t enough Allahs, Calames, or in the case of the “unmarried” story, Michael Medveds, to catch it all, or to comment on it all. The old editorial controls, as ineffective as they often were in the past, no longer seem to be present at all. Be skeptical — very skeptical.

Who’s Intimidating Whom? Ellen Goodman’s Disgraceful Globaloney Analogy (UPDATES: Goodman Bio, Steyn Weighs In, So Does Vaclav Klaus)

Ellen Goodman goes over the top (HT Pundit Review):

I would like to say we’re at a point where global warming is impossible to deny. Let’s just say that global warming deniers are now on a par with Holocaust deniers, though one denies the past and the other denies the present and future.

It’s amazing how supposedly mainstream people like Goodman so casually write garbage like this with no personal accountability — at least immediately. But if you want to see how an acquired newspaper that dominates its market can create most of an $800-plus million writedown for its parent company and ongoing layoff episodes for its employees, look no further than the Boston Globe and its decision to keep mean-spirited liberal lightweights like Goodman on board.

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UPDATE: Just to demonstrate how out of touch Goodman’s image is with the reality of her current writings, here are snippets from her postwritersgroup.com bio:

She once said, “I think readers need to be less alienated from editorial pages” and made them so by expanding the debate on op-ed pages.

….. She is widely acclaimed as a voice of sanity….

Yeah, tell me how calling anyone who isn’t a globalarmist, including thousands of scientists who aren’t buying the climate-change orthodoxy, the forward-looking equivalent of a Holocaust denier “expands the debate” and demonstrates “sanity.”

Goodman’s best work, and her 1980 Pulitzer, are a quarter-century behind her. She is one of a very long list of writers who appeared to be reasonable people through much of their careers, but who slowly but surely began going over the edge when Ronald Reagan triumphed in the 1980 election. Their conditions and temperament worsened as the Soviet Union fell, the Clinton presidency became an obvious underachiever, and George Bush won two presidential elections.

Another, although he obviously didn’t get to see all of the stages involved, was the late Pulitzer winner James Reston, the New York Times writer mentioned at this post. Reston was appalled at the spitting and other actions of antiwar demonstrators in 1967 and appeared to be neutral, perhaps even mildly supportive, of the Vietnam War at that point. But by the summer of Reagan’s 1984 reelection campaign, Reston had taken to whining twice a week about how dumb the voters were, how dangerous the world was getting, and how obvious (to him) it was that Reagan was approaching senility.

UPDATE 2: Mark Steyn admits that he’s a “climate holocaust denier,” with this wrap:

So, faced with a degree rise in temperature, we could destroy the planet’s economy, technology, communications and prosperity. And ruin the lives of millions of people. (and perpetuate global poverty — Ed.)

Or we could do what man does best: adapt.

You do the math.

UPDATE 3, 8:30 AM: The Commons Blog makes the HUGE point that one of the side-effects of screeds like Goodman’s and others’ is that they trivialize the enormity of the real Holocaust when they invoke its name with reckless abandon.

UPDATE 4, 4:15 PM: A special update for commenter Jill — part of an interview posted at Drudge (HT Weapons of Mass Discussion; copy saved to host for future reference) with Vaclav Klaus of Czechoslovakia, a country that has experience recognizing and dealing with tyranny in its many disguises. Money quotes among many gems:

Klaus: ….. Global warming is a false myth and every serious person and scientist says so. …..
….. it’s obvious that environmentalism is a new incarnation of modern leftism.

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Q: Isn’t there enough empirical evidence and facts we can see with our eyes that imply that Man is demolishing the planet and himself?

A: It’s such a nonsense that I have probably not heard a bigger nonsense yet.

Q: Don’t you believe that we’re ruining our planet?

A: I will pretend that I haven’t heard you. Perhaps only Mr. Al Gore may be saying something along these lines: a sane person can’t. I don’t see any ruining of the planet, I have never seen it, and I don’t think that a reasonable and serious person could say such a thing.

Vaclav Klaus for UN Secretary-General (Can you imagine…?). And let’s move the UN to Prague while we’re at it.

UPDATE 5: Dennis Prager nails it

….. the Ellen Goodman quote is only the beginning of what is already becoming one of the largest campaigns of vilification of decent people in history — the global condemnation of a) anyone who questions global warming; or b) anyone who agrees that there is global warming but who argues that human behavior is not its primary cause; or c) anyone who agrees that there is global warming, and even agrees that human behavior is its primary cause, but does not believe that the consequences will be nearly as catastrophic as Al Gore does.

If you don’t believe all three propositions, you will be lumped with Holocaust deniers, and it would not be surprising that soon, in Europe, global warming deniers will be treated as Holocaust deniers and prosecuted.

On ‘The brain scan that can read people’s intentions’

Filed under: Business Moves,Economy,Marvels,Taxes & Government — Tom @ 6:06 am

My reax to this (HT FYI News):

  • Men around the world hope this works with their mates.
  • Salesmen and saleswomen around the world are trying to figure out how to steal it and “lose” the technology.
  • Voters want to try this on political candidates, and politicians in general.

Apple: From ‘How Convenient’ to ‘How Serious’

Filed under: Business Moves — Tom @ 6:01 am

From Information Week (link was in original):

Apple: None Of Our Products Is Windows Vista Compatible
By Paul McDougall, InformationWeek
Feb. 7, 2007

It’s not just Apple’s iTunes software that won’t work properly with Microsoft’s new Windows Vista operating system.

According to a document that Apple has posted on its Web site, none of the software that it’s made available for the Windows environment has been updated for Vista compatibility.

That includes not only iTunes but QuickTime, Airport For Windows, Bonjour For Windows, iDisk utility, and AppleWorks for Windows. All of those applications or utilities are listed by Apple as compatible with Windows XP and earlier versions of Windows, but not Vista.

The document refers iTunes users to another online document indicating that a Vista patch is on the way for that particular application, but it makes no mention of when Apple may work out Vista compatibility for the other products. Sure enough, in a post on Apple’s support forum, a QuickTime user reported that QuickTime “works fine on Media Center 2005 but crashes intermittently on Media Center Vista.”

….. Apple has gone so far as to advise its iPod users not to upgrade to Vista for fear that the device could be corrupted during ejection from a Vista-equipped PC.

It would be very interesting to know whether Apple had the ability to do fixes in advance of Vista’s release or not, which would have depended on whether Microsoft was willing to give Apple pre-release versions of its new operating system to work with. It could also be that pre-release versions were available, but that the whizzes in Cupertino didn’t bother to retrieve them.

The iTunes situation was mentioned here last week (last item at link) as a “how convenient” item, but only in a tongue-in-cheek sense. In the real world, it’s naive to think that the majority of users (i.e., businesses) will delay Vista purchases because of iTunes compatibility problems; to the extent business computers, especially laptops, double as home computers, the compatibility problem certainly has the potential to hurt iTunes and to create an opening for competitive music platforms.

As much as Apple and the Mac community like to yuk it up over Vista’s alleged inferiority, the fact is that Apple will depend on Vista users for a significant-enough percentage of its future revenues, and a bigger percentage of its continued visibility. Thus, fixes ought to be formulated forthwith.

Positivity: Abe Lincoln’s Failures, Setbacks — and Successes

Filed under: Positivity — Tom @ 5:56 am

Worth recalling (go to Page 9 at link) on the 198th anniversary of his birth:

1832 — Lost job; Defeated for state legislature; Elected company captain of Illinois militia in Black Hawk War
1833 — Failed in business; Appointed postmaster of New Salem, Illinois; Appointed deputy surveyor of Sangamon County
1834 — Elected to Illinois state legislature
1835 — Sweetheart died
1836 — Had nervous breakdown; Re-elected to Illinois state legislature (running first in his district); Received license to practice law in Illinois state courts
1837 — Led Whig delegation in moving Illinois state capital from Vandalia to Springfield;
Became law partner of John T. Stuart
1838 — Defeated for Speaker Nominated for Illinois House Speaker by Whig caucus; Re-elected to Illinois House (running first in his district); Served as Whig floor leader
1839 — Chosen presidential elector by first Whig convention; Admitted to practice law in U.S. Circuit Court
1840 — Argues first case before Illinois Supreme Court; Re-elected to Illinois state legislature
1841 — Established new law practice with Stephen T. Logan
1842 — Admitted to practice law in U.S. District Court
1843 — Defeated for nomination for Congress
1844 — Established own law practice with William H. Herndon as junior partner
1846 — Elected to Congress
1848 — Lost denomination (i.e., Chose not to run for Congress, abiding by rule of rotation among Whigs.)
1849 — Rejected for land officer; Admitted to practice law in U.S. Supreme Court; Declined appointment as secretary and then as governor of Oregon Territory
1854 — Defeated for U.S. Senate Elected to Illinois state legislature (but declined seat to run for U.S. Senate)
1856 — Defeated for nomination for Vice President
1858 — Again defeated for U.S. Senate
1860 — Elected President of the United States
1864 — Re-elected as President of the United States