January 30, 2009

Driving Mr. Daschle: HHS Nominee Has $100,000 ‘Geithner Problem’

Filed under: Economy,MSM Biz/Other Bias,Taxes & Government — Tom @ 11:26 pm

Daschle0109.jpgFormer South Dakota Senator Tom Daschle (picture at right is part of a Getty Images pic at a related New York Times story) has just upped the ante in Washington’s tax-avoiding/evading game of “Can you top this?”

Whereas recently confirmed Treasury Secretary Timothy Geithner “only” $40,000 in back taxes and interest, principally relating to unpaid Social Security and Medicare taxes (with a dash of retirement-plan penalty and illegally deducted overnight summer camp expenses included in the mix), the man who Rush Limbaugh used to call “Puff” Daschle during his Senate days has upped to ante to six figures.

Jake Tapper at ABC’s Political Punch appears to be the one who broke the story (HT NRO’s The Corner):

Bumps in the Road: Obama’s HHS Secretary Nominee Faces Tax Questions Over Car and Driver

….. After being defeated in his 2004 re-election campaign to the Senate, Daschle in 2005 became a consultant and chairman of the executive advisory board at InterMedia Advisors.

Based in New York City, InterMedia Advisors is a private equity firm founded in part by longtime Daschle friend and Democratic fundraiser Leo Hindery, the former president of the YES network (the New York Yankees’ and New Jersey Devils’ cable television channel).

That same year he began his professional relationship with InterMedia, Daschle began using the services of Hindery’s car and driver.

The Cadillac and driver were never part of Daschle’s official compensation package at InterMedia, but Mr. Daschle — who as Senate majority leader enjoyed the use of a car and driver at taxpayer expense — didn’t declare their services on his income taxes, as tax laws require.

During the vetting process to become HHS secretary, Daschle corrected the tax violation, voluntarily paying $101,943 in back taxes plus interest, working with his accountant to amend his tax returns for 2005 through 2007.

(Daschle reimbursed the IRS $31,462 in taxes and interest for tax year 2005; $35,546 for 2006; and $34,935 for 2007, a Daschle spokesperson said, adding that Daschle had asked his accountant to look into the tax implications of the car and driver five months before Obama won the presidency.)

The Daschle spokesperson told ABC News that the senator, facing questions from the committee, has said “he deeply regretted his mistake. When he realized it was a mistake he corrected it rapidly.”

The chairman of the Senate Finance Committee, Sen. Max Baucus, D-Mont., has called his colleagues for a private meeting at 5 p.m. ET Monday to discuss these complications surrounding Daschle’s nomination.

In the meantime, the White House and Democratic allies are coming to Daschle’s defense.

What follows in Tapper’s report are the typical “no big deal” Democratic claims, with White House Deputy Secretary Bill Burton leading the charge, along with Jim Manley, a spokesman for Harry Reid. Republican Congressman Eric Cantor of Virginia counters by saying that “The pattern is solidified. … It’s easy for the other side to sit here and advocate higher taxes because — you know what? — they don’t pay them.”

Ceci Connolly at the Washington Post reports the daft dodge developed by Daschle:

Daschle spokeswoman Jenny Backus said that Daschle “naively” believed the car service was a “generous offer from a friend,” and he discovered only last summer that it is considered reportable income.

Daschle brought the matter to the attention of the Senate Finance Committee “when he submitted his nomination forms,” White House Press Secretary Robert Gibbs said in an e-mailed statement tonight. “We are confident the committee is going to schedule a hearing for him very soon and he will be confirmed.”

So why this became a story during the traditional Friday night news dump, when fewer people are paying attention to what’s going on (and Rush Limbaugh and Sean Hannity have to wait almost 72 hours before they can pounce on their radio shows)? How long have any senators known about this, and if it’s more than about 24 hours, why didn’t this break once it was known?

Best question: Is six figures the limit before a tax problem becomes important enough to stop a nomination? Do I hear seven?

But the real entertainment in this will be seeing how (probably not “if”) the Associated Press and other media outlets minimize the significance of the Daschle Dodge. Will they pull out their Geithner words again (“Goofs.” “Discrepancies”), or get even more “creative”?

Cross-posted at NewsBusters.org.

Fourth Quarter 2008 GDP Report: Where We Learn Just How Poor the POR Economy Is (Update: Bad Enough at an Annual -3.8%; Hinting Recovery?)

Filed under: Economy,Taxes & Government — Tom @ 8:11 am

Overview (added in June 2008): Welcome to the POR (Pelosi-Obama-Reid) Recession as normal people define it.

________________________________________________

Well, that long-awaited day is here — the day where we get the first major indication just how bad the damage has been from the POR (Pelosi-Obama-Reid) Economy we’ve been living with since  June 2008.

The third quarter of 2008 came in at an annualized -0.5%.

That’s bad enough, but as you might expect, predictions for the fourth quarter are coming in much worse:

(Link)

Economists polled by Reuters offered a median estimate of a 5.4 percent decline in U.S. gross domestic product on an annualized basis in the fourth quarter, the worst since the first quarter of 1982.

The estimates of 81 economists ranged from a decline of 3.0 percent to a drop of 7.0 percent.

(Link — Don’t let the Obama Administration see this; they want us to assume we’re all gonna die unless his “Porkulus” package passes)

Strange as it may sound, there is a way an ugly fourth-quarter gross-domestic-product report could be a sign good news is afoot.

The Bureau of Economic Analysis on Friday takes its first crack at estimating GDP in the last quarter of 2008. Economists think inflation-adjusted GDP fell at a 5.5% annualized rate, the worst since 1982, as the economy was suffocated by the disappearance of credit.

Often such sharp declines in GDP are followed by significant snapbacks. The quarter following a GDP decline of 5% or more is positive 69% of the time in the past 48 such episodes in the U.S., U.K. and Germany, according to Merrill Lynch international economist Alex Patelis. He calls it a “heart attack” pattern because GDP’s course mimics the jagged line on an electrocardiogram.

(Link — These guys got the Obamemo)

Many economists think the decline will be a whopping 5 percent or more – which would make it the worst quarter for the U.S. economy since 1982.

“When we see fourth-quarter GDP … it will be bad,” said Nigel Gault, chief U.S. economist at IHSGlobal Insight, an economic forecasting firm in Lexington, Mass. “What today’s numbers tell us is that first-quarter 2009 will be just as bad.”

(link)

Ben Herzon, senior economist of Macroeconomic Advisers, who said the GDP growth rate will likely be negative 5.5 percent, told USA Today, “It’s going to confirm what we already know, and that is we’re in a severe recession.”

Gloom has grown with the spreading realization of the refusal by Nancy Pelosi and Harry Reid to back down from their insistence on starving the economy of energy in the name of what might be the greatest fraud in human history, Barack Obama’s campaign promises of huge tax increases on the most productive (deferred but not deleted), and, more recently, the dogged determination on the part of all three players to ram a comically misnamed “stimulus” down the economy’s throat.

What to watch for: How many media outlets “forget” to include the word “annualized” or “annual rate” in their coverage, giving many viewers the impression that the economy shrunk by the amount reported all in one quarter (See Update below — The prediction came true twice in 20 minutes.)

The report will be here at 8:30. Here it is

Real gross domestic product — the output of goods and services produced by labor and property located in the United States — decreased at an annual rate of 3.8 percent in the fourth quarter of 2008, (that is, from the third quarter to the fourth quarter), according to advance estimates released by the Bureau of Economic Analysis. In the third quarter, real GDP decreased 0.5 percent.

Initial reax: Well, that wasn’t as bad as just about everyone thought. In fact, I’d characterize this as a huge miss by the prognosticators. It won’t be seen as that obvious, but it’s really no different than guessing -1.0% and having it turn out a bit less than +1.0%, which would most certainly raise eyebrows.

Initial theory: Factors cited in this post (lower gas prices, lower mortgage rates) began taking hold in December. This means that Obama’s race against the economy recovering on its own may indeed be on, and his lead may not be as great as he thought (better pass the Porkulus package quick, before those January and February reports start coming out).

I’ll have more to say later after reviewing the report and gauging media reaction.

____________________________________________________

UPDATE: The prediction that the media would make this look like a one-quarter drop came true very quickly — as in twice in the first 20 minutes after the release.

USAandCNNre4Q08GDP

No reference to an annualized rate is present in either e-mail.

No one other than the economically astute or close followers of the news reading either of these e-mails would think that the economy really only contracted by 0.94% in the fourth quarter, which is what an annualized 3.8% is.

UPDATE 2: The smaller-than-expected decrease is mostly due to an inventory buildup, per Bloomberg — “Without the jump in inventories, the contraction would have been 5.1 percent ….”

This is where the alarming irresponsibility of Team Obama comes into to play. They’ve been playing the “worst economy since the Great Depression” tune for months. The fact is, we don’t know that, and the numbers, even including today’s GDP, objectively don’t support that claim. But if THEY say it enough and keep consumer confidence at its alltime low, it could happen.

Businesses aren’t stupid. They tend to build up inventories when they either have orders or reasonably expect orders. If Obama and his peeps keep on talking down the economy and their gloom continues to have impact, those expected orders won’t materialize and other existing orders will be cancelled. This will leave businesses sitting on inventories they can’t move. This will cause the contraction to be worse than it could have or should have been.

Like I said, this is alarming irresponsibility, and the press is playing right along.

I can’t help but wondering if this is what they (Obama and the press) really want, given their determination to pass — and quickly (hurry, hurry!) a mis-advertised spending bill containing a trillion dollars (including interest) of their party’s fondest spendaholic dreams.

If we’re supposed to believe that Team Obama doesn’t want to take down the economy, the question becomes: What would they be doing differently if they did want to take it down?

UPDATE 3: Following up on the points in Update 2 –

President Barack Obama says the economic slump is a “continuing disaster” for America’s families and says the country’s leaders can’t “drag our feet” on finding solutions for the ailing economy.”

Pictured at the left is the Master of Disaster. At his right, based on his performance thus far, just as the POR Economy has “achieved” a recession as traditionally defined, is a True Disaster:

news-apollocreed news-apollocreed

Latest Pajamas Media Column (‘The Myth of the ‘Widening Gap Between Rich and Poor”’) Is Up

Filed under: Economy,MSM Biz/Other Bias,Taxes & Government — Tom @ 7:24 am

It’s here.

It will go up Sunday morning at BizzyBlog (link won’t work until then) under the title “The ‘Growing Income Inequality’ Myth: A Convenient Partisan Club” after the blackout expires.

Left on the cutting room floor: Dealing with income mobility, the relative ease with which people move between income groups depending on changes in circumstances, especially between generations. Previous BizzyBlog posts on the subject are:

  • Nov. 13, 2007 — Treasury’s Income Mobility Report Blows Away ‘Mediocre Bush Economy’ and Other Myths
  • Sept. 30, 2007 — The Forbes 400: A Lesson in Economics Old Media Won’t Learn
  • Sept. 29, 2005 — Income Inequality + Economic Mobility = Long-Term Prosperity