April 7, 2011

The POR Economy’s Graphic Failure

Filed under: Business Moves,Economy,Taxes & Government — Tom @ 10:33 pm

At the urging of a commenter, I decided to look at the POR (Pelosi-Obama-Reid) Economy’s performance on job destruction since that sad era began on about June 1, 2008 (evidence continues to mount that its beginning may have been in May or even April, but we’re grading on a curve tonight.

Here is what has happened with government employment, private-sector employment excluding those employed by temporary help services, and those employed as temps:

POReconGovtPvtTemps0608to0311-1

Heckuva job, Nancy, Barry, and Harry.

AP Report on Obamacare 1099 Repeal Ignores How It Came About, Downplays Tax Increase, Misstates Current Law

1099-repeal-provisionThe repeal of Obamacare’s nightmarish 1099 requirement has passed both chambers of Congress and is on its way to the President for his expected signature.

In reporting Tuesday on the repeal bill’s progress, the Associated Press’s headline writers assured readers that the original requirement in Obamacare was a “small” component of it. The AP’s Stephen Ohlemacher also misstated current 1099 filing requirements, ignored the repeal bill’s de facto tax increases (i.e., reductions of tax credits) that were crammed into the bill to “pay” for lost revenue that will supposedly result from repeal, and glossed over the fact that the requirement made it into law because almost no one read the Obamacare legislation in the first place. Other than that, the AP report isn’t too bad. (/sarc)

Here are key paragraphs from Ohlemacher’s report (bolds and number tags are mine):

Congress votes to repeal small part of health law

Congress sent the White House its first rollback of last year’s health care law Tuesday, a bipartisan repeal of a burdensome tax reporting requirement that’s widely unpopular with businesses. Even President Barack Obama is eager to see it gone.

The Senate voted 87 to 12 to repeal the filing requirement, which would have forced millions of businesses to file tax forms for every vendor selling them more than $600 in goods each year, starting in 2012. The filing requirement is unrelated to health care. However, it would have been used to pay for part of the new health law.

The filing requirement was projected to raise nearly $25 billion over the next decade by ensuring that vendors pay their taxes. [1] Under the bill, the money will be made up by changing another part of the health care law, requiring more families to repay tax credits designed to help them cover insurance premiums, if their incomes increase beyond certain levels. [2]

Republicans said the filing provision is an example of what happens when lawmakers hastily patch together a massive bill like the health care overhaul, then vote to pass it without knowing everything that’s in it. [3] Lawmakers from both parties say the filing requirement could create a paperwork nightmare for businesses and the Internal Revenue Service.

Businesses already must file Form 1099s with the IRS when they purchase more than $600 in services from a vendor in a year. [4] The new provision would have extended the requirement to the purchase of goods, starting in 2012.

The requirement would hit about 38 million businesses, charities and tax-exempt organizations, many of them small businesses already swamped by government paperwork, according to a report by the National Taxpayer Advocate, an independent watchdog within the IRS.

… Starting in 2014, the new health care law will provide tax credits to low- and middle-income families to help pay health insurance premiums, if they don’t get insurance through their employers.

Under the law, if a family’s income increases, and the family members no longer qualify for the tax credits, or qualify for a smaller amount, they would have to repay a portion of those tax credits when they file their federal tax returns. [2] The bill passed Tuesday would increase the amount people would have to repay, generating a projected $25 billion over the next decade.

Notes:

[1] — As usual, Congress failed to estimate the out-of-pocket costs and hits to productivity businesses would have had to incur to comply. Those costs would have reduced the taxable incomes of millions of affected businesses of all types, reducing collections of personal income, corporate income, and Social Security/Medicare taxes. Those reduced collections would have partially if not completely wiped out the supposed $25 billion increase in tax revenues supposedly arising from increased compliance, and should have made the travesty in point [2] which follows unnecessary.

[2] — Don’t you love the passivity in the phrases “if their income increases,” and “if a family’s income increases” — like the money just falls out of the sky for no apparent reason? Here’s what this translates to in the real world: If a person works harder and as a result earns more money, or if another family member gets a job enabling the family to earn more money, Uncle Sam will take away a large and sometimes huge portion of the health care premium subsidy they were entitled to when they weren’t working so hard. As I read it, the subsidy takeaway will now be even steeper than what Robert Rector at the Heritage Foundation estimated in early 2010 when Obamacare legislation was advancing through Congress. Here is how it looked then, based on data Rector compiled in a detailed study of the legislation as passed by the House in the fall of 2009:

ObamaCareSubsidiesHeritage032610

As I explained in March 2010:

The orange boxes represent examples where the subsidy decrease amounts to almost 80% or more than 80% of a couple’s $5,000 increase in combined or joint income. After adding another 7.65% for Social Security and Medicare taxes on top of the typical 15% (or higher) marginal federal income tax rate, the extra $5,000 earned will cost the couple more than $5,000 — even before considering state and local income taxes.

Then there are the purple boxes, where subsidy loss alone amounts to more than $5,000, including one case where it’s more than double that, before considering any other taxes.

Given the disincentives, many and probably most lower- and middle-income Americans will conclude that there’s no point in accepting promotions, working overtime, getting a second job, or attempting any other form of financial self-improvement (except perhaps under the table).

As I interpret the AP’s report, the 1099 repeal bill’s “increase (in) the (subsidy/tax credit) amount people would have to repay” worsens the disincentives, something that hardly seemed possible. But never underestimate Congress, apparently even when the House is controlled by Republicans.

[3] — “Without knowing everything that’s in it” = “Without having read it.” Republicans all too typically seem to have missed an opportunity to remind their constituents of the fact that, as former House Speaker Nancy Pelosi brazenly bragged, we had to wait until Obamacare passed to find out what was in it.

[4] — Ohlemacher misstated current law concerning who is required to file 1099s. Issuing a 1099 is not always required when you have purchased “more than $600 in services from a vendor in a year.” As the 2010 instructions for Form 1099 in the second column on Page 1 state, it is generally not required for “payments to a corporation.” With relatively narrow exceptions, vendor 1099s are generally sent only to sole proprietors and partnerships. The Obamacare 1099 expansion would have been twofold, requiring issuance for services provided by corporations for the first time, while also extending the requirement to all purchases of goods.

A further thought regarding Item [2]: John Boehner & Co. must be feeling pretty good about repeal through the courts. If their confidence is misplaced, the tax increases built into the repeal bill will turn out to have been a more than minor betrayal.

Cross-posted at NewsBusters.org.

Fundamental Government Shutdown Truths

Truth 1: If the House passes a bill to continue funding the government, be it a short-term continuing resolution or one covering the rest of the fiscal year, and Harry Reid’s Senate refuses to pass it, it is Harry Reid’s Senate which will have decided to shut down the government.

Truth 2: If the House passes a bill to continue funding the government, be it a short-term continuing resolution or one covering the rest of the fiscal year, and Harry Reid’s Senate then passes it intact, but the President vetoes the legislation, it is President Barack Obama who will have decided to shut down the government.

Truth 3: If the House passes a bill to fund the military to avoid having it be part of a government shutdown, and Harry Reid’s Senate refuses to pass it, it is Harry Reid’s Senate which will have decided to cut off our citizen soldiers serving here and overseas.

Truth 4: If the House passes a bill to fund the military to avoid having it be part of a government shutdown, and Harry Reid’s Senate then passes it intact, but the President vetoes the legislation, it is President Barack Obama who will have decided to cut off our citizen soldiers serving here and overseas.

These fundamental truths are not arguable; it’s how our government works. All the press spin, White House spin, Democratic Party spin, and historical revisionism in the world will never change them.

At IBD: ‘Pain and Suffering’ — And Death

Filed under: Health Care,Taxes & Government — Tom @ 9:19 am

An editorial reminder at Investors Business Daily that the fight to repeal Obamacare really is a matter of life and death (internal link added by me):

Recall the complaints that the U.S. is the only developed nation in the world that doesn’t provide universal medicine? So how’s that arrangement working elsewhere? Rather poorly, particularly in Britain.

Agitators for government health care can no longer, as they did at one time, hold up the British system as the model the U.S. should follow. They’ve learned to stay away — and for good reason. The system has followed the path that all socialist systems must follow: It is breaking under its own weight.

The nation with the reputation for rotten dental care is quickly developing a reputation for delays in medical treatment. “Devastating and cruel” is how British surgeons are now describing the long waits for operations.

… The consequences of trying to treat everyone through the government go far beyond the pain and suffering of missed joint-replacement surgery. Sometimes, the wages are death.

That’s how it ended for Margaret Hutchon, who happened to be a former NHS director. She died last month, the Daily Mail reported, “after waiting for nine months for an operation — at her own hospital” (emphasis ours).

She “had been waiting since last June for a followup stomach operation,” but “her appointments to go under the knife were cancelled four times and she barely regained consciousness after finally having surgery.”

… Britons should be outraged. If the government taxes them to fund universal care, they should get the care. If the government can’t do the job — which clearly it can’t — it should get out of the business of meddling in people’s lives and let everyone take care of his or her own health care.

Americans should be outraged as well, because a Democratic Congress and White House have forced on them a program that will be no more successful than the British health care wreck.

Actually, Obamacare’s bureaucratic maze and incentive-killing subsidy structure — where in some instances earning more money causes decreases in subsidies that are even greater than the income earned, even before considering other taxes — makes it likely to make things worse than anything the UK has ever seen.

Margaret Hutchon’s demise was determined by what turned out to be a de facto “death panel” of medical bureaucrats who decided that she could and should wait. Who could actually want this kind of system?

As usual with IBD, read the whole thing.

Positivity: New pro-life news source aims for cultural impact

Filed under: Life-Based News,Positivity — Tom @ 5:59 am

From Denver:

Apr 4, 2011 / 02:49 pm

Heroic Media, a faith-based company that promotes alternatives to abortion through mass media, has launched an online news portal at Heroicnews.org. The initiative is aimed at making a broad cultural impact, complementing its current outreach to women in crisis pregnancies.

“Heroic Media has always had two goals: to provide women facing unexpected pregnancies with hopeful alternatives through mass media advertising, and to create a culture of life,” explained Heroic Media founder Brian Follett.

While the company’s billboards and other advertisements address the first concern on an immediate level, Heroicnews.org exists to change attitudes and strengthen the pro-life cause.

The service will address a range of related cultural issues in addition to abortion, including euthanasia, embryonic stem cell research, traditional marriage, and human cloning.

Jenny Uebbing, Heroic News’ English-language editor, described the service as “the long-awaited answer to mainstream media’s one-dimensional coverage of the most pressing issues of our time.”

By compiling news from a range of trusted sources, she hopes to promote a universal vision of human dignity rooted in Christian values.

“Heroic speaks into the intellectual and moral void of online news bringing fresh, relevant and hopeful content to a world in need of good news,” Uebbing said. …

Go here for the rest of the story.

Where Did the Fed Foreign Lending Story Go?

Memory HoleLast Friday, in what one would think would be a bombshell story headlined “Foreign Banks Tapped Fed’s Secret Lifeline Most at Crisis Peak,” Bloomberg’s Bradley Keoun and Craig Torres reported that foreign banks secretly and routinely tapping the Federal Reserve’s “discount window” lending program, primarily in 2008 and 2009. Some specifics:

  • “(The) loans protected a lender to local governments in Belgium, a Japanese fishing-cooperative financier and a company part-owned by the Central Bank of Libya.”
  • Dexia SA (DEXB), based in Brussels and Paris, borrowed as much as $33.5 billion through its New York branch …”
  • “Dublin-based Depfa Bank Plc, taken over in 2007 by a German real-estate lender later seized by the German government, drew $24.5 billion.”
  • “…foreign banks … (accounted) for at least 70 percent of the $110.7 billion borrowed during the week in October 2008 when use of the program surged to a record.”

Fed Chairman Ben Bernanke fought for two years to keep the information secret after Bloomberg filed a Freedom of Information Act request in 2009. The Bloomberg report quotes Bernanke as claiming in April 2009 that disclosure “might lead market participants to infer weakness.”

In the Bloomberg report, Congressman Ron Paul is quoted making a prediction that has sadly been way off the mark:

“The American people are going to be outraged when they understand what has been going on,” U.S. Representative Ron Paul, a Texas Republican who is chairman of the House subcommittee that oversees the Fed, said in a Bloomberg Television interview.

Well, Congressman, the American people aren’t “outraged,” because the American people don’t “understand what has been going on.” The reason they don’t understand what has been going on is that the rest of the establishment press in the U.S. has been relatively uninterested in reporting the facts, let alone the legality of a nation’s sovereign bank opening up its discount window to the rest of the world.

A “past week” Yahoo News search on [Bernanke "foreign banks"] (input exactly as indicated between brackets, sorted by time, returns 28 items (it looks like 61 at first, but it’s really only 28). Considering the gravity of the story, that’s barely a ripple, even given the 2-1/2 years which have since passed.

A March 31 Associated Press report by Jeannine Aversa and Derek Kravitz on the Fed’s document release and its related “there’s nothing here you could possibly be interested in” headline (“Fed names banks that drew loans during crisis”) should probably serve as a model for journalism students assigned to cover a story but to reveal as little as possible while doing so.

The pair’s write-up didn’t mention the existence of foreign bank borrowings until its seventh paragraph, and gave no hint of the existence of anything other than domestic loans until that point. Of the six specific dollar amounts they identified, only one was associated with foreign banking entities. Aversa and Kravitz mentioned the existence of loans to an Arab bank in which the central bank of Libya has a large stake, but “somehow” forgot to tell readers that what was involved, according to Zero Hedge quoting Vermont Sen. Bernie Sanders, was “more than $26 billion in credit.”

Here are the first eight paragraphs illustrating Kravitz’s and Aversa’s aversion to the core story:

For the first time in its 98-year history, the Federal Reserve on Thursday identified banks that borrowed from its oldest lending program.

The Fed was compelled to name the banks that drew emergency loans during the financial crisis after the Supreme Court rejected a bid by major banks to keep that information secret. It’s the latest sign of how the Fed is becoming more transparent – either by choice or by force.

The central bank lent up to $110 billion through its emergency “discount window” at the height of the crisis. After Lehman Brothers collapsed in September 2008, banks turned to the Fed as a lender of last resort because their credit had frozen up. The Fed argued then that naming those banks could have stirred a panic, leading to a run on those banks and defeating the program’s purpose.

The documents released Thursday showed that a range of large and small institutions borrowed from the program from August 2007 through March 2010.

Most of the lending took place in the two-month stretch between September and October 2008. The specific program that the banks drew from has been redacted from the documents, but the data points to most of the loans being through the “discount window.” In many cases, those loans were paid back the following day.

Some of the biggest loans were drawn by the nation’s largest banks. For example, U.S. Bank took out an overnight loan of $3.35 billion on Sept. 10, Wachovia borrowed $29 billion on Oct. 6, and Morgan Stanley drew more than $3 billion on Oct. 9.

But foreign banks also relied heavily on the emergency lending program. On one day in late October, Dexia, a Belgian-based European bank, and Depfa, a German subsidiary headquartered in Dublin, each drew about $25 billion in overnight loans. That represented about half of the money that was borrowed by 44 banks that day.

The documents also show that the Arab Banking Corporation took out loans from the discount window during the financial crisis. The central bank of Libya owns a large stake in that bank, according to the bank’s web site.

It would not be out of line to suggest the possibility that the AP pair and the wire service iteself hoped that there would be little interest in the story on the part of subscribing outlets if they kept foreign banks out of the report’s headline and deferred mentioning them as long as possible in its content. It would appear that they largely got their wish.

A March 31 New York Times story appearing on Page B1 of the April 1 print edition (i.e., not on the front page) revealed much of the truth which the AP overlooked:

Perhaps the most surprising revelation in Thursday’s documents was that foreign banks quickly became the largest and most frequent borrowers. On Sept. 15, 2008, the day that Lehman Brothers filed for bankruptcy, the Austrian bank Erste Group borrowed $4 billion. By the end of that week banks from Spain, France and Japan had also borrowed billions.

An analysis of discount window lending from February 2008 to February 2009 shows that the vast majority of the loan volume went to foreign institutions.

No one seems to be asking what one might think would be a couple of pretty central questions:

  1. Is the foreign lending, which the Fed may never have engaged in until 2007 (and certainly never at the level then undertaken), legal or constitutional?
  2. Was Ben Bernanke telling the truth when his answer at a 2009 Congressional hearing concerning which European financial institutions received money was “I don’t know”? His ultimate answer was that he knew 14 central banks got money, but that he didn’t know the names of specific banks which got money from those central banks, which is hardly satisfying.

It would seem that the vast majority of the establishment press isn’t interested in finding answers to these questions. They should be.

Cross-posted at NewsBusters.org.