According the Associated Press, “Ask AP” is “a weekly Q&A column where AP journalists respond to readers’ questions about the news.”

Given how biased the wire service’s news reporting is, you wouldn’t expect “Ask AP” responses to be very different. They usually aren’t.

Case in point (second question at link) — Reader Cindy Garcia of Vista, California asked AP about the costs and benefits of illegal immigration:

I hear so many conflicting stories on illegal immigration. Please tell me if you can how much the illegal immigrants contribute to the economy and how much they use in free services. If they all got deported, how would it affect our economy?

Here is the sadly incorrect and incomplete answer from AP writers Laura Wides-Munoz in Miami, Jacques Billeaud in Phoenix, and Suzanne Gamboa in Washington (bolds are mine):

It’s tough to say how many people are in the U.S. illegally, let alone how many are working or using public resources. Every study uses rough estimates. Still, we do have some clues.

Illegal immigrants contribute to the economy whenever they pay sales tax and, indirectly through rent payments, real estate taxes.

Also, those who use false Social Security numbers pay taxes into the system they don’t get back, since people here illegally aren’t eligible to receive Social Security payments. In 2003 alone, the government received Social Security taxes on $57.8 billion from wage reports that couldn’t be matched to the person filing.

Illegal immigrants are excluded from most federal and state entitlements like subsidized housing or food stamps, and a 2007 congressional report found they appear to contribute more than they use in services. But the money they contribute often goes to federal and state coffers, while many services they benefit from, such as health and law enforcement, come out of local government budgets.

Several studies show more than half of the country’s estimated 12 million illegal immigrants are uninsured (out of a total of 47 million uninsured people in the U.S.) and thus likely to use public emergency rooms that treat everyone regardless of ability to pay. It’s difficult to calculate the amount of free health care - or, for that matter, free public-school education - they benefit from, since it simply isn’t known what proportion of these services go to people who are in the country illegally.

Another cost of illegal immigrants: Their willingness to accept low wages drives down wages in some industries. Then again, if immigrants didn’t take these jobs, some of them might get outsourced overseas.

Using Pew Hispanic Center and U.S. Census statistics, the independent economic research firm the Perryman Group concluded that if all illegal immigrants were deported, agriculture would lose nearly a quarter of its workers, the building maintenance industry would lose 17 percent and the construction industry would lose almost 15 percent.

Even though Garcia asked “how much the illegal immigrants contribute” and “use in free services,” note that only one dollar amount appeared in the AP trio’s answer, and that even this amount, dressed up as a “benefit,” wasn’t the actual amount of the benefit.

I believe that the one item quantified, the “$57.8 billion from wage reports” is meant to make the real benefit look bigger than it really is. If the $57.8 billion in wages is correct, the 15.3% combined employer and employee FICA and Medicare taxes on that amount would be $8.84 billion. Why didn’t the trio calculate and present that easily deduced number? Perhaps there were also federal and state taxes withheld on those wage amounts, but I would expect them to be minimal, as illegals would normally claim as many exemptions as possible to minimize withholdings. The total windfall to governments is at best $10 billion - $12 billion, and may be less if Earned Income Tax Credit fraud is significant.

While the 2007 Congressional Budget Office Report (page linking to PDF is here) didn’t calculate any kind of nationwide figures, the AP trio avoided quite a few specifics in the CBO report that would have given reader Garcia a more meaningful answer.

The first and most glaring is on Page 6 — “The SSA assumes that about half of unauthorized immigrants pay Social Security taxes.” If that’s the case, and your viewpoint is that any worker, legal or not, should be paying those taxes and working on becoming a citizen so they can ultimately collect the related benefits at retirement, that lost tax revenue offsets the windfall without eventual retirement benefits described earlier.

This turns the cost-benefit question into a pretty simple one: Do the sales and (mostly indirect) real estate taxes illegals pay offset the costs, principally medical care, public education, and incremental law enforcement?

Again, the trio chose to avoid specifics, even though they are in CBO’s report to an admittedly limited extent. A few examples:

• (Page 8) Minnesota estimated that, “during the 2003–2004 school year, (its) state and local governments ….. spent between $79 million and $118 million to educate an estimated 9,400 to 14,000 children who were unauthorized immigrants.” If the Gopher State’s estimate is acccurate, the lowest possible per-child cost at the time was $5,643 ($79 mililion divided by 14,000). Using a more current per-child cost of about $6,000, and projecting that over a lowball estimate of 2 million illegal-immigrant children, leads to an annual cost of roughly $12 billion nationwide. (Wiki has an estimate of 4.7 million children, but that includes “birthright citizens. I’m using 2 million to show how going with even low-range assumptions generates huge costs).
• (Page 10) In Texas in 2006, “the state estimated that local governments incurred $1.4 billion in uncompensated costs for health care and law enforcement.” Project that cost, which applies to Texas’s estimated 14% of the illegal immigrant population, over the entire country, and you get another $10 billion or so ($1.4 billion divided by .14).

These factors alone add up to a lowball estimate of $22 billion, or $1,833 for every illegal man, woman, and child (assuming 12 million illegals). Though I’m open to seeing contrary evidence, I don’t see how anyone can credibly make the case that a family of four illegals typically pays over $7,300 (4 x $1,833) directly or indirectly into the system. The trio of AP writers certainly didn’t make that case.

Further, all of this shakily assumes that a more-than-minor percentage of illegals hasn’t figured out how to get onto entitlement programs like Food Stamps or Section 8 housing. My estimate also assumes that “law enforcement” includes incarceration costs; it is not clear whether the $10 billion estimate above really captures all of that. Unfortunately, Page 9 of the CBO report also repeated the proven-false canard that “in general, immigrants are less likely than native-born citizens to be incarcerated.”

The CBO report also excludes the unquantifiable but very real impact of wage depression the “Ask AP” writers cited. That cost is probably not small. If ten million workers are being paid just 50 cents an hour less than they would have been without the unfair competition from illegals, that’s over ten billion dollars in lost income (50 cents times 2,080 hours times 10 million workers is $10.4 billion).

The “Ask AP” answer was weak, but unfortunately characteristic, of discussions and coverage of matters relating to illegal immigration nationwide. It will remain that way until the press gets over its political correctness and its allergy to numbers.

Cross-posted at NewsBusters.org.

If you believe there’s a 50-50 chance that your take-home pay will be cut by almost one-fifth beginning in as little as five months from now, would that belief affect your current spending habits?

Of course it would. But that idea apparently never occurred to the Associated Press’s Mark Jewell.

In the course of a 950-word article Monday about how the rich are getting more stingy, he focused on how “the economic slump” and “downturn” are affecting their spending, while ignoring the massive tax hits high-income earners will likely be forced to absorb (illustrated in detail below the fold) if Barack Obama wins the presidency and Democrats retain control of Congress.

On Tuesday, Rush Limbaugh made the point (link will expire next Tuesday evening) that Jewell at least conceded that what the rich do with their money affects us all, and that we should care. That’s fine, as far as it goes. A much larger and more salient point is that the rich see the possible post-November political landscape, and are recognizing that they have to start adjusting their situations now, not five months from now, just in case Obama wins. The Illinois senator’s proposed tax increases, which I will refer to as ObamaLaw, along with the choke-hold the congressional majority has placed on offshore and other drilling for oil, are affecting the economy to a much greater extent than President Bush can, and in a very negative way. That’s why I’m referring to this pre-election period as the POR (Pelosi-Obama-Reid) Economy.

Here is some of what the AP’s Jewell wrote (bolds are mine):

(more…)

Note: This was originally posted at Pajamas Media on Thursday.

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Remember the grief Dick Cheney received in late 2000, and then President Bush in early 2001, when they were accused of “talking down the economy”?

In Summer 2008, House Speaker Nancy Pelosi, presidential candidate Barack Obama, and Senate Majority Leader Harry Reid aren’t merely talking the economy down; they’re taking it down.

They have created what I am calling the POR (Pelosi-Obama-Reid) Economy. Businesses and investors are responding to their total lack of seriousness by battening down the hatches and preparing for the worst.

Businesspeople now face ugly realities. Their full ugliness has only come to the fore in the past month or so, as energy prices have reached record highs, and as the clamor for Washington to act has grown.

The POR response to the clamor has been shockingly out of touch:

• Pelosi continues to insist that “we can’t drill our way out of our problems” — so the US shouldn’t expand drilling at all, while other countries continue to drill merrily away.
• Reid claims that we have to get away from using coal and oil as soon as possible because they’re “making us sick.” It seem that if Harry had his way, we wouldn’t drill at all, or, for that matter, even dig at all.
• Obama thinks it’s okay that energy prices are at record highs; he just wishes that the increases had been more gradual. What a guy.
• Obama also wants a windfall profits tax on the energy sector, which in real world would redirect money to the government that would largely have been used for exploration and expanding production.
• The courts also pitched in. Expanding the scope of a 2007 Supreme Court ruling that forced the Environmental Protection Agency to regulate CO2 emitted by cars as a pollutant, a Georgia court stopped a coal-fired plant from being built. Gleeful environmentalists are demanding “an end to conventional coal.” Expecting Pelosi or Reid to stop this madness is a pipe dream.

Each and every one of the above is a callous, “let them eat cake” response to a serious problem. We can debate from here to eternity when and whether alternative fuels and energy sources will ever become viable, but right now you can’t power most existing cars, trucks, or fleets with any of them. If fuel and energy become prohibitively expensive for businesses, it will be that much harder for them to be profitable, perhaps even to remain viable. Who would have thought that the three stewards of the POR Economy would be so indifferent to the further suffering they have inflicted on their party’s union base at Detroit’s already-struggling Big Three?

Who can be surprised that businesses are reluctant to hire more people, or to replace them when they leave?

Pelosi-Obama-Reid’s energy irresponsibility has been a major contributor to the stock market’s recent swoon. The Dow Jones Industrial Average posted its worst June performance since 1930. Earning estimates are being lowered en masse.

Investors also face the real prospect of brutal tax increases:

• Beginning in 2009, the Bush tax cuts will begin to expire unless Congress acts to extend them. Obama has stated that he will “only” impose pre-Bush tax rates on the highest earners, thereby sucking about $160 billion a year out of the economy. Republican presidential candidate John McCain supports extending the Bush cuts; how he would get them through the Democratic Congress it seems he will face is not known.
• Obama further wants to siphon even more money from the economy ($40 billion or so) by imposing the Social Security payroll tax of 12.4% on all wage and self-employment income above $250,000.

Make no mistake: Harry Reid, Nancy Pelosi, and Barack Obama are the people who are making the economy sick. I don’t see how anyone can push this off on George Bush; the economy was picking up some steam, despite the housing industry and mortgage credit problems, until the Pelosi-Obama-Reid triumvirate made clear its intentions to put an energy choke-hold on the economy.

These three, and their party, appear not to care one whit about the damage ever-higher energy prices and the prospect of punitive taxes are doing, right now, to both the economy and the stock market. They have set a reached a new low in legislative negligence, one that I believe took businesses and investors by surprise.

The only things that could mitigate the negative growth that I’m afraid has begun are whatever juice is left in President Bush’s supply-side tax cuts and the positive impact of the economic stimulus checks. I believe that they will, at best, keep growth barely positive. I don’t see them doing much for employment.

This POR Economy is an advance demonstration of what an Obama administration would be like. Democrats hope that they can lay the blame for the sputtering economy on George Bush and John “McSame.” Will enough voters recognize this cynical gambit and reject it at the polls?

Today’s employment report, in combination with the ISM Non-Manufacturing Index, should raise alarm bells in Washington.

Instead, I’m afraid that the Democratic majorities in the House and Senate, as well as the people at Obama campaign headquarters, are raising champagne glasses.

These folks aren’t just talking the economy down; they’re taking the economy down.

They’re the ones who have created what I’m going to start calling the POR (Pelosi-Obama-Reid) Economy.

Please, I know it’s hard for some of my readers to do this, but just try to imagine that you’re an employer, especially one who runs a small business — y’know, one of those eeeeee-vile people that just so happens to keep the economy going.

You’re now facing the following realities:

• Record-high energy costs.
• A Speaker of the House who insists that we can’t drill our way out of our problems — so we shouldn’t drill at all, while everyone else drills merrily away.
• A Senate Majority Leader who says that we have to get away from coal and oil ASAP because they’re “making us sick.” So, again, we can’t drill at all, and pretty soon we won’t be able to dig at all.
• Thanks to a Supreme Court which actually believes that the junk science known as “globaloney” is real (”globaloney” is my term for the ludicrous notion that earth is warming dangerously, that it’s our fault, and that only drastic reductions in energy consumption, reductions in worldwide living standards, and the perpetuation of Third-World poverty will prevent Armageddon), new coal-fired plants are being stopped, the latest being one in Georgia. Gleeful enviros are demanding “an end to conventional coal” — NOW — and appear to have the means to enforce it.
• A presidential candidate with a shot at winning who thinks it’s okay that energy prices are at record highs, but just wishes the increases would have been more gradual. Too late — he’s got ‘em where he wants ‘em.
• A presidential candidate with a shot at winning who wants a windfall profits tax on the energy sector.

Thanks to all of these things, you pretty much know that energy costs aren’t coming down, and may very well keep going up.

And if that weren’t enough, there’s this:

• An impending tax hike in 2009, targeting only the most productive, that will suck about $160 billion a year out of the economy if Congress takes no action.
• A presidential candidate with a shot at winning who thinks that even more money ($40 billion or so) needs to be sucked out of the economy (again targeting only the most productive) so that the mother of all intergenerational wealth transfers can be kept afloat for another decade or so before the mother of all train wrecks arrives.
• A presidential candidate with a shot at winning who advocates massive government interventions in the economy that haven’t worked elsewhere (health care, “green” energy), and won’t work here.

In this business climate, are you going to hire more people? Replace employees when they leave? Expand your business? Even if demand for your products or services is strong, which is still the case in many sectors, you’re going to try to get through with the resources and facilities you have.

Perhaps some of these employers and entrepreneurs are considering voting with their feet (I’d guess that Costa Rica’s starting to look pretty good to some), or just getting out or selling out.

Make no mistake: Harry Reid, Nancy Pelosi, and Barack Obama are the people who are making the economy sick. Don’t even try to push this off on George Bush.

If the Pelosi-Obama-Reid (POR) Economy has slipped into recession or negative growth, and I’m afraid that it has in the past few weeks, it’s because the congressional majority and its party’s presidential candidate have made it crystal-clear that they don’t give a damn what ever-higher energy prices and the prospect of punitive taxes are doing, right now, to the economy and the stock market. I’ve never seen anything even remotely as irresponsible as this in the US economic-political arena.

The only thing that could mitigate or prevent the recession or continued negative growth that I’m afraid has begun is whatever juice is left in President Bush’s supply-side tax cuts and the economic stimulus checks. At best, they’ll keep growth barely positive; I don’t seem them helping the job market much, if at all.

This POR Economy is an advance demonstration of what four years of an Obama administration would be like. Perhaps enough voters will recognize this and reject it — and, just as important, the congressmen and senators who support him.

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Related Ohio Item: In February, Harry Reid “accused the coal industry of using ‘the old Hitler lie — when you say things long enough people start believing them.’”

The subject was “clean coal.” In a speech that day, he said that there’s no such thing as “clean coal.”

Do the folks in Columbus, and in the Ohio leftosphere, realize that Reid would prefer to nuke, if you excuse the expression, the primary element (about $150 million) of Ted Strickland’s $1.7 billion bond program?

Note: This post originally appeared on Friday at Pajamas Media under the title “Obama’s Taxes: A $2 Trillion Trip Back to the 1970s.”

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Remember how the press made George Bush’s tax-rate cuts look so “huge” in 2001 and 2003?

A March 10, 2001 New York Times article by reporters Frank Bruni and Richard W. Stevenson typified the approach. The trick was to talk about the (scary) $1.6 trillion impact of the “cuts” while minimizing attention to their time frame. At the linked article, the reporters waited until the ninth paragraph to tell us that it was a “$1.6 trillion, 10-year package” — that is, a less-intimidating average reduction of $160 billion a year.

Using consistent language, Barack Obama’s tax proposals involve tax hikes of at least $2 trillion, and possibly $3 trillion, over the next 10 years.

Obama would bring tax policy back to the 1970s, or about where we were before the Reagan-era tax-rate cuts that triggered The Seven Fat Years of 1983-1989. Despite being partially offset by Bush 41’s and Bill Clinton’s rate hikes, the Reagan rate cuts and their remnants propelled the economy forward almost non-stop for almost 18 years until the 2000 bubble-burst.

Using “static analyis,” the non-business press and rate-cut opponents assumed that Reagan would deprive the government of huge sums of money. Supply-side rate-cut proponents knew better, and predicted that more money, not less, would flow into the federal treasury, as the unleashed economy would grow faster than if rates were not changed.

That supply-siders’ predictions were correct is indisputable. Congressional Budget Office data show that federal fiscal-year receipts increased by 65% from 1983 to 1989 — a compound annual rate of 8.7%.

The Bush rate-cut success story is similar. While the rate reductions on earned income were less substantial than many would have liked, bringing the top rate down only to 35% from Clinton’s 39.6%, the 2003 Bush capital-gains and dividend rate cuts were more aggressive than their Reagan-era counterparts.

Those investment-related rate cuts have favorably influenced behavior far beyond even proponents’ wildest dreams. Federal fiscal-year receipts increased by 44% from 2003 to 2007 — a compound annual rate of 9.6%. Even in fiscal 2008, as the media and Alan Greenspan obsess over a possible recession, federal receipts before economic stimulus payments are on track to increase by about 4%. April 2008 receipts set an alltime single-month record.

If a President Barack Obama gets his desired tax increases, he will show us that supply-side economics has a painful reverse gear. Just as Uncle Sam never had to do without the $1.6 trillion the New York Times and the rest of the media fretted over in 2001, an Obama administration will never see anywhere near the multitrillion-dollar tax-increase windfall it hopes for.

Let’s look at the static Obama numbers. I started with the most recent available IRS tax-return data from 2005 (specifically Table 1.4, a download accessible at this IRS link). Adjusting for estimated inflation since then, and (naively) assuming no change in behavior, here are my first-year lowball estimates of the impacts of the major proposed tax hikes:

• Obama has said he will let the Bush tax-rate cuts expire for incomes over $250,000. This will push those taxpayers into either the 36% bracket (up from 33%) or the the 39.6% bracket (up from 35%). Estimated annual impact, before considering the investment-related items that follow: at least $110 billion.
• Although waffling a bit, it appears that Obama plans to increase the capital gains rate nearly to its pre-2003 level, and to once again make dividends fully taxable as ordinary income — again, apparently, on incomes of over $250,000. Estimated annual impact: at least $50 billion.
• Third, as discussed in last week’s column, Obama plans to impose the Social Security payroll tax on all income from work and self-employment above $250,000. Estimated impact: at least $40 billion.

That’s at least $200 billion a year in tax hikes; if 2007 IRS data were available, we might find that the static impact is really closer to $300 billion. Consistent with media treatment earlier this decade, we’re talking about “at least $2 trillion (over the next 10 years).”

But Uncle Barack will never see most of that revenue, because taxpayers will make adjustments. Among them: CEOs will restructure their pay packages; entrepreneurs will work less hard, and pay themselves lower salaries; investors will move funds between investments less often, and push for smaller dividend payouts. In the Wall Street Journal last week, Lawrence Lindsey estimated that the Social Security payroll tax hike alone will “make the private sector $5 poorer …. (and only) make the government $1 richer.”

Barack Obama, in bringing back the tax structure of the 1970s, would cause many of the highest-earning taxpayers with income from work or self-employment to face a top marginal rate of 60% or more: 39.6% federal, 12.4% Social Security, 2.9% Medicare, and often 5% or higher state and local income taxes.

This is one 1970s show that we don’t need to see. Economic stagnation in the name of class warfare doesn’t play well, even in re-runs.

Of all the excuses (bolds are mine):

Barack Obama on Tuesday vowed he would break America’s addiction to “dirty, dwindling, and dangerously expensive” oil if he is elected U.S. president — and one of his first targets might well be Canada’s oil sands.

A senior adviser to Mr. Obama’s campaign told reporters it’s an “open question” whether oil produced from northern Alberta’s oilsands fits with the Democratic candidate’s plan to shift the U.S. sharply away from consumption of carbon-intensive fossil fuels.

….. The remarks amount to a shot across the bow of Alberta’s oil sands industry, which is planning to boost production from 1.3 million barrels a day to 3.5 million barrels over the next decade.

The industry has come under sustained attack from U.S. environmentalists over the past year because the production of its heavy oil emits an estimated three times more greenhouse gases than conventional oil.

….. Mr. Obama is committed to supporting energy sources that help slow climate change if elected — and he will reward industries that meet tough new greenhouse gas standards, Mr. Grumet said.

“It’s a meritocracy. We are going to support resources that diversify petroleum supplies, that bring more production to this hemisphere, and that meet our long-term obligations to reduce greenhouse gas emissions,” he said. “And I think it’s an open question as to whether or not the Canadian resources are going to meet those tests.”

Who died and put them in charge of the marketplace?

Once again, we see that “globaloney” — my term for the belief that the earth is warming (probably wrong), that humans are the primary cause of it if it is taking place (almost definitely wrong), and that drastic actions to reduce “greenhouse gases” is necessary to “save the planet” (how convenient for the command-and-control types) — leading to the conclusion that we can’t consume energy that is in abundance literally in our neighbor’s back yard.

Can’t drill offshore. Can’t drill in ANWR. Can’t build refineries. Can’t get use new technologies to get oil. Instead, bet on the come that some marvelous “alternative technology” will appear — and ridiculously quickly.

Isn’t it amazing that every time Barack Obama has a choice between continued economic growth and government control that either could or will jeopardize it, he chooses government control? Income taxes, capital gains taxes, energy, education, Social Security, health care — it goes on and on and on. Is there nothing he doesn’t want under his thumb?

Mark Levin is right — this guy is a blind ideologue, and a dangerously ignorant one at that. Facts don’t matter. Economic progress doesn’t matter. Only power does.

Note: This column was first posted at Pajamas Media on Saturday morning.

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In a speech in Columbus, Ohio on June 13, Barack Obama proposed a massive tax increase to fund the Social Security program.

A Democratic presidential candidate proposing a tax increase is not exactly news. But this is no ordinary tax increase.

For the first time in the history of Social Security, Obama would impose the payroll tax on a group of people — anyone earning over $250,000 from work or self-employment — who would receive no additional benefit in return. The Illinois senator would carve out a “doughnut hole,” sparing those who earn between the current maximum taxable earnings of $102,000 and $250,000 from having to pay any additional tax.

This is a tax increase that is stunning in both size and scope, as this chart shows:

Obama’s justification is particularly odious (statement comes at about 7:00 into the linked video):

Right now the Social Security payroll tax is capped. That means that most middle-class families pay the payroll tax on every dime that they earn. But once you get to $102,000 per individual, then you’re no longer paying the payroll tax. And what that means is that ….. you’ve got billionaires and miliionaires who are paying ….. payroll tax on only a tiny fraction of their income.

Obama’s class-envy rhetoric obscures his proposal’s abandonment of what has been, until now, an immutable principle of Social Security: Every dollar a person pays into the system affects the amount of his or her Social Security retirement benefits, should he or she live to see that day — not by much, in the case of those whose earnings are in the top half of the taxable earnings range, but at least by a bit. Those who earn more than the taxable threshold aren’t taxed; but, in exchange, they don’t receive any additional benefits.

If Obama’s proposal were ever to become law, those days would be over.

There’s a supposedly open item in all of this that I believe has a pretty obvious answer. On June 4, as the outline of what Obama intended to propose began to become clear, the Wall Street Journal speculated on it:

A key question that the Obama campaign hasn’t yet answered is whether higher earners under his plan would collect more in Social Security benefits than under current law, to reflect the additional payroll taxes paid.

Many economists argue that if the earnings cap is lifted, it would be unseemly to pay benefits according to the current formula to wealthy CEOs who don’t need to rely on Social Security for financial support in retirement.

That’s exactly right. Although it might arguably be “fair” to extend benefits to high-income earners proportionate to the taxes they have paid in, it’s clear to me that any legislator or president attempting to defend doing this would be committing political suicide.

Thus, I believe that Barack Obama has no intention of increasing Social Security benefits paid to anyone he is targeting for the new tax beyond what the system currently provides — or if he claims he will, it will never happen. Instead, the Illinois senator simply wants to force the person earning $1 million, or $10,000,000, along with his or her employer (very often the same person), to kick in a combined additional $93,000 or $1.2 million, respectively, because …. well, because he can.

Obama’s proposal thus officially severs the earnings/benefit linkage for the first time in the 70-year history of Social Security. As Jim Taranto wrote in the Wall Street Journal on Monday:

Obama’s proposal to use Social Security as a means for taxing “the rich” amounts to a repudiation of the program’s original New Deal conception. Social Security is supposed to be a pension for workers, not a redistribution scheme. That is why Democrats have, over the years, resisted efforts at means testing–i.e., preventing the wealthy from collecting benefits. Obama’s proposal would convert Social Security into nothing more than another welfare program.

Many don’t realize that Social Security is already means-tested in at least two ways:

1. The more you make, the less you get, as a percentage of what you earned while you were working. You’ll see that this is the case if you work through and understand the larger implications of the examples that begin on this page at Social Security’s web site.
2. If you make “too much” while you’re retired, you have to pay federal income tax on either 50% or 85% of your Social Security benefits.

Obama’s proposal effectively means-tests Social Security all the way up the income scale, piling additional insult on top of existing injury. Class warriors may take comfort in the money they will take from the rich, but I doubt that they have an answer to this question: How is the economy going to avoid a meltdown if its highest earners see their take-home pay and spending power cut by so much?

It’s here.

It will go up at BizzyBlog on Monday morning (link won’t work until then) after the blackout expires.

Note: I had a post up for two hours that was meant to be held until after the Pajamas Media blackout. This happened because PJM put off publishing the article until tomorrow (it was originally targeted for Wednesday), and I didn’t reschedule my post accordingly. Apologies to PJM for the brief oversight, and to BizzyBlog readers for having to pull the post. The following on Lawrence Lindsey’s Wall Street Journal op-ed covers some of the same ground, but not with the specifics you’ll see in my column.

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Lawrence Lindsey’s op-ed in the Wall Streeet Journal today strongly criticizes Barack Obama’s proposed Social Security tax increase, and confirms what I surmised earlier this week, namely that Obama wants a historic de-linkage of taxes from benefits (bolds are mine):

Obama Turns FDR Upside Down

Sen. Barack Obama has a bad idea for “extending the life of Social Security.” He has proposed applying the Social Security tax to incomes above $250,000, in addition to the current tax on incomes up to $102,000. It’s unfair, he explained, for middle-class earners to pay Social Security tax on “every dime they make” while the very rich pay on “only a very small percentage of their income.”

Reporters cited the Obama statement without asking for the logic behind having someone making $100,000 pay on every dime and someone making $250,000 pay on just 41% of income, while someone making $10,000,000 would pay on 98.5% of income. There is no economic principle or theory of tax law that would endorse such a result.

…. Neither Franklin Roosevelt, who started Social Security, nor the intervening three dozen Congresses thought they were imposing an “unfair” system on the middle class. There is a very good and principled reason why Social Security taxes are paid on just $102,000 of income: Benefits are calculated based on that same $102,000 of income.

The fundamental principle of linking taxes and benefits was established when Roosevelt designed Social Security. He wanted to make sure that it was not a welfare system….

…. Although the formula connecting benefits to tax payments or “contributions” has evolved slightly over time, it still adheres to this basic message. Today, what Social Security terms a “low-wage” worker will pay (in present value terms) $77,197 over his or her lifetime and get $112,261 in benefits. A median-wage worker earning $42,000 will pay $171,550 and get back $187,085. A “high-wage” worker making $67,000 will pay $274,480 and get back $245,085.

Note that the previous paragraph shows that Social Security is already a bit of a welfare program already, in the sense that “high-wage” workers are subsidizing “low-wage” workers. This is a point I’ve made several times, all the way back to the beginning of this blog, and that the vast majority of Americans don’t understand. I know this, because every time I explain it in the classroom, the room temperature goes up by about 10 degrees.

But at least the current system maintains the link between taxes paid in and benefits received. The more you pay in, the more you get, even though the “more you get” diminishes at higher taxable earnings levels.

Obama would throw all of that overboard, as Lindsey notes:

Sen. Obama would do away with this principle by requiring higher-end workers to pay taxes without getting any extra benefits linked to their higher contributions. This would be a big step toward turning Social Security from a contributory pension scheme into just another welfare program.

Given who is affected, I would call it “the nearly final step.” And does anyone really believe Obama’s “doughnut hole” would survive very long in the next “fiscal crisis”? In fact, given the history of Bill Clinton’s “middle class tax cut,” I wonder if it will even survive a first draft if Obama were elected.

Lindsey also points to the incentive effects, and you really should go the final section of his piece to see how he gets to this crucial conclusion, along with his perhaps unintended slap at the candidate (in bold):

It is shocking to think that we have a presidential candidate who would make the private sector $5 poorer in order to make the government $1 richer. More likely, given the calculated political design of the proposal, no one in the Obama campaign told the candidate about the economic, ethical or historical consequences of his suggestion.

What????!!! Is Barack Obama such an ignorant newbie that he needs to be TOLD these things?

O. M. G.

Here’s a site to check out – UCC Truths.

The United Church of Christ is the supposedly “mainstream” denomination the Rev. Jeremiah Wright’s Trinity United Church of Christ (TUCC) is a part of. TUCC is the church which the objectively unfit presidential candidate (second item at link) I refer to as BOOHOO (Barack O-bomba Overseas Hussein “Obambi” Obama) insists he and his family will continue to attend, despite its new pastor’s refusal to renounce Wright’s extensively documented poisonous rhetoric and “black liberation theology” beliefs.

So why anyone be surprised that, at the national level, UCC isn’t really “mainstream”? At least the last time I checked, promoting FALN terrorists as freedom fighters (the Puerto Rican group’s name is translated as “Armed Forces of National Liberation”) was not a “mainstream” cause.

Here’s an “oh by the way” from Wiki which makes the FALN a twofer, as it also negatively affects the other Democratic presidential aspirant (paragraphing added by me):

On August 11, 1999, Bill Clinton commuted the sentences of sixteen members of FALN that set off bombs several times in New York City and Chicago, convicted for conspiracies to commit robbery, bomb-making, and sedition, as well as for firearms and explosives violations.

None of the sixteen were convicted of bombings or any crime which injured another person, and all of the sixteen had served nineteen years or longer in prison, which was a longer sentence than such crimes typically received, according to the White House. Clinton offered clemency, on condition that the prisoners renounce violence, at the appeal of 10 Nobel Peace Prize laureates, President Jimmy Carter, the Cardinal of New York, and the Archbishop of Puerto Rico.

The commutation was opposed by U.S. Attorney’s Office, the FBI, and the Federal Bureau of Prisons and criticised by many including former victims of FALN terrorist activities, the Fraternal Order of Police, and members of Congress. Hillary Clinton in her campaign for Senator also criticised the commutation, although she had earlier been supportive.

In other words, the presidential candidate I refer to as HR4C (Hillary Rodham Cackling Crying Complaining Clinton) was for it, before she was against it.

This UCC Truths link describes those activities of those whose sentences were commuted, and claims that they did not really renounce violence as a condition of their release.

Jeffrey Lord at the American Spectator has more.

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A lot of people don’t want to think about planning for retirement:

Planning for retirement is only slightly higher on the groan scale than dieting or starting a workout routine, according to findings from a survey of 1,000 Americans released April 1, 2008.

Whether it’s financial or physical fitness, it’s tough getting started.

Only one in three people surveyed is on track with retirement planning, and about one-fourth haven’t started planning at all. Nearly one-third view retirement planning as slightly more difficult than starting a workout regimen (29 percent) or a diet (28 percent).

….. Obstacles to retirement planning for many Americans, the survey found, include the following:
• Difficulty knowing what types of investments they should make, 42 percent.
• How much they will need to retire comfortably, 40 percent.
• When to retire, 33 percent.
• Where to begin in the planning process, 32 percent.

The federal government, which is in the process, like it or not, of trying to “get by” on a shrinking annual surplus from Social Security that it has become accustomed to gobbling up to paper over more serious deficits than those reported, doesn’t help in the retirement planning department. It’s way too late for anyone over 50 or so without a big stash to think about getting by with a much lower level of Social Security benefits than today’s retirees are receiving. Yet, despite all the denials made by politicians, the possibility exists that they will have to figure out how to do just that — if not during their early years of retirement, then in their later years, when it will be too late for many to even think about going back to work.

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Enviros are unhappy with the World Bank:

Developing countries and environmental groups accused the World Bank on Friday of trying to seize control of the billions of dollars of aid that will be used to tackle climate change in the next four decades.

“The World Bank’s foray into climate change has gone down like a lead balloon,” Friends of the Earth campaigner Tom Picken said at the end of a major climate change conference in the Thai capital.

“Many countries and civil society have expressed outrage at the World Bank’s attempted hijacking of real efforts to fund climate change efforts,” he said.

….. developing countries want climate change cash to be administered through the existing United Nations Framework Convention on Climate Change (UNFCC), which they feel is much less under the control of the Group of 8 (G8) richest countries.

Likely translation: We’re really mad that the World Bank won’t just give the money to the corrupt kleptocrats at the UN, so they can give some of the money to corrupt governments in the developing world.

(Aside: What in the bleep is Reuters doing quoting a spokesperson for far-left eco-harrassers and possible terrorist collaborators [scroll down to “WALHI’s Strange Bedfellows” at link] like Friends of the Earth?)

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Karl at Protein Wisdom caught the so-called “Moderate Voice” blogger calling Phil Gramm a terrorist (sorry, no link to garbage such as that), because Gramm supported financial deregulation in the late 1990s. Far-lefties are very good at ruining words with plain meanings, aren’t they?

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This is really over the top (HT Hot Air Headlines):

DURHAM - Members of the 2006 Duke University lacrosse team are objecting to the city’s request to shut down a Web site that chronicles the legal proceedings in the players’ federal lawsuit.

….. Lawyers for Duke and the city claim the statements could prejudice a jury.

The more Duke and Durham lawyers keep this kind of arrogance up, the more likely it is that 2006 lacrosse team members will own the school and the town lock, stock, and barrel.

Note: This column was originally posted at Pajamas Media on Thursday under the title “Social Security: Anything But Secure.”
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The Latest Social Security Trustees’ Report Masks the Near-Immediate Nature of Uncle Sam’s Budget Problem

The Social Security Administration’s 2008 Old-Age, Survivors, and Disability Insurance (OASDI) Trustees Report has contained this sterile language for several years:

Long-Range Results
Under the intermediate assumptions, OASDI cost will increase more rapidly than tax income between about 2010 and 2030 due to the retirement of the large baby-boom generation. …..

Conclusion
Annual cost will begin to exceed tax income in 2017 for the combined OASDI Trust Funds, which are projected to become exhausted and thus unable to pay scheduled benefits in full on a timely basis in 2041 under the long-range intermediate assumptions.

Many readers, and many reporters who should know better, naively conclude from this that Social Security’s big problems are 33 years down the road. Others more astutely note that 2017 is when the trouble starts.

I’m here to tell you that as far as the government’s full fiscal situation is concerned, the trouble will really begin in 2010. Things will get progressively worse for the next six years (2011-2016), and go “code red” after that.

To understand why, let’s establish a few undeniable facts about Social Security (Medicare is its own separate nightmare).

For years, Social Security has been taking in more in taxes than it has paid out in benefits — in recent years, lots more. In fact, Social Security has run a 22-year “surplus” of over $2.1 trillion, as reported by the Congressional Budget Office (the related CBO page in graphic form is here; the full report is a PDF found at this CBO page):

That must mean that Social Security’s Trust Fund is flush with investments, right?

Wrong. This bit of history explains why:

In early 1968 President Lyndon Johnson made a change in the budget presentation by including Social Security and all other trust funds in a”unified budget.”

Social Security’s Trust Fund, instead of being a separate, untouchable stash of cash and investments (i.e., instead of being run like a normal pension plan), thus became money that the rest of the government could raid.

This fiscal sleight-of-hand didn’t matter much until the mid-1980s; the net Social Security surplus from 1968-1985 was only about $3 billion. But as you see above, the system’s surpluses exploded after that as the Baby Boomers entered their prime earning years.

What have the politicians in Washington done with those surpluses? They’ve spent them, by continually borrowing from Social Security’s “Trust Fund.”

By including Social Security in a “unified” budget and raiding its surpluses, Uncle Sam has been able to paper over typically huge deficits in all other government operations. For example, as you can see above, in fiscal 2007, the government’s operational (”on-budget”) deficit was $343.4 billion; but after netting in the Social Security surplus and the Postal Service, it “officially” reported a deficit of $162 billion.

This situation has been allowed to continue with rare objection through Republican and Democratic administrations, with the acquiescence of Republican and Democratic Congresses, for 40 years. Insert your own conclusions about the breathtaking irresponsibility of our political class.

The Social Security “Trust Fund” is thus nothing but a pile of IOUs from the rest of the government — which is itself over $9.4 trillion in debt.

So there is no money to speak of in the “Trust Fund” to pay benefits. There is also no indication from anyone who could make a difference in Washington, including the three presidential candidates, that they want to change this situation.

Sorry.

Like it or not, the next president is going to face the “Trust Fund” problem early in his or her first term. That’s because Social Security’s annual surpluses are going to start shrinking, and quickly. You can already see the looming trouble above in the minimal change (less than inflation) from 2006 to 2007.

In 2010 (perhaps 2009, if the economy slips into recession), that subsidy to the rest of the government will get smaller with each successive year. Every year in which the subsidy decreases will be a year with three stark choices: cut spending, raise taxes, or issue more debt.

Beginning in 2017, Social Security will collect less in taxes than it will pay out in benefits. Its annual subsidy to the rest of the government will be a mere memory. The rest of the government will then either have to start paying in to Social Security, or decide to reduce benefits immediately in some way. That’s code-red time.

To believe that the problem doesn’t become serious until 2041, you have to believe that the government, starting in 2017, will “somehow” be able to pay back what will be then be about $4 trillion in Social Security IOUs over a period of 24 years — an average of about $170 billion a year in principal alone — without significantly disrupting or tanking the economy. Surely you jest.

It’s here.

I will post it at BizzyBlog Saturday morning (link will not work until then) under the title, “Social Security Will Cause Fiscal Headaches Within Just Two Years.”

The accomplished economist, prolific author, and Hoover Institution Senior Fellow lists some “Economic Fallacies” in his latest Townhall column:

1. Government programs are needed to create “affordable housing.” (Actually, government intervention is what has made housing so unaffordable in places where even hovels are expensive.)

2. Employer discrimination is the main reason for differences in income between women and men. (Tons of evidence point in other directions.)

3. College tuition is going up so fast because of rising costs. (Only if you call voluntary increases in spending “rising costs.”)

4. Foreign aid helps poor countries become more prosperous. (Only if you don’t look at the evidence.)

5. The rich are getting richer and the poor are getting poorer. (It all depends on whether you are talking about flesh and blood human beings or statistical brackets.)

“Economic Facts and Fallacies” (Sowell’s latest book — Ed.) also brings out some facts that seldom get much attention in the media.

1. The poverty rate among black married couples has been in single digits since 1994.

2. The average income of the elderly is several times their earnings, and their wealth is far higher than among younger people.

3. Just as blacks are turned down for mortgage loans more often than whites, so whites are turned down more often than Asian Americans. (What does that do to racism as an all-purpose explanation?)

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Related, from November 18, 2007: Top Five Myths about the current economy. Sowell’s fifth item above is a large portion of that post’s Myth Number 1: “Income inequality is growing, the rich are getting richer, and they aren’t paying their fair share of taxes.”

Breaking through some of the backlog …..

++++++++++++++++++++

In case you missed it, North Korea is corrupt and has abused the UN aid provided to it:

North Korea used the bank accounts of a U.N. agency for deceptive cash transfers, among a wide range of abuses of that organization’s presence in the communist state, a U.S. Senate panel reported on Wednesday.

The United Nations Development Program deviated from its standard practices in the way it hired local North Koreans and paid their salaries, but was not complicit in — or aware of — the host government’s improper financial transactions, said the U.S. Senate Permanent Subcommittee on Investigations.

I know, the shock must be overwhelming. The press coverage, of course, has been underwhelming.

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Last week in the Wall Street Journal, Eugene Scalia, who formerly served as general counsel of the U.S. Department of Labor, made some important points about how shareholder activism by union pension funds violates ERISA (bold is mine):

….. “union pension funds” do not belong to unions. The funds are managed by trustees — half appointed by the union and half by the companies that contribute to the fund pursuant to their collective-bargaining agreements. Under the federal employee benefits law (ERISA), which is administered by the Department of Labor, these trustees are to act “solely in the interest of the plan’s participants and beneficiaries, and for the exclusive purpose of paying benefits and defraying reasonable administrative expenses” ……

Before undertaking “to monitor or influence the management of corporations,” the department said, fiduciaries “must first take into account the cost of such action and the role of the investment in the plan’s portfolio, and cannot act unless they conclude that the action is reasonably likely to enhance the value of the plan’s investments.”

Most shareholder actions undertaken by retirement/health and welfare funds managing union members’ money are actions that are, by any reasonable benchmark, more likely to reduce shareholder value than to enhance it — which is why Scalia’s conclusion is absolutely correct:

In a word, unions are not entitled to use retirement funds to raise costs at the companies where the funds are invested. And unionized corporations are not required to permit this. Rather, management trustees and the Labor Department are obligated to prevent it.

These retirement/health and welfare funds managing union members’ money have sometimes gone even further from their mission — illegally — in their attempts to influence Social Security reform legislation, as noted here almost three years ago (first item at link). They have no right to do this — none.

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John Stossel had a great column last week on continued growth in the worldwide economy:

This week’s newspapers are full of predictions of an impending recession, and maybe they’re right. But the great untold story is the good news: the worldwide boom in economic growth.

“I think one of the best kept secrets is that the world is in the midst of an economic boom, and it is largely driven by increases in economic freedom,” says economics professor James Gwartney, director of the Stavros Center for the Advancement of Free Enterprise and Economic Education at Florida State University. “The world has become more free, and, at the same time, growth is soaring to new highs. During 1995 to 2005, the growth rate of per capita GDP in99 countries for which data are available has increased to 2.2 percent, nearly twice the rate of recent decades. Since 2000, the annual growth rate of per capita GDP has been even more rapid, 3.2 percent.”

….. The story the index tells couldn’t be clearer: Economic freedom produces high living standards.

Read the whole thing.

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Rich Karlgaard didn’t know it at the time, but the opening of his Forbes column last week turned out to be a fitting epitaph for the now-ended John Edwards campaign:

Gallup poll taken in December says Americans are, surprisingly, not as angry as politicians and pundits want us to be. From Gallup’s Web site: “More than eight in ten Americans say they are satisfied with their personal lives at this time, including a solid majority who say they are ‘very satisfied.’ This personal satisfaction level contrasts sharply with the low level of satisfaction Americans express with the way things are going ‘in the U.S. at this time.’”

Now you know why the John Edwards presidential candidacy has flamed out. The rags-to-riches trial lawyer and onetime hedge fund adviser ran as the angry man. While most normal people might have accepted their spectacular rise in fortune with gratitude, Edwards has run as “the hater,” as described by Rich Lowry of National Review. Writes Lowry: “Edwards is like a stand-up comedian who has honed his act down to the most effective material. In the case of the comedian, all that’s left is laughs; in the case of Edwards, almost all that is left is unbridled hostility.”

Look at how far this has gotten him.

The Treasury Department released its Monthly Treasury Statement for December this afternoon.

Though Uncle Sam did run a surplus last month, the year-to-date figures are alarming:

It should be pretty clear that the big news in the above figures is that federal spending during the first quarter of the fiscal year was almost 9% higher than during the first quarter a year ago. If the spending increase had been held to only 5%, this fiscal year’s quarterly deficit would have come in virtually the same as last year’s.

Yet it took these publications the following number of paragraphs to get to the year-to-date spending news:

• Wall Street Journal (requires paid subscription) — eighth paragraph.
• Reuters — seventh paragraph, though it did note in the first paragraph that the deficit had widened, and in the second paragraph that “slower growth in receipts failed to keep up with higher spending.”
• Associated Press — fourth paragraph.
• MarketWatch (requires free subscription) — fourth paragraph. Reporter Robert Schroeder reported that “December is typically a deficit month,” even though the government has shown a December surplus in seven of the ten years prior to 2007 (2006, 2005, 2002, 2001, 2000, 1999, and 1997).
• Thomson Financial at Forbes.com — eighth paragraph.

For those who are wondering, most of the roughly $58 billion spending increase came from higher interest on federal debt ($15.3 billion), higher military spending ($13.9 billion, probably reflecting higher troop levels in Iraq than a year ago), the Social Security Administration ($12.3 billion), and the Dept. of Veterans Affairs ($5.0 billion).

The decent collections results show that the supply-side tax cuts of 2003 still have some receipt-generating steam left in them. Given the investment disincentives that will only grow as 2010 approaches (because income tax rates are scheduled to increase significantly in 2010 without congressional action), it’s reasonable to wonder how much longer the improvement in receipts will continue.

The downplay of the spending aspect of the fiscal year results thus far by the business press virtually assures that it won’t get picked up in general news stories, and that the general public will therefore not be aware of it. This will enable presidential candidates to tout new and/or expanded government programs without having to answer difficult questions about what they would do about where spending is already heading.

Cross-posted at NewsBusters.org.

Gregg Jackson notes that the specific points he raised last week on Mitt Romney’s record (also noted in this BizzyBlog post) have not been specifically refuted. Oh, but the attacks that are totally devoid of foundation on Jackson and two other Romney critics raising similar specific questions continue. The first several responses at Jackson’s Townhall column last night continue down that odious path.

We’re still waiting, people, and we’re not going away.

Update, 10:00 a.m.: Today is Commonwealth Care Penalty Day, and Romney supporters “speculate” that the Thompson campaign paid off the National Right to Life Committee for its endorsement (I’m not kidding). More at this post.

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Apparently Eliot Spitzer is trying to see how quickly his poll numbers can drop to zero:

Under a new policy, major electronic retailers, such as Amazon.com, will be required to collect sales tax on all purchases from New York. The policy, based on a novel legal theory, could hasten the end of the Internet’s era as a duty-free marketplace if other states follow New York’s lead. With the policy, New York immediately took the lead among states that are seeking to tax online commerce.

In essence, New York thinks it can force e-tailers with “affiliate” programs like Amazon to collect sales tax on every purchase made by a state resident if any one of those affiliates lives in the state. This would apply whether or not the purchase was made through an affiliate.

The state believes that a resident affiliate creates what is called “nexus,” or a business presence. I don’t believe the courts will buy this. If I’m wrong, the obvious response would be for e-tailers to end affiliate programs completely, or just for the states pursuing this “novel” theory.

Update: Spitzer has backed down, in what has to be close to record time.

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“Ho, ho, ho,” no mo, mo, mo (HT The Corner)?

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Give Fred Thompson credit, as an IBD editorial does, for stepping up with a Social Security reform plan:

It’s a gutsy move. Especially when you consider that President Bush, who courageously brought the topic up, got exactly nowhere with it — even with a Republican Congress.

There’s very little gain in this for Thompson politically. He will now take potshots from the AARP and other special interest groups, not to mention those on the left who will falsely accuse him of trying to “dismantle” Social Security.

That said, hats off to Thompson for his plan. It would trade off future benefits of those now working — people over 57 wouldn’t have their benefits touched — in exchange for letting them create 401(k)-style accounts. He would have government match the private savings that workers put in. And it’s entirely voluntary.

Workers could put aside as much as 2% of their Social Security money in a private investment fund. Upon retirement, they’d have a nest egg to pass on to their children. They’d also have the higher returns markets have always provided in modern history.

It beats the daylights out of the inevitable alternative, which is some combination of tax increases or benefit cuts.

I’m surprised that this exists, and it needs to go away:

The Ohio House is expected to vote Tuesday to end Ohio’s unique policy of reducing a jobless senior’s unemployment benefits by the amount the person receives in Social Security.

But Gov. Ted Strickland has not yet decided whether he will sign the bill if it is passed by the House, said spokesman Keith Dailey. Strickland supports the concept but would like to see it as part of a broader package of benefit reforms. The Senate passed the measure in May.

Ohio is the only state in the nation to have a full Social Security offset - where 100 percent of a person’s Social Security benefit is subtracted from the amount of unemployment benefits due.

Since there is a linkage between what you put into Social Security and what you get out (never mind that what you get out is really the next generation’s current contributions; that’s a discussion for another time), I find it amazing that Ohio lawmakers ever decided it was a good idea to intercept Social Security benefits this way. More fundamentally, I’m surprised the federal government either let it stand, or that it survived a challenge if one occurred.

The Governor shouldn’t even be thinking about holding the repeal hostage to other measures. Just consign the SocSec offset to the ash heap of history, and be done with it.

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Lay convicted — No, not “Kenny boy,” Mark Lay:

Mark D. Lay once was a rising star in the high-powered investment world, running a firm that managed more than $4 billion in assets and making frequent appearances on CNBC.

Yesterday, a federal jury found him guilty of fraud in the loss of $216 million of Ohio Bureau of Workers’ Compensation money in a Bermuda-based hedge fund that Lay’s MDL Capital Management of Pittsburgh managed.

Lay, 44, of Aliquippa, Pa., sat back in his chair and held his head in his hands briefly as the guilty verdicts were read on charges of investment advisory fraud, conspiracy to commit mail and wire fraud, and two counts of mail fraud.

He faces up to 20 years in prison and a fine, although his attorney expects the prison term will be less based on federal sentencing guidelines. The jury also decided Lay must forfeit $590,526 in fees that MDL was paid to manage the fund.

Reminder: Tom Noe lost the Bureau of Workers’ Comp about $50 million. Most or possibly more than that has been or will be recovered (though the time value of money losses must of course be recognized). Meanwhile Mark Lay’s $216 million (or $215.4 million, if you believe Lay will ever pony up his ill-gotten fees) isn’t coming back, and Ohio taxpayers and/or Workers’ Comp premium payers are stuck with the consequences for as long as the should-be-privatized BWC continues to exist. Yet Noe’s errant ways gained exponentially more publicity because of his GOP connections, while Lay’s extensive Dem ties have gotten ridiculously short shrift. Anyone who can explain this disparate treatment as anything other than Ohio Old Media determination to take out the GOP as the party in power in Columbus is welcome to try.

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A Republican congressman wants an earmark for a mule museum. Let the pun-ishment over this ass-inine idea begin.

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The Associated Press’s Nedra Pickler plays the gender card for Hillary after last night’s Dem debate in her very first sentence:

In the City of Brotherly Love, there wasn’t much for a sister.

Hillary Rodham Clinton’s rivals ganged up on her during a two-hour Democratic presidential debate Tuesday night, putting the front-runner on defense on issues ranging from Iraq and Iran to Social Security and whether she would be electable in the general election.

Nedra’s undercurrent: “How dare they?”

Earth to Nedra: You, as a supposedly “objective” reporter, don’t get to pretend she’s untouchable because she’s a “sister.”

Politico has more, and though it goes slightly overboard, does an overall better job with its coverage.

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Warren Buffett, quoted in the UK Guardian:

The United States’ second-richest man has delivered a blunt message to the Bush administration: he wants to pay more tax.

Warren Buffett, the famous investor known as the “Sage of Omaha”, has complained that he pays a lower rate of tax than any of his staff - including his receptionist.

Then why doesn’t he just write a check?

Michigan averted a government shutdown, at what will be a terrible price to the state’s economy:

The Legislature agreed to raise Michigan’s income tax rate from 3.9 percent to 4.35 percent and expand the 6 percent sales tax to some services. Granholm signed both measures.

The sales tax would not apply to tickets to sporting and entertainment events or accounting services. But businesses and consumers would pay the tax on ski tickets, administrative and investment services, consultants, warehousing and storage, interior design, commercial landscaping and janitorial services, among other services.

I don’t think I’ve ever seen a sales tax on investment services anywhere else. It will be interesting to see if the tax is based on residency, or the location of the investment adviser. If the latter, in-state advisers will be under a significant handicap.

The air of unjustified certainty in the Associated Press article is really annoying:

Raising the state’s income tax to 4.35 percent will raise an additional $765 million for the state.

….. Extending the sales tax to some services starting Dec. 1 will bring in an estimated $614 million for the 10 months remaining in the fiscal year at that point, or about $750 million annually, state Treasurer Robert Kleine said.

Those new taxes “will” do no such thing. The income tax projection almost certainly assumes that no one will leave the state, even though it’s happening on a daily basis. At least the AP calls the services taxes revenue number an estimate, but the amount involved probably won’t come in either, even if no one leaves. That’s because if you increase the cost of something, people will buy less of it (supply-demand, remember?).

The Wall Street Journal (link requires paid subscription) has choice words for those who allowed all of this to happen:

Hail to the Taxers

Actor Jeff Daniels makes a cool pitchman in those national TV spots inviting business to Michigan, but soon he may have to start pitching inside the state. At about 2 a.m. Monday, a handful of Republicans in the Legislature broke days of gridlock and handed Democratic Governor Jennifer Granholm the $1.48 billion tax increase she has been demanding.

The state’s personal income tax will rise to 4.35% from 3.9%, and the rest of the revenue grab will come from a new 6% sales tax on business services. Already 14th in tax burden among the 50 states, according to the Tax Foundation, Michigan is now headed up in the rankings. Congratulations.

Update: Dave at Wide Open gives the perspective of an ex-Michigander (himself) on why he remains an ex-Michigander.

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In Spring 2005, when President Bush was supposedly serious about Social Security reform, the AFL-CIO (first item at link) threatened to take pension-fund money out of the hands of investment firms supporting the idea — a crystal clear violation of ERISA (Employee Retirement Income Security Act of 1974). As I wrote at the time:

As noted here, “ERISA requires plan fiduciaries to discharge their duties for the ‘exclusive purpose’ of providing participants and beneficiaries with benefits.” That is, no money, time, or effort can be spent on any other matter, and participants’ money must be placed with those who the fiduciary believes will achieve the highest long-term returns, PERIOD. Any participant who believes that the actions taken recently by the AFL-CIO are sacrificing his financial well-being has standing to sue.

Well, as the Wall Street Journal notes, here they go again (link requires paid subscription; bolds are mine):

According to an article in Financial Week that quotes Dan Pedrotty, the director of the AFL-CIO’s office of investment, the union plans to try to influence — really, intimidate — corporate boards with proxy fights. It also intends to ask companies to file reports on political contributions by directors and executives, especially those who support candidates who oppose universal care.

These threats should raise eyebrows at the U.S. Labor Department. The 1974 Employee Retirement Income Security Act — or Erisa — requires that union officials who administer pension funds do so in a way that protects and enhances retiree assets. Labor Department guidelines allow shareholder activism, but only as long as there is a “reasonable” expectation that pension-fund actions are “likely to enhance the value of the plan’s investment in the corporation.”

American businesses are already struggling with rising health care costs. If they are suddenly forced by proxy resolution to spend even more, the cost will have to come out of their bottom lines, and by extension their share price. There is thus no “reasonable expectation” that such policy by proxy would enhance the value of a pension’s investment. Quite the opposite.

Labor Department guidelines also make clear that fiduciaries are barred from subordinating the interests of their plan members to “unrelated objectives.” Forcing companies to support federal legislation for “universal coverage,” or to disclose the personal political activities of management, is about as “unrelated” to the retirement security of workers as it gets.

Aggressive action by the AFL-CIO here would appear to create the potential for the mother of all DOL enforcement actions — or if DOL won’t do its job, the mother of all class-action lawsuits against the AFL-CIO’s office of investment.

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Worse than worthless: Majoring in English at most “top” American universities:

The bad news is that Shakespeare has disappeared from required courses in English departments at more than three-fourths of the top 25 U.S. universities, but the good news is that only 1.6 percent of America’s 19 million undergraduates major in English, according to Department of Education figures.

It looks like that’s about 300,000 too many. Phyllis Schlafly has more.

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Hillary the Hyena – now on YouTube.

Dick Morris:

The mainstream media hasn’t had much to say about the laughing candidate. But can you imagine if Rudy Giuliani responded to a network interviewer by laughing loudly and hysterically for five seconds? No doubt The New York Times would seriously wonder about his state of mind. But they don’t find it odd with Hillary.

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I’m just puttin’ this one out there (”Advocates Call Iraq Marine’s Court Martial and Conviction Into Question”). It’s hard for me to accept the author’s claims just yet, but if he’s right, oh my.

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From the “Can’t Make This Up” File — Reuters reporter Noor Mohammad Sherzai quoted himself several times in this report from Afghanistan (HT Taranto, who had quite a bit of fun with this).