Thursday, April 17, 2014

A Necessary Evil?

Like millions of other Americans I filed my tax return by the April 15th deadline. According to the IRS, 85% of the population file on time, with 6% of small business owners and 9% of non-business owner individuals filing extensions. For anti-tax folks like myself the process is nearly as frustrating as the tax bill itself. Longtime readers may recall last year’s post A Taxing Situation sharing my journey as a victim of identity theft for tax purposes. The IRS had 770,000 people who were in the same situation as me. The delay in finalizing the return and issuing the refund (which is really an interest fee loan we give to the government) is already at six weeks. The 2011 delay was 14 months, the 2012 wait 8 months. Frustrating as it all is, and as much as I philosophically am anti-tax, it is the law and I may rant and blog, but I don’t violate. Not everybody has that same response.

People have been resisting paying taxes as long as there have been taxes. In Biblical times the tax collectors may have been unpopular, but Jesus paid his taxes according to several liturgical quotes.

Donald Rumsfeld, former Defense Secretary under Presents Bush and Ford, four-term congressman and former Director of the Office Economic Opportunity sends a letter each year to the IRS "stating he has “absolutely no idea” whether he has filed his forms correctly."
History Commons tells the story of Arthur Porth, a Wichita, Kansas, building contractor who filed a claim in a Kansas court to recover his income tax payment of $151 in 1951. “Porth argued that the 16th Amendment is unconstitutional because it places the taxpayer in a position of involuntary servitude contrary to the 13th Amendment. The court rules against Porth, but the defeat does not stop him. For 16 years Porth continues battling the income tax requirement, finding new and inventive challenges to the practice. He claims that the 16th Amendment ‘put[s] Americans into economic bondage to the international bankers.’ He also argues that because paper money is not backed by gold or silver, taxpayers are not obligated to pay their taxes because ‘Federal Reserve notes are not dollars.’ In 1961, Porth files an income tax return that is blank except for a statement declaring that he is pleading the Fifth Amendment, essentially claiming that filling out a tax return violates his right of protection from self-incrimination, a scheme that quickly becomes popular among anti-tax protesters. Porth becomes an activist and garners something of a following among right-wing audiences, traveling around the country distributing tax protest literature.” After many years of fighting and losing in court, with a propensity of anti-sematic and racist statements along the way, Porth exhausts his appeals and goes to jail. “Though sentenced to five years’ imprisonment, he only serves 77 days.” Port was certainly creative!

Responses to being over taxed vary. According to Mediaite this week “a Chicago man was arrested yesterday for pulling out a sub-machine gun after learning that he had to pay a 22-cent tax for his Diet Pepsi. “ The soda cost $1.79 and the tax is high – 12%. “Court records allege that Shelton got mad at the store clerk, saying that since he was a resident of that neighborhood, he was ‘tax-exempt.’ … He returned to the store carrying a Gucci satchel, from which he pulled out a loaded gun, He began waving the gun around ‘while yelling that he was going to shoot and kill everyone in the store.’”

“Taxes are a necessary evil” is an idiom that means that most people recognize the value of being taxed while disliking paying for them. TheAtlantic has a series of charts that demystify how much American’s pay, and who pays them...a great baseline for a factual discussion, uncommon in most discussion of taxes.

For 137 years America survived and thrived without an Income Tax. Government and the military were funded by excise taxes and tariffs. In 1913 the Income Tax act went into effect – charging “a 1% fee on the rich and a 6% fee on the super-rich.” By World War II that changed and in post-war America the tax code became the social safety net – with the support of the public and the politicians.

Democrats and Republicans are cut from the same cloth. They both have political platforms that redistribute wealth – taxing the public and spending it. Each party has different priorities, but the underlying philosophy is identical. As long as Americans continue to elect politicians from the major parties, taxes will continue to be a necessary evil.

Thursday, April 10, 2014

The cost of free speech

In college I wrote a weekly column for my alma-matter’s Daily Newspaper. (Yes, there was newsprint back then...and yes, my opinion writing is now marked by decades!) I learned in pretty quick order that there's a cost to "free" speech. The University’s longtime Chancellor released, to great fanfare, a list of his 10 priorities and goals for the University. He and the Board trumpeted the breadth, innovation and vision of these ambitions. They came with pretty pictures and graphs. The local television and newspapers parroted the press release. After carefully reviewing the list and all the various supplemental materials, I was left with a question. I used my column to opine on why the University didn’t have anything about academics in their list of goals. Suffice to say my column had a few weeks hiatus. Free Speech – whether it be actual talking, or writing or funding of those who write or talk is one of the most precious rights bestowed on Americans under the Constitution. In fact, it was the first thing to be granted. Recently the Supreme Court weighed in on the cost of speech, and many are wound up about it.

On April 2 the Supreme Court lifted the cap on what an individual can give overall to political candidates. The $2,600 limit to what one person can give to a particular campaign remains in place. What was rescinded is the $123,200 overall ceiling on contributions. Individuals can now give to an unlimited number of campaigns. According to Open Secrets, a well known and well-respected non-profit specializing in aggregating contribution information 591 people contributed close to the ceiling in the 2012 election cycle. It’s not a ruling that will impact a lot of individuals. It will more than likely just change how money flows into campaigns – not the total dollars.

In January 2010 the Supreme Court ruled that “the First Amendment prohibits the government from restricting political independent expenditures by corporations, associations, or labor unions.”  The Wikipedia summary goes on: “The case did not involve the federal ban on direct contributions from corporations or unions to candidate campaigns or political parties, which remain illegal in races for federal office.” 

The Citizens United case changed the funding of elections far more dramatically than the McCutcheon case will. It fundamentally redefined speech so that non-persons won the same protections as humans. The lifting of the cap may result in more candidates receiving funding, and overall spending going up, but with the $2,300 cap in place, it’s unlikely to have the same breadth that Citizen’s had.

The two rulings move further away from how I’ve long advocated campaigns should be funded. To summarize prior posts:  Let anybody give as much as they want to any campaign. The giving would have to be in proportion to the person’s earnings:  somebody giving $123,200 would have to earning more than that as a wage basis. Disclosure would be immediate and transparent. Donors have to be registered to vote in the area that the race is. Anybody under 18, corporations, unions, etc. couldn’t donate money because they can’t vote. Donors would have to be able to vote on the race/issue: eliminating out of state, out of community influence. The people impacted by the election/issue are the ones who should vote on and fund the campaign.  How radical!

Writing a newspaper column that pointed out a glaring omission embarrassed my University’s chancellor resulting not only in my column's hiatus, but in a revised list of priorities a few months later. There was a cost to that speech, and it was worth it. Having a few hundred individuals give $2,300 to every possible candidate doesn’t seem to as calamitous as others indicate. There's a better way to fund political campaigns. In all instances, though, there's a cost to Free Speech.

Thursday, April 3, 2014

Double Tailed Coin

The “heads or tails” game of flipping a coin is generally fair – there’s an equal probability of one side of the coin coming up versus the other. Only when the game is fixed – say with the double-headed-coin, does it become unfair. The idiom “two sides of the same coin” is applied to things that are essentially the same. In the case of American wages – a couple of recent news events from what seem like opposite ends of the economic spectrum are, in fact, more closely aligned than they are different.

Silicon Valley CEO’s of tech giants like Apple, Microsoft, Facebook and others allegedly had agreements amongst themselves not to recruit, hire or lure engineers away from each other based on a class action lawsuit that is currently being tried, according to the New York Times.  “The case involves 64,000 programmers and seeks billions of dollars in damages.”  The companies previously settled with the Justice Department and agreed to stop the no-poaching practice. Individual engineers, however, have formed a class claiming that the companies undervalued their services by taking away the element of competition that would have impacted their wages. According to average salaries in the area – the base starting wage for this position is in the $115 to $125,000 range.

On the other side of the spectrum President Obama has made increasing the minimum wage a signature issue for 2014.  According to the Huffington Post  he wants the minimum to be $10.10 an hour, well above the current $7.25. In fact he issued an Executive Order requiring Federal Contractors to pay the $10.10 an hour to their employees.

In August 2013 I wrote back-to-back blogs about the issue – Minimum Fairness and The Union Label.  The posts addressed how a minimum wage can’t address the essential inequalities that exist geographically and culturally. What a family needs to earn in a rural town will be quite different than what a family need needs to earn in a large metropolitan city. Eliminating the minimum wage should be a boon to Unions as they would then step into the role of protecting workers rights and negotiating wages – increasing their rolls, dues, and influence. 

The President’s unilateral action put Federal Contractors at a competitive disadvantage. If a company does business both in the private sector and in the government sector – they now carry a higher cost burden that other businesses in their industry. To be able to offer goods and services to the same customer base the company will either have to eliminate jobs or reduce costs and quality elsewhere. Passing the additional cost to its customers with higher prices will result in the competition winning more business.

In Silicon Valley Steve Jobs in death continues to wield influence. He apparently came up with the no-poaching scheme, ensuring that no other tech company could just pay more for the best engineers. That kept turnover low, base wages steady and the companies colluding to manage costs. It also likely lowered innovation. While the wages earned by highly skilled engineers are eight to ten times higher than workers on the President’s minimum wage – they weren’t in control of their earning ability.

Capitalism thrives and economies blossom when the market is able to determine wages, benefits and employee value. The minimum wage issue and the engineering collusion lawsuit seem to be quite different because of the people impacted and the vast gulf between $10.10 and hour and $60 an hour engineers make –but it really is two sides of the same coin. Somebody other than the worker and their employer are determining their value individually and in the marketplace.  In one case it’s companies colluding, in another its Government.  It’s just not what America’s supposed to be about…it’s unnatural, like a double-tailed coin.

Thursday, March 27, 2014

A Chilly War

Hi ho, hi ho, it’s off to war we go.  Da da duh da, da da duh da…. Oh, wait. That’s not the accurate Disney lyric, is it?  It just seems so listening to the frothing by a variety of “leaders” up in arms over the annexation of Crimea.  In August of 2013 my blog Fight Fight Fight looked at the various wars that the U.S. is involved with and whether they made sense.   I’m surprised that President Obama and a number of political leaders seem to have taken my comments literally.

“…It’s much better when we have a definable  enemy whom we can personify.  Vladimir Putin is the perfect foil – right out of Central Casting.  Quite dour looking.  He’s remaking Russia into the Soviet Union V2.0.  He’s given safe haven to Edward Snowden, a huge irritant to the Obama administration.  He’s declared war on gay people – throwing civil rights and basic humanity out the window.”

The media and political establishment are quite energized at being able to tell a black/white, good-guy/bad-guy story. Much easier to follow than the complexity of terrorism where the ‘enemy’ is spread out and there’s no leader to demonize. Russian’s reclaiming part of their land from Ukraine falls neatly into the simple narrative.

With Russian action the Obama administration is following my “suggestion” to draw Putin as the enemy for Cold War II.  Vlad helped the case by sliding into Crimea and annexing in a matter of days with no bloodshed or resistance from the people or “the West” brought a part of the Ukraine back under Russian control. He even had a vote, winning with 97.5%.

Senators like John McCain who are always chomping at the bit to go to war or engage the military in some way have lambasted the President for ‘losing’ Russia, as if it was some sort of board game. Two time Presidential failure Mitt Romney used the words:  “naivete” and “faulty judgment” on CBS to describe the Obama foreign policy.  Former Defense Secretary Donald Rumsfeld said a “trained ape” could do better.  Perhaps President George W. Bush (43) mistook what he saw when he “looked into the soul” of Putin in 2001? Or should he be blamed too?

The past year has seen a lot of political dust-ups over the NSA listening in on Americans as well as foreign leaders.  With all of that, nobody heard anything about tank and troop movement that Putin ordered?

The CIA reinvented itself after 9/11 – its self-described “greatest intelligence failure” –  to more nimbly move about and anticipate world events.  Missed another one.  Defenders say it’s impossible to read the mind of a madman like Putin.  Right, because those tanks and troops just materialized out of nowhere. Surprise! 

The problem isn’t what Obama did or didn’t do, what the NSA heard or didn’t hear, or what the CIA could figure out or couldn’t figure out.  The question is whether the U.S. needs to care about a small geographic region that’s home to 2.35 million people  - less than the number of people who live in Baltimore or Houston.

Russians remaking the map by force is against U.S. ideals. Is it against U.S. strategic interests? Does it justify a new cold war – or even a chilly war? If it does the U.S. President must articulate why American dollars, American prestige and American lives are worth it.  We're waiting.

Thursday, March 20, 2014

A teachable moment

I’m the product of educators, and am the “black sheep” of the family by not working in academia. I remember my Dad taking on some administrative responsibilities right when the school had to undergo a once-in-a-decade certification. It was a whole all-encompassing review. Having a set of standards across the educational spectrum may rub against my libertarian philosophy conceptually, but it is a practical and important way to ensure consistent quality across the country that I totally support. Making sure schools are able to teach the basics consistently is good public policy. Encouraging citizens to educate themselves is also good public policy. Providing financial incentives (loans, grants, etc.) to make that education accessible are good in theory, less successful in practice. Government as the regulator and primary funder/lender is ripe for conflict. Now President Obama wants (private) colleges to guarantee their results or face de-certification.

Americans now owe more than $1 trillion in student loans, nearly $30K per student. (This is more than Americans owe on their credit cards.)  The debt has increased as the costs for higher education have increased steadily – nearly double 10 years ago.  According to USA TodayA report issued in mid-August by the Department of Education shows that 57% of students received some sort of federal aid, and 41% of all undergrads had taken loans, up from 35% four years ago.”

I’m not sure that it’s the role of government to be in the loan business, especially when the regulate the same industry. But they are. It’s good to know that the U.S. Government has negotiated quite a good rate of return on its money for taxpayers. USA Today's reporting: “The law, regulating interest rates for federal student loans, was passed by Congress and signed by President Barack Obama this summer. It was hailed by politicians on both sides of the aisle as a win in the campaign to combat a rising tide of student loan indebtedness. … In total, the CBO projects the government to clear $175 billion in profit over the next decade on student loans.” As a capitalist I applaud this, as a citizen I'm not sure that students should be such significant financiers of the government.  

It’s not a one-sided payoff.  Median earnings of full time employees are nearly double if you have a college degree. So what’s the problem? Government earns a nice rate of return and students earn more after they graduate. President Obama has decided to add new regulations geared towards making sure that (private) colleges produce a citizen who has the capacity to pay back their loan.

USA Today reports: “Under the new requirements, the colleges will have to demonstrate that graduates' debt load on average does not exceed 20% of their discretionary earnings or 8% of their total earnings. Institutions must also demonstrate that former students' default rate does not exceed 30%. A program becomes ineligible for student federal aid programs if it fails to hit the debt-to-earning standards any two out of three consecutive years, or the institution default rate exceeds 30% for three consecutive years. Colleges could also be disqualified if the institutions are at near failing rates for four consecutive years.”

In short it means that to remain in business and certified schools must know how much their graduates make and whether they’re making their loan payments. It makes the NSA look like the ACLU and puts the college into the position of job-placement rather than educator.  It's incredibly invasive and is powerful evidence supporting why the Government should not be in the business of funding the industry that it regulates.

I have a BFA in theatre. I’ve never earned a full paycheck from my primary area of focus. Does that mean that my university failed? Should the program that I studied at be disqualified because I can’t demonstrate earnings related to my area of study? What about the fact that for the first few years out of college I deferred my payments and scraped along … should my school pay the price for this? Has the nanny state become so protective of people that there is no personal responsibility to educate yourselves, and the blame is on the institution?

The President’s new regulations shift the entire focus of higher education towards having graduates produce paychecks to cover the debt load of going to school. It’s perhaps the least progressive approach to education imaginable. The Bush (43) Administration’s focus on testing seems to be a bastion of educational integrity in comparison to this plan.  Congressional approval isn’t required of these rules – they have been issued by Executive Order.

President Obama tried something similar in 2012. U.S. District Judge Rudolph Contreras invalidated the rules, calling the requirements "arbitrary and capricious," because they weren't based on any economic studies. Now the Administration has economic studies to back up their revised approach.

Too bad the President didn't take the 2012 setback as a teachable moment – learning that education is not about producing a paycheck to pay the government back. He hasn’t. Schools will now have to produce paychecks for students rather than diplomas.

Thursday, March 13, 2014

A War on Defense?

I’ve never had the privilege of serving my country militarily, though I did try. At a career fair during my senior year of high school, I wandered over to the military recruitment table. When they asked what I was most interested in studying and pursuing. I was truthful: I was looking for a theatre school where I could have a life of performing! The guys in uniform shooed me away. I was actually serious – and said “What about the USO?” I don’t quite remember the response, but it certainly wasn’t all that inviting. So off to college I went, winding up with a BFA in theatre. There in the fall of my freshman year after I gave what I thought was a particularly brilliant performance in a scene, the professor took a moment, cleared his throat, and said “Dear boy, have you considered directing?” Thus my life beyond the footlights began where in short order I found my inner-producer. I probably would have been a terrible soldier as giving orders is more my style. Giving or taking orders – it’s clear that the Department of Defense needs some offense.

Defense Secretary Chuck Hagel spent most of last week defending his proposed budget. It would “slash” defense spending to half-a-trillion dollars, down from $680 Billion in 2010 ($16 billion more than the Obama Administration requested. Iraq, Afghanistan and other wars are extra.) “Hagel described the big reductions in spending as necessary to protect training budgets for the current force and to preserve money set aside to buy new planes, ships and ground combat vehicles.”

The U.S. budget is made up of mandatory spending, like Social Security and Medicare – where the costs are already determined by prior Congressional action. The expenditures can be changed, but they are so mired in politics that it’s unlikely in the foreseeable future that they’ll be addressed.  Budget hawks aim for ‘discretionary’ spending. Defense is the largest component of that at 19%. 

It’s a lot of money. How much exactly isn’t known. Once again in FY 2011, as in 2010, 2009, and, well, every year prior – the Department failed its financial audit. “Serious financial management problems at the Department of Defense (DOD) that made its financial statements unauditable."  With this track record the Department continues to get nearly one-fifth of every taxpayer dollar. What do they do with it?

According to Wikipedia, “The military of the United States is deployed in more than 150 countries around the world, with 164,227 of its active-duty personnel serving outside the United States and its territories and an additional 118,966 deployed in various contingency operations.”  It’s stunning to view the list of countries and how many service people are assigned. I’m struck as much by the 40,304 in Germany or the 50,341 in Japan as I am by the 1 Marine in Singapore or the 2 Army folks in Portugal. There’s 1.1 million service members serving in the contiguous US. What are all these people doing? The US seems only to be in a military conflict in one country currently – where US troops outnumber the enemy 12-to-1, according to The Huffington Post. I guess the drone revolution is still a ways off.

I am not an expert in military maneuvers, strategy or anything like that. I’m more of a protectionist than a globalist. I’m a pacifist on personal and religious grounds. The argument today about the DOD is not based on any of those reasons: it’s financial. The producer/financial analyst part of me knows there’s a better way. At a time of relative global peace it seems that spending 19 cents of every dollar on Defense is too much. Hagel’s proposed budget is a start – about a 17% reduction. We need a war on the Defense budget.

Thursday, March 6, 2014

Try Try Try Again

William Edward Hickson popularized the English proverb “If at first you don't succeed Try, try, try again.”  The sentiment is a good one – it encourages people not to give up.  It helps build endurance and character.  In my role as a not-for-profit executive I often find myself living the adage – constantly trying to move donors, audience, members, etc. towards something.  It requires patience and fortitude.  Many times it works out, but just as often it doesn’t.  In my case, you just move on.  In the case of politicians, it appears that even in defeat they won’t give up.

This week Congress voted for the 50th time to repeal ObamaCare.  I guess they don't care that the Senate and the President won't ever accept that.  They keep trying.  That's perhaps not the best use of time and resources and focus, but with the checks and balances system, it's relatively meaningless and they can keep whacking away at it.  Too bad the system doesn't work elsewhere in government.

In 2002 the National Security Agency (NSA) launched a program known as “Trailblazer” which according to Wikipedia:  “intended to develop a capability to analyze data carried on communications networks like the Internet. It was intended to track entities using communication methods such as cell phones and e-mail. It ran over budget, failed to accomplish critical goals, and was cancelled.” 

Waste, fraud and abuse came to light in a whistle-blowing incident that ended when then NSA Director Michael Hayden “told a Senate hearing that the Trailblazer program was several hundred million dollars over budget and years behind schedule.”  The American public was outraged and pushed back to have the program ended.  It was supposedly shut down in 2006 and the whistle-blower was criminalized and punished.

We know today that the NSA simply renamed and expanded the program, continuing to collect data – this time far more widespread than was known or authorized.  The public didn’t learn of the expansive and all pervasive program until another whistle-blower (Edward Snowden) came forward with the truth.  The NSA didn't take no for an answer, lied about shutting it does, and went forward anyway after telling the public it was over.  And they're surprised at the push-back from the public when it was revealed?

The Troubled Asset Relief Program – known by the acronym TARP and by the shorthand “stimulus” was President Bush’s attempt to “save capitalism.” The American public flooded Congress with calls begging their representatives to vote no – with the message:  let the banks go under, let capitalism work.  They were heard – if for only a day.  Politician after politician spewed forth that their constituents were heard loud and clear and that the “no” vote was a great day for democracy.  Within a week a slightly smaller package ($700 billion) with far fewer restrictions came to Congress and passed comfortably.  When the public learned about it, approval ratings for Congress began a downward spiral that now has the august body in single digits.  Bush didn't give up - he and his administration kept going back to the well until they got the government to give a blank check to industry.

As discussed in last week's post, the FCC recently tried to impose itself into the decision making process of how news is made and disseminated.  Thanks to a brave FCC Commissioner, the matter came to light before the first news agency got the questionnaire.  The FCC hastily withdrew the report, announced that no survey would go out and tried very hard to pretend that this hadn't happened.  The public has breathed a sigh of relief.  But patterns are patterns:  this one will come back.

There are plenty of parables and passages about vigilance.  It’s up to us to live them before government tries again to curb the Constitution.