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Archive for May, 2009

Read the rest of the story.

When you’re done with this story, please buy or check out from your local library – Obama Nation – Jerome R. Corsi’s excellent book which is a review of Barack Hussein’s book, “Dreams From My Father” – which should be retitled “Myths From My Father.”

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Levy Viewed as Way to Reduce Deficits, Fund Health Reform

(Washington Post Staff) –  With budget deficits soaring and President Obama pushing a trillion-dollar-plus expansion of health coverage, some Washington policymakers are taking a fresh look at a money-making idea long considered politically taboo: a national sales tax.

Common around the world, including in Europe, such a tax — called a value-added tax, or VAT — has not been seriously considered in the United States. But advocates say few other options can generate the kind of money the nation will need to avert fiscal calamity.

At a White House conference earlier this year on the government’s budget problems, a roomful of tax experts pleaded with Treasury Secretary Timothy F. Geithner to consider a VAT. A recent flurry of books and papers on the subject is attracting genuine, if furtive, interest in Congress. And last month, after wrestling with the White House over the massive deficits projected under Obama’s policies, the chairman of the Senate Budget Committee declared that a VAT should be part of the debate.

“There is a growing awareness of the need for fundamental tax reform,” Sen. Kent Conrad (D-N.D.) said in an interview. “I think a VAT and a high-end income tax have got to be on the table.”

A VAT is a tax on the transfer of goods and services that ultimately is borne by the consumer. Highly visible, it would increase the cost of just about everything, from a carton of eggs to a visit with a lawyer. It is also hugely regressive, falling heavily on the poor. But VAT advocates say those negatives could be offset by using the proceeds to pay for health care for every American — a tangible benefit that would be highly valuable to low-income families.

Liberals dispute that notion. “You could pay for it regressively and have people at the bottom come out better off — maybe. Or you could pay for it progressively and they’d come out a lot better off,” said Bob McIntyre, director of the nonprofit Citizens for Tax Justice, which has a health financing plan that targets corporations and the rich.

A White House official said a VAT is “unlikely to be in the mix” as a means to pay for health-care reform. “While we do not want to rule any credible idea in or out as we discuss the way forward with Congress, the VAT tax, in particular, is popular with academics but highly controversial with policymakers,” said Kenneth Baer, a spokesman for White House Budget Director Peter Orszag.

Still, Orszag has hired a prominent VAT advocate to advise him on health care: Ezekiel Emanuel, brother of White House chief of staff Rahm Emanuel and author of the 2008 book “Health Care, Guaranteed.” Meanwhile, former Federal Reserve chairman Paul A. Volcker, chairman of a task force Obama assigned to study the tax system, has expressed at least tentative support for a VAT.

“Everybody who understands our long-term budget problems understands we’re going to need a new source of revenue, and a VAT is an obvious candidate,” said Leonard Burman, co-director of the Tax Policy Center, a joint project of the Urban Institute and the Brookings Institution, who testified on Capitol Hill this month about his own VAT plan. “It’s common to the rest of the world, and we don’t have it.”

Seeking New Revenue

The surge of interest in a VAT is testament to the extraordinary depth of the nation’s money troubles. While some conservatives have long argued that a consumption tax would provide a simpler and more efficient alternative to the byzantine U.S. income tax code, this time it’s all about the money.

The federal budget deficit is projected to approach $1.3 trillion next year, the highest ever except for this year, when the deficit is forecast to exceed $1.8 trillion. The Treasury is borrowing 46 cents of every dollar it spends, largely from China and other foreign creditors, who are growing increasingly uneasy about the security of their investments. Unless Congress comes up with some serious cash, expanding the nation’s health-care system will only add to the problem.

Obama wants to raise income taxes for high earners and impose new levies on business, but those moves would not generate enough cash to cover the cost of health care, much less balance the budget, and they have not been fully embraced by Congress. Obama’s plan to tax greenhouse-gas emissions could raise trillions of dollars, but again, Congress is balking.

Key lawmakers are considering other ways to pay for health reform, including new taxes on sugary soda, alcohol and employer-provided health insurance. The last proposal could raise a lot of money — nearly $1 trillion over the next five years, according to White House budget documents. But options on the table would raise a fraction of that sum. And while it might pay for health care, it would barely dent deficits projected to total nearly $4 trillion over the next five years and to grow rapidly in the future, as baby boomers draw on Social Security and Medicare.

Enter the VAT, one of the world’s most popular taxes, in use in more than 130 countries. Among industrialized nations, rates range from 5 percent in Japan to 25 percent in Hungary and in parts of Scandinavia. A 21 percent VAT has permitted Ireland to attract investment by lowering its corporate tax rate.

The VAT has advantages: Because producers, wholesalers and retailers are each required to record their transactions and pay a portion of the VAT, the tax is hard to dodge. It punishes spending rather than savings, which the administration hopes to encourage. And the threat of a VAT could pull the country out of recession, some economists argue, by hurrying consumers to the mall before the tax hits.

A VAT’s Bottom Line

What would it cost? Emanuel argues in his book that a 10 percent VAT would pay for every American not entitled to Medicare or Medicaid to enroll in a health plan with no deductibles and minimal copayments. In his 2008 book, “100 Million Unnecessary Returns,” Yale law professor Michael J. Graetz estimates that a VAT of 10 to 14 percent would raise enough money to exempt families earning less than $100,000 — about 90 percent of households — from the income tax and would lower rates for everyone else.

And in a paper published last month in the Virginia Tax Review, Burman suggests that a 25 percent VAT could do it all: Pay for health-care reform, balance the federal budget and exempt millions of families from the income tax while slashing the top rate to 25 percent. A gallon of milk would jump from $3.69 to $4.61, and a $5,000 bathroom renovation would suddenly cost $6,250, but the nation’s debt would stabilize and everybody could see a doctor.

Sales Tax Gains Momentum

Burman, who helped House Democrats craft an unsuccessful 2007 plan to repeal the alternative minimum tax, said he’s received a number of phone calls from lawmakers interested in his idea, though “they can’t quite imagine how to make it happen politically.” Burman said the 25 percent rate has caused some sticker shock, and he’s trying to figure out how to bring it down.

Graetz’s proposal drew an endorsement from Volcker, who last year called it “a sensible plan for reform.” (Volcker did not respond to a request for comment.) It also has piqued the interest of Conrad, the Senate Budget Committee chairman who argues that it could be modified to accommodate Obama’s pledge not to raise taxes on families who make less than $200,000 a year.

“I think interest is quietly picking up,” Graetz said. “People are beginning to recognize that the mathematics of the current system are just unsustainable. You have to do something. And a VAT has got to be on the table if you want to do something big and serious.”

Still, the Senate Finance Committee declined to include a VAT among the options it is considering to pay for health reform. And even VAT supporters doubt the tax will find a place among the tax-reform proposals the Volcker panel has been asked to produce by Dec. 4.

Though the nation’s fiscal outlook is grim, Burman said “the situation will have to get more desperate” before lawmakers are likely to consider a new levy aimed directly at the pocketbooks of every one of their constituents.

Most lawmakers are still looking for “a painless source of revenue” to overhaul the health-care system and dig the nation out of debt, Burman said. “Who knows?” he added. “Maybe the tooth fairy will bring that to them.”

So, we have stupidity in the White House – of course we knew that – and now we’ve added, theft, nepotism, and the total lack of anyone in office knows what the fuck they’re doing. After Obama ruins our country and leaves office, and tomorrow wouldn’t be soon enough, where, exactly will he go? To Indonesia where was tutored in the Islamic Religion or to Kenya where his alcoholic polygamist father ended his life?

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Mansfield, Texas (CBS) – Is it okay to show your patriotism at the office?

For one Arlington woman, the answer was “no” after she hung an American flag in her office just before the Memorial Day weekend.

Debbie McLucas is one of four hospital supervisors at Kindred Hospital in Mansfield. Last week, she hung a three-by-five foot American flag in the office she shares with the other supervisors.

When McLucas came to work Friday, her boss told her another supervisor had found her flag offensive. “I was just totally speechless. I was like, ‘You’re kidding me,'” McLucas said.

McLucas’ husband and sons are former military men. Her daughter is currently serving in Iraq as a combat medic.

Stifling a cry, McLucas said, “I just wonder if all those young men and women over there are really doing this for nothing.”

McLucas said the supervisor who complained has been in the United States for 14 years and is formerly from Africa. McLucas said that supervisor took down the flag herself.

“The flag and the pole had been placed on the floor,” McLucas said. But McLucas also said hospital higher-ups had told her some patients’ families and visitors had also complained.

“I was told it wouldn’t matter if it was only one person,” she said. “It would have to come down.”

McLucas said hospital bosses told her as far as patriotism was concerned, the flag flying outside the hospital building would have to suffice.

“I find it very frightening because if I can’t display my flag,” McLucas asked, “what other freedoms will I lose before all is said and done?”

Kindred Healthcare’s corporate headquarters are located in Kentucky.  We called them for comment when we were first working on this story Tuesday, but they did not return our calls.

Wednesday morning, however, our story received nationwide attention.  We have received hundreds of emails and comments from people who had something to say about it.  Several dozen people protested outside the Mansfield hospital Wednesday. And a receptionist at Kindred’s headquarters told us they received many phone calls.

Then, late Wednesday morning, Kindred posted on its website a statement about the incident.  It reads, in part:  “The disagreement was over the size of the flag and not what it symbolized. We have invited the employee to put the flag back up.”

We talked to McLucas Wednesday afternoon.  She says the hospital’s local CEO called and apologized.  And McLucas says the woman did tell her she could put the flag back up, which she has done.

But she says when she was first told the flag had to go, nobody mentioned anything about its size.

“At no point was I afforded the opportunity — [no one said,] ‘Hey Deb, could you get a one and a half by three and a half and hang it instead of hanging this three by five?'” McLucas said.

Even so, McLucas says she’s happy people have spoken out about the issue.  “It’s just restored my faith in the American people,” she said.

Is this America – doesn’t seem to be. What an outrage.

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(RWN – McQ)   —  I’ve tried to make the point in the past about how, regardless of anyone’s desire, there is going to be pain associated with the financial mess in which we presently find ourselves. The question is will an apparent aversion to pain lead government to soften it but also extend while doing so, or do politicians have the fortitude and will to advise us to endure the pain, get it over with and begin the inevitable recovery much more quickly?

As is obvious, it is the former pain aversion formula which seems to be the one our politicians choose. Because even short term but significant pain is likely to cost them their jobs, and, when all is said and done in matters such as these, that is what they end up focusing on.

However, what it means, according to news reports, is something I never thought I’d ever see contemplated, much less seriously considered in my lifetime.

Bank nationalization:

So far, President Obama’s top aides have steered clear of the word entirely, and they are still actively discussing other alternatives, including creating a “bad bank” that would nationalize the worst nonperforming loans by taking them off the hands of financial institutions without actually taking ownership of the banks. Others talk of de facto nationalization, in which the government owns a sizeable chunk of the banks but not a
majority, with all that connotes.

That has already happened; taxpayers are now the biggest shareholders in Bank of America, with about 6 percent of the stock, and in Citigroup, with 7.8 percent. But the government’s influence is far larger than those numbers suggest, because it has guaranteed to absorb the losses of some of the two banks’ most toxic assets, a figure that could run into the hundreds of billions of dollars.

Many believe this form of hybrid ownership — part government, part private, with the responsibilities of ownership unclear — will not prove workable.

“The case for full nationalization is far stronger now than it was a few months ago,” said Adam S. Posen, the deputy director of the Peterson Institute for International Economics. If you don’t own the majority, you don’t get to fire the management, to wipe out the shareholders, to declare that you are just going to take the losses and start over. It’s the mistake the Japanese made in the ’90s.”

“I would guess that sometime in the next few weeks, President Obama and Tim Geithner,” he said, referring to the nominee for Treasury secretary, “will have to come out and say, ‘It’s much worse than we thought,’ and just bite the bullet.”

I’ve derisively cited the “Japanese model” repeatedly when discussing this on the blog and podcasts thinking, apparently erroneously, that we’d be smart enough to understand what Japanese government intervention ended up doing to their economy over the past two decades and not repeat that mistake.

Obviously I was wrong. As the government pumps in money in trade for stock in the taxpayers name (even though the taxpayers will never see a nickel of any future returns personally), nationalization becomes a de facto situation.

As the NYT points out, both Lawrence Summers (an Obama economic adviser) and Timothy Geithner (Obama’s choice for Sec Treasury) have made the point during the Asian financial crisis of the ’90s that governments make “lousy bank managers”.

Yet here we have government already hip deep in the banks and heading deeper. And even given the past experience cited, I guess we’re expected to believe that in this case, it will all be different.

Of course with de facto or actual nationalization, the entire political game changes. Politicians would have a new vehicle to enable pain aversion by short-circuiting the consequences of irresponsible actions by those who keep them in office:

Moreover, Mr. Obama’s advisers say they are acutely aware that if the government is perceived as running the banks, the administration would come under enormous political pressure to halt foreclosures or lend money to ailing projects in cities or states with powerful constituencies, which could imperil the effort to steer the banks away from the cliff.

“The nightmare scenarios are endless,” one of the administration’s senior officials said.

And, unfortunately, they’re only one part of the whole “nightmare sceanrio” this level of government spending and intrusion might bring.

“We told the Asians that they had to be willing to let banks and companies fail,” said Jeffrey Garten, a professor at the Yale School of Management and a top official in the Clinton administration. “We warned that there was great moral hazard if governments just bailed them out.”

“And now,” he said, “we are doing the polar opposite of our advice.”

Isn’t the definition of insanity trying the same thing over and over and expecting different results?

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WASHINGTON — The Obama administration has begun serious talks about how it can change compensation practices across the financial-services industry, including at companies that did not receive federal bailout money, according to people familiar with the matter.

The initiative, which is in its early stages, is part of an ambitious and likely controversial effort to broadly address the way financial companies pay employees and executives, including an attempt to more closely align pay with long-term performance.

Administration and regulatory officials are looking at various options, including using the Federal Reserve’s supervisory powers, the power of the Securities and Exchange Commission and moral suasion. Officials are also looking at what could be done legislatively.

Among ideas being discussed are Fed rules that would curb banks’ ability to pay employees in a way that would threaten the “safety and soundness” of the bank — such as paying loan officers for the volume of business they do, not the quality. The administration is also discussing issuing “best practices” to guide firms in structuring pay.

At the same time, House Financial Services Committee Chairman Barney Frank (D., Mass.) is working on legislation that could strengthen the government’s ability both to monitor compensation and to curb incentives that threaten a company’s viability or pose a systemic risk to the economy.

It is unclear how such a bill would fit with what the Fed and others are already considering. But any legislation passed would make it harder for policy makers to dial back limits once the financial crisis subsides.

Any new compensation rules would likely be rolled out alongside a broader revamp of financial-markets regulation that the Treasury is pushing. The compensation effort is the latest example of the government’s increasing focus on aspects of the financial sector that once were untouched.

Regulators have long had the power to sanction a bank for excessive pay structures, but have rarely used it. The Office of the Comptroller of the Currency last year quietly pressed an unidentified large bank to make changes “pertaining to compensation incentives for bank personnel responsible for assigning risk ratings,” a spokesman said. Since 2007, it has privately directed 15 banks to change their executive compensation practices.

Government officials said their effort, which is just beginning, isn’t aimed at setting pay or establishing detailed rules. “This is not going to be about capping compensation or micro-management,” said an administration official. “It will be about understanding what is the best way to align compensation with sound risk management and long-term value creation.”

Despite the banking industry’s weakened state, it would likely try to push back against curbs on how financial firms can compensate people. Bank executives have complained to federal officials that strict rules could prompt some of their best employees to move to parts of the financial industry that aren’t regulated, such as hedge funds, private-equity firms and foreign banks. They’ve also argued that paying substantial bonuses is integral to how the industry works.

cash flow bank pay overhaul grapg“Our companies have already enhanced, strengthened and expanded the number of compensation programs that are tied to long-term incentives,” said Scott Talbott, a senior vice president at the Financial Services Roundtable, a trade group.

Edward Yingling, chief executive of the American Bankers Association, said banks might be able to accept new rules “as long as they are general in nature and could be enforced on a case-by-case basis. What would never work is detailed regulation of compensation.”

President Barack Obama and Treasury Secretary Timothy Geithner have both blamed the way banks structured compensation plans for contributing to the financial mess. In February, Mr. Obama said executive pay helped lead to a “reckless culture and a quarter-by-quarter mentality that in turn helped to wreak havoc in our financial system.”

Mr. Geithner recently instructed his staff to begin discussions with the Fed, the SEC and others about ways to address compensation practices.

During a recent congressional hearing, Chairman Ben Bernanke said the Fed was working on rules that will “ask or tell banks to structure their compensation, not just at the very top level but down much further, in a way that is consistent with safety and soundness — which means that payments, bonuses and so on should be tied to performance and should not induce excessive risk.”

In an indication of how broad the effort may become, Federal Deposit Insurance Corp. Chairman Sheila Bair said regulators need to examine compensation practices in the mortgage industry, suggesting new limits could stretch beyond banks.

“We need to make sure that incentives are aligned among all parties by making compensation contingent on the long-run performance of the underlying loans,” Ms. Bair said on Tuesday.

The discussions follow a narrower effort by the administration to clip pay at firms that get federal aid. Earlier this year, it issued guidelines limiting salaries for top executives at firms that received funds under the Troubled Asset Relief Program.

Congress chimed in with even tougher rules curbing bonuses for top earners at the same firms, among other things. One rule bars firms receiving federal funds from paying top earners bonuses that equal more than a third of their total compensation.

The administration is still wrestling with how to marry those two efforts, which in combination are more punitive than officials intended. The Treasury is expected to issue new rules sometime in the next few weeks.

Just plain insanity.

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WASHINGTON (AP) – A source tells The Associate Pressthat President Barack Obama is considering California Supreme Court Justice Carlos Moreno and more than five other people as nominees for the Supreme Court.An official familiar with Obama’s decision-making said others include Solicitor General Elena Kagan, Michigan Gov. Jennifer Granholm, Homeland Security Secretary Janet Napolitano and U.S. Appeals Court judges Sonia Sotomayor and Diane Pamela Wood—people who have been mentioned frequently as potential candidates.

The official said there were other people under consideration. The official spoke on condition of anonymity because no names have been publicly revealed by the White House.

I find it incredulous that Obama is even considering Gov. Jennifer Granholm, Janet Napolitano or Carlos Moreno.  Just ask any Michigander exactly how Granholm hasn’t done a damn thing for them – I should know as we have family living there and things aren’t good- and it’s not just the auto industry that’s broken. As for Janet – just look at how she’s reacted (or not) to the recent SWINE FLU outbreak – talk about incompetent. Carlos Moreno – check out his views on abortion, homosexuality, etc.  The other three nominees might be non-biased, but we won’t know until they pass muster in their nomination and are sitting on the bench.

Your thoughts?

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WASHINGTON (AP) — In his first quarterly report on the nation’s stimulus package, Vice President Joe Biden uses anecdotes to paint a glowing picture of an economy on the rebound. In reality, the picture is incomplete and the colors far more muted.

It is not disputed that Washington is spending historic amounts of money at a rate far faster than normal. Workers are getting tax breaks, Washington is picking up a greater share of state Medicaid costs and road construction projects are beginning.

Even Recovery.gov, the Web site that has yet to live up to its billing as a one-stop way to track every penny, offers more information than typical government programs, and faster.

But the effect of that spending is less clear. Many of the claims the White House is making are based on anecdotes selected to fit the Obama administration’s message. For instance, the report cites a newspaper article about workers being rehired at a factory in Chicago. That account is true, but is no more an accurate snapshot of the nation’s economy than a story, not cited in the report, about a Roanoke, Va., railcar factory closing.

Capturing the full effect of the stimulus at this early stage is difficult, but the administration has set high bars for success. In championing those successes, however, the White House plays a little loose with the facts.

BIDEN SAID: First-time homebuyers are “driving increased activity in the home sales market,” while mortgage and title companies are hiring more workers because of the first-time homebuyer tax credit included in the stimulus bill.

THE FACTS: The report cites anecdotes from a New Orleans business journal to back up the claim. It’s true, buyers are taking advantage of the $8,000 first-time homebuyer tax credits. The IRS said more than 567,000 tax returns claimed the credit in just the first weeks of the program. But that hasn’t provided an immediate turnaround in the market.

Since February, sales of existing homes have fallen 3 percent and new home sales are down .6 percent.

And the number of jobs in the real estate industry has declined by about 20,500, according to the Department of Labor.

There are signs that the housing market is improving. But the numbers suggest that if the market bottomed out, it did so in January, before the stimulus was passed.

BIDEN SAID: Employment agencies are placing more workers in jobs, and demand is up since February.

THE FACTS: The report cites an interview with an employment service manager quoted in the same New Orleans business article. The anecdote may be true, but it’s impossible to extrapolate that any further, even just to New Orleans. The city has lost more than 200 jobs since February. Overall, Louisiana lost 16,085 jobs over the same span, according to the Department of Labor.

THE WHITE HOUSE SAID: The stimulus has created or saved 150,000 jobs.

THE FACTS: Since February, the nation has lost more than 1.3 million jobs, according to the Department of Labor. To make the case that the country created jobs over that same stretch, the White House has put forward a benchmark of jobs created “or saved.” The argument is that the job numbers would have been even worse had it not been for the stimulus, and the difference between those numbers is a net positive.

To visualize that disconnect, consider this: The administration has promised to create or save 600,000 more jobs in the next 100 days. Even if the nation loses another 5 million jobs during that span (a highly unlikely prospect) the White House could still claim success.

There are few hard numbers when it comes to tracking stimulus jobs. The Obama administration numbers are based on estimates by the White House Council of Economic Advisers, based largely on a formula Obama’s transition team put forward. It estimates the effect of tax breaks, government spending and social programs on job growth.

Spending money will put people to work. But spending has a cost. At some point, Washington will have to pay for this program, either by raising taxes or interest rates, and those policies typically hurt job growth. The Obama administration’s job data do not take into consideration this back-end cost, an omission some economists, particularly conservative economists, say is a flaw in the analysis.

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