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Archive for the ‘President Obama’ Category

There Is No Tax Deduction For Off-Shoring Jobs

In Political Rhetoric, President Obama, Tax Breaks on October 13, 2012 at 10:24 pm

During the first presidential debate against Mitt Romney, President Obama repeated a charge I see in the netherworld of liberal blogs and progressive’s Facebook posts.   As the head of the Business Round Table, John Engler, wrote in an op-ed:

What the candidates didn’t agree on was whether there is a deduction in the U.S. tax code that encourages companies to move plants overseas. Mr. Obama contended that such a deduction exists. Mr. Romney said, “I’ve been in business for 25 years and I don’t know what you’re talking about.”

According to the nonpartisan congressional Joint Committee on Taxation, there are no specific tax credits or deductions for moving plants and jobs overseas. …the tax code provides a deduction for all business expenses, including plant-closing costs, severance pay and worker retraining. [1]

I’ve never seen any “offshoring” deduction and am confident the Joint Committee on Taxation is correct that no offshoring jobs tax credit exists.

As President, Mr. Obama should know the law.  If he thought there’s a tax credit for exporting jobs, why didn’t he undo it during the past four years, especially the two when his party held complete control of Congress?  The answer is no such tax credit exists, Obama continued the spread of a false internet rumor.

Image of a globe centred on India, with India highlighted.

 [1] http://www.4-traders.com/news/BR-Business-Roundtable-The-Wall-Street-Journal-Op-ed-Engler-Corporate-Taxes-the-Myths-and-Fa–15327082/

Pictures from Wikipedia Commons.

What Barack Obama Would Tell Vincent Van Gogh

In President Obama on July 18, 2012 at 1:45 am

Vincent Van Gogh, you’re nothing.

You didn’t paint “Starry Night on the Rhone” on your own. You might think you had some special talent but any three-year old with a paintbrush could do it. 

Did you build the quay?  Did you build the gas lighting system or the buildings you painted?  I didn’t think so.  Some local government officials are more responsible for your art than you are, my painter for the 1% friend.  

Don’t even get me started on the river or stars in the sky.  I speak Austrian better than Netherlandian so I dunno who was king back then, but the Rhone had to be a Stimulus project.

Just to prove anyone can do what you did, I’ll take up painting as soon as I’m retired from politics.  Like you, I’ll paint a few self-portraits. 

Sincerely,

Barack Obama

File:Starry Night Over the Rhone.jpg

You Built Your Business, President Obama Did Not

In Economy, Political Rhetoric, President Obama on July 16, 2012 at 9:23 pm

Sorry, Mr. President, but you’re wrong. 

If you have a business, you built it.  It’s yours, not Barrack Obama’s.  You’re the one who quit your comfortable day job to take on a dream.  It was your 401(k) savings you dipped into for the start-up.  It was your credit card that purchased office supplies.  You’re the one who had trouble sleeping at night when you signed for the lease, knowing you needed to sell like crazy to justify the risk.   You’re the one who sped to the bank before it closed to deposit a receivable check you personally picked up.  It is you who sent a check to the state to incorporate. 

It is you who learned QuickBooks and how to do payroll.  You learned about liability insurance and key man policies and a million other tidbits of business you never imagined you’d have to.  You’re the one who reassured your spouse you weren’t insane when the economy took a downward trend or you lost your big customer.

You’re the one who gets up at 4AM and leaves last in the evening.  You’re the one who signs personally for your bank loans.  You’re the one who signs the tax returns.  It is you who negotiates with salespeople of your vendors.  You work so hard because your day seems to be filled with meetings, meetings and more meetings.  You’re the one who deals with the angriest customers when things go wrong.  You’re the one who does the thankless jobs – like interviewing or firing people when times are tough.  It’s your drive and vision that pushed each new product.

You’re the one who has to be a rock.  When customers or employees scream and swear, you’re the one who has to settle things down.  You’ll get sued if you don’t, after all, you’re the supposed ‘deep pocket’.  When times are tough, you cheer up the staff.  When times are good, you dampen overenthusiasm, lest it put the firm in a bad spot later.

You’re the one who had trouble sleeping at night when you contemplated adding a second location or moving to a larger facility.  There were no guarantees.  You’re the one who had to testify in court about the frivolous lawsuit.  Even though the judge tossed it, your insurance rates went up, anyway. 

You’re the one who gave back to your community as you succeeded.  You sponsored a little league team, you organized fundraisers and gave more and more to local charities.  You volunteered for Junior Achievement and you offered leftover food from your restaurant to a homeless shelter.  As your company grew, more and more people in your community asked for your advice.  They started recommending you get involved.  You didn’t have the time, but you ran for school board or village board, anyway.  You paid a fortune in taxes, not only income but real estate and sales taxes for your business.

No matter what politicians say, you are the bedrock of the American economy and society, too. 

President Obama revealed perhaps more than intended of his feelings toward entreprenuers and successful people in general.  Ironically, most successful people are quick to extend credit to people who’ve helped them along the way, be it parents, mentors, teachers, spouses and the like. 

But, Apple and Hewlett-Packard didn’t become great companies because of the workmen who build the garages they started in. [1]  They became industry leaders by the endless hard work, drive and brilliance of Steve Wozniak, Steve Jobs, Bill Hewlett and David Packard.  Millions of American business owners toil away in far less glamorous surroundings, though the dry cleaner, cleaning service and local restaurant are all crucial to local economies.

I reprint Obama’s remarks at length below, sourced from whitehouse.gov:

They know they didn’t — look, if you’ve been successful, you didn’t get there on your own.  You didn’t get there on your own.  I’m always struck by people who think, well, it must be because I was just so smart.  There are a lot of smart people out there.  It must be because I worked harder than everybody else.  Let me tell you something — there are a whole bunch of hardworking people out there.  (Applause.)

If you were successful, somebody along the line gave you some help.  There was a great teacher somewhere in your life.  Somebody helped to create this unbelievable American system that we have that allowed you to thrive.  Somebody invested in roads and bridges.  If you’ve got a business — you didn’t build that.  Somebody else made that happen.  The Internet didn’t get invented on its own.  Government research created the Internet so that all the companies could make money off the Internet. [2]

[1] Early Apple computers really were made in Steve Job’s parent’s garage in Los Altos, CA.   http://cicorp.com/apple/garage/index.htm

[2] Note he is even wrong about the internet, which was created by the Defense Dept. for national security purposes, not “so companies… could make money”.  The internet is nothing without private telecomm, too (phone lines, switches, routers, etc.)  Many years after the invention of the internet, smart entrepreneurs figured out ways to make the internet useful to consumers and thus, make money. http://www.whitehouse.gov/the-press-office/2012/07/13/remarks-president-campaign-event-roanoke-virginia?utm_source=wh.gov&utm_medium=shorturl&utm_campaign=shorturl

Pictures (Steve Jobs’ parent’s garage and early HP & Apple logos) from Wikipedia Commons.

Government Vultures Pick At Taxpayer Carcasses for Green

In 2012 Elections, Economy, Government Spending, President Obama on July 6, 2012 at 8:09 pm

 

Unused parking spots near author’s residence. Photo by author.

President Obama is no fan of American capitalism of the venture sort.  He actually used the term ‘vulture’ to refer to Bain Capital. [1]  Despite Bain’s obvious success in promoting many successful companies WITH ITS OWN MONEY, Obama has been the real vulture, picking at taxpayer carcasses. 

One after another, the President’s ‘green’ investments have failed.  Oops, did I say the President’s investments?  I mean your investments he makes.  Unlike Bain, the Obama bad investments, which seems to be essentially all of them, come right out of your pocket.

Bloomberg reports on Abound Solar’s failure:

Abound plans to file for bankruptcy in Wilmington, DE, next week and will fire about 125 employees, according to a statement yesterday.

The company, based in Loveland, CO, borrowed about $70 million against its guarantee. U.S. taxpayers may lose $40 million to $60 million on the loan after Abound’s assets are sold and the bankruptcy proceeding closes, Damien LaVera, an Energy Department spokesman, said in a statement. [2]

After Solyndra, Ener1 [3] and other taxpayer-backed bankruptcies, it should be clear to everyone it is best to leave investing to the real venture capitalists, private equity firms and stock markets and avoid the real vulture: the federal government, which tends to make bad investments to politically-connected parties.  Anthony Kim, analyst at Bloomberg New Energy Finance in New York said this of the Abound Solar bankruptcy, “This is not surprising at all,” because they backed the wrong type of technology. [2]  With your money. Solyndra logo.svg

 [1] http://online.wsj.com/article/SB10001424052702304840904577424583779000656.html [2] http://www.bloomberg.com/news/2012-06-29/abound-failure-revives-debate-over-obama-solar-policies.html [3]http://abcnews.go.com/Blotter/ener1-parent-obama-backed-green-company-files-bankruptcy/story?id=15456414 Parking lot picture by author.  Solyndra logo from Wikipedia Commons.

Crystal Ball: 2012 Elections Predictions: Romney, Obama, Boehner, McConnell

In 2012 Elections, Hispanic Voting Patterns, Mitt Romney, Occupy Wall Street Protests, President Obama on December 31, 2011 at 3:36 pm

Happy New Year!

Today’s post is my prediction for the 2012 Election season.  I have made a habit of doing this in the past with friends but this is my first locked for eternity in cyberspace.  I formally put forward my election predictions on New Year’s Eve the past couple of elections.  For 2008, I predicted Obama would beat Hillary and McCain would beat Huckabee and Romney, and Obama would win the Presidency.  In 2010, I was probably as lucky as prescient in emailing my friends Dec. 31, 2009 the GOP would win a net +62 in the US House, +6 Senators and +7 Governors.  I was off by just one in the House (+63)!

Now that I have raised the bar to an improbable level that I will probably regret in 11 months, let the predictions begin.

PRESIDENT:

In the GOP Nominating Contest, I continue to think Mitt Romney will overcome all competition.  If he wins Iowa, it is probably all but over, barring a major misstep on his part.  Someone else, e.g. Ron Paul, may win Iowa but Iowa winners tend not to win the nomination, just ask Presidents Gephardt, Harkin, Muskie or Huckabee about Iowa.  Iowa may winnow out some of the also-rans, especially amongst the most conservative.  Romney has the money, the organization and the poise to likely pull off the nomination.  Few seem to discuss the many delegates available in ‘blue’ states like Illinois, New Jersey, Maryland, California, New York or Massachusetts that I expect Romney to win, just as McCain did in 2008.  Obama did something similar in 2008, winning the most delegates in a lot of states he had no prayer of winning in the fall (e.g. Texas and Montana).  I expect Romney will win a fair amount of cross-over moderate Democrats and independents in states, like Illinois, with open primaries.  Gingrich somehow managed to not get on the ballot in important Virginia.

I just have a hunch Florida Senator MARCO RUBIO will be Romney’s VP choice.

Obama will be the Democratic nominee and despite idle talk, he will not dump Biden for Hillary Clinton.

We will get to the Presidential winner below. 

Congressional elections tend to follow the direction at the top of the ticket, meaning a Romney or Obama landslide win could mean coattails below for their respective parties.

US HOUSE:

Some of my Democratic friends have made up their minds the Republicans will lose the House.  History is not on their side.  The Democrats need to win at least 25 net House seats.  All 435 are up for reelection each year so anything is possible.  Not once in the modern era has a President been reelected with significant House gains, not even Reagan in 1984.  Why?  I think the answer is simple: a landslide reelection for a President only happens when the public is very happy with the status quo.  If the public feels the country is doing swimmingly well, the President will be reelected and whoever is currently in Congress will largely be returned.  Wave elections in the House happen against the party in power (e.g. 1974, 1994, 2006, 2008, 2010).  If a wave happens in 2012, it will be against the Democrats, not in their favor.

Another quirk to 2012 is Reapportionment and redistricting.  Declining states are generally Democratic ones, so some of the lost seats necessarily come from Democratic states with meager population growth like Connecticut or Massachusetts and winning states include Utah, Washington, Georgia, Arizona, Florida (+2) and Texas (+4).  Republicans controlled more states’ new maps than ever before and look to protect their 2010 gains in many states and squeeze out Democrats in places like North Carolina, Missouri and Indiana. 

Democrats controlled the Illinois map, which was unusually aggressive in targeting as many as eight Republican seats.   Illinois is huge in Democratic Congressional dreaming.  I live in Illinois and have followed the new map, which reportedly came from the national DNCC not local sources.  I think the Democrats overreached and will end up winning only a handful of GOP seats, most likely two in the Chicago suburbs and by spreading out Democratic voters as they did, they inadvertently forced one of their own, Jerry Costello, to announce his retirement [1] and the GOP has a 50/50 shot of winning that district, possibly offsetting a suburban Chicago loss.  Besides Illinois, the Democrats best shot is in California where the new map jumbles up many Members and the Democrats might win as many as a net five seats.  The Texas map was ultimately drawn by a Court and Democrats will probably win half of the four new seats and have a halfway decent shot at one incumbent Republican near San Antonio.

One of the underreported stories of 2010 is how the Republicans beat a lot of aberration Democrats who had managed to hang on in small town America years after the areas had trended Republican at the Presidential level, places like rural northwest Florida and Waco, Texas.  The GOP did not win very many urban or ‘tough’ suburban seats except a small number around Chicago, Orlando, Phoenix, Palm Beach, Columbus, Philadelphia, New York and the aforementioned San Antonio seat.  The Democrats will have to win in rural areas in states like Michigan, Ohio, Wisconsin, Pennsylvania and New York to make a deep dent into the GOP 2010 gains.  Only an Obama landslide would do that.

Congressional retirements announced thus far strongly favor the Republicans [2] with a number of Democrats like Dan Boren of Oklahoma [3] giving the GOP highly probable pick-ups.

Some of my Democratic friends also are hoping Tea Party challenges will knock off some moderate GOP candidates, leading to fall defeats.  It is possible, but the overall impact will be slight, at most a seat or two.  This works the other way, too, as union or leftist netroots organizations could defeat a moderate Democrat or two, leading to fall defeats in centrist districts.

If Romney is the nominee and wins handily, I foresee the GOP winning some suburban seats they have come close to winning but not been able to crack in recent years, in places like Fairfax County, VA, Orange County, CA, suburban New York City and especially in Massachusetts.

Obama Health Care Speech to Joint Session of Congress.jpg

PREDICTION:  GOP HOLDS HOUSE, NET GOP HOUSE GAIN +1

US Senate:

Sobering for Democrats: 23 seats in play with retirements creating open seats in states like Nebraska, North Dakota, Wisconsin, Virginia and New Mexico.

Sobering for Republicans: need +13 to get to a filibuster-proof Senate.

At most, two Republicans are at risk (Brown in MA and Heller in NV).  I give Brown 60/40 odds, which are a little better with Romney on the ticket.  Heller is 70/30 solid.  A Giffords campaign for the open GOP Seat in Arizona would be promising for Democrats but appears not to be happening.

On the Democratic side, incumbents have their work cut out in Missouri, Montana and Florida.  The open seats are the biggest problem, especially in North Dakota and Nebraska, where GOP gains are going to happen. 

The GOP will get the +3 to even up the Senate, possibly even if Obama wins narrowly, but the question is if the GOP can be competitive in enough states to get near 13 if Romney wins?  The answer oddly is, yes, it is possible.  If the GOP runs the table on the open seats above and is able to win open seats in Connecticut or Hawaii (former Governor Lingle gives GOP an unusual Hawaiian opening), hold their own, and then beat some Democratic incumbents in industrial and purple states, then, it could be a GOP landslide.  The Democrats are also defending Florida, Ohio, Pennsylvania, and Michigan and the GOP looks to have credible challengers for all.  Beyond that, West Virginia is fertile GOP territory but moderate Dem. Sen. Manchin should hold on and the GOP would need to run strongly in places like New Jersey, Minnesota and perhaps Washington state.  They would need a Romney solid win to get those coattails.

What about the Tea Party?  Again, my Democratic friends pretty much have it in the bank that credible GOP candidates will be knocked off by Tea Party unknowns in primaries.  It might happen though where is important.  A Tea Party challenger is never going to win in California but probably will win, anyway, in Indiana or North Dakota.

111th US Senate class photo.jpg

PREDICTION: GOP NET +5 in Senate, taking control.

GOVERNORS: GOP net +1.

PRESIDENT:

Most people seem to be unable to discuss this rationally because their emotions clog their analysis.  I have friends who guarantee an Obama landslide win and others guarantee an Obama landslide loss.

First off, I make no secret I’d like Obama to be defeated, but that doesn’t matter for my analysis.  Can he win?  Of course.   He’d benefit from the most conservative and least experienced GOP nominee and above all, from better job performance.  Strong employment gains, housing price gains and high GDP growth would improve his chances.

How much does ideology matter in a Presidential election?  Quite a bit.  See Nate Silver’s recent, excellent piece on Obama’s prospects [4] to see how statistical models do suggest the further a candidate is from the political center, the tougher it is for them to win the General Election.  This is not to say someone more ideological cannot win (e.g. Reagan in 1980 or Obama in 2008) but they tend to win only with strong anti-Washington, throw the bums out winds at their backs.  Thus, Obama will have more trouble with Romney than Santorum, Paul or Bachmann (none of whom has a prayer of being the nominee). 

The flip side of the coin nearly everyone fails to see is it also matters for Obama, does he run from the center or Left?  All indications are he is going to run a populist campaign from the Left.  The goal is to shore up his base and try to get to 51%.  Anecdotally, I know a lot of independents and soft Republicans who tell me, often in hushed tones, they voted for Obama in 2008 and they are hoping the GOP nominates someone not “too extreme” so they can vote against Obama in 2012.  The risk to Obama is alienating these successful private sector workers as he tacks to the Left and rails against economic success.  Again, the GOP nominee will be very important in determining who these centrist voters flock to.

Obama starts with the benefit of incumbency.  People tend to stay with who they know unless they are unhappy with the results.

Obama will have more money, perhaps upwards of $1 billion for his campaign.  Money helps but does not win elections per se.  Just ask President Kerry about money.  Obama’s money will buy an unprecedented amount of negative campaign ads.  No matter your ideology, I predict you will be turned off by the tone of the 2012 campaign.  It is a general rule of thumb in elections that you campaign positive (Reagan’s 1984 “Morning In America”) when the voters are happy with you but you run a negative campaign when they are not.  Obama’s economic track record means this will be a highly negative campaign.  That is not to imply it cannot work (see the unpopular Harry Reid’s 2010 Senate win).  Unfortunately, I fully expect Obama’s campaign to play up “racism” as if that were the reason people were down on the deficit, unemployment and the growth of government.  I doubt it is very effective with whites though the real goal will be to drive black turnout, which heated accusations of “racism” may produce.

Much is written about demographic changes.  It is absolutely true the country is becoming more Asian, more black and above all, more Hispanic.  I’ve seen projections the 2012 electorate will be as many as 2 points more Latino, which some have argued is a huge plus for Obama.  As I discussed in a recent post [5], the Hispanic vote varies widely by state and the 2008 Latino vote for Obama was 56% in Arizona, 57% in Florida, 61% in Colorado but 76% in California and 78% New Jersey.  This is inefficient from the Obama perspective.  Additional Hispanic voters in California, New York, New Jersey and Illinois will not change the outcome in those states Obama will be winning anyway.  On the other hand, southern and southwestern states like Florida, New Mexico, North Carolina, Virginia and Colorado are states Obama needs to win.  Since Obama’s share of the Hispanic vote will almost certainly decline from 2008, he may not be doing much better than splitting the incremental new Hispanic voters in many of those states.  A Marco Rubio VP nomination may even mean an outright GOP win of Florida’s Hispanic vote.

I suspect Obama will struggle to match his 2008 stong performance with blacks, college students and Jews in 2012.  The exceptionally high underemployment/unemployment rate for people in their twenties suggests the 2008 turnout will not be replicated.  In fact, I expect Obama to face a chasm of lack of excitement from Democrats, the mirror image of 2008 when people literally quit their jobs to work full-time on his campaign.

That said, it is splitting hairs to focus too much on how this or that subgroup will vote.  In the end, large macro effects drive all the subgroups in one direction or another.  I am seeing consensus economic forecasts of rather lousy GDP growth of 1.7% in 2012, with continued high unemployment and home prices still dropping or flat at best.  If so, Obama will be hard-pressed to win.  Nate Silver’s model suggests GDP is key and an economy near zero growth makes a Romney win highly probable, whereas he projects Obama squeaking it out at 4% GDP growth.  Mr. Silver is very good and I would not lightly dismiss his reasoning.  I agree GDP and unemployment and a general sense of wealth (especially housing values) are important, more so than a lot of the “debating skills” sorts of things that matter, but only at the margins.  As shown in polls, Obama’s major legislative achievements are unpopular with voters (Health Care/”ObamaCare” and the Stimulus).

What of Third Parties?  Usually much overrated, third parties and independent campaigns could, if well-financed, impact the campaign.  More likely than not, none will be.  A Trump or Ron Paul third-party run might be Obama’s best bet.  I am unconvinced a Bloomberg run would necessarily help Obama so much, perhaps even having an unexpected impact of making some states like Connecticut, New Jersey, Maine, Oregon, Washington and Massachusetts more competitive for the Republicans.  That said, a billion dollar run by someone like Bloomberg would certainly stir things up.

Another factor might be the Occupy movements, which petered out with the cold but will probably return in the Spring.  The Occupy movements turned violent with vandalism and police confrontations near the end.  I fear they will be more violent and destructive if they gear back up because in the odd calculus of media attention just camping out gets old for the TV news.  The pressure to do something outrageous grows and mentally imbalanced Occupy participants may take the most heated rhetoric to terrible extremes.  If I know the American voter, political violence always backfires and thus, an Occupy shooting of say, an oil executive or man in a suit in New York City will hurt politicians like Obama who embraced Occupy.  Fingers crossed it never comes to this.

Thus, baring an unexpected post-Labor Day scandal (e.g. Obama or Romney sex scandal) or massive exogenous shock (e.g. major October terrorist attack), I think it will be ROMNEY defeating Obama in November.

Of course, this is all my judgment based on today and I might be wishing I never wrote this in a matter of months!  Happy 2012 and turn off that TV lest you be bombarded with ads!

[1] http://thehill.com/blogs/transportation-report/aviation/185349-rep-jerry-costello-will-not-seek-re-election

[2] http://thehill.com/homenews/campaign/195795-retirements-hit-dem-aspirations-for-a-house-takeover-in-2012-elections

[3] http://thehill.com/blogs/ballot-box/house-races/165111-oklahoma-rep-boren-wont-seek-reelection

[4] http://www.nytimes.com/2011/11/06/magazine/nate-silver-handicaps-2012-election.html?_r=1&pagewanted=all

[5] https://econscius.wordpress.com/2011/11/30/recent-drop-in-immigration-will-not-impact-growth-in-hispanic-turnout-in-2012/

Bush Did Not “Deregulate”

In Obama Administration, President Obama, Regulation on December 21, 2011 at 12:56 am

I have heard many times “Bush deregulation” caused this or that.  It seems clear a part of the Obama reelection strategy will be to say that voting him from office means every rule will be ripped from the law books and your neighborhood restaurant will be serving bottles of arsenic in place of clean water, just like the supposed halcyon days of laissez-faire, the so-called “Bush years”.  Like many untruths, the “Bush deregulation” is repeated such it appears many accept it as true.

What “Deregulation”? 

If only it were so!

The facts speak for themselves.  The Bush Administration signed into law a very sweeping financial regulatory law, Sarbanes-Oxley.  Did it work?  You be the judge.

A recent Wall Street Journal editorial [1] points to the evidence about the Obama Administration’s rules that impose more than $100 million annual costs each, which shows the Administration is regulating more than prior Administrations.   No surprise there.

The interesting thing about the Journal’s piece is the accompanying graph which shows how the Bush Administration regulated more than Clinton.  The average $100 million+ rule count was 62 under Bush, 56 under Clinton and 84 so far under Obama. 

More evidence comes from this Heritage Foundation report (emphasis added):  

“The Code of Federal Regulations (CFR) is the regulatory equiv­alent of a statute book that includes only the text of existing regulations. In number of pages, the CFR makes the Federal Register look Lilliputian, with the 2007 edition totaling 145,816 pages, more than 4,500 pages longer than in 2001, when Bush took office, and almost 8,000 pages longer than in 2000.” [2]

What were the big regulations that were removed by the Bush Administration?  I am all ears. 

Why the regulatory explosion of recent years matters, from the Journal:

The evidence is overwhelming that the Obama regulatory surge is one reason the current economic recovery has been so lackluster by historical standards. Rather than nurture an economy trying to rebuild confidence after a financial heart attack, the Administration pushed through its now-famous blitz of liberal policies on health care, financial services, energy, housing, education and student loans, telecom, labor relations, transportation and probably some other industries we’ve forgotten. Anyone who thinks this has only minimal impact on business has never been in business.

Comments welcome below.

 

[1] http://online.wsj.com/article/SB10001424052970204770404577082920364818792.html?KEYWORDS=regulation+dummies

[2]  http://www.heritage.org/research/reports/2008/03/red-tape-rising-regulatory-trends-in-the-bush-years

 Picture from Wikipedia Commons.

Recent Drop in Immigration Will Not Impact Growth in Hispanic Turnout in 2012

In 2012 Elections, Hispanic Voting Patterns, Immigration, President Obama on November 30, 2011 at 11:13 pm

  

RealClearPolitics.com columnist Sean Trende’s otherwise sensible article “Obama’s 2012 Chances and Democratic Demographic Dreaming” makes one wrong assertion:

“Latino immigration has largely stopped over the past several years. It may have even reversed. There are multiple reasons for this, including the United States’ deep recession and slow recovery, as well as the continued modernization of the Mexican economy. In other words, to the extent that Latino immigration is what accounts for the increase in the Latino share of the electorate from 1992 through 2004, we should not expect it to do so from 2008 through 2012.” [1] (emphasis added)

Mr. Trende makes a mistake because immigrants cannot vote right away.  A new legal immigrant has to wait five years before applying for citizenship. [2]  A new illegal immigrant will not be able to vote at all. [3]  US born children of illegal immigrants will not be eligible to vote until they attain 18 years of age.

 

Mr. Trende is absolutely correct the recent decline in immigration reflects the aftermath of the economic recession.  But those immigrants who did not come in 2009-2011 would not be voting in 2012, anyway.

The purpose of Mr. Trende’s article is to critique the latest update to the popular “Emerging Democratic Majority” hypothesis of Ruy Teixeira and John Halpin.  Messrs. Teixeira and Halpin first argued in 2002 continuing population growth of American minority groups make a Democratic majority inevitable.  The most recent installment argues an additional 2% of the 2012 voting population will be minority, meaning President Obama can afford to lose white voters, abandoning Ohio, Pennsylvania and Michigan to adjust his 2012 trip to 270 electoral votes down a narrow road running through purplish states with fast-growing minority populations such as Nevada, Colorado, Virginia and North Carolina. 

The Hispanic population is by far the fastest growing in America, surging  by 35% to 50.5 million in the 2010 decennial Census. [4]   The Hispanic population is younger and a substantial proportion are not yet citizens so Hispanics comprised 9% of the 2008 vote but 12.5% of the 2010 population. [5]  The comparative youth of the Hispanic population means a disproportionate share of the growth in the electorate in 2012 and beyond.   Census data shows Hispanics were 18% of the 16-19 age cohort as of March 2009. [5]  When we contrast the 18% against the 9% of the total 2008 vote, it shows the crux of the Teixeira argument.  That 16-19 cohort of 2009 is sure to include many 2012 first-time voters.

One important point Mr. Trende makes about the Teixeira theory is voters are not static.   Obama won 67% of the Hispanic vote in 2008 [5] , which is fairly typical for a nationwide Democrat.  The Democratic share of the nationwide Hispanic vote slipped to about 60% in 2010 and a few candidates such as Ronald Reagan and George W. Bush won about 40% of the Hispanic vote.  Mr. Trende’s point about President Obama being judged on the economy is obvious.  He also notes Latino turnout has varied from year to year even as the overall Hispanic population grew [6], presumably for the same reasons white turnout varies:  turnout is based on how people feel about the candidates and the overall importance of an election.

A flaw  Mr. Trende identifies in the Teixeira theory is the assumption black or Hispanic vote proportions for Democrats or the GOP will remain the same year after year.  This has not been the case in the recent past.  I believe the Hispanic vote is especially subject to generally adjusting to the Republicans because Hispanic voters have, unlike black voters, voted quite differently based on socioeconomic status.   As City Journal’s Steven Malanga wrote: “in the McCain-Obama contest, 83 percent of Hispanic voters with annual incomes of $15,000 or less voted for Obama, as did 71 percent of those earning between $15,000 and $30,000. By contrast, 51 percent of those with household incomes between $150,000 and $200,000 voted for McCain.” [7]   White voting also follows a trend of becoming more Republican as one moves up the income and education scale, though the Hispanic differential between low and high incomes is much more pronounced, indicating more potential upside to the Republicans if the trend continues. [8]

This suggests Hispanic voters tend Democratic at lower-income levels and become ever more Republican as they move up the education and income scale.  No one knows the future for sure, but it would be logical to think overall Hispanic voters will become Republican as the Hispanic population becomes more settled and financially secure.  To the extent some Latinos vote Democratic because they are offended by anti-immigration rhetoric from some of the more strident Republicans, I trust this will also change over time as those Republicans either change their ways or are voted out. 

Actual 2008 exit polling data (below) suggests another reelection headache for Mr. Obama neither Mr. Teixeira nor Mr. Trende suggest:

2008 Hispanic Vote Share: Obama:


New Jersey 78%
Nevada 76%
California 74%
Illinois 72%
New Mexico 69%
US Average 67%
Texas 63%
Colorado 61%
Florida 57%
Arizona 56%
   
Chart by author, data source: http://pewresearch.org/pubs/1024/exit-poll-analysis-hispanics  

The Hispanic vote total for Obama varied greatly from New Jersey’s 78% to Arizona’s 56%.  This dispersion makes the Teixeira hypothesis more of a stretch if it holds in 2012.  Why? 

With the exception of Nevada, the reason is the states with the highest ratio of Democratic Hispanics are generally safely in the Democratic camp, anyway.  Nevada and New Mexico are battlegrounds with six and five electoral votes, respectively.  On the other hand, two larger and therefore more important battleground states in the Teixeira 2012 roadmap are Colorado (nine electoral votes) and Florida (29 votes). Mr. Obama won 61% of Hispanics in Colorado and just 57% in Florida.  A slightly larger 2012 Hispanic voting block in those states will not actually do President Obama  much good if he is winning 61% or 57% of those incremental voters.  Furthermore, Mr. Obama’s 51% current approval rating with Hispanics [9] suggests his 2012 vote percentages will be lower, meaning incremental Hispanic voters in Colorado and Florida may be a draw or even help the Republican.  Perhaps even more so if US Senator Marco Rubio (R-Florida) were the Republican Vice Presidential nominee. 

The chart above shows how, from President Obama’s perspective, Hispanic votes are rather inefficiently placed under the winner-takes-all Electoral College with the largest Hispanic populations in states that are almost certainly already settled (California, Texas, New York, Illinois, New Jersey) or happen to have the Hispanic populace most amenable to Republicans (Florida).  

Despite Mr. Trende’s error in linking the recent drop in immigration to the 2012 election turnout, he does point out flaws in the Teixeira 2012 roadmap.  The Teixeira theory has a huge hole in assuming minority groups remain just as Democratic as they grow in proportion to whites.  When we look at subgroups of whites which were once considered distinct minorities, be it Italians, Poles or Irish, we see a gradual trend away from the Democratic Party as these groups have become increasingly assimilated and economically prosperous.   Anecdotally, most Hispanics I know personally are Republican or independents who lean that way; I trust this higher than normal Hispanic Republican experience reflects my socioeconomic status.  

That said, these changes rarely happen overnight and the demographic trends show future electorates will be increasingly Hispanic as recent immigrants gain citizenship and the young Hispanics attain age 18.  I happen to be a strong supporter of immigration on both humanitarian and economic grounds.  Though we have broadly discussed racial groups here, the fact remains everyone is an individual.  There is no prototypical “Hispanic” as Hispanic Americans came from myriad countries of origin, some do not even speak Spanish and some, such as Eva Longoria, happen to be descendents of people who immigrated to Spain’s American territories four or five hundred years ago, long before Texas, Florida and the Southwest were annexed by the United States.  Each Hispanic has a unique human experience.  The Republican Party would be wise to cater as best as it can to the growing Hispanic population, lest they someday prove Teixeira’s “Emerging Democratic Majority” correct.

[1]http://www.realclearpolitics.com/articles/2011/11/30/obamas_2012_chances_and_democratic_demographic_dreaming_112221.html

[2] http://en.wikipedia.org/wiki/US_Citizenship#Eligibility_for_naturalization. (accessed 11/30/11).

[3] In the absence of any evidence to the contrary, I assume the number of illegal immigrants who actually vote is immaterial.

[4] http://www.census.gov/prod/cen2010/briefs/c2010br-04.pdf

[5] http://pewresearch.org/pubs/1024/exit-poll-analysis-hispanics

[6] See figure 2 in Pew link (note [5]) where Hispanic vote proportion dropped in states like FL and CA between 2004 and 2008, despite significant relative population growth. 

[7] http://www.city-journal.org/2009/19_1_snd-latino-voting.html

[8] McCain won 56% of whites over $50,000, 51% of whites under $50,000.  Exit polling data from page 1 of http://www.cnn.com/ELECTION/2008/results/polls/#val=USP00p1.

[9] http://www.tnr.com/article/the-vital-center/97938/obama-demographics-2012-latinos

Pictures of famous Hispanic Americans Sen. Marco Rubio, Governor Susana Martinez (R-NM), Demi Lovato and Eva Longoria from Wikipedia Commons.

Yes, There Are Lots of Tax Loopholes!

In Income Tax Rates, Oil, President Obama, Tax Breaks on October 18, 2011 at 1:11 am

Yes, there are lots of tax loopholes!  You can hardly step anywhere in the personal or corporate tax codes without falling into a loophole.  Most every tax break was created in the name of helping a good cause (e.g. electric cars) or encouraging people or corporations to buy of something (e.g. homes or ethanol).  Still, the loopholes reduce tax revenue and add great complexity to the tax code.

 You can see for yourself how ridiculous the tax code is simply by looking at IRS Publication 946 at http://www.irs.gov/pub/irs-pdf/p946.pdf.  Be forewarned: it is large .pdf file.  Do not blame the IRS, they are simply enacting what various Congresses and Presidents have put into law. Econscius thinks these 118 pages, which merely cover tax rules for depreciation, are a microcosm of what is wrong with the tax code.  These 118 pages are a like a few drops of water in the lake of tax complexity, too.  But I assume most readers will be perfectly fine with just one helping of accountant-speak. 

What is Depreciation?  When a company buys an asset like a railroad car, it is not allowed to expense the $100,000 cost right away.  The cost is expensed in little pieces over its theoretical ‘useful life’ of, according to the IRS table, 15 years.  Or seven years if the company is using an accelerated depreciation method. 

What is Accelerated Depreciation?  In order to encourage companies to purchase more assets, e.g. more airplanes, the Tax Code includes the ability to depreciate many assets more quickly than their ‘useful life’.  A 15 year asset may be deducted in seven years.

From a taxpayer’s standpoint, accelerating depreciation is valuable.  Increasing your expenses today means less income and less income means less tax paid.  In theory, the government gets all the tax money in the long run but the fact that the deductions are sped up is valuable because of what we call ‘the time value of money’: because of inflation, a dollar today is worth more than dollar five years from now.

I challenge anyone, Left or Right, to skim through the 118 pages and tell me the tax code is not unnecessarily complex.  There are loopholes aplenty, lying right before your eyes. 

On pages 25-28, we find the Gulf Opportunity Zone break, enacted after Hurricane Katrina.  There’s the Qualified Cellulosic Biofuel PLant Property benefit on page 28.  There are extremely generous accelerated depreciation rules on electric cars on page 66.  There are special depreciation rules for Indian Reservations on pages 38-39.  Fruit and nut trees and vines are covered on page 42.

Table B-1, which runs from page 103 to page 112 is a fine print example of tax loopholes.  You will notice there are different columns as there are different depreciation methods.  We can skip the mind-numbing complexity of GDS (MACRS) vs. ADS depreciation to make a few simple points:

(1.) Whenever the GDS and ADS depreciation recovery periods are different, we are really talking about a tax break.  The different method means a potential tax break because companies can depreciate more quickly than the true ‘useful life’ of the asset.  When you look through the IRS Publication 946, you see how most classes of assets do, in fact, have some sort of accelerated depreciation option.

(2.) Are so many classifications really necessary?  There are special depreciation rules for Cable TV-Microwave Systems, Railroad Track, Railroad Wharves and Docks, Manufacture of Foundry Equipment, manufacture of Leather and Leather Products, Sawing of dimensional Stock from Logs, Manufacture of Textile Yarns, and the ever-important Cotton Ginning Assets.

 

My personal favorite depreciation category is found on page 105: “Any Horse That Is More Than 12 Years Old At The Time It Is Placed In Service And That Is Neither A Race Horse Nor A Horse Described In Class 0.1222.” Got that?

There are special tax breaks for the oil and gas industry.  Surely you have heard of them before.   One of the breaks was enacted in 2004 to encourage companies to manufacture in the U.S.  That break lets most companies deduct 9% of profits from domestic manufacturing.   Oil and gas companies were classified as manufacturers, but their deduction was capped at 6%.  [1]  President Obama’s 2009 Stimulus package included an accelerated depreciation tax break for corporate jets on the theory it would encourage corporations to buy more jets, employing more Americans . [2]  President Obama often talks as if the accelerated depreciation for aviation and oil & gas drilling were the only tax breaks in the tax code. 

The oil and gas industry breaks are surely there, but ethanol, solar and wind actually enjoy far more favorable tax treatment.  Anyone looking at this IRS Publication 946 will see how disingenuous it is for politicians to focus on oil when almost every industry seems to have its hand in the till, even highly profitable areas like computers. 

Without question, an awful lot of time goes into interpreting and complying with the tax code.  Corporations and interest groups lobby for their narrow interests within the tax code. 

How do we fix this?  A flatter, simpler tax code with universal rules and few, if any, special deductions would be a place to start.  Ask everyone to give up their favorite tax breaks and we will all be better off; call it mutual tax break disarmament.  The US corporate tax rate in the highest amongst developed nations; why would we not want to lower the rates, drop the loopholes and end up with the same amount of revenue but with a lot less work? While there are some issues with Herman Cain’s proposed “9-9-9 plan”, it is a bold attempt to throw out the old tax code and start afresh.  Ideas like that would help get rid of monstrosities like IRS Publication 946.

[1] http://www.usatoday.com/money/industries/energy/2011-05-12-oil-industry-tax-breaks_n.htm

[2] http://www.foxnews.com/politics/2009/02/18/stimulus-includes-tax-break-promote-private-jet-sales/

Pictures from Wikipedia Commons.  IRS html from IRS link above.

As always comments are welcome.  Love the Tax Code?  Hate it?  Feel free to share below.

Who Pays What Average Income Tax Rates

In Income Tax Rates, Political Rhetoric, President Obama, Warren Buffett on October 9, 2011 at 2:23 am

Average Tax Rate by Share of Income, Source: IRS 2008 Data

There is an awful lot of misinformation floating around about what average tax rates are paid at different income levels.  It is actually very simple, which is why I put together this graph. 
 
Some would have you believe the richest of the rich pay a lower average rate than “a secretary”.  On average, that is simply not the case.  The Bottom 50% of taxpayers paid an average of 2.59% of their Adjusted Gross Income (“AGI”) as income tax.  The Top 1% paid 23.27% of their AGI as income tax.
  

Share of Income Average Tax Rate
Bottom 50% 2.59%
25-50% 6.75%
10-25% 9.29%
5-10% 12.44%
1-5% 17.21%
Top 1% 23.27%
 
The bottom 50% of taxpayers paid 2.7% of all income taxes paid, and the top 5% paid more than half of the total.
 
 

Share of Income Group’s Share of Income Taxes
Bottom 50% 2.70%
25-50% 10.96%
10-25% 16.40%
5-10% 11.22%
1-5%

  20.70%

Top 1% 38.02%
 
Data source: 2008 IRS data from http://www.taxfoundation.org/news/show/250.html

Obama Jobs Solution: Suing Employers For A Job?

In Economy, Job Creation, Lawsuits, Obama Administration, President Obama, Unemployment on September 27, 2011 at 8:07 pm

The “Jobs” Bill that President Obama sent to Congress “includes a provision that would allow unsuccessful job applicants to sue if they think a company of 15 more employees denied them a job because they were unemployed.” [1]

While I understand the frustration of the unemployed, the President’s idea is likely to be counterproductive and lead to even less hiring of the unemployed.

Lawrence Lorber, a labor law specialist who represents employers, said Mr. Obama’s  proposal “opens another avenue of employment litigation and nuisance lawsuits.” [1]  Most employers are small and do not have lawyers on staff to defend against these lawsuits.  Even larger companies with a slew of in-house legal counsel have no desire to be sued over matters that are difficult to disprove.

Why would an employer discriminate against the unemployed?

(1) It is an open secret in the business world many employers formally downsize under-performing employees in order to avoid law suits.  A downsizing of just one person in a large company may actually be a polite way of firing an underperformer.  Most workers are the member of some protected class (female, racial minority, veteran, over age 45, etc.).  If the underperforming employee has not made themselves easy to fire (e.g. by repeatedly skipping work), it can be difficult to prove in Court the subjective judgments that a particular employee’s work is mediocre or worse.  Defending a wrongful termination case is something many companies try to avoid.  Even when the company wins, it racks up legal expenses.  Many companies feel it is better to pay a small severance package and let the employee be downsized “not for cause” rather than terminated “for cause” at the risk of a lawsuit.

This open secret is one reason employers have long preferred to hire someone employed at another company rather than someone who is unemployed.  

(2) Employers think other companies let go of underperformers first and hold on to top performers.  The thinking is that, when XYZ Company lets 10% of its workforce go, it probably is mostly letting go of its 10% least desirable employees.  

(3) Lastly, companies feel that people who are out of the workforce for extended periods of time, such as two or three years, may lose some of their work-related skills.

Are these beliefs always correct?  No, though they surely are at least partly accurate some of the time.  In a normal job market, these biases against the unemployed are not a big deal.  Does every employer feel this way?  Undoubtedly no. 

Unemployment surely is always a disadvantage, but America has traditionally had enough jobs to go round so that most any able-bodied unemployed person would, sooner or later, find something.    In today’s bad job market, the already existent bias against the unemployed is a bigger issue for the unemployed because there are so few jobs available. 

There are other small biases that exist in hiring: in favor of the tall, in favor of the attractive and in favor of people with degrees from prestigious universities.  Studies have shown taller people earn more [2] and more attractive people earn more [3].  These facts add insult to injury to men because studies also show women prefer taller and wealthier men; attractiveness is universally desired in a mate.  But, I would not recommend a federal statute banning discrimination on account of height; how does one even begin to measure such discrimination in a real world situation?  Would it not open to the door to frivolous lawsuits?

 

What would happen if the President’s bill passes and the unemployed are allowed to sue employers for discrimination?  Would the long-term unemployed now quickly find jobs?   I think the answer is no

Let’s think ahead and assume President Obama’s bill becomes law.  It is not clear that employers who are predisposed against the unemployed would be any more likely to actually hire the unemployed.  There are myriad reasons an employer can give (“doesn’t fit our culture”) for passing over an applicant.

But, the new law would make it far more risky to interview the unemployed.  Any unemployed person who applies for a job but is not hired would have legal standing to try to file a lawsuit against the employer.  The safest bet for an employer hoping to avoid these lawsuits would be to try not to interview the unemployed in the first place.  How might they do that?  Obvious options would be to employ recruiters who cold call people already employed elsewhere, look to internal (already employed) candidates, outsource to another country, or automate rather than hire anyone at all.

I know this is cold comfort to the long-term unemployed, but the idea of forcing employers to hire the long-term unemployed through lawsuits will backfire and make it even tougher for the unemployed to get interviewed and may result in fewer new jobs.  A much better idea to actually accomplish that goal would   be a carrot, rather than the stick:  a tax credit for hiring the long-term unemployed.

Unfortunately, this is another example of President Obama- who has no experience whatsoever in private business – proposing something that would actually be counterproductive.   The continuous flow of proposed high taxes, new regulations and laws such as this one creating a new protected discrimination class of unemployed people are exactly what is making American business skittish to hire at all.  The private sector creates jobs, not the government through new laws allowing for more lawsuits.

As always, comments are welcome.

[1] http://news.yahoo.com/blogs/lookout/obama-proposes-letting-jobless-sue-discrimination-191042168.html

[2] http://www.sciencedaily.com/releases/2009/07/090710092226.htm

[3] http://money.cnn.com/2005/04/08/news/funny/beautiful_money/

Pictures from Wikipedia Commons.