Obamanomics 101, closing the loopholes ……..

(NPR, All Things Considered) May 4, 2009 · President Obama sent a broadside Monday across the bow of those companies that now avoid taxes by keeping much of their business on the books of offshore subsidiaries. The practice is perfectly legal right now (1), but the White House wants that to change.

President Obama vowed Monday to "detect and pursue" American tax evaders(2) and go after their offshore tax shelters.

In announcing a series of steps aimed at overhauling the U.S. tax code, Obama complained that existing law makes it possible to "pay lower taxes if you create a job in Bangalore, India, than if you create one in Buffalo, N.Y."

The president said he wants to prevent U.S. companies from deferring tax payments by keeping profits in foreign countries rather than recording them at home, and called for more transparency in bank accounts that Americans hold in notorious tax havens like the Cayman Islands.

"If financial institutions won't cooperate with us, we will assume that they are sheltering money in tax havens and act accordingly," Obama said. (3)

The president, who hammered on this issue during his long campaign for the White House, said at a White House event that his plan would generate $210 billion in new taxes over 10 years and "make it easier" for companies to create jobs at home. (4) Over a decade, $210 billion would make a modest dent in a federal deficit expected to swell to $1.2 trillion in 2010.

He said the government also is hiring nearly 800 new IRS agents to enforce the U.S. tax code. (5)

Under the plan, companies would not be able to write off domestic expenses for generating profits abroad. The goal is to reduce the incentive for U.S. companies to base all or part of their operations in other countries. (6a)

"The plan will reduce the ability of U.S. companies to compete in foreign markets," said John Castellani, who heads the Business Roundtable, which represents some of the largest U.S. companies. "We believe it will not only reduce jobs, but it will also cripple economic growth here in the United States. It just couldn't have come at a worse time."
Gary Hufbauer, a senior fellow with the Peterson Institute for International Economics, says eliminating the deduction on U.S. expenses associated with foreign profits would encourage multinationals to move more of their essential functions abroad. (6b)

"Those are the good jobs at good pay that America should want," Hufbauer said. "I mean, do we want these headquarters' expenses to be incurred in Singapore or London?" (6c)


Treasury Secretary Timothy Geithner said the proposals would end "indefensible tax breaks and loopholes which allow some companies and some well-off citizens to evade the rules that the rest of America lives by." (7) Geithner called them "common-sense changes designed to restore balance to our tax code."

Once again I ask you - can you believe what you just read? I highlighted in the copy some key statements woven into this story. Here are my observations based on these key statements in the same order they appear in the story.

1. First and very important to note, while the administration may not like it, the practice they are complaining about is not illegal.
2. Even though it is not illegal, the President referred to the users of this “legal loophole” as “American tax evaders.” He also vowed to “detect and pursue” them. What does that mean? If it’s not illegal, does this mean the administration plans to bully, harass and attempt to publicly embarrass these companies? At a minimum it means that Obama’s full scale assault on capitalism and American business will continue. The administration seems to be intent on making the business community the bad guys for everything in the eyes of the public. Of course, the savior for the average citizen in “Obama World” is more government oversight and control.
3. Now for the scariest statement in the article "If financial institutions won't cooperate with us, we will assume that they are sheltering money in tax havens and act accordingly," - what does he mean by this? In America, there is a presumption of innocence until proven guilty. We don’t assume guilt and persecute. Plus let’s not forget that what these companies are doing is not illegal under the current rules. The financial institutes the President is referring to are in foreign countries so what is their incentive to cooperate with his administration? So without the cooperation of these foreign institutes the result will mostly likely be a smear campaign against these “evil corporations”.
4. The President goes on to assert that by closing these loopholes it will “make it easier" for companies to create jobs at home. What?? So paying higher taxes will stimulate job growth? What school of economics teaches this business theory? This quite possibly the dumbest thing I have heard from the administration so far.
5. We are also finally getting to see how the president is going to stimulate job growth. He is going to make government bigger by adding IRS agents to persecute real businesses. This will result in increased job loss in the private sector. Is it possible to have a prosperous economy with a giant government workforce? Who are you going to tax in that model? The last time this model was tried we referred to it as the Soviet Union and as I recall their economy collapsed.
6. (a, b,& c) In yet another stroke of business genius, the administration asserts that by eliminating certain write off and deductions it will reduce the incentive for U.S. companies to base all or part of their operations in other countries. However, conventional wisdom would indicate just the opposite is likely to occur. Rather than moving things back to the U.S., it is more likely that large multinational companies would move their headquarters offshore taking high paying executive and management positions with them.
7. Of course this brilliant strategy would not have been be complete without a comment on this “common sense” approach to fair taxes by everyone’s favorite “tax evader” Treasury Secretary Timothy Geithner who is certainly an expert on “indefensible tax breaks and loopholes which allow ……some well-off citizens to evade the rules that the rest of America lives by." Apparently it is O.K. to be a “tax cheat” as long as you have a cabinet post but “make no mistake”, this won’t be tolerated in the private sector. The arrogance of this administration is at times overwhelming considering how little any of them seem to understand about how business works in the real world. Maybe they should all go get a job at a company that produces a product. Then they could learn what it takes to satisfy customers, to stay competitive, and make a profit so that the business can succeed.

So what is the solution - instead of creating more ways to tax businesses which drives jobs to other countries, let’s lower business taxes to stimulate job growth domestically. The U.S. has some of the highest business taxes in the industrialized world which is why jobs are leaving the country. The U.S. has been steadily climbing the world rankings for business taxes. We are currently ranked #1. Since 2000, Japan, Germany, France, Canada, Greece, Italy and Mexico have all lowered their business taxes to stimulate business growth, some by more than 10%. Since 1993 U.S. business tax rates have remained virtually flat. Currently, the effective federal business tax rate is 39.3% in the U.S. which is down from 39.4% in 2000. Japan is at 30% down from 40.9% in 2000. However most of Europe has rates between 25 and 35%. Of course, China arguably the world’s largest competitor is communist and they succeed in the global economy on the back of their people and the ability to play by their own rules.

This administration has capitalism and business squarely in it’s sights. America became the great nation it is by becoming the preeminent economic force in the world. Government jobs do not improve the economy or the GNP. The only way that America can remain a powerful and respected nation that can protect its’ people, its’ sovereignty and its’ way of life is to remain an economic powerhouse. The only way this happens is, we change our tax laws to make America more competitive, instead of forcing us to compete with one hand tied behind our back.

I have made the tough decisions, always with an eye toward the bottom line. Perhaps it's time America was run like a business. - Donald Trump

The budget should be balanced, the treasury should be refilled, the public debt should be reduced and the arrogance of public officials should be controlled. - Ross Perot

You’ve got to stand for something or you’ll fall for anything……………

This is the chorus from a country song that is so grounded in common sense that you wonder why more people don’t get it. I thought about the song as I was listening to a group of radio political pundits debate whether the Republican Party needed a makeover to re-establish its’ clout. Ironically, most of the debate was about style over substance and if the party should move more to the center or more to the right.

As I listened to their babbling I couldn’t help but think that political parties are supposed to represent an ideology that is based on a system of values. So if that is true – how much room do they really have to move before they begin to compromise their beliefs?

It seems that politics today is more about winning the election than it is about a commitment to principles and values. Ideally, candidates in a political contest would debate clearly articulated points of differentiation providing the voters a choice between approaches to problem solving and philosophies of governing.

However, the political strategists of the day seem content with and adept at blurring those lines. Combine that with a little help from the media and often you don’t know who you are really electing until the election is over and the candidate is in office. This by the way is not a shot at any single elected official but rather a comment on the sad state of our political system. Both parties are guilty!

Back to our pundits – they talked about strategies to recruit younger, better looking, more energetic candidates. They suggested a need for candidates who had a better TV presence and were more gifted speakers. One of the esteemed panel even went as far as to say that the content of the message doesn’t matter as much as how it is delivered.

I am not sure what horrifies me more; the fact that this might be true or that we have become a nation of media junkies. It seems we are no longer capable of telling the difference between a commercial and the program.

What I never heard discussed by the panel was the importance of leadership, experience, a record of performance and a well defined ideology by which the candidate would govern. Aren’t these the characteristics that you would want to understand about a candidate that you were considering voting for?

However, this is the real rub. The candidates aren’t the only ones that have to stand for something. As voters, our responsibilities are the same as the candidate’s. We need to invest enough time in the process that we have well thought out and defined positions on the issues. We also have a responsibility to understand, at least conceptually how the candidate will solve a problem or address an issue.

Unfortunately, far too many of us don’t make the time to study the issues instead we get our news in sound bites. We vote for what sounds “good” without ever knowing if it is good. In the end the only ones that can hold the candidates accountable are the voters. This accountability should start on the campaign trail not once they are in office. There should be no surprises once elected. If we understand the issues and set expectations of our elected officials we won’t have to worry about “falling for anything.”

So in the end the pundits got it all wrong! It is not about if the Republicans should move right, center or left. It is not about if they should be more moderate or more conservative. It is about both parties deciding what they stand for and sticking to it. Both parties need to use the election process to honestly sell their views and let the voters decide.
If you lose, you try again next time but you don’t sell out your principles to get in office and then rediscover them once elected. That is corrupt and corruption will destroy trust in the government. When the government loses the trust of the people the country will cease to be great.

One of the key problems today is that politics is such a disgrace; good people don't go into government. - Donald Trump

Cars, part 2 - Now open for business…………..Obama Motorworks!

(The New York Times) WASHINGTON — President Obama forced Chrysler into federal bankruptcy protection on Thursday so it could pursue a lifesaving alliance with the Italian automaker Fiat, in yet another extraordinary intervention into private industry by the federal government.

Flanked by his automobile task force of cabinet secretaries and business advisers in the White House’s grand entrance way, Mr. Obama announced a plan that would allow the United Automobile Workers, through their retirement plan, to take control of Chrysler, with Fiat and the United States as junior partners. The government would lend about $8 billion more to the company, on top of the $4 billion it had already provided.

The arrangement came after an intensive round of White House-sponsored negotiations among the Treasury Department, the union and Chrysler’s executives and creditors. After working through the night, a small group of debt holders balked at Mr. Obama’s final terms, leading the president to decide that bankruptcy could not be averted.

It was a stark moment, and one unseen in modern times, as the fledgling president deepened his involvement in a struggling but iconic American company. Chrysler, which Mr. Obama called “a pillar” of the industrial economy, invented the minivan and owns the Jeep brand.

Bringing to bear his White House megaphone on Thursday, Mr. Obama laid out the terms of a deal that he said would save well over 35,000 jobs. And with a hint of anger, he railed against the holdout lenders, now effectively a hostile group of business partners, whom he called “speculators.”

“They were hoping that everybody else would make sacrifices, and they would have to make none,” Mr. Obama said of the creditors, among them several hedge funds and boutique investment funds. “I don’t stand with them.”

Stop and think about what you have just read! Let me break this down for you:

1. In the words of The New York Times “President Obama forced Chrysler into federal bankruptcy protection …… in yet another extraordinary intervention into private industry by the federal government.” The President is deciding that a private company must file for bankruptcy! This on the heels of firing the CEO of GM and retroactively taxing bonuses on Wall Street. What is wrong with this picture. This is NOT the role of the Federal government!
2. Mr. Obama announced a plan that would allow the United Automobile Workers, through their retirement plan, to take control of Chrysler. The President and his advisors have allowed the union to use their retirement fund to purchase controlling interest in Chrysler after forcing it into bankruptcy. This will allegedly save their jobs but what happens if Chrysler continues to flounder and destroys the value of the pension fund? Who gets to pay for that, the taxpayers? If the union is willing to make this investment are they willing to live with the consequences of failure? If you or I lost our jobs and decided to empty our 401k to start a business, nobody would bail us out if it was a bust.
3. After the Administration could not broker a deal with Chrysler’s creditors, the President lashed out at them for being “greedy”! Imagine the nerve of those guys expecting to get paid as much as possible for a bad debt. I mean they had the audacity to think that they actually deserved more than $0.30 or $0.40 on the dollar.

This of course, is just the beginning. Now they are making plans for GM and the path seems to be the same - forced bankruptcy and protection for the union. The airline unions must be pissed off. After all to save their jobs they had to take cuts and make concessions. That was before our new age of socialism and nationalization of businesses.

There are still more conditions of this bailout. And yes, it is still a bailout because the taxpayers are kicking in an additional $8 billion to make the “deal” work. The government as part of its' "special bailout conditions" will require Chrysler to produce “cleaner and greener” cars.

So where does this end? Or more appropriately, where will this go next? Later this week the government will release the results of their banking stress tests and tell us which banks will require “additional repairs”. Still looming on the horizon is the impending commercial real estate collapse and new legislation for regulation of credit cards.

What happened to good, old fashioned bankruptcy? You know where company officials, creditors and a judge go and work out a plan to either save or dissolve a failing business. It wasn't perfect but at least the government wasn't calling the shots and the taxpayers footing the bill.

For Americans who choose to pay attention there are red flags everywhere. We are allowing the government to take control of the economy, nationalize businesses and the banking system. If we don’t stand up and make our voices heard the result will ultimately be a shift from capitalism to socialism. Are you ready to trade the American Dream for Socialism? Think about it, time is running out.


"The Constitution is not an instrument for the government to restrain the people, it is an instrument for the people to restrain the government -- lest it come to dominate our lives and interests." -- Patrick Henry

Calling all Leaders, Statesmen and Patriots.................

"Come forward, then, and give us the aid of your talents and the weight of your character towards the new establishment of republicanism." --Thomas Jefferson to Robert Livingston, 1800.

Warning: Today’s blog is mostly based on my opinion, observations and perception of what I see going on in Washington, the government and the media. The things I see could cause me to lose faith and hope in our great country but I refuse to give in to those feelings. Instead, I am recommitting myself to spreading the word, partnering with others who also refuse to give in and making a passionate call to American citizens across our country to step forward. It is time to get involved and make a difference.

Webster offers a couple of variations on the definition of a “politician” but the one that seems most fitting these days is “one who seeks partisan or personal gain often by crafty or dishonest means.”

In recent years it seems we have had a difficult time attracting anyone other than “politicians” to take leadership roles in our government, real leaders want less and less to do with elected office. This is most likely due to the harsh light cast on those in public life. The level of personal scrutiny that an individual must endure to embark on the path to public service is enough to scare off most sane people.

Successful, intelligent and ethical individuals who have lived a “normal” life and made common mistakes shy away from throwing their hat in the ring. The personal sacrifices that they and their families must make are often too steep a price to pay for the privilege of serving ones’ country, state or community.

Ironically, character is often what is most lacking in today’s political leaders. Yet the very mistakes, trials and tribulations that become the subject of scrutiny are often the life changing experiences that build character and moral fiber.

And of course, there are the games, compromises and the abandonment of values that seems to be a requirement of “getting anything done.”

Today’s politicians have become largely a collection of “actors’ playing the part of leaders. They have self serving agendas that are equally split between their personal goals and repaying debts to those who supported their candidacy. Most are career politicians who have made a job out of “public service”.

How do we change this trend? How do we get real leaders and statesmen to get involved in government again? Let’s start electing real people with character, ethics, morals and flaws, who were forged in the real world under fire.

We need:

• principled men and women who are willing to represent the values of their constituents and do what’s best for their country, their state or community
• true leaders that will not mortgage our future for short term victories or sell their values to the highest bidder in exchange for support on an item they want
• leaders who have common sense, love their country and believe in the American dream

I’ll close the same way I opened with the wisdom of Thomas Jefferson:

“Whenever a man has cast a longing eye on offices, rottenness begins in his conduct.” – Thomas Jefferson

"Public offices were not made for private convenience." -Thomas Jefferson

“I have the consolation of having added nothing to my private fortune during my public service, and of retiring with hands clean as they are empty.” – Thomas Jefferson

“We in America do not have government by the majority. We have government by the majority who participate.” – Thomas Jefferson

Calling all Leaders, Statesmen and Patriots.................