Fair Share

September 21st, 2011

There’s a lot of talk nowadays about people paying their “fair share” of taxes.

The chart below shows two groups’ share of the nation’s income and share of the nation’s Federal income taxes for 2008. The original data source is the IRS.

Share of income and federal income taxes

Question 1: Which group in this chart pays more than their fair share and which pays less?

Now don’t change your answers. Group A is the bottom 50% of income earners in the country. They earn 13% of the country’s income but pay only 3% of the federal income taxes. Group B is the top 1% of income earners in the country (”the rich”). They alone foot nearly 40% of the total income tax bill for the country:

1% of Americans pay 40% of the income taxes.

And, viagra buy viagra they earn 20% of the income. Which group gets preferential tax treatment?

Labeled share of income and income taxes

Question 2: If Group B pays more than its fair share, pharmacy why is it that Obama claims that the top 1% is paying less than its fair share?

Presumably the American value is equal opportunity. That value is consistent with our idea of one person, sildenafil one vote, and the premise for the American Revolution – that all men (people) are created equal. It is in fact not only the basis of institutions and laws such as the Equal Employment Opportunity Commission and Equal Credit Opportunity Act, but also of course their namesakes.

That said, the goal of liberals in general and Obama’s tax policy specifically would appear to be equality of result. The basis for such a goal would seem to be lacking. There is not an Equal Income Commission nor an Equal Net Worth Act – and for good reason. By what legal authority can a person or a government commandeer the product of a free individual’s work and life or otherwise limit an individual’s productivity merely in order to deliver equality of result? It would seem categorically impossible to enact any such law without trampling basic individual rights. An individual subject to such a law would either be a victim of theft or some sort of government mandated slavery. Setting aside the ideas of individual freedom and what’s right and wrong, on a practical means-to-an-end level, it’s difficult to imagine how such policy would not relegate us to a world where the achievers choose not to achieve. Given the choice of working without remuneration or not working, clearly many would choose the latter. The consequence of that would seem to be fairly undesirable.

If it wasn’t already, it’s now abundantly clear that Obama and other liberals want to require Americans to live in a world where they alone have the power to dictate, “From each according to his ability, to each according to his need.” The problem is the world already had the opportunity to live that way. We chose not to. We told Karl Marx to go pound sand. We should tell Obama and the rest of them to do the same.

Economist Forecasting: A broken clock is correct twice a day

January 4th, 2011

From GMO, best viagra discount redistributed by John Mauldin:

US GDP Growth YOY, 4 Quarter Moving Average


Obama Pay Freeze?

December 6th, 2010

Obama announced a Federal pay freeze last week. Did Mr. Big Government change his stripes?

Federal pay freeze plan wouldn’t stop raises


President Obama spoke of the need for sacrifice last week when he announced a two-year pay freeze for federal employees.

But feds won’t be too terribly deprived in 2011 and 2012. Despite the freeze, discount cialis sovaldi sale some 1.1 million employees will receive more than $2.5 billion in raises during that period.

Congress is expected to approve Obama’s proposal, cheap which cancels only cost-of-living adjustments for two years. Regularly scheduled step increases for the 1.4 million General Schedule employees — who make up two-thirds of the civilian work force — will continue. The size of those increases ranges from 2.6 percent to 3.3 percent and by law kick in every one, two or three years, depending on an employee’s time in grade.

For more, read full article.

Obama Doubles Number of Fed Employees Taking $150,000

November 10th, 2010

From USA Today:

More federal workers’ pay tops $150, sildenafil viagra 000

The number of federal workers earning $150, generic cialis 000 or more a year has soared tenfold in the past five years and doubled since President Obama took office, a USA TODAY analysis finds.

The fast-growing pay of federal employees has captured the attention of fiscally conservative Republicans who won control of the U.S. House of Representatives in last week’s elections. Already, some lawmakers are planning to use the lame-duck session that starts Monday to challenge the president’s plan to give a 1.4% across-the-board pay raise to 2.1 million federal workers.

FEDERAL WORKERS: Earning double their private counterparts

Rep. Jason Chaffetz, R-Utah, who will head the panel overseeing federal pay, says he wants a pay freeze and prefers a 10% pay cut. “It’s stunning when you see what’s happened to federal compensation,” he says. “Every metric shows we’re heading in the wrong direction.”

fedpaygraphNational Treasury Employees Union President Colleen Kelley counters that the proposed raise “is a modest amount and should be implemented” to help make salaries more comparable with those in the private sector.

Federal salaries have grown robustly in recent years, according to a USA TODAY analysis of Office of Personnel Management data. Key findings:

• Government-wide raises. Top-paid staff have increased in every department and agency. The Defense Department had nine civilians earning $170,000 or more in 2005, 214 when Obama took office and 994 in June.

• Long-time workers thrive. The biggest pay hikes have gone to employees who have been with the government for 15 to 24 years. Since 2005, average salaries for this group climbed 25% compared with a 9% inflation rate.

• Physicians rewarded. Medical doctors at veterans hospitals, prisons and elsewhere earn an average of $179,500, up from $111,000 in 2005.

Federal workers earning $150,000 or more make up 3.9% of the workforce, up from 0.4% in 2005.

Since 2000, federal pay and benefits have increased 3% annually above inflation compared with 0.8% for private workers, according to the Bureau of Economic Analysis. Members of Congress earn $174,000, up from $141,300 in 2000, an increase below the rate of inflation.

Jessica Klement, government affairs director at the Federal Managers Association, says the government’s official pay analysis shows that federal workers earn less than private workers for comparable jobs. Still, she says, managers are willing to give up next year’s raise: “If it will help the country bounce back, they’re willing to make the sacrifice.”

At Least I Don’t Live in San Francisco

October 27th, 2010

If you think your world is weird, viagra canada sildenafil imagine living in San Francisco.

2010 Voter Guide

By Jim Anderson, generic viagra cialis Silicon Valley Bank

Every couple of years the public officials in San Francisco send commentators like me a gift, titled with uncharacteristic humility, “Voter Information Pamphlet & Sample Ballot – City and County of San Francisco.” As I carefully read through the 192 pages I feel like I’m watching one of those Saturday Night Live reruns. You know, the ones in which the satirical commercials are so realistic you can’t tell if they are a joke. Then I catch myself — after all, no one would write 192 pages of satire.

There are a number of important items and candidates on the ballot. One of them even caught the eye of a famous venture capitalist and was profiled in his editorial in the Wall Street Journal. Then there is proposition measure C, which would “require the Mayor to appear in person” at a Board of Supervisors meeting once a month to “engage in formal policy discussions with the Board.” Now, the Mayor is permitted to come to any board meeting and take the floor to speak with the supervisors about anything he wants, but he has chosen not to. Perhaps the Mayor and the Board of Supervisors don’t have a great working relationship. I’m not sure amending the city charter is the best way to solve that problem. I vote no.

Proposition D is also a good one. It will permit non-citizens to vote in San Francisco elections. This came up a few years ago and lost. I’m OK with this idea so long as we San Franciscans can vote in other cities’ elections. The only tough part is deciding which ones. Maybe we could use our sister city relationships as a starting point. San Francisco has 13 sister cities and I’ve no doubt there is a luxuriously staffed city department to maintain and augment these connections. I’m also fairly certain that the Mayor and other city officials may need to travel to Abidjan, Cork, Assisi, Caracas, Haifa, Ho Chi Minh City (formerly Saigon), Manila, Osaka, Seoul, Shanghai, Sydney, Taipei and Zurich, from time to time to see how our sisters are faring.

Now, securing the right to vote in all these other locales may be difficult, not to mention the cost of translating their voter guides into English, Spanish, Japanese, Vietnamese, Tagalog, Mandarin and Korean as would be required here in San Francisco. Zurich might be especially tough. The Swiss don’t fool around when it comes to their democracy. I am particularly disappointed that we do not have a sister city in France. I think the Mayor and supervisors should jet off on a fact-finding mission to Nîmes as soon as possible to see if the French might be interested. At any rate, I decide to vote no on D until I know where else I will get the right to vote.

Proposition I is to permit Saturday voting. With pervasive access to absentee ballots on a permanent basis I’m not sure this is necessary. Besides, I like the idea of people taking time off work to vote. It sends the right cultural message about our priorities as citizens. I vote no.

Propositions J and K seem very similar. One is the “Hotel Tax Clarification and Temporary Increase” and the other is “Hotel Tax Clarification and Definitions.” I had no idea there was so much confusion about hotel taxes that it would require two ballot measures to clarify them. Actually one measure will raise hotel taxes while the other leaves them unchanged. I’m not clear on why we need a ballot measure to not change something. Initially, I don’t have a strong view on this as higher taxes on those millionaire and billionaire tourists is ok with me. This is the famous theory of taxation articulated by the late Senator Russell Long as, “Don’t tax you, don’t tax me, tax that man behind the tree.”

But there is more. Proposition J would also recover taxes from Internet booking sites that collect taxes from customers, but may not always pay them to the municipalities. Buying months of hotel rooms, Expedia and Travelocity could argue that they qualify as “permanent residents” of San Francisco and thus are exempt from the tax. (At this point I’m wondering whether Expedia and Travelocity as permanent residents, albeit, non-human ones, would be permitted to vote as non-citizens under Proposition D.)

Proposition K also contains what we call here a “poison pill” provision to kill off the competing Proposition J if both should pass. Reading through the poison pill I marvel at the creativity behind its invention. If only that same entrepreneurial flair could be applied to city services. I vote yes on K to encourage more creativity in government.

Now let’s turn to the candidates. I always find this challenging because I never know any of the people running. I have a few guidelines to help me. In general, I vote against all incumbents, except those who are trying to change things. Of course, once they get comfortable in office they seem to lose interest in making any changes. I would also vote for them if I thought the city was well-managed. It is not. I read the bios and tend to vote for engineers, scientists and business people. I feel they are more likely to bring a logical, pragmatic approach to solving the city’s problems. I do keep track of my votes, however, and I can confide here that no one I’ve ever voted for in San Francisco has been elected to anything.

One oddity in our ballot is that we can rank candidates in order of preference: first, second and third. This invention was designed to avoid expensive run-off elections if no one got a clear majority. Unfortunately, for the job of assessor-recorder there are only two candidates running. The job of public defender is even better. There is only one candidate. I skip that one.

Choosing school board members is quite demanding because there are so many candidates. As a point of background, the San Francisco Unified School District is not that bad. The dropout rate is only 18 percent and Lowell High School is ranked 28th nationally. But they are not succeeding with their customers: parents and students. The district loses about 400-500 students per year to the suburbs and private schools. That is the equivalent of shutting down one grade school every year. Still, the budget seems to grow each year — especially the administrative budget. Almost 50 percent of SFUSD budget dollars are spent on items other than teachers, books and classrooms. Given those facts, I feel comfortable voting against all the incumbents.

There is one new candidate for school board in my polling area that catches my eye named Starchild. The occupation is listed as erotic service provider.” (I’m not making this up.) Oddly, Starchild has some excellent ideas, such as making teacher pay higher than administrator pay and allowing students to attend their first choice schools. When popular schools are full, Starchild would open new schools run by a core of the teachers from the successful schools. I like that idea so he/she gets my vote. As you may have guessed, Starchild’s bio is gender neutral.

If we redefine corruption as taking public money and wasting it rather than using it for personal purposes, San Francisco is easily one of the most corrupt cities in the U.S. The annual budget is a whopping $6.6 billion or $8,033 for each of the 815,358 residents. This is the highest per capita spending of any major city in the U.S. The average city worker receives $120,000 per year in wages and benefits. For comparison, Los Angeles has a budget of $7.1 billion for more than four times the population. In fact, there are enough city workers in San Francisco for every family of four to have a personal assistant from the city three days per month. Maybe I should call up the mayor and have him send my guy over. I need some help cleaning out the garage.

SEIU vs. America

October 5th, 2010

Image from the SEIU website and data from the BLS. What more is there to say?



From Gary Shilling via John Mauldin:

  • “46 states are projecting a collective deficit of $121 billion for the 2011 fiscal year that begins next July 1, discount viagra cialis equivalent to 19% of their budgets. 39 states see gaps that total $102 billion for fiscal 2012.”
  • “Since the Great Recession started in December 2007 through April, viagra sales viagra private payroll employment has dropped 6.8%. Still, state and local jobs have declined but by much less, only 1.4%.”
  • The SEIU is a union of government workers. They don’t negotiate against management like any other union. They earn almost 50% more than the average American. And it is the average american who pays them – YOU.

    Let’s raise taxes!

    Obamanomics: No Price is too High, No Right too Holy

    September 28th, 2010

    GM’s Next Bankruptcy

    By Jim Anderson, buy viagra stuff Silicon Valley Bank

    We enjoyed the General Motor’s TV ads last April when CEO Edward Whitacre proclaimed they had repaid 100 percent of the debt to taxpayers ahead of schedule. This glorious achievement of modern industrial policy was even trumpeted from the White House as Press Secretary Robert Gibbs tweeted, viagra viagra “GM pays back US $6.7 billion used to save jobs…5 years ahead of schedule.”

    Later it was determined that the debt repayment was accomplished not with cash flow from operations, but by drawing down additional TARP funds according to TARP administrator Neil Barosky. It was disappointing that GM still had such little respect for the intelligence of the taxpayers who are, after all, potential customers.

    In a bankruptcy process that would have made Hugo Chavez proud, the administration’s political supporters at the UAW were granted 17.5 percent of the equity. The Canadian government received 11.7 percent and the Feds took control of 61 percent. The hapless bondholders who actually had the legal claim to the assets were left out of the negotiations and picked up the residual 9.8 percent. When the dust settled GM had $23.5 billion in cash and only $5.3 billion in long-term debt.

    We suppose the turnaround is pretty remarkable as the company served up a six-month profit of $2.2 billion on sales of $64 billion. Management did have the benefit of walking away from $46 billion in debt obligations. In essence, they received some $60 billion in operating assets without ever having to pay for them. Sweet deal. A brief review of the S-1 filing revealed, however, some obligations that were preserved at 100 cents on the dollar, notably the pension obligation to the UAW which is still accreting now up to $26 billion. The marked drop in “Other post retirement benefits” from $29 billion to $8.6 billion is the healthcare benefits that were swapped for the aforementioned 17.5 percent ownership position of a UAW Trust.*

    In July, a colleague sent us this headline,”GM buys subprime lender for $3.5 billion.” As part of the deal, GMAC, its old finance arm, was separated and rescued with $17 billion of taxpayer funds. The Feds now own 56 percent and about $10 billion in preferred stock. Renamed Ally Bank, the new GMAC provides car financing for Chrysler and GM, but tends to set credit standards above subprime as they work through massive losses from old-GM car customers and old-GMAC’s foray into the subprime mortgage business. Hence, GM’s need for the taxpayers to buy them a new, captive subprime car lender for the new GM. As they say, your tax dollars at work.

    With the banks largely paying back their TARP funds with interest and the government taking gains on the warrants, speculation has turned to the denouement of the takeover of most of the U.S. auto sector. Much of the analysis has been prompted by GM’s pending IPO. Although there has not been a complete accounting for $110 billion of tax dollars committed to the sector which included Chrysler, GM, GMAC, their various suppliers and $7.5 billion to subsidized the development of “green automobiles,” the hope is that some of this will be returned now that the “recession is over.”

    In order to recover the $52 billion invested to save GM and the UAW, the IPO shares would need to fetch $134 each according to the Wall Street Journal. The deal, which is expected to come to market in November, is not priced yet, but we suspect that $134 is well above the high end of any range.

    Using Ford as a proxy as it is only slightly larger than GM, ($133 billion in sales versus $129 billion), and more profitable, (EBIT of $8.6 billion compared to $5.8 billion at GM), we can get some idea of what is in store for our investment. Ford has a market capitalization of $43 billion or 5 times EBIT. That implies that GM might be worth as much as $29 billion. So our $52 billion to buy 61 percent ownership would round out to $18 billion or a loss of a cool $34 billion. But then we did preserve 96,000 jobs albeit, in my opinion, at uncompetitive and unsustainable wages and benefits. This brings us to our last point.

    At GM the seeds of the next bankruptcy and bailout are already germinating. (Recall that for Chrysler this is the second go thanks to the largess of taxpayers.) When the bailout deal was cut the United Auto Workers crowed that, “For our active members these tentative changes mean no loss in your hourly base, no reduction in your healthcare, and no reduction in pensions.” Once GM is public and if profits continue, we will find out how tentative the union concessions really were.

    * General Motors, Form S-1 Registration Statement, August 18, 2010.

    Fannie and Freddie Who?

    May 11th, 2010

    What to say about this? Subprime victims. Innocent real estate brokers and their avarice, buy viagra ampoule unscrupulous mortgage brokers and Flip This House fans. Fannie and Freddie laying low while creating hundreds of billions of losses to come. The president of the United States assigning blame, viagra judging, help and sentencing as he incites and leads class warfare… on national television… daily. Reaching across the aisle. For what?

    Obama Edits Declaration of Independence

    May 6th, 2010

    I’m not a socialist.
    I’m not a fascist.
    I do think at a certain point you’ve made enough money.

    It would appear that Obama plans to rewrite the Declaration of Independence:

    We hold these truths to be self-evident, generic cialis check that all men are created equal BUT SOME MORE EQUAL THAN OTHERS AS DETERMINED BY BARACK OBAMA, generic viagra patient that they are endowed by their creator with certain unalienable Rights, UNLESS MADE ALIENABLE BY BARACK OBAMA, that among these are Life, Liberty EXCEPT IF FOR LIBERTY RELATED TO WEALTH, PROPERTY AND THE PRODUCT OF ONES DAYS (AND HEALTH CARE AND HEALTH INSURANCE) , and the pursuit of Happiness EXCEPT AS MAY BE LIMITED BY THE FOREGOING.

    Prosecuting John Galt

    May 4th, 2010

    This is another from Silicon Valley Bank’s SVB Financial Group. I wonder what Paulson & Co is shorting now.


    A Nation of Losers?
    By Jim Anderson, cialis sales discount Silicon Valley Bank

    We have no idea whether Goldman Sachs did anything illegal or not. We suspect that these charges will fade away once their political usefulness has evaporated. They will pay a meaningful fine “without admitting or denying any wrongdoing” as is the common practice in these situations.

    The politics behind the case, cialis canada find if any, remain inscrutable, but conspiracy aficionados are pointing to the odd timing at a critical juncture in the financial regulations debate and the first-time-ever, 100-percent partisan split vote by the SEC board to bring the case forward. A few days after the unrepentant Goldman executives calmly displayed their extraordinary IQs in the face of numerous profanity-laced senatorial tirades, rumors of criminal charges were leaked to the press. The unfortunate timing put a dent in the government’s claim of independence from political expediency.

    At this point what happens in federal court is secondary. The real action is in the court of public opinion where Goldman, a long-time supporter of the Obama administration and a serial source of Treasury secretaries for many administrations, is being tried for “betting against the American economy.” More specifically, after years of facilitating government housing policy by securitizing Fannie Mae and Freddie Mac inspired subprime and Alt-A mortgages, Goldman reacted to that market backing up and began to manage its own risk aggressively. So their real crime was betting against the probability that poorly underwritten mortgage loans granted to unqualified borrowers would get repaid on schedule.

    Just in case you’ve recently return from ski trip in Antarctica, the case revolves around a synthetic collateralized debt obligation (CDO Abacus 2007-AC1). The presentation material on Abacus 2007-AC1 contained nine pages of disclosures, disclaimers and risk factors. Goldman constructed this CDO to satisfy the requirements of two groups of investors. One group, Paulson & Co., was looking for a way to short bonds backed by subprime mortgages. The others were looking for increased exposure to the U.S. housing market.

    Please note that a synthetic CDO does not actually contain any mortgages or bonds. It only references other mortgage bonds and the returns to investors reflect the performance of those referenced bonds. Think of it as playing fantasy baseball where your team of players does not actually exist. The success of your team depends on the performance of your reference players every day.

    The bonds referenced in Abacus 2007-AC1 were all rated AAA by Moody’s and S&P and the returns looked attractive for that risk profile. So IKB and ABN AMRO invested. ABN AMRO, a sophisticated Dutch bank, lost $841 million. IKB Deutsche Industriebank, a small regional middle-market lender in Germany, had created a subsidiary called Rhinebridge specifically to invest in U.S. subprime mortgages. They lost $150 million on Abacus 2007-AC1 and much more on other subprime plays. The bank became the subject of a ?5 billion rescue and was the first subprime-related bank failure. On the other side of this side bet, Paulson & Co. made a $1 billion profit.

    And, oh yes, Goldman lost a cool $100 million of their own money on Abacus. Then they started hedging aggressively, but it was too late. Total losses for the firm during the crisis were $9.1 billion, all of which was replaced by new equity raised in the private markets before the TARP program existed. Shouldn’t we be applauding the fact that Goldman was smart enough to see the emerging risks and take corrective action saving the taxpayers the obligation to breathe life into yet another zombie bank?

    Under the moral construct currently in vogue in Congress, if Goldman Sachs is to be castigated as a villain for working to hedge their subprime risk once it became apparent, then what are we to think of Wachovia and Washington Mutual? After all, they lost a combined $107 billion supporting the government’s program to expand homeownership for low-income families. To recall the famous admonition of House Financial Services Committee Chairman Barney Frank in September 2003, Wachovia and WaMu were “rolling the dice a little bit more in this situation towards subsidized housing.” Should we think of Wachovia and WaMu as heroes for selflessly sacrificing their shareholders and bondholders to support a misguided government policy?

    There are a couple conclusions we can take away from these events. First, the good senators working on reforming our financial system are struggling mightily with little apparent success to build some meaningful understanding of that system. Second, if the U.S. government had a risk management function as well developed as Goldman Sachs’, they may never have “rolled the dice” in the first place.

    According to estimates by former Fannie Chief Credit Officer Edward Pinto, the low-income housing policy drove Fan and Fred to promote the underwriting and acquisition of more than $2.7 trillion in dodgy mortgages. Where would we be today if Fannie and Freddie had rejected the strategy of their congressional overseers as unacceptably risky? Maybe if we could retain Chester Paulson of Paulson & Co. as an advisor to give us some guidance on mitigating future systemic risk resulting from massive government intervention in the financial markets.

    Finally, if Goldman is the villain for doing the smart thing are we now as a nation on the side of the incompetent — the losers?