Sunday, January 16, 2011
too big
Are “Muni’s” the next too big to fail product. While states cannot file for bankruptcy cities can and the way many cities finance their long term debt is by selling municipal bonds (Muni’s). As more and more cities face financial difficulties it is becoming more difficult to sell these bonds. Investors are leery. Cities can file for bankruptcy under a special provision called Chapter 9. Since many cities like most states are broke or going broke they will try to sell bonds and if the market collapses the federal government will step in and buy these bonds and thus the next bail out for too big to fail. Much of the long term debt of cities is like the states in that it revolves around legacy benefits for employees, things like pensions and health insurance for retirees. As this happens more and more non public employees are going to rebel against using tax payer money to provide these benefits. There could be a revolt especially when it becomes known that public employee benefits far exceed those of private employees.
earmarks
A few weeks ago I wrote about one of the problems associated with “ear marks”, which are add ons to a major piece of legislation in that they sometimes encourage a person to vote for a bill they really don’t like. This allows bad bills to pass. There is another reason why ear marks should be discouraged and that is the relationship between lobbyist who push for certain ear marks and then reward the congressmen who votes for them with campaign contributions. This is how the process is contaminated by special interest. You vote for my ear mark and I will give you money for your re-election. Since over 90% of incumbents are re-elected this becomes a vicious circle that is often times not in the best interest of the country.
The current Omnibus bill before the congress is 1.2 trillion and contains 6,000 ear marks totaling 8 billion dollars which is only a small part of the total bill but is equal to 1.3 million dollars per ear mark. Say Senator Smith is asked of 1.3 million dollars to provide for research into the sex life of a fly. He gets this paid as an ear mark and the people who get the money provide him with $50,000 for his next campaign.
This is legalized corruption.
The current Omnibus bill before the congress is 1.2 trillion and contains 6,000 ear marks totaling 8 billion dollars which is only a small part of the total bill but is equal to 1.3 million dollars per ear mark. Say Senator Smith is asked of 1.3 million dollars to provide for research into the sex life of a fly. He gets this paid as an ear mark and the people who get the money provide him with $50,000 for his next campaign.
This is legalized corruption.
cash
Here is another example of a news story that gives a misleading impression by leaving out pertinent information. It was announced that the four big banks that got TARP money have now repaid it all with interest. End of story. What was not reported is that the treasury in order to get cash to spend loaned these banks money at zero interest and then allowed these same banks to purchase government bonds that paid three percent interest thus giving them a risk free guaranteed profit. It is from this profit that the banks repaid the TARP loans.
Why do this? The government gives them cash and when they buy bonds they pay for those with cash and now the government has cash and the government can deny that they are just printing money which is called monetizing the debt which the government said they would not do. Another example of our government at work.
Why do this? The government gives them cash and when they buy bonds they pay for those with cash and now the government has cash and the government can deny that they are just printing money which is called monetizing the debt which the government said they would not do. Another example of our government at work.
estate
The news today is about estate tax. When I first started in the finance business the estate tax limit was set at $200,000. This meant that when you died the government totaled up everything you owned and if it came to more than $200,000 you had to pay tax which started at 35% and went as high as 55%. We would call on farmers and help them prepare for this event. For example most farmers and asset rich and cash poor, meaning they owned land and equipment that might be worth millions but the price of commodities was so low that they barely made enough to get by. When they died the estate tax was due in 9 months so part of the farm had to be sold to pay the tax. Now a farm is a unit with equipment sized to the acreage and when part of it is sold it disrupts the whole operation. Many times this resulted in the farm being sold to some large corporate farm and as time passed we had fewer and fewer small farmers and that trend continues to this day.
About 30 years ago they raised the tax limit from $200,000 to $600,000 and that helped a lot and then it went to $2,000,000 and the Bush tax cuts of 2001 removed the estate tax completely until this January one when the new bill suggest $5,000,000 for individuals and $10,000,000 limit for couples and at tax rate of 35%.
This is the kind of bill that will protect most small farmers and most very rich people have professional estate planners who limit their tax. For those who have that much money and still don’t plan, I say let them pay
About 30 years ago they raised the tax limit from $200,000 to $600,000 and that helped a lot and then it went to $2,000,000 and the Bush tax cuts of 2001 removed the estate tax completely until this January one when the new bill suggest $5,000,000 for individuals and $10,000,000 limit for couples and at tax rate of 35%.
This is the kind of bill that will protect most small farmers and most very rich people have professional estate planners who limit their tax. For those who have that much money and still don’t plan, I say let them pay
court case
The big news this week is that the Virginia court struck down Obama care based on the commerce clause of the constitution. This clause gives the federal government the right to regulate interstate commerce. Commerce by definition means having a buyer and a seller and interstate means that these two are in different states. An Iowa corn farmer sells his corn to an elevator in Illinois. The challenge in this case is that there is no buyer and the government is stepping in and forcing a person to buy and for this reason the Supreme Court is likely to agree with the Virginia lower court. That however is only the first challenge. The second part has to do with enforcement. The Obama care law says that you must buy health insurance and if you don’t you can be fined $750. However the law further states that if you refuse to pay the fine then there is nothing else the government can do. The reason this is important is that the law has removed the pre-existing conditions clause, which means anyone with any kind of health problem can buy insurance with no questions asked. If this is the case then people will not buy health insurance until they get sick which will destroy the Obama care idea of insuring everyone. Cost sharing is based on the idea that everyone sign up and pay premiums when they are healthy.
This currently happens with Medicaid as many people who are eligible do not sign up until they are sick since there is no pre-existing condition clause in Medicaid.
The way around this is too change Obama care to include stiff penalties for those who choose not to purchase health insurance, however this is some concern that it is not constitutional to penalize someone for not buying a product thus the reason for the lack of enforcement in the plan.
Does all this sound like a federal government plan!
This currently happens with Medicaid as many people who are eligible do not sign up until they are sick since there is no pre-existing condition clause in Medicaid.
The way around this is too change Obama care to include stiff penalties for those who choose not to purchase health insurance, however this is some concern that it is not constitutional to penalize someone for not buying a product thus the reason for the lack of enforcement in the plan.
Does all this sound like a federal government plan!
work
Dick Morris reports that since Fox News is now the station of record for things political they plan to conduct debates with the Republican candidates for president on a regular basis starting next years. This will give lots of exposure to these candidates and more importantly it will allow the voters to decide if these people are qualified to be president.
I find this particularly interesting because most people have concerns about Sarah Palin in regards to her understanding of the major issues. If she has been doing her home work and is able to answer questions with knowledge based answers she can turn around the view that many if not most people currently have of her.
Since many of the talking heads consider her to be some kind of dunce the bar is set low and she could easily surprise her critics and rise to the top of the group. If she has not done her homework she will quickly been seen as a loser.
The really interesting part is that most people can learn about the issues but most cannot be taught charisma which is her strong point.
If she proves that she is in charge of the major issues she will be hard to stop and with her way with people she would present a formidable challenge to Obama in any debate format especially since teleprompters would not be allowed.
I find this particularly interesting because most people have concerns about Sarah Palin in regards to her understanding of the major issues. If she has been doing her home work and is able to answer questions with knowledge based answers she can turn around the view that many if not most people currently have of her.
Since many of the talking heads consider her to be some kind of dunce the bar is set low and she could easily surprise her critics and rise to the top of the group. If she has not done her homework she will quickly been seen as a loser.
The really interesting part is that most people can learn about the issues but most cannot be taught charisma which is her strong point.
If she proves that she is in charge of the major issues she will be hard to stop and with her way with people she would present a formidable challenge to Obama in any debate format especially since teleprompters would not be allowed.
Palin
Dick Morris reports that since Fox News is now the station of record for things political they plan to conduct debates with the Republican candidates for president on a regular basis starting next years. This will give lots of exposure to these candidates and more importantly it will allow the voters to decide if these people are qualified to be president.
I find this particularly interesting because most people have concerns about Sarah Palin in regards to her understanding of the major issues. If she has been doing her home work and is able to answer questions with knowledge based answers she can turn around the view that many if not most people currently have of her.
Since many of the talking heads consider her to be some kind of dunce the bar is set low and she could easily surprise her critics and rise to the top of the group. If she has not done her homework she will quickly been seen as a loser.
The really interesting part is that most people can learn about the issues but most cannot be taught charisma which is her strong point.
If she proves that she is in charge of the major issues she will be hard to stop and with her way with people she would present a formidable challenge to Obama in any debate format especially since teleprompters would not be allowed.
I find this particularly interesting because most people have concerns about Sarah Palin in regards to her understanding of the major issues. If she has been doing her home work and is able to answer questions with knowledge based answers she can turn around the view that many if not most people currently have of her.
Since many of the talking heads consider her to be some kind of dunce the bar is set low and she could easily surprise her critics and rise to the top of the group. If she has not done her homework she will quickly been seen as a loser.
The really interesting part is that most people can learn about the issues but most cannot be taught charisma which is her strong point.
If she proves that she is in charge of the major issues she will be hard to stop and with her way with people she would present a formidable challenge to Obama in any debate format especially since teleprompters would not be allowed.
Subscribe to:
Posts (Atom)