The Washington Post on Obama's "unbalanced" approach to the deficit

From the Washington Post:

Nudging the Medicare eligibility age from 65 to 67, which President Obama supported last year? Unconscionable. Changing the way cost-of-living adjustments are calculated, which Mr. Obama also supported? Brutally unfair to veterans and seniors. Reform of Medicaidprovider taxes, which liberal Senate Majority Whip Richard J. Durbin (D-Ill.) only days ago described as a “charade” used by states to jack up funding from Washington? Unthinkable, the White House now says:In fact, with the Supreme Court having struck down a facet of Mr. Obama’s Affordable Care Act involving Medicaid, nothing in that program can be touched. And, while they’re at it, put Social Security off the table, too. We’re asked to accept the mythology that, though the pension and disability program is facing ever-widening shortfalls, it isn’t contributing to the overall deficit. . . .

Election results send small business owners into deep funk

From the Washington Post:

The National Federation of Independent Business said its index of small-business optimism dropped 5.6 points last month to 87.5. The index was compiled from a survey of 733 NFIB members taken throughout November. . . .NFIB Chief Economist William Dunkelberg said the biggest drag on the index was owners’ expectation that business conditions will be worse six months from now. The number of owners expecting better times ahead fell 37 points. Nearly half the owners surveyed are now pessimistic about the future. . . .Dunkelberg said the survey points to the election results as the biggest factor in owners’ darker mood.

Another Obama tax that people might not have known about

So you want to cover the insurance costs of people who don't have insurance?  The obvious solution is to tax insurance right?  Forcing more people off insurance will surely lower the cost of covering people who don't have insurance, right?

Your medical plan is facing an unexpected expense, so you probably are, too. It's a new, $63-per-head fee to cushion the cost of covering people with pre-existing conditions under President Obama's health care overhaul.  

The charge, buried in a recent regulation, works out to tens of millions of dollars for the largest companies, employers say. Most of that is likely to be passed on to workers.
Employee benefits lawyer Chantel Sheaks calls it a "sleeper issue" with significant financial consequences, particularly for large employers.  

"Especially at a time when we are facing economic uncertainty, (companies will) be hit with a multi-million dollar assessment without getting anything back for it," said Sheaks, a principal at Buck Consultants, a Xerox subsidiary.  

Based on figures provided in the regulation, employer and individual health plans covering an estimated 190 million Americans could owe the per-person fee. 

The Obama administration says it is a temporary assessment levied for three years starting in 2014, designed to raise $25 billion. It starts at $63 and then declines.  . . .

More complicated Obamacare rules coming out after the election

To bad these rules couldn't have come out slightly earlier to give people more time to prepare for the tax changes, but then they would have had to come out before the election.

The Internal Revenue Service has released new rules for investment income taxes on capital gains and dividends earned by high-income individuals that passed Congress as part of the 2010 healthcare reform law.
The 3.8 percent surtax on investment income, meant to help pay for healthcare, goes into effect in 2013. It is the first surtax to be applied to capital gains and dividend income.
The tax affects only individuals with more than $200,000 in modified adjusted gross income (MAGI), and married couples filing jointly with more than $250,000 of MAGI.
The tax applies to a broad range of investment securities ranging from stocks and bonds to commodity securities and specialized derivatives.
The 159 pages of rules spell out when the tax applies to trusts and annuities, as well as to individual securities traders.
Released late on Friday, the new regulations include a 0.9 percent healthcare tax on wages for high-income individuals. . . . 

Gallup: "U.S. Small-Business Owners Pessimistic Post-Election"

From Gallup:

U.S. small-business owners are pessimistic post-election, with the Wells Fargo/Gallup Small Business Index plunging to -11 in November from 17 in July. This is the most pessimistic that owners have been about their operating environment since July 2010, when the index stood at -28. . . .

Germany is not taking Paul Krugman's attacks seriously

I have previously noted how far off Krugman's predictions have been about Germany and other countries.  So is it surprising that German's haven't really taken his critiques seriously?  From the New Republic:

And yet, it’s equally apparent that Germans aren’t cowed by his vitriol—nor are they much persuaded by what he has to say. Merkel is still enjoying record popularity and Steinbrueck recently received a birthday greeting from an ordinary German citizen thanking him for sticking up to the New York Times columnist. When Krugman suggested the international community impose “sanctions” against Germany for its monetary policies, a number of notable German economists publicly, and sternly, pushed back. When Krugman accused Wolfgang Schaueble, the country's current finance minister, of “just making stuff up” when discussing the Euro crisis, Schaueble told the press that he had “no use for” economists with Nobel prizes. And when Krugman received a major award from one of Germany’s most prestigious economic research centers in 2010, the organizers made sure to pair his remarks on the European crisis with a speech by Schaeuble that undermined everything he had to say. . . .

With Obama pushing hard to increase taxes on corporate dividends companies are trying to quickly give out a lot of money in dividends

A long list of companies are trying to quickly give out dividend payments before the end of the year.  With the tax rate on dividends possibly going from 15 percent to as high as 40 percent, is it any surprise that companies are responding?  What do you think that this will do to the incentive for people to invest.

Companies are racing the clock to hand out billions in special dividends before year end—and some of them are taking on debt to do it. . . . .

UPDATE:  Here is an announcement from Apple.

If Apple took all the money earmarked to pay out dividends over the next three years and paid it out now, shareholders would get $31.88 per share. If taxed at the current 15% rate, that would leave investors with $27. If that same money is paid out after January 1, it would leave shareholders in the highest tax bracket with $18 after taxes. 

This has nothing to do with "fair" or the 1%. The money belongs to shareholders, and the option is either to take $27 in the next month or $18 spread out over the next 3 years. It's not a trick question; the only rational choice is to take the money now. 

A company and its board are obligated to attempt to efficiently invest shareholder money. If Apple does anything other than pay shareholders a minimum of $30 per share in a one-time dividend, they are ignoring their fiduciary responsibility for reasons they can't or won't explain. . . . 

Here's a quick primer for those of you new to the dividend conversation. The current tax rate on dividend income is 15%. Set in the Bush-era, this rate is set to expire in January unless lawmakers intervene. Under President Obama's proposed plan, dividends would be taxed inline with wages and salaries in 2013. That would mean dividend taxes will increase to as much as 39.6% for high-income earnings. With the kicker of a 3.8% additional tax on all investment income, the effective tax for dividends could be as high as 43.4% for anything paid out next year. . . .

Does Krugman understand that there is both Supply and Demand?

Low interest rates can be due to two reasons.  Either people don't find the US an attractive place to invest (demand has shifted down) and/or the supply of funds is increasing.

Far from fleeing U.S. debt, investors have continued to pile in, driving interest rates to historical lows. . . .

So Krugman's solution?  With massive debt, the solution is yet more debt.

Beyond that, suddenly the clear and present danger to the American economy isn’t that we’ll fail to reduce the deficit enough; it is, instead, that we’ll reduce the deficit too much. For that’s what the “fiscal cliff” — better described as the austerity bomb — is all about: the tax hikes and spending cuts scheduled to kick in at the end of this year are precisely not what we want to see happen in a still-depressed economy. . . .

Does anyone notice what a failure these policies have been for the countries that have adopted them (see here)?

UPDATE: Michael Tanner has some notes on Krugman here.

"Two-thirds of millionaires left Britain to avoid 50% tax rate"

People are so much more mobile now than they used to be.  With the internet, you can often do work any place in the world.  Other countries also used to have much higher tax rates so there wasn't the same ability to avoid the high rates.  This shows what happened when Britain's top tax rate was raised from 40 to 50 percent and then again when it was lowered back to 45 percent.

In the 2009-10 tax year, more than 16,000 people declared an annual income of more than £1 million to HM Revenue and Customs. 

This number fell to just 6,000 after Gordon Brown introduced the new 50p top rate of income tax shortly before the last general election. 

The figures have been seized upon by the Conservatives to claim that increasing the highest rate of tax actually led to a loss in revenues for the Government. 

It is believed that rich Britons moved abroad or took steps to avoid paying the new levy by reducing their taxable incomes. 

George Osborne, the Chancellor, announced in the Budget earlier this year that the 50p top rate will be reduced to 45p from next April.

Since the announcement, the number of people declaring annual incomes of more than £1 million has risen to 10,000. . . .

Paul Krugman seems to seriously argue that we could raise today's tax rates to what they were in the 1950 and everything would work fine.

But the ’50s — the Twinkie Era — do offer lessons that remain relevant in the 21st century. Above all, the success of the postwar American economy demonstrates that, contrary to today’s conservative orthodoxy, you can have prosperity without demeaning workers and coddling the rich. 

Consider the question of tax rates on the wealthy. The modern American right, and much of the alleged center, is obsessed with the notion that low tax rates at the top are essential to growth. Remember that Erskine Bowles and Alan Simpson, charged with producing a plan to curb deficits, nonetheless somehow ended up listing “lower tax rates” as a “guiding principle.” 

Yet in the 1950s incomes in the top bracket faced a marginal tax rate of 91, that’s right, 91 percent, while taxes on corporate profits were twice as large, relative to national income, as in recent years. The best estimates suggest that circa 1960 the top 0.01 percent of Americans paid an effective federal tax rate of more than 70 percent, twice what they pay today. 

Nor were high taxes the only burden wealthy businessmen had to bear. They also faced a labor force with a degree of bargaining power hard to imagine today. In 1955 roughly a third of American workers were union members. In the biggest companies, management and labor bargained as equals, so much so that it was common to talk about corporations serving an array of “stakeholders” as opposed to merely serving stockholders. . . . 

More on Romney's comment about Obama using government largess to buy votes

I am not sure how saying that Obama was using government money to buy votes is the same thing as saying that you aren't contesting for people's votes.  I can say that I understand the president is trying to buy votes, but if I offer policies to create growth, voters might be willing to forgo the government money.  Possibly there is a better way to express the point that Romney made, but that seems to me to be a different point.  Former Texas Senator Phil Gramm used to talk about people pulling the wagon versus those in the wagon.  Would Gramm have gotten reprimanded nowadays if he had said that it is hard to win an election with so many people "in the wagon"?  If Gramm's way of phrasing things is still acceptable, why aren't these Republican politicians below more constructive in their criticism?  Or is this just an issue of Republican politicians seeing a chance to get publicity?

Louisiana Gov. Bobby Jindal (R) criticized Republican candidates on Sunday for making comments he said alienated voters and cost the party the presidency and key Senate seats.
"We don't need to demonize, and we also don't need to be saying stupid things," Jindal, the new chairman of the Republican Governors Association, said on "Fox News Sunday."
He singled out Republican Senate candidates Rep. Todd Akin of Missouri and Richard Mourdock of Indiana, saying their controversial comments on rape and abortion cost Republicans Senate seats and dragged down the party nationally.
Jindal also denounced Mitt Romney's recent comment to donors that President Obama was able to win reelection by giving "gifts" to key voting groups."I absolutely reject what he said. Look, we as the Republican Party have to campaign for every single vote," Jindal said. . . . .

Senator Lindsey Graham made a similar point:

[Graham] on Sunday blasted Republican nominee Mitt Romney's assertion that Democratic "gifts" to minorities had helped them win the election.
"We’re in a big hole, we’re not getting out of it by comments like that," Graham said on NBC's “Meet the Press.” “When you’re in a hole, stop digging. He keeps digging.”
In a Wednesday call with donors, Romney cited Obama’s healthcare reform law and executive order stopping the deportation of some illegal immigrants as “gifts” which motivated voters to back the president. . . . .

The "self-deportation" comment by Romney could also have been a mistake with Hispanics, especially those here illegally, but is Romney's point about vote buying really wrong?

The debate over Romney's 47 percent comment

I understand that Romney's statement was politically stupid and that it confuses the fact that a lot of people are pressured by the government to behave differently than would otherwise be in their interest to behave.  If it were me, I would blame the government pressure, just as I blame the government for the break up of the African-American family.  But if Romney had said that farmers tended to vote for politicians who support aid to farmers, would that have been OK?  Why would this be any more surprising than the fact that unions support politicians who help out unions or that the NRA supports politicians who support their positions?  Would the national media had come down on Obama if he had lost and blamed it on the NRA?  Wait, didn't Clinton already blame the NRA for loses in 1994 and 2000?  Well, I suppose those cases are different, right?  I would hope that someone will explain the differences to me.

In addition, Romney's comments sound like a lot of academic economics papers on this regulation and generally how government operates.  See for example, Sam Peltzman's 1976 paper in the Journal of Law and Economics or Gary Becker's comment.  From Politico:

Mitt Romney told donors Wednesday he blamed last week’s loss to President Barack Obama in part to “gifts” the Obama administration gave to key voter blocs, including African Americans, Hispanics and young women, according to media reports. 

“The president’s campaign focused on giving targeted groups a big gift — so he made a big effort on small things. Those small things, by the way, add up to trillions of dollars,” Romney said on a conference call with donors, the Los Angeles Times first reported. 

The “gifts,” according to Romney, included forgiving college loan interest, free contraceptive coverage and the part of Obamacare that allows people 26 and younger to be covered under their parents’ health care plans. 

“You can imagine for somebody making $25,000 or $30,000 or $35,000 a year, being told you’re now going to get free healthcare, particularly if you don’t have it, getting free healthcare worth, what, $10,000 per family, in perpetuity. I mean, this is huge,” Romney said, the New York Times reported. . . .

"Biden: 'We've got to get this economy working' before considering 2016"

Well, it is great to know that they have eight years to get things fixed.  A little longer than what they promised.

“We’ve got to get this economy working. If three years from now the economy is not working, it’s not going to be worth doing much. This is all about making Barack an incredibly successful second-term president. That’s my focus.” 

Biden had alluded to a possible presidential bid as recently as Election Day, when he was asked  after voting if that would be his last time voting for himself. 

“No, I don’t think so," Biden said with a grin. . . .

Food Stamp data showing large increase delayed until after election?

If it is actually true that these data aren't released after the second day of the month, it would be hard to come up with a benign explanation for why it was released on the 9th this time.

On Friday, the U.S. Department of Agriculture (USDA) released their most recent data on U.S. participation in the Supplemental Nutrition Assistance Program (SNAP), more commonly referred to as 'food stamps.'
While the report is ordinarily released at either the end of the month, or no later than the first or second day of the following month, the Obama administration waited until November 9, a full three days after the election to announce the number of Americans currently receiving food stamps.
After seeing the data, it is not surprising why the administration delayed the report...
By the end of August 2012 (the most recent data), there were 47.1 million Americans on food stamps, a new all-time record high.
Another 420,947 Americans were added to the food stamp rolls from the previous month of July, representing the largest monthly increase in a year. . . .

One could write a book on everything that the Obama administration seems to be hiding from the public.

The coming regulatory explosion

Since July I have been warning about the coming onslaught of federal regulations.  Obama obviously didn't want these coming out during the campaign.  I believe that Obama has been delaying issuing new regulations until after the election.  From CNS News:

It’s Friday morning, and so far today, the Obama administration has posted 165 new regulations and notifications on its reguations.gov website. 

In the past 90 days, it has posted 6,125 regulations and notices – an average of 68 a day. 

The website allows visitors to find and comment on proposed regulations and related documents published by the U.S. federal government. "Help improve Federal regulations by submitting your comments," the website says. . . .

Remember Obama's claim about oil exploration during the Second Presidential debate that he was responsible for increased oil production.  Yet, immediately after the presidential debate we have this new regulation:

The Interior Department on Friday issued a final plan to close 1.6 million acres of federal land in the West originally slated for oil shale development. 

The proposed plan would fence off a majority of the initial blueprint laid out in the final days of the George W. Bush administration. It faces a 30-day protest period and a 60-day process to ensure it is consistent with local and state policies. After that, the department would render a decision for implementation. 

Related point: "The Top 3 Special Interests Expecting Favors During Obama’s Second Term," the payoffs to labor, environmental groups, and "green" energy companies. 

UPDATE: Finally, the WSJ gets up to speed on this point.  

Since Election Day, the Health and Human Services Department has submitted a raft of key health rules for White House review that it has been sitting on for months. . . . 

Financial services. According to a Davis-Polk analysis, only 133 or 33.4% of the 398 rule-makings the law firm estimates Dodd-Frank requires have been finalized. The law is ambiguous and other reviews suggest the figure could be closer to 500. As of November 1, some 132 rules haven't even been proposed, while the government has failed to meet 61% (or 144) of Dodd-Frank's legal deadlines. . . . 

Energy. In the lead-up to November, the Environmental Protection Agency stood down under White House pressure, delaying rules for ozone air quality and industrial boilers, and deferring carbon standards. Now EPA chief Lisa Jackson has the run of the place. . . . 

Economic potpourri. The National Labor Relations Board, the Equal Employment Opportunity Commission, the Occupational Safety and Health Administration and the Office of Federal Contract Compliance Programs are teaming up to rewrite employment, labor and workplace law. The FCC and the FTC are doing the same for the tech industry and Silicon Valley via investigations, audits and "oversight." The Agriculture Department is going after "illegally harvested plants." The Consumer Product Safety Commission has its eyes on . . . table saws. . . .

Some random notes

Mayor Bloomberg: Tax Hikes on Rich ‘Drive Out the 1 Percent’

New York Mayor Michael Bloomberg called it “dumb” to raise taxes on the wealthy, and later pointed out they would leave New York, pointing to France as an example.
“You saw in France people moving out when they raised the tax rates,” Bloomberg said, according to the New York Post on Oct. 13. “Whether you like it or not, the wealthy are mobile.”
A few days prior to that – in a press conference before the Columbus Day parade in the city –Bloomberg was asked about candidates for mayor hoping to succeed Bloomberg who are pledging more taxes on the rich.
“It is about as dumb a policy as I can think of,” Bloomberg responded, according to Capital New York on Oct. 8. . . .

Former Gov. L. Douglas Wilder is not going to endorse Obama again as he did in 2008.

"They often note that Obama ran as a moderate — and that is the man they threw their support behind in 2008. But some look back and say that he has governed as a left-of-center liberal who did not keep the focus squarely on jobs and economic recovery. 

"Is that group of independent-minded voters enough to swing Virginia's 13 electoral votes away from Obama on Tuesday? The race is so close, we will have to wait until November 6 for a definitive answer. But for a state Obama may need to win, that uncertainty after almost four years on the job cannot be a great comfort to his campaign operatives." . . .

Reminder that Michael Boskin had this piece at the beginning of the year about the election being a referendum on Obama:

Obama and his congressional allies enacted an $800 billion “stimulus” bill that was loaded with programs geared to key Democratic constituencies, such as environmentalists and public employees; adopted a sweeping and highly unpopular health-care reform (whose constitutionality will be determined by the Supreme Court this year); imposed vast new regulations on wide swaths of the economy; embraced an industrial policy that selects certain companies for special treatment; engaged in borrowing and spending at levels exceeded only in World War II; and centralized power in Washington, DC (and, within the federal government, in the executive branch and regulatory agencies). . . . .

194,000 jobs, 14.7 million more people on food stamps

There are 194,000 more people are at work now than in January 2009, but our population has grown and there are now 8,822,000 more working-age people.  There is another comparison that should also be made: "During his time in office, 14.7 million people were added to the food stamp rolls. Over that same time, only 194,000 jobs were created — thus 75 people went on food stamps for every one that found a job."  This is from Sen. Jeff Sessions (R-Ala.).

So did tax rules the threat of the coming tax changes result in Star Wars 7 being made?

More evidence that taxes matter.  From Market Watch:

Disney will buy LucasFilm for $4.05 billion in cash and stock, the two companies announced Tuesday. By cashing out now, experts say the filmmaker spared his family the need to pick up the pieces of his empire after he’s gone. . . , 

That Lucas struck a deal in 2012 may be no accident either, advisers say. Long-term capital gains tax from the sale of assets held more than one year are taxed at a rate of 15% for investors in the 25% income tax bracket or above (Lucas’s level), and zero for investors in the 10% or 15% bracket. Those rates are set to jump to 20% and 10%, respectively in January. “He probably wanted to take advantage of the lower rate on long-term capital gain while it’s certain,” says Bill Smith, managing director at CBIZ MHM, a national accounting and professional services provider. . . .

Fiat moving Chrysler and Jeep production to China or Italy

Well, this comes at an awkward time for Obama, though I suppose that it would have been much worse before the debates or the Democratic National Convention.  It sure would have stepped on some Democratic talking points.  From Bloomberg News:

Fiat SpA (F) Chief Executive Officer Sergio Marchionne set a target two and a half years ago to sell 6 million cars annually by 2014, a goal that analysts and industry observers at the time deemed impossible to achieve. They were right. . . . 

Fiat’s problems are bigger than many rivals’ because its troubled home country accounts for half its sales in the region. Its plants in Italy, where car sales are on pace to plunge this year to the lowest level in more than three decades, are running at 50 percent of capacity, far below the 80 percent threshold typically considered profitable. 

To counter the severe slump in European sales, Marchionne is considering building Chrysler models in Italy, including Jeeps, for export to North America. The Italian government is evaluating tax rebates on export goods to help Fiat. Marchionne may announce details of his plan as soon as Oct. 30, the people said. . . .

Remember my warning about the coming regulatory flood?

For those who might remember my post in July about the coming regulatory flood after the November election, here is a news story about what is forthcoming from the EPA.  From Fox News:

Republican Sen. James Inhofe says the Environmental Protection Agency has delayed action or "punted" on numerous regulations while President Obama tries to "earns votes" for a second term. 

The Oklahoma senator and ranking Republican on the chamber's Committee on Environment and Public Works has released a report stating that when the agency approves the roughly one dozen regulations next year in 2013, they will "spell doom" for jobs and economic growth. 

"The Obama-EPA plans to move full speed ahead to implement this agenda if President Obama wins a second term," Inhofe writes. "These rules taken together will inevitably result in the elimination of millions of American jobs, drive up the price of gas at the pump even more, impose construction bans on local communities and essentially shut down American oil, natural gas and coal production." 

The 14-page report cites pending regulations on a wide range of environmental-economic issues including those on power plant emissions and hydraulic fracturing. . . .

Can welfare payments sway the election?

While he was a senator, Phil Gramm often used the term people in the wagon versus pulling the wagon. He and Michael Solon have this in the WSJ:

. . . In 1980 and 1992, only 3% of the American labor force drew disability benefits from the government. Today it is 6%. The number of workers qualifying for disability since the recession ended in 2009 has grown twice as fast as private employment. 

How would Presidents Jimmy Carter or George H.W. Bush have fared on their Election Day if 40% of the Americans who were unemployed had instead qualified for disability benefits? How would voters have reacted in 1980 or 1992 if food-stamp benefits had grown by 65% instead of an average of less than 25% during the first four years of their administrations? 

During the past four years, the Obama administration's aggressive promotion of the food-stamp program has increased the number of recipients by 18.5 million. Do these people feel the same level of discontent about economic conditions as the rest of the voting population? 

Unemployment insurance that lasted no longer than 55 weeks in 1980 and 72 weeks in 1992 now can last 99 weeks. Does this ease the distress level of the 40% of unemployed workers who have been out of work for more than half a year? 

The federal government's 120 means-tested programs today provide $1 trillion of benefits. The spending for these programs has grown 2½ times faster during the Obama presidency than in any other comparable period in American history. To what extent might these benefits not just foster dependency but also make the economy's performance seem less of a deciding factor in voters' choices? . . .

More on this issue is provided by Larry Kudlow here.

In a larger budget context, reporter Jeffrey H. Anderson uses a Treasury Department study to chronicle the 7-Eleven presidency. In fiscal year 2012, ending Sept. 30, the government spent nearly $11 for every $7 of revenues taken in. The exact figures are $2.5 trillion in tax revenues and $3.5 trillion in spending. In other words, it spent 44 percent more than it had coming in. 

Previous fiscal years look even worse: The government spent 56 percent more than revenues in fiscal year 2011 and 60 percent more in fiscal year 2010. 

All in all, according to Anderson, the government under the Obama administration received $6.8 trillion in taxes and spent $10.7 trillion -- 56 percent more than it had available. . . .