by | ARTICLES, ECONOMY, GOVERNMENT, OBAMA, TAXES
Recently, the WSJ had an article drawing attention to Obama’s changes made to the student loan system for higher education. The article, while it raised good points, did not go far enough to explain the detriment to our economy that his program is causing.
President Obama is intentionally undermining people’s successes — and our nation’s success — by encouraging large amounts of graduates to go into the government and the non-profit sectors and then subsequently forgiving student loan debt. This practice is both a) incompetent as a matter of economics and b) devious as a matter of policy.
Indisputably, the driver of economic growth in our country’s history has been the free market. By having the forces of supply and demand set prices for different things and wage levels for types and quality of labor, people were able to make logical choices of what businesses to go into, and what jobs to study and train for. The higher paying jobs were those most productive to society and had the logical effect of encouraging economic growth. Individuals could match their skill set with their desire to earn money to find their best employment, and would be maximizing the country’s economic growth as a by-product.
While non-profits have in important place in our society, they do not play an important role in actually driving our economy, which is something we desperately need right now. Discouraging economic growth, and paying a high price to do so, is certainly not smart.
Likewise, the other sector in which Obama is encouraging students to find work is the government. In the past, the public sector may not have paid as much as the private sector. Today, however, the public sector is better paid with more generous benefits, making it a very lucrative career path. How then, can Obama justify student loan forgiveness for government workers who will actually earn more than their private sector peers, who are also the ones who have to fulfill their contractual obligations to pay back their student loans?
One of the provisions of student loan reform is that Obama made certain student loans “non-taxable” if the loan is forgiven, while keeping other loans taxable as income received. This inconsistency creates confusion regarding which loans have what kind of classification.
In general, if someone forgives a debt, like a credit card company, if you racked up $10,000 in debt and settled to pay off $5,000, the IRS considers that you received $5,000 of income from the loan forgiveness; you will receive a 1099 for it, and will be expected to report it as income on your taxes. On the other hand, if you work in a qualifying field in exchange for income and also student loan forgiveness, you have a scenario that is truly the very definition of income — and yet Obama has given a free pass to some loans by making their loan forgiveness also non-taxable.
Obama is essentially picking winners and losers in particular industries through the student loan programs and masking it under student loan forgiveness and “non-taxable” categories. This is underhanded policy.
This mindset is one that suggests to and encourages students to take large amounts of student loans and then go into the sectors where their loan can be forgiven — not into the sectors where they would be most productive, and therefore most likely to earn enough to pay it back. It’s like saying to the students, “Here’s a way to not pay back your loans!”. Frankly, that’s criminal. And it fundamentally subverts the basis principles of logic and economics. Also, I can tell you as an accountant, the numbers for Obama’s student loan policy simply don’t work.
For example, if someone borrows $30,000 a year for 4 years for a degree, that is $120,000 of student loan debt. The debt carries an interest rate of at least 6%. The Obama repayment plans offer an option that allows borrowers to pay 10% (it used to be 15%) of what they earn, and if not fully paid back by the end of ten years, any balance is forgiven.. So for instance, if a new graduate lands a job that pays a generous $50,000/year, he/she would pay back $5,000/year. With interest of at least $7,200 ($120,000 x 6%) which likely does not even cover the interest on the original $120,000 loan.
There is almost no way a borrower can begin to pay back anything on their loan, and by the time they actually can make a dent, the additional interest accrued would have ballooned the total loan amount to at least $150,000. This is financially crippling for a young person.
In essence, what Obama is doing to win over the young people voting bloc is simply telling them another huge lie. He is suggesting they take out loans on which they will never be able to pay back the principal. The numbers do not work. It’s a terrible gamble; no student can pay off the loan in any rational way from any jobs in the fields they are encouraged to enter to in with the incentives offered to by the Obama Administration.
The costs for “Pay As You Earn” have ballooned from $1.7 billion in 2010 to $3.5 billion in 2013 to an estimated $7.6 billion for 2014.
“This might seem like a windfall for the students, but the only clear winners are the universities that are the ultimate recipients of the taxpayer money. While the students may technically get the freebie, the impressionable youngsters, who likely have little or no wealth, are being given an enormous financial incentive to pursue careers in government or at low-paying nonprofits.
The consequences for our economy are no less tragic than for the individual borrowers. They are being driven away from the path down which their natural ambition and talent might have taken them. President Obama keeps talking about reducing income equality. So why does he keep paying young people not to pursue higher incomes?”
The real impact of this higher education reform is that the government is now encouraging people to borrow substantially for their education, while simultaneously providing an avenue for students to avoid paying back the funds — leaving the taxpayer on the hook, a deficit in freefall, and an economy in stagnation.
by | ARTICLES, ECONOMY, OBAMA, POLITICS, TAXES
It’s the spending, stupid.
CNS News reported today that “Federal tax revenues continue to run at a record pace in fiscal 2014, as the federal government’s total receipts for the fiscal year closed April at $1,735,030,000,000, according to the Monthly Treasury Statement.
Despite this record revenue, the federal government still ran a deficit of $306.411 billion in the first seven months of the fiscal year, which began on Oct. 1, 2013 and will end on Sept. 30, 2014”.
The White House Office of Management and Budget has put out the following estimates for 2014: revenues will be $3.001721 trillion in taxes with spending estimated to be $3.650526 trillion — thereby running a deficit of $648.805 billion.
The problem isn’t lack of taxes. “The single largest source for the federal government’s record tax receipts in the first seven months of FY 2014 was the individual income tax, which brought the Treasury $823.079 billion”
The problem is egregious spending.
by | ARTICLES, BLOG, BUSINESS, ECONOMY, ELECTIONS, FREEDOM, GOVERNMENT, HYPOCRISY, POLITICS
Oh, the hypocrisy!
In February, it was announced that retired hedge-fund billionaire Tom Steyer, has committed $100 million of his own money to “to make climate change a priority issue in this year’s midterm elections.”
How can this possibly be? First, Steyer made his millions as a hedge-fund operator — which is typically and universally denounced as a greedy profession. But if he spends his greedy millions on items considered tolerable and suitable to the political Left, it’s becomes okay.
That same political Left decries the Koch Brothers who are accused of funding groups with their obscene amounts of money to promote policy positions. The Koch Brothers made their money as businessmen, which clearly is repugnant. It begs the question: why does Harry Reid go after the Koch Brothers and turns a blind eye to Steyer’s tactics?
In reality, what Tom Steyer is doing is much worse. Steyer is essentially telling a political candidate, “if you take this position, I will give you money”. Isn’t this line of thinking exactly what the Supreme Court was trying to stop? How is this okay? Because it works for the Left.
Steyer’s game proved effective in 2013 when his NextGen Climate Action Super Pac spend $2.5 million to target conservative-leaning coal areas of Southwest Virginia on behalf of Democrat gubernatorial candidate Terry McAuliffe. Coupled with Mayor Bloomberg’s Independence USA Super PAC which spent roughly $2 million on ads in Virginia to target Republican candidate Ken Cuccinelli’s position on gun-rights, the two out-of-staters helped lead the Democrat to victory.
Steyer’s next plan is to influence the 2014 midterms. His money is planning on being spent on “attack ads during the election, including the Florida governor’s race and the Iowa Senate race.
Clearly, Steyer’s actions are appropriate for the 2014 elections, because political candidates with the “proper positions” are able to benefit from Steyer’s “generosity”. Yet in contrast, other organizations are called out for being “tainted” by the Koch Brothers for merely promoting various policies that the Left deems unacceptable. Either it’s okay for both, or for neither.
The double standard prevails.
by | ARTICLES, BLOG, ECONOMY, HYPOCRISY, OBAMA
Can you believe it — a bigger lie than “you can keep your doctor”?
President Obama’s comments regarding the gender pay gap and discrimination are as vicious a lie as his statements that you can keep your doctor. The idea that women earn $.77 for every $1.00 that men earn, for equal work, has never been true, never in the slightest.
That $.77 comparison is not for equal work. It strictly represents the reality that women, more often than men, work at jobs that are lower paying. The reason for such jobs might include school and family situations, flexibility of schedule, and their desires to be able to be use work secondarily for their needs for their families or a source of discretionary income.
There is actually no evidence of any discrimination for women doing the same work an being paid less. If the world of labor could indeed pay women less (23% less) for equal work, why isn’t virtually every company hiring only women as a means to curb costs and increase profit?
A more full and excellently written description was put forth in the WSJ on April 7th. It is a must read.
The most incredible thing about Obama’s statements is that Obama appears to have his own “pay gap disparity” at the White House (women earn $.88 cents per $1.00 for men). Interestingly, the White House takes great pains to discuss the discrimination variables that cause this disparity.
“An analysis of staff salaries done last fall by the conservative American Enterprise Institute found the president’s female aides were paid 88 cents for every dollar paid to men, about $65,000 to $73,729 annually. On Monday, Carney argued the comparison is based on aggregate wages that include the lowest salaries at the White House “which may or may not be — depending on the institution — filled by more women than men.”
He said men and women in equivalent roles at the White House earn the same amount and that 10 of 16 department heads are women, earning the top White House salary of $172,200″.
Here we have the Obama administration admitting that more women are in jobs that include the lowest salaries at the White House.
So, it is not gender discrimination at the White House, which is what Obama has tried to claim in his “$.77 cents” missive and new Executive Order. He wants to apply that label when discussing the “gender pay gap” to all other businesses (as a means to appeal to his female base), but then when the spotlight is shined on the White House pay scale, Obama retreats from that rhetoric.
As he should. Because the gender pay gap is truly a myth. And Obama’s own White House data and discussion prove it.
by | ARTICLES, BUSINESS, ECONOMY, GOVERNMENT, HYPOCRISY, OBAMA, POLITICS
Bernie Sanders recently chose to test the waters of a possible Presidential campaign by weighing in on the deliberations regarding the Post Office. Thankfully, we have this Op-Ed so early on, because it reveals Sanders’ complete and utter inability to comprehend basic economics and accounting.
Bernie argues two main points: 1) the Post Office is not broke and 2) those who believe it is are “anti-government”, “wealthy special interest”, profit-seeking, or all of the above. These points rest entirely on his premise that pre-funding health benefits to postal workers is a very bad thing.
Sanders actually believes that planning for future promised benefits is not a fiscally sound practice. If he feels this way about the Post Office, surely he feels the same about Social Security and Medicare (two programs who have trillions in future liabilities). Does Sanders know that his type of accounting would land any business executive in jail?
Sanders says that if we didn’t have to pre-fund future benefits, than the Post Office would make a profit. Simple, right?
What he fails to mention that if we didn’t pre-fund benefits, the Post Office would merely be sloughing off paying its promises to some future nebulous day and time for some other taxpayers else to take care of –only when its liabilities were astronomical and the finances were on the edge of a precipice.
That result is precisely what we are facing programs like Social Security, Medicare, and many defined benefits plans across the country: politicians made future monetary promises without planning for them, and now the economic pressure has ballooned into severe fiscal instability. Sanders belongs to the ‘spend first, fix (maybe) later” group of bureaucrats who refuse to follow basic accounting practices like any business would be required to practice.
With the Post Office, we actually have an quasi-government entity following good, non-gimmick accounting so taxpayers can see first-hand the true financial picture (current and future) of the post-office. Pre-funding benefits to account for future and current liabilities is a proper and healthy way to do business. And if the Post Office cannot turn a profit while protecting its current and future liabilities, than it must make changes to its business operations
By repealing the legislation to pay for future liabilities, Bernie Sanders is ostensibly demanding someone in the future — your kids and grandkids — to clean up the mess of his government and his generation’s deliberately poor financial planning.
Which bring us two his second point. Bernie Sanders does what the Left does best, which is resort to name calling, straw-man arguments to build up his weak ideas. Sanders actually thinks that those who wish to pass on a health economic future while practice basic and principled accounting practices are anti-government, bought-and-paid-for, or profit-mongers. No, Mr. Sanders, we only wish for the government and its entities to practice the same kind of accounting standards that any other business or family is required to do.
Watch out, America — Bernie Sanders is just more of the same. Another bureaucratic imbecile who refuses to face economic and financial realities when it comes to the Post Office — or any big government program which deals with current and future liabilities. Sanders would rather pass the buck to the next generation in order to save a few union jobs.
by | ARTICLES, ECONOMY, GOVERNMENT
Janet Yellen, the new Fed Chairman, recently spoke about her decision to continue low interest rates, calling the policy “beneficial.” As the WSJ noted, Yellen described how she seeks to assure the markets:
“By keeping interest rates low, we are trying to make homes more affordable and revive the housing market,” she said. “We are trying to make it cheaper for businesses to build, expand and hire. We are trying to lower the costs of buying a car that can carry a worker to a new job and kids to school, and our policies are also spurring the revival of the auto industry.”
The problem with Yellen’s approach to the economy is that she completely misunderstands how interest rates affect the economy, an incredulous thing considering that she is the Fed Chairman.
When Yellen describes the benefits of low interest rates, she gives several reasons for them: homeownership, business growth, and car prices. However, the real estate market and auto industries are actually doing fine, and businesses are not using low interest rates to borrow to hire.
The crux of the problem is that all of Yellen’s examples analyze the economy from a consumption perspective. While consumption does affect the economy, it is not nearly a powerful a stimulant as investment. Any basic economics course will tell you that.
The real reason for the continued sluggishness is that investors are prevented from earning any real and considerable income when interest rates remain low. When investors don’t see a decent return on investment (ROI), they stop investing.
What else? Couple the investment problem with the administration’s policies that hurt growth such as burdensome regulations, minimum wage increases, food stamp usage, and Unemployment Insurance extensions, and you have a recovery that is best described as tepid.
Yellen should know better than to appeal to emotion rather than basic economics when making her Fed decisions. The choice to continue low interest rates for at least another year guarantees an anaemic economy for the foreseeable future.
by | ARTICLES, ECONOMY, OBAMA, OBAMACARE, TAXES
Americans for Tax Reform (ATR) has done an analysis of taxes that Obama has proposed since taking office, by looking the Obama administration budgets for FY2010 – FY2015.
“The 442 total proposed tax increases does not include the 20 tax increases Obama signed into law as part of Obamacare.
Here’s a breakdown of potential taxes by by budget year:
“-79 tax increases for FY 2010
-52 tax increases for FY 2011
-47 tax increases for FY 2012
-34 tax increases for FY 2013
-137 tax increases for FY 2014
-93 tax increases for FY 2015
“History tells us what Obama was able to do. This list reminds us of what Obama wanted to do,”
by | ARTICLES, ECONOMY, FREEDOM, TAXES
The Tax Foundation releases an annual “Tax Freedom Day” report, which calculates “the day when the nation as a whole has earned enough money to pay its total tax bill for year”.
This is done by looking at federal budget projections, data from the U.S. Census and the Bureau of Economic Analysis, and projections of state & local taxes. Then, all the federal, state, and local taxes are divided by the country’s income.
This year, Tax Freedom day is April 21st, 3 days later than last year. The Tax Foundation cites sluggish economic growth and recovery.
Here’s a neat graphic from the Tax Foundation, which shows the breakdown:
The Tax Foundation calculates that “in 2014, Americans will pay $3.0 trillion in federal taxes and $1.5 trillion in state taxes, for a total tax bill of $4.5 trillion, or 30.2 percent of income”.
You can also visit the site to see how your state factors in, or what the Tax Freedom date is if you include federal borrowing.
by | ARTICLES, ECONOMY, OBAMA, POLITICS
During Bob Beckel’s recent appearance on “Cashin In”, Bob stated that “Wall Street investment bankers should be in jail because they nearly threw this country into depression”. This statement is quite ridiculous. Since when is the economic cycle grounds for throwing people in jail?
Bob Beckel has absolutely no information that anybody from Wall Street who committed any wrongdoing has not already been appropriately prosecuted. There is no more evidence that any of these people should be in jail than there is evidence that the economic recession was caused by Bob Beckel and his statements on television. Bob Beckel’s cluelessness was further demonstrated by his comment that implied that he did not believe that executive compensation is reduced even when companies were losing money! Does he have no contact whatsoever with the economic world?
It is quite clear that the major course of the recent meltdown was government activities creating an environment for making real estate loans that never should have been made. A short trip down memory lane through Youtube and the unconscionable congressional hearings moderated by Barney Frank, Maxine Waters, and Chris Dodd should be enough to remind Beckel of the real economic culprits.
It was all too obvious that when the Republicans tried to rein in this overextended lending policy of Fannie Mae and Freddie Mac they were viciously attacked as scare mongers and racists. For Bob Beckel to insist that unnamed Wall Street groups performed criminal activities in connection with this economic meltdown is incredibly irresponsible. From an evidentiary point of view, it is just as likely that Beckel committed criminal activities.
by | ARTICLES, ECONOMY, FREEDOM, GOVERNMENT, OBAMA, OBAMACARE
The recent revelation that the White House, congressional Democrats, and the CBO all now consider work to be a lifestyle choice reminds me of a scenario some years back with one of my clients.
There was a person who was getting a divorce, and the couple had 2 children. One of the discussions involved who was going to pay for the children’s college. The husband offered to pay 90% of the cost since he made substantially more money, leaving 10% as the wife’s portion to pay. This seemed to be a pretty fair offer.
The wife, on the other hand, did not agree that the offer was fair. Her rationale? If she ultimately got remarried down the road and decided to stay at home and not work, she would not be able to afford her 10% portion.
Understandably, the husband was taken aback. He said to her something along the lines of “you mean to tell me that you have a responsibility to take care of your children’s education, and because you have the chance not to work, then your children’s needs and your obligations somehow aren’t your responsibility anymore?”
The wife was understandably a little embarrassed, as she had never looked at it that way before.
Have you? We ought to have the moral compass not to insist that other people pay our bills for us.
This brings us back to Obamacare. It is not in any way morally acceptable, for those of us who are working, to subsidize people who prefer not to work and stay home and call it a “choice”.
Here’s the root of programs like Obamacare and welfare. A social safety net is supposed to be just that — a temporary hand-up, not a prolonged hand-out. A steady diet of benefits creates a disincentive to work. The decision not to work unfairly forces other people (who do work) to pay for the things that the benefit receipients should be paying for. With the expansion of programs such as food stamps, unemployment, and now healthcare, we are making it harder, if not impossible, to move out of that lower class rung.
