Tuesday, January 31, 2012

The G.E. Rule – Part 2

In an earlier post I proposed The G.E. Rule, which is that no company should pay more tax than General Electric, the nations largest corporation and President Obama’s favorite company.   Since G.E. pays ZERO taxes, this would end income tax at the business level and solve a plethora of major problems today:

  • Unemployment would plummet
  • Growth would flourish
  • Capital would flood into the US
  • Your pay would go up
  • Your company would be able to compete with the Big Boys who currently buy influence
  • Your health insurance choices would be yours and not your boss’s (it would end the corporate deduction for employer insurance) 
  • You could leave your job and not worry about your health insurance 
  • Dividends and capital gains could be taxed at the same rates as income (Obama’s  Buffett Rule would be satisfied)
  • Overseas profits could be repatriated instantly
  • It would end taxation without representation 
  • It would satisfy the Tea Party and end Stealth Taxes (all taxes would be transparent to voters once and for all)
  • Most corporate lobbyists would be out of a job
  • Crony capitalism would be seriously wounded
  • Washington’s manipulative power would be greatly reduced
  • Prices on all goods and services would plummet 
  • Stocks would be rationally valued as the double taxation would end (this would end stock bubbles like the Tech Bubble of the 90s) 
  • Companies, even Warren Buffett’s Berkshire Hathaway, would pay dividends
And this is just a partial list of instant benefits from The G.E. Rule.  (Update:  For much more on this, check out my older post - GE is Right!

Of course, this would be politically impossible because almost no politician in Washington wants to cede power to business, markets, or voters.  Lobbyists would freak out.  In fact no politician, even Ron Paul, is proposing anything like this.  If I was a Republican frontrunner, I’d take a good hard look at The G.E. Rule.       

Monday, January 30, 2012

If I was Mitt Romney... Part 2

If I was Mitt Romney - I'd fire back at Romneycare critics and say, "Look,  everyone keeps citing similarities between Romneycare and Obamacare but this misses the point; it's the differences that matter.  Chimpanzees and humans share 90% of their DNA, yet no one would confuse a human with a chimp.  Romneycare and Obamacare do share some DNA but they are very different animals.  Romneycare was a plan to prevent freeloading, and that was its only purpose.  Obamacare is a direct line to socialized medicine, and was specifically designed for that purpose."  Game. Over.        

Saturday, January 28, 2012

If I was Mitt Romney...

If I was Mitt Romney - I'd fire back at Romneycare critics and say, "Look,  Massachusetts is a little different.  Context is everything.  You try Governing a state made-up of Barney Franks!"  Game. Over.      

Thursday, January 26, 2012

The GE Rule

President Obama is making his "Buffett Rule" a central part of his re-election campaign.  According to Obama's "Buffett Rule", Warren Buffett should pay a higher tax rate than his secretary.  Currently, Mr. Buffett pays about 15% tax on his dividends and capital gains, while his secretary, who lacks dividends and cap gains, pays perhaps a 35% income tax on her last dollar of salary earnings.

Unfortunately, like most of Mr. Obama's statistics, this one is misleading.  Worse still, his cynical bet that he can pedal this nonsense and ride it back into the oval office is, I fear, not really a long shot.  With most Obama voters being either government dependents, government employees, the liberal professoriat,  the liberal media, student dependents, artists, union members, or the uneducated,  this kind of arcane taxation issue will never be understood.

The truth is, Mr. Buffett is actually paying about 45% total tax because his income is taxed twice.  All dividends and capital gains are double taxed - once at the corporate level and once at the personal level.  Moreover, this double taxation amounts to Taxation Without Representation.  If one is taxed twice, shouldn't one be able to vote twice?   Didn't we fight a revolution over this very concept?  Isn't this what the original Tea Party was about?

I say Republicans should campaign on the "GE Rule".  General Electric, President Obama's favorite corporation pays ZERO income taxes!  That's right, one of the largest corporations in the US pays nothing.  This is due to cozy relationships with lawmakers and effective lobbying efforts which have resulted in loopholes and kickbacks in all the right places.  Smaller corporations could never afford that kind of influence and it represents everything that is wrong with the Crony Capitalism model favored by Obama and the Democrats.

I say, let every corporation pay ZERO income tax.  Let everyone enjoy the "GE Rule".  End corporate lobbying.  End Taxation Without Representation.  End double taxation on dividends and capital gains.  And, finally, make the dividend and capital gains rates the same as the income tax at the individual level.

The GE Rule would satisfy the Buffett Rule, the Tea Party Rule, the Crony Capitalism problem, and the excessive lobbying problem.  A Magic Bullet if ever there was one.  

(Update: Check out GE Rule - Part 2)

Tuesday, January 17, 2012

Demand Side Economics - Update

Investors Business Daily - Lawmakers Proposed 1 Trillion in New Spending Last Year
The NTUF analysis found that congressional Democrats are by far the biggest spenders. Last year, 692 spending-hike bills had either all or majority Democratic sponsorship. Republicans, in contrast, sponsored just 126 such bills.
At the other end of the spectrum, GOP lawmakers introduced 172 bills that would have cut federal spending, compared with just 33 such bills offered up by Democrats.
As I've said, the "Demanders" are still in-charge!

(Hat tip:  Instapundit )


Friday, January 13, 2012

Honey, I blew up the world! (And still got a second term!)

We are just now getting a glimpse of Fed transcripts from 2006, and the view is not encouraging.  But is anyone who pays attention really surprised?  I wrote this a year ago, just before Ben Bernanke's reappointment as Fed Chairman: 

Listen to any Ben Bernanke detractor and they’ll sing basically the same tune, which goes something like this: “Ben Bernanke is a an excellent academic economist and an honorable guy who performed well this past year as Fed Chairman, but he was right there at Alan Greenspan’s side in the early 2000’s when interest rates were kept too low for too long. Those low rates helped cause the housing bubble which eventually burst and collapsed the global financial system in 2008. That kind of negligence should not be rewarded with a second term.”

I have trouble disagreeing with much of that, except that there is a far better and more compelling reason to lay some blame for the financial collapse with Fed Chairman Bernanke. I haven’t heard the following argument from anyone in the economic press, so that could either mean I’m out of my mind, or everyone else is missing something. Read on, and judge for yourself.

First a little history: Below is the Fed Target Rates for the last 10 years. The period most Bernanke detractors are focusing on is the period of low rates from roughly 2002 through 2004 when he was Alan Greenspan’s right-hand man.


Ben Bernanke became Fed Chairman February 1, 2006 when the Fed Target rate had already been raised by Greenspan to 4.25%. The day Bernanke became Chairman, he raised the Target Rate to 4.5%, but he didn’t stop there. He kept raising until July 1, 2006 when the Fed Funds Target hit 5.25%. So from July 1, 2004 to July 1, 2006 the Fed raised it’s Target Rate from 1.00% to 5.25%, an increase of 425% in 24 months.

What effect did all those rate increases have on the yield curve and why would that matter? Well, as most economists will tell you, nothing screams recession quite like an inverted yield curve (when long term rates are lower than short term rates) and forcing one is economic poison.

In January, just before Bernanke became Chairman, the yield curve was essentially flat with a slightly positive bias, but that quickly changed. Bernanke’s first raise to 4.5%, resulted in a slightly negative yield curve and again, he kept raising the Fed Target all the way to 5.25% by July 1, 2006. By November 2006, there was a clear downward trend in yields. (see chart below).

Why did Ben Bernanke keep raising interest rates in the midst of a housing bubble, with an election coming up in November 2006, and a yield curve already threatening negative by late 2005? Why did he persist and force the yield curve decidedly negative by mid 2006 which threw us into recession and crashed the housing market? No one but Ben Bernanke knows for sure, but in my humble opinion, if there is a smoking gun against him, it is this and not the period from 2002 to 2004, before he was even Chairman!

In Hebrew, Shalom, which is Bernanke’s middle name, can mean Hello, Goodbye, or Peace. I say Goodbye, and leave us in Peace, but I don’t see that actually happening. In a political and economic climate where a tax cheat can get Senate approval to be Treasury Secretary, a reckless but honorable Fed Chairman is virtually a shoo-in.

(For further encouragement, Treasury Secy. Tim Geithner was a Fed official in 2006!)

Tuesday, January 10, 2012

The Tebow Test


Reflections on the GOP primaries and Tim Tebow:  

During post-game analysis in the midst of Denver's winning streak, I heard Jimmy Johnson, ex-coach, superbowl winner, and football analyst, opine that he’d never seen a quarterback get more out of his teammates and inspire them to play-up than Tim Tebow.  It reminded me of Harry Potter, the average wizard who manages to pull off amazing feats against all odds with the help of his loyal group of friends, without whom he would not be nearly as magical.  Sunday he did it again against the heavily favored Steelers.

And this brings me to the GOP primaries.  Being a chief executive is never a solitary endeavor despite what we’ve heard.    Good executives are team leaders.  Sure, “the buck stops here” and “it’s lonely at the top”, but look at any effective leader and you will find a team inspired by his/her example.  

The questions for voters are these:  Who will build a team and inspire them to play-up when the game is on the line?  Who has done that in the past?  Who has maintained good relations with former teammates?  Who can lead by example?    Are ideology and oratory enough?  What value should be placed on effective leadership experience?  Who is capable of turning adversaries into allies?  

In other words, who in the GOP field can pass "The Tebow Test"?

(This is an UPDATE of an earlier post by the same name.) 


Tuesday, January 3, 2012