THE WEEK IN WASHINGTON

Posted on April 24, 2010 | Leave a comment

Week ending April 23, 2010

Monday
Obama misses Polish President’s funeral
Heads of state from the smaller European countries found ways around their ashes to attend the funeral, Sarkozy and Merkel stayed home. Biden and Clinton express their sympathies to the Polish Embassy. Obama played golf.

New York Times reports Muslim outreach
Obama is becoming less cautious about speaking out for Muslims

Tuesday
GOP goes on fishing expedition
Asks for investigation into White House connection to Goldman Sachs case.

Biden lays it on.
Blames greedy banks for financial collapse

Wednesday
Grounds trembling under SEC case against Goldman Sachs
SEC charge is Goldman defrauded ACA by failing to disclose Paulson’s intent to short the portfolio ACA was assembling. Paulson aide says he informed ACA of Paulson’s intent.

Thusday
Obama and Biden both go to the scene of the crime to pump up some resentment
In a speech at Cooper Union in NYC Obama lays it on the greedy banks for causing the country’s economic problem. Biden carries the same water elsewhere in the city.

Friday
Obama slams Arizona immigration law
Claims law violates civil rights

About Washington Week in Review
It is our intent to publish this feature on Saturday in the future. The goal is to provide a handy recap of interesting events that occurred during the week, including some that may not have been given much attention in the major media.

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VAT FOR IDIOTS

Posted on April 23, 2010 | 1 comment

The Value Added Tax is an insidious invention we are about to import from Europe. It is like a sales tax in that it is a tax on activity, not on income or profit. It is like a flat tax, or fair tax, in that it cannot be escaped. It is an inflationary tax because it will increase the price of all goods to which it is applied. It is also somewhat of a hidden tax. Let’s explore each of theses facts.

The European Union mandates a standard minimum rate for the VAT each member nation must charge. The standard rate is 15% with allowance for some exceptions. Europeans are the most heavily taxed people anywhere. Income tax rates are roughly comparable to ours; it is the VAT that makes the difference. France gets 50% of their tax revenues from the Value Added Tax.

The VAT is insidious because it is applied at the wholesale level where you do not see it. It is quietly built into the price of everything. It is not in your face the way a local sales tax is. Efforts to increase the rate, or the list of activities to which it is applied do not meet with the same opposition as do efforts to increase income tax rates. Income tax is personal, value added tax is seen as something someone else pays.

Because it is a tax on activity, not income or profits, the justification for it is more convoluted. The concept is that adding value increases wealth. If you buy some lumber for $500 and build a shed with it that’s worth $2,000 you are $1,500 wealthier. The VAT taxes this increase in wealth as though it were income. It is only applied at the business level so you are not assessed personally, but the lumber will cost you more.

The VAT cannot be avoided because it is an indirect tax. It is similar to gasoline in that federal and state taxes are built into the price. Everyone pays it. From members of the underground economy to Bill Gates, they all pay, and pay the same rate.

It is inflationary because it increases the cost to produce, and therefore the price, of a broad array of goods and services. In Europe it is assessed on everything from cell phones to restaurant meals.

It is somewhat hidden. The gasoline tax is again a good example. In most states the tax is right on the pump but do you know what it is in your state? Most of us only care about the price on the big sign we can read as we drive by.

The Value Added Tax should not be confused with the Flat Tax or the Fair Tax. There are similarities and differences, the most significant being the Flat and Fair taxes are replacements for the Income tax, the VAT is in addition to income tax.

Bob B

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FORDHAM RUNNER LEAPS HOME

Posted on April 22, 2010 | Leave a comment

Here is a baseball play that justifies the cliché, “it’s gotta be seen to be believed”.

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MADOFF WITH SOCIAL SECURITY

Posted on April 21, 2010 | Leave a comment

This is not original work and I do not know the author to whom to give credit. Whoever it was, they did a good job comparing how Madoff made off with investors money and how the government has made off with our contributions for Social Security.

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Why did Bernie Madoff go to prison? To make it simple, he talked people into investing with him. Then he didn’t invest their money. He simply took the money from the new investors to pay off the old investors. Finally there were not enough new investors coming in to keep the payments going. Now Madoff is one of the most hated men in America.

Madoff did to his investors what the government has been doing to us with Social Security. There is no meaningful difference between the two schemes except that one was operated by a private individual who is now in jail, and the other is operated by politicians.

Here is a side-by-side comparison.

BERNIE MADOFF SOCIAL SECURITY
Takes money from investors with the promise that the money will be invested and made available to them later Takes money from wage earners with the promise that the money will be invested in a “Trust Fund” and made available later.
Instead of investing the money Madoff spends it on nice homes in the Hamptons and yachts. Instead of depositing money in a Trust Fund the politicians use it for general spending and vote buying.
When the time comes to pay the investors back Madoff simply uses some of the new funds from newer investors to pay back the older investors. When benefits for older investors become due the politicians pay them with money taken from younger and newer wage earners to pay the geezers.
When Madoff’s scheme is discovered all hell breaks loose. New investors won’t give him any more cash. When Social Security runs out of money they simply force the taxpayers to send them some more.
Bernie Madoff is in jail. Politicians remain in Washington.

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In a corporate pension plan the corporation makes a pension promise to employees then backs it up with annual cash contributions into a trust fund. The fund then invests in a broad spectrum of securities. If the trust fund managers were to give the money back to the corporation and call it a loan it would be an abuse. The trust would be a sham. But that is exactly how Social Security works.

Funds are withheld from our wages. Our employer matches the amount taken from us and sends the total to the Social Security division. The Social Security  division sends it to a trust fund. The trust fund uses it first to pay current retirees then gives the balance to the federal government to do with as it pleases. The federal government thanks the Social Security division and gives them an IOU called a bond. No investments are made. There is no money in the trust fund, only IOU’s.

Our Social Security scheme is indeed a Ponzi scheme.

Bob B

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Posted on April 21, 2010 | Leave a comment

THERE IS ALWAYS A NEXT.

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WHEN INCOME TAX IS INCOME, NOT TAX

Posted on April 21, 2010 | 1 comment

The IRS provides a simple online income tax calculator. They call it an “Estimator”. You will find it here. One could enter the following hypothetical data:

Married with two children, adjusted gross income $50,000, child care expenses $1,500, claiming just 2 of the 3 child care credits offered.

Then enter $1,800 as income tax withheld and click the button to see the result.

The tax due is calculated to be $2,439 but the government pays it all, and more. The “refund” turns out to be $2,131 which is $331 more than was withheld in the first place. It all happens through the magic of “tax credits” in excess of tax due.

I will say one thing for this system. As a method to spread the wealth it is very efficient. An increment of money is taken from those who pay taxes and given directly to those who don’t. Administrative costs for this Robin Hood plan are minimal. It also qualifies as stealth welfare. Voters do not think of the IRS as a source of income and net income from the IRS does not show up in the welfare statistics. well, perhaps it’s not welfare, our citizen was earning $50,000 a year.

Bob B

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DID GOLDMAN DO IT?

Posted on April 20, 2010 | Leave a comment

It doesn’t matter.

Of course it matters civilly; if wrongs were committed the consequences should be applied. But guilt or innocence doesn’t matter politically because the allegation alone serves the purpose.

In Rules for Radicals Alinsky’s 13th Tactical Rule is “Pick the target, freeze it, personalize it, and polarize it.” Goldman has been picked. (If they are guilty, a cynic might say they volunteered.) “Freeze it” means stay on it. Obama is coming to New York Thursday to stay on it. To “personalize it” means getting the community to feel personally harmed by it. You lost your job because of a recession by which Goldman profited. To “polarize it” is to use the target to fan the flames, to agitate. Get the people angry. Get them behind legislation to reform the financial markets. The government needs more power over the financial industry, to keep the cats from getting fat while you are looking for work.

Mayor Bloomberg learned of the intended visit only upon seeing it in the news. He was not amused. But the goals of polarization and agitation were advanced in the process. A good community organizer makes it plain that he is not subservient to the man, not part of the establishment. There is no need to coordinate with the mayor.

Random Thots hopes to publish an analysis of Goldman’s guilt or innocence when more details become available. In the meantime we recommend today’s article in the New York Times. It appears to be a fair and well written analysis.

Bob B

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Posted on April 20, 2010 | Leave a comment

If you are a golfer you will enjoy the defense of Obama’s golf outing yesterday, written by Stephen Smith in the Washington Examiner

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RON PAUL RISING ?

Posted on April 20, 2010 | Leave a comment

A Rasmussen poll puts Ron Paul in a dead heat with Barack Obama, 42 to 41 percent. Why are Ron Paul’s poll numbers so high? Because people are fed up with Washington, that’s why. Clinton soiled our house with Monica. Bush took us on a hunting trip for a target that did not exist and spent like a Democrat. Obama is selling America short around the world and leading us into bankruptcy at home. Taxes are going up and health care is going down.

Along comes Ron Paul, riding into this melee of disgust with his Libertarian message to eliminate the federal government, or at least a big part of it. He wants to bring all the troops home, end foreign aid, abolish the IRS and the Department of Health and Education. Hip! Hip! Hooray! for Ron Paul!…However, Paul’s popularity is a but a primal scream.

He has no chance of winning the nomination for the Republican party. His popularity will wane with time as sane Americans see him as a bit of a nut. It is one thing to cheer him on between elections but quite another to put him up as your candidate. Both conservatives and Republicans know that. However, the man is tenacious and has a loyal hard core constituency. President – no, spoiler – maybe, but only if he bolts the party.

Bob B

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THE NEXT PROBLEM

Posted on April 19, 2010 | Leave a comment

“And if we don’t change what led to the crisis, we’ll doom ourselves to repeat it.” “Opposing reform will leave taxpayers on the hook if a crisis like this ever happens again,” With these words Barack Obama has introduced the next problem that requires increased government control in order to solve. He was referring, of course, to the mortgage meltdown that precipitated the economic recession.

Kudos Mr. President. You have chosen the next problem well. Government’s responsibility has already been transferred to the private sector. Dodd is done. Criticism of Barney Frank can be framed as homophobia. Voters don’t know what a GSE is and Franklin Raines is remembered as the Editor in Chief of the New York Times. The word “crisis” plays nicely with the current Problem as well.

Of course Franklin Raines is the should-have-been convicted former head of the Government Sponsored Entity (GSE) known as Fannie Mae. It is interesting to note that the F in the official name stands for Federal, not Fannie. It was Howell Raines at the New York Times, the one who was discredited and dismissed as a consequence of the Jason Blair scandal. The two Raines are related, but only by ideology.

Related links

New York Times articles about Franklin’s fraudulent financial finagling.

Obama is major recipient of  campaign contributions from FNM

Washington Post reports extensive fraud at Government Sponsored Entity

The Motley Fool publishes a summary of Fannie Mae culprits.

Bob B

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Posted in Political polemics