The ONE PERCENT

The latest Case Shiller home price index reports are out and once again Washington DC Metro area shows an increase in home pricing from the previous month. And for the year, incredibly DC is up 1%  (the ONE percent). We have finally found the 1%. It is in Washington DC where housing prices are rising while the rest of us sit by and continue to see our values drop. What is the fundamental driver of home price increase? Unemployment. So when unemployment is low, prices tend to rise as there are more "buyers" in the market by virtue of their having jobs. Unemployment is low because our government is spending billions creating non-value added jobs that do nothing productive for the economy. Does anyone think it is a good idea that DC Metro has a rising house value index as compared to the rest of the US? Don't you find that odd? Our politicians are enjoying a booming economy that has been self created with your tax dollars. And these same folks enjoy rising home values. So if this 1% march and sit-in is really about inequality, then why isn't anyone marching on DC? Wake up people! The single largest class of greedy, power hungry people congregate inside the beltway. Do yourself a favor and direct your anger at the ones that have really created the inequality. And next year, replace the professional self-serving politicians with people that can actually do the job they are elected to do. Balance the budget! And reduce the size of government so that the rest of us can finally start to have equality when our home values finally start to rise.

http://blogs.wsj.com/economics/2011/11/29/a-look-at-case-shiller-by-metro-area-6/tab/interactive/

Italy may have the answer after all

It takes courage to do courageous things. It takes leadership to be a leader. And in politics it probably takes grave circumstances to cause any real change. So in Italy we have all of those today. And what do we get? A leader, the new Prime Minister, Mario Monti, who installs a cabinet of NON-Politicians. Wow! What a novel idea? Instead of putting in his cabinet career politicians, he is doing the right thing and installing actual businessmen. Businessmen without political agendas. Businessmen who have other careers to fall back on as is not the case with career politicians. It might have taken extraordinary circumstances to get to this point, but at least it has happened before it was too late for Italy. We will see what happens over the next days and weeks with Italy. But rest assured that whatever happens will be significantly better than what the Berlusconi regime would have accomplished. So perhaps America needs to look across the Atlantic to Italy to see the beginnings of what it really will take to solve our problems at home. Remove the career politicians that have caused our budget crisis. And replace with people that understand budgets and tough decisions before it is too late.

Does the Super Committee have a chance?

Does anyone really think that a committee composed of professional politicians has any chance of addressing the budget crisis? That would be like expecting a criminal to solve the crime problem. Think about it. These folks are the same ones that already are largely responsible for the budget crisis. They are in most cases the most senior members of their respective parties. How can anyone expect this group of 12 hand picked career politicians to solve a problem their existence created? Then let's take it one step farther. The members credentials to understand and solve "bankrupt" entities. Virtually all 12 have never had real jobs. Again, they are career politicians. But the biggest joke is that there is a committee at all and that somehow by forming a"commission" as politicians call them to make them sound more important, we will reach a proposal that "politicians" will endorse. Again, the very nature of career politicians proves they are only capable of self dealing in order to get re-elected. Check out each on the committee below. And don't be surprised when at the end of this month nothing happens but more finger pointing along with divisiveness from the "political class" we elected. Sorry, but there is no chance for this group to present real solutions and even less of a chance that those recommendations would get implemented.

	Democrats	Republicans
Senate members	Patty Murray, Washington, Co-Chair Max Baucus, Montana John Kerry, Massachusetts	Jon Kyl, Arizona Rob Portman, Ohio Pat Toomey, Pennsylvania
House members	Xavier Becerra, California Jim Clyburn, South Carolina Chris Van Hollen, Maryland	Jeb Hensarling, Texas, Co-Chair Fred Upton, Michigan Dave Camp, Michigan

Equality and Greed

Percentiles Ranked by AGI	AGI Threshold on Percentiles	Percentage of Federal Personal Income Tax Paid
Top 1%	$343,927	36.73
Top 5%	$154,643	58.66
Top 10%	$112,124	70.47
Top 25%	$66,193	87.30
Top 50%	$32,396	97.75
Bottom 50%	<$32,396	2.25
Note: AGI is Adjusted Gross Income Source: Internal Revenue Service

When its all said and done, the occupy Wall street's movement for equality and the elimination of greed could be really good! If equality actually happens, then the fact that only 25% of the taxpayers pay 87% of all taxes will certainly change. Equality must include a fair share of taxes being paid by everyone. Not just the top 1% or 25%. And greed...well I consider it excessive when soo much of the tax burden is borne by such a small percentage of the population. And the very complainers apparently want more excessivness. They couldn't possibly think that attacking the 1% that pay 37% would result in that same 1% paying more taxes could they? If the attack is asking for equality, then there will no longer be a 1%. And all of the people that have all of this extra time to protest will soon be sharing more equally in the tax burden. Nice result!

Occupy Wall Street Efforts ARE Mis-guided

Does anyone really know what the occupy Wall Street movement is about? Do the protesters? Inequality and Corporate Greed seem to be the two descriptors for the movement. So let's address each one separately.


Inequality. Of course the Declaration of Independence addresses inequality by saying "all men are created equal". Did that mean that inequality after creation was bad? No, it means what it says, that all men are initially created equal. It did not, and never meant to, address what happens after creation. The practical interpretation is that we all start with the same opportunity. What happens after that is not prescribed by the Declaration. Nor should it be. That means we all start from the same basis of equality. But it doesn't mean stay equal does it? For the most part, people make their respective selection as to who they want to be and what they want to accomplish on their own. Some people choose to be farmers and others choose to be bankers while others engineers and so on. The ability to choose results from the freedoms afforded all of us by living in this great country. But the result of those choices is different for every person. Inequality by itself sounds bad. But in fact inequality is what makes Americans great. We are all different in our own way. We make our own choices. We believe in our own values. So the notion of "equality" is actually counter productive to the reality of "freedom". We can't be free to choose what we want to do and when we want it and expect equal results.


Greed: Why does the word "greed" conjure up a negative image? Is "greed" in fact a bad thing? What is greed anyway?  Somehow "greed" has become a dirty word. When in fact greed may be at the very core of capitalism. Why build a business if you don't want to make money beyond an average paycheck? And what is excessive wealth anyway? Or have other benefits inherent with self employment? Is the word "greed" only limited to financial greed? What about someone who wants to set his or her own schedule and answer to no one? Is he greedy? Or capitalistic? At the end of the day, greed probably is a bad word because of the association with "excessive" in the dictionary. Today it is politically convenient to use greed to categorize capitalistic behavior resulting in success as defined by wealth. But is using the word greed really an accurate or fair descriptor for capitalism, or is it more of a convenience for the media and politicians to draw attention to Wall St. thereby creating an avenue for socialism to take root further?


At the end of the day, IF the Wall Street movement by the protesters is really about inequality and greed, I suggest they relocate their camps to Washington DC where inequality as illustrated by the "political class" and greed as defined by "excessive" power are centralized. If you want to address inequality and greed, go to DC! That is the one clear place in our country where inequality and greed prevail 24X7.

Social Security Circus

Today, there are approximately 55 million Americans on social security. This group represents the single largest voting block of people in the US. Every politician knows that this group of people has a very strong voting voice and if you want to get elected you better listen to it. Social security recipients are people over 65 years old that are retired. This  large group of patriotic Americans that has finally reached the point of life where they are trying to live out their last years with dignity and respect. And here is the message this group repeatedly says over and over and over again, whether at the voting booths or being interviewed or in informal discussion: “don’t mess with my social security check”. Period! Fix government, fight wars, reform banking, etc., but DO NOT MESS WITH MY SOCIAL SECURITY! I am not taking a stand here one way or the other. I am simply stating what should be obvious and is in fact true. There is a 55 million group of voters that unanimously stands for not reducing their benefits. OK, so now knowing that fact, how do you think politicians will handle the single largest entitlement program and corresponding budget cost our nation provides? Do you think congress or the president will suggest anything meaningful? This group will scream bloody murder. After all the "fixed income" argument resounds. Oh, but aren't we all on fixed incomes after all? Oh and hasn't just about every single person been impacted by this recession? So why not social security recipients? Why not take an across the board reduction in benefits? Didn't private enterprise cut pay and benefits going all the way back to 2008 when profits fell? The fact is that the single largest cost to our annual budget is social security and the group that it represents is getting larger and larger every day. Changing this system will require political courage. Something that does not exist today.

Home prices are rising!!!

At least if you live in the greater Washington DC area. That's right, Washington DC metro. According to a September report by Standard & Poors dated Sept. 27, 2011 (http://www.standardandpoors.com/indices/sp-case-shiller-home-price-indices/en/us/?indexId=spusa-cashpidff--p-us----)  , home prices in DC rose an average of 4.9% year over year. And get this, of the 20 major metro areas; DC was the only one that rose. No other metro area had a price increase year over year. Surprising? If it is, it shouldn’t be. Washington has been on a construction boom throughout the recession. Don’t think for a minute that a $1.3 trillion federal annual budget deficit doesn’t mostly stay in DC. Does anybody see how obvious this simple fact highlights the problems we face in getting out of the recession? The only place in the US where there are home price increases is in DC.  And of course, in order for that to happen, unemployment in DC must also drop. Employed people buy houses. According to the Bureau of Labor Statistics (http://bls/web/metro/laulrgma.htm), of 49 metro areas, the greater DC area has the second lowest unemployment rate in the country at 6.1% far below the national average of 9.1%. Okay so maybe that’s good news. After all aren’t we supposed to be creating jobs as the medicine to get us out of the recession? The answer is yes. But DC jobs? Really? Does anyone outside of the beltway really believe that creating jobs in DC resulting in, among other benefits to DC elites, rising housing prices in DC is good for the country? The only people that think it is good are the same people that are creating these bureaucratic big government jobs that result in self-serving increasing wages and rising property values. And why doesn’t’ the media jump all over these kinds of outrages? We all know the answer to that one. Don’t we? Anyway someday when the solutions to the economic malaise are more than “big government”, you will see your home values rise and unemployment drop where you live. Until then, only the ones self-empowered with the responsibility of solving our economic problems will benefit. TO BE CLEAR: the only jobs program that is working is jobs in DC. And if you live there, you get the added benefit of watching your home values rise. For the rest of us, we sit around on the sidelines.

Governments are the root cause of today's Economic problems!

Look deep inside our current economic malaise and you see "Governments" at the root. Think about it. How did Greece get into the problems that it has now?Their government did what ours is attempting to do. They borrowed from Peter to pay Paul and basically offered to the populace a beneficial lifestyle unheard of in developing countries and unrealistic in capitalistic enterprises. The Greek government, corrupted by itself, believed that somehow by providing ever increasing benefits to its' citizens that somehow not only would the politicians get re-elected, but the system could sustain itself. And its no surprise that the population would strongly object to reducing their beneficial world in any way similar to how here in the US every single man and woman on Social Security vehemently opposes the reduction of their benefits. The Greek problem should be an example to the liberal left of exactly what could happen when governments don't actually govern, they instead believe they are to provide a social safety net for all aspects of their society, no matter what the consequences. Somehow someway these programs will pay for themselves? Not! Looking at the US problem one sees that because of the politicians inability to manage a simple budget (which by the way should be their NUMBER 1 priority of office), we now face a set of economic conditions never before experienced in the history of America. And somehow, we standby and allow the very ones that have caused this to develop to be given responsibility for solving the problem. Their solution? Continue to spend more than they take in. Ridiculous. Looking around the world country by country it is fairly easy to see "governments" at the center of every major economic problem. From over regulation to under regulation to socialistic entitlement programs, virtually all of the worlds major economies are being negatively impacted by what the elected officials do, or don't do. Face it, the credentials of the very people we expect to solve the problems are so bad that how could we expect anything different than a continuation of the status quo. Sarah Palin has it right really...we need to get rid of the Permanent Political Class. Then and only then, do we have a chance of true reform. For the record, I am not a Sarah Palin fan, but I do agree with the basic message she is bringing to the table. Remove the PPC. I like it.

What is fair?

Again and again our liberal politicians and media talk about a fair approach to taxation. In dire need of revenue to fund their socialistic agenda, liberals cite example after example of successful people paying marginal tax rates lower than other middle income families. They only use percentages whenever comparing top wage earners to middle class. First of all let's be clear. We don't pay our bills with percentages, we pay them with dollars. I am sick and tired of only focusing on percentages when dollars are what we spend. So from now on I say let's speak in dollars whenever comparing one US taxpayer to another. Secondly, as my previous blog explains, even if we do use percentages, they need to include the entire story of that particular taxpayers situation. Remember, Capital good purchases (machinery, computers, vehicles for business and so on) can be deducted on an accelerated basis and many times all in the year acquired. But also, don't forget the people who have been very successful and now only have income from Dividend and Capital Gains, the marginal rate is 15% which is lower than say the maximum rate of 38%, but this is taxation on top of taxation. The business that issues a Dividend has already paid Corporate Income Taxes before the Dividend. Oh, and don't forget that same business that has employees, has also participated in wage taxation as part of the business. So by the time a Dividend is issued, there has already been a significant taxation revenue stream prior to the final "Dividend tax".

So let's get to the fairness question...What is fair? Let's start with  ZERO. Is that fair? Well that's in fact the case for nearly half of all federal filers. They don't have any tax liability based on the current tax code. In fact, by using the Earned Income Credit, many people get money back! That's right, they are paid money instead of paying taxes. How is that fair? So I say, how can we have a discussion about a fair tax policy when sooo many people don't pay anything. ZERO...ZILCH. Okay I understand they may have low earnings and so on. But ZERO???? Hey how about throwing in say a buck? Something. But NADA? And I thought in this great country with all of the benefits and freedoms that those things cost money. But FREE? So before we talk about increasing taxes on the top 1% that pay 40% of the taxes, let's at least get everyone to throw something in the pot. That is why there is so much focus on tax reform or flat taxes or something else that actually is fair and actually stimulates the economy. Lowering taxes while eliminating "loopholes" will increase tax revenues. And taxing everyone on either consumption or something similar could also work and be FAIR. But don't let the media confuse you. Tax policy can never be fair when half the people required to file don't pay anything at all.

Examples to consider...

Person earning $500,000 paying a net marginal rate of 20% pays $100,000 in fed taxes.
Person earning $60,000 paying 30% pays $18,000
Person earning $32,000 paying zero and getting back $3,000 on EIC.
Each of the above people has the same access to the benefits of living in America. The top example pays more than 4 times example 2. Should he get 4 votes? The last example pays nothing and gets money back. Nice.

Which person is paying his or her fair share???

Loop Holes

The latest buzzword from the liberal left is "loopholes". As they attack the job creators, our media and liberal and/or ignorant politicians constantly make reference to closing the loopholes that the so called wealthy take advantage of in lowering their taxes. This latest warpage of the facts has a very interesting history while screaming with hypocrisy. What do I mean? Let's start with a simple view...who do you think creates the so called "loopholes"? Well its not the wealthy. Nor businesses. It is in fact the legislatures. That's right, loopholes, and the negative image the word conjures up, are ONLY created by legislatures. The first hint how unqualified people like Obama are to assert that "loopholes" are a problem is in the very fact that if he is criticizing loopholes, he is in fact criticizing himself. Think about the most well known "loophole"(sec. 179) that was encouraged and celebrated by Obama and company less than 2 years ago as part of the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010. But it wasn't called a loophole then. It was wrapped up in the buy it now (and job creation) message that accelerated depreciation and binus depreciation provides to every business person in America. What is accelerated depreciation? It allows a business to accelerate the write off of certain business assets faster than the typical lifetime. In offering accelerated depreciation, the government is saying loud and clear (and in front of the cameras), WE WANT BUSINESS TO SPEND MONEY NOW. Accelerated depreciation becomes a so called job creation stimulus. Starting to sound familiar? That's right, 2 years ago, Obama stood up in front of the cameras to take credit for extending accelerated depreciation rules in order to "create jobs". And guess what, many businesses took advantage of it while doing EXACTLY what Obama asked business to do. INVEST. Oh, but it didn't work so good when looking at the budget mess, since businesses that take advantage of this so-called loophole, and invest, also lower their taxes. And that has now become a problem since Obama needs tax revenue to fund his socialistic policies. The real point here is that "loopholes" are created by legislatures to accomplish certain objectives, rightly or wrongly. And just about every business in America whose basis is capitalism, looks to the tax code for ways to lower their taxes because their duty is to their shareholders, employees, and suppliers to increase profits. Keep in mind, a profitable business is the best and most safest way to have job security and provide a basis for job creation. PROFIT is not a four letter word!!!.And avoiding taxes legally is the most capitalistic and American thing you can do for your business. So when businesses comply with the law, and thereby do what the legislatures asked them to do, they should not be vilified and accused of using loopholes. They should be encouraged to do so in the spirit of creating jobs. And for those of you that think loopholes are unfair or should be eliminated. I would agree subject to re-doing and simplifying the current code! Just re-do the tax code - i.e lower corporate income taxes to a lower flat rate, and we will create even more jobs while eliminating all the wasted jobs of compliance and enforcement with the current tax code. I am not defending the code today, just pointing out to you all that it was created by the very legislatures that now claim there are too many loopholes. We all know that you can't speak out of both sides of your mouth. Or do we?