Beyond Crony Capitalism by Sandy Ikeda

Some libertarians don’t like the term “crony capitalism.” They complain that cronyism—the use of political power for private gain—is incompatible with capitalism, so why conflate the two terms? While they may have a point, I’d like to look beyond the issue of terminology and focus on the underlying phenomenon: The problems with interventionism go far beyond cronyism.

On Facebook and other places, libertarians talk among themselves with a heavy, almost exclusive focus on cronyism over other forms of interventionism. It troubles me.

What Is Crony Capitalism?

The idea behind crony capitalism is what we used to call “special-interest politics” or the more technical “rent seeking.” The politically powerful, or those with connections to them, use that power to channel wealth from other people to themselves.

Examples of cronyism aren’t hard to find, of course. Here in New York, our new mayor wants to tax high-income earners to fund pre-kindergarten programs in public schools in order to reward teachers’ unions for their help in getting him elected. Erecting trade barriers to protect the textile industry has a long and dishonorable history. And aspects of President Obama’s Affordable Care Act (ACA) seem to have been designed to privilege well-established insurance companies, who can afford to lobby, at the expense of smaller ones who can’t.

I don’t want to go over this well-trod ground again. I raise the issue of cronyism for two reasons.

Imputing Bad Motives

First, the charge of cronyism or political opportunism assumes that those who favor interventionism do so for narrowly selfish, even venal reasons. Painting your opponents as crony capitalists puts you on the side of virtue—a free-market good guy who really wants to promote the general welfare.

Don’t get me wrong: I’m certainly not saying that free-market advocates don’t have good intentions. What I am saying is that imputing bad intentions to your opponents from the get-go may be fitting for a street fight—and I know there sometimes are street fights—but it’s a bad idea if you want constructive dialogue or debate.

F. A. Hayek explained that he dedicated his great book The Road to Serfdom “To Socialists of All Parties” not to mock his opponents but to open a conversation with them. Like his mentor Ludwig von Mises, he typically chose to treat people with whom he disagreed as men and women of goodwill. In other words, he refrained from assuming his adversaries were intellectually dishonest, unconquerably stupid, or plain evil. I know many of you will say, “But these people are evil!” Sorry, I don’t go there because it’s unnecessary, and if you want to know why, read this and this. When you foreclose honest dialogue, bullets replace ideas.

Ideas Inform Interests

Ultimately what underlies crony capitalism is bad ideas.

A common idea is that getting very rich from voluntary trade is tantamount to getting very rich from political redistribution. If the ways in which Vladimir Putin and Bill Gates each became billionaires are morally equivalent, the former mostly through threats of violence and the latter mostly by selling stuff, then what’s wrong with using aggression to get rich? Or, if they are equivalent, then can’t political power serve as a countervailing force against “economic power”? It’s easy to see how such ideas might appear to legitimize political power for special-interest pleading.

So bad intent may not always motivate even cronyism. I believe most of us, whatever our ideology, want to do good—for ourselves, our families, our friends, and our communities—most of the time. Mises wisely pointed out that the dichotomy between “interests versus ideology” is unhelpful because “it is not sensible to declare that ideas are a product of interests. Ideas tell a man what his interests are.”

Thus, as Henry Hazlitt argued long ago, preferring short-term gains for a small group of people over long-term improvement to the general welfare is just a bad idea because it ultimately runs counter to the interests of those who favor it.

Other Forms of Interventionism Are at Least As Important

The second reason I’m raising this issue is that the study of interventionism also includes looking at the unintended consequences of interventionism. Interventions are subject, to one degree or another, to what are called knowledge problems. Because knowledge in both the private and governmental spheres is imperfect, it’s simply not possible to be aware beforehand of how people will respond to an intervention. Knowledge problems generate perverse incentives that tend to frustrate the intentions of even well-meaning interventionists.

Perverse incentives refer to things such as people driving more recklessly as a result of mandating airbags in all cars, which is an example I used in a recent column. It also includes the spectacle of people losing their low-cost insurance because under Obamacare their coverage doesn’t meet the new minimum standards. (NBC news reported that the Obama administration may have known this would happen, but unlike crony capitalism it’s hard to see how this particular aspect of the ACA benefits anyone systematically, especially politically.)  Advocates of raising the minimum wage to $10.10 an hour don’t realize the negative impact this increase would have on already disadvantaged low-wage workers, who will now be priced out of the labor market. For example, Time magazine reports that it could “lift 4–6 million out of poverty” but fails to mention that it could also increase unemployment by hundreds of thousands.

It’s hard to change the minds of hard-core proponents of interventionism (and of hard-core proponents of any ideology, including libertarianism) but there have been important examples. A recent one is the surprising change of heart by the activist/rock star Bono on the value of capitalism in developing countries. If changing minds through ideas isn’t possible, then I’m in the wrong business.

I don’t think I am.

I’m a Misesian on many issues, including this one. But here I’m also a Keynesian. In the closing paragraphs of his General Theory, Lord Keynes famously wrote:

The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. . . . I am sure that the power of vested interests is vastly exaggerated compared with the gradual encroachment of ideas.

I worry that focusing so narrowly on crony capitalism feeds into the very human but very misguided tendency to feel contempt for anyone who doesn’t believe as you do. Of course, there are those who do mock and tease, or worse, in arguments. But if you’re facing serious opponents, it’s better to regard them as people with gaps in their knowledge (which we all have) than to dismiss them as invincibly ignorant. Better to patiently point out the weaknesses of their arguments and to listen to what they have to say.

That’s hard, but it’s the only way to win. And by “win” I mean maintaining respect for yourself and being able to improve your position by seeing the weaknesses, as well as the strengths, in your own ideas.

ABOUT SANDY IKEDA

Sandy Ikeda is an associate professor of economics at Purchase College, SUNY, and the author of The Dynamics of the Mixed Economy: Toward a Theory of Interventionism. He will be speaking at the FEE summer seminars “People Aren’t Pawns” and “Are Markets Just?

Time to Lower Corporate Tax Rate

I earned my undergraduate degree in tax accounting from Oral Roberts University (ORU). Upon graduation, I spent a decade working in tax accounting, both for government and the private sector.

So, in this week’s column, I want to take advantage of my education and training to write about tax law. Let me start by giving the example of how our welfare state has crippled our economy and destroyed the family unit.

Back in the day, if a girl was on welfare, she could not be married or have a male living in the house. If the girl was discovered to be in violation of these rules, she was immediately removed from the welfare rolls, even if that meant hurting her children.

So, in a perverse way, the government was rewarding single motherhood and discouraging marriage with their policy. In simple economics, if you tax (or penalize) something (marriage), you get less of it. If you reward something, you get more of it (fewer single mothers and more marriage).

In a similar manner, governments reward and punish corporations and entrepreneurs by the way they tax earnings. Some industries are more sensitive (elastic) to changes in the tax code than others (inelastic).

You raise taxes on cigarettes and sales will not drop because those who smoke are addicted and they will always find a way to get their next smoke (inelasticity—their behavior is not sensitive to price). But if you raise taxes on sodas, sales will decrease because it is considered a discretionary purchase (elastic—they can buy a cheaper fruit drink, they are very sensitive to price).

Currently, our economy is anemic in its growth, unemployment is still above 7 percent, and job creation is almost nonexistent; but just imagine if someone magically injected more than $ 2 trillion into our economy. What would happen?

Well, you don’t have to imagine this scenario because Obama and the Congress can make this a reality.

As in my earlier example, the more of something you have, the cheaper it becomes. So, if the U.S. economy is infused with $ 2 trillion, banks would have more and cheaper money to loan to small businesses (who are the biggest job creators in our economy); these businesses would hire more people; as more people begin to work, they will spend more money in our economy; thereby increasing our gross domestic product (GDP). The beginning of a growing economy.

Recently Bloomberg News analyzed the security filings of 307 multinational companies headquartered in the U.S. Bloomberg estimated that these companies have almost $ 2 trillion sitting in offshore accounts (all legal based on current tax law). Their offshore companies pay taxes in the country they operate in and those taxes are deducted from their U.S. taxes.

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Graph courtesy of Bloomberg News.

But they don’t pay U.S. taxes on their foreign profits until they bring the money into the U.S. The current tax rate for foreign income is now 35 percent, one of the highest in the world (along with China and South Korea).

So, companies are docking their profits in countries like Ireland, whose tax rate is 12.5 percent; or Bermuda whose rate is 0 percent.

According to the Congressional Research Service estimates, giving incentives for these corporations to repatriate their profits back to the U.S. would generate an additional $30-$90 billion in tax revenues.

But why pay a 35 percent tax rate to bring money into the U.S. when you can borrow money at 5 percent to expand your foreign operations; plus the interest you pay on the loan is deductible as an expense on your U.S. tax return. In essence, you are making interest on the money you will eventually have to pay U.S. taxes on. Defacto, the U.S. government is giving these corporations interest free money to play with.

Chairman of the U.S. House’s Ways and Means Committee, Dave Camp (R-MI) submitted a bill last month that would reduce the corporate tax rate from the current 35 percent down to 25 percent); unfortunately, it has absolutely no chance to pass in an election year.

Camp’s bill is a good starting point. I think consensus can be reached to lower the corporate tax rate to 25 percent in order to get companies to repatriate some of their profits back to the U.S. I would mandate that the new revenue be earmarked for an infrastructure fund that can only be used to repair our bridges, roads, etc.

This would create jobs and fix up our deteriorating infrastructure at the same time. I think both parties can agree on this.

FairTax Ushers In New Governance

Painting by Jan Matsys, 1509-1575, titled “Beim Steuereintreiber” (At the tax collector)

Eight months ago, 21 seasoned FairTax® grassroots leaders responded to an invitation from Americans For Fair Taxation® (AFFT) Vice President Leo Linbeck III, to meet in Houston and discuss the FairTax campaign.

After more than two days of spirited discussions the team, which became known as “C21”, reached consensus on a plan to transfer governance of the FairTax campaign and AFFT from the current board of directors to volunteer grassroots supporters.

Since that remarkable weekend, this dedicated team, guided by Linbeck and Steve Hayes, a member of the Florida FairTax Educational Association board of directors, hammered out a comprehensive plan embodied in a Memorandum of Understanding (MOU), License Agreement and amended bylaws.

It is now expected that governance of AFFT will be transferred by the end of April in accordance with the terms set forth in the MOU.

The C21 leaders and AFFT took great care to define fair and equitable requirements for both a state FairTax organization and the process for them to nominate delegates who may be elected as directors of AFFT. This process includes both organizational qualifications and minimum AFFT contribution requirements.

The organizational qualification requires that state FairTax organizations operate as a legally recognized, non-profit entity in compliance with state and federal laws, have written and published bylaws, and maintain a board of directors and a defined organizational structure, a checking account and operate under the AFFT umbrella.

The contribution requirement includes minimum individual donations of $10 per donor made directly to AFFT. These donations may be made online through FairTax.org, in response to an AFFT online or direct mail solicitation, or by donating to AFFT with a personal check, money order or through the banking system.

Qualified states may elect up to three delegates who will become voting directors of the AFFT board of directors. The number of state delegates will depend on the number of contributors to AFFT in 2013, and through March 31, 2014, and the total amount of money donated from the state to AFFT during this same time period.

Additionally, a state that does not meet the minimum donation requirements, but which is otherwise qualified will be able to elect a non-voting delegate. This non-voting delegate may attend AFFT board meetings, but may not vote on board matters.

It is important to note that this process is limited to the election of directors to AFFT and does not affect the way states select their own leadership.

Next Step Highlights

In early April, all donors to AFFT in 2013 and through March 31, 2014, will receive an email providing detailed next steps for the AFFT board of directors election.

If you want to want to be included, you must do two things right now. 

First, as stated, only those individuals who have donated a minimum of $10 to AFFT in 2013 or 2014 will be allowed to nominate or vote for delegates. If you have not donated and would like to you may go here to donate. Second, ensure your contact information is current at FairTax.org by logging in here.

Once delegates have been selected a national meeting will be convened in Houston to confirm the election of the AFFT board of directors.

Finally, to show their continued support and to help ensure the new grassroots board has every opportunity to succeed while assuming leadership of the FairTax campaign, the current AFFT board of directors has generously offered to establish a post-transition, dollar-for-dollar matching fund up to $100,000 for AFFT.

The FairTax is the largest, single-issue grassroots tax reform movement in the nation. It is therefore fitting that the grassroots assume governance for both AFFT and the campaign.

We want to thank everyone who has assisted AFFT and the grassroots with this massive undertaking. And on behalf of everyone who supports the FairTax, may I express our profound appreciation to the AFFT board of directors – past and present – for their steadfast leadership in founding and governing AFFT and the FairTax campaign.

If I Had a Million Dollars by Sarah Skwire

Dorothy Parker. “The Standard of Living.” 1941.

From the very first sentence, Dorothy Parker’s “The Standard of Living” awakens not only admiration in the lover of literature, but attention in the lover of economics. “Annabel and Midge came out of the tea room with the arrogant slow gait of the leisured, for their Saturday afternoon stretched ahead of them,” she writes. In one simple sentence we are given a perfect picture of these young women. We know instantly, for example, that Annabel and Midge (and those names, when Parker was writing, were the equivalents of Brooklyn and Madison today) are not leisured. They have assumed the “arrogant slow gait of the leisured” because this is their afternoon off. And indeed, we are informed in the following paragraph that the young women are stenographers. “Annabel, two years longer in the stenographic department, had worked up to the wages of eighteen dollars and fifty cents a week; Midge was still at sixteen dollars. Each girl lived at home with her family and paid half her salary to its support.”

These are young, middle-class working women, about to enjoy a hard-earned afternoon off. And they will enjoy it by playing their favorite game.

Annabel had invented the game; or rather she had evolved it from an old one. Basically, it was no more than the ancient sport of what-would-you-do-if-you-had-a-million-dollars? But Annabel had drawn a new set of rules for it, had narrowed it, pointed it, made it stricter. Like all games, it was the more absorbing for being more difficult.

Annabel’s version went like this: You must suppose that somebody dies and leaves you a million dollars, cool. But there is a condition to the bequest. It is stated in the will that you must spend every nickel of the money on yourself.

…It was essential, of course, that it be played in passionate seriousness. Each purchase must be carefully considered and, if necessary, supported by argument. There was no zest to playing it wildly.

And so the young women window shop. But they do so with “a seriousness that was not only proper but extreme.” When Annabel declares that she would spend some of her money on a silver fox coat, “It was as if she had struck Midge across the mouth. When Midge recovered her breath, she cried that she couldn’t imagine how Annabel could do such a thing—silver-fox coats were so common!” The friends do not speak to each other or play their game again until Annabel revises her decision and elects to imagine purchasing a mink coat instead. (As Virginia Postrel reminds us in her book The Power of Glamour“Glamour is subjective.”)

But the crisis of this particular episode of the game is a different one. On a hot September day when it is far too uncomfortable to think about fur, the girls pause outside the window of a Fifth Avenue jewelry store. (In my mental movie of this story, the store is Tiffany & Co., of course, because there is no more glamorous jewelry store.) In the window, Annabel and Midge spot a necklace, “a double row of great, even pearls clasped by a deep emerald.” Instantly, the fur coats are forgotten.

On a dare, Midge goes into the store to price the pearls. Told that the price is $250,000, the girls react at first with disdain:

“Honestly!” Annabel said. “Can you imagine a thing like that?”

“Two hundred and fifty thousand dollars!” Midge said. “That’s a quarter of a million dollars right there!”

“He’s got his nerve!” Annabel said.

And then with despair they realize that their game of endless wealth has become subject to the chilling effects of scarcity.

But Parker knows that the effervescence of youth cannot be contained for long. And the final sentences of the story begin the game again. But this time:

Look. Suppose there was this terribly rich person, see? You don’t know this person, but this person has seen you somewhere and wants to do something for you. Well, it’s a terribly old person, see? And so this person dies, just like going to sleep, and leaves you ten million dollars. Now, what would be the first thing you’d do?

I don’t know about Annabel and Midge, but I’d buy that necklace.

Virginia Postrel has observed that glamour “focuses preexisting, largely unarticulated desires on a specific object, intensifying longing. It thus allows us to imaginatively inhabit the ideal and, as a result, to believe—at least for a moment—that we can achieve it in real life.” She adds later that “glamour leads us to imagine ourselves in the other: another person, another place, and another life. . . . Glamour’s promise of escape and transformation can create an enjoyable but transient experience, provide a source of solace in difficult circumstances, or offer direction toward real-world action.” Highly unlikely ever to have the opportunity to spend $10 million, $1 million, or even, at their salaries, $100 on something glamorous and desirable, Annabel and Midge play their game to soothe their frustrations and escape their daily grind.

Guy de Maupassant’s story “The Necklace” must have been on Parker’s mind when she wrote “The Standard of Living.” Here Madame Loisel, the beautiful young wife of a middle-class Parisian clerk, is invited to an expensively elegant party. She borrows a diamond necklace from a wealthy friend and loses it. She and her husband must then borrow the money to replace the necklace. They spend the next 10 years in grinding poverty while they repay their debts. At the end of the story, we discover that the lost necklace was made of artificial stones, and Madame Loisel has destroyed her youth, beauty, and happiness to attain something that was never real.

All of this reminds me of my favorite economic fairy tale—the episode of the poor man’s son in Adam Smith’s Theory of Moral Sentiments. This young man, “whom heaven in its anger has visited with ambition,” is discontented with his poverty.

He finds the cottage of his father too small for his accommodation, and fancies he should be lodged more at his ease in a palace. He is displeased with being obliged to walk a-foot, or to endure the fatigue of riding on horseback. He sees his superiors carried about in machines, and imagines that in one of these he could travel with less inconveniency. He feels himself naturally indolent, and willing to serve himself with his own hands as little as possible; and judges, that a numerous retinue of servants would save him from a great deal of trouble.

The poor man’s son then labors his whole life to attain these luxuries, enduring “more fatigue of body and more uneasiness of mind than he could have suffered through the whole of his life from the want of them.” After a lifetime of this work, and of toadying and obsequiousness to “those whom he hates,” he ends in despair and misery. “He begins at last to find that wealth and greatness are mere trinkets of frivolous utility, no more adapted for procuring ease of body or tranquility of mind than the tweezer-cases of the lover of toys; and like them too, more troublesome to the person who carries them about with him than all the advantages they can afford him are commodious.”

We should not fault the poor man’s son for his ambition. We should, however, fault him for the technique he uses to pursue his ambitions. “For this purpose he makes his court to all mankind; he serves those whom he hates, and is obsequious to those whom he despises.” Caught up in the glamour of wealth and ease, he sacrifices his character and his comfort in order to procure it. As Postrel comments, “The young man’s picture of the good life—the glamorous vision that inspires his quest—omits important details. It leaves out years of laborious effort, showing only the result of hard work. . . .Glamour always obscures the difficulties and distracting details of life as it is really lived.” Chasing an impossible dream of wealth without work, the poor man’s son destroys his happiness.

Annabel and Midge are much wiser than Madame Loisel and the poor man’s son. Annabel and Midge know that wealth without work is a dream. They know they will almost certainly never have the necklace in the window. Their game—like my grandmother’s Depression-era trips to the movies—provides them with a brief time of fantasy and escape that allows them to return to their work with renewed energy and inspiration. Midge can hope to climb the ladder of the stenography pool the way that Annabel has. Annabel can hope to manage the pool one day. They can help make their families, and themselves, better off, bit by bit and by working hard. They understand how to balance their ambition with their reality. And they know that you can take a great deal of pleasure from fur coats and expensive necklaces without ever needing to own them.

20121127_sarahskwire (1)ABOUT SARAH SKWIRE

Sarah Skwire is a fellow at Liberty Fund, Inc. She is a poet and author of the writing textbook Writing with a Thesis.

EDITORS NOTE: The featured image is courtesy of FEE and Shutterstock.

IRS currently employing convicted associate of jihad terrorist

This is insane, but it is also completely consistent with the way that the Obama Administration has operated from the beginning. It purged counter-terror trainers who spoke honestly about jihad terror (including me) from counter-terror training programs, while turning a blind eye to the unsavory connections of people like Mohammed Elibiary and Arif Alikhan.

“(EXCLUSIVE) IRS Currently Employing Convicted Terrorist Associate,” by Patrick Poole for PJ Media, March 6 (thanks to Jerk Chicken):

While IRS officials were targeting Tea Party groups for special scrutiny of their 501(c)3 tax exempt applications, the IRS also hired a policeman who had been prosecuted by the Justice Department — and convicted in federal court — of using his access to the FBI’s NCIC system to tip off a terror suspectabout the bureau’s surveillance. The leak wrecked a major terror investigation.

He is still at the IRS.

Weiss Russell (he has changed his name from “Weiss Rasool,” the name under which he was convicted), is currently employed as a financial management analyst in the IRS Deputy Chief Financial Officer’s Office.

In 2008, Russell/Rasool was prosecuted for his role in tipping off Abdullah Alnoshan, a close associate of al-Qaeda cleric Anwar al-Awlaki and a friend of Russell’s from their mosque. According to the Justice Department’s Statement of Facts filed at the time of Russell’s indictment, Alnoshan provided license plate numbers to Russell for cars he believed were conducting surveillance on him. Russell then checked those plate numbers in the FBI’s NCIC database, which came back to a leasing company which federal prosecutors claimed would have tipped off Russell to the bureau’s surveillance.

He left a phone message for Alnoshan that the FBI intercepted.

Prosecutors also claimed that on more than a dozen instances, Russell checked his name, the names of relatives, and other friends to see if they were listed on the Violent Crime and Terrorist Offender File on NCIC without an authorized reason for doing so.

According to the Washington Post, Russell’s tip-off to Alnoshan actively obstructed their investigation:

The target was arrested in November 2005, then convicted and deported, according to court filings in Rasool’s case. Assistant U.S. Attorney Jeanine Linehan said that the target and his family were already dressed and destroying evidence at 6 a.m. when agents arrived to make the arrest, indicating that they had been tipped off.

Alnoshan was deported to Saudi Arabia in December 2005. Russell was indicted in January 2008, and pleaded guilty in April 2008.

While prosecutors had requested jail time for Russell after he failed a polygraph just a week before sentencing, the judge sentenced him to two years of probation. He continued on the Fairfax County police force while an internal affairs investigation was conducted. Reportedly, he was eventually given the choice to resign or be fired. He resigned in August 2008.

Chris Farrell, director of investigations at Judicial Watch, told PJ Media:

Somebody like Russell who betrayed his oath as a police officer and was convicted in court essentially for aiding and abetting the subject of an open terror investigation has absolutely no business with any position of trust and responsibility with the government.

If as reported he holds a top financial analyst position within the IRS, it’s not just a disgrace to a discredited agency but an insult to the American public. Russell has already betrayed his country and shown that he can do enormous damage and abuse his authority and powers, which he is now free to do within the IRS….

Read it all.

Passenger Trains: A Cancer in Florida that Keeps Growing

I guess as children we all loved playing with trains. Why this has become a fascination as adult taxpayers is hard to understand. It’s probably because we don’t look behind the curtain to see what this habit is costing society. Once you do the investigation, it turns out that passenger trains are consistent in one area only, eating up taxpayer dollars.

All Aboard Florida (AAF) is the newest passenger line being presented as an investor backed privately funded entity. It is difficult to understand why a private company as big as Florida East Coast Industries, and with their knowledge of the business, would follow the public sector into this debt laden industry. Their plan is for a high-speed passenger train to service Miami, Fort Lauderdale, West Palm Beach and Orlando. We already have passenger trains that service this route, their names are AMTRAK and Tri-Rail. Let’s examine their profitability for the 2013 operating year.

AMTRAK has state supported routes and long distance routes, that service most of the major areas of the United States. Examining their FY 2013 Budget Statics by Route we note that they have fifteen (15) long distance routes. The one thing that is consistent with all of these long distance routes is that they all lose on average Forty-Million dollars ($40,000,000) per route each year. Just the long distance routes create a Six-Hundred Million dollar ($600,000,000) loss every year.

One of these passenger routes is the Auto Train, which is familiar to citizens in Florida. This route lost Forty-Eight Million dollars ($48,000,000) in 2013 an average of One-Hundred, Eighty dollars ($180.00) lost for every passenger who traveled on the Auto Train. This route does show employment of 34 core employees. That equals out to a loss of One Million, Four-Hundred, Twelve-Thousand ($1,412,000) per employee!

AMTRAK does better on its state supported routes. It only looses One-Hundred Million dollars ($100,000,000) per year on these operations. One of these state supported lines is the Silver Star that provides services to Miami, Fort Lauderdale, West Palm Beach and Orlando. In 2013 they had revenue on this route of Thirty-Nine Million ($39,000,000) and expenses of Eighty-Six Million ($86,000,000) for a loss of Forty Seven Million dollars ($47,000,000).

Where does the money come from to support these heavy losses? According to their 2013-2017 projected operating summary, AMTRAK received Four-Hundred, Fifteen Million dollars ($415,000,000) from Federal Appropriation Support otherwise known as TAXPAYER SUPPORT. Look at the bright side, their projections are for a Two-Billion dollar ($2,000,000,000) loss over the next five years! At least they are leveling off at a consistent loss every year into the future.

The other train that services south Florida with passenger service is Tri-Rail. Tri-Rail does not go to Orlando but it will compete with All Aboard Florida for the passengers who travel Miami-Dade, Broward and Palm Beach. How well has Tri-Rail been doing? Let’s examine their 2013 revenue and expenses.

Tri-Rail had a 3% increase in revenue in 2013 bringing total operating revenue to Twelve-Million, Five-Hundred Seventy-Five Thousand, Six-Hundred Fifty-Two dollars ($12, 575,652). That’s the good news. The bad news is they had total operating expenses of One-Hundred Million, Two-Hundred Forty-Nine Thousand, Six-Hundred Fifty-Eight dollars ($100,249,658) for an operating loss of $87,674,006. To be fair it should be noted that $30,214,462 of this loss is attributed to depreciation of assets, so the true loss for Tri-Rail is only Fifty-Eight Million dollars ($58,000,000).

The good news about this statement is we can track where Tri-Rail balances its budget. Non-Operating Revenue allows Tri-Rail to continue to operate. Where does this non-operating revenue come from? THE TAXPAYER! Here is the breakdown:

  • Federal Transit Administration (FTA) $19,163,234
  • Federal Highway Administration 4,000,000
  • Florida Department of Transportation (FDOT) 30,613,700
  • Other Local Funding 184,795
  • Broward County 1,565,000
  • Miami-Dade County 1,565,000
  • Palm Beach County 1,565,000
  • Interest Income 139,080
  • Total Non-Operating Revenue $58,795,809

What a way to break even. It’s nice to know that you get the support of federal, state and local tax dollars to run your train. How much would just the Tri-Rail loss buy in better education, emergency services, medical advances or other areas that service our citizens.

By the way, did someone mention that a private investment group wants to get into the train business because they want to make a profit? I know I heard that somewhere. The only profit is in raiding the public coffers.

FP&L – No “Choice” of Meters for 36,000 Floridians

By now many of you that refused the installation of FP&L’s smart meters have received a “Dear Customer” letter telling you that you have a choice of meters. The letter goes on to say that if you don’t take their smart meter that you will be charged $95 upfront and $13/month to retain your old meter. If you haven’t received such letter, you will shortly.

On January 7, 2014 the Florida Public Service Commission (FPSC) approved this deal. Although, it is being contested by two separate citizen petitions (one of which I am leading), the rules state that FP&L can continue as planned with the stipulation that fees collected are “subject to refund”. That is, if the FPSC Order is overturned, they must return the fees charged to the customers.

Why the fees? Well you resistors are “cost causers”. It is a long-standing principle that is invoked at will when they want to get you to comply with the game plan. In 1987/1988 they invoked the same principle when they transferred the ownership of meter enclosures and associated cost burdens (maintenance/replacement) to you the customer. The order (PSC Order # 18893) stated that:

“Since self-contained meter enclosures are not a part of the utility function, but simply house the meter itself, their costs should be borne by the customer when the structure is initially wired for electric service or when it must be replaced due to obsolescence or wear. The burden of maintaining and repairing the enclosures’ must likewise rest with the customer.”

As we all know by now, a smart meter is not “simply a meter” but contains lots of additional components that are part of the utility function. It establishes a wireless Neighborhood Network and sends messages back and forth amongst neighbor meters, remotely disconnects services and monitors your usage. In the future they will turn on the second transmitter to establish your Home Area Network to connect with your Home Energy Controller or Smart Thermostat and will give your smart refrigerator the ability to text you. It collects more data than is needed to bill you for your current plan. But why fuss over details!

If you don’t enroll in their plan, they will slap a smart meter on your home. If you think you got that covered (i.e. you already caged/locked your meter or have restricted access to your meter) think again. You will be automatically enrolled and charged the fee.

The process to fight this will be long and painful. If you don’t want a smart meter you need to:

Retain your analog meter. Once they take it, you will never see it again. (Remember you will get an undefined “non-communicating” meter in the future.) You may want to send a certified letter to FP&L stating that you do not consent and that you are enrolling under duress.

File a formal compliant with the FPSC.  Here is the complaint page http://www.floridapsc.com/consumers/complaints/index2.aspx

Write/call your Florida State Senators/Representatives. They are in session right now. Make your voices heard. Senate – http://www.flsenate.gov/Senators/Find, House: http://www.myfloridahouse.gov/Sections/Representatives/representatives.aspx

Contact the Energy committees that oversee the FPSC. House Energy & Utilities Subcommittee – http://www.myfloridahouse.gov/Sections/Committees/committeesdetail.aspx?TermId=85&CommitteeId=2724 and Senate Communications, Energy, and Public Utilities  http://www.flsenate.gov/Committees/Show/CU/

Contact Gov. Scott – http://www.flgov.com/contact-gov-scott/

For those who still believe smart meters save money, ask FP&L how much net operation and maintenance savings are in the current rates you pay.

What they said in the 2009 rate case:

2009 rate case schedule

What they reported in the 2012 rate case:

2012 rate case schedule

The lack of cost savings was confirmed by the Office of Public Counsel who said on October 12, 2012 “However, to OPC’s knowledge, no studies, analyses, or quantification of the benefits or cost savings from the implementation of smart meters exist at this time. OPC is still waiting on the promised cost savings benefits of smart meters to be realized and shared with the customers.” http://www.floridapsc.com/utilities/electricgas/smartmeter/09_20_2012/WorkshopComments/OPC.pdf

Think smart meters prevent outages? Check out Northeast Utilities initial comments in a recent Massachusetts Department of Utilities investigation – “Meters do not reduce the number of outages” (page 4) http://haltmasmartmeters.org/wp-content/uploads/2014/01/NSTAR_R12-76-Comments-7986-POSTED01172014_HIGHLIGHTED.pdf

And finally, how many of you run home from work or golf and check your FP&L energy dashboard each night? Apparently not many. The last annual report from FP&L showed that as of the end of 2012 with over 4 million meter installed, only about 15% accessed the dashboard about 2 times.

IRS: Two Fifths Doesn’t Solve Anything

Two very important things happened at yesterday’s short-lived House Oversight hearing investigating the IRS targeting of nonprofits.

First, IRS former senior manager Lois Lerner again invoked the 5th Amendment. In January, her attorney said she would testify if given immunity. That same attorney now states, Lerner cannot testify because she fears for her life.

Second, graphics were apparently displayed that showed previously disclosed communications of Ms. Lerner. However, when viewed in the context of testifying under oath, well, as Fox News Greta Van Susteren said in her Facebook Post, “THESE EMAILS ARE HORRIBLE! Lois Lerner is in a heap of trouble — and these emails (below) are really bad.”

Lois graphic

Just who is “everyone” and “they” and is this why Ms. Lerner is so afraid to tell the American people the truth?

More importantly, why isn’t the news media falling all over themselves to get answers to these and other important questions regarding this scandal – just as they did with the Watergate and Iran-Contra scandals?

And why isn’t every member of Congress demanding the appointment of a special prosecutor just like they have done in the past?

And the most important question of all – who is standing up for and defending the taxpayers of America – the ultimate and perennial victims of the IRS?

The answer is simple – nobody.

Taxpayers, the very people who paid for Ms. Lerner’s salary, pension and most likely, her attorney; who pay the salaries, benefit plans and perks of the IRS employees who carried out this political weaponization; who underwrite the lavish lifestyles of Members of Congress appear to not be even an afterthought in this escalating political cat and mouse.

This can change. If Congress enacts the FairTax® Plan, the American people will have a tax code that is fair, simple and truly represents them – not a plan that is used by a Congress bent on partisan manipulation and retribution.

More importantly, with the FairTax, the IRS is gone – no more scapegoated federal employees to do partisan political bidding and no more cowering by taxpayers from enforcers who act like brown shirt thugs instead of public servants once sworn to uphold the rights guaranteed in the U.S. Constitution.

No citizen – most certainly no American citizen – should ever feel the need to cower before their government or any of its representatives.  As John Adams said in 1776, “Fear is the foundation of most governments; but it is so sordid and brutal a passion, and renders men in whose breasts it predominates so stupid and miserable, that Americans will not be likely to approve of any political institution which is founded on it.”

Perhaps that is why a majority of Americans want the FairTax passed, the IRS defunded and disbanded and the 16thAmendment repealed.

A Quick Guide to Obama’s 2015 Budget

14ObamaBudget_V2_MBYesterday, Heritage experts dove into President Obama’s new budget proposal. Check out our infographic to see just a few of the disturbing things they found.

Congress: Going Around and Around Again

Long before the digital age, Americans of all ages loved to listen to music on 78/45 and 33 rpm records. That is, until the record became scratched and the diamond needle stuck in the groove and all one heard were pops, cracks and the same sound over and over.

These long forgotten records came to mind earlier this week when the Ways and Means Committee Chairman, Dave Camp, released his 979-page tax reform plan. Reactions have been swift and ranged from warnings about mid-term election fallout to indignant outrage by a few K-Street lobbyists whose carve-outs didn’t make the cut.

Although well intentioned, this plan is nothing more than a simpler version of a corrupted income tax code that panders to special interests and enables the IRS to continue as a partisan weapon.

Or as Congressman Jim Bridenstine declared, “This is a noble objective, but the plan released Wednesday inappropriately preserves both the IRS and all the nefarious opportunities for politicians to again use the tax code to hand out cash, control markets, and manipulate human behavior”.

For nearly a year, Congressional investigators have been reporting findings and oversight committees holding investigations on the IRS targeting scandal. Congressman Camp was at the center of these oversight and investigatory activities including Lois Lerner repeatedly invoking the 5thAmendment prior to negotiating immunity in exchange for testimony.

Given this, how can any Member of Congress, advocate for tax legislation that continues an agency as abusive as the IRS? Rest assured, to support the continuation of the income tax is to support this continued abuse!

There is a solution and it awaits a promised vote by the Committee on Ways and Means. HR 25, “The FairTax Act of 2013” is a simple, fair and transparent tax replacement plan that disbands and defunds the IRS in its entirety. It is the only tax plan before Congress that accomplishes this and is ready to be immediately implemented.

The FairTax fully funds the federal government, including Social Security and Medicare, and will stimulate the economy while generating jobs – jobs the American people desperately want and need.

Our income tax code is beyond repair and should be thrown into the dust heap of failed legislative experiments. The American people have labored under a punitive income tax code for 100 years. They are tired, demoralized and desperately want elected representatives who have the courage to end partisan game playing while doing what’s right for taxpayers and the nation. They want the FairTax.

EDITORS NOTE: The featured image This image was originally posted to piqs.de was uploaded to Commons using Flickr upload bot on 21:36, 19 July 2007 (UTC) by Bryan. The use of this image does not in any way imply the endorsement of this author or the Fair Tax.

RELATED COLUMN: Congress Recalling Former IRS Official Lois Lerner, Who Took the Fifth: ‘If We Have to Hold Her in Contempt, So Be It’

How Social Security Makes Us Poorer by Brenton Smith

When you read that Social Security lifts 50 percent of seniors out of poverty, keep in mind that it was largely the cost of Social Security that put them there. It’s the perfect example of government incompetence creating higher costs and misguided incentives—and delivering exactly the opposite of what it promised.

The contradiction stems from the cost of Social Security, which has exploded. In 1950 Social Security cost 2 percent of the first $3,000 of income (in 2013 dollars, that would be 2 percent of roughly $29,000, according to the BLS calculator).  In 2013, the retirement portion of Social Security cost 10.6 percent of the first $113,700. On top of this cost, the government now takes another 1.8 percent of your wages to cover the cost of disability benefits, which were added in 1958.

What’s more, you get a lot less bang for a lot more bucks. A couple retiring in 1960 expected to collect $8 of benefits for every $1 of contributions. Today the return for average Americans is actually negative.

The process of rising costs and declining returns has continued for 80 years. We are now at a point where the largest investment in retirement planning of the vast majority of Americans loses money. No one should be surprised to find that people who invest their retirement savings poorly wind up in poverty when they reach retirement.

The Urban Institute’s “Social Security and Medicare Taxes and Benefits over a Lifetime” projects what a hypothetical worker will contribute to Social Security versus what they expect to collect. The “lifetime value of taxes” shows what would have happened if the accumulated taxes had been put into an account that earned interest. The research projects that an average worker who retires in 2030 will have lost more than $400,000 in savings in order to collect about $370,000 in expected benefits.

Here is where the system gets really ugly. The $370,000 isn’t guaranteed. In fact, the Trustees project that in a good economy this worker will only get 77 percent of his scheduled benefits because he will retire after the trust fund is exhausted. Mind you, the 77 percent of scheduled benefits is completely dependent upon the willingness of future workers to commit 12.4 percent of their wages to this system as it falls into collapse. Basically this worker only collects provided another worker gets a worse deal.

The government has compounded the impact of the problem by feeding the systemic dysfunction directly through our labor market. Social Security is financed with a tax on labor—so it penalizes work even though the best cure for poverty is a job. This tax also creates a disincentive to hire people and creates an incentive to move work to countries with a lower tax burden. Social Security introduces incentives to work less, such as early retirement.

Nobody wants to be poor in their old age. If workers did not have to spend their entire careers burdened with Social Security taxes, fewer would face that possibility.

ABOUT BRENTON SMITH

Brenton Smith is the founder of Fix Social Security Now.

Rick Santelli and 5th Anniversary of “The Birth of the TEA Party”

It was five years ago this week that CNBC Newsman Rick Santelli made his fiery speech from the floor of the Chicago Board of Trade that helped launch a movement:

“This is America!…President Obama, Are you listening?!…It’s time for another tea party.”

Joe Miller states, “The answer five years later to Santelli’s question is a resounding, ‘No.’ The President is not listening. It is clearly time to add some more tea bags to the pot and stoke up the fires.”

[youtube]http://youtu.be/bEZB4taSEoA[/youtube]

 

RELATED COLUMNS: 

New PAC To Protect Tea Party Candidates Against GOP Establishment Attacks (+video)

Bachmann: ‘Lawless’ Obama ‘Rules by Tweet,’ Congress Must Have Support from Voters to Impeach Him

EDITORS NOTE: The featured image “T Party Flag” is courtesy of Tabnumlock. Tabnumlock does not in any way endorse this video or our use of this work. This image is licensed under the Creative Commons Attribution-Share Alike 3.0 Unported

A Rogue IRS: Enough is Enough

 “On matters of style, swim with the current. On matters of principle stand like a rock.” – Thomas Jefferson

For over 10 years, the FairTax® campaign has warned about the politicization of the IRS. Events over the past nine months have only served to heighten this concern. Consider the following revelations:

  • The IRS admitted to and apologized for targeting certain conservative leaning groups.
  • The senior IRS official at the center of the targeting, Lois Lerner, pleaded the 5th during questioning by members of a House Oversight Committee.
  • The Chairman of the Ways and Means Committee released an email from another senior IRS official confirming the IRS had been “off-planning” this targeting as early as June 2012.
  • A senior Senator publicly requested the Executive Branch use the IRS and bypass Congress to weaken and curtail funding for certain conservative leaning 501(c)(4)’s.
  • The Chairman of Ways and Means stated the IRS has targeted established conservative 501(c)(4)’s for audits.
  • The IRS proposed new rules that would redefine political activities by 501(c)(4)’s and effectively extinguish their 1st Amendment right to free political speech. Thankfully, opposition has been swift and strong and is coming from the left and the right.

This cascading series of events should strike fear in the heart of every single American citizen.

Today, the IRS may target you for your political beliefs.Tomorrow it could be the color of your skin, your gender or your religious beliefs. Once you begin power sliding down the slippery slope, it’s impossible to predict where you might land.

There is a way out of this increasingly dangerous mess – a way in which citizens do not have to fear their elected officials or their government. It is the FairTax Plan.

The FairTax eliminates the income tax while defunding and disbanding the IRS. The FairTax institutes a progressive, national consumption tax that is simple, fair and ready to implement. It fully funds the federal government, including Social Security and Medicare, while stimulating the economy and generating desperately needed jobs at an unprecedented level!

The American Revolutionary War began because of colonists who were fed up with Britain’s increasing tyranny and taxation. Having had enough, they drew a line in the sand and declared  “no more taxation without representation”.

When a nation’s elected officials use government agencies for partisan political gain, suppress free political speech and target individual citizens for punitive action, that nation has effectively slid into taxation without representation.

Where is your line in the sand? When do you tell your elected representative, I’ve had enough, I want simple and transparent taxation without interference by special interests and a government that does not engage in punitive, partisan manipulation?

Finally, congratulations to Congressman Chris Stewart (UT-2) for becoming the 74th co-sponsor of HR 25! Please call Rep. Stewart and welcome him to the FairTax family.

EDITORS NOTE: The feature image is by Elvert Barnes from Hyattsville MD, USA. The photographer does not in any way endorse the author or the positions taken in this column. The image is licensed under the Creative Commons Attribution-Share Alike 2.0 Generic.

FL: Sarasota County School Board wants more money to pay teachers for doing less?

OLYMPUS DIGITAL CAMERA

Sarasota County School Board members. Front row: Caroline Zucker, Shirley Brown. Back row: Dr. Carole Todd, Jane Goodwin and Frank Kovach. For a larger view click on the photo.

The School Board of Sarasota County is pushing for the extension of a 1 mill tax on all county property holders on March 25th. They are using school funds to lobby in favor of and promote the 1 mill tax. According to their official Report on the Uses of Referendum Funds since 2002, ”This vote allows the District to maintain existing programs, provide additional programs and continue the District’s commitment to quality education.”

In a previous column I questioned whether the School Board is really committed to a “quality education”. School Board Member Caroline Zucker responded to my column in an email stating, “There u go telling incorrect info.” I replied, “What is incorrect?”. To date Zucker has not answered my question.

Historically the revenue from the 1 mill tax goes directly into teacher’s salaries (see the District Report on the uses of referendum funds since 2002).This is why the School Board holds a special off cycle referendum at a cost to the School District of $.5 million. Doing so suppresses the vote.

However, teachers come out in droves to vote for their pay raise, and the union promotes the referendum via teachers and parents as a must have do-or-die effort to insure a “quality education.”

What the referendum does is make for a “quality union salary and benefit package” for teachers and administrators. For their $.5 million investment the School Board gets an ROI of an estimated $30+ million annually for four years. Not a bad deal but will it lead to a better education for Sarasota County public school children?

There are two issues. The first is that the School Board is all in with Common Core. This means that teachers have little or no control over what is taught, how it is taught, when it is taught and how it is tested. Parents are totally out of the picture. Common Core cuts out the ideal of local control of the education process, leading to a top down approach designed and implemented by the US Department of Education.

Terrence O. Moore, an assistant professor of history at Hillsdale College, states, “The Common Core Standards control the testing and curriculum of public schools and a large number of private schools in over forty states in the nation. Sold to the public as a needed reform, the Common Core nationalizes absurdity, superficiality, and political bias in the American classroom. As a result, the great stories of a great nation are at risk, along with the minds and souls of our children.”

So, teachers will be given what they must teach – in effect and in practice – Sarasota County teachers will be getting paid more, if the referendum passes, for doing much less due to Common Core.

The second issue is the children themselves. Which does research show truly enhances student achievement – teacher salaries or the child’s family?

Rod Thomson in an op-ed writes, “The debate over extending the extra tax for Sarasota County schools needs to be seen in light of the much larger debate over the future of our children and grandchildren and their opportunities for improved lives. In that context, the extra money taken by the school district is not just a waste of taxpayer money. It is a feel-good but ultimately empty distraction that allows us to vote for something without taking any action on the actual underlying, fundamental causes of poor student achievement and lack of upward mobility. But those root causes are hard to correct.”

“An extensive Harvard study was recently released titled ‘Where is the Land of Opportunity?‘ The four researchers concluded that the largest predictor of a child’s positive ability to move up in life is a family with both parents at home. For lack of upward mobility, they wrote, “the strongest and most robust predictor is the fraction of children with single parents. This study piles on top of a snow-capped mountain of data pointing to what all of us really know to be true — the metaphorical elephant in the living room. And spending more money on programs and salaries is simply irrelevant to the driving factor of family,” notes Thomson.

So why doesn’t the Sarasota County School Board recognize this disconnect between teacher salaries and student performance? Why they want to get reelected. Who gets out the vote for them? Why the teacher’s union of course. Are they buying votes? All we can say is that since the referendum was first introduced only one school board member wasn’t re elected – Caroline Zucker. But she ran again and was elected.

Three school board members are up for reelection in 2014. Perhaps that is why they are pushing the 1 mill referendum?

EDITORS NOTE: Stephanie Simon from Politico writes that with states such as Florida, Texas, and Washington state recently deciding not to require courses such as chemistry, physics, Algebra II or a foreign language for high school graduation, they are thumbing their noses at Obama’s call for a “rigorous college-prep curriculum” for all students, supposedly embodied in the Common Core State Standards.

Is Your State one of the Seventeen that Cut Taxes in 2013?

Ned Ryun, Founder & CEO American Majority writes, “A report released by our friends at the American Legislative Exchange Council Center for State Fiscal Reform reveals which states cut taxes in 2013 – whether through fundamental tax reform or slight modification of their tax codes.

Cutting taxes gives businesses the ability to hire more employees, creating much-needed jobs and lowering unemployment. The co-author of the report emphasizes the impact lower taxes can make on unemployment:

“In fact, from 2001 to 2011, the nine states with the highest personal income taxes have increased their total employment by only 4.9 percent. Over the same time period, the nine states with no personal income taxes saw their total employment grow by 12.7 percent, more than double.”

Eighteen* states cut taxes in the 2013 legislative year. Find out if yours is one of them.

UPDATE: The tax cut package from Oklahoma that is included in the 2013 Tax Cut Roundup was struck down by the Oklahoma State Supreme Court on Dec. 17, 2013, a month after the release of Tax Cut Roundup. This means only 17 states will see tax cuts as a result of the 2013 legislative session.

I’m happy to see that over one-third of states took successful steps toward implementing pro-growth reforms and cut taxes in 2013. It takes courage and commitment to see a proposed tax cut enacted into law.

Ryun asks, “I encourage you to get involved in your state for the chance to impact taxes and spending in 2014. One way to start is by educating yourself. Download American Majority’s free State Legislative Manual today!

*UPDATE: The tax cut package from Oklahoma that is included in the 2013 Tax Cut Roundup was struck down by the Oklahoma State Supreme Court on Dec. 17, 2013, a month after the release of Tax Cut Roundup. This means only 17 states will see tax cuts as a result of the 2013 legislative session.

EDITORS NOTE: The featured image (map) is courtesy of the American Legislative Exchange Council Center for State Fiscal Reform.