Howard Rich's Blog

June 30, 2009

California : The “Furloughing” Of Common Sense

By, Howard Rich
How many California state employees does it take to screw in a light bulb?

We’ll find out soon enough.

After steadily growing both its budget and bureaucratic payroll for years, California’s fiscal house of cards collapsed last year, opening a $24 billion hole in its upcoming budget.

In an effort to save a nickel – or rather, $1.4 billion worth of nickels – Gov. Arnold Schwarzenegger proposed last December that state employees take two days worth of furloughs each month, an idea that was roundly rejected by the state’s government unions. In fact, they sued Schwarzenegger – and after losing their case in court they filed an unfair labor practice claim against him.

Earlier this year, Schwarzenegger relented and trimmed the furlough down to one day a month, although both the governor and Democratic lawmakers are moving to restore the second day in the budget for the upcoming fiscal year. Similar plans have stoked union outrage in other states and municipalities – most notably Chicago –but it’s California where the furlough debate has been most acutely focused

Continue reading California : The “Furloughing” Of Common Sense


Waxman-Markey Is Our Smoot-Hawley

From Investor’s Business Daily

Following is the floor speech that Republican Rep. Tom McClintock of California’s fourth congressional district gave last Friday in opposition to the cap and trade legislation that passed that day.

I had a strange sense of deja vu as I watched the self-congratulatory rhetoric on the House floor tonight, and I feel compelled to offer this warning from the Left Coast.

Three years ago, I stood on the floor of the California Senate and watched a similar celebration over a similar bill, Assembly Bill 32. And I have spent the last three years watching as that law has dangerously deepened California’s recession. It uses a different mechanism than cap and trade, but the objective is the same: to force a dramatic reduction in carbon dioxide emissions.

Until that bill took effect, California’s unemployment numbers tracked very closely with the national unemployment rate. But then, in January of 2007, California’s unemployment rate began a steady upward divergence from the national jobless figures. Today, California’s unemployment rate is more than two points above the national rate, and at its highest point since 1941.

What is it that happened in January 2007? AB 32 took effect and began shutting down entire segments of California’s economy. Let me give you one example from my district.

The city of Truckee, Calif., was about to sign a long-term power contract to get its electricity from a new, EPA-approved coal-fired electricity plant in Utah. AB 32 and companion legislation caused them to abandon that contract. The replacement power they acquired literally doubled their electricity costs.

So when economists warn that we can expect electricity prices to double under the cap and trade bill, I can tell you from bitter experience that in my district, that’s not a future prediction, that is a historical fact.

Gov. Schwarzenegger assured us that AB 32 would mean an explosion of new, green jobs — exactly the same promises we’re hearing from cap and trade supporters. In California, exactly the opposite has happened. We have lost so many jobs the UC Santa Barbara economic forecast is now using the D-word — depression — to discuss California’s job market.

Madam Speaker, the cap and trade bill proposes what amounts to endlessly increasing taxes on any enterprises that produce carbon dioxide or other so-called greenhouse gas emissions. We need to understand what that means.

It has profound implications for agriculture, construction, cargo and passenger transportation, energy production, baking and brewing — all of which produce enormous quantities of this innocuous and ubiquitous compound. In fact, every human being produces 2.2 pounds of carbon dioxide every day — just by breathing.

So applying a tax to the economy designed to radically constrict carbon dioxide emissions means radically constricting the economy.

And this brings us to the fine point of it.

When you discuss the folly of the Hoover administration — how it turned the recession of 1929 into the depression of the 1930s, the first thing that economists point to is the Smoot-Hawley Tariff Act that imposed new taxes on more than 20,000 imported products.

Waxman-Markey is our generation’s Smoot-Hawley. In fact, it’s worse, because it imposes new taxes on an infinitely larger number of domestic products on a scale that utterly dwarfs Smoot-Hawley.

Let’s ignore for the moment the fact that the planet’s climate is constantly changing and that long-term global warming has been going on since the last ice age.

Let’s ignore the fact that within recorded history we know of periods when the earth’s climate has been much warmer than it is today and others when it has been much cooler.

Let’s ignore the thousands of climate scientists and meteorologists who have concluded that human-produced greenhouse gases are a negligible factor in global warming or climate change.

Ignore all of that and still we are left with one lousy sense of timing. In the most serious recession since the Great Depression — why would members of this House want to repeat the same mistakes that produced that Great Depression? Watching how California has just wrecked its economy and destroyed its finances, why would they want to do the same thing to our nation?

Madam Speaker, this is deadly serious stuff. It transcends ideology and politics. This House has just made the biggest economic mistake since the days of Herbert Hoover.

If this measure becomes law, two things are certain. First, our planet will continue to warm and cool as it has been doing for billions of years. Second, Congress will have delivered a staggering blow to our nation’s economy at precisely that moment when that economy was the most vulnerable.

June 29, 2009

Largely Useless, Even Harmful

The blunt truth is that even if we had had President Obama’s financial regulatory “reforms” in place four years ago–reforms designed to prevent another financial meltdown–we would still have experienced a horrific economic disaster. In other words, the Administration’s prescriptions deal with the symptoms–and those badly–not the underlying causes.

The astonishing housing bubble could not have happened without the Federal Reserve’s easy-money policy, which got under way in late 2003. If not for the excess liquidity created, there would not have been sufficient fuel to distort the housing market and ultimately the financial system. Yet President Obama has remained mum regarding the need for a strong and stable dollar. Without such a policy it’s guaranteed we’ll continue to experience financial turmoil.

The Fed’s punishment for its wretched doings is that Congress will likely give it more regulatory powers. That’s the thing about government: The more it fails, the more power it accrues.

To respond to criticism that the Fed is becoming too powerful, the Administration is proposing that the Fed get permission from the Treasury Department before it takes “drastic” action to stabilize the economy. Hamstringing or inhibiting such vigorous action is ludicrous. The Fed should respond to panics in the same way we respond to natural disasters: Take immediate, overwhelming action, then pull back as the crisis recedes.

Right up to the government takeover of Fannie Mae and Freddie Mac in September, Congress resisted substantially reforming those two giants, which together guaranteed, repackaged and sold to investors around the world more than $1 trillion in junk mortgages. Significantly, the Obama proposals do not address what to do about Fannie and Freddie.

The bursting of the commodities and housing bubbles would not have threatened the very existence of our financial system had it not been for the perversity of mark-to-market accounting rules. This concept, enacted in 2007, turned the economic equivalent of a serious flood into a tsunami by relentlessly destroying the ostensible value of our banks’ regulatory capital. It was no coincidence that once Congress made it clear in early March that it wanted substantial and quick reform of mark-to-market accounting that stocks–especially those of banks and life insurance companies–vigorously rallied from their recession lows. Mark-to-market accounting should be prohibited just as it was from 1938 to 2007. Again, the White House remains silent.

There’s also no word from Obama-ites about reinstalling speed bumps to short-selling. The SEC has yet to reinstate the uptick rule, nor has it provided guidance on how it will enforce already existing laws against naked short-selling.

Credit-rating agencies? Other than more “disclosure,” no change in their government-sanctioned, cartel-like privileges has been proposed.

The White House has ignored the problem of how to deal credibly with institutions now regarded as “too big to fail.” If this elephantine issue of moral hazard isn’t resolved, additional destructive distortions will arise.

New rules and agencies also can’t eradicate the fallibility of human judgment. The Bush Administration’s response to the unfolding crisis was wildly inconsistent. It saved the operations of Bear Stearns, yet months later allowed Lehman Brothers–an institution of far greater significance–to go under, then within mere hours reversed itself again in regard to AIG. Of course, banks are the most heavily regulated sectors of the economy, yet all that oversight didn’t avert disaster.

What about Obama’s proposals themselves? The new consumer protection agency will have to justify its existence by meddling more and more in financial institutions under the guise of protecting we the people. This will be a damper on innovation. New consumer products–or new anything–always bring with them unintended consequences, especially when they are misused or overused. Thus, this agency will find it suffers less political heat if it stands in the way of innovation.

Commercial paper became the rage in the 1960s as a means of borrowing short-term money and saving interest costs by bypassing the banks. The market blew up when Penn Central went under in 1970, precipitating a serious financial crisis. Thankfully, no agency or regulator was around then to ban commercial paper, even though it had momentarily become a weapon of mass destruction. Instead, the markets came up with the right reform: Such paper had to be backed by ironclad lines of credit from commercial banks. The markets rebounded to higher levels than before.

Would money market funds, which technology made possible in the 1970s, have proliferated if such an agency had been around? Banks would have lobbied intensely to kill the concept in fear that such funds would draw off deposits. The innovation of allowing customers to write checks on their money market accounts would also never have been allowed.

The new consumer protection agency will also be tempted to square circles. Congress is not touching the Community Reinvestment Act and subsequent government decrees mandating that banks grant mortgages to unsound borrowers. Such an agency will thereby be tempted to mandate that credit be extended in accordance with that act, which will lead to future losses.

The White House regulatory plan will also effectively put the kibosh on so-called industrial loan companies–banks created by outfits such as Target and Harley-Davidson to provide credit and other financial services to their customers.

The one sensible idea the Administration has had was put on the table several months ago–the creation of clearinghouses or exchanges for credit-default swaps. In fact, this should be the fundamental core of regulatory reform: transparency. Authorities–and the markets–could then impose proper rules regarding collateral and capital.

Higher cigarette taxes: unhealthy and unfair

From the LA Times:

June 29, 2009

Nicholas Goldberg’s “How and why taxes go up, in smoke” (June 14) reads more like press release from the anti-smoking lobby than an objective question-and-answer backgrounder: Smoking is bad and the state needs more money, therefore hiking the cigarette tax is good. If smokers quit, so much the better. It’s a win-win!

Oh, if life were only so simple.

Is smoking “bad”?

An overarching theme of the article is that smoking is simply a bad thing. Yet we live in a diverse society in which tastes vary widely. For some, total bliss is a pack of Marlboros and a day at the monster truck show; for others, it’s a bottle of Cabernet and a night at the opera. There is no reason one group should be subject to punitive taxes while the other is praised for its sophistication.

The fact that something is risky doesn’t make it bad. Some people ride motorcycles and sunbathe; like smoking, these are risky activities. Are they therefore bad? No. As long as people understand the risks of what they are doing and bear all of the costs, there is no reason for the government to threaten to impoverish them if they don’t live their lives in the way some bureaucrat demands.

Life in a free society requires tolerance of activities that have little or no effect on others, even those we don’t personally approve of. If government or interest groups have information about risks that are not widely known, they should disseminate it. Otherwise, adults should be left alone to live their lives in accordance with their own dreams and values.

Are cigarette taxes “good”?

Goldberg also points out that “smoking is unpopular, and smokers are politically weak,” so why not raise tobacco taxes? Is tyranny of the majority, the classic danger of democracy that Alexis de Tocqueville warned about, really something Californians want to embrace? Of course not. Instead, we should ask, what is an equitable division of the tax burden? Presumably we all benefit from government services. Then we should all pay for them.

A special tax on cigarettes could be justified if smokers were foisting some costs onto their fellow citizens. This subject has been studied extensively by some of the nation’s leading economists, who have found that there is indeed a small “externality” associated with smoking — about 35 cents per pack. However, because federal and state cigarette taxes are far in excess of this amount, the current fiscal system transfers billions of dollars from relatively low-income smokers to higher-income nonsmokers. If anything, tax fairness calls for a reduction of the cigarette tax, certainly not a higher one.

Ancillary costs

Goldberg spends much of his time discussing how the law of demand — the common-sense idea that as the price of something rises the quantity demanded by consumers falls — can be used to snuff out smoking. Unfortunately, he glosses over another economic concept, the notion of a substitute good — in this case, bootleg cigarettes — that undermines his argument.

Right now, it is possible for bootleggers to earn more than $400,000 on every truckload of cigarettes smuggled into the Golden State. Those from a foreign source can fetch five times that amount. These illicit profits are the reason the California Board of Equalization estimates that the state loses more than $275 million annually to tobacco tax evasion.

It doesn’t take a Nobel laureate to know what would happen if the cigarette tax were doubled or tripled. The marked rise in bootlegging would mitigate any health benefits of the hike. Moreover, as commerce migrates from the corner store to the street corner, youth access to tobacco products would probably increase.

A higher tax would also probably trigger a wave of cigarette thefts, a problem that has plagued the state in the wake of past tax hikes. The increase in such lawlessness coupled with the rise in the crimes traditionally associated with black markets — murders from deals gone bad, gun battles over turf and so on — would adversely affect smokers and nonsmokers alike.


There are no easy answers to California’s budget woes. These problems have been building for decades. Perhaps it’s time for citizens to fundamentally reappraise exactly what they want the state government to do and devise a fair and efficient tax system for collecting revenue. Hiking what is already one of the most unfair and disruptive taxes on the books will only increase the harm to smokers and nonsmokers alike.

Patrick Fleenor is chief economist at the Tax Foundation.

June 26, 2009

A Young Barack Obama

June 25, 2009

Putting New York Back Together

From the New York Times

Scrambled letters reading NY State Constitution

NEW YORK STATE government is not working. This has been true for some time. But the paralysis and confusion that has overtaken the capital demonstrates the need to confront this dysfunction directly and take decisive steps to solve it once and for all. That’s why I’m calling on Albany to convene a state constitutional convention.

This is not a partisan criticism. There is enough blame for all to share. Recently, though, the situation in our state has gone from bad to worse.

There are more New Yorkers unemployed than at any time in 33 years, and the poverty rate is rising. Our combined state and local tax burden is the highest in the nation after New Jersey. Our business tax climate is rated the second worst in the country. And in the face of the worst recession in a quarter-century, the State Legislature decided to increase spending by 9 percent while increasing taxes and fees by $8 billion. No wonder a recent poll showed that more than 20 percent of New Yorkers are thinking of leaving the state in search of lower taxes and fewer government mandates.

Over the course of New York’s history, our state has held seven constitutional conventions, one as recently as 1967. Calling another convention would be an extraordinary step, but it is a necessary and effective way to overcome the challenges we face. It would be an opportunity for Republicans, Democrats and independents to come together, take a long hard look at our problems and then propose real, lasting solutions.

If the State Legislature were to approve the measure in the next few weeks, New Yorkers could vote on whether to proceed with a constitutional convention this November. A “yes” vote would move the process forward, allowing voters to choose a slate of delegates in November 2010. After the convention took place, the recommendations would be put forward to the people for an up-and-down vote.

The specific measures should be left to the convention itself and then judged by the voters. But to start the debate I offer seven recommendations for reform.

THE BUDGET PROCESS The governor should be empowered to set revenue estimates on his own, as the mayor of New York City does, adjusting future spending against responsible benchmarks rather than unrealistic estimates. The budget should conform to generally accepted accounting principles, and there should also be a formal four-year financial plan allowing for transparency and long-term planning. Finally, if a new budget is not adopted by April 1, the previous year’s budget should be automatically continued.

TERM LIMITS All statewide elected officials and members of the Legislature should be term limited to bring new blood into Albany while stopping the careerism that too often blocks real progress. A citizens’ legislature would be more effective in addressing New Yorkers’ problems with a fresh perspective.

REDISTRICTING New York’s Legislature has been called the most dysfunctional in the nation, yet Albany legislators enjoy a 98 percent re-election rate. They avoid accountability through partisan gerrymandering, which has reduced the number of competitive elections, depriving millions of voters of real choices.

An independent commission, rather than the legislators themselves, should draw up district lines to ensure the system is not rigged to reward incumbent legislators or one party over another.

CAMPAIGN FINANCE Special interests have a disproportionate influence over state politics in large part because of a weak campaign finance system with high contribution limits and lax disclosure requirements. Individuals can give up to $55,900 to gubernatorial candidates and $15,500 for State Senate candidates. Unions and other special interests exploit loopholes that allow millions of dollars worth of phone banks, volunteers and other in-kind contributions. There are no regular audits and minimal fines, and an unlimited amount of money can be transferred to candidates from party committees.

SUPER MAJORITY FOR TAX INCREASES Too often increasing taxes is the first impulse for Albany legislators. Requiring a supermajority for tax increases would provide a powerful check on those who still think we can tax and spend our way out of economic problems. A supermajority would protect already over-burdened citizens and attract businesses, improving our long-term competitiveness.

JUDICIAL PAY The integrity of an independent judiciary depends on being able to attract qualified people who are not beholden to party bosses and power brokers. Instituting an automatic cost-of-living adjustment on an improved base salary would take the politics out of judicial pay raises.

SUCCESSION FOR LIEUTENANT GOVERNOR Over the last 40 years, New York has been without a lieutenant governor three times. The lack of any established process of succession for the state’s second in command creates the potential for chaos. In the interest of simplicity, stability and transparency, clear lines of succession must be established.

Many of these suggestions have enjoyed bipartisan support in the past. What’s been missing is action. Legislators have not been leading. But we citizens can take charge and carry out these fundamental reforms through a constitutional convention. Together we can cure the structural dysfunction of our politics and hand New York to the next generation better and stronger than it was handed to us.

Rudolph W. Giuliani was the mayor of New York from 1994 to 2001.

June 23, 2009

Obama’s Poll Driven “Rope-A-Dope”

Saying one thing and doing another is standard operating procedure for many – if not most –American politicians, but President Barack Obama has turned this political version of boxing’s “rope-a-dope” into a true art form.

Like a heavyweight champion expertly deflecting body blows with a bare minimum of effort, Obama’s “float like a butterfly, sting like a bee” approach to governing has his political opponents scrambling – and the American taxpayer on the ropes.

With deft moves that would make even the great Muhammed Ali jealous, Obama has capably demonstrated his mastery of political maneuvering by paying lip service to limited government themes at the precise moment(s) that his big government overreaching seems to be reaching a point of critical mass. And not surprisingly, a fawning Fourth Estate has taken the American public along for the ride, essentially parroting talking points from Obama’s White House with barely a critical word.

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June 17, 2009

The Immorality Of Waxman-Markey: Intense Pain, No Environmental Gain

From Investor’s Business Daily

Even a $600-a-year increase in utility bills would be a “hardship” for 78% of American families, notes a recent Lauer Johnson Research poll. They should be so lucky.

If the pending Waxman-Markey energy and climate bill (HR 2454) becomes law, utility bills will soar. Farm and business energy costs will skyrocket — and be passed on to consumers, or defrayed by layoffs. Everything Americans grow, make, buy and do will be far pricier. And bureaucrats will control our lives.

Compared to no cap-and-tax regime, Waxman-Markey would cost the United States a cumulative $9.6 trillion in real GDP losses by 2035, concludes a study by the Heritage Foundation’s Center for Data Analysis. The bill would also cause an additional 1.1 million job losses each year, raise electricity rates 90% after adjusting for inflation, provoke a 74% hike in inflation-adjusted gasoline prices, and add $1,500 to the average family’s annual energy bill, says Heritage.

The Congressional Budget Office says the poorest one-fifth of families could see annual energy costs rise $700 — while high-income families could see costs rise $2,200. Harvard economist Martin Feldstein estimates that the average person could pay an extra $1,500 per year for energy. And those are just direct energy costs.

Where will families find that extra cash? “What do I tell a single mom, making $8 an hour?” asked North Carolina congressman G. K. Butterfield.

That was a few days before he, his Democrat colleagues and one Republican on the House Energy and Commerce Committee voted to approve Waxman-Markey. They also defeated amendments that would have suspended its punitive provisions if electricity prices go up 10% after inflation, unemployment reaches 15% or gasoline prices hit $5.

The bill would radically “transform” our energy and economic systems; tax and hobble hydrocarbon use; mandate and subsidize “green” energy; and dole out innumerable preferences — and penalties.

No wonder 2,300 energy/climate lobbyists have descended on Washington. Companies are desperate to have a “seat at the negotiating table,” and thus happy to pay $400-$850 per hour to help cut deals that benefit them, hobble competitors and enact cap-tax-and-trade rules that will make mortgage derivatives markets look like child’s play.

Written largely by professional environmentalists, the numbingly complex 942-page bill would require an 83% reduction in U.S. carbon dioxide emissions by 2050 — a level last seen in 1908. That’s before accounting for the far lower population levels and nigh-antediluvian manufacturing, transportation and electrification systems of a century ago. Its costly provisions would dictate every aspect of our lives.

Even worse, the draconian rules would have no detectable benefits, even assuming CO2 does cause climate change. Using global warming alarmists’ own computer models, research climatologist Chip Knappenberger calculated that the painful 83% reductions would result in global temperatures rising a mere 0.1 degrees F less by 2050 than doing nothing. That’s because Chinese and Indian emissions would quickly dwarf America’s job-killing reductions.

A key Waxman-Markey goal is to replace hydrocarbons with wind power. But that would require billions of dollars in taxpayer subsidies; hundreds of thousands of turbines, across millions of acres of scenic land, habitats and sea lanes; thousands of miles of new transmission lines and towers; and billions of tons of concrete, steel, copper and fiberglass — plus raw materials and natural gas for backup generators.

Spanish taxpayers spent $754,000 for each new wind energy job, mostly installing towering turbines, Dr. Gabriel Calzada calculated. But switching to wind destroyed 2.2 regular jobs for each “green” job, largely because pricey “renewable” electricity forced companies to lay off workers, to stay in business.

White House and congressional leaders don’t want to hear any of this.

President Obama says the Bush administration “made decisions based upon fear, rather than foresight, and all too often trimmed facts and evidence to fit ideological predispositions.” He and his congressional allies should take that critique to heart on global warming.

We need a serious, robust debate on this intrusive legislation — and on a rapidly growing body of scientific evidence that says planetary temperatures are actually falling, carbon dioxide plays only a minor role in climate change, and we do not face worse floods, droughts, storms or other disasters.

To inflict intense pain for no environmental gain is immoral. To ram such legislation through with backroom deals and no substantive debate — and unleash bureaucrats to control our energy use and lives — is dictatorial and un-American. When The People finally catch on, it won’t be a pretty sight.

June 16, 2009

The Restoration of Dependency

By Howard Rich

Multi-billion dollar bailouts. A new national energy tax. The return of socialized medicine.

Almost every day we’re seeing another big government offensive taking direct aim at the core ideals on which our nation was founded – and upon which rests our essential strength.

Yet of all the counter-capitalist pillars included in President Barack Obama’s new “Era of Obscenely Big Government,” the deliberate undoing of welfare reform is receiving a surprisingly small amount of ink.

Perhaps that’s because our sympathetic (if not sycophantic) mainstream media doesn’t want to throw a monkey wrench into the tired old “we’ve got to do something” refrain that has already seen $13 trillion spent, lent or pledged on “economic recovery” in the last year alone.

Or perhaps it’s because this “stealth’ dismantling of welfare reform doesn’t fit neatly within the “Post hoc, ergo propter hoc” framework often used to justify so many of Obama’s policies.

After all, you can’t pin an “after Bush, therefore because of Bush” tail on this issue – which has its roots in the administration of President Bill Clinton.

Passed in 1996, the bipartisan “Personal Responsibility and Work Opportunity Act” represented a fundamental shift in the way our nation approached welfare. Rather than incentivizing states to expand their welfare rolls, the new law sent money in block grants which offered incentives for taking people off of welfare – and encouraging them to find jobs.

Not surprisingly, when the federal government stopped rewarding the perpetuation of poverty, it stopped seeing so much of it.

Contrary to the doom and gloom, “death in the streets” pronouncements of government bureaucrats chained to the failed “War on Poverty” approach, the results of welfare reform (in conjunction with a reduction in capital gains taxes and other economy-empowering reforms) were nothing short of phenomenal.

Poverty rates plunged, welfare rolls were cut in half, unemployment fell and the government recorded its first annual surpluses in decades.

At the heart of this free enterprise success story was the fact that personal responsibility, not government dependency, had been incentivized – a fairly self-evident truth that nonetheless had been ignored for decades by Washington politicians.

“The advocates of (the old system) had no inkling that these good-hearted strategies would lead to enduring cycles of poverty and family disintegration that threatened to consume entire generations,” writes Dr. Hunter Baker, a professor at Houston Baptist University. “Wishing for good outcomes resulted in disaster. It was only when a more tough-minded view took hold (the idea that it is reasonable to expect productivity and initiative out of healthy, working age persons) that many managed to escape mere subsistence.”1

Sadly, Obama’s plans represent a nothing short of a complete U-turn back to the days of dependency and subsistence. In fact, one of the little-publicized components of the massive “American Recovery and Reinvestment Act” is the unfortunate “reinvestment” it makes in poverty and dependency.

The “bounty system” of paying cash-strapped states to expand their welfare rolls is back, only this time with an even higher incentive – a whopping $4 to $1 cash bonus for every new family that state bureaucrats are able to hook up to the government dole.

“The original goal of helping families move to employment and self-sufficiency and off long-term dependence on government assistance has instead been replaced with the perverse incentive of adding more families to the welfare rolls,” a recent report from the Heritage Foundation states.2

This approach clearly benefits no one – well, except for government bureaucrats and Obama’s friends at ACORN, who rely on the perpetuation of poverty and dependence to keep their various scams up and running.

The sad, unavoidable reality is that the more one examines Obama’s position on welfare, the more obvious it becomes that his goal is not to help people who are poor, but rather to keep them dependent on his government to provide for their every need.



June 15, 2009

The IRS Phones Home

From the Wall Street Journal

With federal spending in 2009 at 28% of the economy and deficits heading north, Democrats are eyeing tax increases on everything from soft drinks to electricity to health benefits to charitable contributions. But the palm for creativity goes to the Internal Revenue Service, which is contemplating a new tax on the use of business cellphones.

The IRS believes that some percentage of the costs incurred by employees using company-provided wireless devices should count as a “fringe benefit” and thus be subject to taxation. Since workers inevitably end up taking personal calls or emails, the thinking goes, it’s only fair that they pay for the privilege. What’s next? Maybe a per-cup tax on office coffee, or targeting furtive visits to ESPN or Hulu on the office PC? As one wag put it on the Journal’s Web site, “It’s like charging for the use of the company washroom.”

The IRS isn’t proposing a new rule per se, merely planning to strictly enforce a 1989 law requiring workers using company phones for personal use to include the value of those calls as income. But in effect it’s the same thing, given the inherent difficulties of distinguishing the work from the personal when employees are expected to remain tethered to the office 24-7. The IRS suggests that businesses automatically assign 25% of annual phone expenses as a taxable liability — unless employees could provide proof that they used other forms of communication during work hours. We think most taxpayers will agree that preparing for April 15 is stressful enough already.

The political class may come to regret stepping into this minefield, however, and not only because this is precisely the sort of common non-sense that incites tax revolts. It’s one thing if the next Tom Daschle forgets to pay taxes on his company chauffeur. But it’ll be quite another if the next nominee goes down for taking too many personal calls without giving the government its due.

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