Death and taxes...mostly taxes

Now that the Super Committee has failed to come up with a plan, my blog could be running short of easy fodder.

However, the debt never sleeps and nor should I!

Congress has returned for a brief session before breaking for Christmas, and the first thing on their list is to decide whether or not to extend the payroll taxes cuts.

These payroll tax cuts reduce the amount of money that workers put into Social Security from each paycheck. Essentially, it decreases the amount of money put into Social Security and lets Americans keep that money in their pocket.

As it stands now, the cuts put about $1000 back into average American households.

Sounds good? Well, it is and it isn't.

Limiting the amount of money put into the Social Security trust fund (which is WAY more complicated than I thought, but I will do my best) does a couple of things. The government borrows money from the Social Security fund to pay for things, which means it accrues debt that is owed to the trust fund. The less money in that fund, the less money that can be borrowed from Social Security when needed (OK, no politician is going to make that argument, but that's one of the deals).

An argument they will make? Having less money in Social Security over a longer period of time could mean decreases in Social Security payments or (a lot more far-fetched) the collapse of Social Security (this would happen if population and its payments began to outpace the payments made by Social Security). Couple in less workers in the workforce (now I'm getting nitpicky) and it could add up against Social Security.

Having these payroll taxes does increase the amount of money in our pockets and that does help the economy by allowing us to spend. It also may promote more savings if pockets are flush with a few extra dollars. The trade-off? The lower tax still means you are paying less into Social Security. Sure, the IRS says you are still guaranteed by law your Social Security checks, but you aren't helping your retirement by spending that extra G on an iPad or North Face jackets.

Our politicians have to decide if they want to keep these tax cuts (Democrats do) or let them expire (Republicans do).

If the economy wasn't on a borderline recession, I would say let the tax cuts expire. Paying a bit extra into Social Security will make sure (hopefully) the system will be available for our generation and our children. However, we are on a borderline recession and letting the public have extra money in their pocket is more important (at the moment).

So it seems like a no brainer for me and you would think Republicans would be behind the whole tax cuts thing, right?

NOPE!

They want to let the tax cuts expire because they say the "nation can't afford it." Yes we can afford it. We have been affording the Bush Tax cuts for the last 11 years, which typically benefits the wealthy and add to the federal deficit. However, in a brilliant move of levergae (and Democrat weakness) the Republicans will be allowing the payroll tax cut extension to go through, but they will probably get another wealthy American tax cut or get the XML pipeline approved.

These cuts will pass and Republicans will get a little deal in the process. I have to admit, I don't like the idea of the Republicans getting anything (when they take the hypocritical stance of never raising taxes, but then saying these payroll taxes are too much).

It is the right move but the wrong people in Washington will benefit. Oh well, at least I will have an extra hundred bucks or so in my pocket.

Do you think the cuts should be extended?

The next big battle

Now that the Super Committee has failed. What do we have to look forward to?

Well, we could look forward to imminent military action in Iran (Trust me, with the way things are going, SOMEONE is going to put troops in there). That doesn't mean the U.S. will be putting troops there, but I am sure we will send drones or something. We love some drones.

Will it be the big 2012 presidential battle? Perhaps. The next year's election cycle is ramping up to be one of the most brutal, partisan contests in ages (OK, that's probably a bit much). Both sides have tons of vitriolic speech chambered in their throats. It is going to be ugly and depressing. I've got a stash of wine and whiskey to get me through the second half of the year.

No, it won't be those two. The next big political battle will be to accept the $1.2 trillion in cuts set up by The Budget Control Act of 2011. You know, the act that created the Super Committee and is supposed to help us reduce our deficit. That thing.

You see, U.S. Congress is trying to repeal the triggers. That's right! Politico reported they are trying to repeal the triggers on military spending, but I doubt they will get any support doing that. But, they might get support repealing all of the cuts. So, Congress made a law, the law's committee failed to do what was intended, so now they are backtracking. That's like when I tell myself I can't play video games until I finish my homework, but halfway through finishing my homework, I give up and play video games anyway. Nobody is policing me except myself, so why not break the rules anyway?

The great thing is Congress does have someone policing them. President Barack Obama said he will veto any attempts to repeal the triggers. This means Obama is saying, "You set up these rules and now I am going to make sure you follow them." Of course, Congress could just send someone to negotiate with Obama. I'm sure he would drop the veto threat and probably give them the family dog. He is just that good at negotiating.

I want Obama to stand by his threat, but I don't think the country and handle the triggers without revenue increases. As I have said time and time again, the triggers are going to push more workers into the private market and that is going to exacerbate job growth. That is mathematics people. More people looking for less jobs means higher unemployment. It isn't set in stone that it will happen, but it is fairly damn close.

It is an interesting moment now. The federal government failed to do something. Even when the Super Committee has ridiculous power (No amendments and no filibustering on its recommendation) they still couldn't get anything done. Does Obama take the hard line and make the country and Congress take its medicine? Or do we wait on the medicine and see if we can't find a different cure?

Who knows.

Playtime is over

So, the Super committee failed.

I had a plan, you know, to post here the day after it happened. To do my "told you so" dance while I sipped a glass of wine alone in my dark room.

But that didn't happen. Instead I'm sitting here still doing my "told you so" dance, but it lacks the gusto associated with doing said dance on time. And the glass of wine. Writing about the damn committee is so much easier with a bit of mental lubrication.

Oh well. You can't win them all.

Anyways, they failed and now the triggers that will slice $1.2 trillion from the budget over the next 10 years will go into effect in January 2013.

All of that doom and gloom (mostly gloom) I spoke of earlier will start kicking our ass two winters from now. To what degree will that ass kicking be? Well, $1.2 trillion over 10 years is about roughly $54.7 billion dollars from defense and domestic spending a year, according to Secretary of Defense Leon Panetta (I totally called this guy...OK, I'm lying) and The Washington Post (they did call him...I hope).

On the defense side: That means defense contracts will be nullified, civilian workers will be fired and they will scale back purchases. That last one isn't so bad, since we do spend more than -- oh I don't know -- the WORLD in military spending. (Ok, so it isn't the world, but Christ do we spend a lot of money on the military).

On the domestic side: This means less money given to Medicare payments. Meaning? Insurance companies and doctors will be reimbursed less for seeing Medicare patients. Less money for them means businesses that rely on heavy Medicare patients (larger hospitals) could see a drop in revenue.

More domestic goodies: Less money for infrastructure building, border patrol, EPA, IRS (eff those guys anyway), and National Oceanic and Atmospheric Administration. That last one is important. They play a big role at OU and give us a nice chunk of research dollars.

The time is here. Our Congressmen/women failed to put a deal together, so the guillotine they locked the public in for motivation is set to come crashing down. The problem? The blade is rusty and dull. It isn't going to cut through in one swift fall. It will have to take a few swings (10 to be exact) each year to finally make the cuts it wants to.

It is going to hurt. Once the triggers go into effect, people are going to get fired. Pay is going to freeze. Governments (which as much as Republicans don't want to admit it, DO employ people) will stop hiring while they layoff droves of workers.

It is going to get worse for 10 years before it gets better. Our economy hasn't been in the best health, but that doesn't mean we need to take its medicine away, and then punch it in the face for good measure.

There is no justification to make these cuts, and I dare any of you to tell my otherwise. Actually, I want you to tell me otherwise because this is what we are stuck with.

Homework: Privacy and ethics in an internet age

The booming era of the internet has posed one important question to the masses huddled over their keyboards, what is our reasonable expectation of privacy?

It is an even trickier question for journalists. Our realm is the public. We are constantly using the laws and rules allowing to gather public information lawfully (most of the time) in an effort to redistribute that information back to the people.

The rise of Facebook, Twitter and other social media goodies has unlocked a new journalistic cache of tools. Now we can look at what other people are thinking and doing in their respective social circles.

But journalists begin running into problems when trying to harness the potential energy of the information on display (sometimes locked) on social media websites.

Do we use the information to further our stories? It's for the public, right?

Or do we leave the information there, perhaps to be mined by another less ethical journalist.

The same mentality applied to physical world information gathering doesn't directly translate into the digital world. But a journalist's obligations to his/her sources does.

Bailey's responsibilities to Del Rocco is to protect her privacy as a citizen as much as possible while trying to get the information she needs for a story. Bailey was correct in approaching Del Rocco on Facebook (incorrect for not saying she was a reporter from the onset) and asking for an interview.

After that? If she says no, the journalist should either attempt to coax the source into talking or find other avenues to collect information without violating a reasonable expectation of privacy.

Can Bailey use the Facebook posts? If I was her editor, I would say no. This isn't a perfect metaphor, but I liken it to a conversation. Del Rocco's "friend" acceptance was like letting Bailey stand next to her while she talks to her friends. None of you would use something overheard in a conversation, so why use the Facebook posts?

Also, there are several factors Bailey needs to weigh before using the posts. What is the actual value to the readers in this situation? And that value, how does it weigh against protecting Del Rocco and her reasonable expectation of privacy?

Also, how in the hell do you even PROVE that Del Rocco is operating that Facebook account? The internet is the bastion of anonymity. Yes, it is REASONABLE to assume Del Rocco is operating that account based on the posts in the article. But if I am reporting on something as dire as murder allegations, any kind of assumption should be off the table.

As journalists we must remember that we are humans first and journalists second. From our conversations in class, you probably think I am some robotic asshole. Most of that is probably true, and I can always use a great element of humanity to draw me back in.

In our quest to get and tell stories we quickly forget to protect the people we are trying to help.

Using Facebook, Myspace, Twitter and other posts should only be done when that information is given to the reporter, or the publication of that information is in the public's supreme best interest.

Unless you are a public official, then your shit is fair game.

Crunch time

It is getting close to the end of the line for the supercommittee.

On Nov. 23, the committee has to vote on a plan to submit to Congress. The committee's plan must cut the deficit by at least $1.2 trillion.

(I've harped on this before, but a reminder never hurt anyone)

The Washington Post put together a great graphic to illustrate what the committee has to do.

A month after that (after the bill has been submitted to Congress and the public) Congress — oh the lovable Congress — will then have to decide on the bill.

The catch here is that Congress can't amend the bill and the Senate can't filibuster anything. That takes away the two major strengths of both the House and the Senate. So it's either a yes or no vote.

There are a few places here that the bill can hit a snag. As I have mentioned before, it is possible the supercommittee won't agree on a damn thing and nothing will be submitted to Congress. The triggers will take effect and the federal offices and private companies with government contracts will have to deal.

 The bill also could get caught up in Congress. Remember, we have a Republican House of Representatives and a Democrat Senate. It only takes one group to shoot it down.

It is possible President Barack Obama could veto the bill if it makes it to his desk. That's a stretch though because if both houses agree on the cuts it would be political suicide for Obama to actually take a stance (one of the few times he would in his presidency) and kill the bill.

There is still a long road to go. If I was making any bets, I would bet the supercommittee fails to put anything together and it doesn't make it out of committee.

There will be more political positioning as both parties attempt to blame each other for the failure (I bet some of the committee members lost their seats in the following elections).

I hope I'm wrong. The country's financial infrastructure needs to be changed. I just don't think the people we have elected to do it have the capability.

What numbers should we be afraid of?

A lot of focus has been given to the United State's debt. Politicians talk about it ad nauseam.

Have you ever thought about what they haven't told you about the debt? Well first, whenever they say the government is broke, that isn't true. Ten year U.S. Treasury bonds have really low interest rates, so other countries see the United States as a good investment and continue to give us money.

But, what should worry American's isn't the size of the debt, but the ratio of the debt to the U.S. Gross Domestic Product. The U.S.'s 2011 GDP estimate is $15.065 trillion. The projected deficit? Well, it is currently at $14,931,186,933.22. The deficit is roughly 99 percent of the GDP.

That's like saying someone that makes about $40,000 a year has a debt level of about $39,900. It would take the individual and the United States a whole year to pay off the debt by taking all available assets and diverting them to paying down the debt.

(Interestingly enough, while the U.S. is getting close to 100 percent debt vs. income [GDP is the defacto economic wealth statistic for countries] average Americans can have debt that doubles or even triples their income. A single mortgage of $90,000 almost doubles the 2010 median American salary of about $50,000.)

So, OK it is getting pretty bad. In fact, we might want to start worrying because countries begin to unravel around the time their national debt reaches 100 percent GDP, according to a report by NPR's Planet Money. However, an argument can be made that because the international currency is the dollar, the U.S. will last longer, but I doubt it will be much longer.

This is why we have to be careful when making budget cuts. Yes, budget cuts and reforms are needed, as are revenue increases. The reason? If the budget cuts happen to put a bigger strain on the economy and cause a recession anyway, it is possible the value of money cut will not be as great as the loss in GDP. If that occurs, sure the almost $15 trillion debt will recede. But, the debt to GDP ratio could remain the same, and still cause headaches for the country.

If we aren't careful, we could end up like Greece, which has a debt to GDP ratio of about 140 percent.

And if you have looked at the news at all, they aren't doing too hot.

This is the information our media and politicians should be given us. It isn't just about how HIGH the debt it is, but it is about how MUCH it is drowning us.

Why we need revenue increases

I hate to say it, but I told you so!

The Associated Press reported today something I alluded to a few weeks ago. The supercommittee is experiencing the same gridlocks that kept President Barack Obama and House Speaker John Boehner from reaching a compromise in the debt ceiling deal.

To summarize AP's report, the Democrats of the supercommittee won't pass a deal unless there are revenue increases on the table. Or, tax increases if you will. Republicans won't pass anything that has tax increases.

So, here we go again.

I'm pleased with this development for a few reasons:

First, I was right, which is always awesome.

Secondly, it shows that Democrats are standing by their desire to offset cuts with revenue increases. This may increase our taxes (students, public employees and the rich) but it is something that must be done to maintain our social programs.

Revenue increases must also be established to help the government reinvest back into the economy during a period of small growth and borderline recession.

You see, there was this guy named John Maynard Keynes.

Keynes developed the macroeconomic theory of Keynesian economics (of which I am fan). Keynes said that private sector was a good thing, but it could lead to inefficient market issues that would require the public sector (government) to step in and regulate the private sector or to stimulate the economy by pushing money into the hands of businesses or the people.

Now, I'm summarizing a bit here since Keynes theory could be studied for years and years -- and I'm not expert anyway -- but stay with me.

In today's "too big to fail" era of banks and corporations, the influence these entities wield is similar to the power John D. Rockefeller brandished in the late 1800's and early 1900's before his railroad abuses and monopolies were broken up by Ida Tarbell.

This power gives the banks and massive corporations like Wal-Mart and General Electric the ability to really influence the economy through politics and Wall St.

The most recent example of an abuse of this power was the 2008 financial collapse that was caused by banks lending money to at-risk borrowers (people that probably couldn't pay the loan back, but were told by the bank they could). The banks, which wield more capitalistic power than any private entity in the United States, kept creating these loans and creating these loans. Then, they would sell the loans to other banks for a decent profit, but promised the other banks the loans would pay off in the long run.

To add insult to injury, individual investors and big banks took out credit default swaps (which are bets that something will default or fail) at low interest. These swaps acted like insurance and if the bond of mortgages (at this point, hundreds of millions of dollars of at-risk home loans had been bundled together to be a more enticing purchase for the banks) were to fail and not be paid back by the borrower, the investor or bank would be able to collect a fee.

The only thing the swap purchaser had to do was pay a premium based on the size of the bond. These swap investors made BILLIONS of dollars when the housing market collapsed, which forced the banks to face collapse as well because the revenue they were generating on these loans was never paid back by the borrowers, according to multiple reports by NPR Planet Money and as detailed in Michael Lewis's book, The Big Short.

What happened if the banks were to have failed? Honestly, I don't know. Logic tells me the intricate borrowing patterns exhibited by the United States government, banks and consumers would have collapsed. Banks would have to drain their assets to pay back the credit default swaps and to pay for the at-risk loans they made with consumers. This would have forced the banking system to collapse. Consumers would have to pay absurd interest rates to borrow any money, and at worst, there may have been withdrawal rushes that were similar to the ones that happened in The Great Depression. The stock market would have crashed further it did and investors would have stopped buying into the U.S. economy.

Essentially, I vacuum  effect on the financial stability of the U.S. market would have destroyed the lives of typical consumers and Wall St. investors.

But, the U.S. government stepped in.

The bailout pushed government money back into the private sector and helped keep the banks from completely collapsing. It avoided a crisis, but it's difficult to determine if the banks learned their lesson from the experience. It's also hard to gauge the effect this bailout had on typical consumers.

I believe this proves that Keynes's theory has its merits. And the only way to continue reinvesting back into the economy during our financial crisis is to let the government play a role. Increasing revenues will give the government access to more funds to create work projects for unemployed citizens. It will help us build new roads and schools. It will let the government invest money back into education.

We haven't seen any hardcore numbers on tax increases, but it can't be more than $10 to $15 dollars paycheck. Isn't that worth helping get the economy back on its feet?

We can't rely on the corporations to do it themselves because if they can keep operating at record profits without having to create new jobs, what is there incentive to create those jobs?

Once the government has provided adequate stimulation to the economy and people are back to work and generating a salary, then the government can back off and let the market do its thing. Then they can lower taxes and look at ways to cut spending during a time of growth.



If you agree with this, what do you think the government should be investing in? There are issues that investment into education has not produced a increase in learning compared to dollars spent.