Looming Government Shutdown Reminds Us That Congress Is Not A Business
It’s become common to bash large public institutions with the phrase, “if I ran my business the way they run [government/public schools/whatever], I’d be bankrupt.”
Maybe so. But Congress and law making are not businesses (the high-cost business of campaigning and lobbying aside). And public schools are not businesses, either.
Still there’s a tendency to think that putting corporate executives or small business owners in leadership positions at public institutions will somehow make those entities profitable or successful. That accounts for the election of some businesspeople to Congress, and the appointment of former magazine magnate Cathie Black as New York City schools chancellor.
Just a few months after her appointment by New York City Mayor Michael Bloomberg, Black is out. It was hardly a surprise, her approval rating among city residents had been an anemic 17 percent, according to a Quinnipiac University poll released last month. She had made some foolish comments, such as suggesting that birth control was the solution to schools overcrowding, and she upset some parents with her proposal to install an “elite” new high school inside an existing Park Slope high school.
Black had no education experience, which might have contributed to her troubles. She may be great at bottom-line decisions, but such calculations are nearly impossible in a public school. You can’t fire your students to improve your graduation rate. You can call a school “failing” for not reaching certain testing standards, but the school can’t do anything about the challenges–such as poverty, substance abuse in the home, or language barriers–that make certain student populations more difficult to teach.
And ironically, the business model on Wall Street doesn’t follow the market approach being imposed on schools. Financial big-wigs who helped run the economy into the ground got big bonuses, despite their poor performance. Their businesses weren’t closed for incompetence; they were given government bailouts. There is indeed an argument to be made that letting those businesses fail would have done tremendous damage to innocent parties, such as people whose IRAs are dependent on the performance of stocks over which they have no control. So why are schools not given the same “business” courtesy?
The same goes for the federal budget. Sure, one couldn’t run a business budget in the same way. But then, the government can’t fire Social Security recipients. It can’t–not without planning and consensus–decide to shutter “underperforming” enterprises such as the Afghan war. The government is meant to take care of everyone, to some degree, and unlike a business, the government can’t pick and choose which customers to target.
As stubbornness in Congress threatens a government shutdown, lawmakers tethered to a business model approach should remember their roles. A CEO or small business owner can dictate; a House member is one of 435 and must accept the needs and perspectives of the rest of the chamber. Businesses can price items high enough to cut out low-income consumers. Government has an obligation–though to what degree is a valid discussion–to protect the neediest. Having former businesspeople in Congress provides a valuable perspective in a diverse institution. But Congress is not a business.
By: Susan Milligan, U.S. News and World Report, April 7, 2011
Tea Party Budgeting: Everyone Doesn’t Deserve A Fair Shot
Three lessons I’ve learned from Tea Party budgeting:
1. Charles Lightroller was a chump.
Lightroller was the second mate on the Titanic. Legend holds that no one enforced the command to allow women and children to board the lifeboats first more rigorously than he did. Some call him a hero. But not me. That’s because I, like Rush Limbaugh, think Paul Ryan’s budget is “wonderful.”
And how could you not? Ryan surveys the budget battlefield and here’s what he sees: on one side, an onrushing horde of seniors, working people, and the disabled. On the other, defenseless corporations and their affluent compatriots prancing like happy kittens amongst the flowers. In the face of such forbidding odds some might duck, but Ryan strides onto the field of play and bravely interposes himself between the conflicting parties, prepared to defend the defenseless come what may.
Here’s what that looks like: Medicare, the health program relied on by millions of seniors, is replaced with a benefit guaranteed to fall further and further behind the actual cost of healthcare. Medicaid (healthcare for people with low-incomes) sustains deep cuts. But tax rates on corporations and the highest earners are lowered, while subsidies for oil companies remain untouched. Truly a profile in courage.
2. Pell Grants are destroying America.
I feel badly for not recognizing it, but it seems so obvious now. Freeloaders figured out how to get free food, free housing, and free electricity years ago, but they’ve never been able to reach the Holy Grail: free Biology of the East African Mud Turtle 101. Until now. “You can go to school,” warns Rep. Denny Rehberg of Montana, “collect your Pell Grants, get food stamps, low-income energy assistance, Section 8 housing, and all of a sudden we find ourselves subsidizing people that don’t have to graduate from college.”
Welfare cheats scheming to take the college courses of their dreams? (And then not graduate!) It’s an outrage. How many of them are sitting in a college cafeteria right now snickering over a steaming plate of American Chop Suey? (Purchased with food stamps, natch.) “It’s turning out to be the welfare of the 21st century,” Rehberg says. Talk about getting schooled: that’s got to be one of the smartest theories I’ve ever heard.
Of course, it’s not just Pell Grants that are so nefarious. It’s Head Start too, and Medicare, and Medicaid, and …(hence, Lesson 1 above).
3. Better than Government? Fairies.
A signal question in American political life today is: when things go wrong, what role, if any, should government play in trying to make things right?
We seem to have settled on some answers. When we’re to blame for the bad things that happen, we’re on our own. The same is true when we do our best but lose fair and square. But what about when people encounter difficulties through no fault of their own and in a way that offends our sense of fairness? A kid who’s born into a family without the means to send him to a good school, or a mother who works hard every day but loses her employment because global economic forces are moving manufacturing jobs to other countries? Should government lend a hand in those kinds of cases?
The Ryans and the Rehbergs conceive of a government that does so less and less. They say the benefit of helping the disadvantaged is outweighed by its expense. What they don’t say is what happens to people who no longer can rely on needed government assistance. Perhaps magical fairies come along, wave their magic wands, and everyone who used to get a Pell Grant can still go to college, only this one is taught by chocolate bunnies! And all those people who can’t afford healthcare anymore? It’s OK. They’re now living in a cottage made entirely of gingerbread!
Let me be clear: there’s every reason to be serious about reducing the budget deficit. Political leaders on both sides of the aisle should be open to good faith ideas that emanate from anywhere on the political spectrum. But it’s reasonable to ask whether using concern over the deficit as an excuse to accomplish purely ideological goals can be considered serious.
Democrats agree that the private sector should be the engine that drives our economy and that we need the discipline to cut government programs that aren’t working. But there’s something else we believe that sets us apart from the Tea Partyers: there’s a promise inherent to the American free market system that says everyone deserves a fair shot, and that promise goes unfulfilled when people are disadvantaged by forces beyond their control and we all stand by and do nothing about it.
In other words, bring back Charles Lightroller. Boy, do we need him.
By: Anson Kaye, U.S. News and World Report, April 7, 2011
Implosion: Paul Ryan’s Radical, Ridiculous, Rip-Off Roadmap
While the process of crafting a budget plan for this fiscal year implodes under the weight of GOP intransigence, today also happens to be the day next year’s budget fight begins in earnest. And if you think the current fight is a mess, prepare to have Republicans take your breath away.
And if you’re a disabled senior on Medicaid, relying on an oxygen tank, that expression should probably be taken literally.
Today, House Budget Committee Chairman Paul Ryan (R-Wis.) unveils his plan for fiscal year 2012. He promised a truly radical approach to our entire system of government, and he wasn’t lying — Ryan’s budget is based on his radical “roadmap” and effectively rewrites the American social contract.
Medicare would be eliminated and replaced with a voucher system. Medicaid would be gutted and sent to the states as a block grant. The Affordable Care Act would be scrapped, tax rates on corporations and the wealthy would be slashed, and all told, Ryan’s plan intends to slash roughly $6 trillion from the federal budget over the next 10 years.
This is madness.
There’s obviously no way Democrats in the Senate or the White House will even consider such extremism, but House Republicans don’t much care. This is the plan they want; this is the plan they’ll pass; and this is the plan that will set a truly ridiculous benchmark for future negotiations. If a shutdown seems inevitable this week, wait until the House GOP votes to eliminate Medicare as part of their next budget pitch.
Those of us hoping the chattering class will recognize the Republican plan as extremist nonsense are likely to be disappointed. David Brooks gushed today about the radical roadmap.
The country lacked that leadership until today. Today, Paul Ryan, the Republican chairman of the House Budget Committee, is scheduled to release the most comprehensive and most courageous budget reform proposal any of us have seen in our lifetimes. Ryan is expected to leap into the vacuum left by the president’s passivity. The Ryan budget will not be enacted this year, but it will immediately reframe the domestic policy debate.
His proposal will set the standard of seriousness for anybody who wants to play in this discussion…. Paul Ryan has grasped reality with both hands. He’s forcing everybody else to do the same.
Jonathan Zasloff’s point-by-point takedown of the Brooks column is worthwhile, but my biggest fear is that the D.C. establishment will start to assume that Brooks is correct. He’s not. Ryan’s budget plan is stark raving mad.
“Courageous”? To the extent that a major political party and House majority is actually willing to rally behind such extremism — without a hint of shame or trepidation — I’ll gladly give Republicans credit for actually putting their ridiculous wish list on the table.
But in this context, real, meaningful courage requires sound judgment, not just a willingness to fight for millionaires and corporations, while screwing over the elderly, the poor, the disabled, and working families.
By: Steve Benen, Washington Monthly, April5, 2011
Don’t Try This At Home But, How You Can Pull A General Electric On Taxes
There’s been a firestorm this week over the news that General Electric will pay no tax—at least, no federal corporate income tax—on last year’s profits.
But if you’re like a lot of people, your first reaction was probably: “Hmmm. How can I get that kind of deal?”
If General Electric pays close to zero in Federal Income taxes, can you? Brett Arends tells Kelsey Hubbard how even a “regular Joe” can lower their tax bill, especially if they are self-employed.
You’d be surprised. You might. And without being either a pauper or a major corporation.
I spoke to Gil Charney, principal tax researcher at H&R Block‘s Tax Institute, to see how a regular Joe could pull a GE. The verdict: It’s more feasible than you think—especially if you’re self-employed.
Let’s say you set up business as a consultant or a contractor, something a lot of people have been doing these days. And, to make this a challenge on the tax front, let’s say you do well and take in about $150,000 in your first year.
First off, says Mr. Charney, for 2010 you can write off up to $10,000 in start-up expenses. (In subsequent years it’s only $5,000.)
Okay, let’s say you claim $7,000. That takes your income down to $143,000.
You can also write off all legitimate business expenses. Mr. Charney emphasizes that this only applies to legitimate expenses.
He didn’t say, but everyone seems to understand, that this can be quite a flexible term. Even if you buy a computer, a cellphone and a car primarily for business use, you can use them for personal purposes as well. If you happen to take a business trip to Florida in, say, January, no one is going to stop you from enjoying the sunshine or taking a dip in the pool.
So let’s say you manage to write off another $10,000 a year in business expenses.
That brings your income, for tax purposes, down to $133,000.
You’ll have to pay Medicare and Social Security taxes (just like GE). Because you’re self-employed, you have to pay both sides: the employee and the employer. That will come to about $19,000.
However, you can deduct half of that, or $9,500, from your taxable income. So that brings your total down to $123,500 so far.
Now comes the creative bit. The self-employed have access to terrific tax breaks on their investment and retirement accounts. The best deal for many is going to be a self-employed 401(k), sometimes known as a Solo 401(k).
This will let you save $43,100 and write it off against your taxes. That money goes straight into a sheltered investment account, as with a regular 401(k).
Why $43,100? That’s because with a Solo 401(k), you’re both the employer and the employee. As the employee you get to contribute a maximum of $16,500, as with any regular 401(k). But as the employer you also get to lavish yourself with an incredibly generous company match of up to 20% of net income.
Yes, being the boss has its privileges. (And if you’re 50 or over, your limit as an employee is raised from $16,500 each to $22,000.)
You can save another $10,000 by also contributing to individual retirement accounts—$5,000 for you, $5,000 for your spouse. If you use a traditional IRA, rather than a Roth, that reduces your taxable income as well. If you’re 50 or over, the limit rises to $6,000 apiece.
If you contribute $43,100 to your Solo 401(k), and $10,000 to two IRAs, that brings your income for tax purposes down to just over $70,000.
We haven’t stopped there either, says Mr. Charney.
Now come the usual itemized deductions. You can write off your state and local taxes. Let’s say these come to $10,000.
You can write off interest on your mortgage. Call that another $10,000. That’s enough to pay 5% interest on a $200,000 home loan.
That gets us down to about $50,000 And we’re not done.
If you’re self-employed, health insurance is probably a big headache. But the news isn’t all bad. You can write off the premiums for yourself, your spouse, and your kids.
And if you use a qualifying high-deductible health insurance plan—there are a variety of rules to make sure a plan qualifies—you get another break. You can contribute $3,050 a year into a tax-sheltered Health Savings Account, or $6,150 for a family. You can write those contributions off against your taxable income. The investments grow sheltered from tax. And if you spend the money on qualifying health costs, the withdrawals are tax-free as well.
So call this $10,000 for the premiums and $6,150 for the HSA contributions. That gets your income, for tax purposes, all the way down to about $34,000.
If you have outstanding student loans, you can write off $2,500 in interest. And you can write off $4,000 of your kid’s college tuition and fees.
Then there’s a personal exemption: $3,650 per person. If you’re married with one child, that’s $10,950.
Taxable income: just under $17,000. That’s on a gross take of $150,000. You’d owe less than $1,700 in federal income tax.
And it doesn’t stop there. Because now you can bring in some of the tax credits. Unlike deductions, these come off your tax liability, dollar for dollar.
GE got big write-offs related to green energy. There are some for you too, although on a small scale. You can claim credits for things like installing solar panels, heat pumps or energy-efficient windows or boilers in your home. Let’s say you use a home equity loan to pay for the improvements and take the maximum $1,500 write-off.
That gets your tax liability down to $200.
Can we get rid of that? Sure, says Mr. Charney.
If your spouse spends, say, $1,000 on qualifying adult-education courses or training programs, you can claim $200, or 20% of the cost, in Lifetime Learning Credits. (The maximum is $2,000.)
That wipes out the remaining liability.
Congratulations. You’ve pulled a GE. You owe no federal income taxes at all.
OK, it’s just an illustration. Few will be quite so fortunate. On the other hand, it’s not comprehensive either. There are plenty of other deductions and credits we didn’t mention. You could have written off up to $3,000 by selling loss-making investments. Your spouse may be able to use a 401(k) deduction as well. There are lots of ways to tweak the numbers.
In this case, you’ve paid no federal income tax, and meanwhile you’ve saved $19,000 toward your retirement through Social Security and Medicare, and $53,000 through your 401(k) and IRAs. You’ve paid most of your accommodation costs (that is, the interest and property taxes on your home), covered your health-care costs and quite a lot of personal expenses through your business account, paid $4,000 toward your child’s college costs and had about $2,000 a month left over for cash costs.
Who says GE has all the fun?
By: Brett Arends, The Wall Street Journal, April 1, 2011
Share This Blog
Unknown Feed- An error has occurred; the feed is probably down. Try again later.
mykeystrokes.com 