This bill passed 98 - 0 in the senate.  This bill passed 403 -12 in the House.  Both major political parties are overwhelmingly in favor of this idiocy.

This bill does three major things.

The first thing this law does is extends unemployment benefits again.  The law extends unemployment benefits to in some cases 99 weeks (A record high amount of time in the US).  I oppose this change; however, there are many economists and think tanks who feel that increasing unemployment benefits helps the economy because it puts money in the hands of people who will immediately spend it.  This is done at a cost of a couple of billion dollars.  So while I disagree with this; there are a significant number of reputable economists and think tanks who feel this is helpful so lets ignore this small portion of the bill.

The second and third things this law does are the problem.  The two items below bring the cost of this bill to over 24 billion dollars. 

The second thing this bill does; and the one that honks me off the most, is it extends to 1st time home buyers credit through June 30th of 2010 as long as you have a contract signed by April 30th, 2010.  Further it extends the credit to people who have owned a home for five of the last eight years.  Further it raises the income limits on the people who qualify for the credit.  This credit is ABSURD and shows the Congress and the President have no understanding of basic economics.  This provision was opposed by large majorities of both liberal economists and conservative economists.  As far as I can tell the only groups in favor of this give-away are the mortgage industry and the real estate industry and the residential construction industry. There are several things going against this bill:

The IRS has already opened over 107,000 civil investigations into the 1st time home buyers credit.  They have done this because the credit is rife with fraud.

The IRS has reported that at least 582 children claimed the credit; several of them were as young as four years old…  Imagine a four year old buying a house.

The IRS has opened 167 criminal investigations due to suspected fraud.

The IRS is starting to investigate fraudulent claims to such a large extent that it is taking 12-16 weeks for taxpayers to get the tax credit sent to them at this point.

According the the National Association of Realtors the tax credit will cause 350,000 homes to be purchased by November 30th, 2009 that otherwise would not have been purchased.  Goldman Sachs thinks this number is high and feels that the credit only cause 200,000 homes to be purchased by November 30th, 2009 that otherwise would not have been purchased.  In other words the original tax credit that is about to expire cost you and I (and our kids) between $43,000 and $80,000 per additional house that was sold.  This has to be paid back with interest.

There is no possible justification for the extension of this tax credit.  Even the New York Times opposes it along with numerous liberal and conservative think tanks.  Between 80% and 90% of the people who get the tax credit would have purchased a home ANYWAY.

The third part of this bill is a provision that allows businesses in some cases to take losses they have in 2008 and 2009 and roll them back for a period of up to five years.  This will mean the IRS will have to refund taxes these companies previously had already paid in.  This makes our current tax code even more complicated.  

Good Grief…

Mike Sylvester

Now we have to hope that the Senate defeats this socialist bill…

Good Grief…

Mike Sylvester

The state’s finances are so bad that they recently enacted a law that puts in place new state with-holding tables in California as of November 1st, 2009.  These with-holding tables require employers to with-hold 10% more from each employees pay for California with-holding tax as of November 1st, 2009.

The State of California keeps telling its citizens that this is NOT a tax increase; instead, it is an interest free loan from the taxpayers of California to the California state Government through with-holding taxes.

From a technical standpoint the state of California is correct; however, I wonder how the voters of California will feel when their next paycheck is lower than the previous one? 

Can you even imagine living in a state where they would increase your state with-holding taxes in order to force you to give you state an interest free loan?

Does anyone reading this post think that California did the right thing?

Mike

I have not yet formed a strong opinion about this issue except the following:

I find it surprising that the City of Fort Wayne started this process so near the end of the current lease.

I find it surprising that neither I&M nor the City of Fort Wayne made it a priority to renogotiate what would happen at the end of a 35 year lease until a few months before the end of said lease…

What do the readers of this blog think about this issue?

Mike

Each year Social Security recipients get an increase in benefits if there is inflation.  In 1975 these adjustments were made law and are automatic each year.  For some STUPID reason they also passed a law saying that Social Security benefits can never decrease.  In other words in years where the general price levels drop Social Security recipients get the same amount of money as the prior year. 

This year there is no inflation so there will be no increase in payment to Social Security recipients next year…

The idiots in Washington DC have decided that they want to make a second round of $250 payments to seniors, veterans, railroad workers, and people with disabilities.  The cost to the taxpayer would be about 13 billion dollars.

This is 100% wrong and I bet it passes with bi-partisan support…

The 13 billion will have to be borrowed by the Federal Government (Will sell more Treasuries)  and this 13 billion will be paid back with interest by current and future taxpayers.

Consider the following from the 2009 Trustee Report for Social Security and Medicare:

“Projected long run program costs are not sustainable under current program parameters.

To sustain Medicare and Social Security for the next 75 years alone (The programs become even less sustainable after 75 years) the following would have to occur:

Increase medicare payroll taxes from 2.9% to 6.78% OR

Reduce benefits by 53%

To sustain Social Security over the next 75 years (The program also becomes less sustainable after 75 years) the payroll tax would have to be immediately increased from 12.4% to 14.4% or benefits reduced by 13%.

This country is on an unsustainable path and has been for a long time.  It does not seem to matter which Party is in charge; they both just keep “kicking the can down the road” to future generations.

Both of these programs are financially unsustainable.  There is no way on this planet that either Party will ever cut benefits in either program; neither has the courage to do what needs to be done.  The only way they will cut benefits is they will eventually means test social security and not pay it to the wealthy.  That move will do little to make the program more solvent…  They also MAY increase the retirement age; however, I am not sure they have the courage to do that either…

What will happen is that payroll taxes will increase.  This will cause employees to be paid less and will cause employers to pay higher payroll taxes.  Both events will hurt the economy as the former will cause consumer consumption to decrease and the latter will increase the cost of doing business in the United States and cause even more jobs to flee this country.  This can best be shown with an example.  Lets say you are employed in Fort Wayne and are paid $50,000 per year for your hard work.  Lets say Congress decides to make both Social Security and Medicare financially solvent for the next 75 years (Taxes would have to increase even more in 75 years) by increasing payroll taxes as outlined above.  The following would happen to your take home pay:

Before the change your employer already with-holds $3100 of your salary and remits it to Social Security.  Your employer then takes $3100 of its own money and MATCHES your payment to Social Security.  After the above change your employer would with-hold $3600 of your salary and match that amount.

Before the change your employer already with-holds $725 of your salary and remits it to Medicare.  Your employer then takes $725 of its own money and MATCHES your payment to Social Security.  After the above change your employer would with-hold $1695 of your salary and match that amount.

So in aggregate the following would happen:  You would take home $1470 less home per year of your $50,000 salary.  This means you would spend less money in the economy which would cause consumer consumption to decrease which would in turn cause GDP to contract.  $1470 per year is a lot of money to someone who makes $50,000 in gross salary per year.  Also please remember that your employer would also have to take an additional $1470 per year for you and send it to Social Security and Medicare.  This would increase their cost of doing business and lower their profits.  This would in turn cause the company to contract and spend less.  This would cause GDP to contract and more jobs to leave this country.

This change would have to be made as of January 1st, 2010 to make the social security and medicare systems solvent for the next 75 years if you believe the projections provided by the Trustees of these organizations.

Note the effect this would have on Government as well.  Several million people work for various Government organizations in this country; these employers would have to pay these increased taxes as well.  Imagine what would happen to the Fort Wayne City budget if the City had to come up with the money to pay these increased payroll taxes!

The idiots in Washington needs to get serious about our fiscal future and stop “kicking the can down the road.”

That being said; they won’t.

Mike Sylvester

While the 13 billion would not come out of either program (It would instead come from the General Fund) this illustrates that neither Party has the will to fix either program.

A HUGE financial crash is coming down the road.  It will make the most recent turbulence look rather minor…    

Mike Sylvester

The race is between Bill Owens - a somewhat moderate Democrat, Dierdre Scozzafava an extremely liberal Republican, and Bill Hoffman running on the Conservative ticket.

First you have to realize that New York has multiple political parties, the Conservative Party in New York is relatively strong for a third party.

Next you have to realize that the Republican nominee was chosen by a few Republicans who appointed her to run.  She is extremely liberal; in fact, she is widely considered to be more liberal that Bill Owens who is the Democrat in the race…

The National Republican Party and many Republicans supported Scozzafava in the race; however, Sarah Palin and several other conservatives have backed the Conservative Party candidate over the Republican.  Note this is exactly what conservatives need to do.  

I am sick and tired of seeing Republicans support big Government and Liberal Republicans like Arlen Specter from Pennsylvania (Who finally became a Democrat this year). 

Today Scoffafava dropped out of the race.  She will still be on the ballot; however, she is telling her supporters they can vote for one of the other two candidates.  Interestingly enough, she did NOT endorse either candidate.

I hope that Conservative Party Candidate Hoffman wins this coming Tuesday and that he wins big.  That would send a message to “country club Republicans,” big government Republicans,” and “liberal Republicans” that they need to clean their act up or be challenged in the primary or even General Election by conservative candidates.

Go Hoffman!

Mike Sylvester

State law requires her position to be filled by a vote of Democratic precinct committee members from Wayne Township. So if you’re a Democrat in Wayne Township and want to serve on the board then now is your chance - although one might question your sanity given the board’s history of infighting…

I personally think we have entered a period that will be similar to the “lost decade” in Japan.

In other words I think wages will be stagnant, unemployment will remain high, the stock market will not recover to peak levels, the dollar will continue to fall, Government debt will continue to pile up, etc.

I think that the Government will keep pouring money into big banks, Fannie Mae, Freddie Mac, etc. I think that the crash in Commercial Real Estate will start to resonate throughout the economy.  I think everyone will soon realize that most Government and many Private pension plans are broke.  I think Citi will file bankruptcy even after getting huge amounts of money from the misguided TARP plan, etc…

What do the readers of this blog think?

There was ~$460k cut from the administration’s proposed budget. The bulk of this was reducing city employees’ raise from 1.5% to 1%. They also voted to eliminate two neighborhood area advocate positions as well as their own part-time research assistant.

In the end I don’t think this budget cut nearly enough considering the revenue reductions we’re going to see over the next 2 years. I think giving city employees a raise in this economic climate is an outrage but given the lack of support for serious cuts the 1% compromise was the best council could do.

The council’s plan seems to be to spend down a portion of the city’s $23 million in cash reserves once the revenue starts declining. I certainly applaud that but there’s still a chance there will be major structural deficits remaining that can only be addressed through cuts and/or a tax increase. Furthermore, I don’t believe this administration will ever be willing to spend down a significant amount of those cash reserves. City controller Pat Roller is too influential and it makes her job much easier to maintain them so I’ll believe it when I see it.

Remember the horrors that we were all going to experience by cutting so much from last year’s budget? Did anyone even notice? Now some of this is due to the diligence of city employees who are doing more with less. But let’s be honest too, some of this is built-in fluff that always makes up a portion of any budget. Seeing how they are spending our money at time when we all need it the most I think the prudent decision would be to continue making cuts until we hit our pain threshold.

Do we really need consultants for gambling and I&M studies and whatever else is getting paid that we don’t know about? Can the city live with less tree trimming and leaf pickup and audit department? Do we need to spend millions of dollars in interest and bond fees for every project that comes along? Does our mayor need to make more money than every other mayor in the state - are we really buying any value for that?

I guess you know you came to a good compromise when nobody is happy. City employees, the mayor, taxpayers - I doubt anyone is too thrilled with this budget…

I found the retort by Deputy Mayor Purcell to be rather presumptuous. I mean whose to say that the $60k cut wouldn’t be to eliminate his salary. After all, a city this size probably needs a legislative liaison more than we need a deputy mayor. Hell, we pay the mayor $120k+ (more than any other mayor in the state) - can’t he come to council and argue for his own budget? He has 2 PIO staff, numerous department heads, a legislative liaison and 4 neighborhood advocates - why in the world do we need yet another layer of management called “deputy mayor”?