Economy & Budget

Keep taxes low and rein in government spending

As we approach the tax filing deadline on April 17, we see how much the government and taxation have grown in America. There is no question we need to lower taxes for all hardworking Americans, from our job creators to our friends and neighbors who have fallen on hard times. Excessive regulation and taxes are a deterrent to business expansion and income.
The president’s solution to economic recovery is the opposite. In his budget he is proposing $1.5 trillion in new taxes. His plan would raise tax rates across the board on small business owners and entrepreneurs. Job growth will be stifled if the government is acting as a roadblock to the job creators.
One example of the crushing new tax burden that the Obama Administration is trying to implement is the president’s health care law. The nonpartisan Congressional Budget Office has warned that the IRS will need up to $10 billion to implement the law over the next decade. Recent reports indicate that the administration is shifting half a billion dollars to the IRS already to implement the health care law. This expansion of the IRS’ power and reach into hardworking taxpayers’ daily lives has hit a new high and will now include a verification system that you have acceptable health care coverage, penalizing you if you don’t and increasing audits.


Credit rating companies and the FICO need more oversight

The recent downgrading of government bonds in the US and several European countries has focused attention on three major rating agencies: Standard & Poor’s, Moody’s and Fitch. While the EU and others have faulted those companies for their lack of transparency and potential conflicts of interest, the three major bureaus that rate individual credit (Equifax, TransUnion and Experian) have largely escaped scrutiny.

That may soon change as the new Consumer Financial Protection Bureau (CFPB), established under the 2010 Dodd-Frank legislation, assumes its oversight role.

In it's report of last July (“The Impact of Differences Between Consumer and Creditor-Purchased Credit Scores”), the CFPB criticized scoring systems that provided scores to lenders that were different from the ones disclosed to consumers. Good, but not good enough. Deficiencies in the credit rating process go much deeper. They raise important questions of transparency and extend to the Fair Isaac Corporation (FICO) rules and their implementation.


Access to capital: The key to unleashing small business hiring

By signing the Jumpstart our Business Startups (JOBS) Act into law April 5, President Obama signaled that both he and the U.S. Congress agree on stimulating U.S. job creation: entrepreneurial small businesses hold the key to our national economic engine, and they won’t start hiring again until they have access to capital. We can all embrace the goals within the JOBS Act and the overwhelming bipartisan support it received -- not to mention some ideas within that are downright innovative.

The timing could not be better. Numerous economic indicators suggest that the recession should be over: Stock prices are surging, gas prices are rising, unemployment is down, and hiring is up. But we simply will not fully rebound until small businesses recover.


Washington's status quo is bankrupting our nation

Washington's addiction to spending has placed our nation on the same perilous road as Greece. In fact, the United States recently joined Greece on the short list of seven nations with debt exceeding total economic output. Our national debt went from $10 trillion in 2008 to $15.6 trillion today and is projected to reach $26 trillion in 10 years.

It seems that Washington never runs out of ways to waste taxpayers' money in breathtaking fashion. Consider the following:
        - It was disclosed last week that a federal agency (the General Services Administration) held an $800,000 five-day conference at a resort in Las Vegas that included a mind reader, a clown and $147,000 in catering fees. The mind reader was paid $3,200. The clown's fee was not reported. 


No one is being paid $2.13

In a recent op-ed, Saru Jayaraman of the Restaurant Opportunities Center (ROC) offered readers of The Hill her version of the truth on the federal cash wage for employees who earn additional tip income: “If there is anything we should all be able to agree on, it’s that in 2012, no one should be paid $2.13.”
I’m happy to report to concerned readers that, in 2012, no one is being paid $2.13.


Playing politics with food stamps

Two weeks ago, the House Republican Majority passed a budget – embraced by their likely presidential nominee, Mitt Romney – that, among other things, slashes deeply into the social safety net and ends the Food Stamp program as we know it. Their budget cuts food stamp funding by at least $133.5 billion, or 17 percent, over ten years, meaning over 8 million men, women, and children could be cut from the program. It also attempts to convert our most important and successful federal anti-hunger program into a woefully inadequate block grant that would be incapable of responding to downturns in the economy or the needs of American families.
This is not the direction we should be moving in. In the words of President Harry Truman, "nothing is more important in our national life than the welfare of our children, and proper nourishment comes first in attaining this welfare." And in this economy, child poverty, child hunger, and food insecurity have all been on the rise, and middle-class and working families are working harder than ever to make ends meet. In 2010, nearly 15 percent of American households were food insecure. This means nearly 50 million Americans, including over 16 million children, face the real risk everyday of going hungry.  


Achieving affordability: A smarter approach to the Pentagon budget

Pentagon budget cuts create difficulties for everyone along the U.S. Department of Defense value chain, from customers, contractors and suppliers to congressional appropriators and Wall Street investors. These pressures are forcing the government and its suppliers to dramatically challenge the status quo. On Capitol Hill, members of Congress are seeking ways to make smarter national security investments.

Unfortunately, those on the defense acquisition as well as development, production and sustainment sides are ill equipped either to meet today’s new budget-pressure realities or address the many other changes that demand greater transformation of the value chain.


Cliff-hanger end to 2012 awaits

At the end of 2012 and the beginning of 2013, many major fiscal events are set to occur all at once. They include the expiration of the 2001/03/10 tax cuts, the winding down of certain jobs provisions, the activation of the $1.2 trillion across-the-board “sequester,” an immediate and steep reduction in Medicare physician payments, the end of current AMT patches, and the need to once again raise the country’s debt ceiling.


Don't raise shipping costs for Minnesota businesses

Like any business, Minnesota farmers and utilities have a wide range of costs they have to manage in order to be successful. From seed and fertilizer to labor and equipment, getting a fair price can mean the difference between profit and loss. But a decision currently being considered in Washington could result in an unfair hike in the costs our farmers and other businesses face for shipping their goods to market, and each of us would get stuck with the bill.

Let me explain. In 2010, the hugely successful investment fund Berkshire Hathaway purchased Burlington Northern Santa Fe railroad (BNSF). As part of that multi-billion dollar deal, Berkshire Hathaway agreed to pay a so-called “acquisition premium” of $8.1 billion above the railroad’s fair market value.


The Sound Dollar Act: A worthwhile debate in Congress

On March 8, 2012 Republican Congressman Kevin Brady of Texas proposed the Sound Dollar Act of 2012. The central focus of the legislation is to change Fed from a dual mandate system charged with promoting both maximum employment and price stability, to an institution solely focused on promoting price stability. However, Mr. Brady includes a variety of other interesting and substantive provisions in the legislation. With no illusions about this legislation passing through both chambers of Congress and receiving the Presidential signature of approval, Mr. Brady clearly designed many of these provisions, “to start a thoughtful debate.” So, that debate begins here.

The central tenet of the legislation, to end the dual mandate in favor of a single price stability objective, would bring the Fed in line with most other central banks in the world. However, taking away the explicit mandate to deal with employment, while unemployment remains over 8%, is extremely unlikely to be popular with constituents. Moreover, the legislative language implies that the Fed should adopt a hard inflation target, as opposed the current soft target, which could have disastrous consequences. While a soft inflation target provides little additional information to the markets, a hard target sets up the central bank to fail. If the Fed misses a hard target, it loses credibility in the markets and the target becomes functionally worthless.