We’ve directed a lot of attention to the deficiencies of the House version of the highway bill ( here and here ). We must also work to defeat the Senate version, which is even worse. The 2-year $109 billion Senate bill ( S.1813 ) offers no reform to mass transit and continues to mandate that states use 10% of their funding for wasteful “enhancement projects.” As bad as the House bill is for conservatives, the Senate bill is absolutely indefensible. Yet, amazingly, it was reported out of the Senate Environment and Public Works Committee with unanimous support from Republican members last year. Last night, it was approved by the Finance Committee. The Senate bill will spawn even larger deficits in the long-run. Even for the two-year authorization period of the bill, there will be a $35 billion deficit between trust fund outlays and gas tax revenue. Both the House and Senate versions rely on drawing down all existing funds in the trust fund to cover some of the gap ( to the extent that those funds really exist outside of an accounting gimmick). However, there will still be a $13 billion shortfall over the next two years (and much more in the long-term). The House bill relies on new royalties from oil exploration (that will never be approved by Democrats), but the Senate bill relies on phantom savings (from revenues that are already used to offset other expenditures) plus…you guessed it; tax increases. After the EPW committee approved the underlying provisions of the bill, the Senate Finance Committee voted last night to approve $7 billion in sundry tax increases to fund this terrible bill. One of those provisions includes a tax hike on inherited “stretched” IRAs and 401(k)s. Here are the details from the horse’s mouth ( Baucus Chairman’s Mark ). Require Distributions of Inherited IRAs within 5 years . Under current law, holders of IRAs and 401(k)-type accounts are required to begin taking taxable distributions from those accounts once they reach age 70-1/2. However, they can stretch those distributions over many years if they leave their account to a very young beneficiary. When the account holder dies, the taxation of the account is then spread over the life of the beneficiary. The Chairman’s Modification would require the retirement savings accounts to be treated, for tax purposes, as distributed within five years of the death of the account holder, unless the beneficiary is the account holder’s age, a child with special needs or older than 70. This provision is estimated to raise $4.648 billion over ten years. Hence, if someone bequeaths a retirement savings account to his grandchild, the beneficiary will have to liquidate the fund within 5 years and pay full taxes on the distributions. This applies irrespective of how young the grandchild would be at the time of the grandparent’s death. This ridiculous bill also transfers some revenue on tariffs from imported cars to plug the hole in the trust fund. The problem is that this revenue is already accounted for and is used for other purposes. This bill merely spread the same money around and uses the savings for multiple expenditures; not unlike the effort to use “war savings” as pay-fors. The committee report passed with 17 ayes, 6 nays, and 1 present vote . Here is the breakdown of the vote: Ayes: Baucus, Rockefeller, Conrad (proxy), Bingaman, Kerry (proxy), Wyden, Schumer, Stabenow, Cantwell, Nelson, Menendez, Carper, Cardin, Snowe, Crapo (proxy), Roberts (proxy), Thune Nays: Hatch, Grassley (proxy), Enzi, Cornyn (proxy), Coburn (proxy), Burr (proxy) Present : Kyl (proxy) Snowe, Crap, Roberts, and Thune were the 4 Republicans who voted for this travesty. The full Senate will vote for cloture on the tax hiking, deficit-spending highway bill on Thursday afternoon. We must defeat both bills, especially the Senate version. Nevertheless, the House bill is almost as offensive. Once we agree to the premise that we must overspend the level of gas tax revenue purveying the trust fund, we will always be exposed to future tax increases and bailouts to bridge the gap. Call your Senators and tell them to vote no on cloture for S.1813 – the highway bill with tax increases. Cross-posted from The Madison Project [ Follow @RMConservative ]
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Alert: Senate Republicans Vote to Raise Taxes With Highway Bill
The Muslim Brotherhood persecutes Egypt’s Christian minority relentlessly then has the balls to complain about “Islamophobia.” (IkhwanWeb) — Dr. Mohammad Badie, Chairman of the Muslim Brotherhood (MB), received in his office Tuesday afternoon, Hervé Gaymard, France’s former Finance Minister and president of the French National Assembly’s Egyptian-French Friendship Group, Jean Felix-Paganon, the French ambassador in Cairo,
Wall Street Vampire? Or Just Another False Caricature? Mitt Romney has been depicted as a blood-sucking, Wall Street Vampire. If only that were the simple truth. Having an iniquitous personality would be better than the public persona he exudes right now. It would add a certain cache to his otherwise soporific blandwagon of a campaign. Newt Gingrich represents the anti-Romney persecution with a 28 minute political ad entitled “When Mitt Romney Came to Town.” The ad could be a Michael Moore “documentary” about E-VIL, Greeeee-dy, Rethuglicans snorting fine, Columbian Cocaine off the succulent rear-end of a hooker through rolled up $100 bills. Cicero was more fair and balanced in his indictments during The Cataline Conspiracy. Candidate Romney has predictably fired back with an ad that portrays Bain Capital as pretty much the good guys from The Lord of The Rings. His ad “Bright Future” paints Romney as a creator of wealth and jobs. It shows the names of hugely successful businesses that presumably would still be vending their wares out of pushcarts or bucket shops without the Benevolent Mittman. Like much we see in the heated skirmishes of a Presidential Primary, neither view of Bain Capital seems exactly steeped in the light of justice and truth. I’m not sold by either Mitt Romney or his opposition. I’ve tried to blog about this issue from the standpoint of a guy who just wants the fulsome, soiled laundry out of the gym bag so that it can be aired. Let’s settle this puppy in house, before David Axelrod tells America what to believe about this during next Fall’s Presidential Election. It would help to get some perspective on this not driven by Romney’s minions or detractors. Perhaps Fortune Magazine offers exactly that in a feature blog entitles “Fact or Fiction? Romney’s Private Equity Past.” Dan Primack, author of the Fortune Blog issues a statement outlining his purpose. “Mitt Romney is running for president as a “job creator,” based on his time as a venture capitalist and private equity investor at Bain Capital. Some of his rivals are beginning to accuse Romney of being more of a job destroyer, citing some of Bain’s more troubled investments.” ”So we’ve decided to keep track of who is saying what about Romney’s tenure at Bain, and about private equity in the context of presidential politics. More importantly, we’re going to tell you if the statements are true, sort of true or false.” He speaks out on several recent depictions of Romney’s role at Bain Capital. He begins with “When Mitt Romney Came To Town”. “Winning Our Future, a political action committee supporting Newt Gingrich, today released a 28-minute video titled ‘When Mitt Romney Came to Town.’ It focuses on the failures of four companies formerly owned by Bain Capital, and is so chock full of errors that it deserves its own post.” His post goes on to say: A) Unimac’s Florida plant was not closed until after Bain had sold Unimac to a different entity. He goes on to point out that Romney had stopped being a decision-making principal at Bain Capital five years prior to Bain’s sale of the asset and six years prior to Unimac’s plant closing. B) KB Toys was purchased one year after Romney left Bin in 1999. C) DDI Corporation was acquired under Romney’s watch. Romney and Bain acquired DDI in 1996, left the company in 1999. DDI Corp ran into trouble in 2000. However, contra-Primack, Romney isn’t completely in the clear because a 13D form suggests Romney was still involved in DDI as late as 2000. (Although not as a member of the Bain Board). So I’m not as willing as Mr. Primack to completely absolve Mitt on DDI as Primack does later in the post. Primack does not, however, paint a completely rosy picture of Romney’s activities at Bain. Primack takes issue with National Review Online for stating “Bain is involved in, among other things, leveraged buyouts, meaning that the firm and its investors borrow money from banks to acquire companies, usually firms that are in trouble but believed to be salvageable.” Primack notes factual discrepancies and omissions in the National Review Online Article. Primack points out the PE firms often arrange the finance so that they aren’t 100% on the hook if the deal goes Ka-Bloom! I take no great moral umbrage to them managing risk to avoid blowing themselves up. However, it is somewhat self-serving to claim Bain took on more actual risk than it really did. It sort of reminds me of a soldier that embellishes his old war stories a bit to look more heroic in front of the ladies. Primack further delves into this risk management issue and indicts National Review for not properly describing how Bain Capital took dividends out of money that they sometimes forced firms to borrow. This is a major and significant failure on the part of National Review Online. It also is worth noting that National Review completely ignored the issue of dividend recaps, which is the real issue that keeps getting glossed over because it doesn’t fit into a 30-second soundbite. Dividend recaps are when a private equity firm raises even more debt for an existing portfolio company, and then takes a dividend out of the debt proceeds (rather than from profits). That is how a private equity firm can profit on an investment whether the company later thrives or fails (although, typically, dividend recaps alone do not generate the type of returns that PE firms promise their investors). This issue needs to get aired out. If I were cursed by the gods with being Debbie Wasserman-Schultz for a fun-filled evening of barking at the moon and chasing parked cars, that’s the one I’d demagogue to the hilt. I’d talk about Romney eating these companies’ seed-corn like it was a box full of Cracker Jacks. Primack astutely and correctly points out: “Sometimes, however, such companies later fail and cite their heavy leverage load as a contributing factor. That is why Romney and Bain Capital are sometimes accused of profiting from bankrupting companies, even though that’s really some sloppy shorthand for what actually happens.” Believe you me, the Democrats running ads this Fall would cite heavy leverage load as a reason for these companies going under and tell you the personal life history of every line worker who was ever fired. Primack’s entire blog is long, detailed and well-researched. If you actually care about what happened when Mitt Romney came to town, Primack gives us about as good and as fair-minded a view of it as anyone else I’ve seen out there. No, Mitt’s still not charismatic enough to be Dracula. However, he’s not clear of Bain Capital by a long shot. The GOP voting public can and should demand of him more answers.
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Hero or Villain? Romney Under The Microscope At Bain Capital
To summarize : $92.6 billion in spending ( 7% increase over last year’s ); $9.2 billion deficit over eighteen months (half in the first six months, the other half in the next twelve). Brown is requesting $7 billion in new taxes, mostly from raising the sales tax again (to 7.75%) but with a faux-populist-friendly soak-the-rich* (actually, soak-the-small-business-owner) increase to 10.3%. Or the state can ‘cut’ an additional $4.8 billion in educational aid (he’s already planning to reduce poverty assistance by $4.2 billion): the most increased spending appears to be in tax relief/local government**… and education. In other words, that cut would actually be mostly in a projected increase in education spending, which means that it’s not really a cut at all. Or, to summarize the summary: Brown’s bailing out the municipalities; and he’s trying to blackmail the Californian populace into a tax hike to pay for it by threatening to wipe out an increase in K-12 education funds if they don’t vote said hike in. See how that works? Increase spending in a line-item; then call the threat to remove that increase a ‘budget cut’ and use it to justify a ‘temporary’ tax. It’s a great scam; or, rather, it was a great scam twenty years ago, when there was more give in the system. Today, it’s just kind of alarming. And, just for anybody still ready to believe in old Moonbeam: “Brown had been scheduled to release his general-fund budget Jan. 10, but was forced to unveil it today after it was inadvertently posted to the Finance Department’s website.” Oops. Moe Lane ( crosspost ) *Not to be rude about this, but California business owners should contemplate that, say, Texas has no state income tax and a state sales tax of 6.25%, with a maximum state/local tax of 8.25%. Which is one major reason why Texas now has four extra seats in Congress and California’s delegation has stagnated for the first time since it became a state. **But don’t worry! …The Legislative, Judicial, Executive line item in the new CA state budget isn’t going to take a hit, either .
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Gov. Jerry Brown’s (D, CA) new budget: more spending and higher taxes!
On Tuesday, the House Financial Services Committee passed , by a 52-4 margin, a bill designed “to stop future bonuses at Fannie Mae and Freddie Mac and suspend the current multi-million dollar compensation packages for the top executives.” The rest of the Committee’s press release on the bill: Earlier this month, the Federal Housing Finance Agency announced the CEO of Fannie Mae received $5.6 million in compensation and the CEO of Freddie Mac received $5.4 million. Under the bill, the top executives of Fannie and Freddie could only have earned $218,978 this year.
