by | BLOG
From PJMedia
“Emails released today by the House Government Oversight and Reform Committee show that Rep. Elijah Cummings (D-MD) has some explaining to do. The emails show that Cummings and the IRS were asking for nearly identical information from election integrity watchdog True the Vote. Further, the emails show communication as Lerner was feeding information to Cummings and his staff.
The communication occurred in 2012, before the public was ever aware of the ongoing and widespread IRS abuse of Tea Party and conservative groups. In a press release detailing the newly delivered emails, committee Chairman Darrell Issa asks Cummings to answer for himself”
You can read the full exchange here
by | ARTICLES, BLOG, ECONOMY, FREEDOM, TAXES
It seems like the White House and media these days are spending a lot of their energy discussing disparity between the haves- and have-nots. The phrase “income inequality” is especially being used more frequently as a means to continue the class warfare rhetoric and is absolutely certain to be a major theme of Obama’s State of the Union Address this month.
Many explanations are bandied about in an attempt to show that “devious policies” are causing the wide gulf between higher and lower income earners. They include the vague and general terms such as “special tax benefits for the wealthy”, “corporate welfare”, and a “tax system that favors those with higher incomes”. Though these targets are great for talking points, they fail solidly on substance.
There are no virtually no special benefits for the wealthy — only higher tax rates, phased out tax deductions, and added surtaxes that lower income earners do not have to contend with. As for corporate welfare, though it does exist, it only affects a few crony capitalist-type industries and companies out of the millions of small businesses which form the backbone of our economy (think: GE, green energy, electric cars). What’s more, the tax system clearly favors those with lower incomes, not higher, with lesser rates and more deductions and tax credits available. It has been shown clearly and indisputably that the US has – by a large margin – the most progressive taxes in the world (yes, far more progressive than even Europe and the Scandinavian countries). Though there is income inequality in America, why it exists is not what you think.
The simple reason is this: unlike people in the fastest growing countries, and unlike our own citizens in prior generations, the current middle and lower income classes in America have lost their inclination to personally invest in their future. I would argue that much of this is because the growing government welfare system is stripping individuals of their need to prepare and plan ahead, and a wide safety net also exists. For the most part, it is only the upper middle and higher income individuals — those who are not the beneficiaries of government welfare and those with more entrepreneurial orientation — that are forcing themselves to save and put this money at risk into investments for their future.
Much of China’s current economic success can be directly attributed to the financial attitude of their citizens with regard to investing. Almost all earners, including and especially the middle and lower income ones, keep a certain amount of income each month and invest it in both entrepreneurial endeavors and the existing equity markets. It is common for even the minimum wage earners to save at least 10% of their income! Large or small sum, they regard investment as a priority and a path to prosperity.
I have a close relative who is an owner and executive of a substantial manufacturing operation that he started in Shenzhen, China because of its business friendly environment. I’ve heard from him many times that he went into business, not to comply with government regulations, but to make things. And part of that business friendly environment is the people. He has been pleasantly surprised by the careful frugality of the owners and their passion to invest and grow– a sentiment extends to, and is practiced by, even their lowest paid workers.
Contrast this to the present state of affairs in our country. We have not been saving– we have been borrowing for more than a generation now. Citizens have mortgaged their future by consuming continuously — while investing nothing — and passing on that example to the next generation. We are turning into a country where people will begin to wonder why they should invest, if it’s just going to be taken away from them in the long run by those who do not, or go into a market that is wholly unstable.
People are encouraged to spend as if consumption is a good thing , but truly, it is investing that is far better for individuals and for the economy as a whole. When our government pushes measures such as extending unemployment benefits, food stamps and other welfare programs, it reinforces prolonged financial dependency. It is government policy aimed in the wrong direction as recipients have harder, not easier, obstacles to overcome.
The biggest problem that this country has to deal with regard to moving people away from a culture of dependency is that it continues to be demagogued by the Left for the precise reason that it easily mischaracterizes those who might being against such policies as “insensitive” and as being against the “less well off”. But many who are opposed to such policies merely recognize that success of investment, independence, and upward mobility are making other countries greater while we persist our slide into wider dependencies and economic decline.
In order to get the middle class back on track, we must focus our efforts and rhetoric on reminding ourselves that this country was built upon those who were willing to invest their time and money to become great. It is the true source of upward mobility – and those that do not do their fair share will be left behind by those who do. This is what truly drives at the heart of income inequality in our country.
Investment is what made our country thrive and it is the only thing that will properly sustain our country’s financial future.
_________________________
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by | ARTICLES, BLOG, OBAMACARE, TAX TIPS, TAXES
New Changes to the Itemized Medical Deduction
For years, taxpayers have been able to claim an itemized deduction on their taxes for medical expenses. That deduction still exists, but the threshold has been increased starting this years, as part of the implemenation of Obamacare taxes.
When a taxpayer, spouse, and/or dependents accumulate large medical bills in a given year, the ability to deduct them comes as a welcome relief to many family. The rule-of-thumb was that the sum of medical expenses totalled 7.5% or more of the Adjusted Gross Income (AGI). So for instance, if a family’s AGI was $50,000, they could claim an itemized deduction of medical expenses if it was at least $3,500 (not including insurance premiums, etc).
Now beginning this year and beyond, the threshold has been raised to 10% AGI. That same family making $50,000 AGI needs to have accumulated $5,000 worth of qualifying medical expenses before they can claim that deduction on their tax return.
There is one group for which the floor is still 7.5%; that is persons who are age 65 and above. The 7.5% AGI calculation will remain as such for another 4 years until 2017.
For data through 2009 from the IRS, 10 million families used this tax deduction. Raising the threshold was a means to limit the amount of deductions taxpayers would claim starting this year, thereby raising more tax revenue to pay for Obamacare.
This change is found of found on pages 1,994-1,995 of the PPACA.
——————————-
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by | ARTICLES, BLOG, GOVERNMENT, HYPOCRISY, OBAMA, POLITICS
As we get into blame season surrounding the extension of the debt ceiling, let’s make sure we remember – and remind anyone who will listen — what actually caused the government to shut down just a few short months ago.
The Democrats insisted that the Republicans accept a pure Continuing Resolution (CR) as a first and final offer with no negotiation along the way.
In contrast, the Republicans (after a number of initial offers were rebuffed and ignored with no discussion), made a final offer of 1) simply delaying the individual mandate for one year (which is effectively now happening) and 2) subjecting Congress to ObamaCare as the existing law actually requires anyway.
The Democrats refused even this more than reasonable –and in hindsight quite astute — offer causing the Government to shut down.
In what possible world can the shutdown be blamed directly on the Republicans?!
_______________________________
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by | BLOG
Ben Casselman penned a thoughtful piece this summer in the WSJ which documented the decline of risk-taking in business ventures. Hard data show that both the number of new companies and the use of venture capital is waning. And this downward trend is a major contributor to the fact that the recovery from the recent recession is so painfully slow and anemic.
Casselman goes on to explain that economists aren’t entirely sure what is behind the decline and gave some potential causes: health care costs, licensing requirements, an aging population, and an increase in large corporations are among some of the suggestions. While these factors do contribute, Casselman missed the glaring elephant in the room. The government, and her anti-business policies, do more to stifle free business activity than any other than any other single mitigating circumstance.
This administration has been exceedingly heavy-handed in its efforts to demonize businesses, while promising that businesses will be highly taxed and regulated. Whether it is labor regulation by the NRLB or environmental regulation by the EPA, government interference is overreaching and restrictive.
Additionally there have been huge increases in both criminal rules and regulations about what businesses are allowed and not allowed to do — from nitpicky labor rules to dictating employee minutiae to minimum wage requirements which restrict business hiring.
More importantly, Obama has provided the background for a litigation-friendly environment. If a larger, more financially stable company wants to steal something from a smaller company, they can sue them or just threaten with a costly legal battle. Or, if labor doesn’t like them, they can force them to shut them down as an alternative to litigation.
Finally, Obama has taken the stuffing out of entrepreneurship by telling people “you didn’t build that” — meaning it’s not yours and it belongs to everyone else. He delivered the further blows that if you are successful, we’re going to take your success away from you by taxing you to death with higher rates and surtaxes.
Of course, there will be some successes. It just now takes a higher level of skill, ideas, and money to exercise your entrepreneurial spirit. It’s not like there won’t be the Jeffrey Bezo or the Bill Gates or the Steve Jobs. They’ll still come through everything despite the immense impediments. The problem is that it is the middle entrepreneurs who will have a hard time getting started, and even when they do, they will likely get discouraged in the mess. But it is this middle group, the bread-and-butter of small businesses, that have made this country great. That future is threatened, as we are seeing now in subtle shifts within the realm of business making.
The future of this country will continue to decline if the anti-business sentiment that Obama has unleashed is allowed to continue. The middle entrepreneurs, the mom-and-pops, the family businesses are the ones that make up the difference between the very tepid growth that we are seeing and the strong growth and recovery that could be better if businesses actually had better opportunity.
Businesses go into business not to comply with government dictates, but to provide a product, a service, to make things. The very liberty for Americans to have the opportunity to succeed and fail, to take risk, to survive, and to thrive is under siege.
_______________________________
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Did you like what you read?
If you did, I hope you’ll join my Secret Tax Club.
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by | ARTICLES, BLOG, HYPOCRISY, OBAMA, OBAMACARE, POLITICS
Today, the architect of Obamacare, Zeke Emanuel, modified another one of Obama’s promises. This time, he explained the “if you like your doctor, you can keep your doctor” now actually means “if you want to, you can pay for it,”.
During Fox News Sunday, Chris Wallace pressed Emanuel to whether the promise would be upheld. Here’s the exchange, courtesy of The Weekly Standard.
“The president never said you were going to have unlimited choice of any doctor in the country you want to go to,” said the Obamacare architect.
“No. He asked a question. If you like your doctor, you can keep your doctor. Did he not say that, sir?”
“He didn’t say you could have unlimited choice.”
“It’s a simple yes or no question. Did he say if you like your doctor, you can keep your doctor?”
“Yes. But look, if you want to pay more for an insurance company that covers your doctor, you can do that. This is a matter of choice. We know in all sorts of places you pay more for certain — for a wider range of choices or wider range of benefits….“
Here’s the problem. Right on the White House website, there is a document called “Health Insurance Reform Reality Check”. . There it states: “It’s never been more important to dispel these outlandish rumors and myths. Learn the facts and share them with your friends, family and neighbors.”
Then it has a “Reality Check” list. The very first bullet item says this:
“You Can Keep Your Own Insurance
Reform isn’t about putting government in charge of your health insurance; it’s about putting you in charge of your health insurance. If you like your doctor, you can keep your doctor. If you like your health care plan, you can keep your health care plan”.
Notice that it doesn’t say, “if you like your doctor, you might have to pay more”
This isn’t the only place on whitehouse.gov that has the Doctor Promise. On the FAQ page entitled “Putting Americans In Charge of their Health Care”, it says:
“Q
: Will the government take my choice of doctor away?
A: No.
Nothing about the President’s proposal will interfere with the choice of doctors you have today. The legislation will not cause you to change the coverage you have at work today”
Here’s the screencap:
In fact, the Doctor Promise goes all the way back to at least 2009. On whitehouse.gov, you can find Obama’s weekly address from August 8th, 2009, where he states,
“So, let me explain what reform will mean for you. And let me start by dispelling the outlandish rumors that reform will promote euthanasia, cut Medicaid, or bring about a government takeover of health care. That’s simply not true. This isn’t about putting government in charge of your health insurance; it’s about putting you in charge of your health insurance. Under the reforms we seek, if you like your doctor, you can keep your doctor. If you like your health care plan, you can keep your health care plan.
So, since at least 2009, we’ve been hearing the simple promise, “if you like your doctor, you can keep your doctor”. Yet today we hear a modified version of that Promise, much like the recent caveat to the “If you like your plan, you can keep your plan” promise”.
Now we find out the caveat to the Doctor Promise. Here’s the rest of the interview with Emanuel from earlier today. The exchange with Wallace finishes up:
“The president guaranteed me I could keep my doctor,” said Wallace.
“And if you want to, you can pay for it,” said Emanuel.
Caveat emptor, indeed.
by | BLOG, OBAMA, OBAMACARE, POLITICS, QUICKLY NOTED
In Animal Farm, the most important of the Seven Commandments of Animalism was the “All Animals Are Equal” Commandment. Upon this, Animalism was supposed to thrive.
Later, Napoleon gains power, drives out Snowball, moves into Mr. Jones white house, sells Boxer to the glue factory, and enjoys whiskey while the animals work. Animalism is struggling to survive and suddenly, the maxim is changed. It becomes:
“All Animals are Equal, But Some are More Equal Than Others”
In a strikingly similar way during this new age of Obamacare, we were repeatedly told that “if you like your plan, you can keep it”
Now, today we get the Animal Farm version:
PRESIDENT OBAMA: Now, if you have or had one of these plans before the Affordable Care Act came into law and you really liked that plan, what we said was you can keep it if it hasn’t changed since the law passed. So we wrote into the Affordable Care Act, you’re grandfathered in on that plan. But if the insurance company changes it, then what we’re saying is they’ve got to change it to a higher standard. They’ve got to make it better, they’ve got to improve the quality of the plan they are selling. That’s part of the promise that we made too. That’s why we went out of our way to make sure that the law allowed for grandfathering.
I guess Obama expects that we won’t remember what he said. After all, he is our leader of Obamacarism. He has nothing to really apologize for. The Obamapology blames everyone else.
Surely it is the fault of the “bad apple” insurers who had such terrible plans to offer to begin with. Surely it is our fault because we couldn’t possibly have known any better or even really truly liked the plans we had picked.
Now, all insurance plans are equal. But some are more equal than others. (And those that aren’t equal will be canceled).
by | BLOG, POLITICS
What a year it has been since Hurricane Sandy hit the US on October 28-30, 2012. The size and scope of Superstorm Sandy is a perfect analogy of the the fiscal ineptitude that has churned up in Congress over the last year.
Nearly three months after the Hurricane, the Sandy Relief bill was passed. It almost didn’t make it in Congress at all, having been caught up in the “Fiscal Cliff” crisis of January 1, 2013. No one denied that those citizens who were affected by the catastrophic and legendary storm deserved help. However, the bill was mired down by pork and Congressional dysfunction.
Only three weeks after the fiscal cliff deal that raised taxes on the highest income earners, Congress managed to figure out how to fritter away a year’s worth of that revenue that was raised (after many months of wrangling and negotiations, mind you). By raising the tax rates on the wealthiest citizens, which was a longtime objective of Obama’s, here was finally something tangible to soak the rich so the the rich could “pay their fair share” This, we were told, was absolutely necessary to raise revenue because of our deficit. The tax increase was to provide the government with $600 Billion in revenue over ten years (roughly $60 billion each year).
But when Congress finally got its hands on Sandy Relief, a bill with good intentions, they created a half-pork barrel spending/half-relief spending measure. Once the Mulvaney amendment failed, a $17 billion Hurricane Sandy relief bill with a 1.63 percent cut to discretionary programs, the final version of Sandy Relief metastasized into the monstrosity passed. It was spending spree bill that was not offset by equal and opposite cuts. It fully added $50.5 Billion dollars to the deficit — three weeks after the tax hike on the rich for the purpose of deficit reduction.
The stinging part of the Sandy Relief Bill was that it wasn’t all hurricane relief. Also included were items such as $10 million for FBI salaries, $2 billion for road construction across the country, as well as funding for the Head Start program and roof repairs at the Smithsonian. Such items did not belong in the Sandy Relief Bill. Only about a third was actually for relief: $17 billion was for aid, while another $33 billion was for “other”
This has nothing to do with whether the non-Sandy provisions of the bill were worthwhile or not. But there is no reason why those extra provisions shouldn’t be dealt with on the same playing field as all the other potentially important uses of our federal tax dollars. Why did these particular spending measure bypass the intense oversight and scrutiny that every expenditure in the budget requires of our legislators so that we don’t overspend our revenue? Herein lies a neverending problem.
At the end of the day, the tax hike on the rich was almost entirely wiped out by the Sandy Bill. By voting up the $50.5 Billion in “aid” that was crafted, (and if you combine that amount with the $9 billion for the National Flood Insurance Program also approved in January 2013), Congress spent the entire sum of a year’s worth of revenue from the rich’s “fair share” — with most of it going to fund more government instead of reducing the deficit — in one fell swoop.
Here we are a year later. The AP reported this week citizens impacted by Sandy have had a lot of waiting to do with very little to show for it in New York City. “Because the federal government has only released the first tranche — about $700 million — of the roughly $60 billion package of storm recovery aid approved by Congress, city officials say they still don’t know how much money they’ll be able to distribute to storm victims”.
And more: “About 24,000 families have signed up for the city’s Build-It-Back program, which will help pay for repairs, elevate their homes and reimburse them for repairs that have already completed, among other things. But many still haven’t received any money nearly a year after the storm“.
How can this be? How is it that Congress has only released $700 million so far? The $17 billion “aid” part of the Sandy Relief bill included the following:
$5.4 billion for FEMA to provide immediate relief to families and pay for temporary housing, debris removal and crisis counseling.
$5.4 billion went to major transportation agencies in New York and New Jersey
$3.9 billion to repair damages to publicly owned hospitals, roads and utilities
$1.35 billion to the Army Corps of Engineers
$287 million for national parks
$235 million for veteran facilities
$32 million for Amtrak
$6 million to replenish and stock food banks and soup kitchens.
It is gross incompetence that supposedly only $700 million of a $50 billion aid package — 1.2% — has been released by Congress. Where are the funds? And what about the non-aid parts of the bill? The $33 billion in pork? Have those funds been distributed?
Equally disturbing is the revelation this week that the very company responsible for the disasterous Obamacare website (CGI Federal Inc.) also received funds to distribute for Sandy Relief. According to the Daily Caller, CGI “assisting the U.S. Department of Housing and Urban Development (HUD) in the distribution of $1.7 billion in relief for Hurricane Sandy”. This was verified by a memo obtained by Freedom Works. Notes of the minutes of the memo record that
Mr. Nelson presented that the State received a $1.7 billion allocation in CDBG Disaster Recovery aid from HUD to aid impacted businesses and residences. He stated that the State’s Action Plan was approved on April 26, 2013 and HTFC is currently in a phase of implementing the program. He stated that in this phase, the corporation needs to stand-up its recovery programs as soon as possible to deliver critical resources, and in order to do so, the corporation requires immediate access to consultant services to assist in policy and procedure development, training, surge capacity, and call center assistance, and stated that CGI Federal Inc. could provide such services.
Mr. Nelson stated that the corporation entered into a short term contract with CGI, Federal Inc. on a discretionary basis of $49,000 to start with these critical disaster recovery efforts, and he requested that the Board approve a contract with CGI Federal Inc., procured on an emergency basis as justified under Executive Order 63, for an amount up to $4,280,000 for a term through March 31, 2016.
The company that charged the federal government more than $600 million to build a website that has failed miserably is the very same company that received a contract for another $4 + million through 2016 to help distribute Sandy aid, a task at which it has also failed miserably.
One year after Superstorm Sandy, we can clearly see the failings of Congress in its fiduciary responsibility.
It approved tax hikes on the wealthy under the guise of deficit reduction — $60B a year for 10 years
It approved as a relief bill nearly the same amount that was to be raised by the tax hikes — a bill that was 2/3 pork and only 1/3 relief — that increased government spending
It has only released 1.2% ($700 million) of the $50+ billion in aid
It contracted enormous sums of federal tax dollars with CGI, a company that is being paid 1) to assist with distributing nearly $2 billion in aid and 2) is the chief architect behind the Obamacare website abomination
And yet, just a few days ago, Senate Majority Leader Harry Reid gave a radio interview in which he spelled out the next phase of budget negotiation, where he once again calls for more taxes:
“The only people who feel there shouldn’t be more coming in to the federal government from the rich people are the Republicans in the Congress. “Everybody else, including the rich people, are willing to pay more. They want to pay more.”
He also went on to announce that the only way there could be some sort of Congressional “grand bargain” would be under the conditions that the Republicans would have to agree to more tax revenue:
“They have their mind set on doing nothing, nothing more on revenue, and until they get off that kick, there’s not going to be a grand bargain on — there’s not going to be a small bargain,” Reid said. “We’re just going to have to do something to work our way through sequestration.”
William Pitt the Younger sagely observed that “Necessity is the plea for every infringement of human freedom. It is the argument of tyrants; it is the creed of slaves.” We constantly hear how the government needs more money . After a year of particularly gross fiscal mismanagement in Congress — from Hurricane Sandy to the Fiscal Cliff to Sequestration to the government shutdown to Healthcare.gov the Democrats still have the gall to sound the call for more taxes.
The trillion dollar question then becomes: What Will Republicans Do?
by | ARTICLES, BLOG, ECONOMY, OBAMA, POLITICS
In case you missed it, Harry Reid displayed the most incredible mind reading skills this past week during an interview on Nevada Public Radio.
As reported by Roll Call, the Senate Majority Leader explained that, “The only people who feel there shouldn’t be more coming in to the federal government from the rich people are the Republicans in the Congress,” He went on to declare that “Everybody else, including the rich people, are willing to pay more. They want to pay more.”
He also went on to announce that the only way there could be some sort of Congressional “grand bargain” would be under the conditions that the Republicans would have to agree to more tax revenue:
“They have their mind set on doing nothing, nothing more on revenue, and until they get off that kick, there’s not going to be a grand bargain on — there’s not going to be a small bargain,” Reid said. “We’re just going to have to do something to work our way through sequestration.”
For those who are short on memory, the Republicans agreed to tax increases on the wealthy immediately after we went over the “Fiscal Cliff” last January. Obama did not get his $250K threshold to raise taxes to 39.6% for “upper earners”, but he did get a $400K single/$450K married couple threshold. January 1, 2013 was the original sequestration deadline. With the Fiscal Cliff deal, the sequestration decision was booted again for two months.
Fast forward to the end of February with sequestration talks and the March 1 deadline looming. The White House and liberal media began discussing in earnest the possiblity of more taxes, especially after it was pointed out by Bob Woodward that sequestration did indeed originate with Obama.
After the Republicans didn’t blink on sequestration and the cuts went into play, Investors Daily revealed on March 1 that Obama’s “sequestration” plan was $1 Trillion in new revenue. That was followed up by Pelosi’s announcement that same afternoon that there would be “no sequestration deal without new taxes”. But sequestration stayed, much to the chagrin of the Democrats.
Here we are now, post-government shutdown. Obamacare is failing badly. Obamacare was supposed to be a source of revenue for the government over 10 years with its myriad of taxes — except that no one is signing up. The Democrats look bad, and the Congressional Dems are warming to the idea of a one-year delay, the very thing that many Republicans have been calling for ad nauseum.
What is Harry Reid to do? Why, talk about sequestration, of course. Let’s talk about how billions in cuts have been made to the government because the Republicans have “refused to compromise”. Let’s put the blame game back on them and off of the Democrats who voted hook, line, and sinker for Obamacare. Let’s stir the pot and talk about how tough sequestration is for everyone. Ergo, we need to fix the government budget with more revenue.
Pay attention folks. The Democrats are frustrated because of Obamacare right now. In the coming weeks, we’ll see renewed energetic playbook buzzwords talks of a “balanced approach”, a “compromise”, and a “grand bargain” approach to budget discussions…except that the only approach from the Democrats will be a firm call and firm stand for more revenue via tax increases.
Leviathan is wounded. And hungry. And he’s coming for your wallets.
by | ARTICLES, BLOG, BUSINESS, ECONOMY, GOVERNMENT, HYPOCRISY
Right before the government shutdown, Detroit received a pledge for a $320 million federal “aid package”. The Obama Administration wants to make it perfectly clear: this is not a bailout. That word is too toxic during this time of fiscal instability in Washington. This is relief. A stimulus. It is a hand-up, not a hand-out, and, as the NY Times reports, this will not be the only federal infusion that Detroit receives to get back on its feet.
Some questions immediately come to mind:
1) Various news agencies reported that the funds are being scraped together mainly from agencies such as TARP, FEMA, Homeland Security, and HUD. Who authorized this aid package?
2) Much of the funds are for projects that are similar to projects already funded by alternative sources, such as the Ford, Kresge, and Knight Foundations. The funds will not be used in anyway with regard to debt structuring. Why are federal funds duplicating projects already in motion?
3) Detroit already receives 71 federal grants for operation and it still couldn’t manage to avoid bankruptcy. Clearly, Detroit has been malfunctioning for years even with government intervention, so Why are we propping up this city even more?
4) What is to prevent other cities who are struggling financially for reasons to call for aid? After the aid to Detroit was announced, at least one Congressman, Jerry McNerney, went on the offensive. He wrote to the White House asking why aid was not extended to Stockton, California, a city which declared bankruptcy last year, “and suffers from many of the same problems as Detroit”. Will this type of federal aid package for cities become a slippery slope? Will it be a pick-and-chose/reward scenario? How about a carrot dangled to cities?
A recent WSJ article on the aid noted that with federal money comes strings. “Grants from the Transportation and Housing and Urban Development Departments will require the city to pay prevailing union wages, which will jack up costs. Prevailing wage is an economic compensation theory that requires municipalities to pay more-than-market wages. The end result of paying prevailing wages means that Detroit will get less with their our money. Even now, prevailing wage theory is hotly contested in NYC, a form of unionism for those workers who are non-unionized. Isn’t this type of overpayment what helped get Detroit into the mess it is in in the first place?
Furthermore, this cash fund may impact pension reforms that city manager Kevyn Orr is trying to accomplish. The pension managers insist that pensions are only underfunded by $634 million, while Orr is arguing closer to $3 billion. Part of pension restructuring and cost savings proposed by Orr were expected to be re-diverted toward blight abatement. With the arrival of this federal aid package — much of which is supposedly for the blight problem — you can expect that pensioners will argue that their pensions do not need, or need less of, the chopping block. That is a pity, as it undermines real pension reform so badly needed in Detroit.
What Kevyn Orr really needs to do to forge a path of prosperity in Detroit is to completely fund the pension system according to what the pension managers say they need ($634 million vs $3 billion), in exchange for complete government removal from the pension system; Impose a switch from a defined benefit model to a defined contribution model and be done with it. Let the pension heads grapple and manage their own funds now. Such a bold fiscal move would give Detriot a much more solid path to economic revitalization than any aid package can do.
There was no emergency that necessitated the use of federal funds being injected into the city of Detroit. No Katrina. No Sandy — only decades of fiscal irresponsibility, corruption, mismanagement. This “non-bailout” only undermines the task of this city, and potentially others, to make hard decisions about money, taxes, pensions, and budgets. It is a band-aid where a tourniquet (or maybe an amputation?) is needed. In a city rife with every kind of unimaginable fiduciary irresponsibility, the idea that the city of Detroit should be entitled to receive any more federal tax dollars is wholeheartedly repugnant.
