Obama Administration - Value Added Tax (VAT) May be Necessary to Trim Deficit

The Value Added Tax - trickle down effect: image: bulatlat.com

Reuters: White House Advisor, Paul Volker, has acknowledged that a “Value Added” or “energy” tax may be necessary, as the ever increasing deficit becomes unsustainable. Volker , former Federal Reserve Chairman, (Carter Appointee), and White House Economic Advisor. appears to be in sync with the rest of the staff: a series of his lectures include: “The Implication of Globalism is Globalism” and his treatment of Economics vis a vis Foreign Policy: includes the following: “Most egregious to me is our continued failure to pay our dues to the United Nations.” It is no wonder, therefore, that a Value Added Tax, or “other tax” is in our future.

With entitlement programs growing exponentially larger by the day, under the Obama Administration, there has to be a way to bail out of the spend, spend, spend which has taken place in just one year. Although the 82 year old Carter appointee, speaking at a New York Historical Society program: “The Global Financial Crisis: America Making a Comeback”, suggested that the idea of such a tax is becoming more acceptable. That is, of course, if ones point of view is similar to that of Carter and Obama. However, if one is the taxee, the idea of adding a VAT on top of every other Federal tax citizens now pay is abhorrent. If one thinks that the VAT would replace other Federal Taxes think again, The Obama administration has even tied the Health Care Reform Bill to the Internal Revenue Service. Should one fail to be insured, the IRS will be seeking reimbursement.

Also, economists who hold such politically charged views may not be the best advisers when it comes to making sound decisions regarding our economy. A recent article by Curtis Dubay, at the Heritage Foundation speaks to the failure of the VAT in Europe to curb the deficit. (Excerpt)

There is a growing call by backers of bigger government for Congress to impose a value-added tax (VAT) on top of all the other taxes Americans already pay. A VAT is similar to a national retail sales tax but is collected at every stage of business production until its entire burden ultimately falls on the consumer.
Among its suggested advantages, proponents argue a VAT would be an easy fix for the deficit because it would be difficult to evade relative to the income tax.[1] Evidence from countries with VATs suggests otherwise. If Congress implements a VAT as an additional tax, businesses and individuals would try to avoid it through fraud, severely limiting a VAT’s ability to close budget gaps.

The author also suggests that Europe has not improved with the addition of a VAT, rather the opposite is true. Financials straights in Europe have led to rioting in Greece as economies cannot keep up with the entitlement programs and lack of revenue generated by the governments.
It is strongly suggested the Heritage Foundation article be read in its entirety Heritage.org/Research Reports/2010/01/Value-Added-Tax-No-Easy-Fix-for-the-Defici

It is not that a consumption based, or fair tax, is such a bad idea, after all, it crosses all socio and economic lines, but, that is if the IRS is removed, and the Federal Income and other Federal Taxes rescinded. The likelihood of that is about the same as Barak Obama being elected to a second term in office.
At a time when 10% of the American populace is out of work (those that do work, the number that are on entitlements were, as of 2004, at 11%the loss of revenue coupled with increased needs for entitlements and new entitlement programs with historic costs passed by this Administration, the ability to pay (as the government cannot print money indefinitely), will eventually end, and that may be sooner than later. Those left holding the bag, will see an increase of 20% or more in taxes, making the ability to own a home, a car, or save for college, a mere memory of what this Great Nation once was – a land of Opportunity.

Tea Party Ideology Trumps Obama in latest Rasmussen Poll - Analysis

Tea Party in Boston, A revolt against Taxes, image: atr.org
A poll released Monday, April 5, 2020 by Rasmussen Reports indicates that by a margin of 48 to 44% the “Tea Party” is viewed more favorably than Obama. A growing number, 63% of those considered “mainstream” (Rasmussen qualifies those as “Populist”), feel that the movements ideology is closer to their own than that of Obama. The Tea Party, as defined, is a multi-politically affiliated group of individuals who are fed up with the current systems use of tax dollars (i.e. the economy) – incumbents, regardless of party affiliation, are looked upon as a non-option for reelection if they had voted to increase government spending at any level. Additionally, only 16% of respondents identified themselves as part of the Tea Party, but are viewed favorably by the majority of respondents compared to the President (or left of center ideology).

Unions are also on the firing line, when compared to Tea Party Ideology, Unions are viewed at 33% favorability compared to the 45% who chose the Tea Party. The problem for Unions today, they are seen as closely tied to both the administration and the Democrat Party, and part of the tax and spend process. Obama’s own popularity in recent polls, suggest his approval slipping further after singing the health care reform bill: CBS News Poll April 2, 2010 – 44% approval, Gallop showed a rise from 44% on March 14 to 51% on March 21st attributing the rise in approval to the Health Care Reform Bill, (plus or minus 4% for the margin of error on most polls), Marist has Obama’s approval at 46% as of March 31st, and the balance found at Real Clear Politics gives the President a 47% overall combined polls approval.

Those most likely to disapprove are the unenrolled or independent that are deemed necessary to win elections. These are the voters who are in the “middle”, neither too left or too right. As expected, partisan ideology is present in all polls with the majority of Democrats approving of the Presidents performance, while the majority of Republicans disapprove.

What this means for November is simply put, incumbents, regardless of party, are in trouble if they voted on legislation seen as adding or projected to add, an additional burden to the deficit. Should an incumbent represent a State or Commonwealth as either a Senator or Congressional Representative, and should that State or Commonwealth have a large share of independent or unenrolled voters, then retirement is likely. Massachusetts, is a case in point, the Commonwealth’s electorate is represented by over 50% unenrolled or independent – newly elected Senator Scott Brown (Republican) was pushed over top by those unenrolled (and yes moderate Democrats who are aligning with the Tea Party in the Bay State), and Brown, one can be assured was not an anomaly. There are, at present, with one or two exceptions, competitive House races in every district in Massachusetts. Those, outside the Commonwealth, who follow sites such as CQ Politics will find that Massachustts is considered “Safe Democrat”, as was the January 19th Special Election. The problem lies in the fact that most pundits do not factor in the electoral makeup of the Bay State (or other States) when making these projections.

The one safe District in Massachustts is that held by John Olver, the large 1st Congressional District, the remainder, from the 2nd Hampden (Richard Neal), to the Massachustts 4th (Barney Frank), one can find all races at FEC.gov showing incumbents facing challengers from Republican, Independent and Democrats. With the mood in Massachusetts (and the balance of the nation) remaining the same, it is conceivable that Commonwealth, may not longer be the “Bluest State” come November.

Where are the polls? Massachusetts, and like States when usually considered “Safe Democrat” are not polled, unless and until, the writing in on the wall that an incumbent and/or political party is about to be up-ended. Pollsters began looking at the Brown-Coakley race a mere 2 weeks prior to the election when it was apparent that there was an actual race taking place. One can anticipate the same may occur with all Congressional races in Massachusetts as well as California. Should there be one pollster who does take that leap, will find that all is not “safe” in these blue bastions, and should also look to others across the country that may be considered solidly held, by one party or the other, (in the case where an incumbent voted for any legislation that, again, put taxpayers dollars on the line.)
It is the ideology of less government and self government that is driving voters away from “usual” and towards the beginnings of a “civilian” run government. With the President and members of Congress, as well as the Unions, all spotlighted continuously in the media as broadening and supporting the broadening of government, it will, in the end, result in a change that is long overdue and that would serve all political parties to take note.

Congress Plays “He Said – She Said” with Unemployed – 200,000 to lose benefits Monday – Analysis

Unemployment Lines in the 1930's preview of 2010? Image: Mt. Shasta News

The statistics are grim: the unemployment rate is currently at 9.7% and the administration has put the unemployed on notice that the situation will not improve soon. The fact that those counted in the 9.7% (or 15 Million Americans by Obama administration estimates, do not include those who have fallen off the reports due to exhausting unemployment claims. These figures do not include the “underemployed” which represents between a rise of 16.8% using “seasonally adjusted” data from the government to Gallops recent poll giving a 20.3% rate. The latest political football – 200,000 newly unemployed, who will not be receiving benefits immediately – this is due to a difference of opinion by the Congress as to how the government is going to pay for any additional unemployment claims.

One the one hand, Republicans asked the Democrats how they might pay for additional unemployment befits, while the Democrats resorted to the term “emergency funds” (which do not exist on paper), the Republicans asked the Democrats to stay through the weekend to work things out, and the Democrats declined, preferring to have the weekend off. The left blames the right, and the right blames the left, while, in reality, those underemployed and the unemployed who have fallen off the roles, and are no longer eligible for any benefits, added to those on the rolls, are not paying taxes necessary to sustain the program (and any other programs).

The IRS lost $138 Billion in 2009 due to unemployment and the underemployed. The logic follows that as more individuals join the unemployment rolls, fall off the roles, and are underemployed, these losses will become more severe. The fact that the Federal Government relies on income tax collected to pay for everything, should be sending a message to both the administration and the Congress, that job creation (besides the 17,000 jobs to be created at the IRS to oversee the collection of “fees” from those who cannot afford, or refuse to carry health insurance), should be a first priority – the recent job creation bill, passed by congress, creates more bureaucracy than actual hard jobs, and those jobs, (even with incentives to small businesses), will be hard to come by, considering that small business, will be burdened with the costs of complying with the new health care legislation (taxes are only a part of the problem with that program.)

Therefore, the 200,000 that will go without benefits, being used by both parties to gain political points, are just the tip of the iceberg, (although no less important that the other 15 million American’s), and that is due to the reasonable assumption that with the largest of corporations taking a huge financial hit (reported by CNN) , including John Deer and Caterpillar, they will either lay-off, put in place a hiring freeze, or move plants to nations who are more “tax friendly”. The preceding will lead to more unemployed and less income from the IRS to give to the federal government for things like unemployment benefits.

Therefore, the bigger headlines are being lost, and 200,000 individuals are being left holding the bag – (temporarily). To raise the type of money it will take to continue to fund existing and new programs (such as the massive health insurance reform bill), the little income that will be derived from the expiring Bush Tax cuts (which will resulting an across the board federal tax increase for every working American will be hardly enough. Real tax increase must be put into place to cover the losses and those will be across the board. Unless and until the spending is reigned in and the Congress acts responsibly when passing legislation (see Pork in every bill passed to date), in order to try and cover the current federal bills. The only sane way to deal with this is a concerted effort to make life more bearable for both Big Business and Small, as well as those left working, in the form of tax cuts, to increase hiring and revenue in the private sector, where the permanent jobs are created, and the taxes are paid. It is no wonder that the President as well Congress has seen a drop in approval, the Congress specifically reaching historic proportions. The partisan “he said-she said” will no longer cut it - both parties need to work together, and if one refuses (and that appears to be the Democrats who are in the position of power to either work or not work with the Republicans, who have made the offer on numerous occasions) in order to save our nation. The fact that a third viable party is necessary at this stage, perhaps a party of constitutionalists and fiscal conservatives, (Tea Party), is being raised at coffee tables nationwide. The current crop of politicians from both major parties, need to adjust and learn to play well together. One things that the Democrats cannot have failed to notice is that, although they did win, as they keep reminding any republican who will listen, there is a great deal of buyer’s remorse.

Barney Frank (D-MA) and Finance – Latest Political Peccadillo with Yet another Failed Institution Brought to Light.

Frank and Paulson image Politico

Barney Frank, (D-MA) the House Committee on Financial Services is apparently responsible for using his influence to prop up yet another failed institution with taxpayers dollars. Frank, who is up for reelection in 2010, is best known for his association and support of Fannie Mae and Freddie Mac, the federal lending giants, who were, in a greater part, responsible for the current financial crisis.

In 2003, several Congressional Representatives and Senators were concerned about the stability of those two institutions, and had called for a review, Frank, who was, at the time merely the ranking Democrat on the Finance Committee, appeared to feel all was well with the lenders: see excerpt here from the New York Times Business Section:

Freddie Mac, whose accounting is under investigation by the Securities and Exchange Commission and a United States attorney in Virginia, issued a statement calling the administration plan a ''responsible proposal.''
The stocks of Freddie Mac and Fannie Mae fell while the prices of their bonds generally rose. Shares of Freddie Mac fell $2.04, or 3.7 percent, to $53.40, while Fannie Mae was down $1.62, or 2.4 percent, to $66.74. The price of a Fannie Mae bond due in March 2013 rose to 97.337 from 96.525.Its yield fell to 4.726 percent from 4.835 percent on Tuesday.
Fannie Mae, which was previously known as the Federal National Mortgage Association, and Freddie Mac, which was the Federal Home Loan Mortgage Corporation, have been criticized by rivals for exerting too much influence over their regulators.
''The regulator has not only been outmanned, it has been outlobbied,'' said Representative Richard H. Baker, the Louisiana Republican who has proposed legislation similar to the administration proposal and who leads a subcommittee that oversees the companies. ''Being underfunded does not explain how a glowing report of Freddie's operations was released only hours before the managerial upheaval that followed. This is not world-class regulatory work.''
Significant details must still be worked out before Congress can approve a bill. Among the groups denouncing the proposal today were the National Association of Home Builders and Congressional Democrats who fear that tighter regulation of the companies could sharply reduce their commitment to financing low-income and affordable housing.
''These two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis,'' said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ''The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.''

One should also note that Frank recently received a reelection bid endorsement from Bank of America president, Chief Executive Officer Brian Moynihan. In a recent article from the Financial Times, Frank had asked four banks (Bank of America included) to modify their lending practices and write down second tier mortgages, in other words, take a loss, “in order to save U.S. Housing. This was in March of 2010.

With his hands in every nook and cranny of the financial industry, Frank is now facing some scrutiny over a direct intervention with then Treasury Secretary Paulson, to save a failed bank in his district. Although one might argue that the Congressman was doing his job by taking care of an industry specific to the 4th Congressional District, emails and documents obtained under the Freedom of Information Act by the watchdog group Judicial Watchsuggests otherwise.

First, the bank did not meet criteria to be included in the program, it was under an Cease and Desist order: (From www.fdic.gov/bank/individual/enforcemnet/2008-10-09)

OneUnited Bank, Boston, Massachusetts ("Bank") and its institution-affiliated parties, as that term is defined in section 3(u) of the Federal Deposit Insurance Act (“Act”), 12 U.S.C. § 1813(u), and its successors and assignees having been advised of its right to a Notice of Charges and of Hearing detailing the unsafe or unsound banking practices and violations of law alleged to have been committed by the Bank and of its right to a hearing on such alleged charges under section 8(b)(1) of the Act, and having waived those rights, entered into a STIPULATION AND CONSENT TO THE ISSUANCE OF AN ORDER TO CEASE AND DESIST ("CONSENT AGREEMENT") with counsel for the Federal Deposit Insurance Corporation ("FDIC") and the Commonwealth of Massachusetts
The FDIC and the Division considered the matter and determined that it had reason to believe that the Bank had engaged in unsafe or unsound banking practices and violations of law. The FDIC and the Division, therefore, accepted the CONSENT AGREEMENT and issued the following:
ORDER TO CEASE AND DESIST



Apparently, Barney Frank brought pressure to bear on the Treasury in order to allow OneUnited to receive Tarp Funds. Frank, not alone in this endeavor was joined by Congressional Representative Maxine Waters (D-CA), whose husband was affiliated with that institution. Both Frank and Senator John Kerry (D-MA) were mentioned in documents obtained by Judicial Watch.

Accountability and elementary accounting practices appear to have gone missing from the Chairman of the Committee that oversees Banking and Finance for the nation. That said, what one can expect to come out of this particular brouhaha is yet another “Charlie Rangel” – by that, individuals who have committed dubious acts, even scandalous acts, who have managed to hold onto their Committee Chairs and seats, by virtue of the insanity that pervades in the Capital. It took decades before Rangel was held somewhat accountable, therefore, one can expect Frank to continue to skate, with the help of Pelosi and Company – unless and until Frank is no longer eligible to sit on a Committee that has, perhaps the greatest impact on our economy. The only way to permanently ensure that Frank can no longer be an influence is to effectively remove him from office via the ballot box. To allow him to remain in office, only puts his Chairmanship on hold – (assuming the Congress changes political power hands in 2010), he would still be sitting on that Committee.

The power of the ballot must be brought to bear in order to permanently remove Frank from the vicinity of the House Committee on Financial Services by the 4th District voters themselves, electing an alternative to Frank. A new radio commercial from the Sholley for Congress Campaign hits the nail on the head (see YouTube video below). It is imperative that the citizens of the 4th Congressional District get to know Mr. Frank and his impact on the nation – to learn more about voting in Massachusetts visit the Massachusetts Secretary of State’s website on Elections.

Of Car Dealerships and Pacemakers – Federal Government Priority Drives Health Device Industry Down Props Up Car Dealerships

Richard Neal (D-MA) far left - takes credit for reinstating Car Dealership - GM of course - photo credit: Springfield Mass. Republican

Western Massachusetts – Two articles which appeared in the Springfield Republican, highlight the disparity in the Federal Governments commitment to job development vis a vis the nationalizing of private industry in the United States. On one hand, General Motors, a government owned entity, has recently reinstated a local car dealership which had been closed during the takeover. Richard Neal (D-MA – Hamden 2nd), was featured in an article where he takes responsibility for reinstating local car dealership, Bob Pion Pontiac in Chicopee. The article begins: “After prodding from U.S. Rep. Richard E. Neal, D-Springfield, General Motors Corp. reversed course and has reinstated Bob Pion as a Buick and GMC dealer.”, and goes on to describe how the dealership lost its status during the government “bail-out” in January. The article goes on to point out: “Pion kept the dealership going with the service department and by buying used cars at auction to sell, Donald Pion said. He has 32 employees and annual payroll of $1.4 million.

Neal, a member of the powerful House Ways & Means Committee, said he met with GM executives and asked them to review Pion’s sales statistics and profitability.”

Based on the figures include in the piece, assuming this dealership is representative of the other 1300 plus which were closed in the bailout, approximately 43,000 jobs were endangered or lost when the Government took control of the auto industry. The fact that a Congressman has the power to reinstate a specific business is chilling in that it becomes a question of human nature and the whim of a particular congressional representative and/or the fact that an election year is at hand.

On the flip side, businesses are preparing for the heavy negative impact brought about by the recently passed health care legislation. On a national level, large employers who have filed anticipated losses due to the legislation, an anticipated one billion dollars in losses which will impact hiring as well as eventually result in layoffs. Firms such as Caterpillar, AT&T, and Deer and Company are on the top of the list, however, other firms, such as those involved in the Medical Device Industry, which are smaller in scope, are also seeing immediate impacts from health care reform taxes.

In the same week, the Springfield Republican ran an article regarding the loss of revenue to the Medical Device Industry in Massachusetts. In Massachusetts alone, the industry directly employs 21,000 individuals, while smaller industry that manufacture parts for these devices employee an additional 29,000. Neal, featured in this article due to his support and yes vote on the Health Care Reform Act, apparently feels that an excise tax on an industry that is critical to the health and welfare of millions of people (Medical devise manufactures make everything from pacemakers to hip implants), was lucky to pay a smaller tax than originally proposed by the Bay State congressman. In the same city as the auto dealership the featured firm employs 200 individuals, and placed any expansion plans on hold indefinitely.

Neal’s response to Senator Scott Brown (R-M)’s legislation to repeal the Health Care Reform in order to save businesses such as medical device manufactures: :”Neal challenged Brown to find another way to pay for the reforms.”

The message Richard Neal (and his like minded cohorts in D.C.) is sending to his constituents: More Cars, fewer pacemakers! Save 32 jobs, lose 200! Perhaps if the Government takes over the medical device industry once it goes bankrupt, Neal will be on hand to reinstate that concern, unless of course, he is not re-elected in 2010.

Someone should point out to Rep. Neal that the loss of an industry due to legislation will result in less income for the Federal Government, which it needs to pay for all of this - lost jobs equal losses in tax revenue. A situation which the taxed to smithereens Massachusetts residents and businesses were well acquainted with before the Health Care plan was exported nationally.

A video found on Hillbuzz.org sums up the continuing angst felt by the general public when they see articles such as these: