Olympic Update: The Results Are In, And They’re Not Good!

800px-Olympic_Rings.svgWe recently posted that Team USA would need to sweep all 98 medal podiums at Sochi (and 122,000+ more Sochis besides) in order for the IRS to have enough taxable medal winnings to pay off the interest on the federal government’s debt in 2014 alone.

Unfortunately, Team USA did not win gold, silver, and bronze in all 98 events. Accordingly, we will have to revise our projections.

Team USA won 9 gold medals, 7 silver, and 12 bronze medals. This will give the IRS the opportunity to leech a mere $178,200 in tax revenue, a downward revision from $1,940,400.

This unfortunately means that the IRS will have to wait for more than 1.3 MILLION Sochis (which will take 5.3 million years!) in order to collect the revenue needed to pay off only one year of interest on the federal government’s debt today.

Are we being ridiculous? Of course we are! The US was never going to win all medals at all 98 events at the Winter Games.  But then again we’re no more ridiculous than the federal government’s politicians who continue to irresponsibly enact unrealistic budgets that spend far more than is collected in revenue and far more than is the constitutional mission of the federal government.

Go Team USA, Your Government Needs Your Prize Money!

800px-Olympic_Rings.svgThe 2014 Olympic Winter Games are underway in Sochi!

Team USA Olympians are engaging in their quadrennial quest for winter gold, and, if they’re successful, they’ll pay for it. Each medal comes with a cash prize of $25,000 for gold, $15,000 for silver, and $10,000 for bronze (per medal) paid by the US Olympic Committee to the event winner.

And the IRS is already salivating at the opportunity to stick Team USA with tax bills on their winnings.  At the highest tax bracket, Americans for Tax Reform estimates an approximate $9,900 tax bill for each gold medal, $5,940 for a silver, and $3,960 for each bronze medal.

But let’s take it a step further.

There are 98 events at the Winter Games this time around.  If Team USA were to sweep the medal podiums and win every single medal available (gold, silver, AND bronze) in every single event, the IRS would need more than 122,000 Sochi Winter Games (at 98 events each!) just to pay the interest on the federal government’s debt, for this year alone!

Despite having imposed math mandates on states, it’s clear yet again from this example that federal government elected officials utterly fail to comprehend even the most basic math.

So ski, snowboard, skate, shoot, and curl hard Team USA. Your government needs you!

De Blasio’s Unbridled Corruption Play

deblasio_Fraud3New York City has itself a new mayor. And the first thing he is going to is tackle the city’s biggest problem of…horse drawn carriages?

De Blasio’s campaign website lists “A Humane City for New York’s Animals” as 14th in an overall list of issue priorities.  But at a press conference Monday, De Blasio said, “We are going to get rid of horse carriages, period,” bumping the issue up to be one of the first tasks he undertakes as mayor.  The escalation of priorities deserves scrutiny.  Let’s put De Blasio to the side for a moment and take a closer look at some players in the horse drawn carriage opposition “industry.”

One of New York City’s biggest advocates for banning horse-drawn carriages has been a group called New Yorkers for Clean Livable And Safe Streets (NYCLASS). Sounds like a decent group, right? Everybody likes clean, livable, and safe streets! Animals seem to be an afterthought in the organization name, but at NYCLASSleast they found room to clarify on their website tagline “Get political for animals.”

NYCLASS is a 501(c)4 non-profit “social welfare” organization. We’re assuming the IRS didn’t give this group the same flack in issuing their non-profit status the same way they have with other groups recently.

Steve NislickThe group’s founder, Steve Nislick includes his bio on the website as a member of the NYCLASS board of directors. Steve is “an avid equestrian,” “animal lover,” and “proud rescue dad of a former NYC carriage horse.”  Lovely titles–that is exactly the kind of  background suggesting someone would create a non-profit organization concerned with clean livable and safe streets that also advocates for animal rights.  If only that were true.

Steve Nislick seems to have left a bit out of his bio.  Both of the other board members listed a three paragraph bio on the website. Let’s help Steve a little bit since he seems to have forgotten about spending the past four decades at Edison Properties, a New Jersey-based real estate property development and investment firm.

Steve Nislick - Edison Properties But it seems that Mr. Nislick wasn’t always as slick at covering his connections to real estate development when it comes to the ongoing dispute over horse-drawn carriage rides in the city.

In 2009 Michael Gross published an article on his website after finding a 5-page pamphlet supporting a horse carriage ban, signed by none other than Steve Nislick.

In the article Gross quotes from the Nislick pamphlet that banning horse-drawn carriages would be “‘a windfall for the carriage industry from the sale of its multi-million-dollar stables alone.’ Nislick writes, before getting to his real point. ‘Currently, the stables consist of 64,000 square feet of valuable real estate on lots that could accomodate up to 150,000 square feet of development. These lots could be sold for new development.‘”

HMMM!  So the CEO of a real estate development and management company suddenly finds himself to be an emphatic friend of animals. The same CEO with nearly all of his company’s business interests in the City of New York. The same CEO whose company owns several storage and parking businesses situated in the same West Midtown area as the stables for the horses that power New York’s iconic horse-drawn carriage industry. And the same CEO who founded a social welfare organization that just happens to support a candidate who wants…well…what he wants. Neat, huh?! What a coincidence!!!

Besides putting his energy behind NYCLASS, Nislick also contributed the maximum $4,950 for an individual campaign contribution, held a fund raiser on Dec 13, 2010 for De Blasio, and in his board role at NYCLASS would have approved expenditures of some $770,000 for attack advertisements against De Blasio’s primary opponent Christine Quinn.  Sounds like a lot of effort to get to 14th place on the mayor’s list of priorities.

Let’s put Nislick back in his stable and return now to New York’s new mayor. De Blasio claims on his campaign website that carriage horses suffer “abuse” and  “inhumane treatment” which must be immediately banned in favor of “electric, vintage-replica tourist-friendly vehicles.”

But the New York Post reports that it looked into investigations completed by the city that might provide some evidence that there is widespread abuse or inhumane treatment of carriage horses. It found both the city health department and the ASPCA conducted investigations that determined no serious violations existed in terms of safety or health of the horses. The carriage industry hired a veterinarian from Cornell University to examine its horses. His report found “45% of the 130 animals inspected were “fat,” 50% were in good condition and 5% would be classified as thin. The thin horses were not unhealthy, just thin.” As far as finding any evidence of maltreatment of animals, there isn’t any. So what is the justification for government involvement?

May we humbly suggest, that if tourists wanted to be driven around the city or Central Park in electric, vintage-replica tourist-friendly vehicles, that an enterprising individual would be providing the service already.  Maybe Steve Nislick could have taken his 3/4 of a million spent on political activities and used it as seed money to start such a business.  He then could have seen for himself if the market wanted electric, vintage-replica tourist-friendly vehicles. When his business enjoyed undoubted success, he could have put the horse drawn carriage industry out of business and bought the property he coveted at a bankruptcy auction.

But instead, Nislick’s answer is to find a political opportunist in Bill De Blasio and legions of polyezniy idiots of liberal and progressive activists supporting causes like animal rights, social justice, and environmental activism to use as his and try to use the power of government to achieve his goals. The resulting loss of freedom impacts tourists, consumers, and the owners and employees of the current horse drawn industry.

And it’s important to remember that the existing business–despite being despised by political opportunists–are real people. Horse drawn carriage operators in the city accounts for more than $15 million in economic activity and provides nearly 300 jobs and stables for 200 horses. What about their freedom to operate their business without being badgered by idiot politicians who can’t find something better to do with the public’s time?

We’ll point out that Democrat Bill De Blasio doesn’t have a monopoly on this bad idea.  His Republican opponent in the mayor’s race, Joe Lhota, is reported as supporting replacing the horse drawn carriages with electric carriages also. It goes to show that neither party is immune from putting forward freedom killing bad ideas and pretending that government knows best or has the answers to life’s ills.

Business owners attempting to purchase political power within the colossus of government in order to achieve their business goals through force is not capitalism. This is corporatism and “crony capitalism,” better known as crapitalism. But it is not what one would expect to find in a society that values freedom, market competition, or free markets.

It’s what one would expect to find in a banana republic run by a despotic dictator where the dictator’s friends are rewarded for their loyalty and support. And where the dictator’s enemies are punished in order to give spoils to the supporters. (Kind of reminds us of how our current president does business, who commented on Oct. 25, 2010: “We’re gonna punish our enemies and we’re gonna reward our friends who stand with us on issues that are important to us.”).

We hope this effort to demonize one of New York’s tourist industries fails. The logic and politics behind the movement to end the horse drawn carriages are based on fraud, corruption, and kind of smell a lot like a steaming pile of the stuff that comes from the horses the mayor and his ilk are trying to forcibly retire.

Budget “Deal” Shows Why You Shouldn’t Trust Politicians to Fix Anything

House Republican Paul Ryan and Senate Democrat Pat Murray proudly emerged from crafting their back-room budget deal. Finally, an end to the dreaded “sequester” budget cuts that were promised to be so intense and so devastating that the sky might literally fall if they were enacted. Finally, an end to the threat of another government shut down when the continuing resolution passed in October expires in mid-January.

House Majority Leader Eric Cantor praised Ryan for “the hard work behind trying to get a deal in this divided government we’re in.”

Speaker John Boehner was so angry that conservatives in his caucus weren’t widely supporting the budget deal, he yelled “Are you kidding me?” at one point into a microphone at his press conference earlier today.

That’s funny. We think the question really should be asked of him and those who support the budget “deal” and think that something meaningful has actually been accomplished.  Maybe a better question is “who are you trying to kid?”

The non-partisan Congressional Budget Office scores the deficit impact of the laws Congress passes.  They evaluated this budget deal and reported the law would result in about $150 billion in deficit reductions. Over ten years.

Of course Representatives have two-year terms–meaning there will be five elections between now and the end of this projection. Even the Senate will go through nearly two full election cycles of its members during this timeline. What is the chance that the cuts enacted will be left in place? If you need a hint, the budget cuts that went into effect January 2, 2013 lasted until…well until about today, so not even a full year. What’s the likelihood that budget cuts enacted ten years from now actually remain in place?

This is the dishonesty of budget projections. All the budget pain is in the later years of the timeline. But politicians claim to have made “the hard choices” now and done “the hard work” now of getting a deal done today. They’re hoping you don’t notice when the cuts go into effect.

The “hard choice” made in the House today is to make NO change to the projected deficit in 2014. That’s right. Zero change. All changes take place after 2014. And we know 2014 is an election year, meaning in 2015, fresh faces in Congress may alter this budget blueprint at will.

The pie chart below shows the dollar value of deficit cuts in each year of the budget plan.  Yes, 2014, the year when Congress could have actually enacted something that would stick, is zero. As each year passes, the likelihood of the cuts remaining in place drops–so we shaded the chart to reflect lighter pie slices until 2023 when the final slice is a pale white-green color.

Seventy cents of every dollar in proposed cuts won’t take place until after the 5 year mid-point (2019) of the budget plan. We won’t even have the same president by then. The remaining 30 cents in cuts will be realized between 2015 and 2019.

But the size of the cuts themselves are unbelievably small. Sure, politicians will claim to have cut the deficit by $150 billion (…*cough*overtenyears*cough*…)

But what does that mean? Even if every penny that is proposed to be on the budget chopping block remains on the chopping block, the size of the cuts is insignificant.

Over the same 10 year period where Republicans and Democrats are slapping each other on the back over their $150 billion in deficit reductions (…*cough*overtenyears*cough*…) your government is expected to spend some $46.6 TRILLION. Suddenly the $150 billion in reductions (your turn! *cough*overtenyears*cough) is little more than an insignificant rounding error–just 0.3% of funds to be spent.

We colored the area of the rectangle below green in a sea of red to represent the value of the cuts as a percentage of expected spending. You might need to zoom in to find the cuts.

This inability of Congress to address the country’s fiscal woes will lead to economic ruin in the form of crippling tax increases, inflation, and a damaged US Dollar in foreign currency markets. These effects in turn limit the freedom we have to enjoy a fruitful and prosperous lifestyle as we have less disposable income, must pay more for basic goods and services with the money the government was gracious enough not to tax, and an inability to afford goods and services that are not produced here.

All of which begs the question of Speaker Boehner and those who voted for the measure, “Are you kidding us?”

This…Actually Won Money…Money…Money…

The US Department of Health and Human Services and Young Invincibles teamed up to spend a sum of some thousands (we think $5,000 but it’s not clear, if you can interpret the beaucra-speak from the contest prizes rules and press release let us know) on this mess…


Even the White House joined in the fun of ripping off a pop song to try to turn it into political propaganda for an age group that so far  is largely not interested in buying into Obamacare.

Here’s why the video isn’t worth whatever price the government and its unwitting partner paid:

1. The video, which received financial compensation, makes heavy and unattributed use of a copyrighted song by Jessie J without attribution. We’re pretty sure if a Tea Party group had used a copyrighted song to illustrate a point against the Affordable Care Act, that concerted teams of IRS agents, left-wing activists, media types, lawyers, FBI swat teams, heavily armed Predator drones, even Eric Holder himself would descend on the Tea Party group to capture those involved and dispense whatever mob justice seemed appropriate at the time.

2. The video’s chorus asks you to “Forget About the Price Tag” for a program that’s been plagued with upward cost estimate revisions since the president claimed it would cost only $90 billion per year. Coming up on 5 years and 5 revisions later the current estimate stands at $2.7 trillion (3 times the president’s original figure) factored in a 10-year CBO projection. Forget about that price tag, indeed…

3. The program’s signature product website healthcare.gov cost taxpayers more than $600 million, and was nowhere near ready for prime time on the administration’s launch date of October 1 of this year. Negligence and gross mismanagement abounded, but no one has been held accountable. But forget about the price tag; we guess it “ain’t about the uh-cha-ching cha-ching.”

4. Speaking of “cha-ching cha-ching,” the $600 million the federal government blew on a non-working website still has NO payment transfer mechanism to pay insurance companies those subsidies the federal government promised. As one observer has pointed out, the Armed Forces of the United States mobilized, deployed, fought, and defeated the Axis Powers, winning World War II in less time than it took the government to develop a non-functional website.

5. In a lilting exhortation, our singer says “there’s no excuse to be uninsured.” But the law applies to all Americans. You get a government-approved health plan, or you get fined. But “just stop for a minute to think.”  Do the super-wealthy like Bill Gates, Oprah Winfrey, Mark Zuckerberg, and Warren Buffet really need to purchase individual health insurance?

6. “Keep your mind at ease and get some security.” Like the 5 million+ people who had an individual health insurance policy and have had their plans cancelled due to the Obama Administration’s implementing regulations for the Affordable Care Act? But don’t worry about the “yeah bla-bling bla-bling”!

7. “We just wanna make it more fair with affordable health caaaare.”  But having an insurance policy that has the Obama administration’s gold (or maybe even red!) star seal of approval, does NOT mean you will be getting any health caaaare. It means you have coverage and now have to find a doctor that participates with that insurance program.

8. When coverage expands? Well coverage so far has only contracted with millions of cancellation notices and the president’s extra-legal request that insurers extend policies that his law, as his administration has chosen to implement it, are barred from having…  Even as Obamacare enters maturity as a federal program, the CBO projects we will still have 30 million some uninsured Americans.  But wasn’t that close to the number of uninsured before the government seized control of the health insurance industry?

9. “Take advantage of this opportunity!” What opportunity? Insurance actuarial tables work thusly: a population or risk pool pays premiums. Premiums are used to pay for the bad things that happen to members of the risk pool. Young people in general have far fewer health care requirements–and thus many could benefit from a plan offering catastrophic coverage and socking money into a Health Savings Account, which they control, for later in life when their needs, unfortunately, are destined to change. But like Social Security, the young are paying higher premiums into a program that will pay NOW for sicker people and will not have enough future money coming in to pay for the young when they advance in age and require more costly care.

10. “Why is everyone so oblivious?” Well, many aren’t. A recent poll suggests that only 1 in 4 young people (the target of the video) plan to sign up for “Obamacare,” suggesting that at least the remaining 3 out of 4 aren’t so oblivious and can do the simple math above and see that the program is not a good deal for them. It’s too bad we can’t count the video author among the un-oblivious.

11. “I know we’re in our prime. About time we opened our eyes.” Agreed!

We think the video’s author, Erin McDonald, could have gotten more benefit and closer to the truth if she had stuck with words from the original song:

“Seems like everybody’s got a price” (Like the Louisiana Purchase–Right, Sen Landrieu?)

“…when the sale comes first, and the truth comes second” (Ain’t that the truth? Right, Pres Obama? And your close to 40 recorded promises of “if you like your doctor/health plan you can keep your doctor/health plan.”

“It’s not about the money, money, money//We don’t need your money, money, money.” While Obamacare is precisely about the money, money, money, we’d much prefer a government that espoused this idea!

“Money can’t buy us happiness//can we all slow down and enjoy right now.” This sounds an awful lot like freedom to us. If government would stop worrying about what you and I do with our money and stop trying to steal it to buy votes, corruption, and political power, perhaps we could all just “make the world dance.”

Social Insecurity

Last week the Associated Press reported that people now starting to receive Social Security benefits will–for the first time–receive less in expected benefits than they have paid in payroll taxes. 

The chart is easy to follow:

In 1960, the average American paid about $36,000 in payroll taxes over a lifetime of work. With each paycheck, workers “contributed” 3% (with a matching 3% “contribution” from their employer) on the first $4,800 of wages. We say “contributed” because they had no choice, as the government forced them to do pay the taxes into the system.

Think about this for a moment and figure out the math.  If a person is taxed at 3% on the first $4,800 they earn, then in 1960, the total Social Security tax bill would have been $144, or about $2.77 per week.  In exchange, the average worker who paid in $36,000 received checks for $259,000. Not a bad deal at all!

Unfortunately, you can probably also see the immediate problem with this formula.  If a worker pays in $36,000 and receives $259,000, where is the difference coming from? The Social Security Administration states that the program has never been significantly funded by general income taxes.  And that has been true–but it won’t be for long.

The only way to balance out the math is for far more workers to be paying into social security than there are receiving payments from social security.  In 1960 there were 5 workers paying in for every person receiving checks.  Consider the change from 20 short years earlier when there were a whopping 42 workers paying into the system for every person receiving checks.

Unfortunately as time marches on and people (not unfortunately!) live longer and the population growth rate slows, we find fewer workers paying into the system for every beneficiary; 3.2 for every recipient.  By 1980 the government realized it wasn’t pulling in enough in payroll taxes to continue funding the program.  The tax rate jumped 70% from a 3% payroll tax rate to a 5.08% rate on the first $25,900 of income.

Again, double check the math. 5.08% on $25,900 is $1,315 or $25.30 per week.  Although the tax rate only went up 70% over the 20 year period, a person paying “the max” saw his/her payroll taxes increase by a whopping 813%! Talk about paying your “fair share.”  More money is being funneled into a system that is still going bankrupt with each check written.

The gap between the red bar (taxes paid in) and the green bar (benefit checks) is literally a transfer of wealth from current workers (a.k.a. future retirees) to current recipients.  In other words, as each generation of workers pays in, they receive money from future tax payers, and they receive less in benefits relative to the amount paid in.

Some politicians have compared Social Security to a Ponzi scheme. And drawn fierce criticism for making the comparison.  Unfortunately, the term is correct, and this is precisely what Social Security is.  Here is a simple Wikipedia definition:

A Ponzi scheme is a fraudulent investment operation that pays returns to its investors from their own money or the money paid by subsequent investors, rather than from profit earned by the individual or organization running the operation. The Ponzi scheme usually entices new investors by offering higher returns than other investments, in the form of short-term returns that are either abnormally high or unusually consistent. Perpetuation of the high returns requires an ever-increasing flow of money from new investors to keep the scheme going.

The system is destined to collapse because the earnings, if any, are less than the payments to investors. Usually, the scheme is interrupted by legal authorities before it collapses because a Ponzi scheme is suspected or because the promoter is selling unregistered securities. As more investors become involved, the likelihood of the scheme coming to the attention of authorities increases.

Unfortunately, with this Ponzi scheme, there is no help from legal authorities to put an end to it. The AP report shows that in 2010, the average Social Security recipient will have paid $588,000 in taxes, yet is estimated to receive only $555,000 in benefits.  The current rate (excepting a temporary tax reduction) is 6.2% on the first $106,800 of income or $6,621 per year from both employer and worker.  The rate of taxation increased 106% from 1960 with the maximum collected amount increasing nearly 4,500% over the $144 from 1960.

Notice the gap between the red bar and the green bar in the chart. The gap will have to be balanced by either a benefit cut or higher taxes.  The math is inescapable.  We say “Bravo!” to politicians who actually have enough of a spine to speak about the need for entitlement reform. To politicians who make base attacks on others seeking to fix the problem, we say “Shame on you!”  Social Security is destined for change whether it’s intentional now and done with reforms in mind that could preserve some portion of the program for people truly needing help instead of having no choice but cut benefits or hike taxes.

The real tragedy here is the lie perpetrated by government to make people think that government is the only solution and to force people into the system with no alternatives or way to opt out.  This limits freedom for everyone and perpetuates a cycle of dependency that will be very painful to break in having people return to being responsible for their own future.

Clearly the myth that “social security will be there for you” has taken its toll. A recent survey of retirees confirms that 40% of Americans age 55 and over have saved LESS THAN $25,000 for their retirement, over a 40 year lifetime of work.  With such a low savings rate and with Social Security’s promise becoming an empty one that pays the average recipient less than he/she contributes, we can see a bumpy road ahead where the longer we wait to fix the problem now the more painful the solutions that will be necessary down the road.