Taxing Thoughts

Is running up huge deficits today the Republican plan to curtail future spending?

US ‘faces future of chronic deficits’
By Peronet Despeignes in Washington

The Bush administration has shelved a report commissioned by the Treasury that shows the US currently faces a future of chronic federal budget deficits totalling at least $44,200bn in current US dollars.

The study, the most comprehensive assessment of how the US government is at risk of being overwhelmed by the “baby boom” generation’s future healthcare and retirement costs, was commissioned by then-Treasury secretary Paul O’Neill.

But the Bush administration chose to keep the findings out of the annual budget report for fiscal year 2004, published in February, as the White House campaigned for a tax-cut package that critics claim will expand future deficits.

It seems that Florida has joined the bandwagon. Florida is considering lowering the required test scores on the FCAT needed to graduate. Florida’s solution is three tiered. The first tier would allow students to enter community college as long as they have a 2.0 GPA and have completed all of the required courses, even though they did not pass the FCAT. The students would then be required to take remedial classes before they take college level classes. Assuming they complete the requirements for an Associates Degree, they will be allowed to go on to a 4 year university and earn a Bachelors Degree, even though they never earned a High School diploma. The second tier would allow students who have moved to the state from another state or country to graduate provided that they have a 2.0 GPA and have completed all of the required couses, as long as they meet the graduation standards of the location where they previously lived. The third tier, which was originally designed for speakers of other languages, but is now available to any student will give a High School diploma to any student that scores above a minimum score on the ACT or SAT, even though state education administrators state that there is no relationship between the scores on the FCAT and the ACT/SAT. The minimum score for the SAT would be 370 verbal and 350 math.

Direct from the White House’s Office of Management and Budget about the FY2004 Budget.

THE REAL FISCAL DANGER
As noted frequently in this document, the federal government appears likely to spend more than it takes in for at least the next few years. Although the resulting deficits are manageable by any reasonable standard, they are cause for legitimate concern and attention. But whatever judgment one reaches about the deficit of this year or even the next several years combined, these deficits are tiny compared to the far larger built-in deficits that will be generated by structural problems in our largest entitlement programs. Social Security and Medicare combine to provide financial support to 39 million seniors-14 percent of our population-and account for one-third of total federal spending. As our population ages and health care costs continue to escalate, the costs of these programs will grow enormously, in fact, so rapidly that they will threaten to overwhelm the rest of the budget.

Donald Rumsfeld Seems to Think So

The basis of the invasion of Iraq was that Saddam Hussein posed an immediate threat to the United States because of his possession of WMDs. Now, Defense Secretary Donald Rumsfeld has stated that a reason that no WMDs have been found is because Hussein may have destroyed all of the WMDs prior to the war. If he destroyed the WMDs prior to the war and the U.S. knew he had WMDs prior to the war, then why didn’t the U.S. know that he destroyed the WMDs? Or did the current administration know this, but just neglected to pass that along to the American people?

Apparently, after merging with TimeWarner, AOL’s Steve Case is unhappy with the way the merger has turned out. He is now considering the idea of spinning off AOL into a standalone company. Is this another case of corporate greed gone bad? TimeWarner’s shares have gone from $56 at the time of the merger (May, 2001) to $14.71 today.

Have you ever felt like the same company owned every radio station in town? Have you ever flipped the channel on the radion not once, but twice, and had the same song playing on each station? If that has happened to you like it has to me, then you are not likely to be happy about this. The FCC is considering loosening the rules about media ownership for television, radio, and newspapers. The FCC loosened the rules on radio stations in 1996, now it wants to loosen the rules for the remainder of the media outlets. Wired has an article about how the rule changes will affect you.

Anatomy of FCC Media-Rules Change

Talking Points Memo by Joshua Micha Marshall has the following article on WMDs and the political machine in the White House today.

In recent days there has been a spate of news stories and editorials on whether the US intelligence community might have greatly overstated Iraq’s WMD capacity and, if this is so, why this might have happened.

First, let’s stipulate that if we eventually find that Iraq had few if any continuing WMD programs, that would be a major intelligence failure.

The New York Times has an article about President Bush’s “No Child Left Behind” law passed in 2002. The law requires states to administer standardized tests to the states’ public school students to measure a student’s proficiency in various academic areas. If schools do not meet passing standards Federal money can be withheld from the states and local school systems.

Many states, including Texas, are realizing that they will not be able to meet their own standards and are now lowering the passing standards to insure that they meet the law’s requirements. The “No Child Left Behind” law allows states to set their own passing standards, which completely destroys the credibility of the program. Any state can change the passing standard at their will, which will essentially allow states to gerrymander the test scores as evidenced by the following quotes.

Told only like John Irons at ArgMax can tell it.

T minus 9 days
Nine days until default….

The Senate is currently considering a $1 trillion increase in the debt ceiling, which now stands at $6.4 trillion. Just last year Congress and the President boosted the debt limit by $450 billion.

If Congress does not pass the debt-limit increase by May 28th, the government will not be able to meet its obligations to, among other things, pay social security recipients, make tax refunds, etc.

And Congress is about to pass, and the President is about to sign, the third largest tax cut in history – in the form of a dividend tax cut – that will have very little effect on the economy in the short run…

Dividend Voodoo

By Warren Buffett
Tuesday, May 20, 2003; Page A19

The annual Forbes 400 lists prove that — with occasional blips — the rich do indeed get richer. Nonetheless, the Senate voted last week to supply major aid to the rich in their pursuit of even greater wealth.

The Senate decided that the dividends an individual receives should be 50 percent free of tax in 2003, 100 percent tax-free in 2004 through 2006 and then again fully taxable in 2007. The mental flexibility the Senate demonstrated in crafting these zigzags is breathtaking. What it has put in motion, though, is clear: If enacted, these changes would further tilt the tax scales toward the rich.