This week, Bloomberg Politics reported that investor and businessman, Sheldon Adelson, was taking advantage of a loophole in the current tax law to pass assets on to his heirs. Passing new tax laws in 1990–both the House and Senate were Democratic controlled at that time–is what created the loophole initially. It takes advantage of a special trust called a “GRAT” (grantor retained annuity trust), which allows placing assets into an irrevocable trust, where the person creating the trust pays a tax. The trust pays an annuity every year, and upon expiration, the beneficiaries receive the remaining assets in the trust, tax-free.
Adelson and other businessmen have successfully used this mechanism to pass their assets to others and to avoid paying penalizing government fees and estate taxes to the tune of $100 billion over the past 13 years. Adelson himself has been able to pass $7.9 billion of his money to his heirs. Mark Zuckerberg (of Facebook fortune) and Lloyd Blankfein (of Goldman Sachs Group) have also taken advantage of the loophole.
Proponents of big government seem suddenly to realize the additional billions that they could spend if the loophole were closed, and they bemoan the fact that it’s still available. Adding to that, the fact that there is simply such large amounts of money mentioned, and other’s greed and envy kick in as well. Ironically, the concerns that people utter, reflect the same thinking as Adelson et al., namely that, “I don’t have enough” and “I need a way to save what I have now for myself and my children”.
Quickly after that, any parallel thinking ends, and arbitrariness kicks in. All too suddenly, a self-concerned commenter engages in the conditioned response of this administration– “Surely those terribly rich men have enough money already? Why shouldn’t I be able to help spend some of that? Those businessmen must have made that money illegally or exploitatively…”
So, let us review: Congress screws up when they rewrite the tax code, Congress continues to refuse to fix the loophole, people are able to save their own money, and give it to their children. And the unavailable money that the government cannot collect is largely the businessman‘s fault? I am not sure what mental gymnastic enables one to bend logic that far, but it is quite a stretch.
I expect it will be some time before Congress does anything to close this loophole, since the right’s opposition to taxes is well-known, and the left has far too many big donors taking advantage of the loophole to close it. One thing is certain–whenever a government attempts to increasingly micromanage and legislate things, they will always underestimate the ability and ingenuity of the people to find ways to wriggle out of the most awful laws. The people may be dumb enough to vote for the Congressman, but they are smart enough not to follow his laws.
Another day, another fiscal-cliff deal gone down the drain. John Boehner, already taking heat from the right for his softening stance on raising taxes, has come out with another offer to the president and the left. Called “Plan B”, the plan formerly had the support of Nancy Pelosi. Plan B would set the lower limit for raising taxes at the $1 million level. Plan B is very similar to the same bill that had Senate Democrats’ support in 2010.
For her part, in an interview with Andrea Mitchell, Pelosi now says she only supported the plan to “smoke out the Republicans”, and see at what level they would consider raising taxes. Pelosi was negotiating purely in bad faith, it seems. She did not have anything serious to bring to the discussion, and she was merely wasting time. That, or she is negotiating from the standpoint of “getting an inch, and taking a foot”. Whatever her motive was, it is plain to see how destructive and pointless it was.
Mitch McConnell says he would support the Plan B design, but he would do so with reservations. McConnell would rather have a bill that did not raise taxes on anybody. With Boehner’s support of this newest plan, numerous other House members raised objections to the new tax considerations, but they seem to recognize that without any plan, taxes would greatly rise. The gambit now is to “shield” as many people from the massive tax increases as possible. Sean Duffy, Jim Jordan, and Raul Labrador all seemed lukewarm at best to the prospect of voting for any tax increases, with Labrador refusing to even share his criticisms.
Called out for his part (or non-part) in the fiscal-cliff talks was Harry Reid. One Republican adviser said Reid has been on the sidelines for the cliff negotiations. Reid has also claimed that, despite numerous revisions to their positions, and despite the most recent offer, Republicans “…have threatened to abandon serious negotiations”. Perhaps more proof that he is merely running interference for the White House, Reid also claimed that President Obama has not heard from Boehner since Boehner’s new offer on Monday.
President Obama has balked at every offer the Republicans have proposed so far. Threatening a veto of everything has him in the position of a win-win situation. On one hand, if nothing happens, and taxes explode, he can continue to spend, thanks to the new revenues. On the other hand, if the Republicans cave in, he can both claim he negotiated the excellent deal, and privately, he can tell his sycophants he made Boehner and the Republicans submit. White House officials are also now claiming that the President will refuse to negotiate with Republicans out of principle. That of course, will allow President Obama (and Reid) to claim they attempted to negotiate, but were simply prevented from passing any legislation by the blocking Republicans (yet again).
To the left, the worst thing to come of failed fiscal-cliff talks is that President Obama has to postpone leaving for his Christmas vacation. They face: finally getting huge tax increases, yet again, furthering the narrative of a blocking, do-nothing, Republican party, and they get huge military cuts. Merry Christmas, America.
I was recently reading a book by British author, economist, and historian, Niall Ferguson, called “Colossus“, where he compared the British Empire to the American pseudo-empire. Ferguson made it very clear that the American version was far differing in its outcomes than the British, which had numerous factors working in its favor. One of the most glaring differences was that British citizens were far more willing to move to colonies and conquered areas, both to build and develop a British-style administration and to improve infrastructure over decades, where American citizens would rather simply stay put.
There were a number of factors Ferguson cited, in a list by historian David Landes, that are tactics that second- and third-world countries’ economies and legal systems should use to improve and grow. Upon reading this list, I grew dumbfounded as many of the things enumerated within that list, are the polar opposite of the policies of President Obama and his administration, in the last three years in the United States. Instead of moving “Forward” (if you will forgive the use of the already hackneyed campaign slogan of Obama’s), the president acts in ways that are completely contrary to common sense and pro-American beliefs. I post the list below (also posted in one of Ferguson’s previous works, “Empire“) along with my thoughts as I read the tactics:
1. secure rights of private property, the better to encourage saving and investment
This item put me in mind of the egregious Gibson guitar raids in the summer of 2011. Secure rights of private property? Hardly – the U.S. government twice raided the Gibson factory, citing a law from 1900 (more commonly known as the Lacey Act, found here with amended text), that was originally written to protect the trade of feathers for hats. Amended and broadened in 2008, the law now includes plants. Despite legal sales, approved by Indian and Malagasy authorities, the U.S. Feds raided and seized Gibson wood stocks anyway.
2. secure rights of personal liberty...against both the abuses of tyranny and...crime and corruption
Can we honestly say the administration has done this? My mind goes to the loss of Brian Terry’s life, as a result of the “Fast & Furious” scandal, a flawed, illegal, haphazardly executed gun selling operation. Refusing to apologize to Terry’s family, A.G. Holder still balks at producing the papers Congress is requesting from his D.O.J. Another example that is also connected to this program, is the ongoing scuttlebutt that the program’s design was to negatively effect the power of the 2nd Amendment.
3. enforce rights of contract;
I do not feel like there is much more to say than bringing up the government take over of the student loan program, and its take over of healthcare in the country. The government came in, and while promising one thing, delivered everything but.
4. provide stable government...governed by publicly known rules;
Have we seen a good example of this from Democrats? Between their “deemed to have passed” legislation, and a completely “tabled” Senate (also led by Harry Reid and Democrats) – can we honestly call this a “stable government”? With state Congresses fleeing the states to prevent votes on hotly contested legislation, who needs rules and stability? There are plenty of easily understood rules, but if the people in charge choose to ignore them, what do we have?
5. provide responsible government;
Responsible government? Again, I’d like to bring up “Fast & Furious”. Eric Holder continues to serve as Attorney General, and the threat of contempt of Congress does not seem to phase him. Another thought is the numerous, unanswerable czars of the president’s and the regulatory agencies (think: E.P.A.) that are using their power (with little, if any) oversight and accountability.
6. provide honest government...[with] no rents to favour and position;
How could I not think of the Solyndra mess? Loaning millions of dollars to the business, only to saw it wasted, as the company blew through it, at its (well-known and purposely overlooked) high burn-rate, and where it was later revealed that a big investor was George Kaiser, one of President Obama’s campaign bundlers. As far as no favor to position – how about the benefit of being a Congressional member? Access to a legal way to get in on nearly impossible-to-join IPOs and investments, that normal Americans were held out of?
7. provide moderate, efficient, ungreedy government...to hold taxes down [and] reduce the government's claim on the social surplus
While the cry of the left is “Well, Bush did it too!”, when they defend Obama’s questionable actions, whatever Bush may have done does not hold a candle to the extent of Obama’s odious actions. Obama has expanded the deficit more than any other president in history. How would he and his party seek to pay for their bills? Taxes, of course. Create some new ones, and expand the old ones – simply tax, tax, tax, then they can spend, spend, spend. The administration raided Medicare Advantage funds to help pay for Obamacare (to the tune of $204 billion).
So, if the list contains directions for a well-maintained and least troublesome government, why would the president do anything otherwise? If I were a cynic, I might offer Rahm Emmanuel’s quip, “Never let a crisis go to waste.” Create a crisis, and then ride in to save the day. The only problem is that there are far too many crises, and too many unaccountable people, following their own rules, in Washington.
So, our dear leader warns us that once again, those crazy Republicans want to drive this country into the ground – by stealing money from everyone of us, who are struggling to break even, and then generously give it to people that hardly need it (their filthy rich buddies – the 1%). He neglects to mention that the fact so many of us are struggling to break even may have something to do with his still-failing economic policies – but that is ok, since, as he has promised us for three years now, happy days are just ahead (thanks to him). The GOP just wants to cut and cut, like a mad lumberjack in a forest, not caring what they strike, so long as the ax connects, the president would have us believe. Obama even went so far as to claim Republicans’ mentality as being “…driven by our ideological vision about how government should be” and he went even further, claiming the Republicans were sticking with the same types of economic decisions that drove the country into the Great Depression.
The Senate, having not given the country a budget in the past three years, has not deterred Republicans from trying their hands at writing one in the House, but Paul Ryan’s most recent effort was met with the usual scatterbrained excuses and rhetoric. Obama tells us children will starve and Medicare patients will be without their medicines (never mind his own cutting of $528 billion from the Medicare roles, via Obamacare), and finally, that he is not the extreme progressive that he is painted. Indeed, he even went so far as to invoke the names of two outstanding Republicans to compare himself to – Abraham Lincoln (yes, again) and Ronald Reagan. By talking of the Reagan-era, Obama attempted to point out how far right the GOP has moved, and claims Reagan could not win a primary now. For their parts, Republican leaders took the most natural response: they snickered and asked what Obama’s policies would do to help the country. After stumbling, and realizing how much his words were parsed these days, he sauntered off.
I find it odd, that the man who thought it would be brilliant to sign into law, legislation that no one had read, and who continues to defend his administration’s $535 million boondoggle loan to a solar company that “needed” talking robots, would be criticizing anybody’s plans. The president who has created more debt and higher deficits than any other president in history – wants to criticize others’ efforts to try to fix the mess? On the administration’s face, it has been do-little as a matter of course. When it has actually done anything, it seems to be with negative outcomes, or so completely, horribly wrong, one has to wonder if anyone is awake at the wheel. In Iran, with the promising “Green Revolution”, he did nothing as people were beaten in the streets – now he wants to punish some of the same people with crippling sanctions. The president wanted to help Libyan rebels – but violated the War Powers Act to do so. He wanted to help and support the Egyptian uprising – but he stalled for so long, now it appears the Muslim Brotherhood is licking its lips at a presidential election run. In Syria now, where civilians are being fired on, and bombed by the military? The president decides it is better to let the region solve that problem on its own. Our ally in the region, Israel recently had intelligence on their own allies leaked as well. Former Ambassador John Bolton points his finger at the administration…
Obama’s record is so anemic and is full of massive failures. He cannot kowtow to his base of environmentalists, without having the rest of America howling about oil prices. He cannot stretch the military much further than he already has. And he cannot do anything but tear down others, to even make it seem as though he has accomplished anything (I call that “maximizing by minimizing”). At this point, I would rather have a coin in the Oval Office – after all, you can count on it to make a right decision 1/2 of the time.