Archive for April 18, 2009

Rather Dismal Economic Articles

From the TaxProf Blog:

Op-ed on CNN: Why Your Taxes May Double, by David M. Walker (President & CEO, Peter G. Peterson Foundation; Former Comptroller General of the United States and Head of the Government Accountability Office):

Even under the best of economic circumstances, tax season is a tense time for American households. The number of hours we collectively spend working on our returns is probably a lot more than government agencies claim.

The burden in financial terms is even greater: A recent independent survey found that the average American’s total federal, state and local tax bill roughly equals his or her entire earnings from January 1 up until right before tax day.

Now imagine that tax bill doubling over time. …

Regardless of what politicians tell you, any additional accumulations of debt are, absent dramatic reductions in the size and role of government, basically deferred tax increases. Remember the old saw? “You can pay me now or you can pay me later, with interest.”

To help put things in perspective, the Peterson Foundation calculated the federal government accumulated $56.4 trillion in total liabilities and unfunded promises for Medicare and Social Security as of September 30, 2008. … If $56.4 trillion in financial commitments is too big a number to digest, think of it as $483,000 per American household, or $184,000 for every man, woman and child in the country. …

Meet Owen & Payne, partners in a fictional accounting firm that specializes in helping Americans fill out the “new” Form 483000, which spells out how our elected officials are putting our nation into more and more debt and how that bill eventually will have to be paid: By doubling your taxes. The campaign is all in fun, but the intent is very serious.

Unless we begin to get our fiscal house in order, there’s simply no other way to handle our ever-mounting debt burdens except by doubling taxes over time. Otherwise, our growing commitments for Medicare and Social Security benefits will gradually squeeze out spending on other vital programs such as education, research and development, and infrastructure.

Now is a really good time to start preparations for going John Galt, if you haven’t already, just in case.

Then there’s this reassuring article in Town Hall helpfully titled “The Greatest Economic Disaster in Recorded History” to read. Here’s a brief excerpt:

Obama plans to borrow more money over the next eight years than all of the other presidents – combined.

It’s very hard to put this in perspective. The numbers have become so large they’re almost meaningless. “Twenty trillion” has 13 zeros: $20,000,000,000,000. Nobody can think about a number that large. But consider this… In 1980, the entire federal debt totaled $930 million. Assuming we’re paying 5% on our debt in 2019, we will spend more money on interest than our entire national debt of 1980.

Keep in mind these figures don’t include any of the off-budget items, like the obligations of Fannie Mae and Freddie Mac – both of which are insolvent. That’s roughly $2 trillion. They don’t include any of the unfunded future liabilities of the U.S. government – the estimated $40 trillion net present value of the entitlement programs. And perhaps most importantly, they don’t cover any of the pension guarantees the U.S. government supports via the Pension Benefit Guarantee Corp. (PBGC) – one of the dozens of fraudulent insurance schemes that keep the fiction of the government’s accounting alive.

I believe this is a one-term President if I’ve ever seen one, but I digress.

Then there’s the “profit” shown by Citigroup as reported in The Market Ticker:

Oh by the way, here’s another reason that Citigroup posted these numbers:

Citigroup posted a $2.5 billion gain because of an accounting change adopted in 2007. Under the rule, companies are allowed to record any declines in the market value of their own debt as an unrealized gain. The rule reflects the possibility that a company could buy back its own debt at a discount, which under traditional accounting methods would result in a profit.

If you want to talk about obscene, that is obscene balance sheet game-playing. What this means is that a firm that has its credit quality decrease, and therefore the trading price of its bonds go down (meaning the market thinks the firm is more likely to default) is able to claim that change as a profit!

Why? Because the firm could “buy back its own debt” at a discount.

Note carefully – the firm doesn’t actually have to buy it back (that would be reasonable – book the profit from an actual realized gain) but because it could it gets to book that as a paper “profit” on its financials.

*sigh* The local feed store got in a shipment of chicks again on Friday and, yet again, before I arrived home from work, all were sold out. I suppose the “dumbass rednecks” (per CNN) that live out here just don’t quite understand the slick accounting that lets Citigroup claim losses as profits and how we’re ever going to be able to pay back all that money Obama is currently borrowing. Or perhaps they grasp it all too well.


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No Tengo Dinero Here, Either

But here’s a nice song about it.

It’s a couple days past payday and I’m purty much broke after buying feed so when I came across Kumbia Kings singing “No Tengo Dinero”, I figured I’d join in, in a can’t-carry-a-tune, deep-south-accented-Ays-span-yol kinda way.

I miss those days in Arizona when I’d get home from work on Friday night, pour a glass of ice tea, and sit down on the patio out back to watch the sun go down when the temperature had cooled to about 100, while the neighbors were having a baile under the shade arbor out back, and the musicians had just arrived and were starting to play.

The kids, of course, thought it was totally boring to watch the sun set, gazing at the sky streaked with shades of hot pink and orange, and watch the mountains turn different shades of purple. Not to even mention listening to chicken scratch music. They would stay inside the house in case their friends might drive by and witness them doing something so completely uncool.

No tengo dinero pero grande corazon aqui, tambien.

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