Saturday, December 31, 2005

By The Numbers

The Statistical Abstract of the United States for 2006 is out. It's chock full of interesting stuff, such as this chart that shows that the American's median income, in constant dollars, fell between 2000 and 2003:

(Click to see a larger image.)

In other words, most Americans were economically worse off after the first two full years of Bush.

I've only started to plough through the wealth of numbers. I will comment on other statistics in the new year.

Hat tip to beSpacific.

Monday, December 26, 2005

The Rich Get Richer Department

The Daily Kos has charts which illustrate the growing disparities of income in this country since 1979. The most striking is this one which shows that the top 1% of the population increased their income by an incredible 201% over the period. This is almost four times the increase that those in the top 4% achieved and about fifteen times the increase of those in the lower 60% of the population.

Just remember the charts the next time some knave attempts to fool you into believing that the rich are getting soaked.

Saturday, December 24, 2005

By The Numbers

The IRS just released the December Statistics of Income (SOI) Bulletin. Previously, I had posted comments concerning Treasury Secretary Snow's abuse of statistics that he claimed showed an increase in federal tax revenues since the passage of the 2003 Tax Act. The SOI indicates that, at least for 2003, Snow's assertion was false.

According to the SOI:
Taxable income, which is the result of [Adjusted Gross Income] less exemptions and deductions, rose 2.5 percent to $4.2 trillion. However, total income tax fell 6.1 percent to $748.0 billion for 2003. . . . The decline in total income tax for 2003 reflects the reduction in tax rates, under [the Jobs and Growth Tax Relief Reconciliation Act of 2003], which lowered marginal rates above the 15-percent rate bracket and expanded the width of the 10-percent regular tax rate bracket for all returns and the 15-percent bracket for joint returns.
(Emphasis added.) In other words, in 2003, income tax revenues fell due to the Bush tax cuts.

More startling is this chart which shows the decline in tax revenue as a percent of gross domestic product:

Admittedly, the SOI analysed 2003 revenue results while Snow pointed to revenue increases in 2004 and 2005. However, the 2004 and, particularly, the 2005 results are skewed by additional changes in the tax law that distort the picture by decreasing total revenue over time, but accelerating the receipt of the revenue.

Hat tip to Tax Analysts.

Is Mickey Kaus Nuts?

According to Mickey Kaus:
"Reasonable expectations of privacy," as the lawyers put it, are simply lower in the age of blogs and Webcams and surveillance videos than in the age of dial telephones. ... I wouldn't be all that upset if the Feds ran every damn phone call through the Echelon-style NSA computers. Do you have a problem with that?
Well, yes:
Any sound that Winston made, above the level of a very low whisper, would be picked up by it, moreover, so long as he remained within the field of vision which the metal plaque commanded, he could be seen as well as heard. There was of course no way of knowing whether you were being watched at any given moment. How often, or on what system, the Thought Police plugged in on any individual wire was guesswork. It was even conceivable that they watched everybody all the time. But at any rate they could plug in your wire whenever they wanted to. You had to live -- did live, from habit that became instinct -- in the assumption that every sound you made was overheard, and, except in darkness, every movement scrutinized.
1984 by George Orwell, Chapter 1.

Sunday, December 18, 2005

A Grain of Salt

On October 9, I commented on a story that was making the rounds of the blogosphere concerning a development project in Union Township, New Jersey. The meme of the various postings was that evil wealthy developers had, in essence, paid off a political boss in order to steal a valuable development opportunity from the proverbial little guy, one Carol Segal, and that this exposed the basic of the Supreme Court's opinion in Kelo. This particular story line was reflected by bloggers on both the left (Kevin Drum) and the right (The Queen of All Evil). I expressed my doubts that the actual facts were that simple ("As related by the anti-Kelo commentators, there is something of an air of a "just-so story" about this matter.")

At the time I posted my comments, I had missed the comments of Nathan Newman posted three days earlier. He had picked up some facts that I had missed, specifically that:
  • Segal, a local retired electrical engineer, [had bought] up a bunch of abandoned industrial property in Union Township for $1.5 million. He [lobbied] the local government to rezone the land for residential development, which will instantly make him rich, since what was low-value land becomes instantly more valuable with the zoning change.

  • The city [demanded] that as a condition of making Segal rich that he agree to various conditions, including working with developers picked by the Township, possibly for public interested reasons, more probably to share the economic booty from the zoning change with their political supporters.
Newman concluded that:
Let's be clear-- giving it to the original owner is not rewarding anything but dumb luck or shrewd political manipulation and lobbying prowess. And if we are rewarding the latter, then why complain if someone else with better political manipulation powers grabs the land?

Of course-- and this is the key point -- we should want no one gaining financially from manipulation of the political process. Which is why people need to FOCUS on the economic payoff from zoning changes and the public should demand that WHOEVER develops land after a zoning change has to pay the public for the windfall from the zoning change.
I'm not certain that I fully agree with Newman's political theory here, but the facts seem to support his view that this matter involves a sharp developer (Segal) who attempted to benefit from the same sort of exercise of police power that underlies the Kelo decision. The Township, for its part, simply wanted to exercise that police power differently.

I am in no position to determine whether that difference was totally benign (the development that the Township's preferred developers promised was more in line with the overall planning goals of the Township), partially benign (the Township's preferred developers simply offered the Township a a better economic return from the development), or outrageously malignant (the preferred developers got the deal due to a political payoff to a local political boss). But then neither are any of the other weblogs who commented on the story.

Last week, the Township canceled its plans to condemn the Schaefer Salt Site, as the Segal property is known. It gave as its reasons the costs of having to litigate the matter with Segal and the fact that it had too many other development irons in the fire. In another deal, for the development of a hotel, the Township had sold the land at a significantly reduced price and had given the developers large tax abatements. In response, Segal said "If the town gives us the same deal for the hotel, we'll give them $2 million -- five times what the town is selling it for -- and we'll take half of the tax abatement."

Of course, we now know the principle that Segal is attempting to vindicate. As the saying goes, now we're only dickering over the price.

Why Blogs Are Not Enough

In the past week, two news stories, one national, one local, illustrate why we need "institutional" news sources.

The national story is the NYT disclosure that President Bush ordered warrantless interceptions of communications to and from American citizens.

The local story is the report in the Baltimore Sun that Maryland environmental Secretary Kendl P. Philbrick faxed a letter to a powerful state senator arguing against a bill that the senator's committee was considering. Using the Maryland Public Information Act (the state analog to the federal Freedom of Information Act), the Sun obtained documents that reveal that Philbrick did not write the letter himself. Philbrick merely lifted the text, verbatim, from the text submitted to him in an e-mail by a lobbyist for the state's largest owner of power plants, Constellation Energy. The lobbyist was so comfortable with the relationship between himself and the Secretary that he suggested that Philbrick provide him with official letterhead and an electronic signature so that he could dispatch the letter himself. (Presumably, when questioned, the lobbyist will explain that he was merely attempting to save the state the cost of a stamp.)

Both the NYT and the Sun expended substantial amounts of time and money on their stories. It is unlikely that the stories could have been written by bloggers who are typically short on time and resources. The stories broke only because the two papers had deep enough financial pockets to fund the investment that their investigations required.

The reports also illustrate the importance of the Sun's lawsuit against the Ehrlich administration's attempt to restrict the access of certain reporters to government sources. (Discussed here and here.) Newspapers operate much like other businesses insofar as their profit margin is not the same for all of their activities. Mundane reporting is relatively cheap, investigatory reporting expensive. To some degree, the profit from the day-to-day reporting supports the more cost-intensive (and lower profit margin) investigative reporting.

If the Ehrlich administration is allowed to limit the access to government of reporters that it doesn't like, it will effectively be increasing the cost of reporting on mundane affairs. As a practical matter, this will limit the ability of newspapers to undertake serious investigatory reporting.

Friday, December 16, 2005

Ho, Ho, Ho!

From Representative John Dingell (D-MI) as reported on the weblog of the National Jewish Democratic Council:

'Twas the week before Christmas and all through the House,
no bills were passed 'bout which Fox News could grouse.
Tax cuts for the wealthy were passed with great cheer,
so vacations in St. Barts soon should be near.

Katrina kids were all nestled snug in motel beds,
while visions of school and home danced in their heads.
In Iraq, our soldiers need supplies and a plan,
and nuclear weapons are being built in Iran.

Gas prices shot up, consumer confidence fell.
Americans feared we were in a fast track to ..... well.
Wait, we need a distraction, something divisive and wily,
a fabrication straight from the mouth of O'Reilly.

We will pretend Christmas is under attack,
hold a vote to save it, then pat ourselves on the back.
Silent Night, First Noel, Away in the Manger,
Wake up Congress, they're in no danger.

This time of year, we see Christmas everywhere we go,
From churches to homes to schools and, yes, even Costco.
What we have is an attempt to divide and destroy
when this is the season to unite us with joy.

At Christmastime, we're taught to unite.
We don't need a made-up reason to fight.
So on O'Reilly, on Hannity, on Coulter and those right-wing blogs.
You should sit back and relax, have a few egg nogs.

'Tis the holiday season; enjoy it a pinch.
With all our real problems, do we really need another Grinch?
So to my friends and my colleagues, I say with delight,
a Merry Christmas to all, and to Bill O'Reilly, happy holidays.
Ho, ho, ho. Merry Christmas.

Hat Tip to Jonathan Zasloff of The Reality Based Community ("The War on Chanukah").

Wednesday, December 14, 2005

Snow Job

On December 8, TaxProf had a nifty chart courtesy of Secretary of the Treasury John Snow which showed the increase in federal tax revenues since the passage of the 2003 Tax Act. The chart shows that federal tax revenues in FY 2005 increased by a whopping $260 billion or so from revenues in FY 2004. Don't be deceived.

Today, TaxProf links to the AP story on the amount of funds coming back to this country due to the one-time tax cut on repatriated foreign earnings (Companies Mum on How They Will Spend Funds). Apparently, the amount of repatriated earnings will be in excess of $300 billion.

I previously blogged on this windfall. In essence, there is a one-time reduction of tax on repatriated earnings from 35% to 5.25%. Applying a little simple arithmetic, it would seem that about $16 billion of the $260 billion in increased FY 2005 revenue is directly related to this one time accounting gambit. Bunching this income into 2005 merely allows the true revenue picture to be distorted. And, of course, over time, the acceleration of revenue into FY 2005 causes a net diminution of revenue over time in the approximate amount of $90 billion.

Even though the repatriated funds cannot be distributed to shareholders directly in the form of dividends, cash is fungible. Thus, the repatriated funds are, to some extent, being distributed as dividends, albeit not directly. (As the AP story reports: '''The tawdry secret about (repatriation) is that it is not likely to change domestic spending,' said Kevin Hassett, director of economic policy studies for the American Enterprise Institute.") Increased distribution of dividends further increases revenues in FY 2005, but in the same distortive way. At best, this part of the increase in revenue represents only an acceleration of the realization of the revenues, not an overall increase in revenues. In fact, over time, the aggregate amount of revenues received is likely to be lower, not higher.

Yes, there are other reasons for the increase in revenue, most particularly the fact that the business cycle came around and the economy has moved out of the recession that it was in. None of these other reasons give credence to the Orwellian nonsense that Snow is peddling that the Bush tax cuts created revenues. But a significant part of the revenue "increase" is due simply to accounting hocus-pocus and is not an increase at all.

Tuesday, December 13, 2005

Gratuitous Sex

From ContractsProf Blog, proof that even staid law school types sometimes put gratuitous sex in their blog. The posting, Expensive Yacht Only "Incidental" to Oral Sex, is from a case decided in 1998, so it certainly isn't current. But the extensive use of quotations from the opinion is certain to draw search engine attention. ("Peters took a woman on a 'sex-filled sailing adventure' to Catalina Island." "Appellant is not claiming that his yacht plunged into a wave trough, causing him to stumble and fall, mouth open, onto Susan L.'s vagina." "There is no proof that appellant ever steadied Susan L. on the boat, and certainly not by grabbing her crotch.")

I would never resort to such sordid tactics to get this blog picked up by search engine bots.

Oh, wait a second. I just did.

Fiscal Meltdown Ahead

Via Tax Analysts:
GAO Chief Again Warns Tax Increases May Be Necessary

U.S. Comptroller General David Walker on December 12 opened a White House conference on aging with a warning that will be unwelcome to a president known for his tax-cutting ambitions: Raise taxes to avoid a fiscal meltdown.

"While nobody likes tax increases, including me . . . in the final analysis, over the longer term, you have to have enough revenues to pay your current bills and deliver on your current promises," he said.

According to Walker, the retirement of the baby-boom generation will put such a strain on the federal budget that tax increases will have to be part of the solution.

With a 15-year term as head of the Government Accountability Office, Walker enjoys a degree of insulation from repercussions for politically unpopular stances. In late October he called for allowing some of President Bush’s tax cuts to expire, and at the December 12 conference on aging he renewed a campaign against tax preferences that began with a stinging GAO report in September.

"Part of the problem is the way we keep score in Washington," Walker said. "Tax preferences are largely off the radar screen even though they amount to $700 to $800 billion a year in forgone revenue."
An audio/video feed of the conference can be found here. Walker's presentation begins at about 50 minutes into the feed. Walker's principal lesson "The past cannot be prologue." He notes that in the last 4 years, the unfunded liabilities of the federal government rose from $20 trillion (Yes, with a "t." According to Merriam-Webster "a very big number.") to $43 trillion. The unfunded debt is beginning to approximate the $48 trillion in total net worth of all Americans.
The status quo is not an option. . . . There is no way that we're going to grow our way out of this problem.
* * * * *
"While nobody likes tax increases . . . . In the final analysis, over the longer term, you have to have enough revenues to pay your current bills and deliver on your future policies."
Admittedly, the presentation appeals to policy wonks, but it is startling to see a mild-mannered, green eyeshade type get really angry.