Tuesday, April 28, 2009

Air Force Scares The People

Air Force One made a flight over New York yesterday. In fact the flight was fairly low. It was done as a photo opportunity with two fighter jets in tow. The people of Manhattan who saw this, decided to leave the buildings thinking of 911. How concerned would you be if you saw this?

Is this a case of government gone amok? When does a federal agency have the right to violate regulations or law? I tend to look for this type of thing and maybe that is why I question the government when they do something that is not right. Some say this is going off the deep end, but where do you draw the line? If no one ever questions the government, then the line is always moving, taking more of our rights.

Was this bad judgment, yes? Will those who made the bad judgment face any type of penalty, no?

Monday, April 27, 2009

Duke Energy: Clean Coal Technology

Duke Energy’s CEO was interviewed on 60 minutes Sunday Night. Duke operates over 25 coal fired plants. The CEO stated Duke has not invested one cent in clean coal technology. The one plant that supposedly is operating would cost over $4 billion to implement the clean coal technology per coal fired plant. I believe there are over 400 coal fired plants in the US. The CEO wants to partner with the Federal Government (US taxpayer) in implementing Clean Coal technology. The company envisions keeping coal and transforming the plants to clean coal by 2050. Duke is breaking ground on two coal fired plants now.

Instead of spending trillions on clean coal technology and getting no value added in terms of cost from the electricity, I say let’s spend the $trillions on wind power which is cheaper than dirty coal now. How inefficient does wind power have to be to be more costly than clean coal?

Duke CEO brought up Yucca Mountain and the thirty years to get it to where it is today only to have Obama shut its door. Nuclear power is doable, but there is no place to store the wasted which means it is dead in the water. Even if there were storage sites available, it is twice the cost of wind power. Clean Coal Technology will double the cost of building a coal fired plant. Stop subsidizing coal and let the best energy source win!

Saturday, April 25, 2009

Wind Power

Wind power made the news recently. As many who know me, know that I am a big proponent of wind power. Indiana is the fastest growing state in wind power. But this is because Indiana has little to begin with. By the end of 2009, Indiana could have 800 megawatts produced from wind power. This is about half the capacity of a nuclear power plant and about what a coal fired plant’s capacity.

Clean coal received $3.8 Billion from the stimulus bill. This is throwing $3.8 billion down the tubes. The feasibility prototype plant was canceled because the cost exceeded $2 billion and they still had no idea how to accomplish the task. You see, clean coal is a theory only. There is no working plant yet. The time line for the original plant was ten years. In ten years we could have great than 35% if not more of our electrical needs coming from wind. Wind power is known and proven technology and there is no need for billions of development costs.

Now if we can only stop the Governor from subsidizing coal we will begin to stop using a dirty 18th century conversion process to make electricity.

Wednesday, April 22, 2009

New Stadium

The New Baseball Stadium had very good attendance opening night, but by the third game it had dropped to less than half that of opening night. Many say the stadium looks great. I am sure it does. It cost $35 million. The stadium at the coliseum was paid for, had great parking, good access and held nearly as many people as the new one.

Some are complaining about parking in that some walked twelve blocks. Yes this is a problem. As people walk further away, you end up with congestion at cross walks making left and right turns difficult backing up cars. I am sure this will improve slightly, but being down town, it is limited to the speed limit and stop lights further away.

People who know me would call me conservative. I drive cars until they are no longer useful. That being said, the old stadium was still very much useful. Will the new stadium attract enough business to pay for itself? I do not think so for the basic reason that the city at most could only get 7% in sales tax collections and it has to share this with the state. To collect enough sales tax revenues to pay $35 million is a lot of sales, $500 million. This will not happen in one year so add in interest and the amount of sales you need is over $1 Billion.

The new stadium I hear now employs 200 people. This helps to cover the couple of hundred who lost their jobs when the old stadium closed and the businesses that closed to make room for the new stadium. Does anyone have a tally on the net jobs from this project?

I certainly hope this new stadium will make money, but I am not holding my breath. How many things has the city invested in that actually made money?

SWAC residents vote to increase their tax

SWAC residents voted to pay more in taxes. Less than 25% of those who could vote did. The number of employees in SWAC number over 1500. Many of them have spouses who would vote as well. How many workers actually get to vote where you work when it comes to keeping your job or raising your company’s revenues?

Tuesday, April 21, 2009

SWAC Tax Referendum

The people who live in SWAC District are voting today on a referendum to increase property taxes. What I saw a bit disconcerting is the use of the Homestead High School Sign out front saying vote “YES.” I thought that the school system was to stay neutral and provide no support either with school or money. Unless both sides have equal access to the school system resources this is an unfair advantage for the SWAC.

I do not live in the school district, but I have several family members who do. With the economy the way it is we all know that layoffs, reduction in work hours, elimination of any raises and in many cases a reduction in pay and benefits are a part of life. Many companies have temporarily stopped contributing to pensions and 401(k)’s. I know of several in our area who have gone to a 4 day work week, no over time and reduced hours. All these cuts were done to save peoples jobs.

I would like to know what school systems are doing to reduce costs. Are they eliminating pay raises? Are they temporarily eliminating contributing to pensions? Have the reduced sick days and/ or vacation days? These are tough times and when a school system asks those paying the bills to pay more, I want to know what they are doing to reduce costs and shoulder the bad economy like the rest of us?

Monday, April 20, 2009

The Fair Tax; Good or Bad?

I attended the Tax protest or as it is referred to as the Tea Protest on Saturday. I handed out fliers from my 2008 campaign in the hopes that my platform would resonate with the majority of the people. In handing out one flier a gentleman asked me what I thought of the Fair Tax proposal. My position on this is that the 23% tax rate that is thrown out is incorrect. In 2006 I asked the Fair Tax Committee to answer questions I had concerning their calculations. I presented my own analysis and found they had made major errors in not only the assumptions, but the overall cost of government in relationship to the total income reported to the IRS. I had assumed they were going to be able to recover additional taxes that go unreported. In essence the Fair Tax is:

The Fair Tax plan abolishes all federal personal, gift, estate, capital gains, alternative minimum, Social Security, Medicare, self-employment, and corporate taxes and replaces them all with one simple, visible, federal retail sales tax – collected by existing state sales tax authorities. No family pays taxes on basic necessities because of a generous rebate system built into the FairTax plan. The rebate system, which makes the FairTax as progressive as the current income tax system, refunds, in advance, the sales taxes paid on consumption expenditures up to the poverty level for families of various sizes.

One major reason I am against the Fair Tax proposal is that it changes the way Social Security and Medicare are paid for and eliminates the safety feature for these two programs enacted in 1984.

Social Security by law cannot borrow money. It has statutory authority to spend only those funds received from the dedicated social security tax on wages, tax on benefits and funds in the trust fund. Federal Law prohibits transferring general revenues to any trust fund.
United States Code Title 42, Chapter7, Subchapter VII, Sec. 911 (a), http://www4.law.cornell.edu/uscode/42/911.html

By law the trust fund cannot be drawn down to zero. The trustees must submit a report promptly to congress detailing benefit cuts or tax increases when in any given year the trust fund is projected to fall below 20% of that given years expenses. Social Security's ability to pay future promised benefits is dependent solely on the ability to raise social security taxes.
United States Code Title 42, Chapter7, Subchapter VII, Sec. 910 (a), http://www4.law.cornell.edu/uscode/42/910.html

For over twenty years the Social Security Trustees have projected and reported the trust fund to be exhausted anywhere between 2019 and 2042 which is decades before its original projection of 2064. Where is their report detailing benefit cuts and/or tax increases to rectify the inadequacy?

This law keeps both Social Security and Medicare from being able to take general funds away from funding the government and using them to fund Social Security and Medicare. It mandates that these programs can only spend the dedicated taxes and no more. In other words there is a limit to what they can spend. This requires Congress to raise taxes which will be difficult. It also will force the issue for major reform in favor of the worker. The Fair Tax by taking over the promised liabilities of Social Security and Medicare will place horrific taxes on our children or squeeze out other spending. The Fair Tax allows Congress to side step this needed reform.

The FairTax proposal would replace all current federal revenue taxes with one federal sales tax. The FairTax is a single-rate, federal sales tax collected only once, at the final point of purchase of new goods and services for personal consumption. Used items are not taxed. Business-to-business purchases for the production of goods and services are not taxed.

Single people and married couples are treated equally. Each adult would be given a $9,310 rebate with a $3,180 rebate for each dependent. For a family of four, this means the first $24,980 would be exempt from any taxation. Any income above this that is spent would be taxed at 23%. Table 1 compares the current tax structure versus the Fair Tax proposal. My analysis uses just the standard deduction, personal exemptions and child tax credit. It also assumes all income is from wages and is treated as an employee wages with a Medicare tax rate of 1.45%. All income is spent, none saved. The savings rate in the US can be no greater than the rate of change in productivity and population growth.

The IRS reported in 2001 that the marginal tax FIT for those making over $200,000 was 23% rising to 29%. This does not include the Payroll tax. In fact none of the IRS tables on income taxes include the payroll tax. The marginal tax FIT on $20,000 was 5%. The marginal FIT was 9% for those making $40,000. Again none of these values include the payroll tax of 15.3%. None of these include corporate taxes, death tax or the gasoline tax. And none are addressing the $>$600 billion deficits we have been running since 2002. Which, means that the Fair Tax comes up short on the tax needed to be revenue neutral?

For those interested my analysis you can view it at http://www.justsayno.50megs.com/pdf/larsen-fairtax-annalysis.pdf

You will need to copy this into the address bar to get to the link. My host does not allow my files to be linked from another source.

Wednesday, April 15, 2009

US Savings Rate, is too high bad?

The savings rate is now being deemed as a real problem in the U.S., not because it is too low, but because it is increasing. The savings rate has always been substantially higher prior to the 1970’s. The savings rate back in the 1910’s was over 15%. Our problem is we have had deficit spending since 1958 and few remember or can even comprehend what saving is.

We have allowed our government representatives to spend, spend and spend more. Each year we turn more and more of our discretionary spending over to the government. You may not see it in the form of increased taxes, but you certainly see the underlying symptom, inflation.

Tonight I heard on the Nightly Business Report that the savings rate has increased so much that it is dramatically hurting our economy. They even had a person who wrote a book on the subject decades ago about being thrifty. Our problem is not saving too much, but spending too much, for too long without any way to pay for it. This recession has been going on for two years. Our country has spent the sum total of 200 years of wealth in the past 52 years. Do I agree that increased savings is hurting our economy at this moment, yes? However, our current problem is not and was not caused by our increased savings today, but by our lack of saving over 52 years. Therefore, how long will it take to correct these decades of lack of saving?

As I said in the Debate between Souder, Montagano and myself, I would have voted no for the bank stimulus. It would be better to let those few banks fail, wash the market of the bad players and identify which assets are bad than to pump money into all banks, reducing lending and extend the time it takes to determine good from bad assets. My other concern was it would not stop at one bailout. The more government spends now, the longer and deeper our recession now will impact.

The recession of 2000 has impacted our current problem as has the 1992, 1986, 1981 and the doldrums of the 70’s. Each one of these past recessions have affected the current one we are in now because they never addressed the root cause, lack of saving, increased government borrowing and less discretionary spending. Each recession has set us up for a larger fall because we never treated the root cause.

Most families/workers are living paycheck to paycheck. If they lose a job they run into problems. The more that run into problems leads to the entire economy having problems. Credit card debt has allowed higher economic growth in the past than what it would have. So had we shaved a fraction of all past years economic growth, we would have less credit card debt, more savings and a better ability to handle recessions. We can extend this to mortgages as well. A higher down payment and shorter term would reduce home sales yearly, but it would have strengthened a family’s ability to withstand a down turn because they would have had savings on which to survive.

Our government has always attempted to stimulate our economy beyond normal so that they could project higher tax revenues to spend more money on programs they deemed necessary.


Pirates, arg! I was in the US Navy and went to sea for a little while. While at sea we did not steam at flank speed, but actually cruised at slower than most freighters and tugs. It was called economy speed. The recent spike in piracy has many asking what can be done? Do we arm the merchant marine? Do we provide escorts?

The ocean is mighty big and you can only sea about 25 miles and at that range it is a pretty large area to search. These pirates are using small boats, grappling hooks and small arms. These last four seizures used mortars.

Some have said we cannot afford to have ships patrolling this area. If they are not patrolling that area, what area are they patrolling? What increase in cost is there to patrol there versus their normal patrol area? The USS Bainbridge was already over there, so what increase was there to the tax payer, three bullets? I got paid whether I was at sea or in port.

I have a proposal. Why not make sure those ships that are over there have an attack helicopter on board? This would increase the range and speed at which the Navy could respond to an act of piracy and cover a much larger area?

On the other hand, maybe we need to use a few C-130 gunships to take care of a few areas on land and reduce the number of pirates. I don’t know about you, but I think it is time to take care of Jack. It is time these pirates pick on someone their own size.

Wednesday, April 08, 2009

Federal Income Taxes

I am doing my federal income tax return today. I have done my own taxes every year. It never ceases to amaze me how the IRS can make something as simple as math so difficult. There are many schedules and forms such as; education credit, social security benefits, alternative minimum tax and more. You would think that the number of lines on each of these forms would not change from year to year, but they do. I have a simple spreadsheet that identifies each form I use every year. I simply fill in the amounts and it goes through all the number crunching that the IRS makes difficult and I simply copy the amounts to the actual IRS forms. However, each year I have to verify that the number of lines I have match the number of lines on the IRS forms. I have found four forms that I use where the number of lines have changed.

Did anything really change, no? They either added another line to make an intermittent step or deleted a line to combine two lines together.

What we need is to eliminate itemized deductions. The standard “head of household” is $8,500, married filing jointly is $10,900 and single is $5,450. How many people actually have enough itemized deductions to exceed the standard deduction? The amount of savings is small for most people. Take married filing jointly. Let’s say you have $13,000 in itemized, it saves you your highest tax rate multiplied by $2,100. Think of all the reporting that goes on for this form. Eliminate itemized deductions and lower the tax rates. While we are at it, we need to eliminate all special interest exemptions and deductions.

There are all sorts of deductions and exemptions: elderly, blind, college, child and more. Each time congress wants to help a particular group, they have to tweak the tax code. Because of all the tweaking we now have people falling into the alternative minimum tax trap. Seniors get an extra deduction for being over age 65, why? If they have enough income to pay taxes, why should they get twice the exemptions of working families?

The tax code has become so complicated and unfair that the best thing to do is to scrap the entire code and start over. I would make it along the lines of the Indiana code where there are limited exemptions. One thing I would surely eliminate is the exemption for taxes paid. Those states who have high taxes are shifting the cost of government onto those who live in low tax states. If you want to live in a state where taxes are high, great, but do not expect the rest of the U.S. to subsidize you. By doing this, we may over time get representatives who understand and know the value of a dollar.

Tuesday, April 07, 2009

NCPSSm poll and Social Security

The National Committee to Preserve Social Security and Medicare (NCPSSM) has conducted a new poll on Social Security. The problem with polls is that they do not always cover all the possible views of those being polled. For example the questions the NCPSSM asked were;

1. Which of these statements do you think best describes the Social Security system?It is in a state of crisis

  • It has major problems
  • It has minor problems
  • It does not have any problems
  • Don't know or refused
2. In which direction do you think the Obama administration will move on Social Security? Do you expect them to:
  • Don't know or refused
  • Increase, or at least maintain, current benefits.
  • Push for limited reductions in benefits.
  • Push for substantial changes in eligibility and reductions in benefits
3. Which of these four ways to insure the future of Social Security would you be most in favor of?
  • Don't know or refused
  • Raise the earnings cap on wages subject to payroll taxes
  • Expand funding sources to include federal income and estate taxes
  • Raise the retirement age
  • Reduce benefits for future retirees
Clearly the questions were biased towards saving the program and current beneficiaries. They present only four ways to insure the future of SS. I can think of several more ways.
  • Cut benefits for current beneficiaries
  • Eliminate COLA
  • Raise the tax on SS benefits
  • Change current benefits to those based on the actual taxes paid, not wage earned.
What also makes the survey terrible is they only asked those age 45 and over. In essence this organization does not care what those under 45, who are more numerious than those over 45 had to say on this important issue. How would you have answered the questions or what questions would you have asked?

Saturday, April 04, 2009

Social Security is not an Investment, but insurance

Individuals seek value for their money. No one likes paying more for an item such as gas, food or travel than they have too. The value one receives from Social Security depends on when you were born. If you were born prior to 1930, you got great value. If you were born after 1930 your value decreases on an increasing basis.

Insurance normally is a signed agreement for a defined coverage in return for a defined payment; Social Security has no such signed agreement as well as no defined payment and coverage. Social security is not guaranteed.

The Cost of Money is generally the highest rate of interest you are paying. Applying the Social Security tax to reduce the number of loan payments would be an excellent way to create wealth.

The average worker applying the Social Security tax each month to a mortgage reduces a 30-year mortgage to less than 14-1/2 years. Now make the very same payment of principal, interest and Social Security tax into 5% US Savings bonds for the remaining payments of the original term. At the end of 30 years the worker would have a home plus $370,646. This $370,646 is the value attributed to the Social Security tax being used to pay off the mortgage early.

The Social Security Administration has stated they can pay but 73% of benefits. This means the effective interest rate paid on our Social Security taxes is close to zero if not negative. Assuming a 1% return the value at the end of 30 years for the Social Security benefit is $177,807. The mortgage application method improved the net-worth of the worker by $192,839.

Less payroll tax to be taken out of workers' check

Shortly there will be less payroll tax withheld from your paycheck. Is this a good idea? Will it increase deficits?

Myth 6
High deficits in the future make it difficult to pay social security benefits

Social Security by law cannot borrow money. It has statutory authority to spend only those funds received from the dedicated social security tax on wages, tax on benefits and funds in the trust fund. Federal Law prohibits transferring general revenues to any trust fund.[4]

By law the trust fund cannot be drawn down to zero. The trustees must submit a report promptly to congress detailing benefit cuts or tax increases when in any given year the trust fund is projected to fall below 20% of that given years expenses. Social Security's ability to pay future promised benefits is dependent solely on the ability to raise social security taxes.[5]

For over twenty years the Social Security Trustees have projected and reported the trust fund to be exhausted anywhere between 2019 and 2042 which is decades before its original projection of 2060. Where is their report detailing benefit cuts and/or tax increases to rectify the inadequacy?

[4] United States Code Title 42, Chapter7, Subchapter VII, Sec. 911 (a), http://www4.law.cornell.edu/uscode/42/911.html
[5] United States Code Title 42, Chapter7, Subchapter VII, Sec. 910 (a), http://www4.law.cornell.edu/uscode/42/910.html

For those who are under 40, this is a great thing. Their payroll taxes are not being set aside to pay their future benefits, but instead to pay beneficiaries who paid far too little in payroll tax.

A. J. Altmeyer, Chairman
Social Security Board Before the House Ways and Means Committee November 27, 1944
“There is no question that the benefits promised under the present Federal old-age and survivors insurance system will cost far more than the 2 percent of payrolls now being collected. As I pointed out in my testimony of last year, none of the actuarial estimates which have been made on the basis of present economic conditions and other factors now clearly discernible result in a level annual cost of this insurance system of less than 4 percent of payroll.”

“Indeed, under certain assumptions the level annual cost has been estimated to be as much as 7 percent of payrolls. On the basis of a 4-percent-level annual cost it may be said that the reserve fund of this system already has a deficit of $6,600 million. On the basis of 7-percent-level annual cost it may be said that the reserve fund already has a deficit of about $16,500 million.”

Robert Ball
Commissioner of Social Security
1962 and 1973,Wrote June 2005
“When Social Security began, benefits for those nearing retirement age were much higher than could have been paid for by the contributions of those workers and their employers. This was done so that the program could begin paying meaningful benefits even though workers nearing retirement would have only a short time to contribute.”

“Instead, the impression is left that the program was sound only when 16 paid in for every one taking out. Thus, of course, when the ratio changed to 3.3 to 1, the program became “unsustainable.”

“They ignore the fact that in 1950 only about 15 percent of the elderly were eligible for benefits and that it was expected by all who were acquainted with the program that the ratio would, of course, change dramatically as a greater proportion of the elderly became beneficiaries.”

“What in fact happened is that when just about all the elderly first became eligible for Social Security benefits, about 1975, the ratio was 3.3 contributors to each beneficiary and the ratio has stayed that way for the past 30 years. As the baby boom reaches retirement age, as the administration says, the ratio is expected to drop for the long run to 2.0 or 1.9 workers to each retiree. But that is the size of the problem - a drop from 3.3 to 2 workers per retiree.”

Alcohol Tax may double, why?

The Indiana Assembly voted to double the alcohol tax to pay for sport arenas. I guess this proves that sport arenas do not pay for themselves. What is it with government that they need to do everything for everybody? Harrison Square is a fiasco and it is not open yet. Does anyone really think it will generate revenues anywhere near enough to pay the taxpayers back let alone the interest on the bonds the taxpayers are on the hook to pay?

The restaurant tax was implemented to pay for the expansion of the coliseum and was set to expire when the bonds were paid. Now Fort Wayne wants the Coliseum to be under the management of the city instead of Allen County. This way they get the revenues instead of the county. If this happens, look for a name change or most likely selling the rights to name it to some non-profit or profit entity, they do not care as long as they get more money.

NBC-33 Debate poll results from 2002