American Shareholders Association

Pat Buchanan--Of All People Hits The Auto Bailout Nail on the Head

Here's how Buchanan thinks DC screwed Detroit.  His conclusions are all protectionist, but the diagnosis is devastatingly-sound:

How did  Big Government do in the  U.S.  auto industry?

Washington imposed a minimum wage higher than the average wage in war-devastated Germany and Japan. The Feds ordered that U.S. plants be made the healthiest and safest worksites in the world, creating OSHA to see to it. It enacted civil rights laws to ensure the labor force reflected our diversity. Environmental laws came next, to ensure U.S. factories became the most pollution-free on earth.

It then clamped fuel efficiency standards on the entire U.S. car fleet.

Next, Washington imposed a corporate tax rate of 35 percent, raking off another 15 percent of autoworkers' wages in Social Security payroll taxes

State governments imposed income and sales taxes, and local governments property taxes to subsidize services and schools.

The United Auto Workers struck repeatedly to win the highest wages and most generous benefits on earth—vacations, holidays, work breaks, health care, pensions—for workers and their families, and retirees.

Half of Country to GM: Your Failure Is For the Best

Just when you thought the whole country had gone nuts:

Nearly half of U.S. voters (48%) say it is better for the economy to let companies like General Motors fail rather than providing government subsidies to keep them in business.  Thirty-five percent (35%) believe it’s better to subsidize their continued existence, according to a new Rasmussen Reports national telephone survey. Seventeen percent (17%) are undecided.

Meanwhile, reports are that the auto bailout is finally starting to collapse.  Is this a momentary blip of sanity, or an actual indication that people are smarter than the MSM gives them credit for?

Maybe Young People Really Are Dumb...

Over a third (36%) of voters between the ages of 18 and 29 now say they are at least somewhat confident in the Social Security system, according to a new Rasmussen Reports national telephone survey.

Let's do a quick review of the facts, shall we?

• The system will run out of money in 2017 (when today's 25 year olds turn 34), and will go bankrupt in 2041 (when today's 25 year olds turn 58)
  
• Social Security taxes 12.4 percent of the first $102,000 in wages and net income from self-employment.  This grows by about 5% every year
  
• According to Heritage, Cato, et al, a 25 year old worker can expect to get a real rate of return on their Social Security taxes of about 0%.  Compare that to 7% in stocks and 3% in ultra-safe bonds

So what exactly are these younger people so confident about?

Tax Rates Continue World Decline

Chock full of good stats from Steven Malanga of the Manhattan Institute:

The tax cutting of the past few years has eroded the United States’ competitive position. One measure of where the U.S. is competitively: According to the KPMG study, the average top personal income tax rate worldwide have fallen to 28.8 percent today, from 31.3 percent in 2003, while our top rate remains at 35 percent. On corporate taxes, the U.S. now ranks second highest within the OECD, below just Japan. We sport a top rate of 35 percent, compared to an average rate of 26.6 percent among the OECD 30. However, many U.S. states also have their own corporate income taxes which they layer on top of the federal rate, making the combined tax in many states among the highest in the developed world. And we have obstinately ignored a worldwide trend. As the World Bank writes in its publication, Paying Taxes 2009, “Reducing corporate taxes has been the most popular reform” of tax codes around the world in the past four years.

What the Democrats Have Planned For Your 401(k)

Here's a very good breakdown:

• Automatic enrollment plan. Under the Obama proposal, employers that do not currently offer a retirement plan would be required to enroll their employees in a direct-deposit IRA account that is compatible to existing direct-deposit payroll systems. Employees could opt-out if they choose. Some estimate that this program could increase the savings plan participation rate for low and middle-income workers from its current 15% level to as much as 80%. Under this plan, the government would match 50% of the first $1,000 of savings for families that earn less than $75,000.Employees could opt-out by signing a written waiver. Even after enrollment, employees would retain the right to change their savings levels, reallocate investment portfolios, or end contributions to the account.

• Bankruptcy laws. Mr. Obama supports putting retirement plan promises to workers higher on the list of debts that are protected in bankruptcy. This would restrict executive bonuses while protecting worker pensions; increase the amount of unpaid wages and benefits that workers can claim in court; and limit the circumstances under which retiree benefits can be reduced.

• Disclosures. Mr. Obama’s proposals would establish annual disclosures to participants about pension funds’ investments, including full details about the projects in which the fund is invested in, the performance of those investments and appropriate details about probable future investment strategies.

• Retirement income. Seniors making less than $50,000 per year would pay no more income taxes. This would provide 7 million seniors an estimated tax cut averaging $1,400.

• Saver’s Credit. The earnings threshhold of the retirement saver’s credit (which gives up to 50 cents per dollar up to $2,000 invested each year in IRAs/401k plans, etc. back as a tax credit) would be raised from $52,000 (for couples) to $75,000, and the credit would be refundable.

• Social Security. Mr. Obama opposes raising the retirement age and opposes any privatizing of Social Security. Those making more than $250,000 would see their contributions to Social Security rise (in the range of 2% to 4% more in total combined employer and employee).

• Retirement plan withdrawals. The President-elect would suspend required withdrawals from retirement accounts, which kick in when participants attain 70 1/2. In addition, Mr. Obama proposes allowing those younger than 59 to withdraw up to 15% of their IRAs or 401(k) accounts, up to a maximum of $10,000, without having to pay the 10% penalty for withdrawing early, though income tax still would apply.

One in Ten Americans in HSA-Compatible Health Plan

Some 4.2 million adults 21 to 64 are in a consumer-directed health plan, equivalent to 3% of the population, according to Washington-based EBRI’s 2008 Consumer Engagement in Health Care Survey.

That is up from 2% of the population in 2007.

Meanwhile, 11%, or 13.4 million people, are in a high-deductible plan this year, holding steady from 2007.

On the National Journal Blog: "Is Obama's Stimulus Plan Good for the Economy?"

Here's my answer:

Let's see: Obama wants to raise the marginal tax rate on two-thirds of small business income and the lion's share of wages to a rate perhaps approaching 50 percent (when the higher individual income tax and Social Security taxable wage base is factored together).

He wants to raise the tax rate on capital gains and dividends from 15 percent to 20 percent.

He wants to "close corporate tax loopholes" and has no plan to reduce our corporate income tax rate, just barely the second highest in the OECD.

So, no, I don't think Obama's plan to raise taxes on small businesses, high income employees, corporations, and investors in stocks is a good recession-fighting stimulus.

And his Keynesian Demogrant handouts to non-taxpayers will do as much for the economy as spitting into the ocean does for the sea level.

Are You Better Off Than You Were 40 Years Ago

Veronique de Rugy thinks so:

• In 2005, a full 85 percent of households that were classified as poor by the Census Bureau had air conditioning (compared to only 36 percent in 1971)
• Some 97 percent had a color television (compared to 40 percent in 1971) and 40 percent had an automatic dishwasher (as opposed to 20 percent in 1971)
• Almost 100 percent owned a refrigerator (compared to 25 percent in 1971)

ASA Now a Contributor to National Journal Econ Blog: "Should Washington Bail Out Detroit?"

Here's my answer:

Absolutely not. The unionized auto sector has spent decades caving into the excessive salary, pension, and health benefit demands of the UAW. Just last year they signed a health care "VEBA" (i.e., union slush fund) which everyone knew was underfunded. Now they want taxpayers to bail out their weak negotiating positions? Please.

Besides, there's more to the U.S. auto industry than Detroit. According to Yahoo Finance, total revenue at the Detroit Three totaled $454 billion for the latest reporting period. That sounds like a lot of money, except when you consider that Toyota and Honda had total revenue of $382 billion in the same period.

What about current market cap? The Detroit Three have a market cap total of $34 billion. Honda and Toyota have a market cap total of $178 billion.

So, there are two "auto sectors" in America. One (Detroit) has caved into unions for decades and is justly losing market share and investor capital. The other (merit shop sunbelt) has avoided the union scourge and is eating Detroit's lunch.

It's not the role of the government to bail out a company that has made bad decisions, especially when there are competitor companies that can acquire them on the cheap. Five-year plans went out with the Soviet Union. Let animal spirits prevail here.

BTW, have you seen the conditions that Barney Frank wants to put on the bailout loan? No dividends (because that's sure to attract private capital); a government oversight board; options for the government to buy stock; executive compensation oversight. If I were one of these companies, I'd take my chances with Toyota.

ATR Formally Requests All the Bailout Cash; Wants to Eliminate the Cap Gains/Dividends Tax, Cut Corp Rate

Today, ATR formally requested all $700 billion in TARP bailout money from the Treasury.

With this money, Americans for Tax Reform's Grover Norquist proposes turning right around and cutting taxes (giving the money back to the people who gave it in the first place). Specifically, ATR would:

• Cut the corporate rate from 35 to 15 percent
• Cut the personal rate from 35 to 15 percent
• Eliminate the capital gains and dividends tax
• Kill the death tax
• Allow full business expensing of capital purchases
• Set up full transparency for all TARP funding

While there's certainly some theater here, it's important to note that cutting the corporate rate that much, moving to expensing, and eliminating capital gains and dividends taxes would result in a stock market increase of several trillion dollars within days.