The need for further local and state fiscal controls

The Indiana General Assembly election results are very encouraging. Economic issues, I believe, will be central for the 2011 legislative session. I do believe there needs to be a discussion from the General Assembly regarding a couple of central fiscal issues to local government.

With the approval of property tax caps to the Indiana Constitution, the GA must address the up-and-down cycles of business that naturally happens. The general economy will always have its cycles of expansion and retraction. Associated with economic cycles come the tax revenue increases and decreases. Many local government services were dependent on local property taxes. That issue is now changing. Many of these services are dependent on revenues from the state. The increase of sales tax was the offset to property tax caps. Sales tax revenue will follow the economic cycles. The GA must look to smooth out the disbursement of revenues to local governments.

This should include greater expansion and controls on the use of local “Rainy Day” funds. The use of these temporary savings accounts should have greater definition regarding the amount (percentage or dollar) that can actually be accumulated and then also how and when these funds should actually be used.

I ask local legislators to begin an in-depth discussion and evaluation of this issue.

Today is Tax Day! Ow, that hurt

April 15^th is U.S. tax day. Supposedly the day all Americans pay their taxes. This is such a false assumption.

As reported on the Tax Foundation.org website, April 9^th is the day that theoretically Americans have stopped working for the government and they can now earn their own money. Half of America has never been working for the federal government. They pay no federal income taxes. Unfortunately, many people think if their refund this year is larger than last year’s must mean that they have paid less taxes.

Americans really need to grasp how much they actually pay in taxes, at all levels. This includes income, sales, property, auto tags, and on and on and on. We don’t realize how much we really pay. Add in to the mix that businesses never pay taxes. All of those obligations are passed on to the consumer through product prices.

I think that government needs to learn a lesson who pays the bills. We need to reduce our withholding to a minimum and pay taxes due next year. Some states are not refunding overpayments to residents because they don’t have the cash available.

It is time that we taxpayers took more control over government revenues, specifically how we pay our taxes to the government!

My answer to health care reform

It drives me nuts about all of this health care talk and the Dems attempt to take over the entire system.

Nowhere have I seen a real discussion about what health care should be used for. The assumption apparently is that insurance just automatically pays for every medical need (and “need” needs to be defined also).

Those people that think insurance companies have unlimited resources have no clue where the money comes from in order to pay out claims. There is no willingness to control individual medical expenses because they assume the “insurance company will pay for it.” Personal control of expenses would have a greater effect on insurance premiums than governmental price controls.

Not only should there be policy options across state lines, there should be greater policy plan options. I think that if people paid for more of personal basic expenses – such as many drugs, doctor, or preventative exams – would help to bring down overall costs. Options for singles or childless couples that essentially covered only catastrophic issues would keep premiums down.

Where is my logic wrong? Oh, that’s right…it isn’t.

Loosen the bureaucratic collar

My last post raised the issue of reducing bureaucratic regulations as a means to reduce expenses to business and local government.

Here is one example of regulations that could be addressed. Various vehicle fuels are required to meet requirements for regions of the country and seasons of the year. These variations increase costs in development, storage, and transfer which are all obviously passed on to the consumer. The consumer includes me at the gas station, the trucking industry that transports products around the country, and even local government when the schools have to put fuel in the buses.

The following map gives an example of fuel (boutique blends) differences around the country.

Can you give some examples also?

A new suggestion to save some money

At all levels of government, belt-tightening is taking place. Here in Indiana, property taxes will soon be frozen as a percentage based on property values. Because of that, local government will be facing lower revenues to provide current services. Sales, business, and income tax revenues are also much lower for the current fiscal year.

So to avoid the pain, some local governments are considering new forms of local income taxes to offset revenue deficits. Other localities are severely reducing services, such as fire protection or trash pickup.

I would like to suggest a third alternative that could relieve some pressure to local governments and possibly help private businesses reduce expenses and possibly redirect those expenses to hiring new employees. My suggestion would be that all levels of government look to reduce regulatory burdens.

Even though I do not identify any specific regulations to eliminate, I do believe – if asked – businesses could easily identify which are most burdensome or costly. There are many federal and state regulations that are imposed on local governments without sufficient revenues to fulfill those policies. Some could be reduced or removed to provide relief.

This is the time and place for somebody out there to start talking. What regulations cause you the most problems that could save everybody some money??

That was then, this is now

Twenty-eight years minus one day, another President gave his first State of the Union speech. Similarly, the United States was in an economic recession. At that time, unemployment was over 10%, inflation and consumer interest rates were above 15% each. In his speech, President Reagan outlined his plan to bring the country out of that recession.

The cumulative national debt had just exceeded one trillion dollars. More than 200 years were needed to accumulate that level. (We have now crossed $12 trillion and see no end in sight for its continued growth.)

Reagan listed 3 keys to reducing budget deficits. First, encourage economic growth. Second, Lower interest rates and third, control federal spending. He was very adamant about NOT raising taxes as an attempt to lower the deficit. He felt that would encourage federal spending (and the Democrats in charge of Congress did not lower spending) and would discourage private investment.

He also referred to recent meetings with foreign leaders. He said how they were surprised that he (Reagan) did NOT apologize for American wealth and its strength of the free marketplace.

These policies DID turn around the national economy then.

Now, 28 years later, another President stood before Congress with a similar economic situation. Fortunately, we do not experience the devastating interest rates we did then. Unfortunately, he is taking just the opposite approach. Considering that Reagan's plan worked - and it did - Obama's plan will probably will not succeed. Our international standing will fall, as it already has started.

I believe Obama may very well be a one term president.

Carbon controls in the US

Now the EPA is going to regulate the emissions of carbon dioxide.

Yet, the US is the world leader in fossil fuel reserves. We are going to restrict our energy production so that China and India will surpass in production output.

My state of Indiana will be severely affected by these controls. Jobs will be lost under this plan.

Where will the federal governemnt get the money to replaced lost revenues from these plans?

Thank goodness 2010 is coming, unfortunately maybe not fast enough.

Congress has to spend money to make money

In a brilliant move by Congress, billions of tax dollars were spent on the "Cash for Clunkers" program. It has now been calculated that it comes out to approximately $24,000 per car purchased!!! What a deal! We spend $24,000 to reimburse car dealers $4,000 for a new car and trash many very usable used cars.

And with this kind of math, the current government wants to take over our health care now. I can't wait to see how much they want to save us here. (Well, actually, I can wait - in fact, I don't even want it to happen!)

The government is upside down

Is it just me or does anybody else notice how topsy turvy the Obama administration is?


First, I see that the Justice Dept. will not pursue the prosecution of illegal marijuana use. We can debate the criminality of such behavior. Is it wise to tell the public that even though "we the government know that marijuana use is illegal according to the law, we are letting you know that we will not prosecute you." Would that not possibly encourage more illegal behavior?


Second, the government has also quietly said they will not pursue pornographers. There is an obvious linkage between pornography and sexual crimes.

What are we telling the criminals?? You go ahead and do what you do and don't fear the government.


Thirdly, the government IS going after highly paid executives in the banking industry and those businesses that have taken bailout money from the government. The "pay czar" is limiting the income of those individuals. Why could not the government see this coming? Companies get government assistance, start to make a profit again and then reward their employees accordingly. There were no ties initially linking pay and performance when the money was distributed. Now they change the rules AFTER the fact. The debate can go on about whether these companies performed the expectations the government originally had for them. Some may very well may not performing as hoped. But there were no expectations put in writing. (That we know of, since the government is not being very open about the details of how the money has been spent.) The government is possibly going after other businesses in the same fields as the original recipients.


I have hard a time accepting the fact that the government can say how much an individual can earn from a private business. This type of government interference is directly contrary to free enterprise. Earn as much as you can for the work you do. This witch hunting the government is involved in is just plain un-American.


In essence, the current administration is saying that criminal behavior is okay, but legal activity that the government deems wrong will be controlled. This is all wrong!

The truth of stimulus spending

A couple of weeks ago there was an interesting article in The Wall Street Journal (Oct 1) about government spending that supposedly spurs the economy. While the article was detailed and a bit over my head, the last paragraph did an excellent job at summary.

The bottom line is this: The available empirical evidence does
not support the idea that spending multipliers typically exceed one, and thus
spending stimulus programs will likely raise GDP by less than the increase in
government spending. Defense-spending multipliers exceeding one likely apply
only at very high unemployment rates, and nondefense multipliers are probably
smaller. However, there is empirical support for the proposition that tax rate
reductions will increase real GDP.

What it comes down to is that government spending does not stimulate the economy. Maybe the American populace may begin to understand this. I know the spenders in DC never will. It will need to take a complete change of the Washington guard before this may be accomplished.

which is better - a national sales tax or VAT??

This is an interesting news bit.

Former Chief of Staff to President Clinton, John Podesta, favors the use of a national value-added tax. A Value-Added Tax - VAT - is a tax that is applied to a product throughout its production. A car would have taxes added to it throughout the production process, such as the construction of sub-parts and parts to an engine, the transmission, frame, etc. would all be taxedd and then added to the price of the vehicle. Then the car would most likely also be charged a sales tax and possibly a luxury tax. The problem with VAT is that it becomes part of the cost of production, significantly raising the final retail price.

A VAT tax would not be so bad if all other taxes were eliminated. If they were, it would become somewhat similar to the concept of the Fair Tax. Thus only the consumer would be charged for the consumption of a manufactured item. Of course, the problem is that all of the taxes are hidden into the production costs and the consumer would never really know the actual cost of the product minus the added taxes.

In contrast, the FAIR Tax does eliminate ALL taxes - sales, income, property, etc. - and just charges a sales tax. The consumer has better information regarding the actual production cost of the product. The consumer pays taxes for only what he/she consumes. Purchasers of luxury items like motor homes, yachts, or SUV's would not be perceived as bad people owning expensive stuff. If you want to pay the sales tax on an item, so be it. Go to their web site for a better explanation. But it is a much better and fairer tax.

The problem with Mr. Podesta's suggestion is that the VAT would be in ADDITION to sales taxes. He advocates this to increase more federal government revenue. What this will obviously do is hurt the national economy by discouraging purchasing and result in reduced need of labor - higher unemployment.

He justifies his position saying that Clinton raised taxes on the rich in the 1990's and it resulted in large increases in revenues while also growing the national economy. That is FALSE! Clinton happened to be the beneficiary of circumstances, namely the explosion of the era of technology. Home computers, the internet, and the overvaluation of technology companies during this decade. Once some intenet-based companies died or were bought out by other companies, the economy came back to reality.

Don't buy into VAT. It will do as much to destroy the economy as cap and trade and health care reform.

Pride in the American economy

Recently, I finished reading the book The Last Best Hope, by Joe Scarborough. Joe was formerly a Republican Congressman from Florida elected as a part of the 1994 wave. He has since left Congress and is now host of the weekday morning show, “Joe in the Morning” on MSNBC cable network. Actually, I like his TV show. He does have a lot of liberal guests on the show, but some of the other regulars do have some centrist or conservative leanings. I do wish Joe would exhibit more conservative perspective. He has spent as much time criticizing Republican policies as he does Democrats’. Given the amount of liberal commentators on television today, every defender of conservatism is needed.

Anyway, back to his book. Generally, it is good. It does take Republicans to task in their need to be the true conservatives they need to be and that America wants. He also points out where common sense should prevail over politicization of an issue. He truly sounds like the conservative I could have a beer with (oh, that’s right, I don’t drink beer).

There is one topic in his book that I do take issue with. He is very critical in the amount of energy America consumes. We consume “a disproportionate amount of the earth’s energy” (p. 101). He favors energy efficiency. While I favor increase in efficiency, there is nothing wrong with the amount of energy we have consumed.

U.S. energy has powered the American economic engine. That engine has created a large amount of wealth, not only for Americans, but also for the rest of the world. It is through our largesse that has been shared worldwide. Annually, the U.S. government sends millions of dollars to foreign governments in the form of aid. We send more emergency relief to disasters than any other nation. Our technology has improved living standards everywhere. Yes, the US of A is great!

We can always improve, but we have no reason to apologize for what our economy has done to improve the lives of people everywhere.

Where is my money going?

Man, this will get you eyes spinning around. This site records the U. S. national debt in real time. While the numbers really speak for themselves, I believe the most significant numbers are in the last box - Unfunded liabilities. These numbers will have the greatest impact on the top box - debt.

Remember after Bush 43 was re-elected and wanted to look into reforming Social Security? The democrats went nuts successfully scaring the populace into thinking Bush would destroy the entitlement program. Yet, the inaction is doing more to destroy it. And the dems in charge know they won't be around for the meltdown. It's all about power NOW!

Is the government right subsidizing new car purchases?

Oh my goodness, the democrats say that the “Cash for Clunkers” auto purchase program has been so successful demonstrated by the fact the program has been suspended because it was about to run out of money.

What makes this so interesting is not that the government is giving away money, but that people really do want to buy new cars. The problem – up to this point – has been the high prices of new cars. Also is the fact that I’m helping somebody else buy a car. What do I get out of this? Oops, I probably shouldn’t ask that. That may be considered un-American.

Anyway, the real success about this program is the proof that people are willing to buy new cars at the right price. The auto makers – and the unions – need to realize that their products will sell when the buying public feels they are getting a fair deal. Macroeconomics has the basic graph that demonstrates that products will sell at the intersection of supply and demand. When outside forces get involved, the intersection goes haywire.

So all of this proves that there is money out there waiting to be spent. Purchasers are looking for value. This should be a lesson not only for automakers, but for all retailers. Fast food restaurants probably understand this better than any.

The government should not expand the "Cash for Clunkers" because it does more to upset the free market than help. And I didn't get a car out of it either.