Most people I talk to

 

Admit to budgeting by….

 

 

How much did we spend last year?

 

 

How do you know what you spent last year;

 

Was the correct amount?

 

 

It may be a comfort level amount

 

 

In today’s growing market

 

It is good to look at all your costs…

 

 

Do not take what you paid last year

 

As the cost of doing business.

 

 

 

Just think…

 

The iphone was invented 9 years ago

 

Look how it has revolutionized how we do business

 

 

Businesses were once paying over $1000 a month for T1’s

 

You can now get 10 times the speed for a fraction of the cost

 

 

Cloud technology is transforming business…

 

 

Natural gas prices were once over $10 a dekatherm

 

We now have a new floor and….

 

Companies are saving thousands of $$$

 

In the deregulated gas and electric market

 

 

 

Did you know that NJ and PA have over a 12% error rate

 

In the payment of unemployment claims

 

The state is taking money out of your account

 

Without asking.

 

 

 

When property values went down

 

How come we continued to pay the same property taxes?

 

 

 

Is sales tax really the cost of doing business…

 

What is this real property exemption?

 

 

 

These are questions we all should be asking ourselves…

 

 

These are questions we deal with…

 

Everyday

 

 

 

 

Don’t just settle and accept that

 

What we are currently paying

 

Is the cost of doing business…

 

 

 

At HBS

 

We validate what you are currently paying and

 

Look for opportunities to save you money

 

 

We are experts in providing smart solutions

 

That will grow your bottom line.

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Each day we all start out with an agenda and then….
The phone rings or…..
Someone walks into your office
Another fire breaks out
You drop everything
All your energy goes into putting out the fire
Sound familiar
It can leave us all frustrated
What is normal
Is this normal
What are my options
HBS we allow you to do what you do best…

 

Run your day to day business
 
Are you getting what you paid for
 
 
 
I have seen many surprised faces in my lifetime
 
 
I was told I was only going to pay…….
 
 
 
Are you getting what you paid for
 
 
Let us review and validate what you are currently paying
HBS looks at every day cost
That most people take for granted
As the cost of doing business
  • Communication – Voice, Data, Hosted, Cloud, Disaster                                         Recovery
  • Utilities – Natural Gas, Electric
  • Business Taxes – Payroll, Sales, Property
  • Business Insurance – Group Health, Package Policies
 
HBS will keep you in the driver seat
We are dedicated to providing opportunities
That will lower your cost…
Increase efficiencies….
Grow your bottom line

As reported in Huffington Post

WASHINGTON — In March, the commissioner of Georgia’s Department of Labor, Mark Butler, explained how the state’s unemployment insurance trust fund had gone broke.

“In an attempt to curry favor with Georgia businesses, Gov. Roy Barnes declared a ‘tax holiday’ before Barnes’ failed 2002 re-election campaign,” Butler wrote. “Businesses stopped paying into the trust fund. By the time we hit the Great Recession –- and many, many Georgians became unemployed through no fault of their own — the $2 billion Unemployment Insurance Trust Fund had been reduced by $1.3 billion.”

“Plainly speaking,” Butler added, “Georgia had not saved for that rainy day.”

Georgia lawmakers agreed to much of Butler’s plan to restore the trust fund to solvency — cutting the duration of benefits in an effort to save money. The legislature also modestly increased the amount of wages subject to the state payroll taxes that fund the unemployment system.

While the cuts to unemployment benefits were relatively drastic, the tax cutting that preceded them was typical. Most states failed to make prudent decisions about funding their unemployment trust funds over the years, according to a comprehensive report from the National Employment Law Project, a worker advocacy group.

States now owe $43 billion to the federal government, according to NELP policy analyst Mike Evangelist, and it’s likely lawmakers will rely more heavily on benefit cuts than tax hikes in order to get out of debt.

“Over the past 30 years, support for accepted norms in the UI program has been systematically eroded, with state lawmakers now more willing to go after long‐standing features of the program, such as the duration of state benefits or suitable work protections that were previously seen as untouchable,”  Evangelist wrote in the report.

Businesses pay both state and federal unemployment taxes for each worker on payroll — state taxes fund the first 26 weeks of benefits for laid off workers, and federal taxes pay for extra benefits that Congress puts in place during recessions. When a state unemployment trust fund runs dry, the state can borrow from the federal government to pay benefits. If a state borrows for too long, federal payroll taxes go up.

When under pressure to refill trust funds, it used to be that state lawmakers would seek savings by tightening eligibility rules. But this year Georgia joined six other states states that had cut the standard 26 weeks duration of benefits for the first time ever. While each state differed in how they cut benefits, Georgia put benefits on a sliding scale that goes up and down with the state’s unemployment rate. When the rate goes down, the duration of benefits could be as low as 14 weeks. The upper limit is 20 weeks.

The states were strapped for cash because tens-of-millions of additional people filed claims, but also because of tax cuts.

According to Evangelist, 31 states cut unemployment taxes 20 percent or more between 1995 and 2005. And from 2000 to 2009, the overall percentage of wages subject to state unemployment taxes fell to the lowest level in the history of the federal-state unemployment system. In 2007, states were collectively $38 billion shy of recommended trust fund reserves.

Doug Holmes, an unemployment insurance expert who advocates for businesses, suggested states would be unwise to try and meet funding thresholds “because to do so would require dramatic increases in state unemployment taxes that would place these states in an uncompetitive position to attract and keep businesses in their states.”

It’s unlikely states will want to hike taxes to pay for unemployment, Evangelist wrote in his report. “Realistically, it is unreasonable to believe that states will close this gap without doing further harm to the UI program’s ability to sustain unemployed workers and their families through periods of temporary job loss.”

As reported by Zach Carter and Ryan Grimm of the HuffingtonPost

 

WASHINGTON — In early February, Alabama Republican Spencer Bachus called for a meeting between two of the most quietly influential interest groups in the nation’s capital: credit unions and community banks.

Bachus, chairman of the powerful House Financial Services Committee, was looking to ensure the passage of a slew of federal favors benefiting both sides. All the lobbyists had to do was show up at a meeting and figure out how to work together.

It was too much to ask.

The Credit Union National Association and the Independent Community Bankers Association immediately agreed to the sit-down, but as the meeting approached the community bankers abruptly cancelled the event, according to lobbyists and congressional staffers familiar with the plans.

“There was supposed to be a couple of joint meetings with different congressional offices and with the leadership of Financial Services. And the banks decided that we had too many bills in play and they didn’t want to meet with us,” says Linda Armyn, a senior vice president for Bethpage Federal Credit Union.

It’s no small matter to cancel on a committee chairman. ICBA had performed the Capitol Hill equivalent of cussing out the boss at an office Christmas party. Still, the group has no regrets.

“There won’t be any meetings. There won’t be any compromise. There won’t be any deals. There won’t be any discussions,” says ICBA chief economist Paul Merski.

To most folks, community banks and credit unions are indistinguishable. Both are often viewed as good-guy alternatives to Wall Street banks, eschewing the too-big-to-fail crowd’s phantom, subprime profits in favor of safe, consumer-friendly products. After the 2008 financial crash, that strategy allowed them to reap financial rewards and reputational halos. The “Move Your Money” movement and Bank Transfer Day shifted billions of dollars worth of business from Wall Street to these small lenders.

But community banks and credit unions each operate under different government charters and regulatory regimes. They compete for the same good-guy customer base, and are openly hostile  with each other on Capitol Hill. Their mutual animosity is frequently unmoored from profit margins and bottom lines, a passionate conflict that at times seems like a Washington version of the Hatfields and McCoys.

“The credit unions have become the skunk at the garden party,” Merski says.

“The hypocrisy of the bank lobby appears to have no end,” Credit Union National Association (CUNA) CEO O. William Cheney said during a November hearing.

But while the dispute between the two groups goes back decades, their most recent clash serves as a window into the way American government works — or doesn’t work — in the 21st century. Legislative scuffles between entrenched interest groups occasionally gather enough momentum to attract public attention. Last year’s blowout over debit card swipe fees hijacked the Senate schedule for nearly six months, and the Stop Online Piracy Act sparked furious online protests.

Most of the time, the special interest stranglehold over Congress is exercised relatively quietly, in small-bore negotiations that never really get off the ground. Even if the bills go nowhere, they present lucrative fundraising opportunities for lawmakers, while devouring the time and attention that elected officials could be using to attend to the public good — say, solving the jobs crisis, ending homelessness or improving the standard of living for the one in four American children who currently live in poverty.

Instead, lawmakers expend tremendous amounts of energy trying to bridge emotional divides between favored interest groups that are accustomed to getting their way and have little interest in compromise — like, for example, credit unions and community banks.

Few fight harder in Washington than your cuddly local lenders.

“People always say it’s Wall Street, but the big banks aren’t the most potent lobbyists, because everybody hates them,” says Rep. Barney Frank (D-Mass.). “It’s the credit unions and the community banks because of their grassroots networks.”

A big bank like Citigroup appears to have oceans of lobbying clout that a small community bank lacks. But every congressional district has a community bank and a local credit union. As united forces, the ICBA and CUNA can (sometimes) defeat even their Wall Street competitors on the Hill.

This week, they will flex that muscle. CUNA expects 4,000 members of the credit union community to fly in to Washington for the group’s annual lobbying convention — including at least one from every congressional district.

Like the credit unions, community banks will be making their annual descent on Capitol Hill later this year. Both groups have profitable requests pending in Congress.

The Communities First Act, introduced in April 2011, reads like ICBA’s wish-list for the entire year. During a November hearing on the bill, Georgetown University Law School professor Adam Levitin criticized the bill as a set of unearned giveaways for small financial firms — tax cuts, accounting gimmicks to hide losses, weaker capital requirements and even immunity from some forms of scrutiny by the Securities and Exchange Commission. But whatever its impact on communities, the bill would undoubtedly help banks pad their profits.

“It does nothing for communities,” Levitin said, calling the bill “narrow, special-interest pleading.”

Credit unions, meanwhile, are seeking legislation that would allow them to expand their business lending operations. Credit unions are currently barred from issuing business loans in excess of 12.25 percent of their total assets, an arbitrary rule that banks were able to slip into a 1998 law over the objections of both credit unions and President Bill Clinton’s administration.

Over the past year, credit union lobbyists have amassed 121 co-sponsors — 46 Republicans and 75 Democrats — for the Small Business Lending Enhancement Act, a bill that would raise that business lending cap to 27 percent. Credit unions argue that allowing them to make more business loans will help small firms hire, claiming the bill will create 140,000 jobs.

Community banks and credit unions need each other. Neither the Communities First Act nor the Small Business Lending Enhancement Act is likely to pass on its own, prompting Rep. Bachus’ attempt to combine them. (Bachus’ office did not return requests for comment). The only trouble? The credit unions and community banks have been at each other’s throat for decades.

“It’s a very visceral reaction they have,” says Ryan Donovan, a top CUNA lobbyist, referring to community bankers. “The ICBA would rather have their entire legislative agenda burned than let our small bill pass.”

On the bill that would lift the lending cap on credit unions, ICBA’s Merski says,”We’ll fight this to the death because of the fundamental philosophical unfairness. It’s almost un-American, really.”

Banks have little to lose from the credit union bill, and large potential profits to gain from their own legislation. Credit unions do very little business lending. For the most part, they stick to simple, standardized consumer products like checking accounts, mortgages and credit cards. Credit unions are generally small, even compared to community banks, and account for just 1 percent of the commercial lending market nationwide, according to CUNA, with an average loan amount of only $220,000.

“We’re not talking shopping malls,” explains CUNA senior vice president for communications Mark Wolff. “We’re talking landscaping and bakeries.”

Even community banks that compete head-to-head with specific credit unions simply will not lose very much if the credit union bill passes. The credit union group only pegs the gains from their legislation at 140,000 jobs — a drop in the bucket relative to the jobs crisis. Yet the legislative arm-wrestling continues.

“If you look at the marketplace, the banks have 95 percent of the market share. There isn’t a whole lot of data that supports we’re taking their business,” says Armyn of the Bethpage Federal Credit Union. “I mean, we’re taking a piece of their business, but if you look at it on the grand scale, they still have 95 percent of the market share.”

But the battle isn’t really over balance sheets. It’s over those “philosophical” differences Merski cites. Talking to members of both groups, bankers essentially think credit unions are tax cheats, while credit unionists see bankers as greed-mongers.

Credit unions are nonprofits owned by their customers, a unique status among financial institutions which allows them to be exempt from income taxes. But a credit union charter comes with major drawbacks — they can’t pay dividends to shareholders, since they don’t have any shareholders, nor can their executives enjoy wild paydays in the form of stock options. They also only have one option for growth: profit. Banks can take on debt or issue stock to capitalize on profit opportunities, but credit unions have nothing but year-end earnings to draw on.

Bank executives do enjoy higher paydays. Among credit unions with at least $100 million in assets, the median CEO pay comes out to $211,558, according to CUNA. According to data compiled by SNL Financial, publicly traded banks with less than $10 billion in assets (a common threshold in regulation and legislation to define a “community bank”) pay out  median CEO compensation of $385,577.

As with most CEO pay in the financial industry, the bigger the bank, the better the potential payday, but community banks with less than $500 million in assets still paid a median of $248,437 — about 15 percent better than the median for all credit unions over $100 million in assets, according to the SNL Financial data. The largest credit union is Navy Federal, with $46 billion in assets.

But both sides use such relative metrics to criticize the other.

“They don’t pay taxes!” says ICBA’s Merski.

“They don’t get that we really are a different model,” counters CUNA’s Wolff.

Both sectors, of course, have always been free to change their charters whenever they wish. Credit unions file to become banks all the time, and there is no law barring banks from adopting a credit union model.

This year’s skirmish between community banks and credit unions will almost certainly dwindle into obscurity, a common fate for special interest legislation. Next year the two groups will undoubtedly concoct new slates of legislative demands, as is the nature of lobbying. But the public has still paid the opportunity cost for the lobbying push.

The dispute between credit unions and community banks is one of an endless array of Washington feuds that tend to not connect with the broader public interest. Even if the two groups had been able to put aside their differences and move their legislation forward, the tangible benefits for everyday Americans would have likely been minor. It doesn’t make much difference for most businesses whether they get their loan from a small bank or a credit union, so long as they get their loan. And the benefits that ICBA was seeking amount to a set of unhelpful deregulation.

Even if the uncounted hours of attention that were devoted to introducing the bills, garnering co-sponsors, holding hearings and briefing lawmakers had borne fruit, the public would still have been left out of the equation. Similar disputes take place every year between dozens of special interests, on every committee in Congress. And, in this case, the special interests groups themselves say the fuss has largely proved to be just that.

“We all just want to move forward and grow,” says Armyn, the Bethpage Federal Credit Union executive, frustrated with the political gridlock. “To me, it’s just silly.”

As reported in Huffington Post

By Andy Sullivan

WASHINGTON — Negotiators trying to tame the United States’ spiraling debt said on Thursday that they had tentatively agreed on a number of cuts and are now gearing up for tough trade-offs that could lead to trillions of dollars in savings.

“We’ve gone through a first, serious scrub of each of the categories that make up the total federal budget,” Vice President Joe Biden told reporters. “Now we’re getting down to the real hard stuff: I’ll trade you my bicycle for your golf clubs.”

Biden and top Democratic and Republican lawmakers aim to reduce the country’s stubborn budget deficits by $4 trillion over the next 10 years in order to give lawmakers the political cover to raise the $14.3 trillion U.S. debt ceiling to prevent a default.

The agreed-upon cuts will serve as bargaining chips in the coming weeks as the two sides tackle a stark divide over taxes and health benefits, participants said.

“Even stuff we agreed to that we may have refined today is all subject to be reopened if we don’t get agreement on some of the big issues. We’ve got a long way to go here,” said Democratic Representative Chris Van Hollen.

Farm subsidies, federal employee pensions, student loans and the trillion-plus dollars that Congress spends each year on everything from defense to river dredging could come under the knife.

But Republicans have refused to consider increased taxes, while Democrats have resisted wholesale changes to health benefits for the poor and the elderly.

COMPROMISE ON TAXES, HEALTHCARE?

Compromise is not impossible in these areas. Democrats hope to boost tax revenues primarily by ending breaks and closing loopholes, rather than raising rates. Two recent Senate votes have given them heart as Republicans backed closing tax breaks for ethanol providers.

On healthcare, Democrats have blasted a Republican plan that would scale back the Medicare health program for future retirees. But they have proposed less dramatic changes that could still save hundreds of billions of dollars.

Both President Barack Obama and Republicans have proposed significant changes to the Medicaid health program for the poor. Obama has also said he would support limiting medical malpractice lawsuits — a longtime Republican priority.

“I think we really are covering every type of spending program there is,” Representative Eric Cantor, the No. 2 House Republican, told reporters. “We are doing all that we have set out to do.”

The group is stepping up negotiations as it faces a self-imposed deadline of July 1, with longer and more frequent talks set for next week.

The Obama administration has warned that it will run out of money to pay the nation’s bills if Congress does not raise the debt ceiling by August 2 — a prospect that could push the country back into recession and upend financial markets across the globe.

Washington needs to show investors that it can rise above its dysfunctional reputation, Biden said.

“The single most important thing to do for the markets is convince them no, that’s not true, we can handle difficult decisions,” he said.

Republicans want at least $2 trillion in cuts, measured over 10 years, to go along with a similar increase in the debt ceiling to ensure Congress doesn’t have to revisit the politically toxic issue before the November 2012 elections.

The Biden group could claim another $2 billion in savings by mandating automatic cuts or tax increases if Congress doesn’t meet specified deficit targets in coming years.

Budget deficits in recent years have hovered at their highest level relative to the economy since World War Two. The deficit is projected to hit $1.4 trillion in the fiscal year that ends September 30.

(Additional reporting by Richard Cowan; Editing by Eric Walsh)

The Mistake of 2010

June 3, 2011

By
Published: June 2, 2011

 

Earlier this week, the Federal Reserve Bank of New York published a blog post about the “mistake of 1937,” the premature fiscal and monetary pullback that aborted an ongoing economic recovery and prolonged the Great Depression. As Gauti Eggertsson, the post’s author (with whom I have done research) points out, economic conditions today — with output growing, some prices rising, but unemployment still very high — bear a strong resemblance to those in 1936-37. So are modern policy makers going to make the same mistake?

Fred R. Conrad/The New York Times

Paul Krugman

Mr. Eggertsson says no, that economists now know better. But I disagree. In fact, in important ways we have already repeated the mistake of 1937. Call it the mistake of 2010: a “pivot” away from jobs to other concerns, whose wrongheadedness has been highlighted by recent economic data.

To be sure, things could be worse — and there’s a strong chance that they will, indeed, get worse.

Back when the original 2009 Obama stimulus was enacted, some of us warned that it was both too small and too short-lived. In particular, the effects of the stimulus would start fading out in 2010 — and given the fact that financial crises are usually followed by prolonged slumps, it was unlikely that the economy would have a vigorous self-sustaining recovery under way by then.

By the beginning of 2010, it was already obvious that these concerns had been justified. Yet somehow an overwhelming consensus emerged among policy makers and pundits that nothing more should be done to create jobs, that, on the contrary, there should be a turn toward fiscal austerity.

This consensus was fed by scare stories about an imminent loss of market confidence in U.S. debt. Every uptick in interest rates was interpreted as a sign that the “bond vigilantes” were on the attack, and this interpretation was often reported as a fact, not as a dubious hypothesis.

For example, in March 2010, The Wall Street Journal published an article titled “Debt Fears Send Rates Up,” reporting that long-term U.S. interest rates had risen and asserting — without offering any evidence — that this rise, to about 3.9 percent, reflected concerns about the budget deficit. In reality, it probably reflected several months of decent jobs numbers, which temporarily raised optimism about recovery.

But never mind. Somehow it became conventional wisdom that the deficit, not unemployment, was Public Enemy No. 1 — a conventional wisdom both reflected in and reinforced by a dramatic shift in news coverage away from unemployment and toward deficit concerns. Job creation effectively dropped off the agenda.

So, here we are, in the middle of 2011. How are things going?

Well, the bond vigilantes continue to exist only in the deficit hawks’ imagination. Long-term interest rates have fluctuated with optimism or pessimism about the economy; a recent spate of bad news has sent them down to about 3 percent, not far from historic lows.

And the news has, indeed, been bad. As the stimulus has faded out, so have hopes of strong economic recovery. Yes, there has been some job creation — but at a pace barely keeping up with population growth. The percentage of American adults with jobs, which plunged between 2007 and 2009, has barely budged since then. And the latest numbers suggest that even this modest, inadequate job growth is sputtering out.

So, as I said, we have already repeated a version of the mistake of 1937, withdrawing fiscal support much too early and perpetuating high unemployment.

Yet worse things may soon happen.

On the fiscal side, Republicans are demanding immediate spending cuts as the price of raising the debt limit and avoiding a U.S. default. If this blackmail succeeds, it will put a further drag on an already weak economy.

Meanwhile, a loud chorus is demanding that the Fed and its counterparts abroad raise interest rates to head off an alleged inflationary threat. As the New York Fed article points out, the rise in consumer price inflation over the past few months — which is already showing signs of tailing off — reflected temporary factors, and underlying inflation remains low. And smart economists like Mr. Eggerstsson understand this. But the European Central Bank is already raising rates, and the Fed is under pressure to do the same. Further attempts to help the economy expand seem out of the question.

So the mistake of 2010 may yet be followed by an even bigger mistake. Even if that doesn’t happen, however, the fact is that the policy response to the crisis was and remains vastly inadequate.

Those who refuse to learn from history are condemned to repeat it; we did, and we are. What we’re experiencing may not be a full replay of the Great Depression, but that’s little consolation for the millions of American families suffering from a slump that just goes on and on.

WASHINGTON (Kevin Drawbaugh) – Twelve big U.S. companies paid far less than the statutory corporate tax rate from 2008 to 2010, despite making substantial profits in that period, said a report released on Wednesday.

With the Obama administration drafting a corporate tax reform plan, the report found General Electric Co, American Electric Power Co Inc, DuPont Co and nine other companies had a negative 1.5 percent tax rate on $171 billion in profits over the three years studied.

“Not a single one of these companies paid anything close to the 35 percent statutory tax rate,” said the report from Citizens for Tax Justice, a left-leaning group based in Washington that promised more details later this year.

The White House and Congress are considering an overhaul of the corporate tax system as a partial solution to the federal deficit, projected to hit $1.4 trillion this year.

Critics say tax loopholes promoted by corporate lobbyists and enacted by Congress are to blame for a system that lets companies avoid taxes, usually in perfectly legal ways.

Some business leaders have said they could live with closing some of these loopholes, but in return, they have said they want the statutory tax rate lowered. It is among the highest rates in the industrialized world.

Both President Barack Obama and Republicans want to trim the rate. Obama has said he wants to end enough corporate tax breaks to compensate for the revenue that would be lost from a lower rate. Republicans have blasted that as “tax hikes.”

The Business Roundtable, a lobbying group for corporate CEOs, issued a report in April that said U.S.-based companies faced an average effective tax rate of 27.7 percent in the 2006-2009 period, more than their non-U.S. competitors.

The debate promises to go on for months and possibly years. U.S. Treasury Secretary Timothy Geithner last week predicted movement on tax reform later in 2011.

Citizens for Tax Justice produced a report in the 1980s that helped lead to President Ronald Reagan’s landmark 1986 tax reforms. Since then, the tax code has become riddled with exemptions, deferrals and other special breaks.

Companies singled out in Citizens for Tax Justice’s newest report also included Verizon Communications, Boeing Co, Wells Fargo & Co, FedEx Corp and Exxon Mobil Corp.

‘TIP OF ICEBERG’

“These 12 companies are just the tip of the iceberg of widespread corporate tax avoidance,” said Bob McIntyre, director of Citizens for Tax Justice, which is working on a broader report covering the Fortune 500 companies.

Elected officials should make “reducing or eliminating the vast array of corporate tax subsidies the centerpiece of any deficit-reduction strategy,” he said.

GE spokesman Andrew Williams said the company is “fully compliant with all tax laws. There are no exceptions.”

He said GE’s 2010 tax rate was low because the company lost billions of dollars in GE Capital, its financial arm, as a result of the global financial crisis. “GE’s tax rate will be much higher in 2011 as GE Capital recovers,” he said.

Citizens for Tax Justice said that in the 2008-2010 period, 10 of the dozen companies studied enjoyed at least one year in which they were profitable, but paid no taxes.

Exxon Mobil had a 14.2 percent effective tax rate over the 3-year period, the highest of the 12 companies cited in the report, according to the group.

Exxon Mobil spokesman Alan Jeffers said, “Our effective tax rate in this country over the past six years has averaged about 32 percent. Last year our total taxes and duties to the U.S. government were $9.8 billion, which includes an income tax expense of $1.8 billion.”

American Electric Power and DuPont did not respond to requests for comment. DuPont effectively paid $258 million in taxes in the first quarter of 2011, a 15.2 percent tax rate.

(Additional reporting by Matthew Daily and Ernest Scheyder in New York, Anna Driver in Houston, Scott Malone in Boston; Editing by Richard Chang)

Copyright 2011 Thomson Reuters

Deficitly

May 25, 2011

With all the commotion going on around us

Osama…..tornadoes….floods

The public has been spared the talk on the debt ceiling

Did you hear the gang of six talks fell apart?

They were seen as representing the best hope

For a bipartisan deal to reduce the deficit

Senator Tom Coburn dropped out

Citing differences over entitlement spending,

Saying the 3 Republicans and 3 Democrats were

Unable to bridge differences over Medicare and Social Security

The clock is ticking,

We already exceeded the debt limit.

Now we are just shuffling payments

While waiting for a resolve.

How did we get to
this point?

There is some great information on the internet about this
subject.

Stephen Bloch did some extensive research on the deficit

And how it relates to each President

His report is titled:

US Federal Deficits, Presidents and Congress

Below are some of the facts I found interesting

  • First data he found showing
    a deficit was traced back to 1910
  • The single best predictors
    of deficits for most of the century have been war.
  • Starting in the 1970’s, it
    became harder to see a connection between war and deficits:
    • Permanent deficits became
      a way of life, regardless of whether there was a war going on.
  • The Deficit did not break
    the $1 trillion mark until 1981
  • The Deficit did not break
    the $5 trillion mark until 1995
  • During the first seven
    years of G W Bush presidency, the deficit was increased by almost twice
    the dollar amount as it had been for 32 years. (Running from JFK through
    GHW Bush).
  • When GW Bush entered
    office the deficit was $5.807 trillion
    • When GW Bush left office
      the deficit ballooned to $11,909 trillion.
    • The deficit increased
      $6,102 trillion
  • Since Obama entered office
    the deficit has grown to $14,268 trillion
    • That an additional $2,359
      trillion

Some other interesting facts:

  • Military spending has
    increased 81% since the year 2000
  • Fraud constitutes at least
    ten percent ($100 billion) of the nearly one trillion in taxpayer dollars
    that Medicare and Medicaid will spend this year.
  • The current tax system of
    the United States will collect about 18% of the GDP(Gross Domestic
    Product)
  • Spending needs are much
    higher, currently around 24% of GDP.

What makes up the 24%?

I referred to an article by Jeffrey Sachs (Economist and
Director of Earth Institute, Columbia University)

Focusing on best estimates for 2021, a decade from now

  • Social Security outlays
    will total around 5.2% of GDP
    • As Americans age and as
      health care cost have multiplied, The cost of Social Security and
      Medicare have risen from 1.7% of GDP in 1980 to 5.1% of GDP in 2011
  • Medicare will total around
    3.6% of GDP
  • Medicaid, assuming no
    drastic cuts, will total around 2.9% of GDP
  • Other mandatory programs
    for the poor, such as food stamps, will total 2.1% of GDP
  • Total defense spending is
    around 5% of GDP, most agree that defense should be cut and be around 3% of
    GDP
  • Most projections put
    interest cost on debt around 2.7% of GDP
  • Discretionary spending
    (cost used on public goods and services that cannot be provided
    efficiently by the private economy alone) will be around 4.5% of GDP

Now if you go and add up all these categories,

You will see that cost will total around 24% of GDP

In Paul Ryan’s plan, taxes would be kept at 18% of GDP and
spending would be cut to 19% of GDP.
However the deficit is still expected to grow to $16 trillion by 2021.

The Obama plan would have a slightly higher tax collection,
around 19% of GDP (by allowing Bush tax cuts expire for those making over
$250,000), while allowing the deficit to grow to $19 trillion by 2021.

Guess what!!!!!

 

They are still going
the wrong way!!!!!

Many experts feel that both of these current plans, as
presented seem practically impossible.

In several opinion surveys,

The public has spoken clearly about what to do:

  • Do not balance the budget
    by slashing Medicare, Social Security, or programs for the poor;
  • Increase spending on
    education and infrastructure;
  • Tax the rich and giant
    corporations.

This is not a practical solution either…….

It is our responsibility to stop the bleeding

Everyone will have to proportionally share in the sacrifice

Will someone step forward and have the vision and leadership,

To usher in this era……….

Will the public be accepting to the reality of their
resolution….

Or will we continue to allow our excesses to undermine us.

Let us know your thoughts…… email george@hbsadvantage.com

As reported by Ebru News             Feb 19,2011 

WASHINGTON (AP) – State officials had plenty of warning. Over the past three decades, two national commissions and a series of government audits sounded alarms about the dwindling amount of money states were setting aside to pay unemployment insurance to laid-off workers.

“Trust Fund Reserves Inadequate,” federal auditors said in a 1988 report.

It’s clear now the warnings were pretty much ignored. Instead, states kept whittling away at the trust funds, mostly by cutting unemployment insurance taxes at the behest of the business community. The low balances hastened insolvency when the recession hit, leading about 30 states to borrow $41.5 billion from the federal government to pay unemployment benefits to their growing population of jobless.

The ramifications will be felt for years.

In the short term, states must find the money to pay interest on the loans. Generally, that involves a special tax on businesses until the loan is repaid. Some states could tap general revenues, making it harder to pay for schools, roads and other state services.

In the long term, state will have to replenish their unemployment insurance programs. That typically leads to higher payroll taxes, leaving companies with less money to invest.

Past recessions have resulted in insolvencies. Seven states borrowed money in the early 1990s; eight did so as a result of the 2001 recession.

But the numbers are much worse this time because of the recession was more severe and the funds already were low when it hit, said Wayne Vroman, an analyst at the Urban Institute, a liberal-leaning think tank based in Washington.

The Obama administration this month proposed giving states a waiver on the interest payments due this fall. Down the road, the administration would raise the amount of wages on which companies pay federal unemployment taxes. Many states probably would follow suit as a way of boosting depleted trust funds.

Businesses pay a federal and state payroll tax. The federal tax primarily covers administrative costs; the state tax pays for the regular benefits a worker gets when laid off. The Treasury Department manages the trust funds that hold each state’s taxes.

Each state decides whether its unemployment fund has enough money. In 2000, total reserves for states and territories came to about $54 billion. That dropped to $38 billion by the end of 2007, just as the recession began.

Over the next two years, reserves plummeted to $11.1 billion, lower than at any time in the program’s history when adjusted for inflation, the Government Accountability Office said in its most recent report on the issue. Yet benefits have stayed relatively flat, or declined when compared with average weekly wages.

“If you look at it from the employers’ standpoint, they’re not going to want reserves to build up excessively high because then there’s an increasing risk that advocates for benefit expansion would point to the high reserves and say, ‘We can afford to increase benefits,”‘ said Rich Hobbie, executive director of the National Association of State Workforce Agencies.

A review of state unemployment insurance programs shows how states weakened their trust funds over the past two decades.

In Georgia, lawmakers gave employers a four-year tax holiday from 1999-2003. Employers saved more than $1 billion, but trust fund reserves fell about 40 percent, to $700 million. The state gradually has raised its unemployment insurance taxes since then, but not nearly enough to restore the trust fund to previous levels. The state began borrowing in December 2009. Now it owes Washington about $588 million.

Republican Mark Butler, Georgia’s labor commissioner, said his state had one of the lowest unemployment insurance tax rates in the nation when the tax holiday was enacted.

“The decision to do this was not really based upon any practical reasoIt was based on a political decision, which I think, by all accounts now, we can look back on and say it was the wrong decision,” Butler said. “Now we find ourselves in a situation where we’ve had to borrow money and that puts everyone in a tight situation.”

In New Jersey, lawmakers used a combination approach to deplete the trust fund. The Legislature expanded benefits and cut taxes, as well as spending $4.7 billion of trust fund revenue to reimburse hospitals for indigent health care. The money was diverted over a period of about 15 years and helps explain why the state’s trust fund dropped from $3.1 billion in 2000 to $35 million by the end of 2010. The state has had to borrow $1.75 billion from the federal government to keep the program afloat.

“It was a real abdication of responsibility and a complete misunderstanding of how you finance an unemployment insurance fund to make sure you have sufficient money in bad economic times,” said Phillip Kirschner, president of the New Jersey Business and Industry Association. “In good economic times you build up your bank account, but in New Jersey, they said, ‘Well, we have all this money, let’s spend it.”‘

California took its own road to trust fund insolvency. Lawmakers kept payroll tax rates the same, but gradually doubled the maximum weekly benefit paid to laid-off workers to $450. The average benefit now is about $300 and is paid for about 20 weeks.

Loree Levy, spokeswoman for the California Employment Development Department, said lawmakers were warned of the consequences.

“We testified at legislative hearings that the fund would eventually go broke and would become permanently insolvent if legislation wasn’t passed to increase revenue,” Levy said.

California has borrowed $9.8 billion to keep unemployment insurance payments flowing. It owes the federal government an interest payment of $362 million by the end of September.

In Michigan, unemployment insurance tax rates declined from 1994 through 2001. The trust fund prospered during those years because of the healthy economy and low unemployment rate. Then the recession arrived and reserves plunged. In response, Michigan lawmakers passed legislation that lowered the amount of wages subject to unemployment taxes from $9,500 to $9,000. They increased the maximum weekly benefit from $300 to $362. The trust fund dropped from $1.2 billion to $112 million over the next four years. In September 2006, Michigan was the first state to begin borrowing from the federal government.

Other states held their trust funds purposely low as part of an approach called “pay-as-you-go.” Texas is a nationally recognized leader of this effort. Its philosophy is that, in the long run, it’s better for the economy to keep the maximum level of dollars in the hands of businesses rather than government. Texas had to borrow $1.3 billion in 2009. State officials have no regrets about their policy.

“By keeping the minimum in the (trust fund), Texas is able to maximize funds circulating in the Texas economy, allowing for the creation of jobs and stimulation of economic growth,” said Lisa Givens, spokeswoman for the Texas Workforce Commission.

The pay-as-you-go approach goes against the findings of a presidential commission that looked into the issue of dwindling trust funds in the mid-1990s.

“It would be in the interest of the nation to begin to restore the forward-funding nature of the unemployment insurance system, resulting in a building up of reserves during good economic times and a drawing down of reserves during recessions,” said the Advisory Council on Unemployment Compensation, which President Bill Clinton appointed.

Hobbie, from the association representing state labor agencies, said there’s no way to tell which approach is better over the long haul. He acknowledged that keeping reserves at the minimum in good times goes against one of the original aims of the program – to act as an economic stabilizer in bad times. That’s because businesses are asked to pay more in taxes, which leaves them less money to invest in their company.

A survey from Hobbies’ organization found that 35 states raised their state unemployment taxes last year.

Hobbie said he suspects that some states allowed reserves to dwindle out of complacency.

“I think we just got overconfident and thought we wouldn’t experience the bad recessions we had in, say the mid ’70s, and then this big surprise hit,” he said.

By

Robert Reich

Why aren’t Americans being told the truth about the economy? We’re heading in the direction of a double dip — but you’d never know it if you listened to the upbeat messages coming out of Wall Street and Washington.

Consumers are 70 percent of the American economy, and consumer confidence is plummeting. It’s weaker today on average than at the lowest point of the Great Recession.

The Reuters/University of Michigan survey shows a 10 point decline in March — the tenth largest drop on record. Part of that drop is attributable to rising fuel and food prices. A separate Conference Board’s index of consumer confidence, just released, shows consumer confidence at a five-month low — and a large part is due to expectations of fewer jobs and lower wages in the months ahead.

Pessimistic consumers buy less. And fewer sales spells economic trouble ahead.

What about the 192,000 jobs added in February? (We’ll know more Friday about how many jobs were added in March.) It’s peanuts compared to what’s needed. Remember, 125,000 new jobs are necessary just to keep up with a growing number of Americans eligible for employment. And the nation has lost so many jobs over the last three years that even at a rate of 200,000 a month we wouldn’t get back to 6 percent unemployment until 2016.

But isn’t the economy growing again — by an estimated 2.5 to 2.9 percent this year? Yes, but that’s even less than peanuts. The deeper the economic hole, the faster the growth needed to get back on track. By this point in the so-called recovery we’d expect growth of 4 to 6 percent.

Consider that back in 1934, when it was emerging from the deepest hole of the Great Depression, the economy grew 7.7 percent. The next year it grew over 8 percent. In 1936 it grew a whopping 14.1 percent.

Add two other ominous signs: Real hourly wages continue to fall, and housing prices continue to drop. Hourly wages are falling because with unemployment so high, most people have no bargaining power and will take whatever they can get. Housing is dropping because of the ever-larger number of homes people have walked away from because they can’t pay their mortgages. But because homes the biggest asset most Americans own, as home prices drop most Americans feel even poorer.

There’s no possibility government will make up for the coming shortfall in consumer spending. To the contrary, government is worsening the situation. State and local governments are slashing their budgets by roughly $110 billion this year. The federal stimulus is ending, and the federal government will end up cutting some $30 billion from this year’s budget.

In other words: Watch out. We may avoid a double dip but the economy is slowing ominously, and the booster rockets are disappearing.

So why aren’t we getting the truth about the economy? For one thing, Wall Street is buoyant — and most financial news you hear comes from the Street. Wall Street profits soared to $426.5 billion last quarter, according to the Commerce Department. (That gain more than offset a drop in the profits of non-financial domestic companies.) Anyone who believes the Dodd-Frank financial reform bill put a stop to the Street’s creativity hasn’t been watching.

To the extent non-financial companies are doing well, they’re making most of their money abroad. Since 1992, for example, G.E.’s offshore profits have risen $92 billion, from $15 billion (which is one reason it pays no U.S. taxes). In fact, the only group that’s optimistic about the future are CEOs of big American companies. The Business Roundtable’s economic outlook index, which surveys 142 CEOs, is now at its highest point since it began in 2002.

Washington, meanwhile, doesn’t want to sound the economic alarm. The White House and most Democrats want Americans to believe the economy is on an upswing.

Republicans, for their part, worry that if they tell it like it is Americans will want government to do more rather than less. They’d rather not talk about jobs and wages, and put the focus instead on deficit reduction (or spread the lie that by reducing the deficit we’ll get more jobs and higher wages).

I’m sorry to have to deliver the bad news, but it’s better you know.