American Shareholders Association

McCain Proves He Can Make Money Too

John McCain purportedly raised $22 million in June, his best effort thus far in the race, and the Republican Party entered July with $95 million in funding.  McCain’s fundraising, coupled with that of the RNC, has allowed McCain to outspend Obama on ads targeted at key swing states.  Obama has yet to report his fundraising for June.  Nevertheless, all are impressed that McCain seems to be keeping pace with the candidate that liberals describe as the “moneymaking juggernaut.”  Read more on this issue here.

Obama Receives Backing of Teachers’ Union… Duh

Senator Barack Obama recently received an endorsement from the American Federation of Teachers, which touts membership of more than one million members. Obama spoke via satellite to the AFT after receiving the endorsement and expressed concern that the “No Child Left Behind” Act was being underfunded. Translation: “Thank you for your endorsement. I will repay you with more money in the future.” Obama will doubtlessly receive many such endorsements from unions in exchange for favors.

Unions are overwhelmingly left-leaning, and for good reason. They will not vote for a candidate that opposes compulsory enrollment in unions. They vehemently scorn the suggestion that they stop structuring their members’ defined benefit plans to invest in heavily unionized industries.  They despise the notion of receiving less funding for their administrators to divvy up. Essentially, they oppose the initiatives proposed by various conservatives for the purpose of growing our economy as a whole. If setting aside these economically beneficial issues is the condition for receiving union backing, then Senator McCain should have no hesitation in leaving them to Obama.

All I Know Is, They'd Better Not Sell the Pats

It's becoming increasingly clear that the Rooney family is selling the Pittsburgh Steelers to avoid having to pay the death tax.  Good article on how the looming Obama tax hike should cause all sorts of accelerated economic decisions today on CNBC.

Good and Bad from McCain On Social Security and Younger Workers

McCain yesterday called Social Security's ponzi scheme "a disgrace" for younger workers.  And so it is, considering anyone under 40 can pretty much assume that they won't be getting their full Social Security benefit.

However, he troubled those of us opposed to higher taxes with this afterwards:

Speaking to reporters on his campaign bus Wednesday in Ohio, McCain went into greater detail. Young workers, he said, "are paying into a system that they won't receive benefits from on the present track that it's on. That's the point. I don't think it's fair. I think it's terrible."

"That's why we have to fix it," McCain said, pointing to a 1983 bipartisan agreement that bolstered Social Security for a while by cutting benefits and raising taxes.

McCain declined to say whether he would endorse a similar package, or a higher retirement age or other suggestions that have been made.

"I cannot tell you what I would do," he said, "except to put everything on the table. Because as soon as I say 'This is what would be my requirement,' then you get into a huge fight and you get all the special interests involved. I would put everything on the table."

As a quick reminder, Senator McCain took Social Security tax hikes off the table just last year in an interview in NRO with Ramesh Ponnuru:

Ponnuru: If you could get the Democrats to agree, or at least to come to the table on entitlements or on tax simplification, are those circumstances under which you’d be willing to accept a tax increase?

Sen. McCain: No; no.

PONNURU:  No circumstances?

Sen. McCain: No. None. None. Tax cuts, starting with Kennedy, as we all know, increase revenues. So what’s the argument for increasing taxes? If you get the opposite effect out of tax cuts?

Competitive Bidding for Durable Medical Equipment

Competitive bidding on durable medical equipment (MDE) has proved promising in reducing Medicare costs. In 2003, the Medicare Modernization Act enacted competitive bidding in ten locales and noticed reductions in costs of 26 percent. Unfortunately, Congress has sought to slow these cost savings.  The downside of slowing this process is demonstrated by Mr. Leavitt, secretary of the Department of Human and Health Services, in the following exerpt:

An oxygen concentrator, for example, is a device that delivers oxygen through a tube to patients, and it costs about $600 on the open market. Medicare beneficiaries typically rent the machines. The rental period, set by statute, is up to 36 months. The monthly rental payment, also set by statute, is $198.40. So renting an oxygen concentrator for 36 months costs $7,142.

As with most items and services in Medicare Part B, beneficiaries pay 20% of the costs, and Medicare pays the remaining 80%. The government, therefore, pays $5,714 – almost 10 times the free-market price of purchasing a concentrator outright. The patient pays $1,428 – more than twice the free-market price of purchase. Even allowing for the costs of setting up equipment, training and fitting the beneficiary, and other things, the rental fee is way out of line.

Immigrants and Entitlements

In yesterday’s post (The Economics of Immigration), it was noted that many Americans are skeptical of immigrant labor because they fear the displacement of American jobs. Another predominant fear surrounding immigration relates to entitlements, because many fear that immigrants take more out of the system than they put in. However, it is necessary to put the argument into context. Immigrant labor provides the undergirding of our economy. A finite population cannot sustain economic growth. A growing economy at large requires a growing labor force.

The detrimental effects caused by immigrants gaming the system to receive benefits without paying taxes are overblown. However, this is not the issue. The fault is not with immigrants, but with the structure of entitlement programs. It is well known that entitlement spending is unsustainable and will cause inestimable problems in the future absent reform. A system that relied on personal accounts would bypass the outcry of immigrants taxing the system, because it would not be possible to reap the benefits of entitlements without paying taxes. Rather than fighting the anti-immigration debate, perhaps we should be fighting (even more) over entitlement reform.

What Obama Has Actually Said On Hiking the Capital Gains Tax

For the convenience of true shareholder activists everywhere, below is a compendium of what Barack Obama has said about hiking the capital gains tax.  A pdf version of the text below (which includes footnotes) can be found here:

What will the rate be?
CNBC : Well, you know, I haven't given a firm number… I certainly would not go above what existed under Bill Clinton, which was the 28 percent. I would—and my guess would be it would be significantly lower than that. I think that we can have a capital gains rate that is higher than 15 percent. If it—and if it, you know—when I talk to people like Warren Buffet or others and I ask them, you know, what's—how much of a difference is it going to be if it's 20 or 25 percent, they say, look, if it's within that range then it's not going to distort, I think, economic decision making.

FOX : In terms of capital gains, I've suggested we might go back up to 20, because... (WALLACE: You suggested 28)  Well, what I've said is I certainly would not raise it higher than it was under Ronald Reagan, but the fact is that I'm mindful that we've got to keep our capital gains tax to a point where we can actually get more revenue.

TECHCRUNCH : I will promote tax fairness by adjusting the top dividends and capital gains rate to a level that would be closer to, but no higher than, the rates set during the Reagan Administration in 1986.

What is the justification for a rate increase?
CNBC: The broader principle that I'm interested in is just making sure that we've got a tax code that is fair for all Americans.

ABC DEBATE : I would look at raising the capital gains tax for purposes of fairness.

Will anyone be exempted?
CNBC: …I think that it may be, for example, that you could structure something in which people with certain incomes were exempted from this increase and it would stay at 15.

CHICAGO TRIBUNE : You know, I generally define well off as people who are making $250,000 a year or more, and that means, for example if we raise the capital gains tax, I would exempt people who are essentially small investors and really capture those who have done very, very well over the last two decades.

Latest Budget Numbers: Same Old Story

CBO came out with their monthly budget report, which is always interesting reading.  The highlight is that revenues are up 2% (not counting the stimulus rebate checks).  However, government spending is up by an adjusted 7.1% from this time last year.

Domestic discretionary spending is up a whopping 9.6%. 

As a result of the government spending much more than it takes in, the deficit is up about 50%. 

To any rational person, it certainly appears that the federal government has a spending problem, not a tax problem.  Another rational observation might be that raising taxes will simultaneouly wreck the economy, and merely cause the government to spend even more money.  Too bad the government isn't run by the rational.

Chattering Class Calls for Tax Hikes

A bunch of articles this morning on how McCain just has to raise taxes on small business owners and investors to balance the budget.  It's next to impossible, they say, to slow the growth of goverment spending, prevent tax hikes, and make the corporate income tax more competitive.

Wrong.

If the growth of government can be slowed to 2.4% annually, say the McCainiacs, then the budget will be balanced at the end of the first term--without having to raise taxes.

Read about it here, here, here, here, and here.

The Economics of Immigration

Kansas recently initiated an ambitious study designed to determine the overall economic consequences of illegal immigration in the state. It is likely that this study will reveal significant gains from immigration. A similar study was conducted by the Oklahoma Bankers Association last year after Oklahoma passed an anti-illegal immigration law. The study determined that the law caused $1.8 billion in economic losses.

Conservatives are supportive of free markets and free trade. However, they remain skeptical of immigrant labor. This is paradoxical, because free trade in its truest sense relies on the free movement of goods, capital, and labor, as do the corresponding economic benefits.

The stigma surrounding illegal immigration arises from a myriad of issues (which will be discussed in greater detail in future posts). One is the fear that immigrants will displace American labor. In reality, the U.S. economy is growing at a rate that necessitates increased labor. Our unemployment rate is low compared to other countries, and our economy is considered to be at full employment. This means that the necessity for increased labor cannot be fulfilled solely from within our borders. Preventing immigration prevents economic expansion and undermines the foundations of our economy.

Who Owns Oil Companies? You Do, If You Have a 401(k)

Interesting article in the WashPost pointing out the obvious: what's good for energy companies is good for retirement plans.  Should be obvious to everyone, but it's not.

Reducing the Marriage Penalty

Getting married is expensive. This is partially because of the ceremonial necessities inherent in any wedding, but even more so due to the “marriage penalty,” which is additional taxes that married couples typically have to pay. When couples get married, their joint income is often pushed into a higher tax bracket, creating higher taxes. Here are five measures that a couple can take to minimize this financial burden:

• Pool liabilities – the ability to share deductions for liabilities, such as mortgage payments, can help ease the tax load.
• Have children – try and keep up with the Catholics and Mormons in childbearing to reap the corresponding deductions.
• Share a healthcare plan – most health insurance companies offer benefits to married couples. Having a joint plan can save thousands in insurance fees.
• Utilize the gift exemption – after the $12,000 limit, gifts are usually taxed. Gifts given to a spouse are not subject to this limit.
• Live a long, healthy life – good advice in any context. In this case, it is necessary to maximize Social Security benefits. Social Security is transferrable to surviving spouses, meaning that long-lived couples receive long-lived benefits.

Pair of McCain News Items For Shareholders

A couple of interesting news items from all-thing-McCain, as it relates to shareholders.

First, the McCain campaign today released a repackaged version of their economic plan.  Not a lot new here--there's a renewed pledge to balance the budget in four years without raising taxes, and it hints at Social Security benefit cuts.  For shareholders, it continues to promote the 15% capital gains and dividends tax rate.

Second, there's an interesting story in the WashPost about a possible platform fight between McCain and some conservatives.  For investors, the big story will be how the platform deals with cap-and-trade.  Our sources indicate that the final document will be very 30,000 feet--covering all issues in fewer than 50 pages.