American Shareholders Association

Sitting in on the "Rogue Congress"

I had a chance today to attend the American Spectator/ATR Conservative Newsmaker breakfast on the House side.  We heard from Congressmen Mike Pence (R-IN) and others.

Later, all the bloggers and a couple of hundred tourists packed the House floor to hear a dozen Congressmen give speeches about bringing the House back in session to vote on H.R. 6566, the "American Energy Act."

Meanwhile, the WSJ lampoons the "Gang of Ten" (including 5 GOP senators) for pushing a left-wing energy bill.

If You Subsidize Unemployment Benefits, You Get...More Unemployed People

The headline today is that initial unemployment claims hit a six-year high of 455,000.  In the USA Today coverage, though, this little nuggett is buried:

The latest snapshot of layoff filings is worse than analysts expected. Economists were expecting claims to drop to around 430,000.

The new layoff figures were distorted by an outreach program to notify people that they could qualify for additional benefits under a new law.

When people went to state claims offices to apply for extended unemployment benefits, state officials discovered that some were eligible — but had not filed — for their initial unemployment benefits, a Labor Department analyst said. That accounted for some of last week's increase, he said.

So, if you fund more unemployment benefits, you get more people claiming them.  Hardly a surprise.  This report seems to indicate that about 25,000 people are now on the unemployment rolls who otherwise would be finding a job.  Further evidence that the whole concept of "umemployment insurance" is dubious at best and stupid at worst.

401(k) Fee Disclosure: Much Ado About Nothing?

There's an interesting piece in SmartMoney on the Department of Labor's 401(k) fee disclosure rules getting rolled out.

My hunch is that this is something industry insiders, politicians, and the financial press care about more than your typical 401(k) investor.  How can the auto-provisions of the Pension Protection Act be so necessary (since they assume a general neglect in retirement planning), and at the same time there be so many people clamoring to see an annual fee statement?

The answer is that the two worldviews are mutually incompatible.  Furthermore, we know the PPA worldview is the correct one.  According to internal Fidelity research obtained by ASA, low-income worker participation in 401(k) plans goes from 60% to 90% when auto-features are introduced.

So what's the interest of those wanting to increase disclosure?  For the politicians, a lot has to do with the big lie that defined benefit pensions are cheaper and more safe than defined contribution pensions.  For many reasons, this is false.  But there you have it.

Commentary Roundup: Drilling and "No New Taxes"

Larry Kudlow has a good analysis of the "guerrilla Congress" and "drill now":

As Sen. John McCain and the Republican leadership nationalize the drill, drill, drill message, the Republican party might conceivably be riding a summer political rally. The question of offshore drilling, along with expanded domestic energy production, has suddenly become the biggest political and economic wedge issue of this election. Is there a Republican tsunami in the making?

Richard Rahn has a piece on why a tax increase isn't necessary to solve our fiscal challenges:

Even though income tax rates by the end of the Reagan administration (1988) were less than half the rates of 1968, tax revenue as a percentage of GDP was actually a bit higher. Budget deficits have averaged about 3 percent of GDP for the last 40 years, and the government debt as a percentage of GDP (approximately 37 percent) is close to its historical average for the last half-century. As the numbers show, those who say disaster is upon us and we must increase taxes are just plain wrong!

Presenting at Wednesday Meeting On "Shareholder Terrorism" Union Tactics

I'm presenting this morning at the Wednesday Meeting on a joint letter ASA is organizing to be sent to the Department of Labor.  It has to do with unions hijacking the pension funds they manage in order to play political games.  Needless to say, this doesn't help the people dependent on these pensions, and the shenanigans hurt overall shareholder wealth for the rest of us.

If you belong to an organization that can sign onto this letter, please let me know.

Text after the jump.

New Addition to Shareholder Lexicon: The "Universal HSA"

John Goodman of NCPA has come out with a new idea: the "universal health savings account (HSA)."  The concept is to combine the best features of the flexible spending account (FSA), health savings account (HSA), and health reimbursement arrangement (HRA).  Each has upsides and downsides:

• HSAs are portable and can accumulate assets over time.  However, they must be paired with a high-deductible health plan, which might scare some people off
• HRAs can be paired with any type of plan and can accumulate assets over time, but the money is not portable when an employee leaves a job
• FSAs can be paired with any type of plan.  However, they are not portable and cannot accumulate assets beyond one year

The "universal HSA" would be portable, be able to accumulate assets (as current HSAs can), but could be paired with any type of health insurance plan (not just a high-deductible one). 

There's a tension between those who want to use HSAs as the carrot to get people to adopt the stick of the high deductibe on the one hand, and those who want to allow almost anyone to have an HSA (besides Goodman, the "large HSA" idea at Cato comes to mind).  Honest disagreement, but interesting nonetheless. 

Actuaries to Younger Shareholders: Drop Dead

The American Academy of Actuaries yesterday came out in support of raising the Social Security normal retirement age up from 67 to as high as 70.

While this may help shore up "the system," it makes Social Security a worse deal for younger workers.  A median-income 25 year old today can expect a real rate of return on their Social Security taxes of less than 1% annually.  Workers and children younger than that can actually expect a negative rate of return.

Raising the retirement age will worsen this rate of return for younger workers, pushing more of them deeper into negative territory.  They'd literally be better off putting their FICA taxes underneath a mattress.

News Roundup: Tax Cuts and Energy

A couple of commendable posts to read today:

• Congressman Jim Saxton (R-NJ) has a good op-ed on the emerging consensus behind tax cuts and economic growth
• Phil Kerpen from Americans for Prosperity has a good piece on energy that's worth a read

Another Analysis of the Obama 50%-Plus Tax Rate

Here's Michael Boskin's take (subscription required).  After crunching the numbers his way, he comes up with a labor tax rate of 62.3%, and an investment tax rate of 58%.  Both of these are inclusive of the 10.3% California income tax.

Obama Calls for Windfall Profits Tax: A Tax On Everyone's 401(k)

Obama has released an ad calling for a new "windfall profits tax" on oil companies.  He'd use the money to give a gasoline welfare check of $1000 to everyone.

Not sure why people accuse him of being a demagogue (insert sarcasm font here).

What he and his supporters fail to see is that taxing oil companies means (according to CBO) that wages will go down to pay for $0.60 on the new tax dollar, and capital gains and dividends will go down to pay $0.40 on the tax dollar.  People might get their $1000, but it will come at the expense of their paycheck and their 401(k).