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“Making the Worst of It”

How often in life has something not gone quite the way you hoped and you or someone responded with the common phrase, “We’ll make the best of it”? This is reflective of the natural optimism that is an endemic part of American culture.

The “Sequester” went into effect just over a week ago. It is inartful. No one loves it. But, it is better than not reducing the deficit at all and borrowing another $85 billion per year. Even though it was his idea, we now know that the president hates it. But, rather than take something he isn’t happy with and “make the best of it”, the president has decided to “make the worst of it”. He has affirmatively decided to intentionally and unnecessarily inflict discomfort on as many Americans as possible in a distasteful attempt to justify his excessive rhetoric of the last few weeks.

Amongst the many egregious actions taken is his unilaterally canceling of all White House tours, effective Saturday, under the guise of forced cost reductions because of the Sequester. The problem with that logic is that White House tours don’t cost anything. There are no tour guides except for a few… Read More

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9 Reasons to Keep the Sequester in Place

The Sequester: I would wager that just a few months ago very few of you knew what the word “sequester” meant. Maybe you didn’t know how to pronounce it either (see-kwes-ter). I can tell you that I had never heard the word before I was elected to Congress. And, it took me a couple of terms on the budget committee to become familiar with it.

But, now we all know. It is a budgeting mechanism by which across-the-board spending reductions are enforced. And, it went into effect on March 1st.

Listening to the president, you would think that the Mayan calendar was off by a couple of months and that the end of the world was really coming as a result of the Sequester. From the dramatic rhetoric in his perpetual campaign swing, it sounds like life as we know it will cease because of a 2% reduction in the growth of planned government spending. What you are not hearing is that even with the Sequester cuts in effect, total federal spending this year will be higher than last year. So, why all the drama? Because it is clear that the president wants to increase spending and increase taxes and he wants you to think that the… Read More

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Update from the “Cliff”

Given Thursday evening’s events in the House, it looks more and more like we may be going over the “fiscal cliff”. Therefore, I wanted to give you an update on what that could potentially mean for you. I also wanted to clarify the total impact of the income tax rate changes that we will face should we go over. These figures, which appeared in my previous “Laptop Report”, have been updated.

The total impact of all the income tax rate changes is estimated to raise revenue of roughly $4.5 trillion over 10 years. The total effect of all of this would be to reduce the deficit by approximately $7.7 trillion over the next ten years according to the Congressional Budget Office (CBO). That means CBO projects an “average” annual deficit of roughly $230 billion if we are over the “cliff” vs. a deficit of about $1 trillion a year if everything is extended.

Again, these projections are based on “static modeling”. That means they do not take into account the economic impacts and the behavioral changes that will occur as a result of what I’ve outlined above. When these tax hikes take place, people will most certainly take actions to… Read More

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Taxes and Culture

Taxes and Culture: Being a CPA and all, I often opine in these pages about things fiscal, financial and economic. Today, in the mainstream, establishment press, all you hear about is the “fiscal cliff” and taxes and such. I care a great deal about taxes and the deficit, as you regular readers well know. And, you will hear much from me about these issues in the coming months. But, the underlying issue before us right now with the so-called “fiscal cliff” is, in my opinion, not actually fiscal or financial. It is cultural.

As you may not be aware, I have always believed that the culture of an organization is the biggest single attribute that will determine the success or failure of said organization. In my 25 year business career, I was obsessed with the culture of our company and with that of companies we might acquire or with which we might do business. A business with a strong culture of customer service will empower people with service skills and will change or weed out those people who don’t care how they treat others. If a company has a culture of dishonesty, even an honest person will cheat now and then because… Read More

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Compromise

Compromise: First of all, thank you to all those who live in the new 45th Congressional District in California for your strong support of my reelection. It looks like I will have won by a margin of 18 points in spite of a new district (50% of which I have never represented), a poor year for Republicans and another opponent who spent many times more money than I did and spent it largely on negative advertising. I appreciate your confidence in me. I will not let you down.

But, I must confess, it didn’t feel much like a winning night. Frankly, I haven’t been this saddened in a very long time. Yes, I won convincingly, but politics is a team sport. I need friends and allies to get stuff done, and a lot of them lost.

I will let others do the political analysis of why the election turned out as it did. But, I will tell you that my sadness is much deeper than it was four years ago. In 2008, we were pretty sure that McCain was going to lose, and we had some hopefulness that Obama wouldn’t turn out to be as bad a president as we feared. But in 2012, we were pretty sure that Romney/Ryan were going to win, and we are pretty sure that Obama,… Read More

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A New Tax Code in 2013?

*NOTE: SPECIAL SURVEY EDITION. This week’s edition includes an interactive survey. After you finish reading, please make sure to assess my plan and tell me what you think!

Taxes: Taxes are always a big issue in politics and public policy. However, right now there is a crescendo of agreement building in Washington that it’s time to make some fundamental change to our tax system.

The debate in Washington of late has been confined to the so-called Bush tax cuts, all of which are scheduled to expire at the end of this year. Essentially, should we extend all of them, none of them, or some of them? The erudite readers of these missives (that’s you) have heard all of this before and know the arguments for and against the extension and all about taxing the “rich” and such. So, I won’t repeat them here. Economists are unified in their predictions of recession if we are allowed to go over the “fiscal cliff” on December 31 and allow all of the tax cuts to expire and the sequestered spending cuts… Read More

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“Fix It” Episode VIII: Too Big To Fail & California

Too Big to Fail: There is a lot of talk these days about the $3 billion loss at JP Morgan Chase. There is a lot of hand-wringing, concern, and investigation into what happened. We are asked about it on Capitol Hill, we have an opinion, and we all care about it. And, that is the problem. We shouldn’t have to care.

The only reason we are all in a tizzy over this is because JP Morgan is too big to fail. If Apple announced it lost $3 billion tomorrow, the shareholders, Wall Street and some trial lawyers would care, but it wouldn’t be any of Washington’s concern. That’s the way it should work with private companies. They take risks to make money. Sometimes you win and sometimes you lose.

Dodd-Frank did not fix this problem for the banks. Arguably, a provision in Dodd-Frank was part of the cause of the JP Morgan loss. Dodd-Frank requires disclosure of trading that was previously private. Hedge funds saw JP Morgan taking big positions (which just a few years ago would not have been made public) and decided to play the other side of the trade. The hedge funds won and JP Morgan lost. However, in this case, we all lost. That’s why… Read More