If the Congress would have done their job in the first place we would never have this problem. Last year when we had this debt ceiling problem the deal was we will go ahead and raise it, and extend the Bush tax rates, and at a later time we will deal with the debt ceiling, Bush tax cuts, and automatic (sequestration) cuts again. The idea may be a good motivator to get Congress to do their jobs, and legislate. But again we are dealing with Congress. Granted, I blame much of this on the Democratically run senate. When was the last time the DEMOCRATICALLY controlled senate passed a federal budget. It has been almost 4 years. A duty that is imposed by law on Congress on a annual basis, and they have not passed one in almost 4 years. They keep passing these continuing resolutions, to keep the federal government funded. The President wants guaranteed increases in taxes on the top 2% of earners. Therefore, raising an additional $1.6 trillion in revenue over 10 years. He says also he wants to make a series of cuts in the amount of $600 billion to multiple social programs such as medicare and social security. However, according to the President’s plan, these $600 billion spending cuts are not automatic and are to be agreed upon at a later time. He wants definite revenues, but will not commit on inking what will be guaranteed cuts. Mr. President, what respectable negotiator would accept non-guaranteed cuts in this negotiation. The republicans have caved on raising taxes, it is time to open your social insurance programs to guaranteed cuts. If I were a conservative in the house, I would laugh at him, and say put your money where your mouth is. If it is so important to you that the middle class Bush tax rates (remember it was Bush who implemented these taxes for the middle class also, yeah the guy who Obama is always blaming) are kept in place, I would plainly say to him, for every dollar of new spending you want in this fiscal cliff legislation, I want a dollar of spending cuts to some entitlement program. It does not have to be social security, medicare, or medicaid. It can be the obama phone program, or the food stamp program, or defense for that matter, if we don’t need it. Then for every dollar of new revenue you want, I want another dollar of spending cuts. As to the one dollar of revenue for one dollar of spending cuts, medicare, social security, etc. would be on the chopping block. That would get us out of debt a lot faster than this either of the current plans being offered. This is the only fair way to do it, tit for tat. It is hilarious that a bipartisan commission came together to resolve our debt problem, and Obama is basically throwing what they came up with in their face. Their solution was to lower the top income tax rate to the mid 20s, and stop a number of deductions. Hmm, where I have heard that before, oh that is right Mitt Romney and Paul Ryan. The thing that boggles my mind the most is the ignorance of low information voters in America. The President’s plan keeps us in the red on a FY (fiscal year) basis for the next 10 years. How can we expect to get our total debt down, if our FY debt is in the red for each of the next 10 years? The answer is, it will not. Somebody show me an FY budget that is in the black, and I will listen. He is the only President in our history to have a TRILLION dollar annual (FY) deficit. Better yet, he has done it three years in a row, and will likely continue. He is a joke of a leader. If he does not budge on guaranteed cuts to entitlement programs, let us go over the cliff. Both parties get a little bit of what they want if that happens. Automatic cuts, and automatic tax increases.
Just another example of what happens when government meddles in things it should not. Controlling prices indirectly, by controlling supply. In fact charging producers a type of surcharge for producing too much milk. We all know demand will not decrease. So what does basic economics tell us what prices will do? Rise! Just another hidden tax imposed by the federal government. Not a tax in the legal definition, but effectively an extra cost passed onto the American consumer because of a federal government enacted policy. Ask a politician if he believes in controlling prices, he will tell you flat out no. Then ask him if he agrees with this. Just like the Federal Reserve once said they absolutely disagree with price fixing, but it is okay for the board of unelected officials at the Federal Reserve to set interest rates upon which all financial institutions, the government, and American citizens borrow money.
See pages 17-24
Okay let’s face it, taxes on capital gains will almost certainly be higher come Jan 2, 2013. President Obama has ran on this basically ever since he became President, in addition to raising the individual income tax rates on the highest earners in America. With that said, Costco, one of President Obama’s biggest corporate backers is doing something quite strange. Remember Jim Sinegal, the founder and former CEO (stepped down this past January), who spoke at the Democratic National Convention. He was very outspoken and favored the President. None of this political support for the President is stopping Costco from making smart, conservative business decisions. Costco is making a last minute dividend payment to its shareholders before the capital gains tax rate will go up. What’s worse, they are going in debt to do it. Going in debt roughly $3 billion. Another example of government affecting the free market in a negative way. Government policy effectively forcing a company to pay a special (not a regularly scheduled) dividend in order to avoid what would likely be an effective loss for shareholders. Costco is going in debt to pay dividends because, if they don’t, shareholders could possibly lose up to 30% on dividend payouts due to capital gains tax increases. This is especially true if the capital gains rate rises to 40+%. My question is, why back President Obama and commit this type of hypocrisy. Costco apparently backs higher taxes on dividends by endorsing the President, yet the company takes revenues that their dear leader could TAKE via the tax code come Jan. 2 in the form of capital gains taxes, and is instead paying it out under the current 15% rate, rather than what will likely be 40+% come Jan. 2, 2013. Kevin Williamson from the National Review says:
“In fact, Costco is set to pay out some $3 billion in a special year-end dividend this year to evade a January tax hike. The biggest single beneficiary will be Mr. Sinegal, the firm’s largest individual shareholder. He stands to gain $14 million. Institutional investors such as Berkshire Hathaway and the Gates Foundation will bring in many millions. That dividend will be made possible in part by a special debt offering. When a firm run by Mitt Romney does this, Democrats call it “vulture capitalists loading up companies with debt in order to write themselves big paychecks.” When companies that make friendly noises about Barack Obama do it, they get a personal visit from the vice president.” (referring to Biden’s trip to a DC Costco opening today.) http://www.nationalreview.com/articles/334460/gaming-fiscal-cliff-kevin-d-williamson?pg=1.
Conclusion is that Costco is making a sound, smart, conservative business decision based on their shareholders value. Remember shareholders are those that provide capital for the company. They are the owners. Jim Sinegal is only the 33rd largest shareholder, but he is the largest individual shareholder. Rankings between 1-32 are all other companies, not individuals. Now my question is this, if President Obama’s plan to raise capital gains taxes is such a great idea, why are you evading it? The only conclusion that I can come to is that President Obama’s plan is apparently not a smart and sound business or economic decision.